Q1 2025 Super Micro Computer Inc Earnings Call
Operator: Thank you for standing by.
Thank you for standing by my name is EMEA and I will be your conference operator today at this time I would like to welcome everyone to the Super Micro Computer Inc. S. M. C. I U S Q1, FY 'twenty five business update call with US today are Charles Liang found.
Tamiya: My name is Tamiya, and I will be your conference operator today.
Tamiya: At this time, I would like to welcome everyone to the Supermicrocomputer, Inc., SMCIUS Q1 FY25 Business Update Call.
Tamiya: With us today are Charles Liang, founder, president, and chief executive officer, David Weigand, CFO, and Michael Staiger, senior vice president of corporate development. All lines have been placed on mute to prevent any background noise.
<unk>, President and Chief Executive Officer, David Wiegand, CFO, and Michael Staiger, Senior Vice President 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. Please press star one on your telephone keypad. Thank you.
Tamiya: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Michael Staiger: Good afternoon, and thank you for attending Supermicro's first quarter fiscal 2025 business update conference call for the first quarter, which ended September 30th, 2024. With me today are Charles Liang, Founder, Chairman, Chief Executive Officer, and David Weigand, Chief Financial Officer. At the end of today's prepared remarks, we will have a Q&A session for sell-side analysts.
Good afternoon, and thank you for attending Super Micro's first quarter of fiscal 2025 business update conference call for the first quarter, which ended September 32024 with me today are Charles Liang, Chairman and Chief Executive Officer, and David <unk>, Chief Financial Officer at the end of today's prepared remarks, we will have a Q&A session for sell side analysts.
Michael Staiger: I will make additional remarks prior to the end of the Q&A, but the company will not address any questions regarding the recent decision of our independent auditor to resign in the delay in the filing of the company's 10K. During today's conference call, Supermicro will address business and market trends from the first quarter of Fiscal 25, including our financial outlook and operations, our strategy, technology and its advantages, our current and new product offerings, and competitive industry and economic trends.
I will make additional remarks prior to the end of the Q&A when the company will not address any questions regarding the recent decision of our independent auditor to resign and the delay in the filing of the company's 10-K.
During today's conference call Super Micro will address business and market trends from the first quarter of fiscal 'twenty, five, including our financial outlook and operations our strategy technology and its advantages are current and new product offerings and competitive industry and economic trends.
Michael Staiger: We will discuss estimated financial results, but reference to any financial results are preliminary and subject to change based on finalized results contained in future filings with the FEC. By now, you should have received a copy of today's news release that was issued after the close of market and is posted on our website, where this call is being simultaneously webcast. Any forward-looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update them. Our actual results may differ materially from the results forecasted, and reported results should not be considered as an indication of future performance.
I'll discuss the estimated financial results, but referenced any financial results are preliminary and subject to change based on finalized results contained in future filings with the SEC by now you Should've received a copy of today's news release that was issued after the close of market and is posted on our website, where this call is being simultaneously webcast any forward looking statements that we make are based on.
Facts and assumptions as of today, and we undertake no obligation to update them.
Our actual results may differ materially from the results forecasted and reported results should not be considered as an indication of future performance a discussion of some of the risks and uncertainties relating to our business is contained in our filings with the SEC.
Michael Staiger: The discussion of some of the risks and uncertainties relating to our business is contained in our filings with the FTC, and we refer you to those public filings, including our most recent annual report on Form 10-K.
Those public filings, including our most recent annual report on Form 10-K. During this call all financial metrics and associated growth rates are non-GAAP measures other than revenue and cash and investments will.
Michael Staiger: During this call, all financial metrics and associated growth rates are non-GAAP measures other than revenue and cash and investments. This call is being broadcast live on the Supermicro Investor Relations website and is being recorded for playback purposes. An archive of the webcast will be available on the IR website and its properties, Supermicro.
Being broadcast live on Super Micro Investor Relations website, and is being recorded for playback purposes, an archive of the webcast will be available on the IR website and its properties Supermicro are second quarter fiscal 2025 quiet period begins at the close of business Friday December 13, 2024 with that I'll turn it over to Charles.
Michael Staiger: Our second quarter fiscal 2025 quiet period begins at the close of business Friday, December 13, 2024.
Michael Staiger: With that, I will turn it over to Charles.
Charles Liang: Thank you, Michael.
Charles: Thank you Michael.
Charles Liang: Before we dive into the first quarter details, I would like to share some thoughts on the recent challenges that the company has experienced. As we have emphasized in our firing things, these challenges, emojis, we remain confident in our previous financial reports, and as previous alarms, we are actively in the process of engaging a new audience. We are working with Urgency to become current again with our financial reporting.
Charles: <unk> type of Angola first quarter details I would like to share some thoughts on the risks and the challenges there.
Charles: The company had its peers.
So we emphasize in our filing.
Speaker Change: What are you seeing these challenges emojis.
Michael: I don't see that in our previous financial reports.
Speaker Change: As previous allowance.
Speaker Change: Activity in the process of engaging a new auditor.
Speaker Change: Welcome Luis.
Speaker Change: She does become current again with our financial reporting.
Charles Liang: I'm pleased to report that the special committee has today provided the following statement to Supermicro, which is also included in our press release. I quote. The Special Committee has completed its investigation based on a set of initial concerns raised by Ernst and Young. Following a three-month investigation led by independent counsel, the Committee's investigation today has found that the Audit Committee has acted independently. And that, there's no evidence of fraud. or misconduct on the part of management or the board of directors. The committee is recommending a series of remedial measurements for the company to strengthen its internal governance and oversight functions.
Speaker Change: I am pleased to report that the special Committee had to date provided the following statement placebo Michael.
Speaker Change: <unk> is also included in our press release.
Speaker Change: Quote.
Speaker Change: The Special Committee has completed its investigation based on that said.
Speaker Change: Initial concerns.
Speaker Change: Hi.
Ernie: Ernie said, yes.
Ernie: Following three months investigation by independent counsel that competes investigation to date has funded debt.
Ernie: The Committee had act independent.
Ernie: And that there's no evidence.
For us.
Ernie: Misconduct.
Ernie: Oh for management Board.
Ernie: So direct cost.
Speaker Change: The committee is recommending a series of the med deal measurement for the company to strengthen its internal governance and oversight functions.
Charles Liang: and the committee expect to deliver the full report on the complete work this week for next. The special committee has other work that is ongoing, but expect it to be complete soon. and O'Court.
Ernie: And the committee expects to deliver the full of your pool on that completed the work this week for next.
Ernie: The special Committee as other work that is ongoing but expect it to be completed soon.
Speaker Change: Okay.
Speaker Change: Oh.
Charles Liang: The special committee has not otherwise provided any additional details or information. We look forward to receiving the committee floor report in the near future. We do not believe the current challenges affect Supermicro's ability to service our customers. as we continue to grow rapidly and strongly with the AI revolution. and my confidence in Supermicro and its staff remains stronger than ever.
Speaker Change: The special Committee has that otherwise provided and the.
Speaker Change: Additional details.
Speaker Change: Asia.
Speaker Change: We look forward to receiving the committee the flawed report in the near future.
Speaker Change: We do not believe the current the challenges affect supermicro is the ability to service our customers.
Speaker Change: Patents.
Speaker Change: We continue to grow rapidly and stronger at least without AIG evolution.
Speaker Change: And my confidence in Shippable, Michael and his staff remains stronger than ever.
Charles Liang: Here are some key quarterly highlights. The preliminary fiscal Q1 net revenue was in the range of $5.9 to $6 billion. As a midpoint, this is up 181% year on year, driven by strong AI demand from our old and new customers. It was one of our strongest first quarters in history, despite the many customers are waiting for the coming soon new generation GPU chips. The Preliminary Physical Q1 Nanget Early. in the range of $0.75 to $0.76 per share was 30% last year. Approximately. 122% year-on-year gross rate. The preliminary non-gap gross margin approximately 13.3% and non-gap operating margin is approximately 9.9%.
Speaker Change: Some key quarterly highlights.
Speaker Change: The preliminary fiscal Q1 net revenue was in the range of $5 $9 billion to $6 billion.
Wendell: At the midpoint this is wendell.
Wendell: 1% year on year.
Speaker Change: Yes.
Speaker Change: And by strong demand from our old and new customers.
Speaker Change: It was one of our strongest first quarters in history.
Speaker Change: Despite the many customers are waiting for the Communist New generation GPU chips.
Speaker Change: The preliminary fiscal Q1 non-GAAP earnings.
Speaker Change: In that range of 75 cents to <unk> 76 per share.
Speaker Change: So the wholesale last year.
Speaker Change: Approximately 30.
Speaker Change: 132%.
Speaker Change: Gross rate.
Speaker Change: The preliminary non-GAAP gross margin approximately.
Speaker Change: 13 policy per se.
Speaker Change: non-GAAP operating margin is approximately 39, 9%.
Charles Liang: Both were higher than the previous quarter as customer mix improve and supply chain cost and expertise shipping. for DLC components.
Speaker Change: Those who are higher than the previous quarter as customer mix improve and supply chain costs and expedited shipping.
Speaker Change: Yeah.
Speaker Change: But the LSC components.
Charles Liang: We have deployed the world's largest DLC-AI supercluster with 1000 with 100,000 NVIDIA GPUs and a record time to deployment, TPD, as well as time to online. This milestone achievement reflects our engineering expertise and complex logistics capabilities for large-scale AI infrastructural deployment. leveraging our data center building block solution, BCBPS. We are now building a full-scale liquid-cooled data center with our rack-scale plug-and-play solutions, featuring our latest DLC liquid-cooling technology at a leading pace. BCBPS data center building block solution can reduce the time required for customers to build new data centers from roughly two years to a few quarters.
Speaker Change: We had a degree that we're the largest.
Speaker Change: <unk> AI <unk> cost with 1000.
Speaker Change: 100000, Nvidia GPU in a record time.
Speaker Change: And the record time to deeper EBIT PPP as well.
Speaker Change: Come 2009.
Speaker Change: This milestone achievement.
Speaker Change: Our engineering expertise and complex logistic capabilities for <unk>.
Speaker Change: Large scale.
Speaker Change: Charge offs deployment.
Speaker Change: Leveraging our data center building broke solution.
Speaker Change: Yes.
Speaker Change: We are now building for scale deep core data center with our rack scale plug and play solutions, featuring our <unk> piece.
Speaker Change: C <unk>.
Speaker Change: Beating peers.
Speaker Change: D C bps data center opinion Brooks that we can reduce the time required for customers to view that new data centers.
Speaker Change: Roughly yes.
Speaker Change: Quarters.
Charles Liang: Significantly improving data center PTP, PTO, time to delivery, and time to online. and Coase for customer of the AI-IT infrastructure. Data Center Building Block Solution is also helping to accelerate the adoption of for driving efficiency and performance while reducing cost of the whole pack. Achieving Greener Communities. We expect 15% to 30% of new data centers will adopt liquid-cooled infrastructure in the next 12 months.
Speaker Change: Significantly improving data center, PTP, PPO time to delivery and time to organize.
Speaker Change: And coast customers the AI.
Speaker Change: IP infrastructure.
Speaker Change: Hey, listen the opinion polls solution is also helping to accelerate the adoption of <unk>.
Speaker Change: B LLC.
Speaker Change: Yes.
Speaker Change: It's driving efficiency and performance, while reduce customers' opex achieved.
Speaker Change: Achieving greenough computed.
Speaker Change: We expect 15% to 30% of new data centers.
Speaker Change: The court.
Speaker Change: It was hydro in the next 12 months.
Charles Liang: The PLRC Boarding. is at least 10 times more than last year. I mean, this year, CLC market share will be at least 10 times more than last year. due to the DLC liquid cooling portal maturity and the rapid growth of AI. to keep the DLLC solutions performing at their best. our new super cloud composer SCC is capable of end-to-end management. from chip level all the way to rack level and data center cooling power. making it the most powerful DLC data center management software on the market today. SCC for the Simplified. provisioning our highly automated, software-defined infrastructure supporting customers with rapidly changing workload requirements.
Speaker Change: D C volume.
Speaker Change: Is at least 10 times more than last year.
Speaker Change: This year.
Speaker Change: <unk> market share will be at least 10% more than last year due to that liquidity.
Speaker Change: Liquidity product maturity and that rapid growth over here.
Speaker Change: So keep it at the NRC solutions performing at their pace.
Speaker Change: Our new <unk> cloud.
Speaker Change: <unk> S.
Speaker Change: Is it capable of end to end management.
Speaker Change: <unk>, Oh that way too rapidly and tell us if the cooling towers.
Speaker Change: Making it the most powerful NLC data center management software on the market today.
Speaker Change: As cc further simplify.
Speaker Change: BJ.
Speaker Change: Highly automated software defined infrastructure supporting customers with rapidly changing workload requirements.
Charles Liang: with the addition of With the addition of SCC, Supermicro is well prepared to service many more customers and grow DLLC liquid cooling data center market share.
Speaker Change: So that additional of.
Speaker Change: With the addition of FCC, she won't likely well payout to service many more customers and grow.
Speaker Change: Recruiting data center market shift.
Charles Liang: On the production front, we are in the process of completing our new Malaysia campus. where we expect to begin manufacturing. Data Discorded. Additionally, we have been non-stop expanding our facilities in Silicon Valley to increase our DLRC including large-scale production capacity. Now they are hosting 50 megawatt of power and able to produce more than 1,500 DLC GPU racks per month. with plans to scale up for Our Taiwan and Europe production facilities also are growing at a quick pace. Moreover, we are planning to expand to several other global manufacturing locations in the near future. by leveraging our strengths in technology innovation.
Speaker Change: On the production for one we are in the process.
Speaker Change: <unk>, our new Malus, yes templates.
Speaker Change: We expect to begin manufacturing.
Speaker Change: Later this quarter.
Speaker Change: Additionally, we have been.
Speaker Change: Non stop expanding our facility in Silicon Valley to increase Hello.
Speaker Change: The ZIP code in rack scale capacity and capacity.
Speaker Change: Now theyre, posting 50 megawatt power and able to produce more than 1500.
Speaker Change: C G.
Speaker Change: <unk> racks per months.
Speaker Change: With plans to scale afforded.
Speaker Change: Our Taiwan in Europe, potentially with Cdp's wholesale are growing at a quick pace.
Speaker Change: Moreover, we are planning to expand to several other global manufacturing locations in the near future.
Speaker Change: By leveraging our <unk>.
Speaker Change: In technology innovation.
Charles Liang: Otak Design Field of Quality, Supply Chain Management, Deployment, and Data Center Services.
Speaker Change: Outback design.
Speaker Change: Quality.
Speaker Change: Supply chain management, Debridement and data Center services.
Charles Liang: We are pushing our goal to transform Supermicro into a leading USA, as well as worldwide, AI, IT, infrastructure company. We are off to a strong start in fiscal 2025. Our total IT solutions deployments are rapidly scaling. and our new product development. Awaken the Muslim. Our NVIDIA GeForce G200MVR72 is ready. and 10U air-cooled and 4U liquid-cooled, B200, right, part-and-plate systems, fully production-ready. The Brand New 200 kW Plus Shupal Rai, Architects co-developed with NVIDIA, which provides near 100% DLSS. I mean, the whole rack, almost no cooling fan required. is also on the right track. The new SuperDroid architecture will be able to achieve power usage.
Speaker Change: We are pushing our goal to transform <unk> into a leading USA as warehouse worldwide AI chat.
Speaker Change: <unk> company.
Speaker Change: We are off to a strong start in fiscal 2010 five.
Speaker Change: Our total IP solutions debridement rapidly scaling.
Speaker Change: And our new product developments.
Speaker Change: A question most of them.
Speaker Change: Our Nvidia GPU 200, and we <unk>.
Speaker Change: 72 is ready.
Speaker Change: And the 10, you airport and four Utica core.
Speaker Change: <unk>.
Speaker Change: Jack has embraced systems floating capacity already.
Speaker Change: Okay.
Speaker Change: The brand new <unk> plus <unk>.
Speaker Change: <unk> architecture.
Speaker Change: Co developed with Nvidia, which provides.
Speaker Change: 100% DLC.
Speaker Change: I mean, the whole Greg almost no coding required.
Speaker Change: It is also on the right track.
Speaker Change: The new <unk> architecture, we have been able to achieve power usage.
Charles Liang: effectively. PUE, close to 1.0. to complete our Broaddisk AI portfolio, the AMD MI320 and MI322. Sorry, MI325. Platforms, and Intel W3 solutions are ready to go as well. Our data center building block solution is attracting more new customers. and our long term investment in DLLC is paying off with all the cars quality and Tavorium Tepaz Even as a sustainable community. Age, and Economics of Scale.
Speaker Change: In fact, even this.
Speaker Change: Close to one point.
Speaker Change: To complete our protest.
Speaker Change: Portfolio.
Speaker Change: AMD M I should the NPI and <unk>.
Speaker Change: Sorry <unk>.
Speaker Change: So you tend to find.
Speaker Change: Peripheral ops and inter Cal. These three solutions are great day to go elsewhere.
Speaker Change: I'll update us in their opinion <unk> solution is attracting more new customers.
Speaker Change: And our long term investment in the LLC the cooling.
Speaker Change: Is it paying off with all the cost quality and <unk>.
Speaker Change: Volume capacity.
Speaker Change: Given us a sustainable competitive.
Speaker Change: H and economics of scale.
Charles Liang: Before passing the call to David Weigand, our CFO, I want to thank our partners, customers, investors, and Supermicro employees and express my appreciation for their patience and support until we can provide more information about our 10K firing status. Our strong foundation. Data Center Building Block Solution and DLC Deep Coding. Green computing leadership not only reduced energy costs for our customers, but also contributed to a healthier modern society. I believe we are well positioned for strong future growth.
Speaker Change: Before passing the call to David <unk>, our CFO.
Speaker Change: <unk>, our partners customers investors and she will make will embrace.
David Wiegand: And expressing my appreciation for their patience and support and we can provide more information about our 10-K filing status.
David Wiegand: Our strong foundation.
David Wiegand: There are similar but in Bronx solution and theoretically.
David Wiegand: So you do recruiting.
David Wiegand: In computing.
Speaker Change: Leadership, not only reduce energy cost for our customers, but also contribute to a healthier mattresses.
Speaker Change: I believe we are well positioned for strong future growth.
David Weigand: Thank you, Charles. We remind investors that the unaudited interim financial information in this report is preliminary. We expect unaudited Q1 fiscal year 25 revenues. in the range of $5.9 to $6 billion, up 181% year over year, and up 12% quarter over quarter versus our guidance of $6 billion to $7 billion. Growth was driven by strong demand for direct liquid cooled rack scale AI GPU platform. AI contributed over 70% of revenues across enterprise and cloud service provider markets. The expected Q1 non gap gross margin is approximately 13.3% versus 11.3% last quarter due to product and customer mix and lower costs.
Speaker Change: Thank you Charles.
Speaker Change: We remind investors that the unaudited interim financial information and this report is preliminary.
Speaker Change: We expect unaudited Q1 fiscal year 'twenty five revenues.
Speaker Change: In the range of five $9 billion to $6 billion.
Speaker Change: Up 181% year over year, and up 12% quarter over quarter versus our guidance of 6 billion to $7 billion.
Speaker Change: Growth was driven by strong demand for <unk>.
Speaker Change: Direct liquid cooled racks scale AI GPU platforms.
Speaker Change: AI contributed over 70% of revenues across enterprise and cloud service provider markets.
Speaker Change: The expected Q1, non-GAAP gross margin is approximately 13, 3% versus 11, 3% last quarter due to product and customer mix and lower costs, coupled with higher manufacturing efficiencies on TLC AI GPU clusters.
David Weigand: coupled with higher manufacturing efficiencies on DLC AI GPU clusters. The Q1 non gap operating margin is approximately 9.9%. excluding 67 million in stock based compensation expenses versus 7.8% in Q4. The Q1 estimate for other income and expense is expected to be a net expense of approximately $9 million, consisting of $17 million in interest expense offset by $8 million in interest and other income. The Q1 tax rate is approximately 14% for GAAP and 16% for non-GAAP. The Q1 estimate for GAAP net income is $433 to $443 million and non-GAAP net income is $483 million to $493 million.
Speaker Change: Q1, non-GAAP operating margin is approximately nine 9%.
Speaker Change: Excluding $67 million in stock based compensation expenses versus seven 8%.
Speaker Change: In Q4.
Speaker Change: The Q1 estimate for other income and expense is expected to be a net expense of approximately 9 million consisting of $17 million in interest expense offset by $8 million in interest and other income.
Speaker Change: The Q1 tax rate is approximately 14% for GAAP and 16% for non-GAAP.
Speaker Change: Q1 estimate for GAAP net income is 433 to a $443 million.
Speaker Change: And non-GAAP net income is 483 million to $493 million.
David Weigand: Non-GAAP net income excludes $50 million in stock-based compensation expenses net of the related tax effects of $17 million. The split adjusted Q1 gap diluted earnings per share range is approximately 68 cents to 70 cents versus prior guidance of 60 cents to 77 cents. The Q1 non-GAAP diluted EPS range is approximately 75 cents to 76 cents versus guidance of 67 to 83 cents. We expect a Q1 GAAP diluted share count of $639 million and a non-GAAP diluted share count of $648 million. Operating cash flow is approximately $407 million, an improvement of $1 billion quarter over quarter.
Speaker Change: non-GAAP net income excludes 50 million in stock based compensation expenses net of their related tax effects of $17 million.
Speaker Change: The split adjusted Q1 GAAP diluted earnings per share range is approximately 68 to.
Speaker Change: To 70.
Speaker Change: Versus prior guidance of 60 to 77.
Speaker Change: The Q1 non-GAAP diluted EPS range is approximately 75 to 76.
Speaker Change: Versus guidance of 67 to 83.
Speaker Change: We expect a Q1 GAAP diluted share count of $639 million and a non-GAAP diluted share count of $648 million.
Speaker Change: Operating cash flow is approximately $407 million, an improvement of $1 billion quarter over quarter.
David Weigand: Q1 closing inventory was approximately $5 billion. CapEx for Q1 was $42 million. positive free cash flow was $365 million for the quarter. The Q1 closing balance sheet cash position was $2.1 billion, and total debt was $2.3 billion, with bank debt of $0.6 billion and convertible bond debt of $1.7 billion, resulting in an improved Q1 net cash position of approximately negative $0.2 billion versus a net cash position of negative 0.5 billion last quarter. Turning to the balance sheet and working capital metrics compared to last quarter, the Q1 cash conversion cycle was 97 days versus 94 days in Q4.
Speaker Change: Q1 closing inventory was approximately $5 billion.
Speaker Change: Capex for Q1 was $42 million.
Speaker Change: Positive free cash flow was $365 million for the quarter.
Speaker Change: Q1 closing balance sheet cash position was $2 1 billion and total debt was $2 3 billion with bank debt of <unk> 6 billion and convertible bond debt of $1 7 billion, resulting in an improved Q1 net cash position.
Speaker Change: <unk> of approximately negative $2 billion versus.
Speaker Change: Our net cash position of negative <unk> 5 billion last quarter.
Speaker Change: Turning to the balance sheet and working capital metrics compared to last quarter. The Q1 cash conversion cycle was 97 days versus 94 days in Q4.
David Weigand: Days of inventory was 85 days compared to the prior quarter of 82 days. Days sales outstanding for Q1 was 41 days versus 37 days last quarter, while days payables outstanding was 29 days from 25 days last quarter.
Speaker Change: Days of inventory was 85 days compared to the prior quarter of 82 days.
Speaker Change: Days sales outstanding for Q1 was 41 days versus 37 days last quarter.
Speaker Change: Our days payables outstanding was 29 days from 25 days last quarter.
David Weigand: For the second quarter of fiscal 2025, we expect net sales in the range of $5.5 to $6.1 billion. We expect GAAP and non GAAP gross margin down 100 basis points sequentially due to customer and product We expect GAAP and non-GAAP operating expenses up approximately $34 million sequentially and GAAP and non-GAAP other income and expense to be a net expense of approximately $7 million. We expect GAAP net income per diluted share of $0.48 to $0.58 and non GAAP net income per diluted share of $0.56 to $0.65. The company's projections for GAAP and non-GAAP net income per diluted share assume a tax rate of 14% and 15% respectively.
Speaker Change: For the second quarter of fiscal 2025, we expect sales net sales in the range of five 5% to $6 1 billion.
Speaker Change: We expect GAAP and non-GAAP gross margin down 100 basis points sequentially due to customer and product mix.
Speaker Change: We expect GAAP and non-GAAP operating expenses up approximately $34 million sequentially.
Speaker Change: And GAAP and non-GAAP other income and expense to be a net expense of approximately $7 million.
Speaker Change: We expect GAAP net income per diluted share of <unk> 48 to 58.
Speaker Change: And non-GAAP net income per diluted share of <unk> 56 to.
Speaker Change: 65.
Speaker Change: The company's projections for GAAP and non-GAAP net income per diluted share assume a tax rate of 14% and 15% respectively.
David Weigand: A diluted share count of 640 million shares for GAAP and a diluted share count of 648 million shares for non-GAAP. The outlook for Q2 of fiscal year 2025 GAAP net income per diluted share includes approximately $54 million in expected stock-based compensation expense and other expenses net of related tax effects of $14 million, which are excluded from non-GAAP net income per diluted share.
Speaker Change: Diluted share count of 640 million shares for GAAP, and a diluted share count of 648 million shares for non-GAAP.
Speaker Change: Outlook for Q2 of fiscal year 2025, GAAP net income per diluted share.
Speaker Change: It includes approximately $54 million in expected stock based compensation expense and other expenses net of related tax effects of $14 million, which are excluded from non-GAAP net income per diluted share.
David Weigand: The final financial results reported for this period may differ from the results reported here based on the review by the new independent registered public accounting firm to be appointed. We are working diligently to select a new independent registered public accounting firm and complete our fiscal year 24 audit.
Speaker Change: The final financial results reported for this period may differ from the results reported here based on the review by the new independent registered public accounting firm to be appointed.
Speaker Change: We're working diligently to select a new independent registered public accounting firm and complete our fiscal year 'twenty for audit.
Michael Staiger: Michael, we're ready. Thank you, David. Hey, before we get into questions, we appreciate you may have further questions about the special committee's findings as well as our audit timeline. We're not in a position to address those questions on the call today.
Speaker Change: Michael.
Speaker Change: David Hey, before we get into questions. We appreciate you may have further questions about the special committee's findings as well as our audit timeline we're.
Speaker Change: We're not in a position to address those questions on the call today, so with that operator, we'll take our first question.
Tamiya: So with that operator, we'll take first question. We will now begin the Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason at all, you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question.
Speaker Change: We will now begin the Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Any reason at all argue we'd like to move that question. Please press star followed by two again to ask a question. Please press star one.
Speaker Change: Mind, you if youre using a speakerphone, please remember to pick up your handset before asking your question.
Michael Ng: The first comes from Michael Ng with Goldman Sachs. You may proceed. Hey, good afternoon. Thank you for the question. Just on the business fundamentals, you know, revenue came in at the lower end of the guidance. I was wondering if you could speak to that and whether you're seeing any market share losses as a result of some of the delayed financial filings. And how do you feel about the $26 to $30 billion full-year revenue guidance that you. previously gave out. And are you hearing from any customers that once this resolution occurs, they'll be able to step up some of their orders?
Speaker Change: Our first comes from Michael <unk> with Goldman Sachs. You May proceed.
Speaker Change: Yeah.
Speaker Change: Hey, good afternoon. Thank you for the question.
Speaker Change: Just on the business fundamentals.
Michael Staiger: Revenue came in at the lower end of the guidance I was wondering if you could speak to that and whether you.
Michael Staiger: Are you seeing any market share losses as a result of.
Michael Staiger: Some of the delayed financial filings.
Michael Staiger: How do you feel about the 26% to $30 billion full year revenue guidance that you.
Speaker Change: Previously gave out and are you hearing from any customers that.
Speaker Change: Once this resolution occurs.
Speaker Change: There'll be able to step up some of their orders or is it a gating factor. Thank you.
Charles Liang: Or is it a gating factor? Thank you.
Charles Liang: Okay, thank you for the question, Michael. Indeed, last quarter, revenue reduced a little bit, I guess the major reason because there are some customers waiting for the new chip, the black whale chip, as you know. So people are waiting for a new solution. And the new solution, the black whale base, deep cooling, air cooler, or GP200, our solution is ready, just waiting for a chip. So I guess that's the major reason. And our capacity continues to grow, and our deep cooling solution is fully ready. Again, we can produce 1500 deep cooler racks for months now.
Speaker Change: Okay. Thank you for the question Michael.
Speaker Change: Yes.
Speaker Change: Last quarter, the revenue deals that it would be I guess, the major reason because.
Speaker Change: There are some customers waiting for the new chip <unk>.
Speaker Change: Well chip as you know.
Speaker Change: So people are waiting for a new solution and.
Speaker Change: That new solution breakaway up is.
Speaker Change: Deep clean air COO GP 'twenty, our solution is ready just waiting for that.
Speaker Change: So I guess it is a major reason and.
Speaker Change: We our capacity continued to grow and now update.
Speaker Change: Liquidity solution is.
Speaker Change: <unk> again, we can produce.
Speaker Change: <unk> hundred Nick core Greg for months now so we have rotary Red desert waiting for the new chip to be available and then I believe we can grow our.
Charles Liang: So we are fully ready, just waiting for the new chip to be available. And then I believe we can grow our market share and revenue after that.
Speaker Change: Market share and revenue after day.
unknown: Great.
David Weigand: And, and for David, just on the full year guidance. Yeah, Michael, we're not providing annual guidance on this call.
Speaker Change: Great and then for David just on the full year guidance.
David Wiegand: Yes, Michael we're not providing annual guidance on this call.
unknown: Great.
Michael Staiger: Okay, great. Thank you Charles Thank you David.
unknown: Thank you, Charles. Thank you. Thank you, by the way. Thank you.
Speaker Change: Thank you Michael Thank you.
Samik Chatterjee: The next question comes from Samik Chatterjee with J.P. Morgan. You may proceed. Hey guys, thanks for taking my question.
Speaker Change: The next question comes from <unk> <unk> with Jpmorgan you May proceed.
Speaker Change: Hey, guys. Thanks for taking my question I guess, maybe to sort of talk about the gross margins here hydro.
Samik Chatterjee: I guess maybe to sort of talk about the gross margins here you had but you're guiding it down. It looks like maybe it's Whitworth Chokshi. does the sort of progression to Fort Getting Back. or are you having to sort of discount more or be more aggressive on price? Current Generation Products.
Speaker Change: In the quarter with what you are guiding it down it seems like maybe it's a bit more choppy in terms of gross margins, depending on customer mix does that sort of progression before getting back to the 14 to 17, Portland that you talked about earlier.
Speaker Change: Keith or are you, having to sort of discount or be more aggressive on pricing on the.
Charles Liang: And as a separate sort of a side question, just I know you're not commenting on relative to the filing. management changes or any changes in how you operate that you're planning or thinking about to sort of overall Thank you, Samik. Yes, I mean, it depends on new product, right? When a new GPU chip available, as you know, whenever there are new generation of technology, we have an advantage to grow our market share and profitability. At the same time, our data centers are building broad solution with SCC, Supermicro Cloud Composer that provides a full end-to-end solution.
Speaker Change: Generation products.
Speaker Change: Sort of a side question just I know you are not commenting on rate filings, but any management changes or any changes at all how you operate.
Speaker Change: Turning or thinking about sort of overall.
Speaker Change: Symptoms of.
Speaker Change: Getting more sort of.
Speaker Change: A more disciplined around more control around the financial reporting thank you.
Speaker Change: Thank you Amit, yes, I mean depends on new products right.
Speaker Change: New GPU chip.
Speaker Change: As you know when it would add new generation.
Speaker Change: Technology, we have advantage to grow our market share and profitability.
Speaker Change: Same time, I'll update us into billion bulk solution with the FCC.
Speaker Change: Sure Michael.
Speaker Change: Carl.
Speaker Change: That provides.
Speaker Change: Hello.
Charles Liang: That's for sure, we are gradually growing our growth margin and net margin. As to management team, yes, we are always faster growing. You know, 2023, we grew 40% about, and then 2024, we grew more than double. And this year, again, we will have a big growth. So when companies are faster growing, we continue to add more people, including senior management. So we are evaluating the possibility, including the report from special committee. And we, by the nature, we continue to grow senior management team as well.
Speaker Change: The end solution that could potentially grow our.
Speaker Change: Gross margin and net margin.
Speaker Change: To manage demand.
Speaker Change: Our team, yes, we always are faster growing.
Speaker Change: Sure.
Speaker Change: 2010 history, we grew 40% and then 10 crews out understanding where we grew more than doubled and this year again, we will have a big gross so when company a possibility and we continue to add more people, including senior management. So we are evaluating that.
Speaker Change: Possibility.
Speaker Change: Including the special Committee.
Speaker Change: We.
Speaker Change: By their nature, we continue to grow our senior management team as well.
unknown: Thank you. Thanks for taking the question. Thank you.
Speaker Change: Thank you thanks for taking my question.
Speaker Change: Thank you.
Speaker Change: Thank you.
Aaron Rakers: The next question comes from Aaron Rakers with Wells Fargo. You may proceed. Yeah, thanks for taking the questions, a couple if I can as well.
Speaker Change: Your next question comes from Aaron Rakers with Wells Fargo. You May proceed.
Aaron Rakers: Yes, thanks for taking the questions a couple if I can as well.
Aaron Rakers: I just, you know, Charles, I want to go back, I think when you guys had originally guided this this quarter, I think the guidance range is like six to 7 billion, you came in at, you know, about 500 million at the midpoint short of that, I guess, given the comments to the prior, you know, questions, Are you assigning that to just the timing of Blackwell? Or was there something that changed the demand or the timing of deployments this last quarter? I'd also add in there, I think, last quarter, when you'd set that guide, I think there was like 800 million of sales that you had alluded to as being pushed out of last quarter into this fiscal first quarter.
Aaron Rakers: Charles I want to go back I think when you guys had originally guided this quarter I think the guidance range is like $6 billion to $7 billion you came in at about.
Speaker Change: About $500 million at the midpoint short of that I guess, given the comments of the prior questions.
Speaker Change: Are you finding that to just the timing of Blackwell or was there something that changed in the demand or the timing of deployments. This last quarter I'd also add in there I think last quarter. When you accept that Guy and I think there was like $800 million.
Speaker Change: Sales that you had alluded to is being pushed out of last quarter into this fiscal first quarter did that all closed.
Charles Liang: Did that all close? And just try to bridge that gap for me between the Delta and the guide relative to, you know, the business update today. Okay, good. Thank you.
Speaker Change: Try to bridge that gap for me between the Delta in the guide relative to the business update today.
Speaker Change: Okay. Good.
Charles Liang: I mean, this is a complicated question. So I believe that major impact is new chip availability. Because a hardware chip, for sure, is much higher performance, much better performance per dollars, right? And the good thing is that it will be available gradually. And Q1, hopefully, Q1, 2025, hopefully, volume become much better. And so that's the major factor, I believe. As to our 10k delay, may impact a little bit. How much I don't know yet, but certain impact for sure. But hopefully not too big.
Speaker Change: Thank you.
Speaker Change: Come complicate the question. So I believe that major impact is the new chip a bit of a ability because unlike what.
Speaker Change: We achieved.
Speaker Change: The much higher performance much better performance, but that is right and.
Speaker Change: The good thing is as I look at that the web available great jewelry and.
Speaker Change: Q1, hopefully Q1, 2010, but I hope it.
Speaker Change: <unk> become much better.
Speaker Change: So thats the major factor I believe.
Speaker Change: As to our 10-K today may impact a little bit.
Speaker Change: How much I don't know yet.
Speaker Change: Impact of issue.
Speaker Change: Hopefully not too big.
Charles Liang: Up to the whole year, yes, today we do not provide any guidance. But basically, with our deep cooling deepening edge, right, in last few months, we deliver more than 2,000 racks DLC. That, I believe, is a very high percentage for the whole deep cooling market. So for our future growth, I personally still very optimistic. Yeah, okay.
Speaker Change: US through now.
Speaker Change: The whole El is today, we could have provided annual guidance.
Speaker Change: <unk> with our <unk>.
Speaker Change: Different cooling a bit in H b.
Speaker Change: You might as we deliver more than 2000 black DLC.
Speaker Change: I believe is a very high percentage for the whole market. So.
Speaker Change: What a huge outgrows pushing that is still very optimistic.
unknown: And then two other quick questions, if I can. So, you know, first of all, I mean, you mentioned $5 billion of inventory coming out of this quarter. You know, any thoughts of where that might trend coming out of this next quarter, you know, embedded in your outlook that you provided today?
Speaker Change: Okay.
Speaker Change: Two other quick questions. If I can so first of all I mean, you mentioned $5 billion of inventory coming out of this quarter.
Speaker Change: Sure.
Speaker Change: Any thoughts of where that might trend coming out of this next quarter.
Speaker Change: Embedded in your outlook that you provided today and then.
unknown: And then I apologize for asking, I know that you didn't, you know, you're not going to address the special committee dynamic. But, you know, any thoughts on the timing of an auditor, of getting an auditor assigned, anything you can share on that front? And I appreciate that, yeah, you know, we're not talking much about that. But I'm curious, any comments on that front?
Speaker Change: Apologize for asking I know that you didnt youre not going to address the special committee dynamic but.
Speaker Change: Any thoughts on the timing of an auditor.
Speaker Change: And the auditors signed anything you can share on that front.
Speaker Change: I appreciate that yes, we are.
Speaker Change: Not talking much about that but I'm curious any comments on that front.
Charles Liang: Okay, for inventory, maybe I can answer a little bit. I mean, the company will continue to grow, I believe. So $5 billion of inventory, I believe, will continue. And as to the special committee investigation result today, I'm very happy to share some very positive information, but as to detail, once it's available from them, we will share with the market. And Aaron, we have no update with respect to the audit timeline that we could talk about, as we mentioned earlier. just getting in order.
Speaker Change: Okay. So did you maybe I can answer a little bit I mean, the company will continue to grow I believe so.
Speaker Change: <unk> you mean through the IPD will continue and as put a special committee.
Speaker Change: Investigation result, today I am very happy to share some very positive.
Speaker Change: <unk>.
Speaker Change: The detail once it's available from them, we wish shale lease to the market.
Speaker Change: We have no update with respect to our timeline that we could talk about as we mentioned earlier.
Speaker Change: So.
Speaker Change: Just getting one.
David Weigand: Thank you. Well, we're working diligently to get that done, as I mentioned, as quickly as possible.
Speaker Change: Thank you.
Speaker Change: We're working diligently to get that done as I mentioned.
Speaker Change: Quickly as possible.
unknown: Thanks, guys. Thank you.
Speaker Change: Yes, thanks, guys.
Ananda Baruah: As a quick reminder, if you would like to ask a question, please press star one on your telephone keypad. The following comes from Ananda Baruah with Loop Capital. You may proceed. Yeah, guys. Yeah, good afternoon. Good evening. Thanks for taking the questions.
Speaker Change: Thank you.
Speaker Change: As a quick reminder, if you would like to ask a question. Please press star one on your telephone keypad. The following comes from Ananda Baruah with loop capital you May proceed.
Speaker Change: Yes, yes.
Ananda Baruah: Yes. Good afternoon. Good evening, thanks for taking the questions.
Ananda Baruah: Two if I could, I guess the first is on gross margin. You know, sort of Should we expect, well, I guess really the question is, should we still expect it to improve as we go through the fiscal year as you were previously anticipating? Yeah, so by the way, we, we guided cautiously, you know, in this first quarter on our margin, so we were glad to be able to to exceed it. And, and so, in like fashion, we're, you know, we're guiding conservatively into the second quarter. And so it's still, we still have our target margin that we're shooting for.
Ananda Baruah: Two if I could.
Ananda Baruah: I guess the first is on gross margin.
Speaker Change: Yes, sorry.
Speaker Change: Should we expect well I guess really the question is is.
Speaker Change: Should we still expect it to improve as we go through the fiscal year as you were previously anticipating.
Speaker Change: Yes, so by the way.
Speaker Change: <unk>.
Speaker Change: Cautiously.
Speaker Change: In this first quarter on our margin. So we were glad to be able to exceed it and so.
Speaker Change: And like fashion.
Speaker Change: We're guiding conservatively into the second quarter and so it's still we still have our target margin that we're shooting for and so we're doing everything we can to improve to improve that.
Charles Liang: And, and so, you know, we're doing everything that we can, you know, to improve to improve that. Yeah, the competition will bring some pressure, as you know. But Blackwell, I mean, new technology, I personally feel very optimistic for Supermicro's chance to grow. And as I mentioned, the data center building block solution, including SCC, SuperCloud Composer, they provide end-to-end management from chip labor to rack scale to the whole data center water tower. So I believe all of those will help our growth. And then we also start to provide, able to provide a customer on-site deployment, on-site cabling and service.
Speaker Change: Yes <unk>.
Speaker Change: Issue, which you are putting your stamp ratio as you well know, but black widow near Tech knowledge, pushing <unk> optimistic what's shippable, Michael has a chance to grow and as I mentioned, the data center build in bulk solution, including.
Speaker Change: She will call Com posted net provide the end to end.
Speaker Change: Management from Chip Weber, who rack scale.
Speaker Change: The wholesalers in the Watertown, So I believe all of those.
Speaker Change: Our growth and then we also start to provide cable to provide the customer onsite deeper EBIT.
Speaker Change: Onsite cabling and service. So all of those are very positive to our business. So I feel very positive to continue on the road.
Charles Liang: So all of those are very positive to our business. So I feel very positive to continue to grow our business.
Speaker Change: Does that mean.
unknown: Yeah, thanks. Thanks for the margin context. Appreciate that.
Speaker Change: Yeah, Thanks, Stacy that widening context, I appreciate that and the follow up is yes. I guess you said, it's a general working capital financing question. This question comes up and come up with a lot with investors and can you just give us really the question.
unknown: And, and the follow up is just, I guess, if it's a general working capital financing question, this question comes up and can come up a lot with investors. And can you just give us, you know, really the question is, is, can you, can you explain sort of the access to capital situation as we go forward? And I guess, really, how would you like the, like the investment community to think about the access to capital? Sure. So Ananda, we put in the last eight, nine months, you know, $4 billion into working capital from two equity raises and one convert.
Speaker Change: Can you can you explain sort of the assets the capital calculation.
Speaker Change: As we go forward and I guess really how would you like in the investment community to think about access to.
Speaker Change: Capital preservation.
Speaker Change: Sure. So Ananda we put in we put.
Speaker Change: In the last eight nine months.
Speaker Change: $4 billion into working capital from two equity raises and one convert.
David Weigand: And so that's really, it really left us with a, in a good working capital situation, exiting Q4 at a run rate of around a billion, of $6 billion. So again, we're forecasting, a little bit, a little down in Q2. So that takes care of our working capital needs for a while. So Access, we have a very strong, growing and profitable company. And so we don't, we don't believe that we'll have any impediments to raising working capital. Yeah, quarterly, every quarter we are making a reasonable good net profit though. So basically, we should be in good shape.
Speaker Change: That's really it really left us with a good working capital situation exiting Q4 at a run rate.
Speaker Change: Around $1 billion of $6 billion, so again.
Speaker Change: We're forecasting a little bit a little down in Q2, so that takes care of our working capital needs for a while.
Speaker Change: So access we have a very strong growing and profitable company and so we don't we don't believe that we'll have any impediments to raising working capital.
Speaker Change: Yes quarterly every quarter.
Speaker Change: Making a reasonable good.
Speaker Change: Perfect. So basically we should be in good shape.
unknown: Okay, guys, thanks so much. That's helpful. Thank Thank you.
Speaker Change: Okay guys. Thanks, so much that's helpful. Thank you.
Speaker Change: Thank you.
George Wong: The next question comes from George Wong with Barclays. You may proceed. Okay, guys, thanks for taking my question. I have two quick ones. Firstly, can you kind of double click on which quarter do you think that you will start booking the Blackwell revenue? Last time you guys alluded to sometime in the June quarter, just curious whether that's still on track? Which is any kind of high level in terms of when do you think the Blackwell is going to show up in the P&L?
Speaker Change: The next question comes from George Wang with Barclays. You May proceed.
George Wang: Hey, guys. Thanks for taking my question I have two quick ones. Firstly can you kind of a double click on.
George Wang: Which quarter do you think that you will start booking the platform revenue.
Speaker Change: Last time, you guys alluded to sometime in the June quarter, just curious whether this is still on track if there's any kind of high level in terms of when do you think the Blackwater is going to show up in the P&L.
Charles Liang: Yeah, very big question. Indeed, we're asking in VTR every day. So I hope their production can go smooth and go for high volume very soon. And once they have a chip available, our solution are fully ready. So we continue to work with them very closely to develop a current product, GB200, MVRL72, and B200 liquid coolant and air coolant. And we also designed some really enhanced large-scale solution. So in terms of total solution, we have a very strong offering waiting for the chip. So We need Nvidia's quick support. Thank you.
Speaker Change: Yeah very good question indeed.
Speaker Change: Are you asking yeah.
Speaker Change: So.
Speaker Change: I hope, but they all propulsion can go smoothly and global high volume medicine and once they have achieved available our solution are floating rate. So we continue to work with them very closely but our current about GBP 200.
Speaker Change: 72 <unk> hundred.
Speaker Change: During the call and in the <unk> and we also design some.
Speaker Change: Judy enhance.
Speaker Change: Scale solution. So in them a total solution, we have a very strong.
Speaker Change: Offering waiting for that chip so.
Speaker Change: We need to be the quickest approval. Thank you.
unknown: Oh, got it. That's helpful.
Speaker Change: That's helpful. Just a quick one if I can just help us think Paul.
unknown: Just a quick one, if I can. Just how do you think about gross margin in the era of Blackwell versus Hopper? Just curious if you can talk about puts and takes on the gross margin for the GB200, especially in light of reference design from NVIDIA. Any kind of incremental value added from Supermicro, just as we kind of head to the Blackwell, just in relation to the profitability and the kind of margin profile.
Speaker Change: Gross margin.
Speaker Change: In the era of Blackwell versus hover just curious if you can talk about puts and takes on the gross margin for the <unk>.
Speaker Change: 200 <unk>.
Speaker Change: Specially in light of the reference designs that Nvidia any kind of incremental value add from Super micro.
Speaker Change: Just as we kind of head to the black what ill just.
Speaker Change: In relation to the profit profitability in the kind of margin profile. Thank you.
Charles Liang: Thank you. Blackwell, for sure, we estimate more competitive because people know AI market is so big now. So with Blackwell, we expect more competition. But at the same time, we also well-prepared by our data center building block solution with our end-to-end super cloud composer and with our on-site deployment, cabling, service business. So those are new. And I believe we are able to provide a very unique, very efficient time-to-delivery, time-to-online advantage to customers. So yes, competition is strong, but I believe we are in good position.
Speaker Change: Yes, thank you, but I can lay out for us.
Speaker Change: Estimate more competitive.
Speaker Change: Because people are not marketing still peaking now so we sat back away.
Speaker Change: Ex peg a more competition, but at the same time, we also weigh up the payout by our data and the bidding bulk solution with our end to end.
Speaker Change: She will call composer and with our on site be putting them in cable service business. So those are new and I believe.
Speaker Change: We're able to provide a very unique but it <unk>.
Speaker Change: Turning to delivery.
Speaker Change: Delivery time to our NIE.
Speaker Change: At a vintage of a customer so.
Speaker Change: Yes competition is strong, but I believe we are in good position.
unknown: Okay, thanks a lot, Charles. I will go back to the queue.
Speaker Change: Okay. Thanks, a lot of tough I will go back to the queue.
Speaker Change: Yeah.
Nehal Chokshi: Thank you. The following comes from Nehal Chokshi with Northland. You may proceed. Yes, thank you. Thank you for taking my questions. A couple of questions, please. First, Dave, any 10% customer exposures in the quarter in the upcoming quarter? Indeed, we will have 10% customers now.
Speaker Change: Thank you the following comes from Nihon Touchy with Northland You May proceed.
Nihon Touchy: Yes. Thank you. Thank you for taking my questions a couple of questions. Please.
Nihon Touchy: First Dave any 10% customer exposures in the quarter in the upcoming quarter.
Speaker Change: Indeed, we will have 10% customers now.
David Weigand: Could you give us some detail as far as what percent of overall revenue do the 10% customers represent in the September quarter? Yeah, so we're not going to release that data today. At the same time, we continue to gain more new customers, especially in Europe and Asia. So I believe we will be able to keep a healthy ratio. Okay, great.
Speaker Change: Could you give us some detail as far as what percent of overall revenue did it represent customers represent in the September quarter.
Speaker Change: Yes, so we're not going to release that data today.
Speaker Change: Yes, but at the same time, we continue to gain.
Speaker Change: More new customer, especially in Europe.
Speaker Change: Asia, So I believe.
Speaker Change: We will be able to keep <unk> ratio.
Speaker Change: Yeah.
Speaker Change: Okay, Great and then Charles.
Nehal Chokshi: And then Charles You know, I think there's a strong feeling in the investment community that the chairman and CEO roles, if separated, could be quite beneficial to Supermicro. From your perspective, what is the benefit of Supermicro separating these roles? Okay, why would I base it on a company? That's my consideration. So every day, if not every day, every week, I have been thinking about a question since many years ago. And so again, we're able to pay for business. So I personally very open mind and I'm technology guy and technology is my best interest. But still, overall consideration is the best benefit for shareholder and the company.
Speaker Change: I think there was a strong feeling in the investment community that the chairman C. Rolls if separate it could be quite beneficial supermicro from your perspective, what is the benefit.
Speaker Change: Supermicro separating these roles.
Speaker Change: Okay, why would a batesville for a company that's under consideration so.
Speaker Change: Every day.
Speaker Change: Every week.
Speaker Change: Thinking about a question since.
Speaker Change: Many years ago.
Speaker Change: So again why would outpace the whole business.
Speaker Change: So I pushed it on a very open mind and.
Speaker Change: And technology Guy and.
Speaker Change: Technology based the interest, but still overall consideration is based the benefit the full shareholder in the company.
Charles Liang: And just to be clear, do you see it potentially being in the best interest of the shareholder of that, of separating these roles here? I'm not coming back at this moment, but I'm seriously considering it, and someday I will retire for sure. Hopefully not in one year or two years, but sooner or later I will retire. So, I mean, those are changes for sure, it's natural, but whatever the pace of a shareholder and for a company. And for my family too. Thank you for taking my question. Thank you.
Speaker Change: And just to be clear do you see.
Speaker Change: And that potentially being in the dust.
Speaker Change: Interest as a shareholder of that.
Speaker Change: Separating these roles there.
Speaker Change: No come back that is a movement.
Speaker Change: You can see that about and someday I will retire as you hopefully 91 yet.
Speaker Change: So I mean those are.
Speaker Change: <unk> <unk> natural.
Speaker Change: But our pace of shareholder and for.
Speaker Change: For our company and for my family.
Speaker Change: Thank you for taking my question.
Speaker Change: Thank you.
Speaker Change: Thank you.
unknown: The next question comes from Vijay Rakesh with Mizzou. You may proceed. Hi, Charles. So on the September quarter and December quarter, just wondering how many liquid cool racks you're shipping in September and if you have some idea in December? David, do you have some number to share? It was a little bit a little below last quarter, but I don't have the exact I would have to say, we had a company ship most of the liquid cooling rack to the market recently, for example, in September quarter, and our liquid cooling, because ahead of the market, so, and customers like our liquid cooling, because save their energy power, and the safe water requirement, and kind of, it is a trend.
Speaker Change: Our next question comes from Vijay Rakesh with Mizuho you May proceed.
Vijay Rakesh: So also in the September quarter, and listen regarding just wondering how many liquid cooled racks.
Speaker Change: Perfect.
Speaker Change: The near term.
Speaker Change: Alright during December.
Speaker Change: Maybe do you have some number of this year.
Speaker Change: Oh it was.
Speaker Change: Little below last quarter, but I don't have the exact I would have to say we had a company ship.
Speaker Change: Most of the OTA, Duke recruiting black to the market recently.
Speaker Change: Nimbler in September quarter, and our tech recruiting because ahead of the market, so and customers like our recruiting because the.
Speaker Change: <unk>.
Speaker Change: The energy power and.
Speaker Change: Save water requirement and kind of.
Speaker Change: Is it a trend so I believe.
Vijay Rakesh: So I believe we will continue to grow our liquid cooling percentage. Got it. And when you say down sequentially into December quarter on the H200 liquid cooling, any, any side, any idea on how much there is sequentially? We did not share the number, but I believe deep cooling will continue to grow very quickly. and we are very happy to promote that. Got it.
Speaker Change: And even grow our deeply.
Speaker Change: ZIP recruiting the percentage.
Speaker Change: Got it.
Speaker Change: They were down sequentially and through some of our corner on the H 200 equally.
Speaker Change: Any idea on how much the sequence the music.
Speaker Change: We did not share that number but I believe this.
Speaker Change: <unk> welcome to you on the Gorilla very quickly.
Speaker Change: And we got it happy to promote.
Speaker Change: Got it.
David Weigand: And yeah, our last question. Go ahead. Sorry, I think David, on the November 16 deadline, are you guys comfortable that you will have an audit and file a plan to the NASDAQ? So we're not we're not answering those questions today. Yeah, so we're, we're, we're, like I said, we're diligently, you know, we're diligently looking to replace the auditor as quickly as possible. And we will be filing a plan with NASDAQ, indeed, regarding an extension. And so, you know, that's all we have to say about that.
Speaker Change: Yes.
Speaker Change: Third quarter.
Speaker Change: Yes.
Speaker Change: Go ahead go ahead Vijay.
Speaker Change: Sorry.
Vijay Rakesh: Thank you David on the number 16.
Speaker Change: Medline.
Speaker Change: Are you guys comfortable that you will have an article on pilot plant to the NASDAQ.
Speaker Change: So we're not we're not answering those questions today.
Speaker Change: Okay.
Speaker Change: Where we are we're like I said, we're diligently.
Speaker Change: We are diligently.
Speaker Change: Looking to replace the auditors as quickly as possible and we will be filing a plan with Nasdaq.
Speaker Change: And indeed rigor.
Speaker Change: Regarding an extension.
Speaker Change: So.
Speaker Change: But thats all we have to say about that.
unknown: Great, thank you.
Speaker Change: Thank you.
John Tanwanteng: Thank you.
Speaker Change: Thank you.
John Tanwanteng: The next question comes from John Tanwanteng with CJS Securities. You may proceed. Hi, good afternoon, and thank you for taking my question. I was wondering, Charles or David, could you break out what your expected revenue in Blackwell was supposed to be in the Q1 guidance and what you're, what you have implied in the Q2 guidance, first of all? And then second, do you see a risk of supply or allocations due to this auditor and filing issue? Especially from NVIDIA, you know, just would they possibly, you know, maybe hold back some just until you figure it out?
Speaker Change: The next question comes from Jon <unk> with CJS.
Speaker Change: Securities You May proceed.
Jon: Hi, good afternoon, and thank you for taking my question.
Jon: I'm wondering Charles or David could you.
Jon: Break out what's your expected revenue and Blackwell was supposed to be in the Q1 guidance and what's your what you have implied in the Q2 guidance first of all and then second.
Speaker Change: Do you see a risk of supplier allocations due to the harder ore and filing issue.
Speaker Change: Especially from Nvidia.
Speaker Change: Would there possibly.
Speaker Change: Sure.
Speaker Change: Maybe hold back some just until you figure it out.
Charles Liang: Or are they supporting you through this? And, you know, just meeting your orders and especially with the new technology? Yeah, our relationship with NVIDIA has been multiple decades and our growth, kind of cooperation between two companies continue to enhance. So we have many important products co-developed and I don't expect a negative allocation from them. So at this moment, according to our relationship, according to our communication, things are very positive.
Speaker Change: Or are they supporting you through this.
Speaker Change: Just meeting your orders and especially with the new technology. Thank you.
Speaker Change: Yes, we didnt ship at least in Bolivia has been.
Speaker Change: Mark do you put the case and our growth.
Speaker Change: Our kind of our operating they tend to come in in <unk>.
Speaker Change: I think that the enhanced so we have had many an important project called the Bev and.
Speaker Change: <unk> X peg and then negative allocation on that so.
Speaker Change: At this moment.
Speaker Change: According to Audi dealership occurred in our communication since our very positive.
Charles Liang: Great. And then the, I guess the Blackwell numbers that were implied in the last quarters and this quarter's guidance. That's hard to answer because we don't know what's the volume of ingredients we have blackberry available every month. So we work with them very closely and co-develop a solution, validate the solution, and service the common customer. So once they have a good volume available, I believe we will have a good percentage in our product mix.
Speaker Change: Great and then I guess the backlog number that were implied in the last quarters and the quarter guidance.
Speaker Change: That's hard to answer because we don't know.
Speaker Change: How are you.
Speaker Change: How what's the podium in media, we have but that's the way our billable every.
Speaker Change: Every month, so we look at which is embedded closely and.
Speaker Change: Co develop a solution better data solution and servicing that come on customer so.
Speaker Change: One is they have a <unk> available I believe we will have a look.
Speaker Change: Percentage now about mix.
Charles Liang: Got it. Thank you. And then if I could sneak one more in there, if I could, is there more efficiency to be unlocked in your liquid cooling supply chain? Or have you mostly resolved the issues in ramping, you know, your production capacity? You know, we focused on liquid cooling much earlier than the industry. So in the last few months, we already shipped more than 2,000 racks. And so far, the feedback from customers are very happy. Indeed, the quality, the customer satisfaction, even better than our air-cooled solution. So we are very excited. Our hard work in the last three years got paid off.
Speaker Change: Got it. Thank you and then if I could sneak one more in there if I could is there more efficiency to be unlocked in liquid cooling supply chain or have you, mostly resolve the issues and ramping.
Speaker Change: Your production capacity and supply chain.
Speaker Change: We focused on and I think we put in much earlier than the industry.
Speaker Change: So.
Speaker Change: In last few months, we already shipped.
Speaker Change: More than 2000 black right and.
Speaker Change: So far the feedback from customer.
Speaker Change: That it had been in <unk>.
Speaker Change: The quality of our customer satisfaction.
Speaker Change: Even better than our.
Speaker Change: Our core solution. So for you've been excited how we're doing in last three years.
Speaker Change: Paying off and we believe the recruiting will continue to be a major advantage including that.
Charles Liang: And we believe liquid cooling will continue to be our major advantage, including the whole data center end-to-end solar solution. Again, not just liquid cooling rack, but kind of deployment, cabling, service, management, solarware. So we are very excited for our TLC liquid cooling solution and customers like that.
Speaker Change: The whole TNF in the end to end solution.
Speaker Change: Again, not yet they do get pulled into <unk>.
Speaker Change: Debridement cable service.
Speaker Change: Managing Minnesota.
Speaker Change: So we are really excited for our plc reporting solution.
Speaker Change: Customer day to day.
unknown: Great. Thank you.
Speaker Change: Great. Thank you and good luck with finding a new auditor.
unknown: And good luck with finding a new auditor. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. The following comes from maybe with Feeney with <unk> you May proceed.
Mehdi Hosseini: The following comes from Mehdi Hosseini with FIG. You may proceed. Yes, thanks for taking my question. David, from what I understand regarding cash flow, it seems like there was a one time positive impact, your days of inventory went up, but you were able to significantly increase your operating cash flow. Did I hear you correct? And if so, what is the item that helped you with positive operating cash flow? Sure. You know, I think the answer is, Mehdi, that we've been, we've been growing at such a high rate. And, you know, over the past, over the past quarters, that that's really what's been impacting our, our, our operating cash flow is that we've had to pour hundreds of millions of dollars into inventory, as well as into accounts receivable.
Speaker Change: Yes, Thanks for taking my question David.
Feeney: From what I understand regarding.
Speaker Change: Cash flow it seems like there was a one time positive impact your days of inventory went up but you were able to significantly increase your operating cash flow.
Feeney: Did I hear you correct.
Feeney: So what is the.
Feeney: The item that helps you with positive operating cash flow.
Feeney: Sure.
Speaker Change: The answer is no.
Speaker Change: We have been.
Speaker Change: We've been growing at such a high rate.
Feeney: Over the past.
Feeney: Over the past quarters, but thats really whats been impacting R. R.
Feeney: Operating cash flow is it we've had to poor.
Feeney: Hundreds of millions of dollars into inventory as well as into.
David Weigand: So, you know, kind of coming off of a, of a quarter, where we didn't have such a dramatic increase in revenue, we, we were able to generate a lot of cash, you know, basically a billion dollars worth of, of improved cash flows. So it was really, yeah, so it was really just the fact that, for the reasons Charles mentioned, the growth wasn't as high. We didn't have to acquire as much. Yeah. I understand, but your DSO went up. I'm sorry, your days of inventory went up. And I think from what I heard from you, your DSO didn't really change.
Feeney: Accounts receivable so.
Feeney: Kind of coming off of a quarter, where we didn't have such a dramatic increase in revenue.
Feeney: We were able to generate a lot of cash.
Feeney: Basically a $1 billion worth of <unk>.
Feeney: Improved cash flows so it was really yes. So it was really just.
Feeney: The fact that.
Speaker Change: For the reasons Charles mentioned.
Speaker Change: The growth wasn't as high.
Speaker Change: We didn't have two questions here.
Speaker Change: Understood.
Speaker Change: Our DSO went up.
Speaker Change: I'm sorry, your days of inventory went up and I think from what I heard from you.
Speaker Change: Sure.
Speaker Change: Due to the deteriorating so was that.
David Weigand: So was that improvement in operating cash flow all driven by working capital reduction? Or was there something outside of working capital that helped No, it was it was it was really for those for those reasons. It was really just for inventory.
Speaker Change: Improvement in operating cash flow or driven by working capital reduction or was there something outside of working capital that helps you.
Speaker Change: No. It was it was it was really for those for those reasons.
Speaker Change: It was really just for.
Speaker Change: And how should we inventory.
Charles Liang: Yeah, Mehdi, I mean, maybe I can have it. I mean, when we grow about 200% more year over year, right? So for sure, and we see continue to grow, right? So for sure, we need a much higher inventory to support our customer demand. And then when our growth become more normal, not 200% year over year, for example, 100%, or 80%, then we don't have to grow that much of inventory, and that will help our cash flow. So it's a good trouble, I would have to say. I said it is a good challenge. Sure. Got it.
Speaker Change: Yes, maybe I mean, maybe I can have it.
Speaker Change: I mean.
Speaker Change: When we grow above 200% more.
Speaker Change: Yeah, right. So if we see any.
Speaker Change: And we see continued to grow and so forth.
Speaker Change: We need a much higher inventory to support our customer demand and then when our growth to become more normal.
Speaker Change: No.
Speaker Change: <unk> year over year for example, <unk> or 80% men.
Speaker Change: We don't need to grow that much inventory and that will help our cash flow.
Speaker Change: So it's a good topic.
Feeney: Is it a good challenge.
Speaker Change: Sure.
Speaker Change: Got it and then maybe you can help us.
Charles Liang: And then Charles, maybe you can help us, give us an update on your total capacity, especially with the Malaysia expansion and how should, how is the utilization of the global installed capacity track? A very good question. We expect we will continue to grow very fast. That's why we have been preparing a huge capacity in Silicon Valley, in Taiwan, and now especially in Malaysia. So long term, we need those capacities. But in terms of utilization rate at this moment, I would like to say a little bit no, because capacity is ready, but not enough new chip.
Speaker Change: Give us an update on your total capacity, especially with the Malaysia expansion and then how should how is the utilization of the global.
Speaker Change: <unk> capacity is tracking.
Speaker Change: Very good question.
Speaker Change: We expect that we will continue to grow very fast and Thats why we have been preparing a huge capacity in silicon Valley in Taiwan, and now it's basically Matt ICF.
Speaker Change: So long term, we need that those capacity, but in terms of Hawaii Declaration ROI at this moment.
Speaker Change: I'd say there would be no because capacity is ready, but no such.
Speaker Change: Ah.
Speaker Change: No.
Charles Liang: As you say that, not enough new chip. That's why utilization rate now is relatively low, maybe only 50%. I think. Yeah, I know you used to say that. This is...
Speaker Change: As you say that no new chip.
Speaker Change: There isn't right now is really the pivot maybe only 50%.
Speaker Change: Yes.
Mike: This is Mike.
Speaker Change: Sure.
David Weigand: David, go ahead. This is Dave. Yeah, I was going to give you a couple other tips on cash flow. You'll probably notice that because of an improved gross margin, we had almost $80 million on a non-GAAP basis, more profit this quarter. In addition to that, you know, again, going back to working capital metrics, we increased our accounts payable by several hundred million dollars. So those are other factors. Go into Improved Operating Cash Flow. Gotcha.
Speaker Change: Sorry, David go ahead.
Speaker Change: As Dave Yes, I was going to give you a couple of other tips on on cash flow.
Speaker Change: Youll, probably notice it because of an improved gross margin, we had almost $80 million on a non-GAAP basis more profit.
Speaker Change: This quarter.
Speaker Change: In addition to that.
Speaker Change: Again going back to working capital metrics.
Speaker Change: Increased our accounts payable.
Speaker Change: Several hundred million dollars so that.
Speaker Change: Or is there other factors.
Speaker Change: Let's go into improved operating cash flow gotcha. It can be it before we go to the before we go to the next question. Thank you, Matt and before we go to the next question towards the clarify one of the comments from earlier with respect into video.
Michael Staiger: Hey, Tamir, before we go to the next question, thank you, Mehdi. Before we go to the next question, I just want to clarify one of the comments from earlier with respect to NVIDIA and clarify, you know, we have the deepest of relationships with NVIDIA at the technology level. It goes back decades, and now we have multiple state-of-the-art projects in progress. And we've spoken to NVIDIA, and they've confirmed there have been no changes to allocations, and we maintain a strong relationship with them and don't expect that to change. So I just wanted to make sure that was clarified.
Speaker Change: Clarify we have the deepest relationships with the video at the technology level that goes back decades, and now we have multiple state of the art projects in progress and we've spoken to vision at least confirm they've made no changes to allocations and we maintain a strong relationship with <unk>.
Speaker Change: Don't expect that to change so just wanted to make sure that was clarified next question actually our last question today.
unknown: Next question, or actually, our last question, Tamir. Absolutely.
Quinn Bolton: Our final question comes from Quinn Bolton with Needham & Company. You may proceed. Hey guys, thanks for taking the question. I guess just want to follow up on the kind of the slightly weaker than expected first half really sounds like it's just customers waiting for new Blackwell chips. Are you guys seeing that starting to show up in the order books, meaning you're building backlog for either the NBL rack or the Blackwell P200 systems. So you see, you know, nice building backlog for those systems. Obviously, you don't know when you'll get the chips, but it gives you confidence for a much stronger second half once Blackwell starts to ship or is it too early for you guys to be actually getting those orders or POs at this point?
Speaker Change: Absolutely. Our final question comes from Quinn Bolton with Needham <unk> Company you May proceed.
Quinn Bolton: Hey, guys. Thanks for.
Quinn Bolton: Taking the question I just wanted to follow up on the kind of the slightly weaker than expected first half really sounds like it's just customers waiting for new Blackwell chips are you guys seeing that starting to show up in the order books, meaning Youre building backlog for either the NBL rack or the black hole PTO.
Quinn Bolton: Hundreds systems.
Quinn Bolton: So you see.
Quinn Bolton: Nice building backlog for those systems, obviously, you don't know when Youll get the chips, but that gives you confidence for a stronger second half once black oil starts to ship or is it too early.
Quinn Bolton: Are you guys can be actually getting those orders are posed at this point.
Charles Liang: Yeah, our solution is very strong. And I believe NVIDIA will continue to allocate their solution to the company, the customer, whoever face the total solution. Because at all, common end user satisfaction is the most important to every company, right? So I would like to say our solution is very strong. And we continue to work with NVIDIA very closely. And to provide the best total solution, end-to-end solution to customers. That's why we started to provide on-site deployment, on-site cabling, on-site service, and all of those new openings are very attractive to lots of new customers and old customers.
Quinn Bolton: Our solution is very strong and I believe.
Quinn Bolton: We will continue allocate their solution to that.
Quinn Bolton: Anthony the customers, who have a base that total solution because at the O.
Speaker Change: Come on and use the <unk>.
Speaker Change: Satisfaction is mostly important.
Speaker Change: Every company right.
Speaker Change: So.
Speaker Change: I would like to say our solution and very strong and we continue that that logo Luisa Nvidia very closely.
Speaker Change: And to provide a total solution end to end solution to a customer.
Speaker Change: Why.
Speaker Change: Start to provide onsite deeply eamonn onsite cabling.
Speaker Change: Site service and overall goes to new opening.
Speaker Change: Very attractive too.
Speaker Change: Also the new customer and the whole customer so listen we feel pretty comfortable for the.
Charles Liang: So we feel very comfortable for the coming new chip. Fabricio So the backlog for Blackwell, you're seeing that building on your order book. We're providing remote POC now, so things are happening.
Speaker Change: Coming soon.
Speaker Change: You too.
Speaker Change: We wish it.
Speaker Change: So the backlog for Blackwell Youre seeing that building on your order books.
Speaker Change: We provide.
Speaker Change: Kind of B mall POC now.
Speaker Change: So it seems that happening.
David Weigand: Okay, the second follow-up question for David, you've recently sort of filed new credit agreements with both of your banks, just, you know, setting a date when you would have to provide the audited financials. To the extent that you don't hit that date, what happens? Do you just have to go renegotiate new credit agreements? Do the banks at that point have the right to effectively call those term loans? I'm just wondering if you might be able to address what happens with both the bank debt and if there's any risk to the convertible debt if you don't provide audited financials within the prescribed time.
Speaker Change: Okay, and then second follow up question for David.
Speaker Change: <unk> recently filed new credit agreements with both through your banks.
Speaker Change: Just.
Speaker Change: Setting a date when you would have to provide the audited financials to the extent that you don't hit that date what.
Speaker Change: What happens so you just have to go renegotiate new credit agreements did the banks at that point have the rate.
Speaker Change: To effectively call those term loans or just.
Speaker Change: Wondering if you might be able to address what happens with both the bank debt and if there's any risk to the convertible debt. If you don't provide audited financials within the prescribed time.
Speaker Change: Yeah.
David Weigand: Yeah, so I think we'll just refer you to our AK filings. You know, we, we have long term and good relationships with the banks. And so you know, as necessary, we will, we will file extensions, yeah, or get waivers. And, like, as I said, as I mentioned earlier, we're not concerned about the company's ability to access the capital market. Thank you.
Speaker Change: Yes, So I think we will just refer you to our 8-K filings we.
Speaker Change: Long term and good relationships with the banks and so as necessary.
Speaker Change: We will file extensions yeah.
Speaker Change: Wavers and.
Speaker Change: As I mentioned earlier, we're not concerned about the company's ability to access to capital markets.
Speaker Change: Thank you.
Speaker Change: Thank you.
Michael Staiger: There are currently no other questions in queue, so I will now turn it back over to the management team for closing remarks.
Speaker Change: There are currently no other questions in queue. So I will now turn it back over to the management team for closing remarks.
Michael Staiger: Hey, thank you for joining our conference call today and we'll look forward to talking to you soon.
Speaker Change: Thank you for joining our conference call today, and we'll look forward to talking to you soon.
unknown: This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect your line.