Q1 FY2025 Earnings Call
SMCI · Preprocessing Report
2024-11-05
Quality
100%
91
Turns
14
Speakers
5
Sections
10
Exchanges
455
Claims
Quality issues

Entities by group 42

company 1
Super Micro Computercompany
company executives 2
Charles LiangpersonDavid Weigandperson
sell-side analysts 6
Aaron RakerspersonMehdi HosseinipersonAnanda BaruahpersonJon TanwantengpersonGeorge WangpersonMichael Ngperson
ai chipmakers 3
NVIDIAcompanyAMDcompanyIntelcompany
analysts 4
Quinn BoltonpersonNehal ChokshipersonSamik ChatterjeepersonVijay Rakeshperson
investment banks 3
BarclayscompanyGoldman SachscompanyJPMorgancompany
direct liquid cooling 1
Direct Liquid Cooledtechnology
datacenter management software 1
Super Cloud Composerproduct
company ticker 1
SMCIcompany
liquid-cooled rack architecture 1
SuperRackproduct
regulator filings 1
SECcompany
stock exchange 1
NASDAQcompany
rack architecture 1
NVLtechnology
auditing firm 1
Ernst & Youngcompany
Ungrouped 15
BlackwellproductMichael StaigerpersonDatacenter Building Block SolutionsproductB200productGB200productH200productRack Scale Plug And PlaytechnologyPower Usage EffectivenesstechnologyMI300productMI325productGaudi 3productGP200productSiebeltechnologyNVL72productHopperproduct
REPORTING 75PROJECTING 51POSITIONING 128EXPLANATORY 23ANALYST 76

Topics 97

liquid cooling×24gross×22blackwell×19cash×15data center×14revenue×13growth×12governance×10inventory×10chip×9nvidia×9guidance×8solution×7working capital×7audit×6server×6capacity×6auditor×5order×5net×5

Themes 262

guidance×12new×7working capital×6non-gaap×5ai×5special committee×4liquid cooling×4q1 fy2025×4quarterly×4annual×4revenue timing×4chairman and ceo separation×4preliminary×3forecast×3future outlook×3year-over-year×3operating×3customer mix×3access to capital×3business update×2archive×2fiscal 2025×2geographic expansion×2customer growth×2net expense guidance×2balance sheet×2readiness×2full-year×2production capacity×2availability×2improvement×2business outlook×2financing×2concentration×2chairman-ceo separation×2ceo succession×2growth outlook×2h200 systems×2revenue guidance×2nvidia supply×2nvl racks and blackwell b200 systems×2call participants×1resignation×1filing delay×1business and market×1financial and strategic×1webcast timing×1forward-looking disclaimer×1sec filings×1live broadcast×1recent challenges×1previous financial reports×1become current×1independence×1management misconduct×1remedial measures×1full delivery timing×1ongoing work×1no additional information×1full report expected×1customer service resilience×1strong first quarter×1q1 non-gaap growth×1gross profitability×1supply chain and logistics savings×1speed to production×1logistics capability×1build time reduction×1building block solutions for ai infrastructure×1direct liquid cooling adoption×1efficiency and lower operating expense×1liquid-cooled infrastructure adoption outlook×1market share growth×1dlc growth×1infrastructure management×1provisioning automation×1malaysia campus×1capacity expansion×1power capacity×1monthly output capacity×1global expansion×1global leadership×1rapid scaling×1progress×1nvidia ai×1production-ready rack systems×1cooling efficiency×1power efficiency guidance×1gpu platform readiness×1intel gaudi 3 solutions×1competitive edge×110-k status×1cost reduction×1green computing leadership×1direct liquid cooled rack-scale demand×1product and customer mix improvement×1net other expense breakdown×1exclusion from non-gaap earnings×1eps guidance×1gaap guidance×1closing inventory×1liquidity position×1sequential decline×1sequential increase×1per diluted share guidance×1earnings adjustment×1financial review×1financial reporting×1lower end of guidance×1losses from delayed filings×1customer response after filing resolution×1filings as a gating factor×1decline×1customer delay×1customer waiting×1blackwell readiness×1chip delay×1supply delay×1supply availability×1management outlook×1base case target×1product discounting×1management and control×1new-generation technology×1data center portfolio×1end-to-end offering×1gross and net×1management team needs×1senior management expansion×1report review×1senior team growth×1midpoint×1timing of miss×1deployment timing×1prior quarter×1pushed into q1×1q1 closeout×1gap×1blackwell performance×1gradual availability×1q1 2025 outlook×1delay impact×1direct liquid cooling deliveries×1deep cooling×1quarter-end balance×1next-quarter outlook×1signing timing×1auditor-signing update×1signing status×1reduction×1company outlook×1previously discussed×1resolution progress×1outlook×1target×1pressure×1technology push×1end-to-end management×1growth driver×1on-site service×1solutions and services×1funding×1position×1coverage×1growth and profitability×1capital raising×1financial health×1p&l timing×1production progress×1production ramp×1product readiness×1product development×1scale solutions×1total-solution offering×1supply support×1blackwell vs hopper×1gb200 and reference design×1competition×1deployment services×1time-to-online advantage×1competitive position×1analyst questions×1customer concentration×1leadership stance×1value×1board leadership×1ceo planning×1timing of ceo exit×1role change×1role changes×1forward guidance×1current quarter×1exact number disclosure×1product rollout×1market launch×1competitive positioning×1energy efficiency×1h200 disclosure×1product promotion×1nasdaq compliance deadline×1deadline×1replacement×1extension plan×1supply allocation risk×1support and order fulfillment×1long-term relationship×1expanded cooperation×1allocation impact risk×1positive communication×1volume availability×1co-development×1supply chain efficiency×1first mover×1shipments×1customer feedback×1product quality×1competitive advantage×1end-to-end solutions×1customer adoption×1inventory days and one-time impact×1explanation×1one-time item×1inventory and receivables buildup×1improved from slower revenue growth×1lower growth driven improvement×1collection efficiency×1inventory management×1company expansion×1customer demand support×1normalizing×1cash flow support×1challenge×1malaysia expansion×1global utilization×1question×1forward outlook×1long-term need×1capacity constraint×1low rate×1additional details×1technology relationship×1longstanding partnership×1blackwell delay×1second-half outlook×1blackwell pipeline×1blackwell systems×1strength×1nvidia customer demand×1nvidia partnership×1onsite cabling service×1backlog build×1remote×1ongoing activity×1audited filing timing and credit agreements×1missed deadline consequences×1renegotiation if deadline missed×1bank call risk if deadline missed×1bank debt and convertible risk×18-k reference×1lender relationships×1extensions or waivers×1access to funding×1

Key Metrics 74

revenue×23gross margin×21inventory×8operating cash flow×7working capital×7shipments×7revenue growth×5market share×4orders×4cash flow×4backlog×4volume×3production capacity×3net income×3diluted share count×3capacity×3capital access×3operating margin×2adoption×2customers×2other income and expense×2tax rate×2diluted eps×2days sales outstanding×2net income per diluted share×2revenue guidance×2sales×2availability×2liquid cooling×2earnings per share×1earnings×1cost×1gpu count×1time-to-deployment×1build time×1time to deployment×1operating expense×1power×1direct liquid cooling×1power usage effectiveness×1energy costs×1interest expense×1stock-based compensation×1capex×1free cash flow×1cash×1debt×1net cash position×1cash conversion cycle×1days inventory outstanding×1days payables outstanding×1net sales×1operating expenses×1stock-based compensation expense×1guidance×1price×1headcount×1demand×1performance×1units delivered×1lead time×1customer concentration×1customer concentration ratio×1percentage×1supply×1product mix×1efficiency×1cash flows×1capacity utilization×1utilization rate×1variation rate×1non-gaap profit×1accounts payable×1allocations×1

Entities 697

Super Micro Computer×332Charles Liang×111David Weigand×45Blackwell×31NVIDIA×21Aaron Rakers×14Michael Staiger×13Datacenter Building Block Solutions×12Quinn Bolton×10Mehdi Hosseini×9Ananda Baruah×7Jon Tanwanteng×7George Wang×6Barclays×6Nehal Chokshi×6Direct Liquid Cooled×5Super Cloud Composer×5Michael Ng×5Goldman Sachs×5SMCI×5B200×4JPMorgan×4Samik Chatterjee×4GB200×3SuperRack×3Vijay Rakesh×3H200×3SEC×2NASDAQ×2NVL×2Ernst & Young×1Rack Scale Plug And Play×1Power Usage Effectiveness×1AMD×1MI300×1MI325×1Intel×1Gaudi 3×1GP200×1Siebel×1NVL72×1Hopper×1

Business Segments 91

Server And Storage Systems×89Enterprise×1Cloud Service Provider×1

Sectors 137

computer hardware×54semiconductors×32data center×29cloud computing×8artificial intelligence×5manufacturing×4thermal management×2cooling equipment×1software×1energy efficiency×1

Regions 15

Silicon Valley×4Malaysia×3Taiwan×2Europe×2global×1USA×1worldwide×1Asia×1

Metadata Distributions

Sentiment
positive 123negative 21neutral 209
Temporality
backward 65forward 85current 203
Certainty
definitive 84confident 111moderate 76tentative 81speculative 1
Magnitude
major 58moderate 214minor 81
Direction
improvement 30decline 8flat 1mixed 6none 308
Time Horizon
immediate 77near_term 172medium_term 25long_term 8unspecified 71
Verifiability
quantitative 86event 38qualitative 229
Analyst Intent
probing 25challenging 2confirming 7seeking_detail 36seeking_guidance 6

Speakers

Executives
CLCharles LiangCEODWDavid WeigandCFO
Analysts
ARAaron RakersanalystABAnanda BaruahanalystGWGeorge WanganalystJTJon TanwantenganalystMHMehdi HosseinianalystMNMichael NganalystNCNehal ChokshianalystQBQuinn BoltonanalystSCSamik ChatterjeeanalystVRVijay Rakeshanalyst
Other
MSMichael StaigerirOPOperatoroperator

Sections

TypeLabelSpeaker
preamblePreambleOperator
prepared_remarksPrepared RemarksCharles Liang, David Weigand, Michael Staiger
qa_sessionQ&A Session—
closing_remarksClosing RemarksMichael Staiger, Quinn Bolton
operator_signoffOperator Sign-offOperator

Q&A Exchanges 10

#AnalystFirmTurns
1
MNMichael Ng
Goldman Sachs7
2
SCSamik Chatterjee
JPMorgan4
3
ARAaron Rakers
Wells Fargo7
4
ABAnanda Baruah
Loop Capital8
5
GWGeorge Wang
Barclays7
6
NCNehal Chokshi
Northland12
7
VRVijay Rakesh
Mizuho12
8
JTJon Tanwanteng
CJS Securities9
9
MHMehdi Hosseini
SIG10
10
QBQuinn Bolton
Needham & Company7

Claim Taxonomy 353

REPORTING75
resultFinancial outcome for a completed period42
metricNon-financial quantitative fact8
operationalDiscrete completed event25
PROJECTING51
guidanceQuantitative expectation with number + time32
commitmentPromise with binary verifiable outcome13
targetLong-term aspirational quantitative goal6
POSITIONING128
strategyPriority, direction, or initiative107
competitiveCompany's position or advantages6
opportunityMarket condition framed as growth driver6
riskHeadwind, constraint, or uncertainty9
EXPLANATORY23
attributionWhy a specific outcome happened4
contextNon-company macro/industry fact19
FRAMING0
thesisFalsifiable belief about how the world works0
ANALYST76
questionInterrogative seeking information57
observationRestates a fact or data point14
concernFlags a risk or challenge3
estimateAnalyst's own projection or calculation2
sentimentOpinion, praise, or critique0

Transcript

Preamble
OP
Operatoroperator
Thank you for standing by. My name is Telia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer Inc., SMCI U.S., Q1 FY'25 Business Update Call. With us today, 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. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.
Prepared Remarks
MS
Michael StaigerirSuper Micro Computer, Inc.
Good afternoon and thank you for attending Super Micro's first quarter fiscal 2025 business update conference call for the first quarter, which ended September 30, 2024. With me today are Charles Liang, Founder, Chairman and 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. I will make additional remarks prior to beginning of Q&A, but 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 '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.
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 SEC. 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. A discussion of some of the risks and uncertainties relating to our business is contained in our filings with the SEC, and we refer you to 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.
This call is being broadcast live on the 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 is the property of Super Micro. Our second quarter fiscal 2025 quiet period begins at the close of business, Friday, December 13, 2024. With that, I will turn it over to Charles.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you, Michael. 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 filings since these challenges emerged, we remain confident in our previous financial reports. And as previously announced, we are actively in the process of engaging a new auditor. We are working with urgency to become current again with our financial reporting.
I am pleased to report that the Special Committee has today provided the following statement to Super Micro, 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 & Young. Following a three-month investigation led by Independent Counsel, the Committee's investigation to date has found that the Audit Committee has acted independently and that there is no evidence of fraud or misconduct on the part of management or the Board of Directors. The Committee is recommending a series of remedial measurement for the company to strengthen its internal governance and oversight functions, and the Committee expects to deliver the full report on the completed work this week or next. The Special Committee has other work that is ongoing but expects it to be completed soon." End of quote. The Special Committee has not otherwise provided any additional details or information. We look forward to receiving the committee's full report in the near future.
We do not believe the current challenges affect Super Micro's ability to service our customers and partners as we continue to grow rapidly and strongly with the AI revolution, and my confidence in Super Micro and its staff remains stronger than ever. Here are some key quarterly highlights. The preliminary fiscal Q1 net revenue was in the range of $5.9 billion to $6 billion. At the mid-point, 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 many customers are waiting for the coming soon new generation GPU chips. The preliminary fiscal Q1 non-GAAP earnings in the range of $0.75 to $0.76 per share versus $0.34 last year, approximately a 122% year-on-year growth rate. The preliminary non-GAAP gross margin is approximately 13.3% and non-GAAP operating margin is approximately 9.9%. Both were higher than the previous quarter as customer mix improved, and supply chain costs and expedited shipment eased for DLC components. We have deployed the world's largest DLC AI supercluster with 100,000 NVIDIA GPUs in a record time-to-deployment, TTD, as well as time-to-online.
This milestone achievement reflects our engineering expertise and complex logistics capabilities for large scale AI infrastructure deployment. Leveraging our Datacenter Building Block Solutions, DCBBS, we are now building full scale liquid cooled datacenters with our Rack Scale Plug And Play solutions featuring our latest DLC liquid cooling technology at a leading pace. DCBBS, Datacenter Building Block Solutions, can reduce the time required for customers to build new datacenters from roughly two years to a few quarters, significantly improving datacenter TTD, time-to-delivery, and TTO, time-to-online and cost for customers' AI IT infrastructure. Datacenter Building Block Solutions is also helping to accelerate the adoption of DLC, direct liquid cooling, driving efficiency and performance while reducing customers' OpEx, achieving greener computing. We expect 15% to 30% of new datacenters will adopt liquid cooled infrastructure in the next 12 months. The DLC volume is at least 10x more than last year — I mean, this year, DLC market share will be at least 10x more than last year due to the DLC liquid cooling product maturity and the rapid growth of AI. To keep the DLC 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 datacenter cooling towers, making it the most powerful DLC datacenter management software on the market today. SCC further simplifies provisioning of a highly automated, software-defined infrastructure, supporting customers with rapidly changing workload requirements. With the addition of SCC, Super Micro is well prepared to service many more customers and grow DLC liquid cooling datacenter market share. On the production front, we are in the process of completing our new Malaysia campus, where we expect to begin manufacturing later this quarter.
Additionally, we have been nonstop expanding our facilities in Silicon Valley to increase DLC rack-scale production capacity. Now they are boasting 15 Megawatts of power and able to produce more than 1,500 DLC GPU racks per month, with plans to scale up further. 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, product design, build quality, supply chain management, deployment and datacenter services, we are pursuing our goal to transform Super Micro 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 developments are progressing smoothly. Our NVIDIA GB200 NVL72 is ready and the 10U air-cooled, and 4U liquid-cooled B200 rack PnP systems are fully production-ready. The brand new 200KW+ SuperRack architecture, co-developed with NVIDIA, which provides near 100% DLC, I mean, the whole rack, almost no cooling fan required, is also on the right track. The new SuperRack architecture will be able to achieve Power Usage Effectiveness, PUE, close to 1.0. To complete our broadest AI portfolio, the AMD MI300 and MI325 platforms and Intel Gaudi 3 solutions are ready to go as well. Our Datacenter Building Block Solutions is attracting more new customers and our long-term investment in DLC is paying off with world-class quality and volume capacity, giving us a sustainable competitive edge and economies of scale. Before passing the call to David Weigand, our CFO, I want to thank our partners, customers, investors and Super Micro employees and express my appreciation for their patience and support until we can provide more information about our 10-K filing status. Our strong foundation, Datacenter Building Block Solutions and DLC green computing leadership, not only reduce energy cost for our customers, but also contribute to a healthier, Mother Earth. I believe we are well positioned for strong future growth.
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DW
David WeigandCFOSuper Micro Computer, Inc.
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 billion 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 platforms. AI contributed over 70% of revenues across enterprise and cloud service provider markets.
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 DLC AI GPU clusters. The Q1 non-GAAP 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 million to $443 million and non-GAAP net income is $483 million to $493 million. 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 GAAP diluted EPS range is approximately $0.68 to $0.70 versus prior guidance of $0.60 to $0.77. The Q1 non-GAAP diluted EPS range is approximately $0.75 to $0.76 versus guidance of $0.67 to $0.83. 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. 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 estimated 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. 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. For the second quarter of fiscal 2025, we expect net sales in the range of $5.5 billion to $6.1 billion.
We expect GAAP and non-GAAP gross margin down 100 basis points sequentially due to customer and product mix. 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 14.0% and 15.0% respectively, 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.
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. Michael, we're ready.
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Q&A Session
Q&A 1/10
OP
Operatoroperator
We will now begin the Q&A session. [Operator Instructions]. The first comes from Michael Ng with Goldman Sachs. You may proceed.
MN
Michael NganalystGoldman Sachs
Hi, good afternoon. Thank you for the question. Just on the business fundamentals, 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 billion 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? Or is it a gating factor? Thank you.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
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 Blackwell chip, as you know. So people are waiting for the new solution. And the new solution, the Blackwell-based liquid cooling, air cooler, or GP200, our solution is ready. That's waiting for a chip. So, I guess that's the major reason. And our capacity continues to grow, and our liquid cooling solution is fully ready. Again, we can produce 1,500 liquid cooler racks per month now. So, we are fully ready. That's waiting for the new chip to be available. And then I believe we can grow our market share and revenue after that.
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MN
Michael NganalystGoldman Sachs
Great. And for David, just on the full year guidance.
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David WeigandCFOSuper Micro Computer, Inc.
Yes, Michael, we're not providing annual guidance on this call.
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Michael NganalystGoldman Sachs
Great. Thank you, Charles. Thank you, David.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you, Michael.
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Q&A 2/10
OP
Operatoroperator
Thank you. The next question comes from Samik Chatterjee with JPMorgan. You may proceed.
SC
Samik ChatterjeeanalystJPMorgan
Hi, guys. Thanks for taking my question.
I guess maybe to sort of talk about the gross margins here. You had robust gross margins in the quarter, but you're guiding it down. It seems like maybe it's a bit more choppy in terms of gross margins depending on customer mix. Does the sort of progression before getting back to the 14% to 17% that you talked about earlier still remain sort of the base case? Or are you having to sort of discount more or be more aggressive on pricing on the current generation products? And as separate sort of a side question, just I know you're not commenting on related to the filings, but any management changes or any changes in how you operate that you're planning or thinking about to sort of overall improve things in terms of getting more sort of more disciplined around and more control around the financial reporting? Thank you.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you, Samik. Yes. I mean, it depends on new product, right, when 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. And at the same time, our data centers are building broad solution with SCC, Siebel, Michael, Carl, Composer. They provide a full end-to-end solution. That for sure, we are gradually growing our gross 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 company 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.
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SC
Samik ChatterjeeanalystJPMorgan
Thank you. Thanks for taking my question.
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Q&A 3/10
OP
Operatoroperator
The next question comes from Aaron Rakers with Wells Fargo. You may proceed.
AR
Aaron RakersanalystWells Fargo
Thanks for taking the question. A couple if I can as well. 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 $500 million at the midpoint short of that. I guess, given the comments to the prior question, are you assigning 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 had 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 the fiscal first quarter.
Did that all close? I'm just trying to bridge that gap for me between the delta and the guide relative to the business update today.
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Charles LiangCEOSuper Micro Computer, Inc.
Okay. Good.
I mean this is a complicated question. So I believe the major impact is new chip availability. Because Blackwell 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 volume become much better. And so that's the major factor, I believe. As to our 10-K delay may impact a little bit, how much I don't know yet, but a certain impact for sure, but hopefully not too big.
As to the whole year, yes, today, we do not provide annual guidance basically with our detailed edge, right. In last few months, we deliver more than 2,000 rack DLC. That, I believe, is a very high percentage for the whole deep cooling market. So, for the future growth, is still very optimistic.
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AR
Aaron RakersanalystWells Fargo
Yes. And then two other quick questions, if I can. So, first of all, I mean, you mentioned $5 billion of inventory coming out of this quarter. Any thoughts of where that might trend coming out of this next quarter embedded in your outlook that you provided today? And then I apologize for asking, I know that you're not going to address the special committee dynamic. But any thoughts on the timing of getting an auditor to sign.
Anything you can share on that front? I appreciate that you ask, we're not talking much about that, but I'm curious, any comments on that front.
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Charles LiangCEOSuper Micro Computer, Inc.
Okay. For inventory, maybe I can answer a little bit. I mean the company will continue to grow; I believe. So, $5 billion level of inventory, I believe will continue. And as to the special committee investigation results today, I'm very happy to share some very positive innovation as for detail once it's available from them, we will share with the market.
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DW
David WeigandCFOSuper Micro Computer, Inc.
And Aaron, we have no update with respect to the time line that we talked about, as we mentioned earlier. We're working diligently to get that done, as I mentioned, as quickly as possible.
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AR
Aaron RakersanalystWells Fargo
Thanks, guys.
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Q&A 4/10
OP
Operatoroperator
[Operator Instructions]. The following comes from Ananda Baruah with Loop Capital. You may proceed.
AB
Ananda BaruahanalystLoop Capital
Yes, guys. Good afternoon, good evening. Thanks for taking the questions. Two if I could. I guess the first is on gross margin. Dave, should we still expect it to improve as we go through the fiscal year as you were previously anticipating?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Yes.
So, by the way, we guided cautiously in this first quarter on our margin. So, we were glad to be able to exceed it.
And so in like fashion, we're guiding conservatively into the second quarter. And so, we still have our target margin that we're shooting for. And so we're doing everything that we can to improve that.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes. The competition is still putting some pressure. As you know, but Blackwell, I mean a new technology push and feel very optimistic with a chance to grow. And as I mentioned, the Datacenter Building Block Solutions including SCC, Super Cloud Composer that provide end-to-end management from chip level to rack scale to the whole data center. So, I believe all of those will help our growth. And then we are also able to provide the customer on-site deployment, on-site cable and service.
So all of those are very positive to our business. I feel very positive to continue to grow business.
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AB
Ananda BaruahanalystLoop Capital
Yes. Thanks for the margin context. I appreciate that. And the follow-up is just a general working capital financing question. This question has come up with a lot with investors.
And really, the question is can you explain sort of the access to capital situation as we go forward? And I guess, really, how would you like the investment community to think about the access to capital situation as we go forward? And I guess, really, how would you like the investment community to think about the access to capital situation? Thanks.
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DW
David WeigandCFOSuper Micro Computer, Inc.
Sure.
So Ananda, we put in the last eight, nine months, $4 billion into working capital from two equity raises and one convert. And so that's really — it really left us with a good working capital situation exiting Q4 at a run rate of around $1 billion — of $6 billion.
So again, we're forecasting 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 believe that we'll have any impediments to raising working capital.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, quarterly — every quarter, we are making a reasonable good net profit, though. So basically, we should be in a good shape.
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AB
Ananda BaruahanalystLoop Capital
Okay, guys. Thanks, so much. That's helpful. Thank you.
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Q&A 5/10
OP
Operatoroperator
Thank you. The next question comes from George Wang with Barclays. You may proceed.
GW
George WanganalystBarclays
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 revenue? Last time you guys alluded to sometime in the June quarter. Just curious whether that is still on track. Just any kind of high level in terms of when do you think the Blackwell is going to show up in the P&L?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, very big question. Indeed, we're asking NVIDIA every day. So I hope their production can go smooth and go for high-volume very soon. And once they have chip available, our solutions are full ready. So, we continue to work with them very closely to develop a current product, GB200, NVL72 and B200 nuclear-cooled and air-cooled. And we also designed some really enhanced rack scale solutions. So, in terms of total solutions, we have a very strong offering waiting for the chip. So, we need immediate and quicker support. Thank you.
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GW
George WanganalystBarclays
Well, that's helpful. Just a quick one, if I can. Just how to think about gross margin in the area of Blackwell versus Hopper. Just curious if you can talk about puts and takes on the gross margin for the GB 200, especially in light of reference design from NVIDIA, any kind of incremental value add from Super Micro just as we kind of hand to the Blackwell just in relation to the profitability and the kind of margin profile? Thank you.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, thank you. By the way, for sure, we estimate more competitive, right, because people know AI market is so big now. So, with Blackwell, we expect more competition. But at the same time, we also were prepared by our Datacenter Building Block Solutions 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 a good position.
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GW
George WanganalystBarclays
Okay. Thanks a lot, Charles. I'll go back to the queue.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you.
#293
Q&A 6/10
OP
Operatoroperator
Thank you. The following comes from Nehal Chokshi with Northland. You may proceed.
NC
Nehal ChokshianalystNorthland
Yes. Thank you. Thanks for taking my questions. A couple of questions, please. First, Dave, any 10% customer exposures in the quarter and the upcoming quarter?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Indeed, we will have 10% customers, Nehal.
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NC
Nehal ChokshianalystNorthland
Could you give us some detail as far as what percent of overall revenue due to 10% customers represent in the September quarter?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Yes. So we're not going to release that data today.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes. But 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.
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NC
Nehal ChokshianalystNorthland
Okay. Great. And then Charles, I think there's a strong feeling in the investment community that the Chairman and CEO roles, if separated, could be quite beneficial to Super Micro. From your perspective, what is the benefit of Super Micro separating these roles?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Okay.
Why would I base it on a company? That's my consideration. So, every day — if not every day, then every week, I have been thinking about that question since many years ago. And so, again, why would I base it on a business? So, I personally have a very open mind and technology guy and technology in my best interest. But still, overall consideration is the best benefit for shareholders and the company.
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NC
Nehal ChokshianalystNorthland
And just to be clear, do you see it potentially being in the best interest of the shareholder of that separating these roles there?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
No comment at this moment, but I'm considering about that. And someday, I will retire it. Hopefully, not in one year or two years. But sooner or later, I will retire. So I mean those changes for sure is a natural base of shareholders and for our company. And for my family too.
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NC
Nehal ChokshianalystNorthland
Thank you for taking my question.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, thank you.
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Q&A 7/10
OP
Operatoroperator
Thank you. The next question comes from Vijay Rakesh with Mizuho. You may proceed.
VR
Vijay RakeshanalystMizuho
Hi, Charles. On the September quarter in December, I'm just wondering how many liquid cool racks we are shipping in September and if you have some idea in December?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
David, maybe do you have some number this year?
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DW
David WeigandCFOSuper Micro Computer, Inc.
It was just a little below last quarter but I don't have the exact…
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CL
Charles LiangCEOSuper Micro Computer, Inc.
I would have to say, we had a company ship most of liquid cooling racks to the market recently. For example, in the September quarter. And our liquid cooling because ahead of the market. So — and customers like our liquid cooling because save their energy power and safe water requirements and kind of the trend. So I believe we will continue to grow liquid cooling percentage.
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VR
Vijay RakeshanalystMizuho
Got it. And when you say down sequentially into December quarter on the H200 liquid cooling. Any idea on how much that is sequentially?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
We did not share that number, but I believe this cooling will continue to grow very quickly. And we are very happy to promote that.
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VR
Vijay RakeshanalystMizuho
Got it. And just last question on…
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Go ahead, Vijay.
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VR
Vijay RakeshanalystMizuho
Sorry. I think, David, on the November 16 deadline, are you guys comfortable that you will have an auditor and file a plan to the NASDAQ?
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DW
David WeigandCFOSuper Micro Computer, Inc.
So we're not answering those questions today. So we — we're — like I said, we're diligently looking to replace the auditor as quickly as possible. And we will be filing a plan with NASDAQ and indeed regarding an extension. And so — but that's all we have to say about that.
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VR
Vijay RakeshanalystMizuho
Got it. Yes.
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Q&A 8/10
OP
Operatoroperator
Thank you. The next question comes from Jon Tanwanteng with CJS Securities. You may proceed.
JT
Jon TanwantenganalystCJS Securities
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 in Blackwell was supposed to be in the Q1 guidance and what you have implied in the Q2 guidance finance, 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, just would they possibly maybe hold back some just until you figure it out? Or are they supporting you through this and just meeting your orders and especially with the new technology?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, 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 projects co-developed and I don't expect and then negative allocation from them. So at this moment, according to our relationship according to our communication, things very positive.
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JT
Jon TanwantenganalystCJS Securities
Great. And then I guess, the Blackwell numbers that were implied in the last quarters and this quarter guidance?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
That's hard to answer because we don't know how — what's the volume NVIDIA, we have rate available every month. So we work with them very closely and co-develop solutions, validate a solution and service the common customer. So once they have no volume available, I believe we will have a good percentage in our product mix.
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JT
Jon TanwantenganalystCJS Securities
Got it. 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 your production capacity and supply chain there?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
We focused on liquid cooling much earlier than the industry, right? So in the last few months, we already shipped more than 2,000 racks, right?
And so far, the feedback from customers are very happy. Indeed, that quality, the customer satisfaction even better than our air cooler solution.
So we are very excited. Our hard work in the last 3 years that is paying off and we believe liquid cooling will continue to be our major advantage, including the whole data center end-to-end total solutions. Again, not just the liquid cooling racks but kind of deployment, cablings, service management so aware. So we are very excited for our DLC liquid cooling solution and customer like today.
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JT
Jon TanwantenganalystCJS Securities
Great. Thank you and good luck for finding new auditor.
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Charles LiangCEOSuper Micro Computer, Inc.
Thank you.
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Q&A 9/10
OP
Operatoroperator
Thank you. The following comes from Mehdi Hosseini with SIG. You may proceed.
MH
Mehdi HosseinianalystSIG
Yes, sir. Thanks for taking my question. David, from what I understand regarding cash flow, it seems like there was a onetime positive impact your days of inventory went up, but you were able to significantly increase your operating cash flow. Can you — did I hear you correct? And if so, what is the item that helped you with positive operating cash flow?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Sure.
I think the answer is, Mehdi, that we've been growing at such a high rate over the past quarters that that's really what's been impacting our operating cash flow is that we've had to pour 100s of million dollars into inventory as well as into accounts receivable. So kind of coming off of a quarter where we didn't have such a dramatic increase in revenue, we were able to generate a lot of cash, basically $1 billion worth of improved cash flows. So it was really — yes, so it was really just the fact that for the reasons Charles mentioned, the growth wasn't as high.
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MH
Mehdi HosseinianalystSIG
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 change. So was that improvement in operating cash flow all driven by working capital reduction or was there something outside of working capital to help you?
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DW
David WeigandCFOSuper Micro Computer, Inc.
No, it was really for those reasons. It was really just for inventory equation.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Mehdi, maybe I can have it.
I mean, when we grow about 200% more year-over-year. So for sure — and we see continue to grow. So for sure, we need 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 challenge I would like to say.
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MH
Mehdi HosseinianalystSIG
Got it. 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 tracking?
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Charles LiangCEOSuper Micro Computer, Inc.
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 needed those capacity. But in terms of utilization rate at this moment, I would like to stay a little bit low because capacity is ready, but no such - no enough new chip. As you say that, no in our new chip. That's why variation rate now is relatively low, maybe only 50%.
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David WeigandCFOSuper Micro Computer, Inc.
This is Dave.
Yes, I was going to give you a couple of 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, again, going back to working capital metrics, we increased our accounts payable by several hundred million dollars. So that — those are other factors that go into improved operating cash flow.
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MS
Michael StaigerirSuper Micro Computer, Inc.
Before we go to the next question. Thank you Mehdi. Before going to the next question I just want to clarify one of the comments from earlier with respect to NVIDIA and clarify 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 and don't expect that to change. So I just wanted to make sure that was clarified. Next question — actually our last question, Telia.
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Q&A 10/10
OP
Operatoroperator
Absolutely. Our final question comes from Quinn Bolton with Needham & Company. You may proceed.
QB
Quinn BoltonanalystNeedham & Company
Hi, guys. Thanks for 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 you're building backlog for either the NVL rack or the Blackwell B200 systems? So you see a nice building backlog for those systems. Obviously, you don't know when you'll get the chips, but that 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?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes.
Our solution is very strong. And I believe NVIDIA will continue allocate their solution to the company, the customer who have faced the total solution because at all, common end user satisfaction is mostly important to every company, right? So I would have to say our solution is very strong, and we continue to work with NVIDIA very closely aim to provide the best total solution end-to-end solution to customers. And that's why we started to provide on-site deployment on site cabling — on-site service.
And overall, those new hopefully, very attractive to a lot of new customers and old customers. So we feel very comfortable for the coming to a new chip solution.
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QB
Quinn BoltonanalystNeedham & Company
So the backlog for Blackwell, you're seeing that building on your order books?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
We provided kind of remote POC now. And so things are happening.
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QB
Quinn BoltonanalystNeedham & Company
Okay. And second, a follow-up question for David.
You've recently sort of filed new credit agreements with both of your banks just setting a date when you would after 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? 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.
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DW
David WeigandCFOSuper Micro Computer, Inc.
Yes. So I think we'll just refer you to our 8-K filings. We have long-term and good relationships with the banks. And so as necessary, we will file extensions, yes, or get waivers. And like as I mentioned earlier, we're not concerned about the company's ability to access the capital markets.
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Closing Remarks
QB
Quinn BoltonanalystNeedham & Company
Thank you.
OP
Operatoroperator
Thank you. There are currently no other questions in queue, so I will now turn it back over to the management team for closing remarks.
MS
Michael StaigerirSuper Micro Computer, Inc.
Thank you for joining our conference call today, and we look forward to talking to you soon.
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Operator Sign-off
OP
Operatoroperator
This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.