Good day, ladies and gentlemen, and welcome to the Super Micro Second Quarter Fiscal 2021 Financial Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. I would now like to turn the conference over to your host, Mr. James Kissner, Vice President of Investor Relations.
Please go ahead, sir.
Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the Q2 of fiscal 2021, which ended December 31, 2020. By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading It is available on the company's website. As a reminder, during today's call, the company will refer to a presentation that is available to participants Other income expenses, taxes, capital allocation and future business outlook, including the potential impact 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 ks filing for fiscal year 2020 and our 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 business outlook. For an explanation of our non GAAP financial measures, please refer to the accompanying presentation or to our press release posted 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 the prepared remarks, we will have a Q and A session for self-service analysts to ask questions.
I'll now turn the call over to Charles Liang, Chairman and Chief Executive Officer. Charles?
Thank you, James, And good afternoon, everyone. Today, we have released our fiscal 2021 Q2 Financial Results. Now let's take a look at some highlights from the quarter. Our fiscal 2nd quarter net sales totaled RMB830,000,000, down 5% year over year and up 9% sequentially, lending at the midpoint of our guidance range. Our fiscal Q2 non GAAP earnings per share was RMB0.63 compared to RMB0.55 in fiscal Q1 of 2021 and 57 in the same quarter of last year.
As we expected, Q2 improved after Seasonally weak Q1, we are proud that we achieved these results despite a very challenging environment Asda impact of COVID-nineteen was significantly worse since early November, which impact our operation, especially in USA headquarter. Over the same period, however, We had significant international growth to offset the weakness in the United States. Quarterly sales in many Asian and European countries were up double digit and in some case, Very high double digit, which demonstrate the strength and the improvement of our global sales organization and channel I expect this strong international business growth to continue in March quarter On the topic of our aggressive growth strategy, our new high profile Customers mentioned on our last earnings call, divested their residential purchase in Q2, And we remain excited about our relationship with these customers. Additionally, our sales Our team are continuing their effort to expand and nurture new opportunity in these accounts for the next few quarters While these efforts have been on track with our internal goal, we have recently We are able to win new accounts in less than 30 months. We plan to further accelerate this growth With new incentive programs and executive actions, the purpose of these actions Other than supercharge our sales force is to restore our original winning culture.
We have set a great goal for ourselves, And my team is deeply committed to Super Micro Future with more and more passion To support this international and global growth strategy, we have aggressively expanded our Taiwan Campus, capacity and capability in production, operation, engineering and sales. The new BD62 at our Taiwan Science and Technology Park will be online early this summer, Which will add another 1,000,000 square feet of manufacturing and office space efficiently Doubling our production capacity within next 6 to 8 months. In the short term, this April will alleviate Some logistic production and engineering impact caused by COVID-nineteen. In the long term, I believe that Our Taiwan campus start to reach higher economic scale. Revenue and profitability growth will become much Stronger in the coming quarters and years.
To complement our A four in Taiwan, our Billing 23 in Somerset is on schedule to become online in the next quarter, which will further boost our strong American manufacturing Credentials. I'm confident these actions will help us capitalize on many new key market opportunity In our approximately RMB100 1,000,000,000,000 Let's move on to our technology and products. With the unique building block solution product approach, our R and D organizations are high at work to expand our optimized Intel, AMD and NVIDIA portfolios. In addition, we have doubled our software and Service, Headcount and Resource over the past 2 years. These investments are making a great impact With the upcoming new Intel iSig processor, we again bring the time to market advantage, High product quality and application optimized solution to our customers.
We are pleased to see A strong trend in terms of customer seeding and early deployment request. And we have stopped some of our early deployments to our key customers recently Due to our application optimized product strategy, we believe our Iceberg product line will provide Precisely the base hardware platforms to telco, 5 gs and AI As well as data center applications. As such, we are prepared for our iStake product line to become a key growth driver in the coming quarters. Although COVID-nineteen continues to disrupt us badly, Our strong foundation has safely supported our company and business. As I have mentioned, We have taken decisive actions to expand our operation, engineering and sales Our sales team in Taiwan to further reduce the COVID-nineteen impact.
These efforts, together with our Application Optimize Building Products Solution has resulted in great progress with our focused business vertical. First, our organic business gained more than 10% new major customer server account In the last few quarters, benefiting from our strong product line and expanding Taiwan operations, Our B2B Automation, auto regulators as well as software and service enhancements will continue this Growth momentum. 2nd, we start to be focused on large data center and OEM Since about 12 months ago, right after our 10 ks was filed, 2 high profile customers have started to shift in small volume recently and we are then proud To a larger scale, better this calendar year, we plan to add 1 or 2 more large DC, Large data center, our OEM customer in this category before the end of this calendar year. 3rd, On 5 gs telco and IoT, we have won a handful of new telco customer last year. They are currently starting to ship Small volume with upside and we expect high volume shipment to these customers will start later this calendar year as well.
And number 4, our B2B and B2C Automation with Auto Commulator Have been greatly improved in the past 3 quarters, which is even more critical as COVID-nineteen forced More remote working environment for lots of customers and our own employees. We have been developing This powerful project for the past 5 years and it will be ready to go live by this quarter end. This will make it much easier to share communication and product communication among our sales, engineer And our customers, as discussed in our last earnings call, We believe that Q1 of fiscal 2021 will prove to be a near term bottom in our business. And our Q2 results are the first proof point that Chipotle Macro is indeed back on the growth track. I'm excited that our recent booking activity along with our new business initiative give us the confidence To provide Q3 guidance that if achieved will reflect a resumption of a quick growth on a year Furthermore, we are pleased to announce a newly approved $200,000,000 of share repurchase program, which investors view As a sign of our commitment to enhance stockholder value and our confidence in our long term business success.
I will share more detail about our strong growth plan, business scale, our unique momentum And when and how will we reach $10,000,000,000 revenue in the Khamsin Investor event? As the only fastest growing server solution, hardware design and manufacturer company in the U. S. In last 27 years, Shufu Mago 3.0 is nearly 100% ready. Let me, we are ready to go quickly.
Before I pass on, I'd like to take the chance to announce the appointment of David Wagen, Asa, our Senior Vice President and Chief Financial Officer. David joined the company in May 2018 as Senior Vice President and Chief Compliance Officer, A CPA and native Silicon Valley, David come to Shifu Micro from HP Enterprise, where he I work as the Vice President. He was previously the CFO of Renaissance Electronics America Inc. David succeed Kevin Bauer, who is our current CFO and is leaving the company to pursue his passion at a Not for profit organization at the end of this month. It has been pretty village working with Kevin And I appreciate his great leadership, hard working and dedication to Super Micro Over the past 4 years, Kevin is credited for improvement over our financial system and Managed System Automation.
I wish him a great success in his new venture. I will now pass the call to Kevin One last time to provide additional detail on the quarter and our outlook. Kevin, please.
Thank you, Charles. I'd like to say a few words to our employees and investors. I have enjoyed working with Charles and the very dedicated Super Micro And helping the company through challenging times over the last 4 years. I am most proud of the work enhancing our company's financial function, Providing a stronger foundation for the company to continue to grow as well as our focus on improving operations to generate cash, Which enabled a return of capital to shareholders. To all the Super Micro team, we have accomplished so much together, Yet there is unfinished work.
Carry on. On a personal note, my new role I'm excited to join as the Chief Financial Officer and Key Business Executive to help this organization to reach its objective of delivering increasing value. When announced, this new role will make sense to you all. Before jumping into the results of the quarter, I'd like to briefly touch on several accomplishments we made this quarter on the environmental, social and governance or ESG Front, which we recognize is becoming increasingly important to investors. A few of our recent accomplishments include: 1, Driven by our efforts to comply with social environmental concerns, Super Micro received a near perfect audit score from the Responsible Business Alliance At our Taiwan manufacturing site in November 2019 with a score of 196.4 out of 200 points.
In December 2020, we sent a commitment letter to the Science Based Targets Initiative and We Mean Business Coalition, Indicating we will join other companies in striving to keep global warming to the 1.5 degree goal and create company targets. We also joined other leading companies in the green grid, where we believe our expertise in hardware design and energy efficient computing Can help drive forward the industry. In January 2021, Super Micro transitioned All our use of energy at our new and old San Jose campuses will not result in the burning of fossil fuels. We believe these recent accomplishments and milestones continue a long history of our commitment to green computing, Sustainability and generally making the world a better place for future generations. Now turning back to 2Q results.
Our fiscal 2nd quarter revenue totaled $830,000,000 This reflects a 5% year on year decrease from the same quarter of last year and a 9% increase from the Q1 of fiscal year 2021. Systems comprised 77% of total revenue and volumes of systems and nodes shipped were up sequentially, but down year over year. System ASPs increased year over year, but were down modestly quarter on quarter. Turning to geographic performance. Our international sales Strengthened from 2 quarters of softness.
On a year over year basis, the U. S. Decreased 12%, Europe increased 5%, Asia declined 3% and the rest of the world increased 68%. On a sequential basis, U. S.
Sales declined 7% quarter on quarter, Europe increased 38%, Asia increased 27% and the rest of the world increased 86%. From a customer point of view, we saw pickup in sales to OEM But this was offset by the expected digestion after a strong Q1 contribution by New Hope High profile customers that we mentioned last call. From this point forward, unless otherwise noted, I will be discussing financial metrics on a non GAAP basis. Working down the P and L. Q2 gross margin was 16.4%, up 50 basis points year on year And down 70 basis points quarter on quarter.
Recall on our November earnings call, we stated that we expected gross margin to decline 100 60 to 200 basis points on a sequential basis, chiefly due to the absence of a cost recovery benefit as well as elevated freight costs. While we did see elevated freight costs, we did however benefit from Additional cost recovery similar in magnitude to the benefit we experienced in fiscal Q1 or about 130 basis points. We do not anticipate a similar benefit going forward. Turning to operating expenses, 2Q Q1 GAAP operating expense benefited from a credit of $2,100,000 for an executive SEC settlement and Q2's GAAP operating expenses 5% quarter on quarter and 12% year on year to $90,000,000 The sequential decrease in non GAAP OpEx Credits for NRE work performed and overall expense discipline. Other income and expense It was $13,100,000 loss as compared to a $1,500,000 loss last quarter.
The increased Loss was chiefly driven by the remeasurement of our Taiwan dollar loans to a weaker dollar. This quarter, our tax expense was $5,100,000 on a GAAP basis and $7,100,000 on a non GAAP basis. Our non GAAP tax rate was 16.4% for the quarter. Going forward, we continue to expect our tax rate to be approximately 16%. Lastly, our joint venture contributed a loss of $1,800,000 this quarter related to an air pocket in revenue as compared to income of $1,300,000 last quarter and a loss of $1,000,000 the same quarter a year ago.
Q2 non GAAP diluted EPS totaled $0.63 as compared to $0.55 in Q1 of fiscal $2,021.57 in the same quarter of last year. Cash flow from operations totaled $63,000,000 compared to cash flow of operations of $121,000,000 in Q1. CapEx totaled $14,000,000 resulting in free cash flow of $49,000,000 Our closing balance sheet position For cash was $315,000,000 while bank debt was $45,000,000 resulting in a net cash balance of $270,000,000 Please also note that we completed our previously announced $50,000,000 share repurchase program on January 6, Wherein we repurchased 1,680,000 shares at a weighted average price $29.82 As Charles mentioned in our earnings release today, we concurrently announced that We have board level authorization for the company to repurchase up to another $200,000,000 of our common stock in a new Share repurchase program. The program is effective until July 31, 2022. As Charles mentioned, we believe this action reflects our commitment to enhancing stockholder value and our positive long term view Of our business opportunity and cash generation prospects, we expect to execute the program in coordination with our cyclical Working capital needs and growth.
Turning to working capital metrics. Our Q2 cash conversion cycle was 92 days, Down from 107 days last quarter, but still outside our target of 85 to 90 days. While the absolute level of our inventory declined, days of inventory at 105 days remains elevated relative to our historical As we prepared for the impact of the Lunar New Year, logistic challenges and some tightening of components. Days sales outstanding was 36 days, while days payable outstanding totaled 49 days. Now turning to the outlook for our business.
We expect new sales net sales for the quarter ending March 31, 2021 In the range of $790,000,000 to $870,000,000 We expect gross margins to decline approximately 120 to 100 and Sequentially due to the lack of a cost recovery discrete event that we explained earlier over the last two quarters and also the product mix that we expect to ship in the quarter. We expect our non GAAP operating expense level to increase quarter on quarter to the mid-90s, driven by payroll taxes in the New Year and selective investing in R and D. We continue to anticipate our GAAP and non GAAP tax rate to be approximately 16% going forward, And we expect other income and expense, including interest expense, to total roughly $1,000,000 and I'm sorry, we expect fully diluted GAAP earnings per share to be in the range of $0.22 to $0.42 and fully diluted non GAAP EPS to be in the range of $0.37 to $0.57 And we continue To expect our CapEx for fiscal 2021 to be in the range of $55,000,000 to $60,000,000 inclusive of our ongoing
Thank you, Kevin.
One quick announcement before entering Q and A. We will be attending the Goldman Technology Neuro Conference on February 11 and conducting one meetings with investors. Operator, we're now ready to take questions.
Thank you. We have your first question from Ananda Baruah from Loop Capital. Your line is open.
Hey, good afternoon, you guys. I appreciate you taking the question. Congrats on solid results. And Kevin, congrats. It's been good working with you.
Well, good luck and we'll miss working with you. Yes, I guess A couple if I could. I guess the first one is just broadly speaking, how should we how would you like us to think about The various catalysts as we move through the year and the things that we should keep an eye out for and what you're expecting To impact the business,
you spoke to a number of them on
in the prepared remarks. We would just love to sort of get More context on how we should think about them layering in? And I have a follow-up for 2. Thanks.
Yes. I believe our business I've been very solid now. Except the COVID-nineteen, threat in U. S. A.
Is still very severely. So we are very carefully taking care of that while kind of aggressively grow our operation and business in Taiwan. So COVID is getting better as now we expect. Our business should be getting to a Much strong growth period. So we have a good feeling about the coming Quarters or years.
And Charles, when you think about So some of the newer aspects to your business, and you mentioned Ice Lake as well in coming quarters, hyperscale Ice Lake, You mentioned 5 gs sort of the 5 gs systems going into the telcos. Which of those could you sort of rank for us, Even if anecdotal, which ones and those do you think would be the most impactful when you look back on 2021 Hyperscale ICE like the 5 gs telco business.
Yes. Like I just share with everyone, we start to focus on large data center and OEMs since about 12 months And we already achieved a couple of them. And they start to move and we believe the volume will ramp up very soon In this year and next year, I believe, has to 5 gs telco, again, we already engaged handful Customer, kind of they are world class telco company. So the relationship has been Create very solidly and start to move some small volume and we also expect some high volume oil fired medicine And it will be long term partnership. So overall, we are very optimistic for our long term growth.
Okay, great. I'm going to sneak one last one in here. Charles, I believe it was you in the prepared remarks you mentioned the analyst event.
Do you
have a time frame you're thinking about for that?
Yes. You mean, in this event?
Investor event, yes.
Yes. I hope within next few weeks, So, we should have already had last quarter, but because of COVID-nineteen, really coming very bad, so we kind of take I'll wait and see. But now it looks like things are getting under control. So I hope in next few weeks, We will have big investor events, so to share the company plan, the future, the momentum with our investors.
Excellent. So just to clarify for myself, in the next few weeks, do you think you'll be announcing the date the event or do you think you may actually be having it in the next few weeks or so?
I guess, we will announce in next 2 weeks, For example, and hopefully have that event in 3 to 4 weeks.
Thank you. Excellent. Thanks a lot.
Thank you.
We have your next question from Jon Tanwanteng from CJS Securities. Your line is open.
Hi, guys. Thank you for taking my questions. And it's a very nice quarter. And Kevin, congratulations on moving on to the next phase. When they spoke about the quarter, they thought they were seeing another quarter or 2 of digestion in the cloud and data center space.
It seems like you're not seeing that. Was wondering what kind of customer are you seeing strength from that's maybe running counter to what they're saying? Is it maybe just from AMD or is it another And market, just give me a sense of why your strength is running opposite to what they're seeing.
Yes. As you know, we have a very strong Intel product line. At the same time, we also have a pretty big N and D product line. So once the market have demand, we will grow. And even if market keep flat because our outstanding product, Our kinds of better solution overall.
So we believe once the market is Not too bad. We will have a chance to grow smoothly as a kind of and even the market is growing, I guess our growth will be very significant. And as you know, since the company was hunted since 1993 2017, our growth has been always much faster than our industry average, and I believe we are getting back to that position very soon.
Okay. Thank you, Charles. And then just on the impact that COVID has had on the business, Can you call out just the impact on either the margin or the revenue that you had in December and into January? So far, you mentioned higher freight Expenses, but lockdowns probably had an impact as well. I don't know if you're seeing anything else such as employee absenteeism, but if you could kind of quantify or give some color on the impact of the pandemic so far, that would be helpful.
Thank you.
Yes. It's kind of the impact is very bad Very broadly, unfortunately, in that more than 9 months now. So our logistics, for example, it's become very How to ship product even from Asia to U. S. A, we see the shipping delay in the cost increase Or even more, so the logistic time to market today and logistic cost increase.
And then most of customer work from home and some of our employee work from home. So all of those created a difficulty for business, Especially for application optimized solution. And the good thing is our auto conveyor, right, which is a program To help sales, help our engineer, help our customer to work together to make the best Optimized solution for them, the tool is getting ready. I believe by end of this quarter, most of our sales, engineering And customer will be able to use those tools. So I'm very excited for the tool to be available in this quarter.
Okay, great. If you don't mind me asking one more.
Yes, John, this is Kevin. I would just echo what Charles has said is that When you have work from home, it definitely reduces the coordination of the organization. We have to push harder in that arena. And then some other examples like just having To confirm that there's someone else on the other side to receive the shipment, not all companies are open every day. So There's definitely a lot of little different things like that that make conducting business more difficult like Charles had said.
Understood. And if I may ask, looking beyond the pandemic and Charles, I know your Facility is opening up in the second half of this year or early this summer. What can margins look like on a normalized basis without all these headwinds When you have new facilities and when you have some more volume on the customer shipping, maybe share some of the plans you have before March could go.
Yes. As you know, we have 2 kind of customer. 1 is a high end enterprise who like our better product, better performance, Beta service. And then we also have another customer who buy high volume and wonderful cost. So before, most of our operations are tied in U.
S. And with COVID-nineteen, the impact was really big. But now, we have a Taiwan operation getting ready, especially by early summer, We will have a much bigger capacity. So we can start to service those customers who buy high volume and cost sensitive. So we are very excited.
We start to line up with those customers since about 12 months ago. Now we have some customer relationship already established, and we already promised them we are ready to support them. So In terms of how much impact, I would like to say, maybe 2% or a little bit more than that And 2% for enterprise sounds small, but for high volume customer, not 2% or 3%. Indeed, there is a big So we are very happy we have those opportunity now ready from Taiwan.
Great. Thank you very much.
Thank you.
We have your next question from Nehal Chokshi from Northland Securities. Your line is open.
Thank you. Congratulations on the strong gross margin and very strong revenue guidance. That's a really nice outlook there. On the net income, the midpoint of the net income, That implies about a $9,000,000 QV decline. How should we parse that between gross margin and OpEx
Quarter over quarter because of some cost increases as well as the specific mix of products that we're going to ship. So I would say that you would weight it probably towards what the expectations are for gross margin in the immediate quarter going forward. That would be the heavier weight. We'll put it that way.
That's very helpful. Thank you. And then Charles, could you clarify what you mean by large OEM opportunity?
Okay. I mean, especially after pandemic COVID-nineteen problem happened. All our Internet, all our social networking company have a strong demand. And those high volume customer Indeed, they moved in high volume, but they want low price, right? So before, we kind of We're not really focused on those segment of customer, but because our Taiwan operation facility is getting ready.
So we start to Work with those customers, engage with them, and we got some very good feedback. So we are very engaged with some of them. And likewise, I just mentioned this we ship a small volume now and the high volume should follow later this year.
Okay. So just to be clear, is there a partnership with these with the HP and Dells To get to the social networks or are you just referring to these large Internet properties as the OEMs?
You know, like this year, the Super Micro in last 27 years, we already established our brand name and our credibility for quality for service. And now especially our management software, our services global wide have been well recognized by Enterprise account. So we are ready to work with any kind of customer, directly with any customer or go through some OEMs. So we open the opportunity.
Okay. Thank you. And then coming back to Kevin. So over the past two quarters, You wanted to mention investors that you're evolving your capital allocation policy. But is that 50% rate at least a good way to think about How is that you guys are thinking going forward?
And then what about that remaining 50%, is that basically near the fuel future growth?
Yes. So I think what I tried to share was that in the $200,000,000 program, it's Got it roughly an 18 month or so duration given the
date that
it's valid through. I think Investors that I've worked with know that we take an incremental approach, and we took first two steps in stock buyback We got feedback that if we feel confident, we should back that up by maybe a more longer term program, and that is Exactly what we have done. So therefore, it's a step by step process. I think the competing forces For the capital allocation, it's going to be the rate of our growth. That's the key thing.
And we hope to be able to continue To grow strongly and have the adequate cash flow to consume or to fully execute that $200,000,000 program over The 18 month timeframe. So it's definitely that as well as We need to continue to make in R and D for continued product development. Given that As it relates to Taiwan, we're kind of in the late mid innings on the investment there. Certainly, the building is close to being completed there. I think it's going to be June or something like that, Charles?
Yes.
And so therefore, that consumption of cash will abate for a while because our Maintenance capital is like $5,000,000 to $7,000,000 a quarter. And so that will help free up some cash In the second half of calendar twenty twenty one, and that's kind of the moving pieces that we're thinking about. And With the continued cash generation of the company, we felt confident to get $200,000,000 program approved.
Okay, fantastic. And my final question before I get back into queue is that you mentioned that NRE work was part of that R and D Q2 decline. So what's the decision for when Supermicro accepts this type of work? Can you talk about that real quickly?
Yes. So we work very closely with Some of our chief component suppliers to work on platforms that work with their key components. And so we really look to work with those key vendors to enable Platforms that we believe are ones that are going to get traction in the marketplace. So, we look at what's the popularity of Likely popularity of those platforms and then enter into those arrangements. They tend to be rather Short term in nature, so I want to share with you that it's not like a multi year development, but rather Maybe half year development.
So it's a little bit easier to make those commitments because not only they're not so large, but also The prospects for the product are pretty close in the future. Yes.
We have Some are very close partners. They really want us to design something unique, something outperform for the market. And also some customers, they want really outstanding unique platform design. So we work with both
What's the type of return in terms of revenue or gross profit dollars you typically see when Pick this type of NRE product that expects to become a platform that drives future sales.
For sure, our goal is not for NRE data. The really goal is for the partnership. When we work with vendors We designed a really optimized solution, then we together to approach the market. Same thing for customer. Some customer With their special application or data center equipment or architecture, we have then designed something exactly Optimize the layout environment.
And because of building box solution, the nature makes human micro much easier and much more efficient
We have your next question from Aaron Richards from Wells Fargo. Your line is open.
Yes. Thanks for taking the question and congrats on the results. And Kevin, also great working with you In the past, I guess I wanted to ask a question about kind of where we stand on the server cycle and the impact That we can think about the timing for Super Micro. So you talked a little bit about Ice Lake, you've got AMD Milan. How do you guys see the demand profile for these next generation server CPUs materializing?
And would you expect to see an ASP uplift benefit Supermicro as these next gen CPUs come into the model?
Yes. As you know, new generation process or platform always outperform the previous generation, right? For same price, Usually, they are kind of 10% or up to 40% faster performance. So for sure, lots of large customers, they want a new generation product. And Sibo Macro is good for that.
Kind of is our building cloud solution. Traditionally, we always introduce new technology to market a few months or a few quarter earlier than others. So this time, we have the advantage again. And other than the market growth, indeed, because we have better solution, Our better service, our better quality, so indeed, we are gaining much share from others as well.
Okay. And I guess maybe dovetailing off some of the earlier questions around industry kind of Supply chain alignment and juggling through kind of the COVID challenges that
you've had, how would you
characterize the component supply chain or component availability that see in the market today, there's been some indications that certain areas have been tied or even constrained. What's your current outlook? Have you seen any constraints? And what are you If you're willing to look out over the next couple of quarters.
Yes. We saw a lot of constraint across Almost all different kind of components. So we have been very carefully engaged with our partner And have a forecast, have kind of a contract. So Logistic cost also increased, lead time also increased. But with our contract and relationship, at this moment, I feel There are a lot of challenges that we should be safe for our smooth growth.
Yes. Yes. And then the final question I just wanted to ask is that I know a couple of years ago you did have a customer that Had accounted for 10% of revenue, do you think that with these new larger data center win opportunities that sound like they're going to ramp over the next Do you think you'll have a situation where you have a 10% customer in the future or not?
Hard to say, but we tried to have many more customers because our customer base was still small Compared with our long term goal. So with now a much bigger capacity, so we are able to engage With many more partners. So I believe that question is or no. It will happen, it's happy to have, It will not happen. It's also happy to be more diversified.
So I'm pretty neutral attitude for that. And it looks like it seems we have been under managed. Okay. Thank you, guys. Thank you.
We have your next question from Nehal Chokshi from Northland Securities. Your line is open.
Yes. Thank you. So I am actually particularly impressed with the guidance Given that at the September quarter call, you guys had indicated an expectation that I think iSight will become generally available for server OEM launch by early 2021. That hasn't happened yet and that looks like
it's going to be More of
a 2Q 'twenty one type of event now at this point in time. So given that context, does that mean that the rest of your business has significantly
Yes, Xue, we might go have much more diversified for that now and also customer base in terms of vertical, in So in terms of many more customers, so we are much more diversified customer diversified company now. And with extension to Taiwan and also capacity growth in USA, we are ready to be a much bigger sized company.
Great. And speaking to that much greater diversity of exposures, can you give us a sense as to what is your exposure to some of the Faster growing parts of this market that you're addressing?
Yes. For example, Telco 5 gs, We did not focus on that market before. But since about 2 years ago, we started to focus on this market, and we already engaged with some Very good partner globally. And for example, large data center and OEM, we did not really focus on that Segment, in last 10 years, about 12 months ago or 18 months ago, we start to engage with some And we have good achievement. Also for IoT, we continue to Extend our IoT product line.
So Xibo Micro indeed like to be much more diversified, much So will it be fair
to say that these three areas that you just highlighted represent maybe 30% of revenue now?
We did not ship that specifically, but likewise just mentioned, Sifu Micro is a great deal To grow company to be a $10,000,000,000 of revenue company in the near future. And in our investor event,
I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Charles Liang, Chairman and Chief Executive Officer. Sir, please continue.
Yes. Thank you, everyone, for joining us today and looking forward to meeting you next quarter. Have a nice day. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.