Thank you for being here. My name is Telia, and I will be your conference operator today. I would like to welcome everyone to the Super Micro Computer Inc. Q1 FY'25 Business Update Call. Joining us today are Charles Liang, Founder, President and Chief Executive Officer; David Weigand, CFO; and Michael Staiger, Senior Vice President of Corporate Development. All lines have been muted to minimize background noise. After the speakers finish their remarks, we will have a question-and-answer session. Thank you.

Good afternoon and thank you for attending Super Micro's first-quarter fiscal 2025 business update conference call for the first quarter, which ended September 30, 2024. With me today are Charles Liang, Founder, Chairman and Chief Executive Officer; and David Weigand, Chief Financial Officer. At the end of today's prepared remarks, we will have a Q&A session for sell-side analysts. I will make additional remarks prior to beginning of Q&A, but the company will not address any questions regarding the recent decision of our independent auditor to resign and the delay in the filing of the company’s 10-K. During today's conference call, Super Micro will address business and market trends from the first quarter of fiscal '25, including our financial outlook and operations, our strategy, technology and its advantages, our current and new product offerings, and competitive industry and economic trends. We will discuss estimated financial results, but reference to any financial results are preliminary and subject to change based on finalized results contained in future filings with the SEC. By now, you should have received a copy of today's news release that was issued after the close of market and is posted on our website, where this call is being simultaneously webcast. Any forward-looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update them. Our actual results may differ materially from the results forecasted, and reported results should not be considered as an indication of future performance. A discussion of some of the risks and uncertainties relating to our business is contained in our filings with the SEC, and we refer you to those public filings, including our most recent Annual Report on Form 10-K. During this call, all financial metrics and associated growth rates are non-GAAP measures other than revenue and cash and investments. This call is being broadcast live on the Super Micro Investor Relations website and is being recorded for playback purposes. An archive of the webcast will be available on the IR website and is the property of Super Micro. Our second quarter fiscal 2025 quiet period begins at the close of business, Friday, December 13, 2024. With that, I will turn it over to Charles.

Thank you, Michael. Before we dive into the first quarter details, I would like to share some thoughts on the recent challenges that the company has experienced. As we have emphasized in our filings since these challenges emerged, we remain confident in our previous financial reports. And as previously announced, we are actively in the process of engaging a new auditor. We are working with urgency to become current again with our financial reporting. I am pleased to report that the Special Committee has today provided the following statement to Super Micro, which is also included in our press release. I quote, "The Special Committee has completed its investigation based on a set of initial concerns raised by Ernst & Young. Following a three-month investigation led by Independent Counsel, the Committee's investigation to date has found that the Audit Committee has acted independently and that there is no evidence of fraud or misconduct on the part of management or the Board of Directors. The Committee is recommending a series of remedial measures for the company to strengthen its internal governance and oversight functions, and the Committee expects to deliver the full report on the completed work this week or next. The Special Committee has other work that is ongoing but expects it to be completed soon." End of quote. The Special Committee has not otherwise provided any additional details or information. We look forward to receiving the committee's full report in the near future. We do not believe the current challenges affect Super Micro's ability to service our customers and partners as we continue to grow rapidly and strongly with the AI revolution, and my confidence in Super Micro and its staff remains stronger than ever. Here are some key quarterly highlights. The preliminary fiscal Q1 net revenue was in the range of $5.9 billion to $6 billion. At the mid-point, this is up 181% year-on-year, driven by strong AI demand from our old and new customers. It was one of our strongest first quarters in history, despite many customers waiting for the soon-to-come new generation GPU chips. The preliminary fiscal Q1 non-GAAP earnings are in the range of $0.75 to $0.76 per share versus $0.34 last year, representing approximately a 122% year-on-year growth rate. The preliminary non-GAAP gross margin is approximately 13.3% and the non-GAAP operating margin is approximately 9.9%. Both were higher than the previous quarter as customer mix improved, and supply chain costs and expedited shipment eased for DLC components. We have deployed the world’s largest DLC AI supercluster with 100,000 NVIDIA GPUs in record time-to-deployment, as well as time-to-online. This milestone achievement reflects our engineering expertise and complex logistics capabilities for large-scale AI infrastructure deployment. Leveraging our Datacenter Building Block Solutions, we are now building full-scale liquid-cooled datacenters with our Rack Scale Plug and Play solutions featuring our latest DLC liquid cooling technology at a leading pace. DCBBS can reduce the time required for customers to build new datacenters from roughly two years to a few quarters, significantly improving time-to-delivery and time-to-online and costs for customers' AI IT infrastructure. DCBBS is also helping to accelerate the adoption of DLC, driving efficiency and performance while reducing customers' OpEx and contributing to greener computing. We expect 15% to 30% of new datacenters will adopt liquid-cooled infrastructure in the next 12 months. The DLC volume is projected to be at least 10 times greater than last year due to the DLC liquid cooling product maturity and the rapid growth of AI. To keep the DLC solutions performing at their best, our new Super Cloud Composer is capable of end-to-end management from chip level all the way to rack level and datacenter cooling towers, making it the most powerful DLC datacenter management software on the market today. SCC further simplifies the provisioning of a highly automated, software-defined infrastructure that supports customers with rapidly changing workload requirements. With the addition of SCC, Super Micro is well-prepared to service many more customers and grow its DLC liquid cooling datacenter market share. On the production front, we are in the process of completing our new Malaysia campus, where we expect to begin manufacturing later this quarter. Additionally, we have been nonstop expanding our facilities in Silicon Valley to increase DLC rack-scale production capacity. They now boast 15 Megawatts of power and are able to produce more than 1,500 DLC GPU racks per month, with plans to scale up further. Our Taiwan and European production facilities are also growing at a quick pace. Moreover, we are planning to expand to several other global manufacturing locations in the near future. By leveraging our strengths in technology innovation, product design, build quality, supply chain management, deployment, and datacenter services, we are pursuing our goal to transform Super Micro into a leading USA as well as worldwide AI IT infrastructure company. We are off to a strong start in fiscal 2025. Our total IT solutions deployments are rapidly scaling, and our new product developments are progressing smoothly. Our NVIDIA GB200 NVL72 is ready, alongside the 10U air-cooled, and 4U liquid-cooled B200 rack PnP systems that are fully production-ready. The brand new 200KW+ SuperRack architecture, co-developed with NVIDIA, which provides near 100% DLC with almost no cooling fan required, is also on the right track. The new SuperRack architecture will be able to achieve Power Usage Effectiveness close to 1.0. To complete our broadest AI portfolio, the AMD MI300 and MI325 platforms, as well as Intel Gaudi 3 solutions, are ready to go as well. Our Datacenter Building Block Solutions are attracting more new customers and our long-term investment in DLC is paying off, giving us a sustainable competitive edge and economies of scale. Before passing the call to David Weigand, our CFO, I want to thank our partners, customers, investors and Super Micro employees and express my appreciation for their patience and support until we can provide more information about our 10-K filing status. Our strong foundation, Datacenter Building Block Solutions, and DLC green computing leadership not only reduce energy costs for our customers, but also contribute to a healthier Mother Earth. I believe we are well-positioned for strong future growth.

Thank you, Charles. We remind investors that the unaudited interim financial information in this report is preliminary. We expect unaudited Q1, Fiscal Year '25 revenues in the range of $5.9 billion to $6 billion, up 181% year-over-year and up 12% quarter-over-quarter versus our guidance of $6 billion to $7 billion. Growth was driven by strong demand for Direct Liquid Cooled rack-scale AI GPU platforms. AI contributed over 70% of revenues across enterprise and cloud service provider markets. The expected Q1 non-GAAP gross margin is approximately 13.3% versus 11.3% last quarter, due to product and customer mix and lower costs coupled with higher manufacturing efficiencies on DLC AI GPU clusters. The Q1 non-GAAP operating margin is approximately 9.9%, excluding $67 million in stock-based compensation expenses, versus 7.8% in Q4. The Q1 estimate for other income and expense is expected to be a net expense of approximately $9 million, consisting of $17 million in interest expense offset by $8 million in interest and other income. The Q1 tax rate is approximately 14% for GAAP and 16% for non-GAAP. The Q1 estimate for GAAP net income is $433 million to $443 million and non-GAAP net income is $483 million to $493 million. Non-GAAP net income excludes $50 million in stock-based compensation expenses, net of the related tax effects of $17 million. The split-adjusted Q1 GAAP diluted EPS range is approximately $0.68 to $0.70 versus prior guidance of $0.60 to $0.77. The Q1 non-GAAP diluted EPS range is approximately $0.75 to $0.76 versus guidance of $0.67 to $0.83. We expect a Q1 GAAP diluted share count of 639 million and a non-GAAP diluted share count of 648 million. Operating cash flow is approximately $407 million, an improvement of $1 billion quarter-over-quarter. Q1 closing inventory was approximately $5 billion. CapEx for Q1 was $42 million. Positive free cash flow was $365 million for the quarter. The Q1 closing balance sheet cash position was $2.1 billion and total debt was $2.3 billion with bank debt of $0.6 billion and convertible bond debt of $1.7 billion, resulting in an improved estimated Q1 net cash position of approximately negative $0.2 billion versus a net cash position of negative $0.5 billion last quarter. Turning to the balance sheet and working capital metrics compared to last quarter, the Q1 cash conversion cycle was 97 days versus 94 days in Q4. Days of Inventory was 85 days compared to the prior quarter of 82 days. Days Sales Outstanding for Q1 was 41 days versus 37 days last quarter, while Days Payables Outstanding was 29 days from 25 days last quarter. For the second quarter of fiscal 2025, we expect net sales in the range of $5.5 billion to $6.1 billion. We expect GAAP and non-GAAP gross margins to be down 100 basis points sequentially due to customer and product mix. We expect GAAP and non-GAAP operating expenses to increase approximately $34 million sequentially and GAAP and non-GAAP other income and expense to be a net expense of approximately $7 million. We expect GAAP net income per diluted share of $0.48 to $0.58 and non-GAAP net income per diluted share of $0.56 to $0.65. The company’s projections for GAAP and non-GAAP net income per diluted share assume a tax rate of 14.0% and 15.0% respectively, with a diluted share count of 640 million shares for GAAP, and a diluted share count of 648 million shares for non-GAAP. The outlook for Q2 of fiscal year 2025 for GAAP net income per diluted share includes approximately $54 million in expected stock-based compensation expense and other expenses, net of related tax effects of $14 million, which are excluded from non-GAAP net income per diluted share. The final financial results reported for this period may differ from the results reported here based on the review by the new independent registered public accounting firm to be appointed. We are working diligently to select a new independent registered public accounting firm and complete our fiscal year '24 audit.

Thank you, David. Before we get into questions, we appreciate you may have further questions about the special committee's findings as well as our audit timeline. We're not in a position to address those questions on the call today. So, with that, operator, we'll take a first question.

We will now start the Q&A session. The first question comes from Michael Ng with Goldman Sachs. You may proceed.

Hi, good afternoon. Thank you for the question. Just on the business fundamentals, revenue came in at the lower end of the guidance. I was wondering if you could speak to that and whether you're seeing any market share losses as a result of some of the delayed financial filings? And how do you feel about the $26 billion to $30 billion full year revenue guidance that you previously gave out? And are you hearing from any customers that once this resolution occurs, they'll be able to step up some of their orders? Or is it a gating factor? Thank you.

Okay. Thank you for the question, Michael. Indeed, last quarter, revenue reduced a little bit. I guess the major reason is that there are some customers waiting for the new chip, the Blackwell chip. So people are waiting for the new solution. And the new solution, the Blackwell-based liquid cooling, air cooler, or GP200, our solution is ready. That's waiting for a chip. So, I guess that's the major reason. Our capacity continues to grow, and our liquid cooling solution is fully ready. Again, we can produce 1,500 liquid cooler racks per month now. So, we are fully ready. We're just waiting for the new chip to be available. And then I believe we can grow our market share and revenue after that.

Yes, Michael, we're not providing annual guidance on this call.

Thank you, Michael.

Thank you. The next question comes from Samik Chatterjee with JPMorgan. You may proceed.

Hi, guys. Thanks for taking my question. I guess maybe to sort of talk about the gross margins here. You had robust gross margins in the quarter, but you're guiding it down. It seems like maybe it's a bit more choppy in terms of gross margins depending on customer mix. Does the sort of progression before getting back to the 14% to 17% that you talked about earlier still remain sort of the base case? Or are you having to sort of discount more or be more aggressive on pricing on the current generation products? And as a separate sort of side question, just I know you're not commenting on related to the filings, but any management changes or any changes in how you operate that you're planning or thinking about to sort of overall improve things in terms of getting more disciplined around and more control around the financial reporting? Thank you.

Thank you, Samik. Yes. I mean, it depends on new products when the new GPU chip becomes available. As you know, whenever there is a new generation of technology, we have an advantage to grow our market share and profitability. At the same time, our data centers are building broad solutions with SCC, which provide a full end-to-end solution. For sure, we are gradually growing our gross margin and net margin. As for the management team, yes, we are always faster growing. You know, in 2023, we grew about 40%. And then in 2024, we grew more than double. And this year, again, we will have significant growth. So, when companies are growing quickly, we continue to add more people, including senior management. So we are evaluating the possibility, including the report from the special committee. By nature, we continue to grow our senior management team as well.

Thank you. Thanks for taking my question.

The next question comes from Aaron Rakers with Wells Fargo. You may proceed.

Thanks for taking the question. A couple if I can as well. Charles, I want to go back. I think when you guys had originally guided this quarter, the guidance range was like $6 billion to $7 billion. You came in at about $500 million at the midpoint short of that. I guess, given the comments to the prior question, are you assigning that to just the timing of Blackwell? Or was there something that changed in the demand or the timing of deployments this last quarter? I'd also add in there. I think last quarter when you had set that guide, there was like $800 million of sales that you had alluded to as being pushed out of last quarter into the fiscal first quarter. Did that all close? I'm just trying to bridge that gap for me between the delta and the guide relative to the business update today.

Okay. Good. I mean, this is a complicated question. So I believe the major impact is new chip availability. Because the Blackwell chip for sure offers much higher performance, much better performance per dollar. The good thing is that it will be available gradually. And Q1 hopefully, volume will become much better. So, I believe that’s the main factor. As for our 10-K delay, it may impact a little bit, but hopefully not too big. As for the whole year, yes, today, we do not provide annual guidance basically with our detailed edge. In the last few months, we delivered over 2,000 rack DLCs, which I believe is a very high percentage of the whole deep cooling market. So, for future growth, I still feel optimistic.

Yes. And then two other quick questions, if I can. So, first of all, I mean, you mentioned $5 billion of inventory coming out of this quarter. Any thoughts on where that might trend coming out of this next quarter embedded in your outlook that you provided today? And then I apologize for asking, I know that you're not going to address the special committee dynamic. But any thoughts on the timing of getting an auditor to sign? Anything you can share on that front? I appreciate that you ask, we're not talking much about that, but I'm curious about any comments on that front.

Okay. For inventory, maybe I can answer a little bit. I mean the company will continue to grow; I believe. So, the $5 billion level of inventory will continue. As for the special committee investigation results today, I'm very happy to share some very positive information, and once it's available, we will share with the market.

And Aaron, we have no update with respect to the timeline that we talked about. We are working diligently to get that done quickly.

The following comes from Ananda Baruah with Loop Capital. You may proceed.

Yes, guys. Good afternoon, good evening. Thanks for taking the questions. Two if I could. I guess the first is on gross margin. Dave, should we still expect it to improve as we go through the fiscal year as you were previously anticipating?

Yes. So, by the way, we guided cautiously in this first quarter on our margin. So, we were glad to be able to exceed it. In like fashion, we're guiding conservatively into the second quarter. So, we still have our target margin that we're shooting for. We are doing everything we can to improve that.

Yes, the competition is still putting some pressure. As you know, with Blackwell, I mean, a new technology push makes me feel very optimistic about the chance to grow. And as I mentioned, the Datacenter Building Block Solutions, including SCC, which provides end-to-end management from chip level to rack scale to the whole data center, will help our growth. We can also provide customers on-site deployment, on-site cable, and service. So all of those factors are very positive for our business. I feel very positive about continuing to grow.

Yes. Thanks for the margin context. I appreciate that. The follow-up is just a general working capital financing question. This question has come up with a lot with investors. And really, the question is can you explain sort of the access to capital situation as we go forward? And I guess, really, how would you like the investment community to think about the access to capital situation?

Sure. So Ananda, we put in the last eight, nine months, $4 billion into working capital from two equity raises and one convertible. And so that's really left us with a good working capital situation exiting Q4 at a run rate of around $1 billion of $6 billion. So again, we're forecasting a little down in Q2. So that takes care of our working capital needs for a while. So access, we have a very strong, growing and profitable company. We don't believe that we'll have any impediments to raising working capital.

Yes, every quarter we are making reasonable net profits. So, we should be in a good shape.

Okay, guys. Thanks so much. That’s helpful. Thank you.

Thank you. The next question comes from George Wang with Barclays. You may proceed.

Okay, guys. Thanks for taking my question. I have two quick ones. Firstly, can you kind of double-click on which quarter do you think that you will start booking the Blackwell revenue? Last time you guys alluded to sometime in the June quarter. Just curious whether that is still on track. Just any kind of high level in terms of when do you think the Blackwell is going to show up in the P&L?

Yes, very big question. Indeed, we're asking NVIDIA every day. I hope their production can go smoothly and ramp up to high volume very soon. Once they have the chip available, our solutions are fully ready. We continue to work with them closely to develop our current product, GB200, NVL72, and B200 nuclear-cooled and air-cooled. Additionally, we have designed some really enhanced rack scale solutions. In terms of total solutions, we have strong offerings waiting for the chip. We need immediate and quicker support. Thank you.

That's helpful. Just a quick one, if I can. Just how to think about gross margin in the area of Blackwell versus Hopper. Just curious if you can talk about the puts and takes on the gross margin for the GB 200, especially in light of reference design from NVIDIA, and any kind of incremental value add from Super Micro just as we kind of head towards Blackwell, just in relation to the profitability and the kind of margin profile? Thank you.

Yes, thank you. By the way, for sure, we estimate more competition because people know the AI market is huge now. So, with Blackwell, we expect more competition. But at the same time, we are prepared with our Datacenter Building Block Solutions, our end-to-end Super Cloud Composer, and our onsite deployment and cabling services. All of these are new, and I believe we can provide a unique, very efficient time-to-delivery and time-to-online advantage to customers. So yes, competition is strong, but I believe we are in a good position.

Thank you. The following comes from Nehal Chokshi with Northland. You may proceed.

Yes. Thank you. Thanks for taking my questions. A couple of questions, please. First, Dave, any 10% customer exposures in the quarter and the upcoming quarter?

Indeed, we will have 10% customers, Nehal.

Could you give us some detail as far as what percent of overall revenue due to 10% customers represent in the September quarter?

Yes. So we're not going to release that data today.

Yes. But at the same time, we continue to gain more new customers, especially in Europe and Asia. So I believe we will be able to keep a healthy ratio.

Okay. Great. And then Charles, I think there's a strong feeling in the investment community that the Chairman and CEO roles, if separated, could be quite beneficial to Super Micro. From your perspective, what is the benefit of Super Micro separating these roles?

Okay. Why would I base it on a company? That's my consideration. If not every day, every week, I'm thinking about that question since many years ago. So again, why would I base it on a business? Personally, I have a very open mind; I'm a technology guy, and technology is my best interest. Still, overall consideration is the best benefit for shareholders and the company.

And just to be clear, do you see it potentially being in the best interest of the shareholder of that separating these roles there?

No comment at this moment, but I'm considering about that. So I will retire someday; hopefully, not in one or two years. But sooner or later, I will retire. So those changes are a natural part of consideration for shareholders and for our company and my family too.

Thank you for taking my question.

Thank you. The next question comes from Vijay Rakesh with Mizuho. You may proceed.

Hi, Charles. On the September quarter in December, I’m just wondering how many liquid cool racks we are shipping in September and if you have some idea in December?

David, maybe you have some number this year?

It was just a little below last quarter, but I don't have the exact number.

I would have to say we have a company that shipped most of the liquid cooling racks to the market recently. For example, in the September quarter. Our liquid cooling solutions are ahead of the market. Customers like our liquid cooling because it saves energy and power and meets their water requirements and trends. I believe we will continue to grow the liquid cooling percentage.

Got it. And when you say down sequentially into December quarter on the H200 liquid cooling. Any idea on how much that is sequentially?

We did not share that number, but I believe this cooling will continue to grow very quickly. We are very happy to promote that.

Got it. And just the last question on…

Go ahead, Vijay.

Sorry. I think, David, on the November 16 deadline, are you guys comfortable that you will have an auditor and file a plan to the NASDAQ?

So we're not answering those questions today. So we are, like I said, diligently looking to replace the auditor as quickly as possible. We will be filing a plan with NASDAQ regarding an extension. But that's all we have to say about that.

Got it.

Thank you. The next question comes from Jon Tanwanteng with CJS Securities. You may proceed.

Hi, good afternoon, and thank you for taking my question. I was wondering, Charles or David, could you break out what your expected revenue from Blackwell was supposed to be in the Q1 guidance and what you have implied in the Q2 guidance, first of all? And then second, do you see a risk of supply or allocations due to this auditor and filing issue, especially from NVIDIA, just would they possibly hold back some just until you figure it out? Or are they supporting you through this and just meeting your orders, especially with the new technology?

Yes, our relationship with NVIDIA has been longstanding, spanning multiple decades. The growth cooperation between the two companies continues to enhance. We have many important projects co-developed, and I don't expect any negative allocation from them. At this moment, according to our relationship and communication, everything is very positive.

Great. And then I guess, the Blackwell numbers that were implied in the last quarter and this quarter guidance?

That's hard to answer because we don't know how much volume NVIDIA will have available every month. We work closely with them to co-develop solutions, validate solutions, and service common customers. Once they have the volume available, I believe we will have a good percentage in our product mix.

Got it. And then if I could sneak one more in there, if I could. Is there more efficiency to be unlocked in your liquid cooling supply chain? Or have you mostly resolved the issues in ramping your production capacity and supply chain there?

We focused on liquid cooling much earlier than the industry. In the last few months, we already shipped over 2,000 racks, and so far, the feedback from customers has been very positive. Indeed, the quality and customer satisfaction are better than our air cooler solution. We are excited that our hard work in the last three years is paying off, and we believe liquid cooling will continue to provide us a major advantage, including the whole data center end-to-end total solutions. Again, not just the liquid cooling racks but also the deployment, cabling, and service management. We are very excited about our DLC liquid cooling solution, and customers are happy with it.

Great. Thank you and good luck finding a new auditor.

Thank you.

Thank you. The following comes from Mehdi Hosseini with SIG. You may proceed.

Thank you for taking my question. David, I understand that regarding cash flow, there was a one-time positive impact; your days of inventory increased, yet you were able to significantly boost your operating cash flow. Did I hear that correctly? If so, what contributed to the positive operating cash flow?

Sure. I think the answer is, Mehdi, that we've been growing at such a high rate over the past quarters that that’s really what's been impacting our operating cash flow. We had to pour hundreds of millions of dollars into inventory as well as into accounts receivable. So coming off of a quarter where we didn't have such a dramatic increase in revenue, we were able to generate a lot of cash, basically $1 billion worth of improved cash flows. So it was really due to the fact that for the reasons Charles mentioned, growth wasn't as high.

I understand, but your days of inventory went up. And I think from what I heard from you, your DSO didn't change. So, was that improvement in operating cash flow all driven by working capital reduction or was there something outside of working capital to help you?

No, it was really for those reasons. It was really just for the inventory situation.

Mehdi, maybe I can add to that. When we grow about 200% more year-over-year, we need much higher inventory to support our customer demand. When our growth becomes more normal, at around 100% or 80%, then we won't have to grow that much inventory, which will help our cash flow. So, it's a good challenge I would say.

Got it. And then, Charles, maybe you can help us give us an update on your total capacity, especially with the Malaysia expansion? And how is the utilization of the global installed capacity tracking?

Very good question. We expect we will continue to grow very fast. That's why we have been preparing a huge capacity in Silicon Valley, in Taiwan, and now especially in Malaysia. Long term we need that capacity. But in terms of utilization rate at this moment, I would like to say it's a little low because the capacity is ready, but there aren't enough new chips available. Right now, variation rate is relatively low, maybe only 50%.

This is Dave. Yes, I was going to give you a couple of other tips on cash flow. You'll probably notice that because of an improved gross margin, we had almost $80 million on a non-GAAP basis, more profit this quarter. Additionally, we increased our accounts payable by several hundred million dollars. So those are other factors that contributed to improved operating cash flow.

Before we move on to the next question, I want to clarify a previous comment regarding NVIDIA. We have a long-standing and deep relationship with them at the technology level, spanning decades, and we currently have several cutting-edge projects underway. We've communicated with NVIDIA, and they have assured us that there have been no changes to allocations. We expect our strong relationship to remain intact. I wanted to ensure that clarification was made. Now, let's proceed to our last question, Telia.

Absolutely. Our final question comes from Quinn Bolton with Needham & Company. You may proceed.

Hi, guys. Thanks for taking the question. I just wanted to follow up on the slightly weaker than expected first half, which really sounds like it's just customers waiting for new Blackwell chips. Are you guys seeing that starting to show up in the order books, meaning you're building backlog for either the NVL rack or the Blackwell B200 systems? So you see a nice building backlog for those systems. Obviously, you don't know when you'll get the chips, but does that give you confidence for a much stronger second half once Blackwell starts to ship? Or is it too early for you guys to be actually getting those orders or POs at this point?

Yes. Our solution is very strong. I believe NVIDIA will continue to allocate their solution to companies that provide the total solution because common end-user satisfaction is crucial for every company. I can say our solution is very strong, and we continue to work with NVIDIA closely to provide the best total end-to-end solution to customers. That’s why we're starting to provide on-site deployment, cabling, and services. I feel very comfortable coming to the new chip solution.

So the backlog for Blackwell, you're seeing that building on your order books?

Yes, we are providing kind of remote POC now. So, things are happening.

Okay. And second, a follow-up question for David. You've recently filed new credit agreements with both of your banks just setting a date when you would after provide the audited financials. To the extent that you don't hit that date, what happens? Do you just have to renegotiate new credit agreements? Do the banks at that point have the right to effectively call those term loans? Just wondering if you might be able to address what happens with both the bank debt and if there's any risk to convertible debt if you don't provide audited financials within the prescribed time.

Yes. So I think we'll just refer you to our 8-K filings. We have long-term and good relationships with the banks. As necessary, we will file extensions or get waivers. Like I mentioned earlier, we're not concerned about the company's ability to access the capital markets.

Thank you.

Thank you. There are currently no other questions in queue, so I will now turn it back over to the management team for closing remarks.

Thank you for joining our conference call today, and we look forward to talking to you soon.

This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.