Super Micro Computer (SMCI) 15 Aug 192019 Q4 Earnings call transcript

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer Inc. Fourth Quarter Fiscal 2019 Business Update Conference Call. The company's news releases issued earlier today are available from its website at www.supermicro.com.

all be presentation, mode. a company’s the participants in will listen-only During all listen-only securities to entire but to invited will call on in open Afterwards, be session, participate analysts basis. a question-and-answer is participants a the

As until XX, the A August recorded, XXXXXXX. XXXX. entering August Thursday, this XX, a be dialing replay accessible replay X-XXX-XXX-XXXX call and reminder, will being Thursday, is call midnight, of XXXX, by pin

Kevin dial should Hayes, and With us Senior Charles Chief are and Chairman Mr. Officer; Investor Senior Relations. Perry X-XXX-XXX-XXXX. today Chief And would Liang, Financial Executive conference the Hayes, now Mr. International turn over Bauer, President, and Hayes. President go Vice please I sir. caller Officer; to to like Vice ahead

thank conference for business fiscal you fourth quarter Micro's Super call which the and ended XX, update XXXX, attending Good June XXXX. for afternoon

address more call, based should for change copy to and to is conference received become Micro contained and finalized distributed was the the with future close company on regular at Super available of company's the any release that References have news subject from a its the financial results quarter to today's the now, of By the fourth results are During on company's the XXXX preliminary SEC. and current filings of results you in trading website. SEC remaining fiscal will preliminary filings. financial efforts with company’s the

expectations. you that to Super of results I'll remarks Micro's Before number cause our risk There materially remind we could a from differ forward-looking that start, our include statements. factors are future

recent our XX-K this the filings. press other afternoon, filing risks for learn can our we release in and You issued about SEC XXXX these earlier Form most more

documents Relations are from All website. Micro's of page of Investor Super the those available

analysts Q&A the to statements. remarks, sell-side a forward-looking presentation will we We and At have refer ask outlook. financial of any today's no obligation to session of will end today's to update non-GAAP Most for results assume questions. prepared

turn Officer. now to over Chairman Chief the Liang, and Executive Charles call I'll

Thank you, Perry and good afternoon everyone.

in $XXX than the midpoint lower from year was of higher and the represents X% which XX% first it quarter revenue approximately last Our Full-year and range be last is to $XXX fiscal million quarter. than increase $[XXX] XX% revenue million will of an guidance million, of last our $X.X of quarterly year. billion quarter is approximately

bring the period to Non-GAAP last in and $X.XX of product range $X.XX AI and reached the of the lower over revenue. up quarter. XX% System of launched and record price new a were of server called new approximately due ASP total to and second-generation of We to to Cascade enterprise, earnings lower system XX% XG that compared processor efficiency per Lake. will portfolio to impacts mostly comprehensive $X.XX $X.XX last System The was which share improvement $X.XX to a a storage supporting $X.XX lean scalable range revenue. bit TCO. XXX year be Xeon performance Cloud, range revenue to then world and year-over-year

advance over and up new tension and trade challenging price our reduction previous traditional in It a component Volatile We product generation. revenues. our impact quarter. was this end have for some conditions that in interest strong strong market product seen key new outpace quarterly period

Taiwan distributed U.S. the global USA, including manufacturing and the Netherlands. minimize in strong footprint our in challenge, and based will However, presence manufacturing trade impact tariff our

and with yearly signs on names basis. both BigTwin our positive higher quarterly see such SuperBlade also We as achieved which product and sales key

for assume performance our as the the in opportunity great optimized operation efficiency internal and see market high not products our long-term declined. we investment application demand and of growth and in we driven improved product Importantly, are

aggregate consumption driven to power and we along cost by product on architecture, data be sub-systems their [e-waste]. major based centers compute, resource independently solution separating can different on upgrade and reduce power, those architecture, new differentiated our environment this and to delivery side, that reducing the reduce higher allowing cycle storage, unique remain focused our Super On Micro’s impact

Some remain in can years. sheer to components price than an opportunity XX encourage power IoT including achieved as whereas us such power up deploying devices vehicle for intrusion. Saving through

typical four new XX% the On three reached, years costs cycle, up Micro Super delivered hardware each cycle. to to they operating

such market database, applications up additional supported reduction more. continue system This our EDSFF positive server to deliver autonomous introducing storage which deliver intelligence, days is performance that cloud optimize higher and days driving, NVMe up scientific mostly storage which apps as engine, storage and to HPC, to for requiring first-based We artificial drive. ideal and worked six for products of five drive the highest research

contractor We future. the believe will near main become storage EDSFF in

For of security, variety for to powerful a the provide across only XG, increase the the providing them need server advanced network, continue age, is allow which for and multiple Super wide most IoT, core is implementation solutions convenient data network. access micro complete. to Open modern radio the networks that will Micro XG access

space this enterprise continue XXXX. as IoT service new server for optimize and our as have high (inaudible) to last, provide, know engineer These Micro made target CPU and who new we our products Super the and speed time let devices intelligent H to me collaborating architectures across you called from H and also QX, in two with projects basic, online cloud. connectivity a customers. but Saving exciting of and connectivity at assistance innovations important for of transform AI same validate are brief connectivity and review from the trending many NVIDIA, design. this

summary, and operating of Super of enterprise, I’m in confident the that results XG very AI opportunity Micro In our cloud, the our we benefit potential will continue and strength published. fundamentals. in improvement see that products we tremendous our

relationships in and first efficiency the build we breakthrough Regarding strategic delivers market achieve performance TCO, to our vertical more our market stronger in our invest customers. effort in go presence to will we design comfort. model target market business innovation cycle, and a that Moreover conveniently key

result and will hand now action share market and growth this Kevin. to section will expect of continued in financial improvement over our performance I the I

Charles. you, Thank

by the quarter of health few on providing overview XXXX. address performance business filings. our our the financial current the will our comments of a SEC make of about I First then I progress fourth will for an

estimate mentioned to our fourth earlier, range was Charles million As quarter revenue million. we $XXX $XXX fiscal within the of

XX% lower. were U.S. basis geographies lower Our lower and on a with approximately EMEA the year-over-year Asia lower, XX% XX%

non-GAAP range of basis the on GAAP Our XX.X% estimated was margin and XX.X%. to gross both

last from for by bad slightly range range, higher this earnings $X.XX sales expenses per $X.XX share per offset share. Operating improved lower lower margins steadily improved Our and component due non-GAAP to the of marketing and debt and We reserves estimate have quarter better was benefited within year pricing. were since mix to then product expense. mix, this customer diluted quarter

continue million. generate cash estimate We cash to from and approximately generated was $XX operations

million of we approximately flow cash the $XX for $XX million, After free of estimate CapEx divesting quarter.

last days. million, cumulative estimate XX to decrease to this to primarily our basis over free quarter we XX a the days cycle On days, four cash with decreased the approximately in the increase quarters, $XXX conversion cash inventory flow was XX-day due

basis Actual a sequentially. declined inventory dollar on

target cycle to cash Our remains conversion XX days. XX

XXXX We both inclusive the of recognition comment me fiscal revenue revenue progress them delinquent audit. submitted now recently efforts, and under our financials for We're standard. fiscal on Now the finalized and on filings. the XXXX XXX on completed SEC have remaining working our XXX work let our on

We auditors on some and will fiscal two-year XXXX fully both SEC focused be for years that engagement our enable a team The under trained with remains our filings. will XXXX becoming efficiency. on

session Q&A a have will sell-side questions. we ask to permitted previously, indicated will with As be analysts

Mehdi Hosseini Thank you, sir. to [Operator from ahead first go Please Susquehanna Instructions] go Group. Financial And we’ll sir.

Mehdi, for so thanks for Ryzhik taking the David much question.

quarter, from down XX.X% XX.X% around quick margins. gross on guess to believe Just prior the I they a question XX.X%. were to I from

the prices tick over ticked dynamics there. Obviously what wondering up, revenue Just were down. probably components,

had what So decline driving just if I wondering follow-up. a the was and

highlighted to question quarter Sure, a highlighted same of the no we Kevin. good talked we in this were in group very perfectly. quarter is And up the Last we we that we've like looked fact that as had everything the problem. mid-XXs, we cautioned terms This aligning and when went we XX and last some steady that progress highlighted being in the so quarter, too mid the had not towards quarters. broached that XX the we through in we're long ago we as XX and as the between XXXX of fact we were XXs mid-year

up So lined we things that very, last well. very highlighted quarter that

I So it's declined. think don't necessarily

I think progress our is continued that not linear. perfectly

in And appreciate that overview that overall moving provide and perhaps the server quarter outlook demand you're maybe current can and trends then the about pricing you what maybe a talk I seeing of follow-up. forward? and is environment just an your

I soft. market, and choppy as macroeconomic the you is Yes, know this that be it mean

it. product to Cascade solution our just especially However wins a of Lake, name, big yes outperform bit very others

especially continue is our our technology and expect although achieving fast business. but we for So business not sign in the will maybe have we improvement revenue new very the positive booming

Yes, this Kevin. is

if have think Usually guidance put I of like are voiced bit conditions when observing macro the situation we've the sometimes as this shorter we little in lens are this many macro already we down quarter's that our a you certainly and this know is and part at poor. looked time seasonally are of our visibility competitors quarter out. is

elements quarter. those to so mind were in next we three as have that guidance this And set we our

mentioned your XXX figures an update This customer you. be past the helpful? in Fortune account enterprise would one to as effort are as thanks. up an update maybe just would you've get then it, just Thank you there Got building last And the accounts we'd there maybe something software love in services where anything Enterprise love efforts. new far is on

Yes it’s Perry.

year-over-year section business of the revenue. approximately yes, section that about bit XX% XX% the So up by enterprise our XX%. better enterprise UK that little that's Within of overall portion includes was which than

So in we're of we're number business that making have that the the in there customers doing. we with steady progress

Thank the get in queue. you, I'll back

next from our Chokshi Nehal We'll Group. question take ahead. from go Please Maxim

is year records congrats non-GAAP and a and represents that income. on operations on think from net what fiscal cash Thanks I

So that trading $XX XX-month market XX XX% at months a net you past on now your Xx income. And even net you've for EPS provided trailing I That's like think your position. cash the yes, million cap. you're looks of have midpoint

to are the in are once you're indeed to willing put net to work that you XX-Ks guys So i.e. cash of terms able once to date? up buybacks

harvested sheet. some certainly have the that that I think the of from have if balance Yes, look now you cash at we we

I think that continue we're we roughly going $XXX leave we million capital again. soon grow I've that harvesting roughly about of million that $XX to know and to got with and working

capital know So feel that. going what I came our as strongly terms understanding continue this question that of We up are about forward just working in pretty are to to last growth time, we needs is a plot returns.

confirm that that financials then submitted within for XXXX And by EPS Okay. and auditors. financials great you are year the revenue that's announced fiscal ranges? the you've Can previously finalization your the estimated

able going I'm No, this not not to addressed something be that. That's moment. that to at I confirm

get Thanks. will queue. back I Okay. the in

[Operator Our Vertical comes Jon Lopez Please of Group. question go next ahead. from Instructions]

Hi, a number please guys system you the business thanks. of clarifications did was give first I’ve you got of systems? a number, give us us service would service rather the that couple as percentage the

in was Yes, was we about it's XX% servers. said that services, the script Charles -- script I'm sorry

that sorry sequentially. can any missed you I’m of if on second A, was to question XX, it B thanks. terrific then you flattish know looks I guess pieces right I how obviously Okay thoughts moving now. really that we not trend that all My wondering like guys environment's ought just have that don't OpEx and but I’m the the confirm XX? kind

doing So you the proactive balance for anything guys are I’m on the the side? year wondering of if OpEx

relatively it the We flattish. talked that wiggled. components So about two was

we in business long-term think investment the have future. we look think confidence as see I in investment. would OpEx we to you for line don't -- our be with forward, large needs increases that in know we I have to what for will

you. Got

pacing if your it elsewhere, just flush Okay, was guys ahead comments could mix the out bit surprised of prior SKUs. one bit a helpful. some Cascade maybe by can’t a made remember we're so little of you specific I is wondering consistent who I up Lake if apologize, you but your, to the made it's of entirely I'm wondering I’m not with that picking generations. version

the that for not that, and but doing So not if you so, on on asking think in guys a I the of the to guidance know could with that the just just you're thoughts Any second going then be and Cascade seasonality as it based toward given how I’m end give you trending given on Lake calendar you're what applicable spend about and year. projects? may environment Thanks. seeing

know we mean thank company. Yes, leading as are you I technology you.

had we technology, to everyday better. one-day, So new chance a grow

Given the months. macroeconomic [inaudible] choppy in coming

So we to conservative. tried be

the had another grown] Cascade mentioned and especially they platform results [inaudible]. Lake continued savings, including new the our [has BigTwin, to and start tool, (inaudible) However, I more recent including retail just like more well get attraction growing been there new I think platform very launched

is in believe [inaudible]. in those growth it our although early So we have [inaudible] new stage, we technologies,

could -- would gain Intel for on are opportunity the this are? with on i.e. Cascade an this point just your this in like like good excuse of platform it peers have Lake SKUs than perhaps me I portion a which follow-up more so relative If share you is basis Cascade competitors you you than view put less iteration a you of Lake, though as perhaps guys significantly your guys around as cycle out on you I’m wondering do that, make have and lot disproportionate appears maybe focused or

are including gain Samsung the product line EDSFF there technology, those of you available ideas just share. kinds and continue to As know of mentioned [NXX], lots I market

technology, Although this early see [inaudible] pretty year where [inaudible] next is are they or new a we but growth. year data

That's great. it. I very appreciate Thanks much,

you. Thank

Our next Susquehanna Hosseini Please Mehdi go ahead. comes from Financial question Group. of

for again. for taking Ryzhik Mehdi David Thanks follow-up. Hi, the

tailwind guess to Should prices. with a component moving back lower to margins, expect to serve we forward? gross Just moving that gross I margins forward as

gone basis. of but the think obviously ramp slowed that we've a on going pretty I we same in not to the ramp quarters. through We're go forward have went price last down Well, through of few kind reduction kind a steep that has

think helping those is be the of in reduction components one sustained the it out. us don't uplift in those that's gross flattening improving prices of in as I So our terms I in terms that of going margins, prices are because think the to same

flattening memory? that given Has adding decision the far you out? strategically making altered inventory your around as Are management as components

been and I to controlled drop price say have we then DRAM everywhere will this have in periods.

to continue will closely. we So very monitor

and growth be to versus able storage? you just traditional Great, storage. the then Would overall and a storage storage question NextGen share on in

Yes indeed.

EDSFF. As any like basically our storage factor and form basically new is one

and about plenty We [inaudible]. of feeling] have we new platform a have in [good

that's in And would your just lastly I but get love your on to trends you're the what what know part or data to center, love you're take hyperscale internet would Charles of customers seeing seeing amongst hear GXXXX there?

Taiwan to [inaudible] you, grow economical while and scale USA. also we continue in our with in share we

And competitive we continues to US scale larger scale our now. are when preparing in So to we grow beat those will be centers. data more

Thanks very much.

you. Thank

Our next Please comes question Maxim of from Nehal Group. Chokshi go ahead.

you quarter. Yes, the so to I gained expected during think have share you stated that market

actually you guys because So enterprise their what year-over-year were XX% about but year-over-year you think market was and group do XX% said down you year-over-year the just the government Intel center side. that down was XX% and on enterprise data up did revenue

performance? Super data did us for a what most center Intel portions as maybe as the and think give group just Micro relevant are of gauging that actually probably So sense far market you metric what

always of part what group business group to that's And their at of they're a and be tracking we there. cetera would it don't customers one-to-one et we hyperscale sort does. and if of again you what then the separate some track although lot a look have At be Nehal, enterprise there. a not what major would our request

Okay, thank you.

in economics those, scale say to we I both centers. we would follow be data aggressively I overall would What with super and more scale compared mean enterprise

Got it, thank you.

we to questions. I'd over Mr. call comments. any this for at that or further time closing Liang It to additional appears the have back turn like no

have joining a for us day. you and great Thank today

and appreciate call. fourth gentlemen. We do update does business your fiscal Micro That participation. conclude Thank ladies quarter you, conference Super the XXXX

at this time. disconnect may Thank you. You