Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Super Micro Computer, Inc. First quarter fiscal 2021 Financial Results Conference Call. A press release issued earlier today is available on Super Micro's website at www dotsupermicro.com. During this presentation, all participants will be in a listen only mode.
Afterwards, Securities and analysts will be invited to participate in a question and answer session. The entire call is open to all participants on a listen only basis. As a reminder, this call is being recorded, Tuesday, November 3 2020. A replay of the call will be accessible via webcast atir.supermicro.com. A replay of the webcast will be available online for 12 months following your call.
An investor presentation and a transcript of management commentary related to Q4 results will also be posted at ir.supermicro.com. With us today are Charles Liang, Chairman and Chief Executive Officer Kevin Bauer, Senior Vice President And Chief Financial Officer. And James Kissner, vice president of investor relations. I would now like to turn the conference over to Mr. Kissner.
Mr. Kissner, please go ahead, sir. Thank you. Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the first quarter of fiscal 2021 which ended December 30, 2020. By now, you should have received a copy of the news release the company that was distributed at the close of regular training and 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 in the Investor Relations section of the company's website under the Events and Presentations tab. We have also published scripted commentary on our website. Please note that some of the information you'll hear during our discussion today will consist of forward looking statements, including without limitation, regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation, and future business outlook, including the potential impact of COVID-nineteen on the company's business and results of operations. 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 ten K filing for 2020 and our other SEC filings.
All of these documents are available on the Investor Relations page of Supermarkets' 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 published earlier today. In addition, a reconciliation of GAAP to non GAAP results is contained in today's press release and the supplemental information attached to today's presentation.
At the end of today's prepared remarks, we'll have a Q and A session for analysts to ask questions. I'm going to 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 for the quarter financial results.
Now let's take a look at some highlights from the quarter. Our fiscal 4th quarter net sales total 762,000,000, down 5% year over year. And 15% sequentially. Our fiscal Q1 non GAAP earnings per share was 55¢ compared to 68¢ in both the same quarter of last year and in fiscal Q4 of 2020. As we expected, expect credit.
Q1 had been our reasoning, seasoning, low quarter out a traditionally strong quarter in June. This year, despite that, continuing on the challenges, from COVID 19, we were agreed to deliver revenue and earnings above the need the points of our guidance ranges. We have been efficiently adjusting to the new normal as a business team essential by the state of California. Although, there are still lots of area camping and work before they improve. Regarding COVID 19 impact.
At the same time, we have been aggressively growing our operations R and D and sales functions in Taiwan, where the COVID 19 impact is much less then bad in our US and email headquarters. During last September quarter, we continued to serve our current customers while enhancing our Taiwan headquarters. Capacity and the capability in production, operation, and Salesforce in order to support our global growth strategy. To sum up, we now have a much bigger and lower cost campus in Taiwan. Which better productivity for revenue and profitability growth.
This is just the beginning of our turnover, April. After raising the challenges that I work, discuss later. I believe as our Taiwan campus, us to reach higher economic scale, combined with our coastal industrial efforts. Revenue and profitability grows, we'll be getting much stronger in the coming quarters and years. I have confidence in capitalization on many new market opportunities.
In our approximately 100,000,000,000 pay, especially in APAC, EMA, and the US East Coast. We have been creating successful at achieving, great market share in the US West Coast. And we aim to duplicate this success in other geographies territories. Let me spend a minute to review our traditional business and the 3 new girls drivers that I state in the past 2 quarter end conference calls. First, our organic enterprise and channel business.
Okay. Our new large data center, public recall, and OEM business. So our new 5 g h and telco business and course our solar and global care companies. Oh, sorry. Our solar and global service business.
We have had a good progress in each of the 4 growth drivers. We had mono enterprise customer to our accounts, and then a couple of top scale cloud companies. We also have won a couple of top tier co partners in each order in Air, Asia, and USA territories. Moreover, we see our solar and service business continues to gain no adoptions worldwide. With the business foundation, we have built and the customer pipeline.
We are neutral. Continue Hubress is expecting in each of these growth areas going forward. Especially in the new large cloud and OEM and the 5 g and telco market. I believe that Rose will be a big extra revenue to us. Before moving on to technology and products, I want to take a moment to decode and share the course of our premium slowdown.
And disruption over the past 3 years. Of course, our 10 K delay in June 2017 followed by our privacy was a significant distraction to management and employees. For over 3 years. Although all are concern and issue will resolve. A few months ago.
This is Robertson, lasting effect on our feelings as in pre morale. However, we are recovering quickly now. Unfortunately, that's as we emerging from our stock in this case, and the June rose in December 2019. COVID 19 canceled US and has slowed down enterprise and channel spending badly. And that was our traditional focus.
Our sales operations and production performance have been impact since the end of this March. You gather you gather these of this challenge and disruption. I want to share with you that Super Michael is still very strong. Our strong foundation allow us to find a ways to overcome these challenges. We stand alone as the only US server hardware solutions company, which no longer is the vehicle of faster and an interoperable goes into inception.
In the 10 years between our IPO and calendar 20072017. We grew at a 20% compound annual growth rate. We are above that or the industry. At about 3% compound annual growth rate over the same time period. Our investors to keep these facts in mind.
We were proven that we are able to recreate the same growth trajectory. Or even better very soon. Moving on to technology and products. Our unique opinion box solution and the organization is strong and smart at all to expand our product line with extensive growth in our Nvidia A And B And Intel Portatives. Our focus within AI platforms and are coming soon new in pair.
I say the product lines. We approved that Chipu Michael, again, we have visa to hardware industry leader. Some technology highlights in the quarter include the following. Because We introduced end to end PCIe team for phase when you told you and for you AI systems. Let's deliver 6 x AI training and 7 x influencing performance, improvement, although polybius generation.
This AI system, available with either the latest a and b epic process, sir. Or upcoming internal isolated processes. 2nd, most important thing, we believe our upcoming expire. I think a product line is absolutely going to be the strongest product line in our history. In a way, it's ready to ship.
As soon as Intel's new CPU is available. 2 to our application of innovation portal strategy. Our Excel product line, we have provided exactly and updates the hardware performance for 5 g, ai, and telco. As well as mandatory data center application. 3rd.
We were also the first to market with, 1 new nevs. Label Stream certified. The VD 100 GPU accelerated server. A key enabler for our transition to 5 g. And we also delivered our orders, most of the going efficient cable computer, placements.
By cooperating with the 24 networks. Our system achieved number 1 in the green with a record breaking 21.11 giga float per watt, which is a 15% higher than that Colivia Worldwide April. Even our leadership in green IT, this is the the vaccine of the deeper mission of our company to help preserve our only planet for future generations. With products, net offer, and filter energy efficiency. Other than that, for business growth drivers.
Our big production and operation capacity program in Taiwan, our new strong product pipeline. And our new product, junk, product pipeline. The company is also investing in business automation branch, which is our B2B and B2C online business transaction system. We started designing this system 5 years ago and have recently put extra efforts to finish with our phase 1 milestone. Now we are able to have ourselves and our customer to easily select the product regulations and order quickly online.
This first one will be open to our sales, miss November. After that, we aim to open it up to some of our customers in a few weeks. While we continue to fine tune, press 1 features and translation optimization. Press 2 has already been kicked off with a command center based structure to follow speed up and optimize sales performance and customer satisfaction. This innovative sales and service software program will dramatically improve our fitness services, scale, and quality.
In summary, we are back, and we will concern much stronger than ever before. We believe that the big challenges in the past 3 years. That battery hurts, Michael, totally behind us now. As we continue to build a much stronger foundation globally, including that much larger, new campus in Taiwan. We work heavily with this investment to efficiently, to accelerate our business goals and profitability in the coming quarters and years.
I appreciated our patients, that investors and our employee has shown to our company during that difficult time. And we aim to devote your support with our faster growth in the near future and long term success. And I believe that we will become one of the top IT, you know, switcher provider very soon. As a coming, and I come in, in Lester, in Maine, Thursday. We were sharing more details about our scale, scope, and schedule for the new Supermichael progress that we have been developing to grow into a tough player.
The key topics will include, a, our 4 business drivers. B, our unique technology and new product lines for ai, 5 g, telco, and large car and our organic business. 2, our new campus in Taiwan, to lower our business costs. E, our software and service business status, and e, our B2B and B2C, fees and needs automation over. Welcome to join us at that time.
I will now pass the call to Kevin Bauer. Our Chief Financial Officer to provide additional details on the quarter. Thank you, Charles. Our fiscal 1st quarter revenue totaled $762,000,000. This reflects a 5% line from the fourth quarter of fiscal year 2020.
Systems comprise 81% of total revenue and volumes of systems and nodes shipped were down sequentially and year over year. System AFP increased quarter on quarter and year over year. Turning to geographic performance. On a year over year basis, the U. S.
Increased 6%. EMEA declined 12% and Asia declined 22%. On a sequential basis, U. S. Sales declined 8% quarter on quarter, EMEA declined 32% and Asia declined 22% sequentially.
From a customer point of view, we saw positives at OEM cloud service provider and internet commerce customers, following strong demand in the June quarter, coupled with the normal down cycle of demand from large enterprise customers. This was offset by first time business at the new high profile customers that Charles referred to earlier. From this point forward, unless otherwise noted, I will be discussing financial metrics on a non GAAP basis. Working down the P and L, Q1 gross margin was 17.1%, up 70 basis points year on year and 310 basis points quarter on quarter. Recall on our August earnings call, we stated that we expected gross margin to improve by 75 to 125 basis points on a sequential basis, chiefly due to a reduction in what were highly elevated commodity and freight costs.
As anticipated, we did see improvement from these factors, but also we accrued for a recovery of costs paid in prior periods that benefited this quarter by roughly 130 basis points. Turning to operating expenses. Q1 OpEx on a GAAP basis decreased 13% quarter on quarter to 99,000,000. Recall, last quarter's GAAP operating expenses included $16,200,000 in one time incentive awards to our employees. On a non GAAP basis, operating expenses increased 4% quarter on quarter and 10% year on year to $95,000,000.
The sequential increase in non GAAP OpEx was primarily due to the fact that Q4 operating expenses benefited from a bad debt recovery of 4 point a $1,500,000 loss as compared to a $1,300,000 loss last quarter. This quarter, our tax expense was $3,700,000 on a GAAP basis and $4,800,000 on a non GAAP basis. In both cases, this quarter benefited from larger tax deductions related to stock based compensation. Our non GAAP tax rate was 14.1 percent for the quarter. We expect our tax rate to approximate 16%, slightly below our prior expectation of an 18% rate.
Lastly, our joint venture contributed income of $1,300,000 this quarter as compared to income of $3,500,000 last quarter, and income of $1,000,000 the same quarter a year ago. Q1 non GAAP diluted earnings per share totaled $0.55 as compared to $0.68 in both the same quarter of last year and in the fourth quarter of fiscal 2020. Cash flow from operations totaled $120,000,000, driven from an improvement from cash flow from operations of negative 96,000,000 in the June quarter, driven largely by changes in working capital. CapEx totaled 12,000,000 resulting in free cash flow of $109,000,000. Our closing balance sheet cash position, which excludes restricted cash, was $300,000,000, while bank debt was $36,000,000, resulting in a net cash balance of $264,000,000.
And I'll remind everyone that we completed our previously announced $30,000,000 share repurchase program for the quarter and wherein we purchased 1,400,000 shares at a weighted average price of $26.24. In our earnings related today, we concurrently announced that our board of directors has authorized the company to repurchase up to another $50,000,000 of its common stock in 31, 2021 until the authorized funds are exhausted under a 10b5 cash flow plan, whichever occurs first. We are currently taking a tactical and opportunistic approach to share repurchase as we fine tune our longer term capital allocation strategy. Turning to working capital metrics. Our Q1 cash conversion cycle was 170 days.
Up from 87 days last quarter and outside of our target range of 85 to 90 days. While the absolute level of our inventory decline based on inventory at 118 days remains elevated relative to history given the lower sales level quarter on quarter. And dealer sales outstanding was 44 days, while days payable outstanding totaled 55 days. Now turning to the outlook for our business. Company expects net sales for the quarter in December 31, 2020, in the range of $780,000,000 to $880,000,000.
We expect gross margins to decline approximately 160 to 200 basis points sequentially due to the cost recovery discrete event mentioned earlier, and higher overhead costs driven by an expected increase in freight. We expect non GAAP operating dollars level to be flattish quarter on quarter. While we're selectively investing in R&D, this was offset by lower audit costs, and actions we took very late in the quarter to selectively reduce headcount. We anticipate the GAAP and non GAAP tax rate to be 16% going forward. We fully expect GAAP diluted GAAP EPS to be in the range of $0.25 $4.7 to fully diluted non GAAP EPS to be in the range of $0.35 to $0.58.
We now expect our CapEx for fiscal 2021 to be in the range of $55,000,000 to $60,000,000, inclusive of the acceleration of the Taiwan building. Project mentioned earlier by Charles. In the meantime, Neoman focused on guiding the company through the volatility presented by this resurgence in COVID 19 and artistly rebuild our business momentum as described by Charles. With that, I'll turn the call back to James for Your first question comes from the line of John Panlankton with FCJS Securities. Your line is open.
My first one is, I think you guys mentioned Internet and cloud as a source of strength in your Q1 results Can you talk a little bit more about that end market and margin profile and the revenue impact of these customers and how
they factor into your guidance for the next quarter? We're having some trouble hearing the question.
I don't know if it's whose line it is.
We can barely hear, John. John, can you speak up a little bit, please repeat the question?
Yeah. Is this better?
Yes. Much better. Here we go.
Okay. Great. I I was saying you mentioned cloud and internet as as a source of strength. In the quarter. I was just wondering if you could talk about the margin profile of the customer and how to factor into your guidance going forward.
Sure. So this was, kind of our 1st phase of some of these customers. I would say that, fortunately, as opposed to what some might think our margin profile was not appreciably different than the margin profile of our other customers. So we expect and hope that that will hold true on a go forward basis as well.
Got it. Thank you. And then can you talk about maybe the, how you see market demand developing over the next two quarters, you know, with the relative puts and takes, whether it be, COVID, election concerns and new platform launches and new product launches that you're doing internally? Yes, it's
hard to predict. But as you may know, right, enterprise and channel image may continue to decline, simply. And, at the same time, the crowd, social networking communication with your screen, demand, still keep strong. And that's why we had created some, big customer in, Logical and, video streaming period. So we started getting some demand from that territory.
And that's why our Taiwan operation manufacture in Taiwan It's basically for no oil cost where have us or not.
Great. That's a good lead off into my next question. I was going to ask about the talent acceleration and then how better positions you both strategically and and maybe if you go into it, how much can you quantify the expected benefit, from moving there over, maybe the near term?
Let me start and have a net value. So, I mean, it's a investment for, I would say, short term, midterm, and long term. So now this year, in Taiwan, Costa is much lower than in our USA operation. Basically into about, 35% to 15%. So for mature products, technically, which is greatly leveraged in our, our possibility, our capacity in Taiwan.
And with COVID and my team, hit USA much worse than in Taiwan. In Taiwan, indeed, almost no impact. And that's why we quickly, that is our Taiwan operation advantage. And I believe there was a few for our short term and gradually, now, at the event that you have become a much clear and much more significant in near term and non trust. Your next question comes from the line of Nehal Chokshi with Northland Capital Markets.
Your line is open.
Yeah. Thanks. And, congratulations on great results all around, especially the strong free cash flow and executing on a share buyback. You guys mentioned that, you noticed areas of recent improvement that gives you confidence that, year over year growth is bottoming here. Can you, discuss exactly which areas are you seeing that recent improvement in And from what point in time are you referencing as well where that, demand profile has improved?
So I think we just navigated a period that was challenging We kind of gave some guidance in terms of how we think that it is, you know, gently going to improve in the December quarter here. Based upon visibility, you know, that we have. I think also, you know, when we talked about some of those new customers, Some of the lead times for their materials are longer in length such that we get a little bit better visibility as to their plans for the March quarter. And so therefore, I think it's some of those, those feeds of information that make us, believe that as we continue to accelerate quarter by quarter, that there is some, you know, tangible evidence of people's plans and not perfect visibility but there's some that's out there to be able to latch on to. I don't know if you have anything else in addition to that Charles.
Yes. Likewise, Yasmina, I mean, in last quarter, I mean, especially after the impact of COVID 19, we start to focused on a large account, high profile, high volume account for a large cloud, a large data center, and a video streaming, a customer, for example, 5g Careco. And we started getting some, very good partnership. And, we start to see the sun. And, however, really high volume, it'll take some time to ramp up.
So last time we say, I mean, at December quarter, we are seeing some help, March quarter and our next year, June quarter, SDV where I see a much bigger head. Yes, I thought of wondering that I could have the investment community understand that a little bit better is that Some of these new customers are actually ordering rack scale products from us. But with that longer lead time, give us some visibility.
I see. Okay. And, second question I have is that a nice slide here on your key vertical markets and growth drivers, I think this is a bit of an evolution of the Supermichael 3.0 vision that you guys had previously talked about. And within that Supermichael 3.0 vision implied in that was a potential for margin expansion. In this new way of presenting it, does that opportunity still present itself?
And can you talk a little bit about how, that might actually look in terms of a a long term margin, profile?
Yes, very good question. I mean, we mentioned Avastin Fomangosurita or about 3 years ago. I'm fortunate to take it today. That is in also for a project. Now this thing is now, it's all over, right?
So we start to execute our super microcontroller power now. Strong way. For example, 5gh and telco, Sydney, SolarWinds 30 So that has been, helping our business and will become a much significant health quarter over quarter. As to our data center and cloud, even our private cloud, business have been growing and we were continuing to invest in that area. So it should be a very significant big driver for us in, certain income and even long term, especially long term, I would have to say.
Your next question comes from the line of Aaron Rakers with Wells Fargo. Your line is open. Aaron Rakers with Wells Fargo. Your line is open.
Sorry, James. I was on mute. I just wanted to ask a question about server cycle. You referenced in your prepared remarks, you know, Intel's ice lake, you also have AMD's Milan Processors. You know, it sounds like you guys continue to see overall ASP increases in your in your system you know, system sales.
How are you thinking about, like, Intel with with 8 channels of memory from 6? You know, how do you think about the ASP trend relative to unit growth as you think about the setup in the calendar 2021?
Yes. More and more customer now really appreciate our total solution. Not just, telephone, but the CPU man, the hard drive. And, Total solution, including management sort of way, including some even applications sort of way up. So including a space of memory, Now as I mentioned, kind of SSP, NVMe, and, total solutions have been our long term goal and, complete direct solution.
And, very soon, we were here with you even more. About, private car, total solution. But, it's a really too early to say too much. Yes. We are moving forward to a final solution.
Okay. And and then maybe sticking on a similar topic. Gross margin was very strong this quarter. Up quite a bit on a sequential basis. So I'm just curious of what you're seeing on the component pricing environment?
What are you embedding in your current quarter expectations far as DRAM and Flash pricing trends? And any thoughts on how that sets up into next year?
Yeah. I mean, economical scale will help us. So, we are growing, global now. And with, new business drives, that we will grow our, revenue, our economies of scale. And that way, I have our gross margin and then a margin ratio.
At the same time, the service business, the solar that is getting up as a half of our coffee as well. Your next question comes from the line of Nick Hajza with SIG. Your line is open.
Thank you. It's actually Mehdi Hosseini. I have a couple of follow ups. Kevin, Can you help us understand how OpEx is gonna play out for the rest of the fiscal year 21?
Sure, Mehdi. So I think, you know, we said that we took some actions in this quarter. We trimmed, some headcount we actually did a similar kind of trend at the end of September that kind of wore fruit here in the December quarter. I think, as we look forward in terms of the pace of our hiring, as Charles has mentioned earlier, If we're going to appreciably hire anyone, it's going to be Taiwan based over the course of time. I think, you know, our views of OpEx now on a non GAAP basis is that, you know, there's, I think we said quarter on quarter, somewhat flat.
May direct a little bit in, the March or, June quarter. If COVID lift and we feel that it's appropriate to give merit increases. But I think we're trying to hover in the, in the mid-90s for a period of time here, And I think that's what you were looking for. Yes.
Got it. And then,
two more questions,
one for Charles, given your extension in Taiwan and how CapEx has effectively increased by 2 to 3 times over a 2 year period. In the meantime, you have been able to diversify and target, at a wider range of end market how should we think for envision opportunities, in the past, you used to give us a 3,000,000,000, revenue target. You'll already be there. I'm not asking you if you're gonna double your revenue given the increasing capacity. But, in the longer term, it seems to me that you can hit revenue CAGR that could be more of a double digit growth given the 2 three times increase in CapEx over the next over the last 2 years.
Is that the right way to think about opportunities in the next 1 or 2 years?
Yeah. I mean, a very good question. I mean, as you may know, right? I mean, our ENA, I mean, I think 2000 year 2017. Pretty much, our yearly compound growth has been about 20% yearly.
Right? So I don't believe we won't be taken to that grocery or paper. Right? We've taken a degree behind us. And although COVID 19 is challenging us, but now we enable Taiwan operation.
The opportunity in Taiwan with lower cost, with, almost no, COVID 19 impact I feel very confident. We will get back to, 2 teach those roles here very soon. Hopefully, not just 2 things. Hopefully, we can never, you know, no no reason we cannot get back to more than 20% or 30% growth yearly. So I have a very good lead and very exciting to in the next few years, I believe.
Okay. And hopefully, we will be with a higher margin business. And in that context, Kevin, how should I think about, either absolute utilization rate, for US San Jose versus Taiwan or or if you don't wanna disclose a specific utilization rate, which region is higher, I'm comparing the US San Jose to Taiwan.
Well, right now, the U. S. Utilization is higher. I think you heard in my prepared remarks that at the current time, Europe and Asia suffering a little bit more than the U. S, you know, because the U.
S. Was the location where we got these new marquee customers. But, I think you know, on a go forward basis, you know, that capacity utilization needs to obviously increase and we'll get some leverage off of that. I think it's also fair to say that with, you know, the, the U. S.
Building is not under active construction at the moment. We're taking a little bit of a pause with it. But we're moving forward with the Taiwan building. I think once those, once those get built out, you know, we may have capacity to on a full tilt basis almost gets like $6,000,000,000. So we would be, building that over the course of time is necessary.
I'm just talking about show and its capabilities. But that's the kind of profile I think that we're looking at. Can I ask you a question? Yes. Indeed, it will reach you at $6,000,000,000, our investment won't increase too much.
Yeah. Those are facility, capacity, pretty much later here. So that kind of describes, Aaron. In previous calls, I talked about how after we get these buildings, you know, done in our CapEx is going to go back to the modest maintenance. And now you have an understanding of where that's going to be.
Your next question comes from the line of Ananda Baruah with Loop. Your line is open.
Hi, good afternoon guys. Thanks for taking the question. A few from me, if I could, just to start, how should we think about the the drivers in the December quarter, could you, could you tell us what you think the biggest, you know, aspects of your business are that will influence the, the incremental sequential revenue in the December quarter? With
COVID nineteen, surveying us, we try to be conservative. So to pay and give a range is 780 to880 I hope it's a conservative number. And, again, that's the one we just mentioned. We are gaining, high callback customer in a large cloud, 5 g vehicle, and, video streaming, all kinds of things. So, I believe, next few quarters should be our good quarter as well.
Yeah. I think Naida also, we're gonna we're gonna see some return on the customers that
took the pause in September. Got it. Some of the more classic on prem on prem, folks. Sounds like. Is that right, Kevin?
And Charles, I appreciate your time and if that's correct.
I gave I gave a long list of types of customer including OEMs and such stuff. It's far.
Got it. And and just with regards to ice lake, and, I don't wanna make I don't wanna stitch things together that that are intended to be sist together, but in the prepared remarks, yeah, I think it was Charles you made mention, you know, slight improvement December. And then it sounded like kind of into 1st half of next year calendar and maybe it's kind of in first half. You know, a stair step stair step kind of kind of take off that big in my words. Does that sound a bit disfigured of it?
And I guess the question is is to what degree does the availability of ice like clay in that relative to just demand you think can get better? You know, regardless of ice lake ice lake or not.
Yeah. As you may know, right, India ice lake now can be available. Very soon that end of this year or early next year. And we have a the strongest product line, Abel, all available now. What is the CPU in potassium, we will be ready to ship a tenth of payment for that night.
So we are already
And it it sounds like you do have a pretty significant impact on when availability occurs.
Yeah. We are waiting for, the new CPU 3 available.
Okay. Great. Just some of the airy questions, how did you guys experience it this quarter? And what are you seeing in, this month to start to start the December quarter. So how do you experience in the, in the September quarter?
And how and how does, how do you feel about, you know, sort of November, sorry, October so far in the context of, you know, linearity.
In in December, I said, or overall opinions. Overall.
Overall. Thanks.
Overall, I believe, the vision will be getting stronger getting paid off, for a couple of reasons. Number 1, we just created some a very high profile customer in that few months. And those rent parties are pretty predictable. And second is our current operation, in the getting already. And we just grow some, strong team in Taiwan.
Those team are ready to grow. So, we have a very good feeling in near future, especially next calendar year, should be a strong year for us. Your next question comes from the line of John Lopez with Vertical Group. Your line is open.
Hi. Thanks so much. Can you guys hear me okay?
Yeah.
Alright. Great. I just want one clarification, Kevin, if I could, which is deferred the last couple of years had trended up pretty nicely. It's kind of flattened out over the last couple of quarters. I'm wondering, is that just because you volumes have dropped off?
And is it just a function of attach, or is there something else influencing that line item?
Well, there's some attach, but it's also true that contracts that we entered into in 20 18 through, you know, early part of 2019. If you recall, I've had very elevated, commodity costs. And, the card for the service is a percentage of revenue. So we had, you know, some more expensive contracts, you know, historically. I think, you know, we do want to continue working on our tax rate.
We do better in some regions than the other, and we need to work on some offshore tax rates to be frank.
Got you. Okay. That's really helpful. Secondly, I'm wondering if you could just rewind a little bit. My recollection, as you guys exited the prior quarter, like calendar Q2, was that the bookings activity had slowed pretty sharply.
Can you just walk us from there to here? Was there a pretty appreciable increase in bookings activity? Did that occur pretty linearly? How does that look exiting calendar q 3 versus, say, exiting calendar q 2?
It's gotten healthier. I mean, hence the guidance.
Fair point. Okay. Two more quick ones, if I could. My recollection is cloud. If we look back a couple of years, I can't remember what you guys called it back then, maybe internet data center, but it was around 20% of the business or or oscillating around that level.
Can you guys give us just a rough sense for where that fits now? Yeah.
We still are not splitting out our revenue segments right now. But I will tell you that the topography of it is quite different now. And that is back in the base that you're referring to, was a pretty large, greater than 10% customer, where we're greater diversified in that segment right now.
Got you. And just on that point, Kevin, is the right way to think about this that you guys are, I mean, to lack of a better term, kind of reentering that vertical. Maybe just talk a little bit about what you guys are perhaps doing differently now. Are you it sounds like perhaps diversifying the customer base is one thing. Are you guys pursuing different use cases?
Is there maybe a bit more geographic spread here? Maybe just talk for a second about how you think about that vertical now versus perhaps how you did say 2, 3 years ago?
Maybe I can share. I mean, please, with our proceeding in Taiwan, getting bigger. And of course, there is a much lower than our operation in USA with Europe. So with that, David, now we will start to approach the market, a much more aggressive reason, and that's a few years. So in in the other way, we already focused on that area very soon.
Your next question comes from the line of John Tanranathan with CJS Securities. Your line is open.
Hi. Just a quick follow on to that question. Is it fair to say that it's the cost advantage of moving the Taiwan that's enabling you to win those customers at this point? Versus, you know, whatever else you may be bringing to the table.
Yeah. Because those large data center, you know, they buy a lot, but they want a more aggressive price. So with our Taiwan operation, now we are much related to service customer like that. And are no further questions at this time. I will turn the call back over to Charles Liang.
Thank you, and I appreciate it today. And looking forward to seeing you in closing. Talk to you very soon. And have a great day. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.