Super Micro Computer, Inc.

Thank you for standing by. My name is Tamia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Supermicrocomputer Inc. SNCIUS Q1 FY25 Business Update Call. With us today are Charles Liang, Founder, President, and Chief Executive Officer, David Wiegand, CFO, and Michael Stager, Senior 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, please press star one on your telephone keypad. Thank you.

Good afternoon, and thank you for attending Supermicro's first quarter fiscal 2025 business update conference call for the first quarter, which ended September 30th, 2024. With me today are Charles Liang, founder, chairman, chief executive officer, and David Wiegand, chief financial officer. At the end of today's prepared remarks, we will have a Q&A session for sell-side analysts. I will make additional remarks prior to the end of the Q&A, But the company will not address any questions regarding the recent decision of our independent auditor to resign in the delay in the filing of the company's 10-K. During today's conference call, Supermicro will address business and market trends from the first quarter of fiscal 25, including our financial outlook and operations, our strategy, technology, and its advantages, our current and new product offerings, and competitive industry and economic trends. We will discuss estimated financial results, but reference to any financial results are preliminary and subject to change based on finalized results contained in future filings with the SEC. By now, you should have received a copy of today's news release that was issued after the close of market and is posted on our website where this call is being simultaneously webcast. Any forward-looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update them. Our actual results may differ materially from the results forecasted, and reported results should not be considered as an indication of future performance. The discussion of some of the risks and uncertainties relating to our business is contained in our filings with the SEC, and we refer you to those public filings, including our most recent annual report on Form 10-K. During this call, all financial metrics and associated growth rates are non-GAAP measures other than revenue and cash and investments. This call is being broadcast live on the Supermicroinvestor Relations website and is being recorded for playback purposes. An archive of the webcast will be available on the IR website and its property, Supermicro. Our second quarter fiscal 2025 quiet period begins the close of business Friday, December 13th, 2024. With that, I'll turn it over to Charles.

Thank you, Michael. Before we dive into the first quarter details, I would like to share some thoughts on recent challenges that the company has experienced. As we have emphasized in our of firing things these challenges emojis we remain confident in our previous financial reports and as previous alarms we are actively in the process of engaging a new auditor we are working with urgency to become current again with our financial reporting i'm pleased to report that the special committee had today provided the following statement to Shibu Manko, which is also included in our press release. I quote, the special committee has completed its investigation based on a set of initial concerns raised by Ernest and Yang. Following a three-month investigation, then by independent counsel. The committee's investigation today has found that the Auditor Committee has acted independently and that there is no evidence of fraud or misconduct on the part of management or the vote of directors. The committee is recommending a series of remedial measurements for the company to strengthen its internal governance and oversight functions. And the committee expect to deliver the full report on the complete work this week for next. The special committee has other work that is ongoing, but expect it to be complete soon. End of quote. The special committee has done otherwise provided any additional details or information. We look forward to receiving the committee's full report in the near future. We do not believe the current challenges affect Supermicro's ability to service our customers and partners as we continue to grow rapidly and strongly with the AI revolution. and my confidence in Supermicro and its staff remains stronger than ever. Here are some key quarterly highlights. The preliminary fiscal Q1 net revenue was in the range of $5.9 to $6 billion. At the midpoint, this is up 181% year on year, driven by strong AI demand from our old and new customers it was one of our strongest first quarters in history despite the many customers are waiting for the communism new generation gpu chips the preliminary physical q1 non-gag earning in the range of 75 cents to 76 cents per share was 31 last year approximately a 122% year-on-year growth rate. The preliminary non-GAAP growth margin approximately 13.3% and non-GAAP operating margin is approximately 9.9%. Both were higher than the previous quarter as customer mix improved and supply chain cost and expertise shipping for DLC components. We have deployed the world's largest DLC AI supercaster with 100,000 Nvidia GPU in the record time to deployment, TPD, as well as time to online. This milestone achievement reflects our engineering expertise and complex logistics capabilities for large-scale AI infrastructure deployment. Leveraging our data center building block solution, DCBDS. We are now building full-scale liquid-cooled data center with our large-scale plug-and-play solutions, featuring our latest DLSE liquid cooling technology at a leading pace. DCBPS, Data Center Building Block Solution, can reduce the time required for customers to build new data centers from roughly two years to a few quarters, significantly improving data center TTB, TTO, time to delivery, and time to online. And of course, for customers' AI, IT infrastructure, Data center building block solution is also helping to accelerate the adoption of DLC liquid cooling, driving efficiency and performance while reduce customers' OPEX, achieving greener computing. We expect 15% to 30% of new data centers will adopt liquid-cooled infrastructure in the next 12 months The DLLC volume is at least 10 times more than last year. I mean, this year, DLLC market share will be at least 10 times more than last year due to the DLLC liquid cooling product maturity and the rapid growth of AI. To keep the DLLC solutions performing at their best, our new super cloud composer, scc is capable of end-to-end management from chip level all the way to rack level and data center cooling towers making it the most powerful dlc data center management software on the market today scc for the simplified provisioning of a highly automated software defined infrastructure supporting customers with rapidly changing workload requirements. With the addition of SCC, Supermicro is well prepared to service many more customers and grow DLLC Deep Recruiting Data Center market share. On the production front, we are in the process of completing our new Malaysia campus. where we expect to begin manufacturing later this quarter. Additionally, we have been nonstop expanding our facilities in Silicon Valley to increase our DLCE liquid cooling large scale production capacity. Now they are hosting 50 megawatt of power and able to produce more than 1,500 DLCE GPU racks per month with plans to scale up for them. Our Taiwan and Europe production facilities also are growing at a quick pace. Moreover, we are planning to expand to several other global manufacturing locations in the near future. By leveraging our strengths in technology, innovation, product design, build quality, supply chain management, deployment, and data center services. We are pushing our goal to transform Simple Micro into a leading USA as well as worldwide AI IT infrastructure company. We are off to a strong start in fiscal 2025. Our total IT solutions deployments are rapidly scaling. And our new product developments are progressing smoothly. Our NVIDIA GP200-NVR72 is ready. And the 10U air-cooled and 4U liquid-cooled B200 rack part and play systems are fully production ready. The brand new 200kW plus super rack architecture co-developed with NVIDIA, which provides near 100% DLC. I mean, the whole rack, almost no cooling fan required. It is also on the right track. The new shipboard rack architecture will be able to achieve power usage effectiveness, PUE, close to 1.0. complete our broad-disk AI portfolio. The AMD MI300 and MI325 platforms and Intel W3 solutions are ready to go as well. Our data center building block solution is attracting more new customers, and our long-term investment in DLLC cooling is paying off with all the cars quality and volume capacity given us a sustainable competitive uh age and economics of scale before passing the code to david wagon our cmo i want to thank our partners customers investors and shibu michael employees and express my appreciation for their patience and support until we can provide more information about our 10K firing status. Our strong foundation. There are central building block solutions and DRC difficulty. Green computing leadership not only reduce energy costs for our customers, but also contribute to a healthier mother earth. I believe we are well positioned for strong future growth.