Super Micro Computer, Inc.

Ladies and gentlemen, 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 Supermicrocomputer Incorporated fiscal third quarter 2023 results conference call. Today's conference is being recorded and 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 that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again. Thank you, and I will now turn the conference over to Michael Sager, Vice President of Corporate Development. You may begin.

Good afternoon, and thank you for attending Supermicro's call to discuss financial results for the third quarter, which ended March 31st, 2023. 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 that is available to participants in the investor relations section of the company's website under the events and presentations tab. We've 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 fourth quarter of fiscal year 2023 and the full fiscal year 2023. 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 our company presentation or to our press release published earlier today. In addition, a reconciliation of gap and on-gap 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'll have a Q&A session for cell site analysts to ask questions. And I'll now turn the call over to Charles.

Thank you, Michael, and good afternoon, everyone. Our revenue for the third quarter of fiscal year 23 totaled $1.28 billion. down five percent year on year and below our initial guidance range as we previously announced but our non-gap earning per share grew over five percent year on year to one point one dollar 63 cents compared to uh 1.55 a year ago while the quarter did not unfold as we expect I'm strongly encouraged by our current business momentum as we navigate market uncertainty with our new generation X13, H13, and H100 leading-edge products, especially in artificial intelligence. These new AI product demands from top tier companies had led us to challenge in terms of new key components availability. Compound with the economic headwind, our Q3 result was reflective of this difficulty, yet opportune condition. The good news is that we have already started to address this component shortage. pressure over the past few months, and we are in a much improved situation going forward. We have started to produce and ship some back orders since April. Here are a few highlights for the quarter. First, record pace of GPU leading edge design wins with growing back order, including winning at least two new global top 20 customers. Second, we refresh our entire product portfolio based on new CPU, GPU, storage, and fabric technology from key partners including NVIDIA, Intel, AMD, and others. And third, increase the customer demand of our large-scale plug-and-play solutions and continued expansion and transition from a server storage hardware manufacturer to a total IT solution provider. With applications like CHAP GDP that heavily count on large language modeling, LORM, and generative AI, the state of AI infrastructure business has grown rapidly. This AI momentum has benefited Supermicro greatly as we are deploying many of the world's leading and large-scale GPU clusters. In addition, we have built a close and collaborative relationship with NVIDIA over the years by co-developing and offering the most optimized and the fastest come-to-market GPU platform on the market. Online new generation product design with partner ecosystem is highly complex. As I mentioned earlier, multiple key components shortage delay our ability to manufacture and deliver a new system like the Delta Next GPU system last quarter. With the improving components availability this quarter, the new GPU system shipment will ramp up quickly. Indeed, we continue to scale up our manufacturing campuses in U.S., Taiwan, New Zealand, and Malaysia so that we can support our revenue growth in a much larger scale in the coming quarters and years. By leveraging our in-house building block design and manufacturing, we are well equipped to navigate through the current economic headwind. With our building block solution architecture, we always deliver workload-optimized new product to market faster than competitors, like with the recent NVIDIA H100 Intel Sapphire Rapid and AMD Genova release. The power consumption and thermal challenge of these new technologies have risen dramatically. And 40 kilowatt or even 60 kilowatt and 80 kilowatt racks the region demand are getting stronger and popular for computing Hungary data center and industry. Having high power efficiency and air, liquid, thermal expertise have become one of our key differentiator of success. Combined with our preliminary green computing strategy, that saved customers much TCO savings, our time to market advantage, and solution optimization via building blocks solution. We anticipate continuing to gain many more new design wins with this new generation product in the quarters ahead. We have made a solid progress in our total IT solution initiative by advancing our rack-scale solution capability. Provided there are no supply constraints, we can design, build, validate, process, and deliver turnkey rack-level solutions to customers within a few weeks of placing an order instead of months from competitors. SuperMineco's one-stop shopping total IT strategy, including AI, server, storage, networking, software, racking, cabling, power, cooling, integration, meditation, and management features, plus service. The idea is to let customers focus more on their applications and new software features. leave the IT hardware solution to Supermicro from cloud to edge. Currently, we are on track to support up to 4,000 racks per month of global manufacturing capability and capacity by the calendar year end. Our business is maintaining a growth rate that is multiple overall IT industry growth rate in the same period. We are doing so by efficiently taking market share in the new and faster-growing market. AI storage, on-prem cloud, embedded, and 5GH are all verticals. We see a potential to greatly increase our team. We are well positioned to support this highly specialized market. by optimizing our technology, design, and business automation at our US, Asia, and EMEA campuses. The great center at liquid cooling rack scale solution and production lines, product auto calculator, and online business automation will bring more value to our customer quicker with better quality. We are also improving our cost structure by scaling through our Taiwan and upcoming Malaysia campuses, which will be online soon with some of our key partners. While our March quarter result has some challenges, our new generation of products are in high demand. especially for AI, and we anticipate more customers deploying our product in large-scale product play. We continue to emerge as one of the largest global suppliers of total IT solutions and continue to gain market share. The strength of our product and technology keep us confident of delivering Q4 revenue in the range of 1.7 to 1.9 billion. If the supply condition improves, we expect to be above that range. Even some economical headwind is still ahead. In other words, I continue to expect our fiscal year 2024 revenue to be at least 20% year-over-year growth. and we are accelerating to reach our mid to long-term growth objective of $20 billion per year. Now I will pass the call to David Wagen, our Chief Financial Officer, to provide the additional detail for the quarter. Thank you.