Super Micro Computer, Inc.

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 Supermicrocomputer Fiscal Full Quarter 2023 Results Conference. With us today, Charles Leon, Founder, President, and Chief Executive Officer, David Wiggin, CFO, and Michael Stager, Vice President of Corporate Development. 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 start followed by the number one on your telephone keypad. If you would like to withdraw your question again, press start and number one. Thank you. Michael Sager, you may begin your conference.

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 30th, 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 presentations tab. We have also published management scripting 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, and other income and expenses, taxes, capital allocation, and future business outlook. including guidance for the first quarter 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 other SEC filings. All 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 and 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.

Thank you, Michael, and good afternoon, everyone. Today, I'm pleased to announce a new record fiscal result of $7.12 billion annual revenue, 37% year-over-year growth rate. We have also achieved our first landmark $2.18 billion quarterly, which is 34% growth year-over-year and 70% quarter on quarter. We are continuing to exceed the world's top and bottom line results and performing well beyond our previously guide ranges. It's no secret that our strong growth has been driven by the demand for our leading AI platforms in product and play large scale, especially for a large language model optimized NVIDIA HGX-based Delta Next solution. Our engineering capability enables us to deliver optimized first-to-market AI products and solutions to our customers, distinguishing us from the competition and empowering us to make 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 rack quickly with both air-cooled and liquid cool water options. Let's go over some key financial highlights. First, we enter fiscal year 24, which record high back order. Many more new design and new customers. Again, our first fiscal year, 2023, net revenue total, $7.12 billion, up 37% year on year. above our midpoint guidance range of $6.7 billion. First year 2023, the gap 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. 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 earning of $3.51 per share grew 31% 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 large-scale total IT solutions. For 30 years, we have been diligently building our company strength and foundation as the only USA-based large-scale AI platform designer, and manufacturer. We have been shipping our winning products in volume to our partner for more than a quarter. Couple of months ago, I was honored to have my close friend, NVIDIA CEO, Jason Fang, 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 large-scale total solutions to large generative AI innovators. Supporting HGX H100 Delta NEX, H100 PCIe GPUs, and just around L4DS GPUs, our Delta NEX, Redstone NEX, and AGPU OVX systems have become the benchmarks or excellence for our industry. We are also getting good traction on Intel Gaudi 2 and PVC, as well as AMD's MI250 accelerator solutions. The demand for artificial intelligence in West Churchill is perfectly addressed by our building block server architecture. And due to our building block solution, we are based and produce application-optimized GPU solution 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 Harper CG1 Superchip. The MGX platform is the vision of AI computing between NVIDIA and Supermicro, designed to be open, flexible, and future-proof for multiple generation 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 revenue this quarter based on AI-related designs, I expect this AI growth momentum to continue expanding our team across all customer types from major AI innovators to super large CSP, PO1 data centers, PO2 cloud, and to the general enterprise market. as the performance of GPU, CPU, TPU, and memory technology increase. Enhanced storage performance is also necessary to feed a massive data set to the application without becoming a bottleneck. That slows the entire system down. Supermicro's new PCIe Gen 5-based E1S and E3S Pedascale, all-flash storage server, all for industry-leading storage performance and capacity. Together with our Utah 2 MVME, top-notch 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 challenge of this new technology has risen dramatically. 40 kW or even 100 kW direct solution demand is rapidly expanding and require for compute-intensive data center, CSP, and other verticals. Having high power efficiency, free air, and liquid cooling expertise have become one of our key differentiators of success. We have made a major investment across a variety of technologies to drive adoption of direct liquid cooling in data center to address the thermal challenge. In addition to increasing computing density and reducing TCO, liquid cooling reduces the environmental impact of data center dramatically, along with our green computing mission. Similarly, the liquid emulsion solution is making good progress, and we will be happy to provide that option to interest partners soon. The reality is that Data center infrastructure is getting more complex, especially with the unprecedented demand of AI. The design complexity and integration skills, along with the requirement to deploy in a timely fashion, are a heavy burden to many end customers. Supermicro's total IT solution approach saved them from the complication of design, validation, sourcing, and integration. It also streamlines network switching, firmware, and software management in data center 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 headquarters and our aim to further increase our current 4,000 racks per month capacity in this fiscal year to further support the demand from key domestic partners. We are also planning to build another manufacturing campus in North America. At this moment, our U.S. headquarters and Taiwan facility can support at least $15 billion in revenue, while the new Malaysia facility will further increase our total revenue capability by serving large-scale product and customer on a reduced-cost structure in the coming few quarters. 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 product in a timely manner. Due to our current key component supply shortage, we forecast revenue in the range of 1.9 to 2.2 billion for the September quarter. Given the record high back order, we see fiscal year 2024 revenue between 9.5 to 10.5 billion. We still need to deliver more depending on availability of supply. Our role as the leader of scale total AI and IT solutions has just begun. We are ready to deliver optimal AI infrastructure to existing and emerging market, along with our value-add software and service. To say it plainly, our foundation and capacity are fully ready, and our demand is growing strongly. With LLLM, 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 Wiggins, our chief financial officer, I want to say thank you to our partner, customer, Supermicro employee, and our shareholders for your continuous support. Thank you, David.