Q1 2023 Super Micro Computer Inc Earnings Call
Please wait the conference will begin shortly.
[music].
Good afternoon. My name is Abby and I will be your conference operator today at this time I would like to welcome everyone to the Super Micro computer incorporated fiscal quarter. One 2022 23 results conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press the star followed by the number one on your telephone keypad. Thank you Mr. Mikles Baker you may begin your conference.
Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the first quarter, which ended September 32022 with me today are Charles Liang founder Chairman and Chief Executive Officer, and David Weekend, Chief Financial Officer by now you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available.
Alible on the company's website as a reminder, during today's call. The company will refer to a presentation is available to participants in the Investor Relations section of the company's website under the events and presentations tab. We've also published management's scripted commentary on our website. Please note that some of the information you'll hear during our discussion today will consist of forward.
Looking statements, including without limitation those regarding revenue gross margin operating expenses and other income and expenses taxes capital allocation and future business outlook, including guidance for the second quarter of fiscal year 2023, and the full fiscal full fiscal year. There are a number of risk factors that could cause super micro's results to differ materially.
From our expectations.
You can learn more about these risks in the press release, we issued earlier. This afternoon. Our most recent 10-K filing for fiscal <unk>.
And in our SEC filings.
All of those documents are available on the Investor Relations page of Super Micros website, we assume no obligation to update any forward looking statements.
Most of today's presentation, we will refer to non-GAAP financial results and business outlook for an explanation of our non-GAAP financial measures. Please refer to the accompanying presentation or to our press release published earlier today. In addition, a reconciliation of GAAP and non-GAAP results is contained in today's press release and the supplemental information attached to today's presentation at the end of today's prepared remarks, we'll have a Q&A session for sell side analysts to ask.
I will now turn the call over to Charles.
Thank you Michael and good afternoon, everyone.
I'm very pleased to announce another fastest growing quarter.
And a great start to our fiscal 2023.
Michael is a fine already ready to do a big jump.
Our green computing and pumping.
The I T total solution company.
Here are some key highlights for the quarter.
Revenue for the fourth quarter of our fiscal year, 2000, and Tennessee totaled 1.85 billion up 17, 9%, Yeah Oh yeah.
Our guidance range of one <unk> to a $1 jacoby.
Whereas the girls toy at about 10 times.
Two tinder oboe IP industry.
Hello fiscal first quarter non-GAAP earnings per share grew over 490% year over year at the street.
Three data put it towards day compare tool.
He is saying that yeah go at it.
Was well above the high end of our guidance range of $2 seven stand to put out a study Tuesday.
If it was achieved by our leading designs.
Innovative products.
Oh, I see total solutions and our strong global operations.
Especially they are growing.
Yeah attrition of our Taiwan facility is improving our ability to meet that demand and lacking Ohio.
Operating margin.
I will pause there and pray that scale total IP solutions and GPU based system had readouts in cheap hold these two percentage growth year over year.
Along with excellent results.
Storage of Phi Chi, but close.
We are making sordid lots of share gains.
They're always in our major geographies.
So crude to the U S at a 70% of total sales this quarter.
Driven by ongoing design win.
Some of the top tier and knowledge Ddos.
They recognize and accept the strong baddiel.
Our position of our Green computing technology.
Total IP solutions.
We are off to a great start for fiscal 2000 and Tennessee.
And we expect Hello, Anthony Seaton gross more momentum to continue.
Oh yeah.
Delivery.
Quarterly revenue in the multiple.
Multiple billion dollars range.
So putting our ambition of reaching $10 billion in the near future, we still have folks, though inquiries in Iowa.
Oh it immediately.
Based on our current demand and our capacity.
Yeah.
Podcasting 1.75 billion revenue for the December quarter.
And I'll say $1 billion annual.
Annual revenue target for fiscal year, 2000, and Tennessee.
We continue see opportunities for.
Well its shane again across our pit.
Basically with strong demand.
Oh rack scale total IP solutions and accelerated computer peripherals.
Despite.
Alright, do you have in the royalties server and storage portfolio in the industry.
We are expanding our product line.
By 25% is supporting our future growth.
This addition of new products nine well spacing.
But its ubiquity.
Magical number one high end AI workflow.
Pfizer telco applications.
Exploration storage systems and.
Number four specific technology partner and top tier customer engagements.
For the first time.
Yeah opening stand the OSC, Pete optimize it pretty full.
And Brett Pullbacks.
We are able to diabetes unique medium bulk solution designs and stay though spending huge additional engineering resource.
And hardware software investment.
Combining our hardware it in bulk solutions.
The vintage soda way yeah.
Security and.
Service fee chose our total IP solutions.
King <unk> stronger.
To address the growing demand our total IV solutions, our manufacturer capacity in both Silicon Betty and Taiwan can place continue to Gil for delivering more it obtained it only Devon and it'll trail rack scale systems, including our new decreased court.
So delicious.
We are on target with scale.
And rack solution.
Uh huh.
Let's scale production capability capacity to a train wreck, but less in U S in the near future.
We're also preparing to expand to our rack scale cracker and pay solution in Europe and in Asia.
Put them all so.
The component shortage.
Police.
Hello ability to deliver our best in class solution, we hope again to exit.
Right.
Given our customer.
Even greater confidence in our ability to service their needs.
Well my system David perspective.
We are ready to launch.
For online next.
<unk> next generation products, which technologies across our key patent law ecosystem.
For India.
We are engaged with many large opportunities.
This entails upcoming Gen full scalable G M CPU.
What an statewide rapids.
We now have hundreds of <unk>.
So D C D engagement, including several thousand early shipments.
Excuse me in our program.
Executing with A&P.
And we have seen very strong demand.
I mean do you know what.
CPU base platforms.
We said wed expect to Nvidia not only do we have the most complete portfolio overseas.
<unk> actually went down to eight Gpus.
We have also developed many brand new architectures.
Dean.
<unk> tablets and <unk> partners.
At the upcoming.
Supercomputer in mint.
We will be showcasing many new systems supporting these latest CPU and GPU, including our next generation water Corp.
<unk> scale plug and play solutions.
We work closely with our customers designing solution. They are both optimized for performance and it reaches.
Putting them on a pace.
Green computing.
Financial perspective, Superman called the Green computing solution newer customers paid.
Data center to feel well maximize performance per kilowatt.
Increase compute capacity correct.
No facility coast.
Well Ed.
Location for SP in particular tool.
Constrain ridges with higher power cost.
We expect to see.
Elevated demand for allergy season rack scale solution are close to the P. O L. In tier two data center ecosystems.
We now have enabled a popular chipotle couldn't.
<unk> product line and some over GPU put online.
So we're already up to my disorder Nyx coding solution.
And three a L coding data center environment.
Soon we will start to also for all need redundant Nickelodeon owned assisted labor simulator to lease.
<unk> Court.
Counterparts.
For even more peace of mind.
If a half OTA image adapt supermicro, when computing solutions, well, Hey, Beth solution as green as ours.
Together, we can potentially save for that index up to $10 billion in.
The excise duty coast per year.
Which is equivalent to eliminating about 30 fossil fuel power plants.
That is also at Cleveland than tool preserving 8 billion trees.
Our printed.
We are planning in database propylene commuting and Pete Bunin computing Tempe free.
We just brought us.
To summarize.
We are emerging as one or the largest global suppliers.
Mobile I'd solutions.
There are some key factors that enables true blue mango to continue with its ability to make a strong market share gains.
First our.
Our unique brilliant broke solution.
MS storage enables us to create optimal botox bomb system neighbor to rack scale.
Second our I T put our solution strategy, including Talos into managed Minnesota, where security features crowd specs as service.
For customer a peace of mind and quicker time to market well explained in our Pip.
Our unique operating model, we speaking as a quarter end campus in U S Asia and Europe .
Is it people toe in supporting these key growth drivers.
Third our bonding combatant DNA.
Our customer achieve.
Much of Dougherty CEO , whereas saving the mother Earth.
I had mentioned earlier, putting computing can be free.
Peppa at the Mis training.
And we said bonus that keep are paying back.
With that I expect.
Our fiscal Q2 revenue will be in the range of one 7 billion to one and our fiscal 'twenty three.
Reached six put in my opinion to stay one player what Bds.
Looking ahead I anticipate fiscal year 'twenty full revenue mandate should a range of 8 billion to $10 billion.
Cedar in the current economic wins.
Adjusting for many quarters.
As we continue to gain market share, we should outpace rack scale PRASM pray he told us that loosens.
I believe we will soon become a $20 billion.
Revenue company.
Our opinion is model had been optimize.
Our engineering team are floating rate.
Hello.
Or the wide tempus potassium capacity and efficiencies allow second to that.
Let me not forget I wanted to take a moment to thanks, Hello, Supermicro three teams our suppliers.
And our partners for their continued dedication to Maximo, Michael a market leader.
Now I will pass the call to David <unk>, our Chief Financial Officer.
Additional detail on the quarter.
Thank you Charles I am pleased to report Q1 fiscal 2023 revenues of 1.85 billion, a 79% year on year and 13% quarter on quarter increase.
Revenue has exceeded our initial guidance range of 152 to 162 billion and our recently updated range of $1 seven eight to $1 82 billion.
Our growth momentum continued with our rack scale total solutions targeting growing markets and customers with accelerated GPU.
I workloads.
Software defined storage and networking.
<unk> and hybrid cloud and five G edge Iot platforms.
Our Green computing solutions helped us gain market share as customers valued both generating less carbon in our environment and reducing their operating costs. These.
These growth drivers have resulted in accelerated revenues with expanding margins and operating leverage.
In fiscal Q1, Supermicro again recorded strong revenues across all three of our market verticals demonstrating the value we bring to our end markets and customers.
We achieved 840 million in our enterprise and channel vertical representing 45% of Q1 revenues versus 51% last quarter.
That vertical was up 16% year over year, and 1% quarter over quarter.
The year over year growth in this segment was driven by our new product offerings are.
Our OEM clients and large data center segment achieved $921 million in revenue representing.
Representing 50% of Q1 revenues versus 44% last quarter.
This vertical was up 268% year over year, and up 28% quarter over quarter with strong growth coming from design wins from data center and OEM appliance customers.
Our five G telco edge Iot segment achieved $90 million in revenues, representing 5% of our Q1 revenues, which was the same as last quarter. This was also this vertical was also up 58% year over year and 9% quarter over quarter.
Our mix of complete systems and rack scale total it solutions has been increasing steadily sister.
Systems comprised 92% of our total revenues and was up 102% year over year and 16% quarter.
Quarter over quarter as we saw growing success with our high value rack scale total solutions for emerging applications.
<unk> systems and accessories represented 8% of Q1 revenues and was down 24% year over year and down <unk>, 9% quarter over quarter as we prioritize our key customers with high growth rack scale applications.
On a year over year basis, the volume of systems and nodes shipped as well as system node asp's increased due to product and customer mix.
On a quarter over quarter basis, the volume of systems shipped decreased while nodes shipped and system node Asp's increased.
Again, due to product and customer mix.
During fiscal Q1, we observed strength in the U S market with the U S representing 70% of our revenues.
Asia represented 14% Europe , 13% and the rest of the world 3%.
On a year on year basis U S revenues increased 131% as we gained market share with our advanced rack scale total solutions for high growth server workloads.
Asia increased 3% Europe increased 31% and the rest of the world increased 78%.
On a quarter over quarter basis U S revenues increased 21% Asia decreased 4% Europe increased 5% and the rest of the world decreased 5%.
Q1, non-GAAP gross margin was 18, 8% up 120 basis points quarter over quarter from Q4, and up 540 basis points year over year due to price discipline, lower freight costs and leverage from our higher factory.
Utilization.
Our Q1 gross margin demonstrates the success of our high value rack scale total EIS solutions.
Turning to operating expenses Q1, opex on a GAAP basis increased by 4% quarter on quarter, and 17% year on year to $127 4 million on.
On a non-GAAP basis operating expenses increased 3% quarter on quarter and increased 16% year on year to $117 3 million.
Our non-GAAP operating margin increased significantly to 12, 5% for the quarter versus 10, 7% last quarter and three 7% a year ago demonstrating.
Demonstrating both improvements in gross margins and operating leverage.
Other income and expense was approximately $4 1 million and income primarily consisting of $7 8 million and a foreign exchange gains offset by interest expense of $3 9 million.
As compared to $4 million, and FX gain and $2 9 million and interest expense last quarter.
Interest expense increased sequentially.
We reduced short term credit lines.
While interest rates increase.
The tax provision for Q1 was $38 9 million on a GAAP basis, and $42 1 million on a non-GAAP basis.
Our GAAP tax rate for Q1 was 17, 4%.
And non-GAAP tax rate was 17, 9%.
Our GAAP and non-GAAP tax expenses increased due to the higher level of pretax profits.
Lastly, our share of income from our JV was a loss of <unk> 9 million this quarter as compared to a gain of <unk> 3 million last quarter.
We delivered strong Q1, non-GAAP diluted EPS of $3 42.
Which was up 490% year over year, and up 31% quarter over quarter and exceeded the high end of the original guidance range of $2 seven.
To $2 32.
And the recently updated range of $3.05 to.
The $3 20.
The increases to earnings per share were due to a combination of higher revenues.
Higher gross margins.
For manufacturing efficiency price discipline and operating leverage.
Turning to the balance sheet and working capital metrics compared to last quarter. Our Q1 cash conversion cycle improved to 95 days versus 100 days in Q4 still above our target range of 85 to 90 days.
Days of inventory was 100, representing a decrease of seven days versus the prior quarter of 106 days as we managed our inventory more efficiently.
Accounts receivable decreased sequentially by $98 million from strong collections, while accounts payable increased sequentially by $130 million due to the timing of payments to our vendors.
Days sales outstanding was down by three days quarter on quarter to 39 days, while days payables outstanding.
Came down by 44.
It came down by four days to 44 days.
For fiscal Q1, we generated.
Positive cash flow from operations of $314 million.
Versus cash used in operations of $25 million last quarter.
The positive operating cash flow was due to higher profitability.
Along with better management of inventory and working capital.
Revenue growth was 79% year over year, and 13% quarter over quarter, while inventory grew 47% year over year and 12% quarter over quarter.
Capex was $10 8 million for Q1 resulted in resulting in positive free cash free cash flow of $303 million versus negative free cash flow of $36 million last quarter.
The closing balance sheet cash position was $238 million while.
Bank debt was reduced to $250 million as we paid down $347 million in short term debt during the quarter.
We did not buyback any shares during the quarter and have $200 million in share repurchase authorization until January 31 2024.
Now turning to the outlook for our business, we are carefully watching the global macroeconomic situation and supply chain dynamics.
The second quarter of fiscal 2023, ending December 31, 2022, we expect net sales in the range of one 7% to $1 8 billion.
GAAP diluted net income per share of $2 54 to.
The $2 81.
And non-GAAP diluted net income per share of $2 64 to $202 90.
We expect gross margins to be down 75 to 100 basis points.
Due to competition from a strong U S dollar and macro and that kind of economic conditions.
GAAP operating expenses are expected to be approximately $133 million and include $11 8 million in stock based compensation that is not included in non-GAAP operating expenses.
GAAP and non-GAAP operating expenses are expected to increase in Q2 due to continuing investments in R&D and higher personnel cost.
We expect other income and expense, including interest expense to be a net gain of approximately $1 6 million and expect a nominal contribution from our joint venture.
The companys projections for GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 17, 4%.
non-GAAP tax rate of 17, 9% and a fully diluted share count of $55 7 million for GAAP and 57.0 million shares for non-GAAP.
We expect Capex for the fiscal second quarter of 2023 to be in the range of $7 million to $10 million.
For the fiscal year 2023 ended June 32023, we're raising our guidance for revenue from a range of $6 two.
To $7 billion to a range of six five to $7 5 billion.
GAAP diluted net income per share from at least $7 27.
To a range of $8 50 to $11 and non-GAAP diluted net income per share from at least $7 50.
To a range of $9 to $11 30.
The companys projections for GAAP annual net income assumes a tax rate of 19, 2% and a rate of 19, 8% for non-GAAP net income.
For fiscal year 'twenty, three we are assuming a fully diluted share count of 57 million shares for GAAP and $58 4 million shares for non-GAAP .
The outlook for fiscal year 2023 fully diluted GAAP EPS includes approximately $32 7 million in expected stock based compensation and other expenses.
Net of tax effects that are excluded from non-GAAP diluted net income per common share.
As we look ahead to the rest of fiscal 2023, we expect that our improved profitability together with good working capital management will lead to operating cash.
Cash flow in line with net income we remain confident in our long term outlook for robust robust revenue growth and profitability driven by our leading edge new platforms design wins market share gains and engagement with significant new global customers.
Michael we're now ready for Q&A.
Operator, I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Pause for just a moment to compile the question and answer roster.
Your first question comes from the line of.
John Ken one thing.
C. J S Securities Your line is open.
Hi, good afternoon, everyone and thank you for taking my questions and congratulations on a really really impressive quarter.
My first question is just looking at the guidance and I know you raised at the midpoint.
Just you're anticipating declining quarters on average for the rest of the year.
Is that a express function of an expectation of perhaps if a recession or macro economic pressure on your clients or are you thinking that specific customer programs.
At the midpoint or is there something else I know in the past you've put into Cushing. Therefore.
It has been supply chain constraints, just help us understand what's your thinking within the brackets of tissue going forward.
Yeah very good question, yes, the macro economy condition is hard to predict but there is movement and looked at <unk>.
Sure, but we see that.
Have you seen 700 rapid new technology from Intel AMD, Quinoa and Nvidia <unk>.
There are lots of a new opportunity for us.
Mark do you have a new technology, <unk> and <unk> have a better chance to gain Mac shale, so which did indeed I believe.
Our business in next 12 months.
Should be net not.
Not too much impact.
And also our Pts automation right.
In last few quarter I mention about I will also come to greater online automation that will help our sales.
Service customer base.
And with those.
<unk> said.
<unk> that the beta tool I believe.
Our next 12 months speaking it won't be too bad.
Great. Thank you for that and then the second question just with the really strong cash flow you had in the quarter and expectations for future cash generation. What are your priorities for cash usage I know you've mentioned that you still have that share repurchase program, which you didn't use are there any capex plans or should we be thinking of any other.
Things you may want to use the cash investment.
So we haven't changed our capex allocation strategy, we still have.
A repurchase plan in place.
As market and the board review that policy and otherwise that our Capex for next quarter was listed as a $7 million to $10 million and.
And so we don't anticipate large increases in inventory.
And this year again that I just mentioned so many new technologies coming so we'd like to take this chance to casino game much here to help.
She will Michael where Houston attempt median.
And then a $20 billion company. So we're casino folks will now quickly go into a company much sure and our position.
Got it one more if I could did you see any weakness in the quarter from any end markets or customers or geographies.
Yes generally.
A little bit.
Kind of signal when we do our overdue for day, but again new product it would take an outage.
That will offset those are Michael economy weakness.
Okay, great. Thank you very much guys.
Thank you.
Your next question comes from the line of Noel.
Hall Chachi from Northland Capital markets. Your line is open.
Yes, Thank you amazing quarter really.
Impressive guidance shows strong visibility here.
And I'm, sorry, I missed quite a bit of a conference calls you've probably already hit upon this but what are you seeing on the supply chain supply chain side at this point.
Supply chain has been dramatically improve as you may know right.
So three months ago <unk> everywhere.
Today.
The program had been that Jeremy.
So not much shortage at this moment.
And we believe.
Looking for in the coming quarters.
Don't have a shot at that is that won't be too bad.
That's why we put a payer to grow market share.
Okay great.
Point in time did you actually see.
The supply chain shortage.
We're looking at that rate.
Indeed, the Kinks.
Quickly improve in about last.
Two months.
Okay great.
And then.
Really incredible free cash flow generation I haven't run through the numbers yet to figure out how.
That was done.
Given the strong growth can you just walk me through.
What was the driver of our strong free cash flow generation.
Sure absolutely.
You can see our cash conversion cycle came down and that was a result of we were able to speed collections and.
Also we did receive.
Some advance customer payments and we will have a little bit more color on that in our 10-Q, which should be filed in the next few days, but we received.
$70 million in advance payments from customers, so that that helped us out, but still our cash flow from operations greatly exceeded our net income.
Yes, and that's where my mind.
<unk> I mean.
We have some cassia of ratio a major because.
Global shortage. So we ended keep.
Larger amount of inventory now.
He meant any of them.
Have been improved because normal.
<unk>.
Hi chain challenging now.
Got it understood. Okay, and then Dave did I hear you correctly that you expect free cash flow generation will be close to that of a non-GAAP net income for fiscal year 'twenty three.
Yes.
Oh, that's correct because.
We have.
We have our inventories are a little more reasonable now.
And then what I mean by that is.
The supply some of the supply chain issues.
We are we have R. R.
Our cash flow is there a little more imbalanced and so we expect cash flows to be a little more in line with income.
Alright, great.
Finally.
Due to the low end of guidance.
Implant.
And.
I think if we look at your prior low end of guidance imply that maybe you'd have a slightly negative year over year growth in the back half of fiscal year 'twenty. Three now this new updated guidance implies 10% to 15% revenue growth.
So and again I'm sure you entrust us during the script, but what is the driver of this improving growth outlook. Despite what we're seeing macro that youre, providing here at the low end of your guidance drivers by the way.
I gave it to them in your region. These are macroeconomic condition.
Yeah.
No one really know how.
No.
Economy economic headwind well asking.
So we try to be more cocos.
Understood I guess my point is is that the update low and actually in <unk>.
<unk> improved year over year growth outlook on the back half of the year.
And this is despite a worsening macro so what are you guys seeing that effectively driving a raise in your back half.
Revenue growth expectations.
Yes.
We really have a we have a growth in all of our verticals and a whole and not only that but but geographically as well so.
As Charles mentioned there is new.
There is new.
Cpus coming out from AMD from Nvidia from Intel as well as.
Well is it new product launches.
So we think that all of those the momentum that we have in our verticals as well as the new product introductions.
That's what gives us guidance to our to the numbers that we put up.
Excellent.
Josh Thank you for taking my questions.
Again, if you would like to ask a question press star and the number one on your telephone keypad.
Your next question comes from the line of John Penguin King.
C. J S Securities Your line is open.
Hi, Thanks for taking my follow up I was wondering if youre seeing any kind of impact from that.
On China by the U S. If there are any I know earlier in the quarter Theres been video news I know a lot of companies kind of added to the entity list, where any of those customers how.
How should we think about the.
The consequences of those actions.
Yeah, we see some impact with <unk> and inject any how long the impact where laskin, we still keeping a watch.
Yeah. So.
By the way, we didnt have any customers that were added.
As everyone knows.
The GPU sales became limited.
China sales last quarter were less than 3%. So we don't consider this to be a significant issue for us going forward.
Understood. Thank you and then in your guidance do you have any impacts from.
Foreign exchange built in there or possibly price declines as as maybe pass through declines in component costs as they occur.
Most of our contracts our invoices are U S dollar denominated.
We.
Our FX really comes from from the fact that we have some Taiwan dollar denominated loans and that's what causes the quarterly fluctuation.
In our FX is just marking the dollar to the.
The U S dollar to the Taiwan dollar so therefore.
The only the only impacts on an FX.
Come from.
Really our price setting issues as opposed to.
Balance sheet issues.
Got it Okay, and then lastly, the strength in the quarter did you observe any pull ins or was it just more of the.
The supply chain loosening up and being able to get more components and were there any push outs.
Did you observe.
So we didn't have any.
We didn't have any any push outs we had some.
Customers. This will be in the 10-Q, we had a couple of customers, who prepaid and who is who shipments.
Some of which were made.
But we're not did not qualify for revenue recognition others that would ship later.
So.
We didn't have any any push outs, though.
Okay, great. Thanks again.
Your next question comes from the line of Mehdi Hosseini from F. I G. Your line is open.
Yes, Thanks for taking my question a couple of follow ups.
Thanks.
For the update on the fiscal year and I was just wanted to better understand how your system H b.
Trend given the updated fiscal year 'twenty three.
Revenue guide and I'm, asking because you have done a really good job.
Increasing content, it's captured in your system is b and.
I wanted to see if you would still be able to increase to see system ASP increasing.
Double digit figure out and I have a follow up.
So many you probably.
May have heard that a lot of.
GPU prices and CPU prices are going up.
Especially with the new.
New refreshes that are coming out so we.
Paint that Asps will continue to go up.
Okay.
Okay.
For your fiscal 'twenty, two it was more than 30%.
Should we assume that the acceleration or would you be able to keep up the pace.
It's a big question.
Again lots of new technologies, new CPU and GPU, so that won't be a positive side.
At the same time, the macro economy can be kept putting some negative impact. So at this moment, we try to play safe.
That's why the number at least is that read the tea very conservative.
Okay.
Thank you.
A balance sheet question.
And David There was a line item.
Accounts payable also helped combined with the $75 million for prepayment it helped.
With.
Positive cash from operation.
And in that context, how should I think about cash from operation.
In Q2 fiscal year 'twenty three.
Yeah. So I think that I think my general comment supply that are.
We see our cash flows as is now.
More balanced with with income with net income and so we will get it will have a few puts and takes where customers.
Prepay more or less from quarter to quarter, but we when we underwent a lot of heavy lifting to get our revenue levels up our AR levels up as we were as we were growing and so to.
To the extent that we have more growth we will.
Face those challenges, but based on our current forecast.
We expect cash flows to be.
Close to net income.
And then.
Updated guidance for Capex in FY 'twenty three.
So we haven't given a guide for FY 'twenty three just for the next quarter.
Should I assume.
Hello.
Capital intensity as last year.
Sure.
We're modeling cash flows.
I think we'll come out with more of a guide later on.
Thank you.
Your next question comes from the line of Ananda Baruah from loop capital. Your line is open.
Hey, Yeah. Good afternoon, guys. Congrats on congrats on the <unk>.
And thanks for taking the question.
I have a few calls Tonight. So I may ask something that's already been addressed.
If it is we can we can just chat on that offline but.
I would love I would love just context on.
Context on customer penetration.
Any new customer acquisition that was contributed in the quarter.
And then any any context, you can give us on what.
It continues to be really really good ongoing strength of these key application type rather.
Rather than driving driving the business.
For the last number of quarters.
Anything that you haven't given yet I can I can take it offline with you or get out of the transcript and you can do that yes.
Lighting, Tom talked about it but there is any additional context as I forget it.
<unk>.
Yes, very good question.
I just mentioned.
Yes, introduce copper of penis automation tool, including <unk>, including <unk>.
<unk> organized studies. So all of those were ahead of our sales made to our sales and customer relationships become more efficient more accurate.
We expect that we are able to gain more customers.
Pretty minimal customer because the improvement of our.
Automation tool.
Let me now.
Again, we saw a much stronger.
<unk> pulled out now right, so including the OTA.
Kind of a data center management tool a security tool and.
Andrew.
Service and.
Applications are Oems.
So much.
Much stronger position from this point of view.
We sell off.
Tend to address scale total solution.
And then let me ask a follow up too and this may this is something that that could have come up earlier as well on the.
Call in your prepared.
I'm not sure in the Q&A.
Yeah.
Sort of upcoming Intel AMD and Nvidia cycles.
Should we think of those as being potentially meaningfully incremental.
Your business run rate.
Are they sort of blended them, but they would need sort of just like blended into the run rate.
<unk>.
For sure customer whereby a new product.
So that all pulled that way, but because we always have a stronger new product nine new tech and outage. That's how we expect that we will continue again.
Customer base and also <unk>.
<unk> customer relationship because of a stronger for that.
Yes, the hardware.
Before but now a total solution.
Customer.
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And green convenient as as you.
No.
Our green computing needs.
A total solution and we met our fleet gimpo water cooling much easier and much quicker delivery time, so all of those.
<unk>.
Positive drive.
And as it goes.
That's super helpful. Thanks, a lot guys. Thanks Scott.
Thanks.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
There are no further questions at this time, Mr. Charles Liang I'll turn the call back over to you.
Thank you. Thank you for joining us today and expect to meet you in next quarter. Thank you.
This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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Okay.
Yes.
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Yeah.
Yes.
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