Super Micro Computer Inc at Citi Global TMT Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Asiya Merchant - Citi - Analyst : Okay. I'll be leading most of the Q&A. And towards the end, we can have it open for investor Q&A. (Operator Instructions) So Mike, thanks again. First question we're pretty much asking all the companies here is just about end demand. You kind of alluded to that right now in your opening remarks as well about the ambitious demand outlook that you guys have. Maybe just given you guys recently reported, how would you characterize the demand environment and how Super Micro is positioned relative to that demand?

Question: Asiya Merchant - Citi - Analyst : Okay. And then just given your market positioning, clearly, AI is the one that's driving the bulk of your demand, the majority of your demand outlook above the industry what do you -- how do you think about your market share positioning relative to your peers?

Question: Asiya Merchant - Citi - Analyst : Okay. And just the conversations that you guys are having with your end customers. What are they focused on? Maybe just relative to where you -- when you report it, how confident are you in those conversations?

Question: Asiya Merchant - Citi - Analyst : And again, as it relates to end demand, I think there's just a lot of concern. Is this sustainable or not sustainable? Just based on your conversations with your customers, what gives you the confidence that this outlook that you guys provided for your next fiscal year remains well on track?

Question: Asiya Merchant - Citi - Analyst : Okay. How do you think about drivers between pricing and volume as you -- as we go through these chip transitions from your major chip suppliers. Do you view that as a pricing opportunity or as a volume opportunity?

Question: Asiya Merchant - Citi - Analyst : Yes. The first-to-market is generally what Super Micro is known for. That's fair enough. With talking about which -- I mean, I think you guys talked about it a little bit on your last earnings call is about the Blackwell delays and how we should think about that as it relates to your business and the revenue ramp ahead with the Blackwell?

Question: Asiya Merchant - Citi - Analyst : Okay. Well, how would you characterize the current supply environment then for these GPUs?

Question: Asiya Merchant - Citi - Analyst : Okay. And on the DLC-specific, I think you just talked about it? The supply and DLC still pretty tight or it's improved?

Question: Asiya Merchant - Citi - Analyst : Yes. Maybe if you can dive a little bit into your competitor -- your competitive advantage and you talk about the modular approach. Some of the other competitors, peers also talk about something similar. So maybe if you can just -- how you guys think about Super Micro's moat as it relates to -- you talked about speed to market, you talk about this modular building. How you guys differentiate yourself from some of your peers on that one?

Question: Asiya Merchant - Citi - Analyst : Okay. So by that you mean storage and --

Question: Asiya Merchant - Citi - Analyst : Okay. Maybe on DLC, just remind investors where you are from a capacity standpoint? And as it relates to, like you mentioned, these Blackwell variants that might be there, there's some chatter that maybe the NVL36 might be preferred, which tends to be more air cooled versus liquid cooled. How does that kind of factor into your outlook for DLC?

Question: Asiya Merchant - Citi - Analyst : Direct liquid cooling. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:20PM, SMCI.OQ - Super Micro Computer Inc at Citi Global TMT Conference

Question: Asiya Merchant - Citi - Analyst : How do you measure where you are relative to your competitors on the liquid cooling and direct liquid cooling format? Is there like some industry standard that you compare yourself to what your peer offerings are. And therefore, you say, okay, you're the leader when it comes to --

Question: Asiya Merchant - Citi - Analyst : Okay. Great. One of the concerns generally as it relates to OEMs in this market is AI, maybe a lot of the primary growth of AI hyperscalers is being supported by ODMs in Taiwan. When you compare yourself to proxy ODMs, where is Super Micro's competitive advantage specifically? And as you talk about gaining share in this AI TAM, how do you think Super Micro is positioned in terms of gaining share there?

Question: Asiya Merchant - Citi - Analyst : Okay. Speaking of customer concentration, can you maybe help us understand what your current customer composition is, what does customer concentration look like today? And as you're talking about inferencing, how do you see that customer concentration -- customer composition are evolving?

Question: Asiya Merchant - Citi - Analyst : What is your current market share with these enterprises? Are you able to share that? Or...

Question: Asiya Merchant - Citi - Analyst : Great. Just going to ask if anybody here in the audience has any questions, please raise your hand. Okay. I will say more that I'll be talking about then -- margins. Top of mind for everybody. Is AI, how detrimental is it to corporate average margins? I know you guys talked about it at your last earnings call. So maybe you can just remind investors what happened there and how you guys are thinking about as your direct liquid cooling ramps. How you guys are thinking about margins there?

Question: Asiya Merchant - Citi - Analyst : And just as investors kind of think about your ramp there for direct liquid cooling, and just if you can expand a little bit on that, like what is that scale that you're referring to that direct liquid cool needs to be as a percentage of your business before perhaps you get back to corporate average here?

Question: Asiya Merchant - Citi - Analyst : As it relates to penetration of liquid cooling as we start to go down more and more of this path, what are some obstacles for data centers to get more? Is it space, obviously, it seems like there's a lot of architecture that has to be redone within data centers to enable direct liquid cooling. And what we hear is there's not -- people aren't there yet. So what else needs to happen?

Question: Asiya Merchant - Citi - Analyst : Okay. Any other questions here from the audience? Okay. Working capital, free cash flow conversion. If you can talk a little bit about that, there's been some concerns around that?

Question: Asiya Merchant - Citi - Analyst : Okay. All right. And maybe if I can just double-click again on liquid cooling because I still do get this question. Aside from, obviously, the GPU side of things, what other things have to happen in order to maybe like increase the penetration and kind of go more your way of more liquid cooling systems versus going back to maybe air cooling or is it a GPU thing? Is it...

Question: Asiya Merchant - Citi - Analyst : Is it a component?

Question: Asiya Merchant - Citi - Analyst : Okay. Any other questions here? We have one. Unidentified Participant I guess one question that I had is a lot of the at least ODMs in Taiwan are talking about the Blackwell series being slightly lower margin, even though it's significantly higher ASP. And I guess -- I know you guys aren't exactly well on ODMs and your value add is much higher just given the design. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:20PM, SMCI.OQ - Super Micro Computer Inc at Citi Global TMT Conference But can you talk about just do you -- to the extent you guys like have firm orders or have conversations around that and having able to sort of map out what you think your ASPs are versus your costs are, where you think you see margin for just the Blackwell series going? And I guess on top of that, how much more sort of design and I guess, thought has gone into the NVL36s and the 72s from NVIDIA versus, I guess, like the DGX Hopper series?

Question: Asiya Merchant - Citi - Analyst : All right. Maybe as we wrap it up here, Mike, what do you think is underappreciated by the investment community about Super Micro?