Q2 2023 Super Micro Computer Inc Earnings Call
Perfect.
We are at the top of the hour, we're going live momentarily I will conduct the count down from five with a silent to one then begin my introduction I will turn the call over to Mr. CAGR.
But stagger Sds CAGR standards.
Okay.
Perfect, we're going live in 543.
Good morning, My name is Devon, and I will be your conference operator today at this time I would like to welcome everyone to the Super Micro Computer Inc. Fiscal Q2, 2023 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 would 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 at any time again press star followed by the number one.
For Ya patients that Mr. Michael <unk>, you may begin the conference.
Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the second quarter, which ended December 31, 2022 with me today are Charles Liang founder Chairman and Chief Executive Officer, and data 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 on the <unk>.
Reis 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 other income and expenses taxes capital allocation and future business outlook, including guidance for the third quarter of fiscal 'twenty through 'twenty three and the full fiscal year 2023, there are a number of risk factors that could cause super micro's future 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 2022 and other SEC filings. All of these documents are available on the Investor Relations page of Super Micros website, we assume no obligation to update any forward looking statements most.
Today's presentation will refer to non-GAAP financial results and business outlook for an explanation of our non-GAAP financial measures. Please refer to accompany presentation or to our press release published earlier today. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation at the end of today.
These prepared remarks, we'll have a Q&A session for sell side analysts to ask questions and I'll now turn the call over to Charles.
Thank you Michael and good afternoon, everyone.
Today, I am pleased to Atlanta.
Another outstanding bakery resolve where she will make her even by contribution across our diversified customers and.
Market and strong for that.
No single customer contributed more than 10% of our revenue.
This is the eighth consecutive quarter of outstanding growth.
That effectively double our annual revenue.
Let me share some key highlights for the quarter.
First.
Revenue for the second quarter or fiscal.
Fiscal year 2000, Tenuously totaled 1.8, all three media.
54% year on year.
Bob our guidance range of one point to seven to one 8 billion.
Our fiscal second quarter non-GAAP earnings per share grew over 20, and 71% year on year at $3.26 compared to a P. S N a year ago.
But exceeding the high end of our guidance.
Range.
Of two.
264 to $2 90, though this greater achievement is made possible by our much.
Much improved operational and financial discipline, including our Taiwan campus that contribute Noah operation in potash and coast.
We used to that inquiries of AI applications.
And pray in rack scale total solutions.
Solutions.
And GPU based systems continued to be strong contributors with more than 100% E. L E Outgrows <unk>.
Salaries pods are also gaining significant traction with 41% year over year growth.
We continue to grow market share.
We are mindful that many of our partners.
Customers.
And become increasingly more cautious.
With respect to our make whole economic.
Headwind.
And we are prepared to deal with this uncertainty as we always ever in the past.
The strength of our pods and business fundamentals keeps us confident in our ability to casino gaming Mac shell from competition given in that traditional salt chews three quarter.
We expected that.
When may persist then in the first half of calendar 2010 is really but we believe our business the way I would recover quickly in the second half.
Oh that year.
Our new Sapphire Rapids.
Genoa powder and etch, one anti product a nice start to ramp up in high volume.
I mean to say that our fiscal year 2000, Twenty's range revenue year over year gross should be in that middle 30% compare with nausea without changing our business plan for a strong growth in the coming years.
While physical E O N E and therefore, we are targeting year over year revenue growth of at least 20%.
We continue to see new customers increased demand for energy efficient rack scale Pratt embraced solution across that T. O N T O tool data center.
She has done as well as the other enterprise customers.
Some of them are Heidi interests in our neural coding.
Greg and see some neighbor put al Green computing Etch PC data center and Cao inspiration in addition.
Our continuous investment in soya seek and service.
Praying evidence to our total IP strategy as they grow.
Our Silicon Valley in Taiwan, Tempus continue to optimize as Dale wrap scale production houses.
Ready to deliver and a pin and always have been and editorial systems in volume, we start Oh, yeah networking and service.
Our U S facility still have a 40% capacity, where Taiwan spearhead.
2% capacity headroom to grow.
Next one to two years.
To accommodate as stronger growth in EMEA and medium future.
Our recently.
Broken ground Mount as she annual campus were start to contribute even pay the bill.
So scale.
With our more a mall Neil high volume customers.
I'm very glad that that lower operation and potassium coast form our new Malaysia campus, where be ready in just four to five quarter away.
When that time gets tough customer looking for tangible value on the I T.
Investment.
We set a power requirement racing.
With each new generation of <unk> now up to fund it while on a CPU and so in underwhelmed that GPU, we have seen that true value of our coding compete in April .
Well you add both the high ambient temperature operation and nuc, including support for our new portfolio to reduce environmental impact.
Coatings related to English Vitale coast and opec's.
We are happy to see minimal cow total solution customer.
Ah speeding Abdel deeper email, we used our winning computing Mr. Paresh many of them have already saved tens of millions of dollars in it extra CD coast as a direct readout.
We expect them to grow even faster by the coming quarters and Es as a weak deliver superior performance performance per watt and put dollars zero new generation out of that.
As I am sure in the past when the IDE integer adopts our green computing solution or the Bev Green solution like ours, it's possible to save close up toward $10 billion in electricity coast per year, which is equivalent of eliminating about third.
E fossil fuel power plants.
In.
Equating talk.
Preservation of up to a PD entry for operating it.
As we approach the second half.
Of our physical 2023, we see opportunities.
Well diversified growth across <unk>.
<unk> large data center enterprise.
Machine learning storage Clough five G table and Iot market.
Our own may be D C and b to B programs, and finally start to ramp up and offer a convenience and quicker service.
<unk> direct suppose Publishable, Michael Dohmen, a cost model now.
With Ora on nine automation and intelligent database driven to us we.
We see many new customers. They are really happy to order from our new pray for 'twenty.
<unk> for our <unk>.
Strong attach service Ria time, these ponds and precise communication costs the recency.
Somewhat either vintage this program office.
With our industry's most of the intensive adapt portfolio supporting that recently launched entail first generation.
Scalable Xeon processor of satellite and IP.
Post in orders in a M D. A peak in our processes and Nvidia edge one entity.
Gpus.
We are confident to maintain and enhance our much.
Leading gross momentum in the coming quarters and Es.
Unlike the last few generations steady product ramp that we currently see minimal customers, taking samples and shipping units of this new solution.
This demonstrated our customer base is as strongly expanding now.
We expect them to become a significant revenue stream.
June quarter.
And more so in the September quarter MBS.
With Martina excited them for the latest innovation from Intel AMD, Nvidia and she will Michael we remain optimistic of dead at.
That demand where it is.
Panda as new architecture developed before AI, Metabo omnibus and I O T. H applications, we have been strong in the foreseeable future.
We had better than expected December quarter waste.
We see new generation or that in strong addition, now that we are generally the market demand, especially with our rack scale solution.
Along with our getting stronger Soto air seats and service offerings.
Our potential to gain back share.
It has never been stronger than today.
Despite of that.
Macro economics headwind.
We used our strong cash position today and especially.
Poodle P/e.
We advocate.
200 million barrels or stock buyback program.
We continue to.
In March as one or at largest global supplier of total IV solutions with market share gains.
We are silicon Valley company, focusing on bringing innovation and system technology.
Our average.
As safe Oh Cosmos.
Opex tremendous city.
With our 50% Steve available capacity in Taiwan, and the sudden come in more cost efficient campus in Malaysia, we continue to expect 20%.
Two of more than 50% year over year growth for the coming years.
And we remain on track to reach our long term growth objectives of $20 billion.
Any on revenue in the long run.
Now I will pass the call to Debbie Wiggins, our Chief financial Officer to provide additional details on our potent David Thank you Charles.
I'm pleased to report Q2 fiscal 2023 revenues of $1 8 billion.
Up 54% year on year and down 3% sequentially.
Revenues were at the high end of our initial guidance range of 1.7 to $1 8 billion and our recently updated range of $1 77 to $1 8 billion.
Our year on year revenue growth continued to be driven by new and existing customers widely adopting our GPU AI systems and rack scale total AG solutions, which contributed to solid gross margins and record operating margins.
In fiscal Q2, we had good growth in our two largest verticals the enterprise channel and OEM.
Vertical I'm, sorry in the enterprise channel Ruger vertical any OEM appliance large datacenter vertical which demonstrated the resilience of our business model.
AI GPU accelerated computing solutions represented more than 20% of our revenues over the past four quarters and is a significant growth opportunity based on a wide range of AI GPU platforms.
We achieved Q2 revenues of 1.8 billion with no customer representing more than 10% of revenues.
We recorded $970 million and our enterprise and channel channel vertical.
Representing 54% of Q2 revenues versus 45% last quarter.
This was up 29% year over year and up 15% quarter over quarter.
The OEM appliance on large data center vertical achieved $766 million in revenues, representing 42% of future revenues versus 50% last quarter. This was up 172% year over year and down 17% quarter over quarter.
Our emerging five G telco edge Iot segment achieved $67 million in revenues, representing 4% of Q2 revenues versus 5% last quarter.
Systems comprised 92% of total revenue and was up 68% year over year and down 3% quarter over quarter subsystems and accessories represented 8% of Q2 revenues and were down 24%.
Year over year, and up 2% quarter over quarter.
On a year on year basis, the volume of systems and nodes shipped as well as the system node ASP fees increase.
Due to product and customer mix.
While on a quarter on quarter basis, the volume of systems shipped increased while nodes shipped and system note asp's decreased again due to product and customer mix.
Taking a look geographically in fiscal Q2, the U S market represented 61% of revenues Asia, 18%, Europe , 17% and the rest of the world 4%.
On a year on year basis U S revenues increased 71% Asia increased 16% Europe increased 45% the rest of the world increased 98%.
On a quarter over quarter basis U S revenues decreased 15% Asia increased 23% Europe increased 33% and the rest of the world increased 33%.
The Q2 non-GAAP gross margin was 18, 8% that was unchanged.
<unk> quarter over quarter, and it was up 480 basis points year over year.
Due to price discipline, lower freight costs and leverage from higher factory utilization.
Taking a look at operating expenses Q2, opex on a GAAP basis decreased by 4% quarter over quarter and increased 8% year over year to $122 million.
On a non-GAAP basis operating expenses decreased 7% quarter over quarter and increased 5% year on year to $109 million.
Opex decreased sequentially due to higher in Ari and marketing credit credits that we received from.
The new platform launches.
non-GAAP operating margin was 12, 8% for the quarter versus 12, 5% last quarter.
And five 2% a year ago.
As we benefited from lower operating expenses.
Other income and expense was approximately $8 million in expense, primarily consisting of $6 million in foreign exchange losses as the dollar weakened during Q2 and interest expense of $2 million.
As compared to an $8 million FX gain.
And 4 million of interest expense last quarter.
Interest expense decreased sequentially as we reduced our credit short term credit lines. This was partially offset by increased and for interest rates the.
The tax provision for Q2 was $30 million on a GAAP basis and $34 million on a non-GAAP basis. The GAAP tax rate for Q2 was 14th.3% and non-GAAP tax rate was 15, 3%.
Our tax rates were lower sequentially as we benefited from some favorable discrete tax benefits.
Lastly, our share of income from our joint venture was a loss of $1 $4 million this quarter as compared to a loss of <unk> 9 million last quarter.
We delivered strong Q2, non-GAAP diluted EPS of 326, which was up 271% year over year and down 5% quarter over quarter.
And exceeded the high end of our original guidance range of $2 64 to $2 90, and our recently updated guidance of three O seven to $3 22.
Our EPS outperformance was attributed to our ability to maintain gross margins manufacturing efficiencies.
And higher in Ari and marketing credits.
Turning to the balance sheet and working capital metrics compared to last quarter. Our Q2 cash conversion cycle was unchanged at 95 days versus Q1.
Days of inventory was 99, which was down by one day sequentially due to a more stable supply chain.
Accounts receivable increased sequentially by $32 million.
Accounts payable decreased sequentially by $225 million.
Days sales outstanding was down by one day quarter over quarter to 38 days.
Days payable outstanding came down by two days to 42 days.
In fiscal Q2, we generated positive cash flow from operations of $161 million versus $314 million in Q1.
Our operating cash flow contributed to continued to benefit from strong revenues and margins and an improved supply chain.
We note that Q1 operating cash flow benefited from $70 million in customer prepayments recorded as deferred revenues.
Capex was $10 million for Q2, resulting in positive free cash flow of 151 million versus positive free cash flow of $303 million last quarter.
The closing balance sheet cash position was $305 million.
While bank debt was reduced to $170 million as we paid down $80 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, our board will determine the timing and amount of share repurchases.
Now turning to the outlook for our business, we continue to watch the global macroeconomic situation.
Additionally, as the supply chain disruptions have eased and the industry transitions to new platforms from Intel a M D and Nvidia during 2023.
We anticipate normal are returned to normal seasonal patterns.
For the third quarter of fiscal 2023, ending March 2023.
We expect net sales in the range of 1.42 billion to 1.52 billion.
GAAP diluted net income per share of $1 75 to 2.02 and non-GAAP diluted net income per share of 188 to 2014.
We expect gross margins.
To be down 30 to 40 basis points due to macro economic conditions.
GAAP operating expenses are expected to be 139 million, which includes approximately $12 million in expected stock based compensation and other expenses that are excluded from non-GAAP diluted net income per common share.
GAAP and non-GAAP operating expenses are expected to increase in Q3 due to lower R&D in a re credits and higher personnel costs.
We expect other income and expenses, including interest expense to be a net expense of approximately $3 million and expect a nominal loss from our joint venture.
The companys projections for GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 15, 9%, our non-GAAP tax rate of 16.9% and our fully diluted share count of $57 million for GAAP and 58 million shares for non-GAAP .
We expect Capex for the fiscal third quarter of 2023 to be in the range of $11 million to $14 million.
For the fiscal year 2023, ending June 30th 2023 we're maintaining our guidance for revenue.
Our guidance for revenues from a range of $6 $6 five to $7 5 billion.
GAAP diluted net income per share.
From a range of $8 50 to $11 and non-GAAP diluted net income per share from a range of nine to 11 30 companies.
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 million shares for non-GAAP .
The outlook for fiscal year 2023, fully diluted GAAP EPS excludes approximately 33 million in expected stock based compensation and other expenses.
Net of tax effect.
That are excluded from non-GAAP diluted net income per common share.
We remain confident in our long term outlook for robust revenue growth and profitability driven by our leading edge new platforms Dizzy.
Design wins market share gains and engagement with significant new global customers.
Michael we're now ready for Q&A.
Okay.
At this time I would like to remind everyone in order to ask a question. Please press star and then the number one on your telephone keypad.
Our first question comes from Niihau choke sheep with Northland capital markets.
Yeah. Thank you and congratulations on the strong results, you'll see that gross margin.
And the guidance that implies very resilient gross margin, Dave you did mention that you're expecting 30 basis points of the Q acute downtick due to macro pressures I mean, that's a de minimis amount can you discuss.
Why only that amount.
Well now our margins are holding up we expected.
Downtick last in this Q2, but it didn't happen.
But we're still allowing for a downtick just in case, we have to to sharpen our pencil on some particular deals.
But otherwise.
Or are prices and margins are holding up.
And so then can you talk about why you think your margins are indeed, holding up in what appears to be pretty quickly deteriorating macro environment.
Well, we have customers that are.
Have pushed out orders certainly nail, but that we still bring value to our customers and that value is has not diminished and in fact with all of the new designs that are coming out.
We believe that it's increased.
Got it that's great.
And then you're maintaining your fiscal year 'twenty three guidance. Despite our performance in the December quarter, and you providing at least March guidance above.
My expectations.
So how should we be reading that implied June Q guidance basically so it would be.
If we take at the low end of the fiscal year 'twenty three guidance.
You could be looking at a pretty dire gross margin situation with the June Q is that the correct interpretation.
No I would say they hold it really we are we don't want to update our our guidance we're confident in our in our guidance and are in the ranges that we've given and so.
Really we're just we're watching the macroeconomic situation, but we remain confident in our basic business fundamentals and in our and our and our values and the values that our products bring.
Okay. So just to be clear there was no reasonable basis for believing that gross margin would drop to the low end of your.
What's arguably.
Our target model of switching of 17% in the June quarter or lower is that correct.
So we are right now we don't see any any degradation of our gross margins as I mentioned and the and so but we feel like.
We remain confident in our in our ranges and we don't we don't believe this is a time to update them.
Got it and then Charles made a comment that he expects fiscal year 'twenty three revenue be at least 30% year over year growth of mid 30%, but your overall fiscal year 'twenty three guidance range is still a pretty large bracket.
So how should we be reconciling these two things here.
Well I think that.
That number of of mid thirties that that's still falls within the range right now.
Yeah, so that so I think that's some indication.
Okay Alright.
Alright, I'll pass the mic and we'll get back in the line.
Okay.
Our next question comes from Ananda Baruah with loop capital.
Hey, guys yeah. Thanks for taking the question.
Just a few if I could.
So.
So maintaining actually I think slightly.
Slightly raising the midpoint of the fiscal year guide.
March is marching below where the street is the implication that June is above where street is at.
And so is it really just a matter of kind of street like we are and I think I'm part of this sort of had mis modeled march to the low side and subsequently also Miss modeling June .
<unk> Mis modeling March to the high side or with modeling June to the low side.
The clarification, just your thoughts on that and I have a couple of follow ups. Thanks.
Sure.
So again, all kind of all kind of go back and were.
Because.
Because things have been changing economically and we've chipped.
We had some we've seen some push outs.
Not cancellations again push outs.
We feel like we.
We shouldn't be.
Adding more.
More details on our annual on Q4, our annual guidance and so really we.
We feel like the guidance ranges that we gave.
Allow for.
Where we think performance will land and so to get to give more specificity to that at a time when when when the details are not easy to and not as clear to see we think is the wrong the wrong way to go and so instead, we're giving a good guidance on what we see.
And there in the quarter ahead.
But again, we're still comfortable with our annual guidance.
And it sounded I think I believe Charles I believe Charles imagine.
Actually just please clarify this for me if this is.
And accurate.
Something about your kind of macro softer, but recovery in the second half of calendar year 'twenty three.
And if I hear that accurately is that to say.
Revision first half of the calendar year being.
Sort of.
Softness.
Part of macro for years.
And you also made comments, Dave about return in calendar 'twenty yearly seasonality.
And so of course that there is a soft spot.
Second half, yes, good morning.
You guys think sort of normal seasonality clots quote unquote recovery began.
Welcome to your fiscal year 'twenty outlook.
Thanks, Julie I just wanted to ask it is that was that.
How you guys are thinking about it.
All right.
Yes.
Macroeconomic Hey, Hey.
<unk> is of some concern to everyone now so other than that indeed, our demand still pretty strong, especially as you know entailed yes.
<unk>.
Semidry beads a M D.
Genoa, and Nvidia Hopper H, one and so we have very strong pull that available and this time, we used we saw our customer very aggressively.
Kim was simple Villa OTC being so we believe that these were put in a big gross and however, big girls Motm she'll be in about summer or even after somewhat timeframe. So a long time.
We have a very strong confidence, especially after summer before summer depends allow medical economic I hate when we tried to be mall closures.
Very helpful Charles and Charles last one for me.
I believe you mentioned potential for more large data centers and in the second half of calendar 'twenty three did I hear that accurately and are those incremental data centers, if I heard it accurately and any more context, you can provide around that thanks.
Yes, I mean as you know when you start to approach your larger accounts since the may be a one year ago. So we continue to gain interest from dose.
C S P a and that larger accounts and that's why we increased power and capacity for lower potash and coast to support Rosa larger Tam and we even start a.
A big campus in Malaysia, So that goal is to our inquiries out per thousand capacity and lower operation and pedestrian coast. So that we are able to support our roes with azure comps with reasonable profitability. So we continue to add against them.
Engagement and interest from larger account.
Around that will indeed, and also I know sometime we also slot.
Engage with lots of me size that Ken Asbury.
Especially goes through.
B to B and B C. So, yes, engaging with a much broader customer base at all.
Very helpful. Thanks, a lot guys.
Thank you.
Our next question comes from maybe Hosseini with S. G.
Yes, thanks for taking my question.
<unk> follow ups.
It seems like the.
This decline in the December quarter.
<unk> has moved to do with the mix.
Assuming that the OEM in large data center mix wind down from 15 September 242% in December .
In the context. My question to you is how should I think of the mix in the March quarter, and how will that impact unit H b.
<unk>.
In March quarter.
<unk>, Mark Hey wing, so we still try to be cautious.
After summer our feeding become a much stronger.
Because another good pull that lots of engagement for my nausea calm me the size of the economy and even small lots of small account.
So it shows just I want to understand make sure I understood what the mix of revenue from OEM.
And large data center.
Decline again in the March quarter.
Yes.
Okay.
I'd have to say, yes.
Okay and then.
I also want to understand how you see the ramp of these three different Cpus.
You have always historically been of course.
Of course partner of Intel MTN in video.
How long in advance do you actually.
Q does components.
In advance of building the boxes, how much of that inventory come up in the working capital commitment that you have to to make before the actual high volume manufacturing takes place.
Indeed, we have a very close partnership with all of our vendor.
In this area I believe we are.
Similar to what our industry standout or slide that beta David you may have.
Many things have improved recently as you know on the supply chain side. So we used to have to procure.
Further in advance and so one of the reasons, our inventories have come down and one of the reasons. Our cash flows have been have increased.
And by the way.
We had net income in the last two quarters of $360 million, we had free cash flow of $454 million and so again. The reason for that is you don't know we had to invest less money in inventory so.
Our ability to produce.
Products is as faster now because we can we can buy.
Later in the cycle, but to your point on the on the timing some of it is going to be depend on dependent on when in the quarter.
Our customers are taking the bulk of their products. So if we have if we have early quarter shipments versus waived late quarter shipments that can affect the timing of our inventory and accounts payable.
Gotcha, Okay, and then one last question for me on the balance sheet, especially with the Malaysia facility coming online are you still targeting.
$45 million of Capex for fiscal year, 'twenty, three or more or less.
Yeah Fair question. So we.
We were gonna add in for Q3, we're adding a $4 million of Capex for Malaysia.
And will add 9 million in in Q4, and our Q4.
For Malaysia.
So that'll that'll be $13 million for the second you know for our fiscal second half and then this is going to be an investment over and over a couple over several years and so the we will make another $13 million in.
The first half of.
Of fiscal.
Fiscal 'twenty four.
So.
So that's not.
That's giving you a little more insight on that investment.
Should I assume that just the maintenance capex after the Malaysia is what $8 million to $10 million a quarter.
Yes, that's correct. So see your question Yeah, you can maintain a 45 and just add in the figures that I just gave you.
Thank you so much.
Our final question comes from the whole Doxie with Northland capital markets.
Great. Thanks, I guess that lead off and cleanup awesome.
So relative to seasonal patterns and excluding the 21, 9% customer from the September quarter.
How did the business actually performed in the December quarter.
Okay.
So the December quarter was.
An outstanding quarter on in every respect and.
So from.
From a free cash flow free cash flow.
Inventory all the metrics were strong cash position.
So.
No.
As you mentioned customer.
No customer concentration.
And so we.
We feel we have we feel we had a really good a really great quarter.
Okay great.
I mean my interpretation here is that the core business, excluding that 120 plus percent customer from the September quarter was up more than seasonal is that a correct interpretation.
Well, we always have customers that will take.
When we when we have design wins.
They hold what will always from quarter to quarter, we'll always have.
Shipments of large shipments to customers.
Sometimes it's according you know sometimes they change their forecast and we shipped a little bit more in one quarter than another so we can't we can't control that always but.
Last we said as the supply chain has improved that was that.
That dynamic was felt a lot harder during the supply chain Crunch now that we've returned to a better supply chain. Therefore, that's why we feel will return to.
Our normal seasonality, but that can also that can always be altered by a new design win that we get.
In one quarter.
We're over two quarters.
Bel cutting.
Intended tool we have is some dodgy account buy in.
Yes.
Physical <unk> now we are adding more <unk> com.
So we are going in that.
<unk> can more MELA side of the economy and the Osaka <unk>. So indeed, our customer mix is.
Is it becoming a much more diversified much mall LCL and for sure the volume Webby bigger that's why we extend to our Malaysia, but really.
The arcos.
Operation and the campus.
Presumably.
Diversification with the larger customers is coming on the <unk>.
Margin plug and play rack scale products is that correct.
We hope so.
So anyway, that's a.
<unk>.
We feel we still have another room to add more customer and.
Once we have a higher capacity in USA, Taiwan, Malaysia.
Our plenty to Ed.
Also more customer.
Okay, Great and then is there a particular vertical that you guys are seeing the push outs from that.
You were talking about some quarter Dave.
Not state Us index right.
The push outs were not and data large data center.
Well he was saying that they were in large data center, but self into large centers.
Got it okay, alright very good.
And then for the March quarter.
You're guiding to an 18% Q over Q decline.
And revenue.
There is clearly obviously some seasonality with March quarter.
Then there might be I guess ongoing push outs from the large data center customers and then there is also a macro element.
These are three major elements are driving that April 18% Q over Q decline and then could you potentially.
So you can help parse out what or rank order. These three drivers here.
So now if you look back pre COVID-19 or are typical Q3 decline was 12%.
Okay. So.
That was just that was during the time of normal seasonal patterns. During COVID-19. There was a different dynamic of course, because supply with scarce, but we think as we return to.
Normalized supply that we will have this kind of seasonality.
Okay, and then as far as the potential runoff of the large customer versus.
Any input as far as what's the driver there as far as the above 12% typical Q2 decline.
Well, we were engaging with new customers.
All the time and so we're not.
We're not we're not looking to be we're not looking to be declining in fact, just the opposite so while we will have.
<unk> seen that seasonality as a in a stable supply chain. We still we still are have our growth plans.
Are intact and we remain confident in.
Okay Alright, great.
And then my last question here is did I hear correctly that there is a new buyback that was implemented something about 200 million buyback can you just clarify that.
No that's the that's the existing.
Already approved buyback.
Got it okay.
And so now that you guys have worked yourself back to a net cash position with a strong free cash flow that you've highlighted we're past two quarters.
Is it reasonable to expect that you guys are going to put that back to work now.
Well of course.
Yes, it's completely up to the board completely up to the board, but I think.
So certainly reasonable.
Okay great.
We got one board member here Charles your thoughts.
Our patent.
Your thoughts on utilizing that buyback.
That's why I say it appears soto and cash flow is strong or not.
Very good alright.
Alright Thats it for me thank you very much.
We have a question from media more Hussaini with S. G.
Yes.
We follow up.
Just a clarification.
David.
Did you imply with did you did you say that the the 10% plus customer that you.
Having September quarter of last year.
He is going to come back or youre going to have another 10% plus customer in the coming quarters.
Yes.
I'll keep it very confusing.
So many of the the 10% customer we had.
A year ago September is it is a different customer.
The 22% customer that we had in <unk>.
In September in the recent September quarter, it began a different customer.
<unk> was below what was did not constitute 10% of our revenues in Q2, okay.
Okay did I did I did I clarify that sure.
Okay.
Do you expect that particular customer to come back is that what the confidence behind the June quarter is.
Well you know we have.
So so many lease our new pulled back in being very sold not offering so we ex peg and in time, we will have a mall.
Noon dodgy Kosovo.
All customer coming back is always there.
Very high possibility and we are working with them very closely Steve.
Partnership would come stronger Eva.
It's very dynamic.
Yeah, yes, sometimes navigate yes.
We thrive on repeat business.
Okay. Thank you for clarification.
Okay.
Yes.
There are no further questions at this time with that said concludes today's conference. Thank you for attending today's presentation. You may now disconnect.
Yes.