Super Micro Computer, Inc.

Thank you for standing by. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Supermicrocomputer Fiscal Q3 2024 results on April 30th, 2024. With us today, Charles Liang, Founder, President, and Chief Executive Officer, David Wiegand, 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 queue for a question during today's call, you can do so by dialing star one. Thank you.

Good afternoon, and thank you for attending Supermicro's call to discuss financial results for the third quarter, which ended March 31st, 2024. 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 have 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 fourth quarter fiscal year 2024 and the full fiscal year 2024. There are a number of risk factors that can 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 23, and our 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, you 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. We achieved another record-breaking quarter, with a revenue of 3.85 billion, a 200% increase from the same time last year, and the long-gap earnings per share of $6.65, up more than 308% year-on-year. Supermicro is at a forefront for the current AI revolution. These strong results reflect the continued demand for our large-scale, plug-and-play, total AI solutions. We continue to face some supply chain challenges due to new products that require new key components, especially liquid cooling, DLSE-related components. and believe this situation will gradually improve in the coming quarters. To sustain this rapid growth, we are making significant investment in production, operation, management software, cloud features, and customer service to further increase our customer base and bring more value to them. To support this scale-up, we raised an additional $3.28 billion through a convertible note and secondary equity offering in the quarter. We'd like to support strong, short, and long-term growth with minimal equity dilution. Overall, I remain optimistic that AI growth will continue for many quarters, if not many years to come. We have long recognized that AI is accelerating the need for deep cooling, and we have invest heavily into high-quality optimized direct liquid cooling DLSE solutions for high-end CSP and NCPs. With GPU reaching 700 watts and more than 1,000 watts, efficiently managing the heat from this AI system has become critical for many customers, especially at the new data centers. I am pleased to announce that our new DLSE liquid cooling unit block and drug-scale total solution technology are finally fully ready for high-volume production. With our DLSE liquid cooling technology, customers can reduce their expense on cooling expense, saving data center space, and allocate a greater portion of their finite power resource to computing instead of cooling, which align with our green computing DNA well. Now, let's go over some key financial highlights. Supermicro is pleased to be included in the prestigious S&P 500 index last quarter. Basically Q3 net revenue total 3.85 billion, up 200% year-on-year within our aggressive original guidance of March quarter. If not limited by some key component shortage, we could have delivered more. Fiscal Q3 don't get earning of $6.65 per share, or well above $1.63 last year. which was about 308% year-on-year growth. Our increasing economy of scale contributed to better net profit. Our year-over-year operating margin and net income both continue to improve, and we continue to expect further benefit as we bring our Malaysia facility online data in this calendar year. This fast-growing quarter was driven by end users wanting to accelerate their deployment of the latest generation AI platform. Through our building block solution, we provide optimized AI solutions at a scale, offering a time-to-market advantage and shorter lead time over our competition. Additionally, our rock-scale plug-and-play total solutions especially with liquid cooling, DLSE, ensure optimal system performance while saving energy costs up to 40% at a data center scale, delivering much more value to customers. We are leading the AI revolution by deploying NVIDIA HGX H100 Silver Cluster solutions to our customers housed in our new 100 kW racks with two to three times higher power density than traditional racks from others. At our NVIDIA GTC last month, we unveiled our next generation Blackwell products, including the GB200MVL72 solutions. To further grow our AI portfolio, We are now strongly focusing on delivering new generative AI and influencing optimized systems based on the upcoming next generation Nvidia H200, B100, B200, GH200, and GP200 GPUs, as well as Intel Gaudi 2, Gaudi 3, and AMD MI300X and MI300A. GPUs. Most of them support both air cooling and DLLC cooling. But Supermicro is transitioning to our next generation of X14 and H14 product lines, featuring the industry's boldest skills of Intel Xeon 6 processor-based and AMD tubing-based platforms. We are fully ready for high-volume production and offer early online access for testing and validation through our Jumpstart cloud service. Meanwhile, our X14 and H14 storage solutions are addressing the specific requirements of accelerating the AI data pipeline with partners like Zika and VAST data and many others. The rapid growth of our business is raising the complexity to scale out capacity. Our production team are making aggressive progress on rechopping the new Silicon Valley facility and scale up our Taiwan and Malaysia factories. We have secured the path and acquired additional warehouse for our next phase of enterprise and data center business. We are currently on track to produce over 2,000 deep cooling DLSE racks per month of AI server with volumes steadily increasing. Each DLSE rack supports up to 100 kW or even 120 kW. At this moment, we are focusing on delivering more than 1,000 racks of NVIDIA HGX AI supercomputer. Each rack supports 64-piece H100, H200, or B200 GPUs with the latest DRC, liquid cooling technology, to three interstitial cosmos from April to June of this quarter. These are three deployments. will be among the world's largest DRC liquid cooling AI cloud, potentially saving our customer up to 40% of energy cost compared to standard air-cooled deployment by our competition. Special thank you to NVIDIA and our close technology partner for this fantastic collaboration. I believe this is just the beginning of our long-term high-volume DLSE liquid cooling mission. Green computing can be free with a big bonus. Let's go for green. In summary, we have a strong quarter with more to come. Supermicro is uniquely capable of delivering new technologies to market faster with our integrated rack scale plug-and-play solutions, in-house engineering, building block architecture, and green computing DNA. With a robust pipeline of new products in calendar year 2024, we are confident fiscal Q4 revenue will be in the range of $5.1 billion to $5.5 billion. This will raise our fiscal revenue guidance to $14.7 billion to $15.1 billion, an increase to our recent fiscal 2024 guide. We continue to win market share and remain committed to executing our growth plan across all verticals. This remains truly the most exciting time yet for Shibo Mango, and I believe This strong year-over-year growth will continue in our fiscal 2025, especially with our new, leading, and ready-to-ship DRC liquid cooling rack-scale plug-and-play solution and technologies. Before passing the call to David Wagon, our Chief Financial Officer, I want to thank you again to our partner, our customer, our employee, and our shareholders. for your strong support. Thank you.