Q4 FY2023 Earnings Call
SMCI · Preprocessing Report
2023-08-08
Quality
100%
65
Turns
9
Speakers
4
Sections
7
Exchanges
370
Claims

Entities by group 58

server and storage systems 1
Super Micro Computercompany
semiconductors 2
NVIDIAcompanyIntelcompany
compute server systems 5
Delta Nextproduct8-GPU OVXproductC2productCG-1productDelta Maxproduct
total it solutions 2
IT SolutionsproductTotal AItechnology
modular acceleration platform 1
MGXtechnology
gpu systems 4
HGXproductL40S GPUsproductPVCproductMI-250product
server platforms 3
Redstone-NextproductMTXtechnologyRedstone Maxproduct
accelerator chips 4
GraceproductH100 PCIe GPUsproductGaudi 2productGrace-Hopper CG1 Superchipproduct
processor components 3
CPUtechnologyGPUtechnologyDPUtechnology
original equipment manufacturers 1
OEMcompany
storage server systems 2
E1.SproductE3.Sproduct
storage servers 2
Petascale All-FlashproductU.2 NVMeproduct
order types 1
NCNRproduct
processor architecture 1
x86technology
interconnect 1
PCIe Gen 5technology
customer support services 1
Global Serviceproduct
ai models 1
LLMtechnology
iOT applications 1
IoTtechnology
data center cooling solutions 1
DRCproduct
Ungrouped 21
Charles LiangpersonDavid WeigandpersonJon TanwantengpersonNehal ChoskipersonMehdi HosseinipersonAnanda BaruahpersonAMDcompanyAItechnologyCSPotherComputexevent5GtechnologyQ4otherFY24otherJensen HuangpersonTAMotherDCotherFY2022otherFedotherOpExotherARRotherBuilding 23other
REPORTING 95PROJECTING 42POSITIONING 109EXPLANATORY 13ANALYST 60

Topics 85

revenue×54ai×17supply×14earnings×13capacity×12solution×11order×11cash×11liquid cooling×9margin×9platform×7demand×7customer×7guidance×6market share×5gpu×5tax rate×5server×4operating×4product×4

Themes 237

growth×8nvidia×8non-gaap×7guidance×7gaap×5working capital×5strong×5capacity expansion×4quarterly growth×3fiscal 2024 outlook×3supply chain×3oem appliance and large datacenter×3operating expenses×3mix×3customer mix×2expansion×210% customers×2enterprise and channel×25g telco edge iot×2u.s. growth×2rest of world growth×2gross margin×2operating margin×2free cash flow×2diversification×2first-quarter fiscal 2024 guidance×2stock-based compensation×2earnings assumption×2fiscal year 2024×2path to $10 billion×2quality×2double ordering×2improvement×2vendor and customer relations×2fiscal 2024 upside×2capacity constraints×2partnership×2product mix×2opportunity and competition×2malaysia expansion×2customer demand×2record annual×1record quarterly×1top-line and bottom-line beat×1beat prior range×1demand-driven growth×1llm-optimized×1first-to-market×1competitive gains×1logistics and production×1faster delivery×1production capacity×1cooling options×1record high×1customer growth×1fiscal year 2023×1q4 non-gaap×130-year foundation×1ai platform volume shipments×1ai solutions showcase×1generative ai×1gpu support×1industry benchmark×1intel traction×1amd traction×1ai infrastructure demand×1application-optimized solutions×1mgx leadership×1modular acceleration×1ai computing vision×1mgx architecture×1mgx customer adoption×1volume production×1performance demand×1petascale all-flash×1nvme scale-out×1compute and storage×1performance time-to-online and cost×1power and thermal×1power efficiency and differentiation×1datacenter adoption investment×1datacenter efficiency and sustainability×1green computing mission×1immersion solution progress×1liquid immersion option×1ai demand and infrastructure complexity×1design complexity and deployment burden×1design validation sourcing and integration×1network software and firmware management×1global tiers×1new building×1rack output×1manufacturing expansion×1manufacturing scale-up×1quarterly guidance×1full-year guidance×1rack-scale ai leadership×1ai expansion×1value-added services×1operational readiness×1annual target×1annual growth×1design wins from ai platforms×1record level×1diversified demand×1storage and services×1ai/gpu and rack-scale solutions×1organic enterprise and channel and ai/ml growth×1total it solutions mix×1server and storage systems mix×1subsystems and accessories mix×1average selling price of total it solutions×1geographic mix×1asia decline×1europe growth×1asia growth×1europe decline×1expense×1offset by foreign exchange gain×1higher borrowing costs×1diluted non-gaap q4×1operating leverage×1quarterly operating decline×1from operations×1capital spending×1remaining authorization×1authorization expiry×1closing balance×1bank borrowing×1liquidity position×1days on hand×1ai platforms constraints×1r&d and personnel costs×1engineering and sales support×1net expense guidance×1fiscal q1 guidance×12024 ends june 30, 2024×1ai exposure×1leadership×1rack-scale differentiation×1company focus and partnerships×1product development×1product expansion×1deployment simplification×1cost and speed efficiency×1revenue mix×1new customers and partners×1rack scale and cloud scale solutions×1rapidly growing orders×1short-term target×1competitor claims×1claims×1cost performance×1integrated service and management×1total service×1gains×1ai mix×1second-half outlook×1ai revenue mix target×1chemical customer×1confidence×1supplier allocations×1order book×1assurance×1uncertainty×1lineup×1vendor support×1partner control×1demand side×1duplicate ordering protection×1other side×1monthly growth×1ncnr×1booking protection×1q4 fy2023 strength×1gen ai server outlook×1new top-tier accounts×1market share gains×1fiscal 2024 beat×1partner expansion×1small partner mix×1partner demand growth×1large data center engagement×1gaining despite constraints×1operational issues×1cooling solutions×1capacity to exceed guidance×1constraints on order visibility and share gains×1business positioning×1portability×1supplier support×1holding stable×1stable guidance×1q4 fy2023 results×1share from ai and rack scale solutions×1ai and rack scale mix×1supply dynamics×1ai demand allocation×1outside ai investments×1relative performance×1business expansion×1ai demand constraint×1capacity constraint×1traditional compute×1traditional server and datacenter×1similar experience×1intel ivy and amd mi300 positioning×1impact on opportunity×1intel and amd offerings×1box architecture advantage×1intel and amd solution availability×1current needs×1future outlook×1generating×1constrained market×1moderating×1increased use×1campus expansion×1americas expansion×1ai sales mix×1sales mix increase×1solution readiness×1readiness×1majority share×1data center guidance×1timing lag×1ai-related×1ai disclosure×1estimate from peers×1constrained supply×1ai supply×1current situation×1distribution timing×1quarterly cadence×1platform demand constraints×1cg-1 readiness×1higher future volume×1

Key Metrics 64

revenue×50orders×9capacity×7guidance×6gross margin×6demand×6operating expenses×5tax rate×5earnings per share×4market share×4shipments×3backlog×3average selling price×3eps×3free cash flow×3working capital×3sales mix×3earnings×2design wins×2customers×2operating margin×2other income and expense×2interest expense×2capex×2cash conversion cycle×2pipeline×2systems×2margin×2cash flow×2racks per month×1backorders×1operating leverage×1power consumption×1tco×1rack capacity×1revenue growth×1tax provision×1diluted eps×1cash flow from operations×1operating cash flow×1authorized buyback amount×1authorized buyback program×1cash×1debt×1net cash×1inventory×1days sales outstanding×1days payable outstanding×1net sales×1diluted net income per share×1non-gaap diluted net income per share×1personnel costs×1shares outstanding×1capital expenditure×1revenue exposure×1revenue exposure growth×1revenue share×1revenue growth guidance×1customer additions×1spending×1cash usage×1supply×1arr×1share×1

Entities 581

Super Micro Computer×292Charles Liang×79David Weigand×67Jon Tanwanteng×17NVIDIA×13Nehal Choski×9Mehdi Hosseini×7IT Solutions×6MGX×6Ananda Baruah×6Intel×5AMD×5AI×5CSP×4Delta Next×3OEM×3HGX×2Computex×2Redstone-Next×28-GPU OVX×2Grace×2C2×2CPU×25G×2Q4×2MTX×2CG-1×2NCNR×2FY24×1Jensen Huang×1H100 PCIe GPUs×1L40S GPUs×1Gaudi 2×1PVC×1MI-250×1x86×1Grace-Hopper CG1 Superchip×1TAM×1GPU×1DPU×1PCIe Gen 5×1E1.S×1E3.S×1Petascale All-Flash×1U.2 NVMe×1DC×1Global Service×1Total AI×1LLM×1FY2022×1IoT×1Delta Max×1Redstone Max×1DRC×1Fed×1OpEx×1ARR×1Building 23×1

Business Segments 95

Server And Storage Systems×85Oem Appliance And Large Datacenter×3Emerging 5G, Telco, Edge And IoT×1Organic Enterprise And Channel And AI/ML×1Subsystems And Accessories×1U.S.×1Asia×1Europe×1Rest Of World×1

Sectors 183

computer hardware×63artificial intelligence×31semiconductor×21data center×20servers×8manufacturing×7data storage×6telecommunications×6cloud computing×5supply chain×4information technology services×3software×3internet of things×2networking equipment×1edge computing×1chemicals×1media and entertainment×1

Regions 29

U.S.×5Malaysia×5Silicon Valley×3Asia×3Europe×3Rest of World×3North America×2Taiwan×2global×1San Jose×1Americas×1

Metadata Distributions

Sentiment
positive 130negative 28neutral 161
Temporality
backward 83forward 63current 173
Certainty
definitive 82confident 104moderate 75tentative 58
Magnitude
major 86moderate 149minor 84
Direction
improvement 49decline 14flat 2mixed 2none 252
Time Horizon
immediate 84near_term 134medium_term 32long_term 4unspecified 65
Verifiability
quantitative 108event 14qualitative 197
Analyst Intent
probing 32challenging 2confirming 7seeking_detail 17seeking_guidance 2

Speakers

Executives
CLCharles LiangCEODWDavid WeigandCFOMSMichael Staigerexecutive
Analysts
ABAnanda BaruahanalystJTJon TanwantenganalystMHMehdi HosseinianalystNCNehal ChoskianalystA[Adam [Indiscernible]analyst
Other
OPOperatoroperator

Sections

TypeLabelSpeaker
preamblePreambleMichael Staiger
prepared_remarksPrepared RemarksCharles Liang, David Weigand
qa_sessionQ&A Session—
operator_signoffOperator Sign-offOperator

Q&A Exchanges 7

#AnalystFirmTurns
1
NCNehal Choski
Northland Capital Markets3
2
MHMehdi Hosseini
Susquehanna International Group7
3
JTJon Tanwanteng
—9
4
ABAnanda Baruah
Loop Capital9
5
A[Adam [Indiscernible]
Wells Fargo11
6
JTJon Tanwanteng
—9
7
NCNehal Choski
Northland Capital Markets11

Claim Taxonomy 319

REPORTING95
resultFinancial outcome for a completed period77
metricNon-financial quantitative fact8
operationalDiscrete completed event10
PROJECTING42
guidanceQuantitative expectation with number + time29
commitmentPromise with binary verifiable outcome13
targetLong-term aspirational quantitative goal0
POSITIONING109
strategyPriority, direction, or initiative86
competitiveCompany's position or advantages4
opportunityMarket condition framed as growth driver8
riskHeadwind, constraint, or uncertainty11
EXPLANATORY13
attributionWhy a specific outcome happened2
contextNon-company macro/industry fact11
FRAMING0
thesisFalsifiable belief about how the world works0
ANALYST60
questionInterrogative seeking information45
observationRestates a fact or data point11
concernFlags a risk or challenge0
estimateAnalyst's own projection or calculation0
sentimentOpinion, praise, or critique4

Transcript

Preamble
OP
Operatoroperator
Thank you for standing by.
My name is Ana, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer Fiscal Fourth Quarter 2023 results conference. With us today, Charles Liang, Founder, President and Chief Executive Officer; David Weigand, CFO and Michael Staiger, 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. Michael Staiger, you may begin your conference.
MS
Michael StaigerexecutiveSuper Micro Computer, Inc.
Good afternoon and thank you for attending Supermicro's call to discuss financial results for the fourth quarter and full fiscal year, which ended June 30, 2023. With me today are Charles Liang, Founder, Chairman and Chief Executive Officer, and David Weigand, Chief Financial Officer. By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available on the company's website. As a reminder, during today's call, the company will refer to a presentation that is available to participants in the Investor Relations section of the company's website under the Events & Presentations tab. We have also published management's scripted commentary on our website.
Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation, and future business outlook, including guidance for the first quarter of fiscal year 2024 and the full fiscal year 2024. There are a number of risk factors that could cause Supermicro's future results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our most recent 10-K filing for fiscal 2022, and our other SEC filings. All of these documents are available on the Investor Relations page of Supermicro's website. We assume no obligation to update any forward-looking statements. Most of today's presentation will refer to non-GAAP financial results and business outlook. For an explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release published earlier today. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation. At the end of today's prepared remarks, we will have a Q&A session for sell-side analysts to ask questions. I'll now turn the call over to Charles.
Prepared Remarks
CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you, Michael, and good afternoon, everyone. Today, I am pleased to announce a new record fiscal result of $7.12 billion annual revenue, a 37% year-over-year growth rate. We have also achieved our first landmark $2.18 billion quarter, which is 34% growth year-over-year and 70% quarter-on-quarter. We are continuing to exceed both top and bottom-line results and performing well beyond our previously guided ranges. It's no secret that our strong growth has been driven by the demand for our leading AI platforms in plug-and-play rack-scale, especially for the large language model-optimized NVIDIA HGX-based Delta Next solution. Our engineering capability enabled us to deliver optimized, first-to-market AI products and solutions to our customers, distinguishing us from the competition and empowering us to take market share. I am also proud of our logistics and production teams' execution to maintain our time to market advantage and deliver our total solution to our key partners much sooner than competition. Our investment of 4,000 racks-per-month state-of-the-art validation and production facility in Silicon Valley is one of the major factors in delivering high-performance AI racks quickly with both air-cooled and liquid-cooled options. Let's go over some key financial highlights: We enter FY24 with record-high backorders, many more new design wins and new customers. Again, our fiscal year 2023 net revenue totaled $7.12 billion, up 37% year-on-year, above our mid-point guidance range of $6.7 billion.
Fiscal year 2023 non-GAAP earnings per share grew 109% year-over-year to $11.81, compared to $5.65 a year ago, exceeding the higher end of our revised guidance range of $10.50 to $11.00. Fiscal Q4 net revenue totaled $2.18 billion, up 34% year-on-year and up 70% quarter-on-quarter, above our guidance range of $1.7 billion to $1.9 billion. Fiscal Q4 non-GAAP earnings of $3.51 per share grew 34% year-over-year compared to $2.62 a year ago, and it was well above the high end of our guidance range of $2.21 to $2.71, demonstrating strong operating leverage and continued customer preference towards our rackscale Total IT Solutions.
For 30 years, we have been diligently building our company strength and foundation. As the only U.S. -based scale AI platform designer and manufacturer, we have been shipping our winning products in volume to our partners for more than a quarter. Couple of months ago, I was honored to have my close friend, NVIDIA CEO Jensen Huang, join me on stage at Computex to highlight our optimized new generation GPU solutions for this AI era. We are deploying not just systems, but complete rack-scale total solutions to large generative AI innovators. Supporting HGX H100 Delta-Next, H100 PCIe GPUs, and the just-announced L40SGPUs; our Delta-Next, Redstone-Next, and 8-GPU OVX systems have become the benchmarks of excellence for the industry. We are also getting good traction on Intel's Gaudi 2 and PVC, as well as AMD's MI-250 accelerator solutions. The demand for artificial intelligence infrastructure is perfectly addressed by our building block server architecture, and due to our building block solutions, we have the best and broadest application-optimized GPU solutions on the market. We plan to extend this leadership with the upcoming MGX platforms that we announced at Computex, bringing modular flexibility on acceleration with X86, Grace, C2 and Grace-Hopper CG1 Superchip. The MGX platform is a shared vision of AI computing between NVIDIA and Supermicro, designed to be open, flexible and future proof for multiple generations of GPUs, CPUs, and DPUs. We already have many customers engaged with these new MGX platforms as we speak, and soon they will be in volume production. With nearly half of our revenues this quarter based on AI-related designs, I expect this AI growth momentum to continue expanding our TAM across all customer types from major AI innovators, super large CSPs, Tier 1 DCs, Tier 2 cloud, and to the general enterprise market. As the performance of GPU, CPU, DPU and memory technologies increase, enhanced storage performance is also necessary to feed massive data sets to the applications without becoming a bottleneck that slows the entire system down. Supermicro's new PCIe Gen 5 based E1.S and E3.S Petascale All-Flash storage servers offer industry-leading storage performance and capacity. Together, with our U.2 NVMe, top-loaded scale-out and traditional storage platforms. We are fulfilling customers' AI, compute, and storage needs with a one-stop total solution shopping experience, with the best optimization in performance, time-to-online, and cost.
With accelerated computing and storage, the power consumption and thermal challenges of these new technologies have risen dramatically. 40KW or even 100KW rack solution demand is rapidly expanding and required for compute-intensive DC, CSP, and other verticals. Having high power efficiency, free-air and liquid cooling expertise has become one of our key differentiators of success. We have made major investments across a variety of technologies to drive adoption of direct liquid cooling in datacenters to address the thermal challenges. In addition to increasing computing density and reducing TCO, liquid cooling reduces the environmental impact of datacenters dramatically, aligning with our green computing mission. Similarly, our liquid immersion solution is making good progress, and we will be happy to provide that option to interested partners soon.
The reality is that datacenter infrastructure is getting more complex, especially with the unprecedented demand for AI. The design complexity and integration skills, along with the requirement to deploy in a timely fashion are heavy burdens to many end customers. Supermicro Total IT Solutions approach saves them from the complications of design, validation, sourcing, and integration. It also streamlines network switching, firmware and software management in datacenter scale. Customers' peace of mind is topped off by the value of our 24/7 Global Service tiers. Given the current infrastructure demand, we have been continuing to evaluate our footprint beyond our recently announced Malaysia expansion. We have recently added another new building close to our Silicon Valley HQ and are aiming to further increase our current 4,000 rackper-month capacity in this fiscal year. To further support demand from key domestic partners. We are also planning to build another manufacturing campus in North America. At this moment, our U.S. headquarter and Taiwan facility can support at least $15 billion in revenue while the new Malaysia facility will further increase our total revenue potential by serving scale builds on a reduced cost structure in the coming CY'24.
In closing, Supermicro is in a great position to continue our growth momentum with our leading AI portfolio, our infrastructure readiness, and our ability to deliver products in a timely manner. Due to the current key components supply shortages, we forecast revenue in the range of $1.9 billion to $2.2 billion for the September quarter. However, given the record high backlog, we see fiscal year 2024 revenue between $9.5 billion to $10.5 billion with room to deliver more depending on availability of supply.
Our role as the leader of rack-scale Total AI and IT Solutions has only just begun. We are ready to deliver optimized AI infrastructures to existing and emerging markets, along with our value-added software and services. To say it plainly, our foundation and capacity are fully ready, and our demand is growing strongly. With LLM large language model and other AI applications booming, I now expect the $20 billion annual revenue target to be just a couple of years away.
Before passing the call to David Weigand, our Chief Financial Officer, I want to say thank you to our partners, customers, Supermicro employees and to our shareholders for your continued support. Thank you, David.
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#61
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DW
David WeigandCFOSuper Micro Computer, Inc.
Thank you, Charles. Fiscal fourth quarter revenues were $2.18 billion, up 34% year-over-year and up 70% quarter-over-quarter. Q4 revenues exceeded initial guidance range of $1.7 billion to $1.9 billion and were at the high end of the recently updated range of $2.15 to $2.18 billion. For Fiscal 2023, we reported revenues of $7.12 billion, representing 37% growth over FY'22 revenues of $5.20 billion. Next generation CPU and AI platforms continue to drive record levels of design wins and orders. Exiting fiscal year 2023 with a record backlog, we are well positioned for fiscal year '24 with an outlook for continued revenue growth and profitability. We expect diversified growth driven by top-tier datacenters, emerging CSPs, enterprise AI build-outs, CPU upgrades, and edge IOT and telco markets. We are also targeting new opportunities in adjacent markets such as Storage, Switches, Software & Services. We note that our shipments against a record backlog may continue to be constrained by supply chain bottlenecks for key new components for our advanced AI server platforms. Q4 results were driven by our high-growth AI/GPU and rack-scale solutions which represented 52% of our total revenues.
We had two 10% customers for Q4 and did not have any 10% customers for fiscal year '23. During Q4, we recorded $976 million in the Enterprise and Channel vertical, representing 45% of revenues versus 50% last quarter. This was up 19% year-over-year and up 51% quarter-over-quarter as we ramped several key enterprise programs. The OEM appliance and large datacenter vertical achieved $1.17 billion in revenues, representing 53% of Q4 revenues versus 47% last quarter, up 59% year-over-year and up 94% quarter-over-quarter as we gained momentum from existing and new datacenter, CSP, and OEM cloud appliance customers. Our emerging 5G, Telco, Edge, IoT segment achieved $43 million in revenues, representing 2% of Q4 revenues versus 3% last quarter. For the fiscal year 2023, Organic Enterprise and Channel and AI/ML revenues grew 10% to represent 48% of total revenues. The OEM appliance and large datacenter segment grew 102% and represented 49% of total revenues. The emerging 5G Telco Edge IOT segment decreased 36% and represented 3% of total revenues.
The mix of complete systems and rack-scale Total IT Solutions has increased over the last two years. Server and Storage Systems comprised 93% of Q4 revenue and Subsystems and Accessories represented 7%. ASPs continued to increase on a quarter-over-quarter and year-over-year basis driven by the value and complexity of our rack-scale Total IT Solutions.
By geography, U.S. represented 76% of Q4 revenues, Asia 11%, Europe 10%, and Rest of World 3%. On a year-over-year basis, U.S. revenues increased 55%. Asia decreased 17%, and Europe increased 1%, and Rest of World increased 12%. On a quarter-over-quarter basis, U.S. revenues increased 112%, Asia increased 10%, Europe decreased 1%, and Rest of World increased 11%.
The Q4 non-GAAP gross margin was 17.1%, down quarter-over-quarter from 17.7% in Q3 as we focused on winning strategic new designs and market share. For fiscal year '23, the non-GAAP gross margin of 18.1% versus 15.4% for fiscal year '22 was driven by an increased rack-scale product/customer mix and higher manufacturing efficiencies.
Turning to operating expenses, Q4 Opex on a GAAP basis increased by 14% quarter-over-quarter and 19% year-over-year to $145 million driven by headcount and related expenses. On a non-GAAP basis, operating expenses increased 14% quarter-over-quarter and 17% year-over-year to $133 million. Our non-GAAP operating margin increased significantly to 11% for Q4 versus 8.7% last quarter due to operating leverage driven by higher revenues that outpaced increases in operating expenses. For fiscal year '23, we achieved a non-GAAP operating margin of 11.4% versus 7.2% in fiscal year '23 due to higher gross margins and operating leverage from higher revenues and expense controls.
Other Income & Expense for Q4 was an expense of approximately $1.5 million consisting of $3.5 million in interest expense offset primarily by a net foreign-exchange gain of $2.0 million. Our interest expense increased sequentially as we utilized our short-term credit lines for working capital requirements along with higher short-term interest rates on our borrowings. The tax provision for Q4 was $31.3 million on a GAAP basis and $36.6 million on a non-GAAP basis. The GAAP tax rate for Q4 was 13.9% and the non-GAAP tax rate was 15.4%. The GAAP tax rate was 14.7% for fiscal year '23 versus 15.7% in fiscal year '22 and the non-GAAP tax rate was 15.9% versus 17.7% in fiscal year '22. We delivered strong Q4 non-GAAP diluted EPS of $3.51 which exceeded the high end of the original guidance range of $2.21 to $2.71 and the recently updated range of $3.35 to $3.45. The increase in Q4 EPS was due to a combination of higher revenues and operating leverage. For the full fiscal 2023, we reported non-GAAP diluted EPS of $11.81, up 109% year-over-year versus fiscal 2022 non-GAAP diluted EPS of $5.65 and higher than the FY'23 guidance of $10.50 to $11.00.
Cash flow used in operations for Q4 was $9 million compared to cash flow generated by operations of $198 million in Q3 due to higher accounts receivable, offset by lower inventory and higher accounts payable from backend loaded shipments in the quarter due to supply constraints. CapEx was $8 million for Q4 resulting in negative free cash flow of $17 million versus positive free cash flow of $190 million last quarter. For fiscal year '23, we had free cash flow from operations of $664 million, CapEx of $37 million resulting in free cash flow of $627 million. We have $50 million remaining under the authorized buyback program which expires on January 31, 2024. The closing balance sheet cash position was $440 million, while bank debt was $290 million resulting in a net cash position of $150 million down from net cash position of $176 million last quarter as we utilized our bank lines of credit to support higher revenues and accounts receivable as we ramped up production of new AI/GPU design wins.
Turning to the balance sheet and working capital metrics compared to last quarter, the Q4 cash conversion cycle improved to 77 days versus 126 days in Q3. Days of Inventory was 75, representing a decrease of 51 days versus the prior quarter of 126 days. Days Sales Outstanding was down 13 days quarter-over-quarter to 38 days while Days Payables Outstanding came down by 15 days to 36 days. Faster inventory turns contributed to the improvement in our cash conversion cycle.
Now turning to the outlook, we remain enthusiastic about our diversified business model, covering a wide range of AI, core computing, storage, 5G telco edge and IOT applications. Design wins span across enterprise/channel, large datacenter/emerging AI CSP, and Telco and OEM customers. We are carefully observing the global macro-economic situation and continuing supply-chain constraints especially for leading AI platforms. For the first quarter of fiscal 2024 ending September 30, 2023, we expect net sales in the range of $1.9 billion to $2.2 billion, GAAP diluted net income per share of $2.02 to $2.80 and non-GAAP diluted net income per share of $2.75 to $3.50.
We expect gross margins to be similar to Q4 levels. GAAP operating expenses are expected to be approximately $185 million and include $48 million in stock-based compensation and other expenses that are not included in non-GAAP operating expenses. GAAP and non-GAAP operating expenses are expected to increase due to continued investments in R&D and higher personnel costs adding to our great engineering and sales teams.
The outlook for Q1 of fiscal year 2024 fully diluted GAAP EPS includes approximately $44 million in expected stock-based compensation and other expenses, net of tax effects of $9 million, which are excluded from non-GAAP diluted net income per common share. We expect other income and expense, including interest expense, to be a net expense of approximately $1.5 million. The company's projections for GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 14.7%, a non-GAAP tax rate of 15.4%, and a fully diluted share count of 56 million for GAAP and 57 million shares for non-GAAP. We expect CapEx for the fiscal first quarter of 2024 to be in the range of $10 million to $12 million.
For the fiscal year 2024 ending June 30, 2024, we are giving guidance — I'm sorry, the first fiscal year 2024. Which ends June 30, 2024. We are giving guidance for revenues in the range $9.5 billion to $10.5 billion. Okay, Michael, we're now ready for Q&A.
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Charles LiangCEOSuper Micro Computer, Inc.
Operator?
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Q&A Session
Q&A 1/7
OP
Operatoroperator
[Operator Instructions]. Now we have the first question, comes from the line of Nehal Choski from Northland Capital Markets. Sir, Your line is open.
NC
Nehal ChoskianalystNorthland Capital Markets
Thank you. And congratulations on an amazing quarter and amazing fiscal year '24 revenue guidance of $9.5 billion. Definitely want to dig into.
First off, Charlie, I think he said you have 50% in revenue exposure AI for the June quarter. That's incredible makes a very strong statement that Super Micro, indeed the leader in AI systems. What do you think is a sustainable differentiation that you guys are wielding with rack-scale AI systems that's driving that incredibly fast increase in revenue exposure AI systems?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yeah, thank you for your question.
Yes, as AI has been our major focus is since a few years ago, and we work with AI chip company kind of very closely. And we could develop lots of our platform, including our MTX [ph]. Now coming MTX, as you know, to support a C2and CG1. So our AI solution with rack scale scale, or cloud scale, customer scale solutions that make our customers deploy even much easier. And full rehab, they also solution for energy cost as they've been for time to online. So I believe our AI product line will continuing to grow in the near future maybe continue to be more than 50% of our revenue.
Q&A 2/7
OP
Operatoroperator
Next question comes from line of Mehdi Hosseini from Susquehanna International Group. Your line is open.
MH
Mehdi HosseinianalystSusquehanna International Group
Yes, thanks for taking my question. And Charles, I think it would be very helpful if you could [technical difficulty] $10 billion of revenue. And perhaps any kind of color on ASP increased that would capture your increased content would give us an insight unless you have other ways of explaining to get to $10 billion net.
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Charles LiangCEOSuper Micro Computer, Inc.
We continue to get lots of new customer or partner continue to like our solution. And we continue to gain new customer with our rack scale, cloud scale, total solution, including [inaudible]. So we see a very strong demand and growing very fast order. So $10 billion should be kind of a short term target this year.
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Mehdi HosseinianalystSusquehanna International Group
Last question, your competitors also argue for innovative cooling? And they also argue for shagging? Is there something with your cooling technology that is better offers better cost performance, compared to some of the emerging cooling that your competitors are for marketing, are talking about?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yeah, indeed, our engineering team is strong and dedicated.
Everyone can design systems, our system simply better than others, not just better in quality, performance, but also earlier time to market. And together with service, software, system management. So it's a total solution and service. So we feel pretty confident that we will continue to gain market share.
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Mehdi HosseinianalystSusquehanna International Group
Okay, maybe move on, because they are becoming more than 50% of your revenue. How is your pipeline as you look into the second half of calendar year? Do you already have a pipeline that gives you confidence, you're going to hit that 50% plus AI as the mix of revenue or you still have to go and qualify and win the business to hit that target.
CL
Charles LiangCEOSuper Micro Computer, Inc.
Indeed, our pipeline I believe is very strong. And that is momentum, its ability is very clear. So we are very confident especially with another chemical customer too.
Q&A 3/7
OP
Operatoroperator
Your next question comes from the line of Jon from Tanwanteng. Your line is open.
JT
Jon Tanwantenganalyst
Hi, good afternoon. Thank you for taking my questions and congrats on a really strong quarter outlook again. My first one, is I just wanted to dig into your confidence for the outlook. Can you just in various parts, maybe talk about your confidence in supply chain, being able to supply that maybe 40% growth guidance at the midpoint? Maybe talk about your ability to get allocations from key suppliers. And then within your order book and backlog? What is your assurance? Or how can you identify if there's double or triple ordering? And how do you protect yourself against that if they do exist?
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Charles LiangCEOSuper Micro Computer, Inc.
Yeah, it's a complicated question.
We have a very good product many product line for delta max for redstone max for grace for [inaudible] and other solutions including error 40s. So the solution is really strong and supply chain we work with our vendor very closely every day. And so hopefully that situation will be consistently improve, but it's not 100% control of our sale. So although we have a good partnership but it's 100% controlled by our sales. So all though we have a good partnership, which vendor, which customer. So we work together very closely, And the situation will be continue to improve I believe
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Jon Tanwantenganalyst
On the order side
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OP
Operatoroperator
Your next question, I will ready for the next question.
DW
David WeigandCFOSuper Micro Computer, Inc.
John, did you ever follow up question?
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Jon Tanwantenganalyst
In order site, double protection against double and triple?
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Charles LiangCEOSuper Micro Computer, Inc.
Yeah, and see the other side? I mean, the tech order had been continued growing strongly. Every month I see older growth.
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David WeigandCFOSuper Micro Computer, Inc.
Also, John, we have a lot of NCNR orders as well. That protects against double and triple booking.
Q&A 4/7
OP
Operatoroperator
Your next question comes from Ananda Baruah from Loop Capital, your line is open.
AB
Ananda BaruahanalystLoop Capital
Yeah. Good afternoon, guys. And thanks for taking the questions. Yeah, congrats on the strong results and the ongoing momentum. I have a couple if I could. Charles, you've talked in the prepared remarks about the unprecedented demand you're seeing and you guys have talked about actually adding new customers, including top tier data center customers, I think you mentioned and some of these gen AI server forecasts, for 2024 calendar are really, really strong. And you're also talking about gaining share, et cetera.
And so I guess the first question is, is what's the opportunity do you see to maybe even do teach stronger than the fiscal '24 guidance. I guess, what would be the puts and takes there? And, if you were to be able to exceed the 2024 guidance, what would be some of the things you think would need to occur? And then I have a quick follow up. Thanks.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yeah, thank you. Very good question. Again, we continue to gain generative AI innovator, and we have a very good partnership. We partnership with some small OEM.
And for sure, they need 10 times 20 time more system. And we just cannot ship at this moment, because of supply chain. And at the same time, we also continue to engage with large CSP, in large data centers. So we continue to gain more customer from I read who say, all given political. So yes, hard to work out which supply chain, three party regime, our supplier, our customer in our sales. And that's have been our major focus now. Although we continue to improve our total datacenter solution included in DRC, direct liquid cooling and liquid immersive solution. So I mean, we are on the right track, yes expecting supply chain can improve so that we can grow our revenue.
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AB
Ananda BaruahanalystLoop Capital
That's really helpful. And so, Charles, just to make sure that I understood that accurately, is that to say, if the supply chain — so if you can, if you can get more from the supply chain, actually use it to say this way you have order visibility, such that if you can procure more, you would have the ability to share gains, exceed the fiscal '24 range that you provide is a really supply chain issue, I guess, is what I'm asking. Did I hear that accurately?
CL
Charles LiangCEOSuper Micro Computer, Inc.
Yeah, absolutely. I mean, we continue to prove to our customer and our vendor, say, hey, we have a business solution. So okay with us, that's where we went wherever you went.
AB
Ananda BaruahanalystLoop Capital
I got it. And then let me just ask a quick follow up to that one. Is there any way you guys could provide in context for us around I guess how constrained you are, like, what might the demand outlook sort of look like if you were not constrained? So not like a guidance, obviously, you gave your guidance to just content context for us and really getting a sense of what the structural positioning of the company is, if there were not constraints?
CL
Charles LiangCEOSuper Micro Computer, Inc.
Yeah, I can. We have a very good product. And we have a very good partner customer.
And we, we pushed our vendor. And we know our vendor doing their best to support us at the same time as well. So we just have to continue to work together.
AB
Ananda BaruahanalystLoop Capital
Charles, I have one more quick one, I appreciate it. Sounds like the gross margin guidance for the September quarter is a pretty solid most attractive guide. For fiscal '24, should we assume that same 17% kind of gross margin range or what's the right way to think about that? And that's it for me. Thanks.
DW
David WeigandCFOSuper Micro Computer, Inc.
Sure, Ananda, this is David. So we're targeting to hold our margins. And that's all the guidance that will give right now.
Q&A 5/7
OP
Operatoroperator
Your next question comes from the line of Adam [inaudible] from Wells Fargo. Your line is open.
A[
Adam [Indiscernible]analystWells Fargo
Yeah, thanks for taking the questions. And also congrats on the results tonight. So I first of all, I just want to clarify, I want to make sure I heard the number. Yeah, the 50% or 52% of the revenue that was from your AI and rack scale solutions as last quarter?
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David WeigandCFOSuper Micro Computer, Inc.
Yeah, Adam. Charles, in his script said approximately 50% and I clarified 52%.
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A[
Adam [Indiscernible]analystWells Fargo
Okay, so I guess the question isn't either that is that, one of the questions I get asked a lot about, is the spend around AI being so strong.
And it sounds like obviously, you're carrying a pretty good backlog looking out over the next several quarters, given the supply dynamics. But if I take that number and I say the non-AI business, how has that trended or basically, are you reallocating capacity away from more of the non or traditional compute side to satisfy demand on the AI side? Or have you seen spending slowdown outside of these AI investments that you're clearly benefiting from?
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Charles LiangCEOSuper Micro Computer, Inc.
Yeah, now AI server storage, IoT telco, we keep involve and a bit blend. Understand that industry has been declining, we are not declining, above Fed.
And we try to grow as well. And that's why we are growing in many directions kind of manufacturing, kind of like Taiwan and Malaysia. And we may have another North America campus. So that's all to increase our capacity, so that we can grow traditional data center business as well, instead of omni focus on that, growing AI.
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Adam [Indiscernible]analystWells Fargo
Okay. So just to be clear, I mean, so you're limiting — you're limited on your supply, on the traditional compute side, because of the AI demand that you're seeing. Is that fair?
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Charles LiangCEOSuper Micro Computer, Inc.
Not exactly impacted, but not exactly. Indeed, as traditional server, traditional datacenter business, and a bit bland from the demand side. So we face into similar experience as well, but not declining to — -
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Adam [Indiscernible]analystWells Fargo
Yep. Okay.
And then the final question for me is just thinking about the AI opportunity. And I think you alluded to this a little bit your prepared comments you mentioned positioning around I think it was the Intel, Ivy chip and then also I think another vendor coming to market the MI300 from AMD. How do you see that playing out for your opportunity? Does it help satisfy the man are you seeing indicators that, this AI opportunity is going to be much more diversified here as we move into '24 versus what you've seen on the NVIDIA side at this point? Just curious how you're seeing kind of the competitive landscape or maybe opportunities that expand for you guys with those newer other solutions coming to market?
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Charles LiangCEOSuper Micro Computer, Inc.
Yeah, in retail solutions, [inaudible] and people are really waiting for NVIDIA more supply.
And other solution from Intel, from AMD, because our box [ph] solution we have a solution ready for show up again. So that's the advantage we have. So we just waiting for their solution to be available in production.
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Adam [Indiscernible]analystWells Fargo
Thank you very much.
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Charles LiangCEOSuper Micro Computer, Inc.
Thanks.
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Q&A 6/7
OP
Operatoroperator
Your next question comes from the line of Jon from Tanwanteng. Your line is open.
JT
Jon Tanwantenganalyst
Hi, thanks for the follow up. Dave, I was wondering if you could talk about your working capital needs in the sort of environment. Can you generate positive cash flow going forward? Are you going to be using cash as you as you try to fulfill this OpEx demand?
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David WeigandCFOSuper Micro Computer, Inc.
Yeah, John.
We see the business generating good cash flows, as it has historically. And we think that the — - especially in this constrained supply market, where we could deliver more if we had more supply. But we're so really, the constrained supply ends up moderating the working capital. And so we grew our business last quarter quite a bit and grew our ARR. So that utilized a lot of working capital, but we have no concerns about working capital.
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Jon Tanwantenganalyst
Okay, great. And then could you guys give a little bit more detail on the capacity expansion, and then when those various facilities come online, and what exactly they add?
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David WeigandCFOSuper Micro Computer, Inc.
Sure, we have Malaysia, which is expected to come online in around 12 to 15 months. And that's going to — - that will eventually double our capacity. And we also have additional capacity coming online in our building 23, here in our Social Valley campus. And we've also added, as Charles mentioned, another site in in San Jose, with intentions to add another site in the Americas.
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Jon Tanwantenganalyst
Got it? And then last one, for me. Maybe a more detailed question, what percentage of your AI sales right now are liquid cooling basin? Do you expect that percentage to increase as you go forward?
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Charles LiangCEOSuper Micro Computer, Inc.
This is very new questions.
So we have a very good DLC, direct liquid cooling solution ready to go now. And it's all depends on customer demand. And at the same time, the big emotions solution also getting ready. So we have all three solution and depends on customer's demand. At this moment, for sure [inaudible] still a majority, as you know.
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Jon Tanwantenganalyst
Okay, great. Thanks. Charles.
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Charles LiangCEOSuper Micro Computer, Inc.
Thanks.
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Q&A 7/7
OP
Operatoroperator
Your next question from the line of Nehal Choski from Northland Capital Markets. Your line is open.
NC
Nehal ChoskianalystNorthland Capital Markets
Yeah, thank you for the follow up question.
So NVIDIA was guided their July quarter data center revenue up 2x QonQ. What does that mean for Super Micro in terms of GPU systems? Especially what I'm trying to drive is that is there a lag between when a video that's recognized revenue and when to rest from server OEMs gets revenue recognized revenue?
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Charles LiangCEOSuper Micro Computer, Inc.
We believe their capacity are growing. And that's why we talk to them every day asking for more. So hopefully we can gather more support from them. And hopefully their capacity that grows mostly quickly. So that's all I can say now. Okay.
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NC
Nehal ChoskianalystNorthland Capital Markets
Okay. You have a — I guess on, what is your AI-related market share during the June quarter and what they're not that was up QonQ?
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David WeigandCFOSuper Micro Computer, Inc.
We don't have — - we're not going to go into offer a market share for the June quarter. You can make some assumptions by looking at the results of others. But, we have we sell different GPUs as Charles mentioned. So, there is a direct correlation.
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Charles LiangCEOSuper Micro Computer, Inc.
Yeah, basically we have a strong order backorder. And we still have not full capacity. We are waiting for more AI chip. That's our situation.
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Nehal ChoskianalystNorthland Capital Markets
Yep, understood. And how should we think about distributing the remaining 8 million across the final three quarters here?
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David WeigandCFOSuper Micro Computer, Inc.
We're not going to announce quarter-by-quarter our guidance. But we're expecting this to be a robust year and has tempered by the natural supply constraints because of the popularity of these new platforms,
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Charles LiangCEOSuper Micro Computer, Inc.
Yeah, basically in NVIDIA we have a more capacity for sure. And we're really happy to wait over there. And besides other than the alternates our residental mix next is a company that is already in our CG-1 solution is pretty much ready as well. So we believe we can ship much more and not less situation. So in next four quarter I believe will continue to grow quarter after quarter.
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Nehal ChoskianalystNorthland Capital Markets
Thank you very much,
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Charles LiangCEOSuper Micro Computer, Inc.
And even a supply condition, I believe we can surpass $10.5 million for sure easily.
Operator Sign-off
OP
Operatoroperator
Thank you, everyone for joining time for question at this time.
And this will conclude today's conference call. You may now disconnect. Thank you, everyone.