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.

With that, I expect our physical

Q2 revenue will be in the range of $1.7 billion to $1.8 billion, and our fiscal 2023 should reach $6.5 billion to $7.5 billion. Looking ahead, I anticipate fiscal year 2024 revenue may reach the range of $8 billion to $10 billion, considering the current economic air winds may last for many quarters. As we continue to gain IT market share with the best large-scale plug-and-play IT total solutions, I believe we will soon become a $20 billion revenue company. Our business model has been optimized. Our engineering team are fully ready, and our worldwide campus production capacity and efficiency are now second to none. Let me not forget, I want to take a moment to thank our Chippewa-Michael employee teams, our suppliers, and our partners for their continued dedication to make Chippewa-Michael a market leader. Now, I will pass the call to David Wagon, our Chief Financial Officer, to provide additional detail on the quarter.

Thank you, Charles. I'm pleased to report Q1 fiscal 2023 revenues of $1.85 billion, a 79 percent year-on-year and 13 percent quarter-on-quarter increase. Revenues exceeded our initial guidance range of $1.52 to $1.62 billion and our recently updated range of $1.78 to $1.82 billion. Our growth momentum continued with our RAC scale total IT solutions targeting growing markets, and customers with accelerated GPU AI workloads, software-defined storage and networking, public and hybrid cloud, and 5G edge IoT platforms. Our green computing solutions helped us gain market share as customers valued both generating less carbon in our environment and reducing their operating costs. These growth drivers have resulted in accelerated revenues with expanding margins and operating leverage. In fiscal Q1, Supermicro again recorded strong revenues across all three of our market verticals, demonstrating the value we bring to our end markets and customers. We achieved $840 million in our enterprise and channel vertical, representing 45% of Q1 revenues versus 51% last quarter. That vertical was up 16% year-over-year and 1% quarter-over-quarter. The year-over-year growth in this segment was driven by our new product offerings. Our OEM appliance and large data center segment achieved $921 million in revenue, representing 50 percent of Q1 revenues versus 44 percent last quarter. This vertical was up 268 percent year-over-year and up 28 percent quarter-over-quarter, with strong growth coming from design wins from data center and OEM appliance customers. Our 5G telco edge IoT segment achieved $90 million in revenues, representing 5% of our Q1 revenues, which was the same as last quarter. This vertical was also up 58% year over year and 9% quarter over quarter. Our mix of complete systems and rack-scale total IT solutions has been increasing steadily. comprised 92 percent of our total revenues and was up 102 percent year-over-year and 16 percent quarter-over-quarter as we saw growing success with our high-value RackScale total IT solutions for emerging applications. Subsystems and accessories represented 8 percent of Q1 revenues and was down 24 percent year-over-year and down 9 percent quarter-over-quarter as we prioritized our key customers with high-growth rack-scale applications. On a year-over-year basis, the volume of systems and nodes shipped, as well as system node ASPs, increased due to product and customer mix. On a quarter-over-quarter basis, the volume of systems shipped decreased, while nodes shipped and system node ASPs increased, again, due to product and customer mix. During fiscal Q1, we observed strength in the U.S. market, with the U.S. representing 70 percent of our revenues. Asia represented 14 percent, Europe 13 percent, and the rest of the world 3 percent. On a year-on-year basis, U.S. revenues increased 131 percent as we gained market share with our advanced rack-scale total IT solutions for high-growth server workloads. Asia increased 3 percent, Europe increased 31 percent, and the rest of the world increased 78 percent. On a quarter-over-quarter basis, U.S. revenues increased 21 percent, Asia decreased 4 percent, Europe increased 5 percent, and the rest of the world decreased 5 percent. The Q1 non-GAAP gross margin was 18.8 percent, up 120 basis points quarter-over-quarter from Q4, and up 540 basis points year-over-year due to price discipline, lower freight costs, and leverage from our higher factory utilization. Our Q1 gross margin demonstrates the success of our high-value rack-scale totalized IT solutions. Turning to operating expenses, Q1 OpEx on a GAAP basis increased by 4 percent quarter-on-quarter and 17 percent year-on-year to $127.4 million. On a non-GAAP basis, operating expenses increased 3 percent quarter-on-quarter and increased 16 percent year-on-year to $117.3 million. Our non-GAAP operating margin increased significantly to 12.5 percent for the quarter versus 10.7 percent last quarter and 3.7 percent a year ago. demonstrating both improvements in gross margins and operating leverage. Other income and expense was approximately $4.1 million in income, primarily consisting of $7.8 million in foreign exchange gains offset by interest expense of $3.9 million as compared to $4 million in FX gain and $2.9 million in interest expense last quarter. Interest expense increased sequentially as we reduced short-term credit lines while interest rates increased. The tax provision for Q1 was $38.9 million on a GAAP basis and $42.1 million on a non-GAAP basis. The GAAP tax rate for Q1 was 17.4 percent and non-GAAP tax rate was 17.9 percent. Our GAAP and non-GAAP tax expenses increased due to the higher level of pre-tax profits. Lastly, our share of income from our JV was a loss of 0.9 million this quarter as compared to a gain of 0.3 million last quarter. We delivered strong Q1 non-GAAP diluted EPS of $3.42, which was up 490% year over year and up 31% quarter over quarter and exceeded the high end of the original guidance range of $2.07 to $2.32, and the recently updated range of $3.05 to $3.20. The increases to earnings per share were due to a combination of higher revenues, higher gross margins from manufacturing efficiency, price discipline, and operating leverage. Turning to the balance sheet and working capital metrics compared to last quarter, our Q1 cash conversion cycle improved to 95 days versus 100 days in Q4, still above our target range of 85 to 90 days. Days of inventory was 100, representing a decrease of seven days versus the prior quarter of 106 days as we managed our inventory more efficiently. Accounts receivable decreased sequentially by $98 million from strong collections, while accounts payable increased sequentially by $130 million due to the timing of payments to our vendors. Days sales outstanding was down by three days quarter-on-quarter to 39 days, while days payables outstanding came down by four days to 44 days. For fiscal Q1, We generated positive cash flow from operations of $314 million versus cash used in operations of $25 million last quarter. The positive operating cash flow was due to higher profitability along with better management of inventory and working capital. Revenue growth was 79 percent year-over-year and 13 percent quarter-over-quarter, while inventory grew 47 percent year-over-year and 12 percent quarter over quarter. CapEx was $10.8 million for Q1, resulting in positive free cash flow of $303 million versus negative free cash flow of $36 million last quarter. The closing balance sheet cash position was $238 million, while bank debt was reduced to $250 million as we paid down $347 million in short-term debt during the quarter. We did not buy back any shares during the quarter and have $200 million in share repurchase authorization until January 31st, 2024. Now turning to the outlook for our business. We are carefully watching the global macroeconomic situation and supply chain dynamics. For the second quarter of fiscal 2023, ending December 31st, 2022, we expect net sales in the range of 1.7 to 1.8 billion, GAAP diluted net income per share of $2.54 to $2.81, and non-GAAP diluted net income per share of $2.64 to $2.90. We expect gross margins to be down 75 to 100 basis points due to competition from a strong U.S. dollar and macro and economic conditions. GAAP operating expenses are expected to be approximately $133 million and include $11.8 million in stock-based compensation that is not included in non-GAAP operating expenses. GAAP and non-GAAP operating expenses are expected to increase in Q2 due to continuing investments in R&D and higher personnel costs. We expect other income and expense, including interest expense, to be a net gain of approximately $1.6 million and expect a nominal contribution from our joint venture. The company's projections for GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 17.4 percent, a non-GAAP tax rate of 17.9 percent, and a fully diluted share count of $55.7 million for GAAP and $57.0 million shares for non-GAAP. We expect CapEx for the fiscal second quarter of 2023 to be in the range of $7 to $10 million. For the fiscal year 2023, ended June 30, 2023, we're raising our guidance for revenue from a range of $6.2 to $7 billion to a range of $6.5 to $7.5 billion. GAAP diluted net income per share from at least $7.27 to a range of $8.50 to $11. And non-GAAP diluted net income per share from at least $7.50 to a range of $9 to $11.30. The company's projections for GAAP annual net income assumes a tax rate of 19.2 percent and a rate of 19.8 percent for non-GAAP net income. For fiscal year 23, we are assuming a fully diluted share count of 57 million shares for GAAP and 58.4 million shares for non-GAAP. The outlook for fiscal year 2023 fully diluted GAAP EPS includes approximately 32.7 million in expected stock-based compensation and other expenses net of tax effects that are excluded from non-GAAP saluted net income per common share. As we look ahead to the rest of fiscal 2023, we expect that our improved profitability together with good working capital management will lead to operating cash flow in line with net income. We remain confident in our long-term outlook for robust revenue growth and profitability driven by our leading edge new platforms design wins, market share gains, and engagement with significant new global customers.

Michael, we're now ready for Q&A.

I would like to remind everyone in order to ask a question, press star and number one on your telephone keypad. We'll pause for just a moment to compile the question and answer roster. Your first question comes from the line of John Tanwanting from CJS Securities. Your line is open.

Hi, good afternoon, everyone. Thank you for taking my questions, and congratulations on a really, really impressive quarter. My first question is, just looking at the guidance, and I know you raised it, but the midpoint still suggests you're anticipating declining quarters on average for the rest of the year. Is that an express function of an expectation of perhaps like a recession or macroeconomic pressure on your clients, or are you thinking of specific customer programs? They're the mid-pointers or something else. I know in the past you've put in a cushion there for what has been supply chain constraints. Just help us understand what you're thinking within the brackets this year going forward.

Yeah, very good question. Yes, the macroeconomic condition is hard to predict at this moment. Looking like there will be some headwind for sure. But with the coming soon new technology from Intel, AMD Genoa, and Nvidia H100, so there are lots of new opportunity for us. Whenever the market have a new technology, Supermicro indeed has a better chance to get market share. So with that, indeed, I believe our business in next 12 months should be not too much impact. And also, our business automation. In the last few quarters, I mentioned about our auto-configurator, our online automation that will help our sales to service customers better. And with those offset the new product, the beta tool, I believe our next 12 months' business won't be too bad.

Great. Thank you for that. And then the second question, just with the really strong cash flow you had in the quarter and expectation for future cash generation, what are your priorities there for cash usage? I know you mentioned you still have that share repurchase program, which you didn't use. Are there any CapEx plans, or should we be thinking of any other things you may want to use the cash to invest in.

So we haven't changed our CapEx allocation strategy. We still have a repurchase plan in place as market and the board review that policy. And otherwise, our CapEx for next quarter was listed as 7 to 10 million. And so we don't anticipate large increases in inventory.

And the vision is, again, like what I just mentioned, so many new technologies coming. So we'd like to take this chance to continue to get market share. So hopefully Shibu Micro will be a $10 billion company and then a $20 billion company. So we'll continue to focus on quickly growing the company market share and the position.

Got it. One more if I could. Did you see any weakness in the quarter from any end markets or customers or geographies?

Yes, generally a little bit kind of signal. We need to observe that. But again, new product, new technology, that will offset those macroeconomic weakness.

Okay, great. Thank you very much, guys. Thank you.

Your next question comes from the line of Nahal Chokshi from Northland Capital Markets. Your line is open.

Yes, thank you. Amazing supporter, really impressive guidance and shows strong visibility here. And I'm sorry I missed quite a bit of a conference call. You probably already hit upon this, but what are you seeing on the supply chain side at this point?

Supply chain has been dramatically improved, as you may know. Three months ago, there are still a shortage everywhere. But as of today, the shortage problem has been dramatically improved. So not much shortage at this moment. And we believe looking forward in the coming quarters, we won't have a shortage problem. At this, it won't be too bad. And that's why we prepare to grow much more.

Okay, great. At what point in time did you actually see the supply chain shortage more or less evaporate?

Indeed, things quickly improved in about last two months.

Okay, great. And then really incredible free cash flow generation. I haven't run through the numbers yet to figure out how that was done given the strong growth. Can you just walk me through what was the driver of the strong free cash flow generation?

Sure, absolutely. We, you know, you can see our cash conversion cycle came down, and that was a result of, you know, we were able to speed collections. And also, we did receive some advance customer payments, and we'll have a little bit more color on that in our 10-Q, which should be filed in the next few days. But we received about $70 million in advance payments from customers. So that helped us out, but still our cash flow from operations, you know, greatly exceeded our net income.

Yeah, in that nine months or three months, I mean, we have some cash pressure, major because global shortage. So we had to keep... a large amount of inventory. Now, inventory problem has been improved because no more big supply chain challenge now.

Got it. Understood. Okay. And then, Dave, did I hear you correctly that you expect free cash flow generation to be close to that amount of net income for fiscal year 2030?

Yes, Nehal, that's correct because we have We have our, you know, inventories are a little more reasonable now. And what I mean by that is, you know, some of the supply chain issues. We have our, you know, our cash flows are a little more in balance, and so we expect cash flows to be a little more in line with income. All right, great.

And then finally, your updated low end of guidance implies an easy, I think, If we look at your prior low-end of guidance, it implies that maybe you have a slightly negative year-to-year growth in the back half of fiscal year 23. Now, this new updated guidance implies, you know, 10% to 15% revenue growth. So, again, I'm sure you've addressed this during the script, but what is the driver of this improving growth outlook despite worsening macro that you're providing here at the low end of your guidance, by the way?

I guess the major reason is the macroeconomic condition because no one really knows how long the economic highway will last. So we try to be more cautious.

Yes, understood. I guess my point is that the updated low end actually implies an improved year-to-year growth outlook on the back half of the year. This is despite a worsening macro. So what are you guys seeing that's effectively driving a raise in your back half revenue growth expectations?

Yeah, we really have growth in all of our verticals, Nehal. And not only that, but geographically as well. So as Charles mentioned, there's new – CPUs coming out from AMD, from NVIDIA, from Intel, as well as new product launches. So, we think that all of those, the momentum that we have in our verticals, as well as the new product introduction, is what gives us guidance to the numbers that we put up.

Excellent. Fantastic job. Thank you for taking my questions.

Again, if you would like to ask a question, press the star and the number one on your telephone keypad. Your next question comes from the line of John Tanwanting from CJS Securities. Your line is open.

Hi, thanks for taking my follow-up. I was wondering if you were seeing any kind of impacts on the sanctions on China by the U.S., if there are any. I know earlier in the quarter there's been video news. I know a lot of companies got added to the entry list. Were any of those your customers? How should we think about the, you know, consequences of those actions?

Yeah, we see some impact for sure. And exactly how long the impact we are lasting, we still keeping watch.

Yeah, so, by the way, we didn't have any customers that were added. You know, however, as everyone knows, the GPU sales became limited. China sales last quarter were less than 3%. So we don't consider this to be a significant issue for us going forward.

Understood. Thank you. And then in your guidance, do you have any impact from foreign exchange built in there or possibly price declines as maybe you pass through declines in component costs as they occur?

Most of our contracts, our invoices are U.S. dollar denominated. Our FX really comes from the fact that we have some Taiwan dollar-denominated loans, and that's what causes the quarterly fluctuation in our FX, is just marking the US dollar to the Taiwan dollar. So therefore, the only impacts on FX come from really price-setting issues as opposed to balance sheet issues.

Got it. Okay. And then lastly, the strength in the quarter, did you observe any pull-ins, or was it just more of the supply chain loosening up and being able to get more components, and were there any push-outs that you observed?

So we didn't have any push-outs. We had some customers. This will be in the 10-Q. We had a couple of customers who prepaid and whose shipments, some of which were made, but did not qualify for revenue recognition, others that would ship later. So we didn't have any push-outs.

Okay, great. Thanks again.

Your next question comes from the line of Nedi Hosini from SIG. Your line is open.

Yes, thanks for taking my question. A couple of follow-ups. Thanks for the update on the fiscal year. And I just want to better understand how your system ASB would trend given the updated fiscal year 2023 update. I'm asking because you have done a really good job in increasing content. It's captured in your system ASP, and I want to see if you would still be able to increase to see a system ASP increasing in double-digit figure. I have a follow-up.

So many probably... You may have heard that a lot of GPU prices and CPU prices are going up, especially with the new refreshes that are coming out. So we anticipate that ASPs will continue to go up.

Okay.

For your fiscal 22, it was more than 30%. Should we assume a deacceleration, or would you be able to keep up the pace?

It's a big question. I mean, again, there are lots of new technologies, new CPU, new GPU. So that will be a positive side. But at the same time, the macro economy can bring some negative impact. So at this moment, we try to play safe. So that's why the number which JR is relatively conservative.

Okay, so I'll ask you a balance sheet question. And David, there was a line item I think accounts payable also helped combined with the $75 million of the prepayment, it helped with a positive cash flow operation. And in that context, how should I think about cash flow operation in in Q2 fiscal year 23?

Yeah, so I think that, I think my general comments apply that our, we see our cash flows as now, you know, more balanced with income, with net income. And so, you know, we'll get, we'll have a few puts and takes where customers, you know, prepay more or less from quarter to quarter. But we went, we underwent a lot of heavy lifting to get our revenue levels up, our AR levels up as we were growing. And so to the extent that we have more growth, we will face those challenges. But based on our current forecasts, we expect cash flows to be close to net income.

And then update a guide for CapEx in FY23.

So we haven't given a guide for FY23 just for the next quarter.

Should I assume similar capital intensity as last year just for modeling cash flows?

I think we'll come out with more of a guide later on.

Thank you.

Your next question comes from the line of

Amanda Barula from Loop Capital. Your line is open.

Hey, yeah, good afternoon, guys. Congrats on the angle of momentum, and thanks for taking the question. I have a few calls tonight, so I may ask something that's already been addressed. If it is, we can just chat on it offline. But I would love just context on, you know, context on customer penetration, any new customer acquisition that was contributed to the quarter, and then any context you can give on, you know, what continues to be, you know, really, really good ongoing strength of those key application types that have been driving, you know, driving the business for the last number of quarters, right? You know, anything that you haven't given yet, I can take it offline with you or get it out of the transcript. Anything that I missed, if you've already talked about it. But if there's any additional context, we'd love to get it. Thanks.

Yeah, very good question. As I earlier just mentioned, we just introduced a couple of business automation tools, including auto configurator, including auto online, online service. So all of those will help our sales. make our sales and customer relationship become more efficient, more accurate, and we expect that we are able to gain more customers, hopefully many more customers, because of the improvement of our automation tool. together with our much stronger solar air product now, right? So, including all the kind of data center management tool, security tool, and other service and application solar air. So, we are in much stronger position from this point of view with our kind of a large-scale total solution.

And let me ask a follow-up, too, and this is something that could have come up earlier as well on the call in your remarks or in the Q&A. Sort of upcoming Intel, AMD, and NVIDIA cycles, you know, should we think of those as being potentially meaningfully incremental to your business run rate? You know, are those sort of blended in? Would they sort of just, like, blend into the run rate?

Thanks. For sure, customer will buy new product to replace the old product, right? But because we always have a stronger new product line, a new technology, that's how we expect we will continue to gain customer base and also improve customer relationship because of a stronger product line. And not just the hardware product like before, but now our total solution have customer And green computing, as you know, our green computing is a total solution, and we make, for example, water cooling much easier and much quicker delivery time. So all of those, we believe, will be a positive drive for our business growth.

That's super helpful. Thanks a lot, guys. Thanks, Charles.

Thank you. Thanks.

Again, if you would like to ask a question, press star then the number one on your telephone keypad. There are no further questions at this time.

Mr. Charles Liang, I turn the call back over to you.

Thank you. Thank you for joining us today and expect to meet you next quarter.

Thank you.

This concludes today's conference call. You may now disconnect.