Super Micro Computer, Inc.

good afternoon my name is abby and i will be your conference operator today at this time i would like to welcome everyone to the super micro computer incorporated fiscal quarter one 2022 23 results conference call all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star followed by the number one on your telephone keypad. Thank you. Mr. Michael Staker, you may begin your conference.

Good afternoon, and thank you for attending Supermicro's call to discuss financial results for the first quarter, which ended September 30, 2022. With me today are Charles Liang, founder, chairman, and chief executive officer, and David Wiegand, 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 as available to participants in the investor relations section of the company's website under the events and presentations tab. We've also published management 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 limitations, those regarding revenue, gross margin, operating expenses, and other income and expenses, taxes, capital allocation, and future business outlook, including guidance for the second quarter of fiscal year 2023 and the full fiscal year. There are a number of risk factors that could cause Supermicro's 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 and our SEC filings. All those 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 gap and non-gap results is contained in today's press release and the supplemental information attached to today's presentation. At the end of today's prepared remarks, we'll have a Q&A session for sales and analysts to ask questions. I will now turn the call over to Charles.

Thank you, Michael, and good afternoon, everyone. Today, I'm very pleased to announce another fast-growing quarter and a great start to our fiscal 2023. Supermicro is finally ready to do a big jump for green computing and for being the best IT total solution company. Here are some key highlights for the quarter. First, revenue for the first quarter of fiscal year 2023 totaled $1.85 billion, up 79% year-on-year, above our guidance range of $1.52 billion to $1.62 billion, with growth rate at about 10 times greater than the overall IT industry. Our fiscal first quarter non-GAAP earning per share grew over 490% year over year at $3.42 compared to $0.58 a year ago. It was well above the high end of our guidance, range of $2.07 to $2.32. It was achieved by our leading designs, innovative products, our IT total solutions, and our strong global operations, especially the growing utilization of our Taiwan facilities. is improving our ability to meet the demands and marketing higher operating margin. Our project-in-play large-scale total IT solutions and GPU-based system had results in triple digital percentage growth year over year, along with excellent results from storage and 5G protocols. We are making solid market share gains. Growth in our major geography screwed to the US at a 70% of total sales this quarter, driven by ongoing design win from some of the top-tier technology leaders. They recognize and accept the strong value proposition of our green computing technology total IT solutions. We are off to a great start for fiscal 2023, and we expect our unprecedented growth momentum to continue. We are comfortably delivering quarterly revenue in the multiple billion-dollar range, supporting our ambition of reaching $20 billion in the near distant future with the focus on increasing our profitability. Based on our current demand and capacity, we are forecasting $1.75 billion revenue for the December quarter, supporting our $7 billion annual revenue target for fiscal year 2023. We continue see opportunities for share gain across our team, especially with strong demands for our rock-scale total IT solutions and accelerated computer platforms. Despite already having the broadest server and storage portfolio in the industry, we are expanding our product line by 25% in supporting our future growth. This additional new product line will specifically be optimized for, number one, high-end AI workload, second, 5G telco applications, third, accelerated storage systems, and number four, specific technology partner and top-tier customer engagements. For the first time, we are offering standard OCP optimized platform, and rack products, we are able to leverage our unique building block solution designs instead of spending huge additional engineering production resource and hardware software investment. Combining our hardware building block solutions, advantage software, security and service features, our total IT solutions are getting ever stronger. To address the growing demand of total IT solutions, our manufacturing capacity in both Silicon Valley and Taiwan campus continue to gear forward delivering more LR10, LR11, and LR12 large-scale systems, including our new liquid core solutions. We are on target to scale up rack solution to rack scale production capability capacity to 3,000 racks per month in the US in the near future. We are also preparing to expand our rack scale product and place solution in Europe and in Asia soon. Furthermore, as the component shortage share to ease, our ability to deliver our best in class solution will begin to accelerate, giving our customers even greater confidence in our ability to service their IT needs. From a system-level perspective, we are ready to launch a full line of next-generation products with technologies across our key partner ecosystem. For Intel, We are engaged with many large opportunities with Intel's upcoming Gen 4 Scalable Xeon CPU, codenamed Sapphire Rabbit. We now have hundreds of early seeding engagements, including several thousand early shipments. Similar programs have been executed with AMD. And we have seen very strong demand for our upcoming Genoa CPU-based platforms. With respect to NVIDIA, not only do we have the most complete portfolio of systems supporting H100 GPUs, but we have also developed many brand new architectures for our leading Metaverse and Omniverse partners. super computer event, we will be showcasing many new systems supporting these latest CPU and GPU, including our next generation Watercool Rackscale plug and play solutions. We work closely with our customers, designing solutions that are both optimized for performance and efficiency, putting them on the path of green computing. From a financial perspective, SimpleMicro's green computing solution lower customers' data center TCO while maximize performance per kilowatt, increase computer capacity product, lower facility cost while add location flexibility, in particular to power-constrained regions with higher power cost. We expect to see elevated demand for energy-efficient large-scale solutions across the Tier 1 and Tier 2 data center ecosystems. Thus, we now have enabled our popular super-blade twin product line and some of GPU product line to be fully optimized for next cooling solution and free air cooling data center environment. Soon, we will start to offer fully redundant liquid cooling on the system level, similar to its air-cooled counterparts, for even more peace of mind. If half of the IT industry adopts simple microgreen computing solutions or develops solutions as green as ours, together we can potentially save the industry up to $10 billion in electricity cost per year, which is equivalent to eliminating about 30 fossil fuel power plants. That is also equivalent to preserving 8 billion trees for our planet. With planning in advance for green computing, indeed, green computing can be free with bonus. We are emerging as one of the largest global suppliers of global IT solutions. There are some key factors that enable Shibu Mango to continue with its ability to make strong market share gains. First, our unique billion block solution design methodology enables us to create optimal products from system level to black scale. Second, Our IT total solution strategy, including data center management software, security features, cloud stacks, and service, offer customers a peace of mind and quicker time to market while expanding our team. Our unique operation model with business headquarters and campus in US, Asia, and Europe is pivotal in supporting these key growth drivers. Third, our green computing DNA helps our customers achieve much lower TCO while saving the Mother Earth. As I have mentioned earlier, green computing can be free with proper advanced training and with the bonus that keeps paying back.