Super Micro Computer(SMCI) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Preliminary fiscal Q1 net revenue was in the range of $5.9 to $6 billion, up 181% year-on-year, driven by strong AI demand [3] - Preliminary non-GAAP gross margin was approximately 13.3%, and non-GAAP operating margin was approximately 9.9%, both higher than the previous quarter [3] - Q1 GAAP net income estimated at $433 to $443 million, and non-GAAP net income at $483 to $493 million [6] - Q1 operating cash flow was approximately $407 million, an improvement of $1 billion quarter-over-quarter [7] - Q1 closing inventory was approximately $5 billion, with CapEx for Q1 at $42 million and positive free cash flow of $365 million [7] Business Line Data and Key Metrics - AI contributed over 70% of revenues across enterprise and cloud service provider markets [6] - The company deployed the world's largest DLC AI super cluster with 100,000 NVIDIA GPUs, reflecting strong engineering and logistics capabilities [3] - The DLC liquid cooling market share is expected to be at least 10 times more than last year due to product maturity and rapid AI growth [4] Market Data and Key Metrics - The company expects 15% to 30% of new data centers to adopt liquid-cooled infrastructure in the next 12 months [4] - The company is expanding its production facilities in Silicon Valley, Malaysia, Taiwan, and Europe, with plans to scale up further [5] Company Strategy and Industry Competition - The company is leveraging its data center building block solution (DCBPS) to reduce time-to-delivery and time-to-online for customers, significantly improving efficiency [4] - The company is focusing on liquid-cooled data centers, with its new SuperCloud Composer (SCC) providing end-to-end management from chip level to data center cooling towers [4] - The company is expanding its global manufacturing capacity, including a new Malaysia campus, to support future growth [5] Management Commentary on Operating Environment and Future Outlook - Management remains confident in the company's ability to service customers and partners despite recent challenges, with strong growth driven by the AI revolution [3] - The company is optimistic about future growth, particularly with the upcoming availability of new GPU chips like Blackwell, which are expected to drive market share and revenue growth [9] - Management highlighted the importance of the company's liquid cooling solutions, which are gaining traction due to their energy efficiency and performance benefits [5] Other Important Information - The company is working diligently to select a new independent auditor and complete its fiscal year 2024 audit [8] - The special committee has completed its investigation and found no evidence of fraud or misconduct, recommending remedial measures to strengthen internal governance [2] Q&A Session Summary Question: Revenue came in at the lower end of guidance. Is this due to market share losses or delayed financial filings? - Answer: The lower revenue was primarily due to customers waiting for the new Blackwell chip, with the company's liquid cooling solutions fully ready for deployment once the chips are available [9] Question: Gross margins were robust but are expected to decline. Is the target of 14-17% gross margin still achievable? - Answer: The company expects gross margins to improve as new GPU chips become available and with the help of its data center building block solution and SuperCloud Composer [10] Question: What is the expected revenue contribution from Blackwell in Q1 and Q2? - Answer: The company did not provide specific revenue guidance for Blackwell but expects strong growth once the chips are available [19] Question: Are there any risks to supply or allocations from NVIDIA due to the auditor and filing issues? - Answer: The company maintains a strong relationship with NVIDIA and does not expect any negative impact on allocations [19] Question: How is the company managing its working capital and access to capital? - Answer: The company has raised $4 billion in working capital through equity and convertible debt, leaving it in a strong position to meet its needs [14] Question: What is the status of the company's liquid cooling production capacity and supply chain efficiency? - Answer: The company has shipped over 2,000 liquid-cooled racks and is focused on further improving efficiency and capacity, with plans to expand production facilities globally [20] Question: What is the company's relationship with NVIDIA, and are there any changes to allocations? - Answer: The company has a deep, long-standing relationship with NVIDIA and has confirmed that there are no changes to allocations [23]