Super Micro Computer, Inc. Q2 FY2020 Earnings Call

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer, Inc. Second Quarter Fiscal 2020 Earnings Conference Call. The company's news releases issued earlier today are available from its website at www.supermicro.com. As a reminder, this call is being recorded on Thursday, February 6, 2020. A replay of the call will be accessible until midnight on Thursday, February 20, 2020, by dialing 1-844-512-2921 and entering replay pin 9606207. International callers should dial in at 1-412-317-6671.

Good afternoon and thank you for attending Super Micro's financial results conference call for the second quarter of fiscal 2020, which ended December 31, 2019. By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available on the company's website. As a reminder, in today's call, the company will refer to a presentation that is available to participants in the Investor Relations team of the company's website under the Events & Presentations tab. We have also published management's scripted commentary on this quarter's results on our website. Before we start, I'll remind you that our remarks include forward-looking statements. There are a number of risk factors that could cause Super Micro's future results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our most recent 10-K filing for 2019 and other SEC filings. All of these documents are available on the Investor Relations page of Super Micro's website. We assume no obligation to update any forward-looking statements. Most of today's presentation will refer to non-GAAP financial results and outlook. For an explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release covered earlier today. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation. At the end of today's prepared remarks, we will have a Q&A session for sell-side analysts to ask questions.

Thank you, Kevin, and good afternoon, everyone. Over the last couple of years, Super Micro has been continuing our journey of becoming a strong global leader of server and storage solutions. We have added many new product lines and roughly doubled our operational capacity worldwide to build our products more efficiently and with high quality. Now Super Micro is the most complete company it has ever been, supporting enterprise customers and data centers with optimized solutions, plus management software and services, and providing our industry-best system building blocks to the channel. 'Better, faster and greener' is what our customers demand, and it's exactly what we deliver. Today is also an important milestone for our company as it is our first quarter after relisting on the NASDAQ Stock Exchange. We begin this new era for Super Micro, a stronger company with better financial and operational controls. Combined with the latest technology and total solutions for our customers, we are more optimistic than ever about our business opportunities ahead. I can confidently say that we are back, stronger and ready for growth. Before we discuss this quarter's results, let me remind our shareholders about what makes Super Micro unique in our industry. First, product innovation is our DNA. We are the only server and storage solutions provider with a majority of our engineering, product development, and final assembly based in the USA. With over 1,700 engineering staff, mostly in the heart of Silicon Valley and some worldwide, our dedicated engineering strength allows us to quickly offer the most advanced technology with the broadest range of products in our industry. We have capitalized on the industry convergence of cloud, artificial intelligence, and 5G from data center to edge. These emerging technologies enable businesses and industries to utilize the growing pools of data and data analytics. Super Micro's technology innovation DNA uniquely positions us to provide timely and optimized solutions to service these key high-growth markets. We are delivering world-class solutions for global enterprises. From the private to the public cloud, our enterprise data center solutions have been widely deployed around the world. As a certified provider of enterprise solutions from leading software applications, such as SAP, Oracle, and Red Hat to name a few, we offer complete, seamless solutions based on our hardware products, service, and firmware/software design capabilities. And finally, we are positioned to be one of the fastest-growing solution providers in the growing $100 billion server/storage market. Super Micro's growth strategy is based on our building block solutions business model, which configures solutions directly to enterprise companies, data centers, OEMs and also indirectly through the channel. We plan to discuss our business opportunities and strategy in more detail with investors at events later this year. Now turning to our Q2 results. Our second quarter net sales were $871 million, which exceeded the high end of our initial guidance and was up 9% sequentially, consistent with typical seasonal patterns. Sales were down 6.5% year-over-year, in large part, due to steep declines in component pricing. Our indirect or channel business grew to represent 51% of this quarter's revenue and grew both sequentially and year-over-year. This quarterly result follows our successful launch of improved channel partner programs. At the same time, our direct and OEM businesses also grew sequentially, with most of the growth coming from large enterprise accounts. Other than our current market focus, we are also enhancing our product offerings to hyperscale installations with highly optimized cloud DC and mega DC product lines. Here are some key product highlights. We saw growth for our Rackmounts and multiple node product lines in data centers. This quarter, Rackmounts grew sequentially primarily due to a strong growth in our Ultra platform, which was up 30% sequentially, and BigTwin, which grew over 20% quarter-on-quarter. Ramping of AMD products and some other new Intel processor-based systems will help continue this strong momentum. We saw sequential growth in accelerated computing and launched multiple new GPU-based product offerings. Our customers choose Super Micro GPU solutions over the competition because they provide the best pure performance with the fastest GPU interconnects and highest performance per dollar. Our 5G, Embedded and IoT solutions for edge computing, telco data centers, and appliances also grew, and we anticipate these product lines to grow significantly later this calendar year. We announced new additions for 5G cell tower deployments, leveraging fully configurable SuperServer to the edge, bringing standard x86 compute design to a traditional proprietary telco market. We also brought AI to the edge, combining ruggedized hardware and optimized software stacks to accelerate the most demanding AI workloads at the network edge. We continue to focus on our mission to lead the IT industry with Green Computing Solutions and resource-saving platforms, including the introduction of our first 12-year longevity power supply, a new part of the disaggregated architecture. With investor attention on ESG considerations, we anticipate increased demand for resource-saving solutions. Summarizing this quarter, we were pleased to see our revenue start to reaccelerate. We are also pleased to be able to move forward this quarter as a NASDAQ-traded public company. We will continue to focus on transforming server and storage technologies by building upon our robust engineering fundamentals. Super Micro is ready to provide the best products to customers who are demanding innovation, quality, lower TCO, and environmental-friendly solutions. I will now turn the call over to Kevin to review the results of the quarter in more detail.

Thank you, Charles. Our fiscal second quarter revenue was $871 million, exceeding the upper end of our prior guidance range. This reflects a 9% quarter-on-quarter increase from the first quarter of fiscal 2020 but a 6.5% decrease from the same quarter of last year. Systems comprised 77% of total revenue, and volumes of systems and nodes shipped were up sequentially and year-over-year. However, ASPs for systems fell due to declines in commodity component costs. Geographic performance was mixed on a challenging year-over-year comparison, with the U.S. up 3%, EMEA down 20%, and Asia 16% lower. On a sequential basis, the U.S. market continued to be our strongest market with sequential growth of 12%. However, this quarter, EMEA also grew sequentially, increasing by 12%. Asia had modest sequential growth with Taiwan, Korea and other Asia countries offsetting weakness in China. Working down the P&L, our gross margin on a GAAP and non-GAAP basis was 15.9%, 210 basis points higher than last year driven by lower key component costs as well as favorable customer, geographic, and product mix. Q2 operating expenses increased quarter-on-quarter and year-on-year, primarily due to higher employee costs, including higher R&D expenses, targeting new opportunities. We had a strong central urgency to get current with our SEC filings by including the fiscal '18, '19—and '19 10-K audit as well as the first quarter '20 10-Q review. We also completed a tax restructuring project on December 1, 2019, that resulted in a lower corporate tax rate of approximately 20% on a go-forward basis. Concluding these 3 projects increased G&A expenses by approximately $6.4 million in the December quarter compared to the September quarter of 2019. Other income and expenses were a $1 million loss compared to a $1 million gain last quarter, primarily related to the foreign exchange impact on our Taiwan dollar-denominated term loan. Our tax rate for this quarter was 8% on a GAAP basis and 12% on a non-GAAP basis, both of which benefited from a release of reserves following the conclusion of a tax audit in a foreign jurisdiction of $1.6 million. Lastly, our share of earnings in a joint venture was a $1 million loss this quarter compared to a $1 million gain in the previous quarter and a $1.8 million loss in the same quarter a year ago. Second quarter non-GAAP diluted earnings per share totaled $0.57 per diluted share compared to $0.68 last quarter and $0.66 last year. Cash flow generated from operations totaled $82 million. After deducting for CapEx and investments of $11 million, we generated free cash flow of $71 million. Our closing cash position was $309 million. This quarter, our cash conversion cycle was 80 days, which is below our target of 85 to 90 days. Days sales outstanding was 38 days. Days payable outstanding totaled 46 days, and inventory days was 87. In summary, we are pleased to see revenues reaccelerate. We are also pleased to be able to report this quarter as a NASDAQ-traded public company with stronger financial controls. Now turning to our outlook. The company expects net sales for the quarter ending March 31, 2020, in a range of $770 million to $830 million. In addition to typically weaker seasonal trends, we are increasingly cautious given the unfolding impacts of the coronavirus outbreak. Barring further significant disruption from the outbreak, we expect this quarter to represent a trough and see constructive trends fueling healthy year-over-year growth going forward. In particular, we are encouraged by a healthy customer pipeline supported by a number of technology refreshes and product cycles in the second half of calendar 2020. With regard to operating expenses, we will continue to invest in personnel to fuel growth. We are also aggressively remediating material weaknesses with the goal of full remediation by June 2020. Therefore, while OpEx will decline sequentially in the March quarter, it will grow sequentially in the June and September quarters due to the audit of our financials and testing of our remediation efforts. We expect audit and remediation costs to revert to normal levels after the September quarter. We also announced that we expect to incur additional charges of $35 million to $40 million in the third or fourth fiscal quarter that are one-time in nature. These one-time charges address residual cleanup matters from our extended blackout period. We are taking actions to address benefits that were not able to be realized by certain of our long-term and most dedicated key employees. Further, the Board is considering an additional retention bonus to certain employees. Lastly, our Board is considering appropriate forms of compensation for both of these matters. Regarding the use of cash through the rest of fiscal '20, we will apply cash to completing two buildings, one in San Jose and the other in Taiwan, which will be completed over two years. As I mentioned earlier, we expect higher than normal costs related to audit and remediation for several more quarters. Assuming this revenue range, we expect non-GAAP earnings per diluted share of approximately $0.35 to $0.55 for the quarter. And as a reminder, these one-time charges are not included in the non-GAAP EPS range. In closing, let me highlight an upcoming event for the financial community. We will be attending Susquehanna's 9th Annual Technology Conference in New York City on March 12. With that, I'll turn it back to Perry for Q&A.

Thank you, Kevin. I'd just like to remind shareholders who are listening in on the call, I understand that the audio may not have been very clear. At this point, I'll remind you that the transcript will be available on our website, in fact, is at this time. So if you had any questions understanding part of it, please refer to the transcript. Operator, we're now ready for questions.

Hi. Good afternoon. Thank you for taking my questions and congratulations on continued progress forward. This could be for both Charles and Kevin. Just starting with the revenue trajectory, you guys—there's two comments. Kevin, I believe you said Q-o-Q growth going forward, and then you also talked about, I think, in the second half of the year, a stronger R&D expense—I'm paraphrasing here but you see revenue opportunities. And the guide for the March quarter, it was 7% to 8% at the midpoint. So could you talk about how you'd like us to think about sequential revenue kind of tempo and trajectory in the coming quarters to the extent that you're comfortable? Just so we can get a sense of that. And then what some of those upcoming revenue opportunities are?

As we highlighted this quarter, we have costs—or caution a little bit with the coronavirus that is out there. What I tried to convey is that once we get through this quarter and say there are no residual effects of that, then we like what we see in terms of what our new customer pipeline looks like as well as knowing that the technology refreshes itself at the end of the year. And so we don't normally give a longer-term guidance, but just giving you a little bit of color for the investment community to results.

And that's the end of the calendar year?

Correct.

Got it. Great. And then just quickly on OpEx, if I could. You mentioned OpEx increasing in this—there's actually a couple of moving parts you sampled for the OpEx. You actually—magnitude of OpEx increasing. Well, you mentioned OpEx increasing in the second half of the year. Can you give us a sense, just for modeling purposes out of the gate year, how you'd like us to think about magnitude? And then I missed the part with regards to the audit costs. I think it's December quarter, it sounds like you're saying that normalizing. I just want to get a sense of what we—how we should expect impact on—when that rolls out as well or normalizes as well.

Yes. So let's first talk about our R&D investments. So we mentioned that we continue to invest in R&D for future products. Another one of the company's goals is to enhance our software capabilities. So some of that is really focused on software engineers. And we are signaling that we continue to invest here. As it relates to OpEx, I understand that certainly, as we really focused on getting compliance in this quarter, that $6.5 million is maybe not comprehended in your model. Therefore, I wanted to address that thing that, when we had our audited bookings concurrently on both '18, '19 as well as first quarter '20, we went through a peak, and that's why I tried to call that out. So that $6.4 million, I think it is safe to model that this will not occur in the March quarter. And so kind of, to reset your base, I'll keep that in mind, and then I was trying to give you the ecology of the way audits play thereafter. So therefore, we're going to be dealing in a lot of remediation activity internally. And then as funded by—we'll be working with the audit firm for our 2020 audit results as well as the intensity of their auditing our performance on internal control, hopefully, such that it would be remediated by 2020. So that's the shape that I tried to give you, a reset, including into the March quarter, and then kind of like increasing to September.

I appreciate it, gentlemen. Thanks, guys.

Thank you for taking my questions. A couple of follow-ups. First one is for both Charles and Kevin. Commodity prices are on the rise, and your OpEx is also going to increase by June and September quarter. You're also talking about our revenue opportunities. So when I look at the trend, it seems like we shouldn't really expect any margin expansion until like a year from now or early 2021 given the commodity prices with GAAP, gross margin expansion and also increase in OpEx. Am I thinking that it's the right way? Or am I missing something? And I have a follow-up.

Well, I think we're always looking for ways to improve, but I think maybe the increase in commodity prices, as a margin percentage, I think I articulated that, that could be a little bit of a headwind. So I think you're on track there.

We started investing significantly more in Korea a quarter or perhaps two years ago. Super Micro now provides most of the total solutions for our enterprise customers. Unlike ten years ago, we are now positioned to operate as a total solution company. As a result, we are adding more value to our products.

Sure. That's a great point, and it leads to my second question for Charles. It's positive that you're not currently NASDAQ, and there are significant growth opportunities ahead. Hopefully, we can achieve margin expansion this year and next. Could you share with us, Charles, what measures you are taking to improve governance? As the business grows, what steps are you implementing to ensure there are checks and balances that will foster increased confidence, allowing us to look forward rather than just reflect on the past?

Yes. That is why we are emphasizing our increasing investment in firmware and software solutions. We are prepared to focus more on the enterprise sector, including governance and other critical areas. From this perspective, we are confident in our ability to grow our business in both OEM and other areas.

Yes. Sure. I can share that Charles has been very proactive and supportive in investing in the team, ensuring that the internal audit and compliance group work closely together. With Don leading sales and Alex as our COO, the communication and training across the organization are significantly improved compared to a year or two ago. This quarter, we improved our closing processes and worked closely with the operational team to fully understand the factors affecting our financials. Charles has ensured we have the necessary resources for that. We also have other remediation efforts to address. We have brought on a fantastic new chair who has assisted us in understanding how a company operating in apps needs to manage daily revenue and make essential IT investments. There is a lot happening within the ecosystem.

Yes. The SAP system is now much more advanced compared to two or three years ago. We are currently incorporating operational improvements. I must point out that we have effectively doubled our compliance and financial department capacity compared to two years ago. All of these factors have significantly enhanced our operations and financial functions.

Great. Thank you.

Thanks for taking the questions. Also congratulations on being out on the results. And so kind of building on Mehdi's question. I'm just curious, I heard the comment in the prepared remarks about positive views on the pipeline of opportunities looking through the course of this year. And I guess the simple question of that is, kind of how would you define pipeline? How has the methodology around looking at the pipeline changed? And then again, what is pipeline to you guys given, obviously, the nature of your business, it's fairly turns-oriented? I'm just curious of how you—what underlies the comment as we look forward, and I do have a follow-up.

Yes. So I think it's probably pretty traditional in that the pipeline that I was referring to was really the targeted customers that we're trying to obtain and understanding that—what is in front of us and the level of effort that we find to land new customers. So sometimes pipeline is referred to growing backlog and all those kinds of things, which is not our business. What we're talking about is landing new customers.

We are beginning to see an increase in enterprise accounts. These larger accounts in the region continue to purchase our products, as well as our commerce distribution and regular data center offerings. They are changing vendors more frequently.

Okay. And then the follow-up question is kind of tied to the pipeline commentary, is that as you move through the course of 2020, there seems to be a little bit of a different cadence to kind of server cycle dynamics. And it's particularly around the cadence of Intel's product cycles, what that means for your business. So how do you see—there's a lot of discussion out there around Cascade Lake and the ramp of that going to Cooper Lake, and whether or not there could be any kind of delays on Ice Lake. How do you see the cadence of kind of the server CPU cycle through the course of this year? And how relevant has AMD compared in the context of your business?

Yes. AMD is growing rapidly, and their new products are more dynamic. When they introduce new technology, the latest generation always outperforms the older ones. We have a strong engineering team fully dedicated to delivering new capabilities in the market. Focusing on AMD, we are well prepared. That's why we believe this calendar year and next year will present significant opportunities for us to grow much faster.

And just to slip in one other question. How quickly can you pass-through your upward pricing on the component front?

Your question again?

How—as we look at component pricing potentially moving higher, I guess, particularly around DRAM, as we move through the course of this year, how do I think about your guys' ability to pass through pricing on the way up? And obviously, it's had an impact on ASPs on the way down. But as pricing comes back, how quickly do I think in your business model, you pass that back through from a pricing perspective?

We have a much stronger relationship with our vendor now, which allows us to deflect any price increases to our customers. The overall effect of this should be clear.

You're trying to understand the delay, and I think there is always a delay, but we try to be very agile in that.

Thank you. Congratulations on a really strong cash from operations quarter. Looks like the drivers were across the board in terms of cash conversion cycle. Should—is this now at a level where you expect it to be? Or did you guys actually over-index a little bit on the construction of the cash conversion cycle?

Yes, I think we had a good quarter. And I did refer to the fact that it was better than what our near-term target range was. I'm not sure it will be there forever because we have seasonalities that we have to live with. But I think what we'll do now is kind of revisit our target. And over the course of time, that project can be shifted, so a little bit better performance, and we'll give an update on that.

Okay. And I apologize if this has been asked earlier, I am having trouble hearing you guys clearly. But did you guys give any metrics on the large enterprise customer segment?

No, we did not. We broke it down basically, in terms of our direct and our indirect channel.

Okay. I've got a couple more questions. On the performance within the quarter, obviously, you guys did—came in just above the high end of your guidance. So that's great to see. What do you think was the delta role with your performance? Do you think it was the industry performing better? Or you guys performed better than what you had expected? And then relative to the prior few quarters, Super Micro's revenue year-over-year growth had been underperforming the industry. Do you have a sense as far as how you guys did perform relative to the industry for the December quarter?

Yes. In the past, we consistently outpaced the industry's growth. We are now noticing a slowdown. It's time for us to return to a faster growth trajectory. We anticipate that we will achieve a stronger growth rate.

Is that what's embedded in the March Q guidance?

I'm sorry, your question was a little muffled. Can you repeat it?

Yes. Charles mentioned that we expect to grow faster than the industry going forward. Now, is that embedded in the March Q guidance?

I mean, March is a very difficult quarter. I think we're talking about beyond the March quarter, just given all of the macro dynamics that we talked about. I think we haven't seen everyone else in the industry breakout. We haven't compared it necessarily. But in Europe, I think we will go soft from data center customers.

Thanks so much. I have three. I hope you can bear with me. The first one, the deferred revenue continues to grow a lot, and it's like comfortably over $200 million. Can you just remind us like what's driving that? And then does that yield you any different or better visibility looking forward than was the case before the deferred balance really starting to come up?

Yes. So I think first and foremost, it's good that we're starting to get stronger service business. Certainly, when you're attacking enterprise customers who want that white glove performance or rather expectations, that helped do that. So it is a little bit of a proxy build out. There's a lot when we add on in that deferred service revenue in terms of the length of contracts that people are signing up for. Also pricing over the course of time ends up being in the service revenue line item as well. But I think you're right in terms of it growing is a healthy thing for Super Micro. And what I've said in past calls is that, so far, it is a small number from a revenue perspective, but it hopefully will be giving us some buffer in the margin area as time goes by. So it's all just a big direct from appliances for Super Micro, and is a proof point to a certain degree of the increase in software and service profit for the company that Charles outlined earlier.

Yes. At this stage, we have begun to provide service for more than 15%. We believe this trend will continue for many years to come.

All right. Great. That's helpful. My second one, if we just look at the December quarter, I don't have the exact numbers here, but if I kind of ballpark your commentary, it looks like the nonservice systems business, that's subsystems and accessories segment, was up a lot. A, drive that right. And b, like what was driving that to kind of a disproportionately high level of growth relative to service systems?

So yes, this indirect channel was higher than what we've typically seen. I just want to call out, though, that both the direct and OEM business and the indirect channel business both grew sequentially. The indirect channel, we've had a number of programs that we've launched in support of the channel. That, I think, has been helpful. Also, we've seen that the channel also includes the logistic part where we sell subsystems, but it also includes bars we have some larger customers buying systems from them. So that's primarily what we sell, larger purchases through the indirect channel from some of our larger customers.

Yes. So I think the key thing there that Perry kind of broke out a little bit is that one cannot make a direct connection to systems versus subsystems and channel versus direct. It is quite a bit of a mix in there.

That makes sense. Just thinking about the March, I'm not looking for segment guidance, but would you expect that growth rate to kind of normalize between the two segments looking into March?

I think we'll see contribution from those probably in the same degree.

Yes. That would be a sequential comment. We might see the same kind of mix shift when we compare year-over-year, however.

Okay. Got you. The last one, I'm hoping to come back to the OpEx real quick because there's a lot of moving pieces here, but if I could just ask it this way. The March quarter, it looks like you're guiding us to something in like the high 80s on a non-GAAP basis. From there, what level of increase should we expect for the balance of the year? And is there just—I'm trying to pause so we see it qualitatively. Is there a scenario where OpEx actually declines from the calendar third to the calendar fourth as some of these one-time things move to completion?

I'm pleased you brought that up because there seems to be a misunderstanding. Our operating expenses and non-GAAP operating expenses for the quarter were just over $100 million. What I meant to convey is that we'll need to adjust for $6.5 million in the March quarter. If we remove that $6.5 million, we will then see some increasing expenses from that new baseline. You've already touched on that.

Okay. And sorry, just the last part of that, is there—are you guys embedding some kind of interim peak here in the middle to late part of the second, third quarter that then declines into the fourth? Or we'll just continue to ramp through the year?

So it'll be continuing to ramp. And then actually first quarter '21, I think, would be a peak from an audit cost perspective.

First quarter calendar '21?

Yes. That's when the bulk of the work of the audit is done on June the 5th.

Okay. Great. Thanks. I appreciate it.

So I just want to mention that I was speaking in the fiscal quarter near the end of 1Q '21, which would be September of 2020. Cool. Kevin, sticking to that theme, this is more of a question focused on the transition from calendar year 2021 to calendar year 2022. I want to discuss the evolution of the business model, specifically regarding all the audit costs that have decreased and the new programs you have initiated. How should we perceive the operating margin, not in terms of guidance but in terms of leveraging the model? How are you thinking about funding these new initiatives? It seems like you have several exciting projects on the horizon. What’s the best way for us to view the transition from calendar year 2021 towards a more normalized outlook?

Yes. It's a little bit premature for us to be able to call that out right now. In our interactions in the past quarter or so, we've mentioned that now that we're back on the market, but we might take a little bit of time redescribing the company and preparing for an Analyst Day in which we would then present a model going forward. So I'm not quite ready to answer that question, please.

Okay. Got it. Are you—have you guys guided upon doing an Analyst Day at some point this year?

Yes. We've kind of said late spring, early summer.

Okay.

As you may know, last year we saw Super Micro extend our business through a total solution, which is a shift from being solely a hardware company five years ago. We are now moving towards being a total solution provider, including firmware, software, and services. This change is adding more value to our business.

Yes. Thank you. On your last slide of your presentation deck, you have 3.0 solutions, management software and then global services and support that's been driving us for the past three years. What is the level of your global service and support personnel to date?

Our global support team is becoming more robust. In terms of hardware, we believe we now offer a more complete system with higher value, and we're enhancing our security management features as well as our entire cloud pipeline. Additionally, we've made progress overall in other areas.

Okay. Could you give any commentary as far as how large is the global support staff at this point in time?

Yes. We don't have that number readily available. However, I can share that we have reasons for collaborating with partners through our offices. Our strategy has focused on working with partners in new markets while also leveraging our existing scale. I believe that as we continue this approach, it will become increasingly significant for the company.

Great. Okay. Thank you.

And it appears at this time, we have no further questions. At this time, I'd like to turn the conference back over to Mr. Liang for any additional or closing remarks.

Yes. Thank you for joining us today, and have a great one. Thank you.

Thank you. Ladies and gentlemen, that does conclude the Super Micro Second Quarter Fiscal 2020 Earnings Conference Call. We do appreciate your participation. You may disconnect at this time.