df5d346add9443748cb9c0e68e475ca6301b7d2fadff4fae437109e27ffb0949

Super Micro Computer, Inc. (SMCI) is a Silicon Valley-based company specializing in accelerated compute platforms, providing high-performance and high-efficiency server and storage systems tailored for various markets such as enterprise data centers, cloud computing, artificial intelligence, 5G, and edge computing **[0001375365-24-000025_a20240521ry2023cmreportdra.htm:0]** **[0001193125-24-070712_d778068ds3asr.htm:8]** **[0001375365-24-000022_smci-20240331.htm:37]**. The company offers a wide range of products under its Total IT Solutions, including complete servers, storage systems, and modular blade servers, emphasizing flexibility and customization to meet diverse computing needs **[0001375365-24-000025_a20240521ry2023cmreportdra.htm:0]** **[0001193125-24-070712_d778068ds3asr.htm:8]**. Server and storage systems are the primary revenue drivers, with subsystems and accessories also contributing to the company's sales **[0001375365-24-000022_smci-20240331.htm:39]**.

1. **Server and Storage Systems** - Offers high-performance and high-efficiency servers and storage solutions optimized for enterprise data centers, cloud computing, AI, 5G, and edge computing.
2. **Subsystems and Accessories** - Provides server boards, chassis, and accessories that complement the main server and storage offerings.
3. **Modular Blade Servers** - Delivers flexible and scalable blade server solutions for various computing environments.
4. **Blades** - Supplies individual blade components for integration into modular server systems.
5. **Workstations** - Designs high-performance workstations for professional and enterprise use.
6. **Full Rack Scale Solutions** - Provides comprehensive rack-scale solutions for large-scale data center deployments.
7. **Networking Devices** - Offers networking hardware to support server and storage connectivity.
8. **Server Sub-Systems** - Supplies essential components for server assembly and customization.
9. **Server Management and Security Software** - Develops software solutions for managing and securing server operations.

c0987cfa27b85f34bcd7a78dc4e3bb74ed95dc498a673e785792e9c56719ee89

cdba3a0b9f86db7f2a9750bce413915379590fe1a55e30f000d286ebdac0939f

| Metric (Unit) | Q2 2023 | Q3 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|---------------|---------|---------|---------|---------|---------|
| Supplier A (% of total purchases) | **14.1%** **[0001375365-23-000012_smci-20221231.htm:7]** | **16.9%** **[0001375365-23-000028_smci-20230331.htm:7]** | **55.1%** **[0001375365-23-000041_smci-20230930.htm:6]** | **68.1%** **[0001375365-24-000011_smci-20231231.htm:7]** | **69.8%** **[0001375365-24-000022_smci-20240331.htm:9]** |
| Supplier B (% of total purchases) | **17.6%** **[0001375365-23-000012_smci-20221231.htm:7]** | **26.9%** **[0001375365-23-000028_smci-20230331.htm:7]** | **10.3%** **[0001375365-23-000041_smci-20230930.htm:6]** | **7.3%** **[0001375365-24-000011_smci-20231231.htm:7]** | **5.1%** **[0001375365-24-000022_smci-20240331.htm:9]** |
| Ablecom (% of chassis manufactured) | **95.5%** **[0001375365-23-000012_smci-20221231.htm:21]** | **96.3%** **[0001375365-23-000028_smci-20230331.htm:22]** | **85.5%** **[0001375365-23-000041_smci-20230930.htm:15]** | **87.2%** **[0001375365-24-000011_smci-20231231.htm:18]** | **95.2%** **[0001375365-24-000022_smci-20240331.htm:24]** |

ba4d04ab1001752913a32b881b2c023e9fb7e2c81056299773040c4bde01fc02

1. Given the resignation of your independent auditor and the delay in filing your 10-K, are you experiencing any market share losses or customer hesitancy due to these issues, and how are you mitigating potential impacts on your business?
2. Can you provide more specifics on the initial concerns raised by your previous auditor that prompted the special committee's investigation, and what remedial measures are being implemented to strengthen your internal governance and oversight functions?
3. With the delays in providing audited financial statements, what are the risks associated with your credit agreements if you fail to meet the new deadlines, and could this impact your access to capital markets or trigger covenants in your convertible debt?
4. You previously gave full-year revenue guidance of $26 billion to $30 billion but did not reaffirm it on this call; do you still stand by this outlook, and what key factors could affect your ability to achieve these targets?
5. Your gross margin is expected to contract in the upcoming quarter; is this a result of increased competition or pricing pressures, and what strategies are you employing to sustain or improve profitability amidst these challenges?

924bce32ef3cef81403986001bc8c926ce98cad2903de11df324f510ff5756ef

0a7a19ddd9ab9ecaa6b60c5caea3591dc13dc1f044d48c23e44a5038e2161f39

Server and Storage Systems

Subsystems and Accessories

Server Systems

Total Revenue

4585e5c2cf962ac4112b065a8ac64c208f82bd832ea93784b5c51f2e9cafcf95

Ablecom (% of chassis manufactured)

42bf372ad4db08428eb8222ce5ee0df97cac12d11b9f3b4cd14c48e0f199dcfe

- Cisco: Global technology vendor  **[0001375365-23-000036_smci-20230630.htm:9]** .
- Dell: Global technology vendor  **[0001375365-23-000036_smci-20230630.htm:9]** .
- Hewlett-Packard Enterprise: Global technology vendor  **[0001375365-23-000036_smci-20230630.htm:9]** .
- Lenovo: Global technology vendor  **[0001375365-23-000036_smci-20230630.htm:9]** .
- Foxconn: ODM (Original Design Manufacturer)  **[0001375365-23-000036_smci-20230630.htm:9]** .
- Quanta Computer: ODM  **[0001375365-23-000036_smci-20230630.htm:9]** .
- Wiwynn Corporation: ODM  **[0001375365-23-000036_smci-20230630.htm:9]** .
- Inspur: OEM (Original Equipment Manufacturer)  **[0001375365-23-000036_smci-20230630.htm:9]** .

f7d9fb7e44ce77baecfbdd87e728051bfce0363e1654fede843f266f22b61b34

United States

Asia

Europe

Other

- China

e5bf1efdfc7a2d9edfcb629bd1a58a42e4a7f071c61f561e5d8d043855c8fc4e

a3a2a3ee6dad6d5d7c882c4dc17fc7957ad34e17bf3bedccd724c607c5a121c7

### Q1 2025 Earnings Call
- **Issued Period**: Q1 2025
- **Guided Period**: Q2 2025
- **Guidance**:
  1. **Net Sales**: $5.5 billion to $6.1 billion  **[SMCI_3405841_3]** .
  2. **Gross Margin**: Decrease by 100 basis points sequentially  **[SMCI_3405841_3]** .
  3. **Operating Expenses**: Increase by approximately $34 million sequentially  **[SMCI_3405841_3]** .
  4. **Other Income and Expense**: Net expense of approximately $7 million  **[SMCI_3405841_3]** .
  5. **GAAP Net Income per Diluted Share**: $0.48 to $0.58  **[SMCI_3405841_3]** .
  6. **Non-GAAP Net Income per Diluted Share**: $0.56 to $0.65  **[SMCI_3405841_3]** .
  7. **Tax Rate**: GAAP 14%, Non-GAAP 15%  **[SMCI_3405841_3]** .
  8. **Diluted Share Count**: GAAP 640 million, Non-GAAP 648 million  **[SMCI_3405841_3]** .
  9. **Stock-Based Compensation Expense**: $54 million, with $14 million excluded from non-GAAP net income per diluted share  **[SMCI_3405841_3]** .

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: Q1 2025 and FY 2025
- **Guidance**:
  - **Q1 2025**:
    1. **Net Sales**: $6 billion to $7 billion  **[SMCI_3396683_5]** **[SMCI_3396683_2]** .
    2. **GAAP Diluted Net Income per Share**: $5.97 to $7.66  **[SMCI_3396683_5]** .
    3. **Non-GAAP Diluted Net Income per Share**: $6.69 to $8.27  **[SMCI_3396683_5]** .
    4. **Gross Margin**: Expected improvement  **[SMCI_3396683_5]** .
    5. **Operating Expenses**: GAAP $282 million, including $84 million in stock-based compensation  **[SMCI_3396683_5]** .
    6. **Tax Rate**: GAAP 9.9%, Non-GAAP 14.6%  **[SMCI_3396683_5]** .
    7. **Fully Diluted Share Count**: GAAP 65 million, Non-GAAP 66 million  **[SMCI_3396683_5]** .
    8. **CapEx**: $45 million to $55 million  **[SMCI_3396683_6]** .
    9. **Other Income and Expenses**: Net expense of approximately $20 million  **[SMCI_3396683_5]** .
  - **FY 2025**:
    1. **Revenue**: $26 billion to $30 billion  **[SMCI_3396683_7]** **[SMCI_3396683_6]** **[SMCI_3396683_2]** .

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: Q4 2024 and FY 2024
- **Guidance**:
  - **Q4 2024**:
    1. **Net Sales**: $5.1 billion to $5.5 billion  **[SMCI_3381574_4]** .
    2. **GAAP Diluted Net Income per Share**: $7.20 to $8.05  **[SMCI_3381574_4]** .
    3. **Non-GAAP Diluted Net Income per Share**: $7.62 to $8.42  **[SMCI_3381574_4]** .
    4. **Gross Margins**: Expected to decrease  **[SMCI_3381574_4]** .
    5. **GAAP Operating Expenses**: $226 million, including $55 million in stock-based compensation  **[SMCI_3381574_4]** .
    6. **Other Income and Expenses**: Net expense of approximately $8 million  **[SMCI_3381574_4]** .
    7. **Tax Rate**: GAAP -2.9%, Non-GAAP 2.6%  **[SMCI_3381574_4]** .
    8. **Fully Diluted Share Count**: GAAP 64.8 million, Non-GAAP 65.3 million  **[SMCI_3381574_4]** .
    9. **CapEx**: $55 million to $65 million  **[SMCI_3381574_4]** .
  - **FY 2024**:
    1. **Revenues**: $14.7 billion to $15.1 billion  **[SMCI_3381574_4]** .
    2. **GAAP Net Income per Diluted Share**: $21.61 to $22.46  **[SMCI_3381574_4]** .
    3. **Non-GAAP Net Income per Diluted Share**: $23.29 to $24.09  **[SMCI_3381574_4]** .
    4. **Tax Rate**: GAAP 3.6%, Non-GAAP 9.2%  **[SMCI_3381574_4]** .
    5. **Fully Diluted Share Count**: GAAP 61.2 million, Non-GAAP 61.8 million  **[SMCI_3381574_4]** .

### Q2 2024 Earnings Call
- **Issued Period**: Q2 2024
- **Guided Period**: Q3 2024 and FY 2024
- **Guidance**:
  - **Q3 2024**:
    1. **Net Sales**: $3.7 billion to $4.1 billion  **[SMCI_3371108_5]** .
    2. **GAAP Diluted Net Income per Share**: $4.79 to $5.64  **[SMCI_3371108_5]** .
    3. **Non-GAAP Diluted Net Income per Share**: $5.20 to $6.01  **[SMCI_3371108_5]** .
    4. **Gross Margins**: Expected to be slightly lower  **[SMCI_3371108_5]** .
    5. **GAAP Operating Expenses**: $201 million, including $39 million in stock-based compensation  **[SMCI_3371108_5]** .
    6. **Other Income and Expenses**: Net expense of approximately $9 million  **[SMCI_3371108_5]** .
    7. **Tax Rate**: GAAP 13.8%, Non-GAAP 15.8%  **[SMCI_3371108_5]** .
    8. **CapEx**: $18 million to $21 million  **[SMCI_3371108_5]** .
    9. **Fully Diluted Share Count**: GAAP 60.1 million, Non-GAAP 61 million  **[SMCI_3371108_5]** .
  - **FY 2024**:
    1. **Revenue**: $14.3 billion to $14.7 billion  **[SMCI_3371108_5]** .
    2. **CapEx**: $105 million to $115 million  **[SMCI_3371108_5]** .

6e5c55f9d00b62086d764ba1a08a7ddf6af48a76926b8256af0534dce6b05e43

| Name         | Position                                                      | Start Date    | Short Bio                                                                                                                                                                                                 |
|--------------|---------------------------------------------------------------|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Charles Liang| President, CEO, and Chairman of the Board                     | Sep 1993      | Charles Liang **founded Super Micro Computer, Inc.** and has served as its **President, Chief Executive Officer, and Chairman of the Board since the company's inception in September 1993**. He has over three decades of experience in server and storage system architectures  **[0001375365-23-000036_smci-20230630.htm:143]** **[0001375365-23-000046_smci-20231207.htm:8]** **[0001375365-23-000024_proxystatement2022.htm:6]** . |
| David Weigand| Senior Vice President, CFO, and Chief Compliance Officer      | Feb 2021 (CFO), May 2018 (CCO) | David Weigand has served as the **Senior Vice President, Chief Financial Officer** since **February 2021** and as **Chief Compliance Officer** since **May 2018**. He has held various positions at Hewlett Packard Enterprise and Silicon Graphics International, Inc.  **[0001375365-23-000036_smci-20230630.htm:143]** . |
| Don Clegg    | Senior Vice President of Worldwide Sales                      | Apr 2006      | Don Clegg serves as the **Senior Vice President of Worldwide Sales** at Super Micro Computer, Inc. since **April 2006**. He has held various senior sales and marketing roles and started his career as a Design Engineer  **[0001375365-23-000036_smci-20230630.htm:143]** . |
| George Kao   | Senior Vice President of Operations                           | Oct 2016      | George Kao serves as the **Senior Vice President of Operations** at SMCI since **October 2016**. He was previously the Vice President of Operations at Pericom Semiconductor Corp.  **[0001375365-23-000036_smci-20230630.htm:143]** **[0001375365-22-000103_smci-20220630.htm:147]** . |
| Sara Liu     | Co-Founder, Senior Vice President, and Director               | Sep 1993      | Sara Liu **co-founded Super Micro in September 1993** and has been a member of the Board since its inception. She has held various positions, including Treasurer and Senior Vice President of Operations  **[0001375365-23-000036_smci-20230630.htm:144]** **[0001375365-23-000046_smci-20231207.htm:6]** **[0001375365-23-000024_proxystatement2022.htm:8]** . |

8f278893baf3ea31b599bad4294d3ae29b53b44e0f610aea3c6041e037f512f6

**Quarterly guidance for Q2 2025:**
- **Net Sales**: $5.5B to $6.1B  **[SMCI_3405841_3]**  (lowered from $6B to $7B  **[SMCI_3396683_5]** **[SMCI_3396683_2]** )  
- **Gross Margin**: Decrease by 100 basis points sequentially  **[SMCI_3405841_3]**  (lowered from “expected improvement”  **[SMCI_3396683_5]** )  
- **Operating Expenses**: Increase by approximately $34M sequentially  **[SMCI_3405841_3]**  (raised from $282M  **[SMCI_3396683_5]** )  
- **Other Income and Expense**: Net expense of approximately $7M  **[SMCI_3405841_3]**  (lowered from net expense of approximately $20M  **[SMCI_3396683_5]** )  
- **GAAP Net Income per Diluted Share**: $0.48 to $0.58  **[SMCI_3405841_3]**  (lowered from $5.97 to $7.66  **[SMCI_3396683_5]** )  
- **Non-GAAP Net Income per Diluted Share**: $0.56 to $0.65  **[SMCI_3405841_3]**  (lowered from $6.69 to $8.27  **[SMCI_3396683_5]** )  
- **Tax Rate**: GAAP 14%, Non-GAAP 15%  **[SMCI_3405841_3]**  (raised from GAAP 9.9%, Non-GAAP 14.6%  **[SMCI_3396683_5]** )  
- **Diluted Share Count**: GAAP 640M, Non-GAAP 648M  **[SMCI_3405841_3]**  (raised from GAAP 65M, Non-GAAP 66M  **[SMCI_3396683_5]** )  
- **Stock-Based Compensation Expense**: $54M, with $14M excluded from non-GAAP net income per share  **[SMCI_3405841_3]**  (lowered from $84M  **[SMCI_3396683_5]** )  

76d3bbfbbcc9aa84c073044a322a8915fe7a95087d52fc774d08489b2c018ce2

| Name                | Start Date         | End Date         | Reason for Change                                                                                                                                                     |
|---------------------|--------------------|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| BDO USA, P.C.       | November 18, 2024  **[0001375365-24-000040_smci-complianceplanpressre.htm:0] [0001375365-24-000040_smci-20241118.htm:1]**  | Present      | Current auditor.                                                                                                                                                 |
| Ernst & Young LLP   | Fiscal year ending June 30, 2024  **[0001375365-23-000023_smci-20230309.htm:1]**  | October 24, 2024  **[0001375365-24-000036_smci-20241024.htm:1]**  | Resigned due to concerns about governance, transparency, completeness of communications, and internal control over financial reporting.  **[0001375365-24-000036_smci-20241024.htm:1]**                           |
| Deloitte & Touche LLP | N/A                | Fiscal year ending June 30, 2023  **[0001375365-23-000023_smci-20230309.htm:1]**  | The Audit Committee decided to engage a new independent registered public accounting firm. No disagreements or reportable events occurred during the relevant periods.  **[0001375365-23-000023_smci-20230309.htm:1]**  |

e89fd75c061aac16926538a60679a205da033dae030c3eea40cb0a717835c5a9

166797388cce75598d1283c73fe8419c6614488170de43253c7e08289d4591e7

b4cdd14d41f79d067bb41db82d67f4f851a71fa87d2bfc7d41b7761c771173f8

- **High Inventory Levels Pose Financial Risk**: The company reported holding $5 billion in inventory and expects to maintain this level as it continues to grow  **[SMCI_3405841_8]** . If demand slows, this high inventory could lead to financial strain due to potential write-downs or cash flow issues.
- **Uncertainty from Delayed Auditor Appointment and Lack of Annual Guidance**: The company has not provided an update on appointing a new auditor, stating, "we have no update with respect to the time line"  **[SMCI_3405841_8]** **[SMCI_3405841_13]** . Additionally, they are not providing annual guidance for fiscal year 2025, which may create uncertainty about future performance  **[SMCI_3405841_5]** .
- **Corporate Governance Concerns Over Combined CEO and Chairman Roles**: Analysts have expressed that separating the CEO and Chairman roles could benefit the company. The CEO acknowledged the consideration but offered "no comment at this moment" on plans to separate the roles, potentially indicating governance risks  **[SMCI_3405841_13]** .

a0eb2f1b0da9aee8ad892fd00b92bee11b5347ba37ea9def7fb7d37f34844450

1. **Revenue Guidance & Chip Availability**  
   **Q:** When will Blackwell revenue start impacting guidance?  
   **A:** Charles Liang explained revenue was impacted as customers await new chips, particularly NVIDIA's Blackwell. They expect growth once these chips become available, possibly starting in Q1 as volumes improve. However, they are not providing annual guidance currently.  **[SMCI_3405841_5]** **[SMCI_3405841_7]** **[SMCI_3405841_11]** 

2. **Gross Margin Outlook**  
   **Q:** Will gross margins improve this fiscal year?  
   **A:** Management is cautiously guiding margins but aims to improve them despite competitive pressures. With new technologies like Blackwell, they are optimistic about growing margins toward their target of **14–17%**.  **[SMCI_3405841_6]** **[SMCI_3405841_9]** **[SMCI_3405841_12]** 

3. **Financial Filings & Auditor Status**  
   **Q:** What's the status of audited filings and auditor replacement?  
   **A:** The company is diligently working to replace their auditor and will file a plan with NASDAQ for an extension. They have no updates on the timeline but are focused on resolving the issue promptly.  **[SMCI_3405841_8]** **[SMCI_3405841_14]** 

4. **Inventory Levels & Cash Flow**  
   **Q:** How are inventory levels affecting cash flow?  
   **A:** Inventory remains high at **$5 billion** to support anticipated growth. As growth normalizes, they expect improved cash flow, evidenced by an improved operating cash flow of about **$1 billion** this quarter, driven by better working capital management.  **[SMCI_3405841_8]** **[SMCI_3405841_17]** **[SMCI_3405841_18]** 

5. **Management Changes**  
   **Q:** Any plans for management or operational changes?  
   **A:** Charles Liang stated they continuously add senior management as the company grows rapidly. They are open to changes benefiting shareholders, including possibly separating Chairman and CEO roles in the future.  **[SMCI_3405841_6]** **[SMCI_3405841_14]** 

6. **Customer Concentration**  
   **Q:** Are there significant 10% customer exposures?  
   **A:** The company acknowledged having 10% customers but did not disclose specifics. They are gaining new customers, especially in Europe and Asia, to maintain a healthy customer mix.  **[SMCI_3405841_13]** 

7. **Relationship with NVIDIA**  
   **Q:** Is NVIDIA supply affected by filing issues?  
   **A:** Charles Liang affirmed their strong, decades-long relationship with NVIDIA, expecting no negative impact on allocations. NVIDIA confirmed no changes, and they continue close collaboration on new technologies.  **[SMCI_3405841_17]**  

8. **Capacity Utilization**  
   **Q:** How is capacity utilization tracking?  
   **A:** They have expanded capacity in Silicon Valley, Taiwan, and Malaysia to support future growth. Currently, utilization is about **50%**, awaiting new chip availability, but they are prepared for increased demand.  **[SMCI_3405841_19]** 

9. **Access to Capital**  
   **Q:** How should we view your access to capital?  
   **A:** With strong profitability, they raised **$4 billion** in the past 8–9 months, ensuring good working capital. They foresee no impediments to raising additional capital if needed.  **[SMCI_3405841_10]** **[SMCI_3405841_21]** 

10. **Liquid Cooling Solutions**  
    **Q:** Is there more efficiency in liquid cooling supply chain?  
    **A:** They are ahead in liquid cooling, having shipped over **2,000 racks** with positive customer feedback. They expect liquid cooling to continue growing rapidly and remain a major advantage.  **[SMCI_3405841_15]** **[SMCI_3405841_18]** 

95d27c55b85a5403667a83d57c8cc1d47f6a8f22a660452b46af164c4a1f9b3f

- **Ambitious Growth Plans**: SMCI aims to grow **3x to 5x faster than the industry's average**, driven by strong demand in AI and their ambitious plans to become the number one vendor.  **[SMCI_3381574_17]** ,  **[SMCI_3381574_16]** ,  **[SMCI_3381574_10]** ,  **[SMCI_3381574_9]**
- **Leadership in Liquid Cooling Technology**: The company is preparing to deliver over **1,000 liquid-cooled racks** in Q4, with in-house designed components that can help customers save up to **40% in energy costs**, positioning SMCI strongly in the AI server market.  **[SMCI_3381574_5]** ,  **[SMCI_3381574_10]** ,  **[SMCI_3381574_15]** ,  **[SMCI_3381574_8]**
- **Strong Backlog and New Product Pipeline**: SMCI has a **record high backlog** and expects strong sequential growth, fueled by new products supporting the latest NVIDIA and AMD GPUs, with leadership confident that this strong growth will continue for **many quarters, if not many years**.  **[SMCI_3381574_16]** ,  **[SMCI_3381574_9]** ,  **[SMCI_3381574_8]**

82963f29c96dd66007eee0149447ec14bea5d72aa778d7633f31474be522d21a

- **Super Micro is experiencing strong demand exceeding supply**, and is actively increasing capacity to meet this demand, indicating potential for accelerated growth. Charles Liang stated, "Indeed, the demand is still stronger than supply. So if we have more supply, we will be able to ship more."  **[SMCI_3371108_6]**
- **The company is leveraging economies of scale and automation to grow quickly and efficiently**, which should enhance operational margins and overall EPS. Charles Liang mentioned, "So when our economy of scale grow, we leverage automation system, again, for sales, for operation and for service. And that's why, I mean, we are in a good position to continue growing quickly."  **[SMCI_3371108_19]**  He also emphasized, "we need economies of scale because economies of scale are very important to our operation margin and overall EPS. So yes, we are ready to grow much quicker."  **[SMCI_3371108_18]**
- **Super Micro is winning new customers and expanding within existing ones**, focusing on market share gains even at the expense of short-term margins, which may lead to long-term profitability. As David Weigand stated, "we are growing really quickly. And then -- and in order to do that, in order to take market share, we will take opportunities by being more competitive on pricing."  **[SMCI_3371108_8]**

3e078322530fd987bbc1f3755b7988e65fbe5aab1dc48a49ba91860b48f0a465

1. **Gross Margin Outlook**  
   **Q:** How are you balancing market share gains with profitability?  
   **A:** Management acknowledges a step-down in gross margin due to competitive pricing to win new customers, aiming to maximize shareholder value by increasing **volume** and **EPS** through tight control of operating expenses. While they set a target gross margin range of **14% to 17%** back in March 2021, they are evaluating this range monthly to ensure what's best for shareholders.  **[SMCI_3371108_8]** **[SMCI_3371108_12]** **[SMCI_3371108_13]** 

2. **Supply Constraints Impacting Growth**  
   **Q:** Are supply constraints affecting revenue guidance and growth?  
   **A:** **Demand is still stronger than supply**, limiting shipment capacity despite improvements. The backlog is growing, and management remains somewhat conservative in guidance due to ongoing supply constraints.  **[SMCI_3371108_6]** **[SMCI_3371108_9]** 

3. **Future Growth Drivers**  
   **Q:** What gives confidence in growth beyond this year?  
   **A:** Growth confidence stems from continued strong demand in generative deep learning and increasing opportunities in **inferencing** across various verticals, including private cloud and edge AI. Positive feedback from customers supports sustained growth.  **[SMCI_3371108_11]** **[SMCI_3371108_16]** 

4. **Customer Concentration**  
   **Q:** Are the top revenue-contributing customers the same as before?  
   **A:** The largest customer, contributing **26%** of revenue, is the same as before. The **11%** customer is a long-term customer reaching this level for the first time. Customer contributions can vary, and increasing total revenue aims to diversify the customer base across large, medium, and small customers.  **[SMCI_3371108_10]** **[SMCI_3371108_15]** 

5. **Capital Requirements and Financing**  
   **Q:** Do you need more external financing to support growth?  
   **A:** The company is exploring financing options to support growth while minimizing equity dilution. **Working capital needs are increasing** due to growth, with inventory growing over **$1 billion**, necessitating additional capital.  **[SMCI_3371108_20]** 

6. **Cash Conversion Cycle and Working Capital**  
   **Q:** How will growth affect cash conversion cycle and working capital?  
   **A:** Rapid growth requires more working capital, affecting cash flows. Timing of inventory receipts and shipments can impact metrics. Strong demand in the March quarter suggests a strong quarter ahead.  **[SMCI_3371108_22]** **[SMCI_3371108_23]** 

7. **Liquid Cooling Adoption**  
   **Q:** When will liquid cooling become significant?  
   **A:** While current systems at **600–700 watts per module** are manageable with air cooling, liquid cooling becomes critical at **1,000 watts and above**. Customers' data centers need more time to be ready, but the company is prepared to ramp up when demand increases.  **[SMCI_3371108_7]** **[SMCI_3371108_14]** 

8. **OpEx Growth and Economies of Scale**  
   **Q:** Will operating expenses rise as you grow bigger?  
   **A:** The company leverages automation in sales, operations, and service to achieve **economies of scale**, allowing continued growth without proportional increases in operating expenses.  **[SMCI_3371108_19]** 

9b3cabbb8a669f2585f39f36833b82d51ca7331ec30e3abc324ce69618f716c5

- **Strong Revenue Growth and Record Backorders:** Super Micro Computer (SMCI) forecasts fiscal 2025 revenue between **$26 billion to $30 billion**, nearly doubling from fiscal 2024 revenue of $14.94 billion, driven by new design wins and increasing customer demand.  **[SMCI_3396683_15]** **[SMCI_3396683_2]** **[SMCI_3396683_7]**
- **Expansion into High-Growth AI Infrastructure Market with Advanced Solutions:** SMCI is launching its **Datacenter Building Block Solutions (DCBBS)** to reduce data center build time and improve customers' time to online, and is expanding manufacturing capacity with a new Malaysia campus starting production in November. Their expertise in **Direct Liquid Cooling (DLC)** positions them well in the AI infrastructure market, with customers increasingly adopting their liquid cooling solutions.  **[SMCI_3396683_2]** **[SMCI_3396683_24]** **[SMCI_3396683_16]** **[SMCI_3396683_17]** **[SMCI_3396683_10]**
- **Expected Improvement in Margins and Operational Efficiency:** While gross margins faced short-term pressure, SMCI anticipates margins to **return to normal range before the end of fiscal year 2025** as DLC solutions mature and manufacturing efficiencies improve. They are leveraging their balance sheet and have secured a **$500 million credit line** to support growth.  **[SMCI_3396683_2]** **[SMCI_3396683_5]** **[SMCI_3396683_16]** **[SMCI_3396683_20]** **[SMCI_3396683_10]**

50b2debcfe0ef0df7337e6153fb4df5d97a3233c6d0c3ee05bf195c2584718d8

1. **Revenue Guidance and Assumptions**  
   **Q:** What's driving the $26-30B revenue guidance?  
   **A:** The company is seeing continued design wins, especially with new products like **DLC liquid cooling** and **Datacenter Building Block Solutions**, leading to increased customer engagement. With growing capacity, they target **$26-30 billion** in revenue over the next 12 months. They believe these offerings will gradually improve profitability.  **[SMCI_3396683_7]** 

2. **Gross Margin Outlook**  
   **Q:** How will gross margins improve this year?  
   **A:** The gross margin decline in June was unique due to deploying many liquid cooling solutions and paying expedite costs. Now, with mature liquid cooling technology and higher volumes, costs are down. They aim to promote liquid cooling as mainstream without significant price increases, focusing on market share growth. They expect to be above **12%** gross margin in Q1 and are working hard to return to their target range quickly.  **[SMCI_3396683_7]** **[SMCI_3396683_18]** 

3. **Impact of NVIDIA Blackwell Delay**  
   **Q:** How will NVIDIA's Blackwell delay affect revenue?  
   **A:** They've conservatively accounted for potential delays in NVIDIA's Blackwell GPUs. No significant Blackwell volume is expected in Q3, and only small volumes in Q4. Real volume is anticipated in the **March quarter** next year. This is why they set guidance at **$26-30 billion**, believing the overall impact will not be significant due to strong demand for their **H100** and **H200** liquid cooling solutions.  **[SMCI_3396683_9]** **[SMCI_3396683_13]** 

4. **Liquid Cooling Market Share**  
   **Q:** What's your liquid cooling competitive position?  
   **A:** In **June and July**, they shipped over **1,000 racks**, accounting for more than **15%** of global data center deployments. They believe they held at least **70-80%** market share in liquid cooling during this period. Their solutions help customers save energy costs and reduce carbon footprint, requiring **30-40%** less power and accelerating data center availability.  **[SMCI_3396683_11]** 

5. **Capacity Expansion for Liquid Cooling**  
   **Q:** How is rack capacity expanding for liquid cooling?  
   **A:** Last month, their liquid cooling capacity was about **1,000 racks per month**. They've increased it by **50%** to **1,500 racks per month** today and plan to expand to **3,000 racks per month** by year-end. They see strong customer interest and believe liquid cooling is a superior market choice.  **[SMCI_3396683_11]** 

6. **Funding and Working Capital Needs**  
   **Q:** Will you need additional funding for growth?  
   **A:** They've secured a **$500 million** credit line led by Bank of America and are leveraging their balance sheet. They expect to announce additional loan opportunities in the future to support working capital needs, especially with liquid cooling deployments and preparations for Blackwell.  **[SMCI_3396683_16]** 

7. **Shift to Hyperscale Customers**  
   **Q:** Are you entering the hyperscale market?  
   **A:** Yes, with increased capacity in Taiwan and upcoming capacity in Malaysia, they're ready for large-scale data center customers but will be selective. They aim to grow both enterprise and large-scale segments to maintain healthy profitability, reflected in their **$26-30 billion** revenue forecast.  **[SMCI_3396683_15]** 

8. **Pricing Strategy for Liquid Cooling**  
   **Q:** Why not pass liquid cooling costs to customers?  
   **A:** They view liquid cooling as delivering significant value through energy savings. While necessary for high-power solutions like Blackwell, they're enabling it for **H100**, **H200**, and CPUs. They aim to promote it as mainstream without significant cost increases to customers, focusing on market share growth.  **[SMCI_3396683_17]** 

9. **Cash Flow and Capex**  
   **Q:** Will you burn more cash to hit targets?  
   **A:** Not necessarily. If they aggressively exceed the **$26-30 billion** guidance, they might need more cash. However, they believe they can focus on growth without burning another **$2.5-2.6 billion** in free cash flow. They're leveraging their balance sheet more with unsecured debt to assist on an inter-quarter basis.  **[SMCI_3396683_20]** 

10. **DLC Failure Rates vs. Air Cooled**  
    **Q:** How do DLC failure rates compare to air cooled?  
    **A:** They emphasize that their optimized liquid cooling allows components to run at lower temperatures, enhancing data center performance and uptime. While not directly comparing failure rates, they highlight the benefits of lower operating temperatures with DLC.  **[SMCI_3396683_21]** 

c06dd2f1a51e90526aaebea93827fb2362a2e9c1d0b38e5ba7f811c5c8c3bff0

- **Strong growth in liquid cooling solutions**, with **over 2,000 liquid-cooled racks shipped in recent months**  **[SMCI_3405841_16]** . Customer feedback is very positive, with **quality and satisfaction even better than traditional solutions**  **[SMCI_3405841_16]** . Supermicro's investment in liquid cooling over the past three years is paying off, providing a **major advantage in end-to-end data center solutions**  **[SMCI_3405841_16]** **[SMCI_3405841_14]** .
- **Robust partnership with NVIDIA**, with a relationship spanning multiple decades  **[SMCI_3405841_15]** . Supermicro expects no negative impacts on supply or allocations from NVIDIA due to auditor issues, and communication remains **very positive**  **[SMCI_3405841_15]** . As NVIDIA's new chips become available, Supermicro anticipates a **good percentage in their product mix**, enhancing growth prospects  **[SMCI_3405841_15]** .
- **Financial strength and access to capital**, having raised **$4 billion into working capital** from two equity raises and one convertible in the last 8-9 months  **[SMCI_3405841_10]** . Supermicro exited Q4 at a **run rate of around $6 billion**  **[SMCI_3405841_10]** . The company continues to make a **reasonable good net profit every quarter**, leaving them in **good shape** with no impediments to raising working capital  **[SMCI_3405841_10]** .

7e8b09eff8dc6952c21f52ec606c6004e2a832557f8aeee49836cc2d23f1f575

- **Significant customer concentration poses risks**, as **two customers accounted for 26% and 11% of total revenues**, respectively, in Q2 2024.  **[SMCI_3371108_15]**  The loss or reduction in orders from these major customers could materially impact the company's revenue.
- **Decreasing gross margins due to aggressive pricing strategies** may affect profitability. The company acknowledged that gross margins have moderated and they are being more competitive on pricing to gain market share.  **[SMCI_3371108_13]** **[SMCI_3371108_8]**
- **Increasing working capital requirements and potential need for external financing** could strain financial stability. Rapid growth is consuming cash, and the company may seek additional funding sources, which could include debt or equity financing.  **[SMCI_3371108_20]**

109f1cf459d688e61ee68c599e16ea387a390903c27f5f0f658ede291e1b0c76

- **Customer concentration risk:** One existing customer represented **21%** of Q3 revenues, and another represented **17%**, indicating heavy reliance on a few large customers.  **[SMCI_3381574_12]** ,  **[SMCI_3381574_8]**
- **Cash flow challenges and need for additional capital:** The company experienced significant cash burn due to increased inventory and accounts receivable, using **$1.5 billion** in cash from operations in Q3. Management indicated the need for more capital to support ambitious growth plans.  **[SMCI_3381574_17]** ,  **[SMCI_3381574_16]** ,  **[SMCI_3381574_13]** ,  **[SMCI_3381574_8]**
- **Pressure on gross margins due to competition and pricing:** The company expects gross margins to decline sequentially, partially due to aggressive pricing to win market share and increased competition in the AI server market. The target gross margin range remains **14% to 17%**, but margins may be under pressure.  **[SMCI_3381574_11]** ,  **[SMCI_3381574_7]** ,  **[SMCI_3381574_15]**

3c454f662be9b0650ad0d83c8f5f54d43e16f387135ec9eb04eb13effcf5b806

- **Gross margins declined by 430 basis points sequentially** in Q4, from 15.6% in Q3 to **11.3%**, due to customer mix and higher costs associated with ramping liquid cooling solutions; margins are only expected to return to target range by fiscal year-end, indicating ongoing profitability challenges.  **[SMCI_3396683_10]** **[SMCI_3396683_18]**
- Supply chain bottlenecks and component shortages caused **$800 million of revenue to be pushed into the next quarter**, highlighting potential risks to revenue growth due to supply constraints.  **[SMCI_3396683_10]**
- The company is aggressively promoting liquid cooling solutions without passing on costs to customers to gain market share, which may lead to **continued margin pressure** and impact profitability.  **[SMCI_3396683_18]** **[SMCI_3396683_17]**

2fcf9e00a211b9fcdea88ab1b05adb3ab0f707b7164b1748e4fa78d1634443a9

Super Micro Computer Inc (SMCI)

Financials