Super Micro Computer Inc at Goldman Sachs Communacopia & Technology Conference Transcript

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

Question: Michael Ng - Goldman Sachs - Analyst : To start things out, maybe we can start with the bigger picture question. Super Micro clearly has had a tremendous amount of success with the class of customers, which many refer to as cloud or AI CSPs. Could you talk a little bit about what has made Super Micro a partner of choice for these customers? How does Super Micro drive differentiation relative to some of the OEM server competitors?

Question: Michael Ng - Goldman Sachs - Analyst : And you've talked about speed to market as one of the many competitive advantages for Super Micro, could you just discuss why Super Micro has had a history of being first to market with these new technologies. What is it about the engineering or the company's history that supported these competitive advantages? And do you worry that some of these advantages may be dampened over time just as the competition intensifies, right? Dell is somebody who comes top of mind when I think about that.

Question: Michael Ng - Goldman Sachs - Analyst : And maybe you could expand on that a little bit. Super Micro clearly has a long history of partnership with all the silica -- semiconductor companies, all the compute suppliers. How do you think Super Micro is positioned to perform in the next wave of innovation, whether that be Blackwell or Rubin or other chips from AMD and Intel. And what does that mean for the financial profile, if anything?

Question: Michael Ng - Goldman Sachs - Analyst : Yes. One other industry dynamic that I would like your thoughts on is just the shift to what feels like more reference design or closed system architectures. Is that a meaningful shift that you're seeing in this upcoming cycle versus prior ones? And does more of the design coming from your compute partners mean there's less value add and more potentially for somebody on the server side? 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 09, 2024 / 10:05PM, SMCI.OQ - Super Micro Computer Inc at Goldman Sachs Communacopia & Technology Conference

Question: Michael Ng - Goldman Sachs - Analyst : Great. And on the last earnings call, Super Micro provided guidance of $26 billion to $30 billion of revenue for fiscal '25. I was wondering if you could talk about the AI server demand environment that you're assuming to support that guidance. What gives you visibility and confidence into providing that outlook for fiscal '25?

Question: Michael Ng - Goldman Sachs - Analyst : And one thing that we all have to consider as we think about the server revenue outlook is how you're thinking about the generation of components and the timing of those components. So what are you assuming as it relates to the Blackwell chips in that outlook? What are the potential offsets to the extent that there's more copper demand if there is some sort of slowdown on the Blackwell side?

Question: Michael Ng - Goldman Sachs - Analyst : And we started out this fireside chat, talking a little bit about Super Micro's investments in liquid cooled servers that may have impacted margins a little bit last quarter for the guidance in the upcoming quarter. Could you talk a little bit about liquid cooling as a margin headwind and when and why does that get better? And while we're on the topic of gross margins, I think you also called out customer mix as an impact as well. So if you could touch on that, that would be great. 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 09, 2024 / 10:05PM, SMCI.OQ - Super Micro Computer Inc at Goldman Sachs Communacopia & Technology Conference

Question: Michael Ng - Goldman Sachs - Analyst : That's great. And maybe just on that. So it sounds like some of the expedite costs and initial efficiencies of liquid cooling will fall off. You're probably getting a little bit of operating leverage, and it seems like the production process is better. Is that what gives you confidence around the 14% to 17% long-term gross margin outlook? Why is that the right range? And maybe you can talk about why the gross margin trajectory should get better throughout the year?

Question: Michael Ng - Goldman Sachs - Analyst : Shifting gears and maybe talking about liquid cooled AI servers, Super Micro shipped, a bunch of liquid cool AI server racks last quarter. I don't think it's too controversial to say that it was the first to market to deliver something like that at scale. And Super Micro certainly talked about the strength in the market share there. Why is liquid cooling important even with copper-based AI servers? What portion of your sales are liquid cool today? And how big do you think that will get over time? 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 09, 2024 / 10:05PM, SMCI.OQ - Super Micro Computer Inc at Goldman Sachs Communacopia & Technology Conference

Question: Michael Ng - Goldman Sachs - Analyst : And just as a follow-up on that, maybe you can talk a little bit about Super Micro's liquid cooling design advantages relative to peers. Is it more in-house design and in-house sourcing, obviously, there are a lot of liquid cooling component companies out there that may sell to some of your competitors like what's different about a Super Micro liquid cooled AI server versus someone else's?

Question: Michael Ng - Goldman Sachs - Analyst : In response to a lot of the demand that Super Micro has been seeing, the company has been investing in production capacity expansion, including with the new facility in Malaysia. My understanding is that production in Malaysia is supposed to come online in November of this year. Could you talk a little bit about what that ramp in production looks like? And what's the best way to think about Super Micro's capacity, whether that be in revenue terms or rack terms, whatever you think would be most helpful for the audience here?

Question: Michael Ng - Goldman Sachs - Analyst : And just as a point of clarification, when we think about the 5,000 rack capacity and the 1,500 on liquid cool, is that including Malaysia? Or is that kind of the current today?

Question: Michael Ng - Goldman Sachs - Analyst : Okay. Got it. Could you touch on the working capital requirements and whether or not Super Micro potentially needs to raise more funding to support customer demand?

Question: Michael Ng - Goldman Sachs - Analyst : Let's talk a little bit about customer types. On the last earnings call, Super Micro had talked about being hyperscale ready. And I was wondering if you could just clarify where Super Micro's position is right now as it relates to hyperscale customers. I'll define those as the big four versus next-gen hyperscale companies, which are obviously this group of large and emerging group of CSPs.

Question: Michael Ng - Goldman Sachs - Analyst : I think it's been well publicized and reported on that Super Micro is one of the key AI server vendors for the xAI Memphis Supercluster, 100,000 GPU cluster, was xAI the 20% customer last quarter? Anything you could share about demand trends from that customer? And how would xAI be characterized when you think about the customer segmentation that Super Micro lays out?

Question: Michael Ng - Goldman Sachs - Analyst : We just have a couple of minutes left. I was wondering if you could end with a more big picture outlook, what are Super Micro's strategic priorities in the next three to five years? Do you expect Super Micro to look more like an ODM or an OEM or somewhere in between? 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 09, 2024 / 10:05PM, SMCI.OQ - Super Micro Computer Inc at Goldman Sachs Communacopia & Technology Conference

Question: Michael Ng - Goldman Sachs - Analyst : It's a wonderful place to cap off. It's been a privilege to be able to spend some time with you. Thank you so much, David.