Q4 2023 Super Micro Computer Inc Earnings Call
Thank you for attending by my name is Anna and I will be your conference operator today.
This time I would like to welcome everyone to the Super Micro computer fiscal fourth quarter 2023 results conference call.
Yesterday Charles Liang.
<unk>, President and Chief Executive Officer, David Bacon, CFO , and Michael Baker, Vice President of corporate development.
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 alright, followed by the number one on your telephone keypad. If you would like to withdraw your question again sorry.
Thank you Michael Baker, you May begin your conference.
Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the fourth quarter and full fiscal year, which ended June 32023 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 with a copy that was distributed at the close of regular trading and has been.
Billable on the company's website.
A reminder, during today's call the company wafers, we presentation that is available to participants in the wet Investor Relations section of the company's website under the events <unk> presentations tab. We have 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 first quarter fiscal year 2024, and the full fiscal year 2024, 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 of today's presentation will refer to non-GAAP financial results and business outlook for an explanation.
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 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's prepared remarks, we will have a Q&A session for sell side analysts to ask questions I'll now turn the call.
Our call over to Charles.
Thank you Michael and good afternoon, everyone.
Today I am pleased to Alan's Nemo vehicle fleets currently gel seven putting 1 billion annual revenue.
So would you say, 1% year over year growth.
And teams execution to maintain our.
To market advantage and deliver our total solution to our key partners.
So not in competition.
Our investment of 4000 racks per months stay or the up meditation and propulsion for CDP is silicon Valley is a one or a major factors.
In delivering high performance the Iraq.
Quickly.
Those are court and the court options.
Not to go over some key financial highlights.
We enter fiscal year 'twenty, four we should record high order.
Many more new design wins and new customers.
Again offers.
Our fiscal year 2010 is really net revenue totaled 712 billion up 37% year on year above our midpoint guidance range of $6 7 billion.
Fiscal year 2023, then get earnings per share grew.
Fernanda and 9% year over year to 11000, Eddie Wednesday in compared to $5 60, what I said in a year ago. So you see it in the higher end of our revised guidance range of $10 50 to $11.
Physical Q4, net revenue totaled $2 1 billion up 34% year on year.
Yeah, and up 70% quarter on quarter above our guidance range of one point of sale MPD and a $1 9 billion.
Physical Q4 non-GAAP earnings of.
So without a 51 cents per share grew 31% year over year compared to $2.62 a year ago and it was well above the high end of our guidance range of $2 91 to $2 71, demonstrating strong operating leverage and.
Continued customer preference towards our rack scale total IV solutions.
For 30 years, we have been diligently building, our company's strengths and foundation us as the only USA base larger scale AI platform designer and manufacturer we have been shipping our winning products in volume to our partner.
For more than a quarter.
Couple of months ago, I was all not to have a my close friend to Libya CEO , Jason fun join me on stage and I come to the tax to highlight our optimize new generation GPU solutions for this AI era.
We are deeper in not just system, but company either drive scale total solution to large generative AI.
Innovators.
Supporting <unk> as you went under the other next one on the Pcie Gpus and the just announced it Fortyish Gpus.
Our next restaurant next.
And a GPU.
<unk> systems.
Become the benchmarks or excellence for our industry.
We are also getting good traction on <unk> and PVC as well as E&ps amyotrophic accelerators submissions.
That demand for Attie Vito intended as English changzhou is it perfectly addressed by our patent Brock server architecture.
And due to our <unk> solution, we are paced and royalties application optimized GPU solution on the market.
We put into extended this leadership, we used at the upcoming <unk>.
<unk> X platforms that we announced at Computex.
Bringing macho flexibility on exploration.
X M P ships.
Race.
<unk> and Grace Hopper GG, one shipper chip.
The MGA expedited form is Australia, the region of AI computing between Nvidia and she will Michael designed to be open flexible and huge approved for multiple generation of Gpus Cpus and Gpus.
We already have a minute customer engage with a decent new MTX spray foams.
As we speak.
And soon they will be in volume production.
With nearly half of our revenue this quarter based on AI related designs.
It's peg this growth momentum to continue and spend in our team.
Across all customer types.
Four major AI innovators are super large CSP.
And data centers.
<unk> and <unk>.
General enterprise market.
Also the performance of GPU, CPU, GPU and memory technology increase.
Enhanced Stora storage performance is also necessary to feed a messy with their asset toward our application without becoming a bottleneck.
Those are the entire system.
Super Micro's, New Pcie Gen. Five base E. One is an easily is.
Pat US scale, all fresh storage server, Oh, four industries deepening storage performance.
Our capacity.
Together with our Utah tool nvme capability to scale out and traditional storage platforms, we are fulfilling customers' AI compute and storage needs.
With the Atlanta stop total.
With a one stop total solution shopping experience, which in our base optimization and performance.
I'm too old nine and coast.
With accelerating the computing and storage.
Power consumption and so much LNG of these new technologies and regions dramatically.
<unk>, Ky or even 100, Ky direct solution demand is rapidly expanding and require for compute intense U S.
Data center CSP and other verticals.
Having high power efficiency.
Oh and coding expertise have become one of our key.
Differentiators of success we.
We had a mega merger investment across a variety of technologies to drive adoption of direct Nick coding.
Data center to address without some more challenges.
In addition to increasing computing density and reducing PCR and if we could introduce to the environmental impact of datacenter termination.
And then going with our wouldn't complete remission.
Similarly, the <unk>.
Emotions solution is making good progress.
And we will be happy to have provided their option to interest partners.
The reality is that they are saying that you will try to get them more complex.
Especially with that pre season demand of AI.
Design complexity and integration scale alone leads to that requirement to temporary in a timely fashion.
Heavy burden two minute and customers.
Super Micro is a total solution approach save them from that.
Complication of design meditation sourcing and integration and also demand.
Networks switching from where yeah and store management and death in this scale.
Customers peace of mind is the top of the value of our kind of let's say when global service peers.
Given the current infrastructure demand.
In our continuing to evaluate our footprint beyond our recently announced militia expansion we had recently.
Another new building close to our Silicon Valley headquarter.
And aim to further increase our current the 4000 rack per month capacity in this fiscal year.
To further support the demand from key domestic partners.
We are also planning to build another manufacturer campus in North America.
And at this moment.
U S headquarter and powered facility can support these few competing in revenue why are the new Malaysia facility will help further increase our total revenue capability.
Soybean.
Our largest scale product and customer OLED reduce coastal structure in the coming.
Few quarter.
Encouraging supermicro is in a great position to continue our growth momentum with our leading portfolio.
Our infrastructure readiness.
And our ability to deliver product in a timely manner.
Due to our current key component surprise shortage.
We forecast revenue in the range of one nine to $2 2 billion for our September quarter.
However, given the record high Backorder, we see for <unk>.
We see fiscal year 2020 for revenue between $9 five to $10 5 billion.
Wisdom to deliver more dependent on a bit of bvd oversupply.
Our no asset that either of rack scale total AI and Iot solutions.
Yeah.
Yes.
<unk> begun.
We are ready to deliver optimized the AI infrastructure.
In an emerging market.
Along with our value add the software and service.
To say the printery.
Our foundation and capacity are floating rate and our demand is growing strongly.
And our.
Largest English model and other applications are booming.
Now expect $20 billion annual revenue.
Target to be just a couple of years away.
Before passing the call to David Wigan.
Our Chief Financial Officer, I want to say, thank you to our partner customer <unk> employees and our shareholders for your continued support thank you David Thank.
Thank you Charles.
Fiscal fourth quarter revenues were $2, one 8 billion.
Up 34% year over year, and up 70% quarter over quarter.
Q4 revenues exceeded initial guidance range of $1 seven to $1 9 billion and were at the high end of the recently updated range of $2, one five to 2.18 billion.
For fiscal 2023, we reported revenues of $7, one 2 billion, representing 37% growth of our fiscal year 'twenty to revenues of $5 2 billion.
Next generation CPU and AI platforms continue to drive record levels of design wins and orders.
Exiting fiscal year 2023, with a record backlog, we are well positioned for fiscal year 'twenty four with an outlook for continued revenue growth and profitability.
We expect diversified growth driven by top tier data centers emerging csp's.
Enterprise AI build outs, CPU upgrades and edge Iot and telecom markets.
We are also targeting new opportunities in adjacent markets, such as storage switches software and services.
We note that our shipments against our record backlog may continue to be constrained by supply chain bottlenecks for key new components for our advanced AI server platforms.
Q4 results were driven by our high growth AI, GPU and rack scale solutions, which represented 52% of our total revenues, we had 210% customers for <unk> for Q4 and did not have any 10% customers for fiscal year 'twenty three.
During Q4, we recorded $976 million in the enterprise and channel vertical reps.
Representing 45% of revenues versus 50% last quarter.
This was up 19% year over year and up 51% quarter over quarter as we ramped several key enterprise programs.
The OEM appliance and large data center vertical achieved one $1 7 billion in revenues.
Representing 53% of Q4 revenues versus 47% last quarter.
Up 59% year over year, and up 94% quarter over quarter as we game gained momentum from existing and new data center, CSP and OEM cloud appliance customers.
Our emerging five G telco edge and Iot segment achieved 43 million in revenues, representing 2% of Q4 revenues versus 3% last quarter.
For the fiscal year 2023, organic enterprise channel and AI ml revenues grew 10% to represent 48% of total revenues.
The OEM appliance and large data center segment grew 102% and represented 49% of total revenues.
The emerging five G telco edge Iot segment decreased 36% and represented 3% of total revenues.
The mix of complete systems and rack scale total <unk> solutions has increased over the last two years server and storage systems comprised 93% of Q4 revenue and subsystems and accessories represented 7%.
Asps continue to increase on a quarter over quarter and year over year basis, driven by the value and complexity of our rack scale total solutions.
By geography.
U S represented 76% of Q4 revenues Asia, 11%, Europe , 10% and rest of world 3%.
On a year over year basis U S revenues increased 55% Asia decreased 17% and Europe increased 1% rest of the world increased 12%.
On a quarter over quarter basis U S revenues increased 112% Asia increased 10% Europe decreased 1% and the rest of the world increased 11%.
Q4, non-GAAP gross margin was 17, 1%.
Down quarter over quarter from 17, 7% in Q3, as we focused on winning strategic new designs and market share.
For fiscal fiscal year 'twenty three the non-GAAP gross margin of 18, one versus $15 four for fiscal year 2022.
It was driven by an increased rack scale production and customer mix and higher manufacturing efficiency.
Turning to operating expenses Q4, opex on a GAAP basis increased by 14% quarter over quarter, and 19% year over year to $145 million driven by headcount and related expenses.
On a non-GAAP basis, operating expenses increased 14% quarter over quarter, and 17% year over year to $133 million.
Our non-GAAP operating margin increased significantly to 11% for Q4 versus eight 7% last quarter due to operating leverage driven by higher revenues that outpaced increases in operating expenses.
For fiscal year 'twenty, three we achieved a non-GAAP operating margin of 11, 4% versus seven 2% in fiscal year 'twenty three.
Due to higher gross margins and operating leverage from higher revenues and expense controls.
Other income and expense for Q4 was an expense of approximately $1 5 million consisting of $3 5 million and interest expense offset primarily by a net foreign exchange gain of 2.0 million.
Our interest expense increased sequentially as we utilized our short term credit lines or working capital requirements, along with higher short term interest rates on our borrowings.
The tax provision for Q4 was $31 3 million on a GAAP basis, and $36 6 million on a non-GAAP basis.
The GAAP tax rate for Q4 was 13, 9% and the non-GAAP tax rate was 15, 4%.
The GAAP tax rate was 14, 7% for fiscal year 'twenty three versus 15, 7% in fiscal year 'twenty two.
And the non-GAAP tax rate was 15, 9% versus 17, 7% in fiscal year 'twenty, two 'twenty fiscal year 'twenty two.
We delivered strong Q4, non-GAAP diluted earnings per share of $3 51.
Which exceeded the high end of the original guidance range of $2 21 to.
So $2 71.
And the recently updated range of $3 35 to $3 45.
The increase in Q4, EPS was due to a combination of higher revenues and operating leverage.
For the full fiscal year 2023, we reported non-GAAP diluted.
EPS of $11 81.
Up 109% year over year versus fiscal 2022, non-GAAP diluted EPS of $5 65.
And higher than the fiscal year 'twenty three guidance of $10 50 to $11.
Cash flow used in operations for Q4 was $9 million compared to cash flow generated by operations of $198 million in Q3, due to higher accounts receivable offset by lower inventory and higher accounts payable from backend loaded shipments in the quarter due to some <unk>.
Supply constraints.
Capex was $8 million for Q4, resulting in negative free cash flow of $17 million versus positive free cash flow of $190 million last quarter.
For fiscal year 'twenty, three we had cash flow from operations of $664 million.
Capex of $37 million, resulting in free cash flow of $627 million.
We have $50 million remaining under the authorized share buyback program, which expires on January 31 2024.
The closing balance sheet cash position was $440 million.
Bank debt was $290 million, resulting in a net cash position of $150 million down from a net cash position of $176 million last quarter as we utilize our bank lines of credit to support higher revenues and accounts receivable and we ramped up production of new AI GPU design wins.
Turning to the balance sheet and working capital metrics compared to last quarter. The Q4 cash conversion cycle improved to 77 days versus 126 days in Q3.
Days of inventory was 75, representing a decrease of 51 days versus the prior quarter of 126 days.
<unk> sales outstanding was down 13 days quarter over quarter to 38 days, while days payable outstanding came down by 15 days to 36 days.
Faster inventory turns contributed to the improvement in our cash conversion cycle.
Now turning to the outlook.
We remain enthusiastic about our diversified business model covering a wide range of AI core computing storage five G telco edge and Iot applications.
<unk> wins spanned across enterprise channel large data center and emerging AI CSP.
Telco and OEM customers.
We are carefully observing that the global macro economic situation and continuing supply chain constraints, especially for a leading AI platforms for.
For the first quarter of fiscal 2024, ending September 32023, we expect net sales in the range of $1 9 billion to $2 2 billion.
GAAP diluted net income per share of $2 <unk> to $2 80.
And non-GAAP diluted net income per share of $2 75 to $3 50.
We expect gross margins to be similar to Q4 levels.
GAAP operating expenses are expected to be approximately $185 million and include $48 million in stock based compensation and other expenses that are not included in non-GAAP operating expenses.
GAAP and non-GAAP operating expenses are expected to increase due to continued investments in R&D and higher personnel costs, adding to our great engineering and sales teams.
The outlook for Q1 of fiscal year 2024 fully diluted GAAP EPS includes approximately $44 million in expected stock based compensation and other expenses net of tax effects of $9 million, which are excluded from non-GAAP diluted net income per common share.
We expect other income and expense, including interest expense to be a net expense of approximately $1 5 million.
The companys projections for GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 14, 7%, our non-GAAP tax rate of 15, 4% and a fully diluted share count of $56 million for GAAP and 57 million shares for non-GAAP , We expect capex for the fiscal.
First quarter of 'twenty to 'twenty four to be in the range of 10 million to $12 million.
For the fiscal year 2024, which ends June 32024.
We are giving.
<unk>.
I'm sorry, the first fiscal year first fiscal year 2024.
Which ends.
June 30, 'twenty 'twenty four we are giving guidance for revenues in the range of $9 5 billion to $10 5 billion.
Okay, Michael we're now ready for Q&A.
Operator.
In order for you to queue up Q&A panel simply press star and number one on your telephone keypad.
Now we have the first question comes from the line of Neil <unk>.
<unk> from Northland capital markets.
Yeah Ronny cellphone.
Thank you.
Congratulations on an amazing quarter, an amazing fiscal.
Fiscal year 'twenty for revenue gains of $9 5 billion definitely want to dig into that.
First though.
Charles I think you said you had 50% revenue exposure AI for the June quarter. That's incredible makes a very strong statement that super Micro's, Indeed, the leader in AI systems.
What do you think is a sustainable differentiation that you guys are wilting with rack scale AI systems, that's driving that.
Incredibly fast increase in revenue exposure AI systems.
Yes, Thank you and a question.
I had been a major focus it seems a few years ago and we local Lisa.
Yes.
Chip company kind of lagging Nvidia very closely and we co develop lots of our platform.
Including that MTX now coming MTX Azure now to support our C tool and GG one so.
<unk> AI solution.
Lisa rack scale.
Cloud scale.
Costa scale solutions that make our customers.
<unk> been much easier and that full already have sales solution.
And is it close to the savings.
Time to online so I believe our AI.
About nine <unk>.
<unk> will come at the end of the growth.
In EMEA <unk> continued to be a more than 50% of our revenue.
Next question comes from the line.
<unk> Highsmith from Susquehanna International Group.
<unk> is helping.
Yes, Thanks for taking my question Charles.
Charles.
I think it will be very helpful. If you could.
$10 billion of revenue in.
Perhaps.
Any kind of color on ASP increase that would.
Capture your increased content will give us an insight unless you have other ways of explaining to get to $10 billion.
Yeah.
We continue to gain those of a new customer.
<unk> partners continue to like our solution and we can be and again new customer.
We sell.
Rack scale, our cloud scale total solution, including <unk>.
Oh, cool and that Duke Court alright.
So we see.
There is strong demand and.
And growing very fast at colder so a $10 billion.
<unk>.
Kind of a short term.
The target for Sheila.
The question your competitors.
Also argue core.
Innovative cooling Andy also argue for share gains is there something with.
Your cooling technology that is better offers better cost performance compared to some of the emerging cooling there your that your competitors are.
Marketing.
I was talking about.
Yes, Indeed, our engineering team is.
Strong and dedicated.
Everyone can design system, <unk> system seemed pretty beta than others.
Not yet.
And quality.
<unk> also.
Earlier time to market and today, we just service <unk>.
It's a managed demand so is it a total solution and service. So we feel pretty confident that we will continue to gain market share.
Okay, maybe move on.
But they are becoming more than 50% of your revenue.
How is your pipeline.
As you look into <unk>.
Second half of calendar year do you already have a pipeline that gives you confidence you're going to hit that 50% plus a higher mix of revenue or.
You still have to go and qualify on the wind business to hit that target.
Indeed in our pipeline and have been very strong and that is a moment that visibility is very clear.
So we are very confident.
Essentially we kind of came out of the game on plasma pool.
The next question will come from the line of John .
From panel Wang Peng.
Your line is open.
Hi, good afternoon, and thank you for taking my questions and congrats on a really strong quarter outlook again.
My first one is I just wanted to dig into your confidence for the outlook.
Can you just.
Various parts, maybe talk about your confidence in supply chain being able to supply that maybe 40% growth guidance at the midpoint.
Maybe talk about your ability to get allocations from key suppliers and then within your order book and backlog what does your assurance or how can you identify if theres double or triple ordering.
How do you.
Protect yourself against that if they do occur.
Yes, its a complicated question.
We have a very good.
Many product line.
Thanks for re <unk> four.
There is full.
Grace Hopper and other solutions so including.
Including that.
And also so.
So the solution is a really strong and so.
Brian Chin.
One can we solve into very closely every day and.
So hopefully that situation will be.
Consistently improve but it's not 100% comfortable about our sale.
Although we have a good partnership.
We spend though with customer so we looked at elevated closely and situation.
We have to continue to improve.
And on the order side.
Yeah.
Your next question Dan.
Yes.
And we're ready for the next question.
John did you have a fire and other site.
Protection against double and Triple Yes, Indeed, the orders I mean, the back order have been continue growing strongly.
Every months I see that now order growth.
Also John we have a we have a lot of.
And CNR orders as well.
So that protects against double and triple booking.
Okay. Your next question comes from the line on that.
<unk> from loop capital your line is open.
Yeah. Good afternoon, guys and thanks for taking the question congrats on the strong results.
And the ongoing momentum I have a couple if I could.
Charles you talked in the prepared remarks about.
The unprecedented demand youre seeing and you guys have talked about.
Actually, adding new customers, including top tier data center customers I think I think you mentioned.
And some of the again.
Get AI server forecasts.
For 2024 calendar are really really strong.
And you're also talking about gaining share et cetera, et cetera, and so I guess the first question is is what's the opportunity you see here.
The Navy, even due to stronger than the 20th that fiscal 'twenty for guidance I guess, what would be the puts and takes there.
And if you were to be able to.
Exceed the 2020 for guidance.
It would be some of the things you think would lead to a car and then I have a quick follow up thanks.
Yes. Thank you a bit of good question again, we continue to gain.
Generally I E.
In Nevada, and we have a very good partnership we started shipping them some mobile Ram and know for sure they need a turn time.
'twenty kind of more system and we just cannot ship at this moment because of supply chain and at the same time. We also continue to engage with largest CSP and large data center.
We.
Continue to gain more customers.
I would rather say all Steven.
Political.
So yes.
I had to work how is the supply chain.
<unk>.
I'll have a surprise our customer knowledge sale.
<unk>.
Lots have been our major focus now, although we continue to improve our sard <unk> <unk> co.
Total paid us in this evolution.
Included in the PRC direct debit coding and.
Dave could you more seats.
<unk>. So I mean that we are on the right track yes.
Expecting.
Our supply chain can improve so that we can grow our revenue.
That's really helpful and so.
Charles just to make sure that I understood that accurately is that to say, yes, if the supply chain.
If you can if you can get more from the supply chain.
Well actually it's the safest way you have.
You have.
Order visibility such that if you can take care of more you you would have the ability to share.
Share gains exceed exceed the fiscal 'twenty four range that you provided is it really supply chain issue I guess is what I'm asking did I hear that accurately.
Yes, <unk> I mean, we continue to prove to our customers and our vendors we have biller.
Basically solutions, so vocal with us.
We went for everyone.
I got it and then let me just ask a quick follow up to that one.
Is there any way you guys could providing context for us.
Around.
I guess, how constrained you are.
What might the demand outlook.
We sort of look like if you were not constrained.
So it's not like a guidance right. So does your guidance suggests.
Contact or asking you really get a sense of what the structural positioning of the company, yes, if there were not constrained.
Yeah, I can't we haven't.
Basically all of that and we have a very good partner.
Customer and we push out vendors and we know our vendors to India basically to support us at a center Venezuela. So we just have to work together.
Charles I have one more quick one.
Move away from demand I appreciate it.
It sounds like the gross margin guidance for the September quarter.
It is a pretty solid like to track the guide.
For fiscal 'twenty, four should we assume that same 17% kind.
Gross margin range or what's the what's the right way to think about that and that's it for me. Thanks.
Sure. This is David so we're targeting to.
To hold our margins and that's all the guidance it will.
Give right now.
Your next question comes from the line.
Rackers from Wells Fargo. Your line is open.
Yes, thanks for taking the questions and also congrats on the results Tonight. So I first of all I just wanted to clarify I want to make sure I heard the number right.
Is it 50% or 52% of the revenue that was from your AI at rack scale solutions This last quarter.
Yes, Adam.
Charles.
Is.
His script said, approximately 50% and I and I clarified 52%.
Okay, and so I guess the question underneath of that as well.
One of the questions I get asked a lot about.
Is the spend around AI being so strong and it sounds like obviously youre carrying a pretty good backlog looking out over the next several quarters given the supply dynamics.
But is.
If I take that number and I say that non AI business.
How has that trended are basically are you reallocating capacity away from more of the non or traditional compute side.
<unk> demand on the AI side or have you seen spending slowdown outside of these AI investments that you are clearly benefiting from.
Yes.
Server storage.
<unk>, we keep.
Adobe Fred I understand the industry and it'll be declining.
Not the Canadian bar about Fred and we try to grow as well and.
That's why we are growing.
In <unk>.
Minute direction kind of.
Manufacturing kind of like the Taiwan, Malaysia, and now we may have.
And also a medical campus. So that's a <unk> increase our capacity so that we can grow traditional.
Data center business SaaS whale instead of.
Oh.
David do you folks will not go into AI.
Okay. So just to be clear I mean, so youre limiting you're limited on your supply under traditional compute side because of the AI demand that youre seeing is that fair.
<unk> impacted by night.
Indeed.
You know the traditional.
Server traditional datacenter business Adobe Fred from the demand side.
So we are waiting to see the experience as well, but not declining.
Okay.
And then the final the final question for me is just thinking about.
The AI opportunity and I think you alluded to this a little bit in your prepared comments you mentioned position.
Positioning around I think it was the Intel Galati Chip and then also I think another vendor coming to market. The <unk> 300 from AMD, how do you see that playing out.
For your opportunity does it help satisfy demand are you seeing indicators that this AI opportunity is going to be much more diversified here as we move into 'twenty four.
Versus what you've seen on the video side at this point just curious how you're seeing kind of the.
The competitive landscape or maybe the opportunity set expand for you guys with both newer.
Their solutions coming to market.
Yes, Nvidia solution than <unk>.
That EDA and people really.
Nvidia most surprised and other solution from India from AMD, because the outbid in bulk solution.
We have a solution to a diesel all over again.
Lots of the advantage we have so yes.
With you for Dale a solution to be available in production.
Yes. Thank you very much guys. Thank you very much.
Thank you.
Your next question comes from the line of John <unk> from <unk>. Your line is open.
Alright, thanks for the follow up.
Dave I was wondering if you could talk about your working capital needs in the sort of environment can you.
Generally a positive cash flow going forward or are you going to be.
Using cash as you're trying to fulfill this demand.
Yes, John we see we see the business generating good cash flows as it has historically and <unk>.
We think that.
The.
Especially in this constrained supply market.
Or where we could deliver.
More if.
If we had more supply.
But.
So really.
The constrained supply ends up.
Moderating the working capital and so we.
We grew our business last quarter.
Quite a bit.
And through our <unk>.
So that utilized a lot of working capital, but we have no concerns about working capital.
Okay, Great and then could you guys give a little bit more detail on the <unk>.
The expansion and when those various facilities come online and what exactly that.
Sure we have.
In Asia, which is expected to come online in around 12.
To 15 months.
<unk>.
That's going to that will eventually.
Double our capacity.
And we also have additional capacity.
Coming online.
Building 23.
In our Silicon Valley campus and we've also added.
As Charles mentioned.
Another.
Another site.
In skin.
San Jose.
With intentions to add another site in the Americas.
Okay.
Got it and then my.
Last one from me maybe.
More detailed question what percentage of your AI sales right now are liquid cooling base and do you expect that.
Percentage to increase as you go forward.
This is very new.
New questions. So.
We have a very good.
TLC direct touch I think liquidity solution ready to go now and it all depends on customer demand.
And at the same time the.
Deep emotion solution also get invoices, so we have a <unk> solution and depends on customers demand.
The momentum for <unk>.
Oh cool.
The majority as you know.
Okay.
Okay, great. Thanks Charles.
Thank you. Your next question comes from the line of Neil <unk>.
Northland capital markets.
Your line is open.
Oh, yes. Thank you for the follow up question.
Okay.
So in video effectively guided their July quarter data center revenue to execute in Q.
What does that mean for Super micro in terms of as you know.
GPO systems, especially what I'm trying to drive that is that is there a lag.
Between when an video gets recognize revenue and when the rest of the server Oems gets recognized revenue.
Oh, we believe Dale capacity are growing and that's why we talk over to him every day asking for more.
So hopefully we can gather more support from them and hopefully they'll cut.
Capacity grows the mostly are quickly.
So that's all I can say now.
Okay.
You have a guess on.
What is your AI.
<unk> related market share during the June quarter, and whether or not that was up Q O Q.
We don't have.
We're not going to offer a our market share.
For the June quarter.
You can make some <unk>.
Functions by looking at.
The results of.
Of others, but we have we sell different gpus as Charles mentioned.
Sure.
There is a.
It's not a direct correlation yes, basically we have a strong odor backorder and we still have it not have capacity there hasnt waiting more mall.
AIG.
That's our situation.
Yep understood and how should we think about distributing the remaining 8 billion across the final three quarters here.
Yeah.
We we were not going to announce quarter by quarter.
Our our guidance.
But we.
We're expecting we're expecting this to be a.
A robust year and.
As tempered by the.
The natural.
Supply constraints.
Because of the popularity of these new platforms, yes, basically in <unk>, we have more capacity for <unk>, and we're really happy to wait over that and besides other than the Alto next our Resto next is a company that Android.
And our <unk> solution is.
Pretty much it Randy is way up so we believe we can achieve much more than.
Not at all.
That situation. So in next four quarter I believe we will continue to grow quarter after quarter.
Thank you very much thank you very much.
And he will summarize the mall.
Even as the prior condition beta I believe we can surpass it.
$10 5 billion plus U R E D.
Thank you everyone for joining us.
Time for questions at this time.
And this will conclude today's conference call you may now disconnect.
Great day.
Please wait the conference will begin shortly.
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Yeah.
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