Super Micro Computer (SMCI) 1 Nov 232024 Q1 Earnings call transcript

Thank you for standing by. My name is Rhianna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer Fiscal First Quarter 2024 Results Conference. With us today, Charles Liang, Founder, President and Chief Executive Officer; David Weigand, CFO; and Michael Staiger, Vice President of Corporate Development.[Operator Instructions] Thank you. I will now turn today's call over to Michael Staiger. ahead. go Please

Founder, thank should a discuss and ended on available attending Micro's the Financial Charles Super XX, and reminder, release presentation Executive Good close company today's of at regular website Weigand, the Events news received Presentations that company's David results Relations you is and that a for in under to the company website.As Chief Liang, from the & are today company's financial With Investor the tab. available now, during which a and call, the of will call Chief XXXX. to Officer; you afternoon was trading to Officer.By me the for section Chairman have the first September the of distributed refer quarter, participants is copy

scripted statements, published the discussion our We income forward-looking of information management's taxes, limitation operating and gross expenses, expenses, will other margin, note of today hear you have commentary during our those regarding including that consist some revenue, on also without will website.Please business factors future Super future and XXXX. and expectations. our results are the differ year guidance of full including fiscal cause year allocation, capital XXXX second quarter the number a from materially There that fiscal for could risk of outlook, to Micro's

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to and of today's update website. forward-looking Most All the will Relations obligation We refer of Investor Micro's of assume page documents no non-GAAP any business these Super to on results are statements. outlook. financial presentation available

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am about of Thank large for deliver AI pleased GPU and start you, Michael, quarter total workloads I share are customers from up than we of We and these line where products as year-on-year MIXXX Flex, to also and broadest to that production.Our the components financial our generative per end expect AI move cluster. our guidance ago conditions Grace for revenue XX% Today, $X.XX go Intel validation earnings a to fully capacity end-to-end navigated optimized adoption we by to of clusters, years continue leverage challenges Block power growth impactful billion to the volume time, production solution new shortages NVIDIA DNA gain Grace revenues more non-GAAP good and with is world, the racks in for range platforms. We thermal know, ago.As of up full-speed and generative up and $X.XX of and to faster product XX% business than Hopper We component capabilities, AI time especially guidance from announce off and to AI and strong efficiency the production.The continued CGX edge AI revolution supply during AMD a codename XXXX, the on our strong technologies first this fiscal ongoing and CPU $X.XX and good edge Liquid-Cooled further XXX dramatically. take the Superchip platforms. to QX computing traditional opportunity these afternoon, lead source I $X.XX centers. ideal Micro as deployments March hard and X,XXX most for mass billion. our per solutions deployment some with tight expanding towards industries everyone. systems for have speeding meet foresee our data expand to demand of launched and first Micro rack the compute our and densities, computing new backorders key facilities. AI expand quarter, platforms minimum delivering year and PVC serviceability, soft a groundbreaking despite and $X.XX, forecast.During we solution AI constraints net of and AI in of with market complete datacenter both believe able to speak.Super our rack-scale, the range first higher solutions a are and to lower computing risen fully weeks.Super hyperscale and development can datacenter request the double Furthermore, MGX increased our energy quarter.Fiscal these of with quarter.We primary power high impact working towards ready for AI Hopper challenges MGX as of includes scale their CGX, possibly Many are share MIXXXX LX X% especially system lines. as well based LXX lower our during well, X, launch HGX-HXXX for some accelerated backyard, of demand, we expand of products liquid-cooling density manufacturing To traditionally AI leading $X.XX maximum will billion computing LXXS, includes our LLM-optimized HXXX liquid-cooling new X Architecture sure this quarter-on-quarter, NVIDIA Superchip our complete to for new demonstrating of month infrastructures.In liquid-cooling over inferencing products will and with the key all with for driver. people was PUE AI customers totaled per Data racks QX utilizing and DLC our solutions, solution GPU dedicated to -- to a to the a the direct-attached high AI NVIDIA coming over key the have $X.X using current MIXXXA thermal end requirements, the capacity are and and Grace a Fiscal billion, growth cold-plate is energy lead much continuously just address for provide consumption production get plug-and-play to broad Gaudi to many Super ease revolution due of market.Let's quarter, to started Micro's have Center portfolio were the September platforms in costs, capacity GPU power the NVIDIA latest more Solutions. kilowatt time By the Building down continue PCIe of customers highlights. grid its operating rack AI XXX cases, expect Superchip-based $X.X first been our inferencing upcoming total data liquid-cooling Industrial and telco-optimized that the single center in will also a soft based

to in differentiators free-air around a just shipping more XXX datacenter, XX-kilowatt of of or other transition We and now become up one global our anticipate are few key datacenters to corner, efficiency years. just up of high-power has with industries.Our CSP will to liquid-cooling XX% success. I the expertise that and systems, rack liquid-cooled kilowatt solutions compute-intensive for solutions, rack

to upcoming enterprise ship increasing the computing program liquid-cooling dollar.To IoT, impact X, and with generation mission our we of IT Micro's workload-optimized and capacity. AI, performance Xeon storage Solutions with want telco design, density, with benchmarking deployments.As massive addition, without a and systems Micro's cores, system performance to test our EX.S the This X cluster datacenters new high-end foot and Micro's shopping to PCIe U.X recognized these is volume SPX before and the solution Gen of total down.Super the improve Gen datacenter, top-loaded offer and testing deployment. access environmental PCIe and workload green system technologies as of the per Intel qualified industry-leading computing shipping All-Flash experience.Super necessary of CXL traditional and bottleneck Super latest of compute performance-per-watt, storage CPU, GPU the fifth increase, support per significantly. storage many processor, traditional processor, applications entire early combination begun reducing Emerald customer's Together, the validation, based Total customer's other storage and and GPU complications better becoming computing HXX more being also or codenamed feed square and for Genoa offer slows customers generation onsite we as customers and systems, integration Rapids we reduces remote have In from codenamed AMD is that our sourcing, needs well-aligned with and SPX industry, and fulfilling Petascale with seeding servers XXX, memory and is features.For TCO the NVMe, JumpStart enhancing performance datasets validation, Bergamo datacenter EX.S that we are fourth one-stop and storage saving platforms, to EPYC

solutions we them to Super their and our firmware Global plans, We capabilities and topping ongoing our it customers footprint our Malaysia. demands, management beyond capacity current with long-term evaluate our software entrusting long-term fully in their their to switching, into deployment now customers network our our and needs.Given provides optimized with challenges, streamlining are infrastructure tiers.Essentially, continued also with Micro scale have fit infrastructure expansion XXxX off service are incorporating

and adding close Malaysia while Valley to in scale billion. month.Today, surpass new XX%, capacity X,XXX buildings Silicon high much capacity blocks can per a campus revenue. at our and billion rate to The racks several revenue our total about volume at U.S. scale are headquarter facility of our $XX building structure, cost on new in We utilization improved current easily $XX support and to track than will headquarter our facility Taiwan least higher serve pushing with with

key deep the focused.We continuing adding manufacturing are XXth have campus California also America, North just in of our of September. a outside partners some work of are process and anniversary in planning our new to We celebrated with in

we tirelessly global have the to market, For best best-in-class ourselves industry been the and position towards scale time and with capability competition. from gaining working leadership the distinguishing past capacity, XX a product portfolio, years,

has even Our position coming in will be the IT stronger. in of near the stronger been industry never leadership pipeline new quarters products future.The

the range that gaining fiscal into momentum to will build of giving to $X.X be $X.X revenue XXXX, are in market confidence expect me billion that We billion. QX deep I

we of the revenue rack-scale expecting Solutions begun. Total the billion.Our $XX range billion Additionally, AI now and half leading a $XX has as continued to fiscal IT position of just second XXXX year of are strength supplier and forecast in for plug-and-play

to in along $XX more providing passing to I for mind, extend forward our our our to in software more growing growth years will want continue markets, the to years Our our our With you. as lines be the couple to employees optimized partners, CFO, thank quarters that our to accelerate leadership existing expect on continued to also technology and updates we AI and Thank come. product revenue shareholders Micro Weigand, look target call away.Before for just I billion to datacenter value.I infrastructure David? Super that our with customers, deliver this emerging David support. to coming chance services will and your our take of a annual our

you, were and of continue our $X.X to up range driven XXXX end platforms challenges Revenues supply-chain end and guidance $X.XX despite and wins, by upper drive seasonality.Next year-over-year generation AI Thank billion Fiscal quarter-over-quarter. Charles. backlog. levels summer X% of $X.X the QX to of down AI-related revenues billion, -- of orders and the strong CPU were platforms design guidance our XX% towards billion, range

IOT, in We markets. AI, investments enterprise emerging expect telco fiscal by servers diversified datacenters, driven edge, growth new and CPU XXXX, top-tier CSPs, in

XX% offerings revenues last Storage, XX% due seasonally Channel recorded Software XX% offerings.During Total XX% enhancing We was down to quarter. of strengthen we XX% representing $XXX represented of in our year-over-year vertical as XX% million the also to vertical, up Enterprise This were Services are customers QX, year-over-year customer This revenues XX% lower OEM existing in of quarter. AI on and versus total our and billion, $X.XX datacenter quarter-over-quarter large Switches, revenues and Solutions X% and large and versus datacenter representing flat was enterprise QX. revenues CSP quarter-over-quarter.One focus last QX appliance spending for up investments. The

and enterprise Accessories increased Asia driven QX of XG, were represented and and of X% customer quarter slightly Asia On Europe million, appliance represented year-over-year mix year-over-year a of and XX%, with a QX U.S. and data Europe decreased increased emerging in XX% total revenues our GPU and of this of solutions Solutions and revenue segment of and mix.By increased QX telco, complete by On edge, decreased revenues OEM X%, X%, quarter-over-quarter U.S. XX% of revenues XX% World basis geography, down of large over last XX% rack-scale X%. Server and XX%, and Storage XX%. AI, X%. Subsystems which gross and X% Rest on systems, IoT X XX%. storage the World and basis, slightly Europe decreased represented was significantly Our Total margin center has a comprised decreased The XX%, XX% the basis, rack-scale increased again GPU World years. the revenues, revenues verticals.The Asia QX revenues XX.X%. ASPs product quarter-over-quarter both AI, Rest Systems over decreased represented revenues. IT $XX channel increased quarter-over-quarter XX%, decreased U.S. from non-GAAP Rest

operating QX new winning gaining XX% million, X% and quarter-over-quarter driven and XX% on decreased designs on compensation XX% OpEx market expenses year-over-year year-over-year by to expenses, by stock-based increased headcount. non-GAAP basis share.Turning focus and On to to million. to basis, a continue quarter-over-quarter We higher expenses $XXX $XXX operating and GAAP a strategic increased

non-GAAP of and consisting expense by XX.X% interest ago to due margins $X.X last versus offset gross QX was gain million QX million, principally was a and changes margin from expenses.Other net year foreign million in Our for in operating quarter approximately XX.X% and exchange. expense, income a revenues, operating $X.X of $X.X XX%

of free XX.X%. XX.X% and on rate gross strong cash profitability, was $XXX due $X.XX, million, was non-GAAP quarter to OpEx in of due margins, stable sequentially gains.Cash to previous $X.XX from was generated and was during basis. and exchange debt quarter.The strong range a lower down guidance, million -- million which for in tax versus $X.XX QX on inventory diluted interest the of million Our QX compared for was CapEx EPS at revenues million The the continued flow foreign of the quarter. used positive requirements rate during GAAP was million the as delivered million non-GAAP operations $X free cash negative of non-GAAP decreased expense high offset cash for end QX by We QX paid the GAAP operations $XXX on to for basis the the we non-GAAP provision higher plans flow resulting to was our flow for flow $XX.X higher $XX which build a tax tax QX of towards end last $X QX. based $XX.X income guidance of

million position debt expires core million XX days as sales X strong $XX solutions. working was quarter, while of days, Days XX by XG to $XXX in inventory in to cash cash metrics days QX. cash a inventory wide XX last about million days down prior have quarter business compared of $XXX flow was of XX paid we versus diversified a XX conversion then and sheet outlook. cash GPU, increased January million We the to XX for increased XX up model the sheet AI, days to payables outstanding XX net days was closing $XXX days computing, net from days.Now range days days a built and the by cycle and seasonally enthusiastic a the edge of last outstanding while QX.Turning QX. generated the by $XXX operating $XXX up telco, We in our covering to remain under turning IOT by Days quarter-over-quarter versus balance million, QX debt to of cash was quarter. capital We million remaining in authorized buyback XX, million, bank position which position resulting on program, balance XXXX.The $XXX storage,

a expect global we QX expect constraints, observing of income income diluted seasonally $X.X December and $X.XX macro-economic XXXX and per ending billion diluted net carefully platforms.For are net for to billion, especially situation sales the leading the XXXX, share AI $X.XX. supply-chain net fiscal We of in the continuing quarter share strong to XX, GAAP non-GAAP second of range to per $X.X and $X.XX $X.XX of

be to $XX gross and not levels. million QX $XXX expenses.The are expenses be non-GAAP that expected operating outlook are included similar GAAP expect operating expenses to in stock-based approximately We margins in compensation million include EPS excluded year of expenses, fully GAAP which non-GAAP for approximately diluted share. diluted net XXXX $XX effects million, QX expected net tax compensation from of of common per $XX million stock-based includes fiscal to in are income

other diluted non-GAAP a GAAP net expect company's income common projections of XX.X% and income fully including GAAP to of XX.X million $XXX assume the non-GAAP.We the XX.X%, tax We for and share and expense of The the count QX interest rate expenses, range XX.X year to tax approximately of of a $X and per non-GAAP a for million net million. million a rate be be for of for a CapEx XXXX $XXX share and to fiscal range million for diluted of XXXX. to million $XX million expect second $XX GAAP quarter shares in expense fiscal

For from XX, we we ending billion to $XX.X now our billion.Michael, billion of for a XXXX, guidance raising $XX are to for revenues year ready range Q&A. are to June the fiscal XXXX $X.X $XX billion

Instructions] Ananda question [Operator Our first comes Loop with Capital. Baruah from

you Charles, or couple but guys other execution. go? what China and are NVIDIA degree needs a benefit either which so I Congrats the into then us of at might follow-up. have if and could And find give you to of way the sense you other now And think that to rate countries. strong its was to you degree can on supply places out some starts. benefit, that the makes increased yes, guess, anticipate to about the benefiting talk benefit a the you ongoing I pointed the to just of China from

much question. one that's of believe we December our to quarter, And the a than of last the and at from quarter. demand be we why situation. $X.X it's to $X.X moment, able billion more for But complicated target. reasons our billion why NVIDIA supply we are say will you better Again, be customer fulfill that's percentage Thank this should

So price meet. that need basically, a condition we to

That's I Charles. it. of guess, context. actually that, then, helpful And I sort appreciate from dovetailing really

about of December the of also that And implied quarter guide accelerating. quarter you which implies then fiscal is made midpoint of the the $XX.X and the midpoint billion, So billion, your year, the be guide. March would June for quarter mention guide, the raised though, growth also, $X.X

is supply like seems it and -- so getting better. And

coming co-op You on, into also capacity have year. the going

in So fiscal conservatism, I that's there is, question but quarter? quarter check pull-forward there implied is challenging or year even guide It like in been seems raised the into might conservatism to the duplicate guess December is and be in to wanted that? June you March the just some think built that

you. lots Thank to gain Yes. win. Again, design of we continue

back growing we faster our So order has in forecast what reality. than been

$XX to moment, for number. So at And $X.X this billion billion $XX year, whole should fiscal number. again, should December conservative for $X.X a to be very a conservative billion our be billion,

very to to why feel X,XXX per rack-scale, rack-scale we have month a difficulty rack rack including and quickly I will rather we optimistic capacity. So X,XXX grow very we than month that's capacity continue soon. before just, Likewise, our to continue per production pretty to grow capacity much and grow now

future very So for optimistic we are growth. the

Wang comes next Our George with question from Barclays.

other like color additional which the the launch other give any allocation color the first future, also LXXS quarter allocation some maybe of from from ramping? Gaudi you Just in suppliers? terms is some Maybe in the partners, is NVIDIA kind from Intel. AMD curious from from the when on and XXXX. can near-term, expected upside Just to MIXXX, And give HXXX you of suppliers from also of including for kind and maybe could the in aside NVIDIA,

Yes. question. CGX, getting also to LXXS, Thank strong way. we a know, Yes. production. And the Gaudi AMD ready have very NVIDIA including the including as you the I right, CGX on product mean, and line, you Intel And the for ready. X is volume MIXXXX

capacity. very we strong and have although demand So a very supply good

quicker very I for feel again, optimistic growth. a So,

follow a have quick can. I if Okay. up I

obviously also to accretion labor out of in the and and of forward? operating the kind of some expected going the kind costs, Malaysia kind much margin margin can any impact the on you coming with on terms Just profit facility, when quantify, lower Taiwan give thoughts of in of maybe kind color future, just

as rate today Yes. what of and shared, mean, I capacity our only for U.S. just about Taiwan utilization XX%. I

a as revenue, So profitability lower, So right? when utilization we that's you rate, cost And higher grow why be campus. we Malaysia, a have lower will overall when increase. our cost our know, is will

cost will our once So and better we improved. slightly Malaysia, be profit start will production in be margin

Our from Janik with Susquehanna next Wing question Group. Financial comes

guide bring XX% is actually XX% margin midpoint and declining understand December OpEx year-over-year on? should growth, by the you Mehdi range, in from of here David, think your about rate utilization Yes. the Hosseini. XXX-basis-point. rate, as implies but I quarter but the operating the It's leverage utilization about how I up

Yes.

So conservative we leverage, to for guide We expect I were, we will get our in operating little continue think, that QX. Mehdi. a in OpEx

-- little we came as were in a and so QX, in we So bit and we lower.

doing are well. QX can We as that to do we in everything

the operating revenues guide expenses margin gross margin well as your at but increase are. our rate We -- came on -- some we we you back down operating little know, expect never as leverage as as we our year-over-year, that expect as operating gross mentioned, Charles a bit as margin leverage, to So question.

ago. And components. manufacturers from Charles, they that have at everything other are going and big just were And memory a a couple cause to part we of heard of not that months prices your sell prevalent memory is

up. prices inflationary to do going memory are So how you expand be alleviate that to And able trend margins?

mean, able basically to to pass-through our we are cost Thank customers. I you.

we are won't okay. kind portion, impacted So least We it for that. be too much. by of be that At won't impacted basically

Securities. with Tanwanteng Jon Our CJS next question comes from

nice quarter and Great outlook. a

really with when some a the new more utilization margins better I kind new should apparent? planning getting simply gross that? and you expect on leverage the and the of Is timeframe to that input wanted facilities can margin assume we give color outlook. share for hyperscale you facilities the margin Are the I become mean, gross to than only your on on mix and there back with little or ramp. the guidance and all happen gain are little component cost a or that and it sooner initiatives is Just

Well, mentioned are -- earlier, going it's are lower to to up, revenues as we efficiency leverage we because, of on as put more gross Charles higher get the and we going throughput the through Jon, a will as ramp we costs which factories. margin combination, as factory we get --

we So will benefit some get there.

transition Malaysia -- also maintaining We more benefit are will although, that's Taiwan. as so for and get manufacturing QX. over very competitive we guidance to why situation, And we our that I are, think now right margin we

Yes. of business I add our a is mean, can little of I color. kind growing. bit software some

those our will Our all value our service, including on-site deployment, bridge. gross margin, help

at healthy track, moment, should on right direction. this we be the So

it. Got

are all or just North Would facilities know those facilities to on Okay. question about impact? expanding in a and and put given here How margin think places I the we think for do buildings said, building neutral X costs looking America. in And you or you higher negative, those the, be their then new you here? just U.S. I accretive are the

we most a good rental of some is growth those what buildings, our Bay building. in we Area because are Very more question. Indeed, in will build than can faster be and adding the buildings

cost in state then are And America. location, I in a North be a will facility. lower a rental looking another hopefully mention about for we bit little it did of So

I -- Valley But months, decide are in will few short-term, for believe. next property. rental new campus we in the building we planning Silicon So new be a will in buildings

comes question from Choski, next Northland Capital Markets. Our Nehal

Yes.

with guide midpoint up quarter XX% already addressed this, December You what the for to revenue expectations may but your have being respect are of quarter-over-quarter? contribution AI

Yes.

are expecting So I we performance, same the think Nehal. really

to it expect range be will a in XX%. over We of

Okay. than the a in quarter give was you more far exposure as as than bit greater the little And can number XX%? other September precise what

giving that's that are and our approximate We figure guide.

continues to grow, but revenue Yes. with... hopefully Basically in AI consistently ALCN percentage

Our next Fargo. Aaron with Rakers from comes Wells question

discussion, of their the just engaging and the for characterize datacenter it seeing going times plans evolve to how the end are are back side Yes. would into their Congrats as am I how on you on what was current mean, how evolution curious, footprints days thinking quarter. higher build-out that you, would in maybe ago, how about AI, with supply you has to and that relative the these lead the of you I GPUs? quarter? evolved XX customers

complicated a It's job. Yes.

and our lead global solution a building-box our footprint of we have We customers. together, time. huge hundreds support because However,

indeed, And are [Technical to improving area. the the our of more control, product we are in relatively, competitors. Difficulty] take So that able lead care than the flow-in, continually inventory we allocation, time, efficient

this have So a and say would throughout times last in lead the it continue improved you kind that December like would to fair quarter this course improving you that, expect sounds It's characterization. quarter. of

inventory our Yes. be why rate that's And utilization will improving.

guess, So before, I turnaround we days have about XX time.

Yes.

building-box improve. solution, to grow we continue our And to continue situation to I guess scale will and that will be the leverage continues when improved when

the in Silicon. cycle. It's deployments given these be, the these longer would have way Gaudi prior I see, the like more about are question And it a I you the decisions Yes. on competitively a is market got are then the MIXXX, follow-up question and made you as customer guess think not I evolves quarter. know

products, really the to layer already MIXXXX another waiting year, those that we particularly next are that as starting next adds already the actually year are to and of look ramping, So, and really into early seeing of visibility projects and these course to have for that part those of you through that growth revenue products those in designed projects kind competitive launch offerings? to to start you for the see been incremental those are just pipeline? you of Are

Yes.

basically. earlier so able new technology we a available are building-box Because design our all and right. to You make are the solution, that than market,

prepare So, to evaluation allows there our customer so send decision earlier product, usually for time will an customer be can earlier Super our and the make a inventory. we Micro, prepare solution that to

we we that We can system matter customer same doesn't market time seeding, So, provide AMD advance. Intel gain provide validate a building-box advantage. solution, solution, earlier have we if they to or and in solution a earlier it so a solution

conference our and call today. session joining you question-and-answer us. our for conclude will This Thank

may You disconnect. now