Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer Incorporated Second Quarter Fiscal 2020 Earnings Conference Call. The company's news releases issued earlier today are available from its website at www.supermicro.com. During the company's presentation, all participants will be in a listen only mode.
Afterwards, security to analysts will be invited to participate in a question and answer session. But the entire call is open to all participants on a listen only basis. As a reminder, this call is being recorded Thursday, February 6, 2020. A replay of the call will be accessible until midnight, Thursday, February 20, 2020 by dialing 1-eight 40four-five 12 2921 and entering replay PIN 9 606207. International callers should dial in at 1 412-317-6671.
With us today are Charles Liang, Chairman and Chief Executive Officer Kevin Bauer, Senior Vice President And Chief Financial Officer and Perry Hayes, Senior Vice President, Investor Relations. I would now like to turn the conference over to Mr. Hayes, Mr. Harris. Please go ahead, sir.
Good afternoon, and thank you for attending Super Micro's financial results conference call for the second quarter of fiscal 2020, which ended December 31, 2019. By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available on the company's website. As a reminder, during today's call, 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 management's scripted commentary on this quarter's results on our website. Before we start, I'll remind you that our remarks include forward looking statements.
There are a number of risk factors that could cause Super Micro's future results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our most recent 10 K filing for 2019, and 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 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 in the supplemental information attached to today's presentation. At the end of today's prepared remarks, We will have a Q and A session for sell side analysts to ask questions. I'll now turn the call over to Charles Liang, Chairman and Chief Executive Officer. Thank you, Penny, and good afternoon, everyone. Over the last couple of years, the simple network has been continuing in our journey of becoming a strong global leader of server installation.
We can add a MME product line and roughly value our operational capacity worldwide. To build our products more efficiently and use high quality. Now Chipotle Michael is the most complete company its AOB. Supporting enterprise customers and data savings is optimized solutions plus maintenance and service and providing the industry base to compete in growth to that channel. And faster and greener.
And what our customer demand, and it's exactly what we deliver. Today, it is also an important milestone of our company as it is our 1st quarter output in listing on the land bank part exchange. We begin this new year on for Supermichael, a strong new company. Each data, financial and operational controls. Combined, we provide basic state technology and total solutions for our customers.
We are more optimistic than ever about our business opportunities ahead. I can comfortably say that we are back stronger and more difficult growth. Before we begin this quarter with regards, mainly remind our shareholders about what Net Super Micro unique in our English. 1st, product innovation with our GMV. We are the only server and storage solutions provider.
With majority of our engineering product development and firmware assembly in that USA. With over 1700 engineering staff mostly in the heart of Silicon Valley and some otherwise. Our stable engineering experience allows us to quickly offer the most advanced technology. Which we have all this great product in our industry. We have capitalized on our industry convergence of cloud at the interim ending and 5G and cellular tender to it.
This emerging technologies to enable business and interchange to utilize the growing tools of ARAS and AR Analytics. To fundamentally economics innovation DNA, uniquely positioned us to provide a company and optimize solutions. To stay with key high growth markets. We are delivering 4 class solutions for global enterprise. From a private to the public cloud, our enterprise data center solution have been widely deployed around the world.
Other certified providers, our enterprise solutions for mediums all the way up applications such as SAP, Orocobre Haagenet to win the field, we also complete seamless solutions based on our hardware profiles. So we and 4,000,000 solid waste design capability. And finally, we are positioned to pay $1,000,000,000 of fast inventory in the growing $100,000,000,000 serverstorage market. Shippo Micro's growth strategy based on our evolved solutions in this model, which continues solutions directly to enterprise companies, data centers, OEMs, and also indirectly to the channel. We plan to discuss our business opportunities and strategy in more detail with investors that are in Maine later this year.
Now turning to our Q2 results. Our 2nd quarter net sales were JMP1000000 which exceeded the high end of our initial guidance and 9% screen share. Consistent with typical season 18. Sales were down 6.5% year over year. And thus far influence these declines in component pricing.
Our indirect or channel business grew to represent 59% of this quarter's revenue. And grew both sequentially and year over year. This quarterly result follows our successful launch of improvement. Channel partner programs. At the same time, our direct and OEM business also grew sequentially with the most older growth coming on largeenterprise.com.
Other than our consumer market focus, we are also enhancing our quota offering through hyperscale installation. We highly optimized CloudDC And Miller DC in product lines. Here are some key product highlights. We saw growth for our local mine and multiple non product lines in datacenter. This quarter, rough months grew sequentially primarily due to strong growth in our outbound platform.
Which was up 30% sequentially and between which grew over 30% quarter on quarter. Mention of AMD products and some other new whereas continued with strong momentum. We saw screen share growth and accelerated computing and non to market for a new GPU base for that hopefully. Our customer choose to go network GPU solution. Overall competition because they provide the best pure performance with our positive GPU interconnect.
And high performance per dollar. Our 5G embedded and IoT solutions for Edge Computing, Careco Data Center, and a Prime also group. And we in this paper, this 2009 to grow significant diabetes calendar year. We are launching new solutions for 5G's spare power in premium leveraging, fully configurable super saver to the edge. Bringing send out X86 computing lines.
To a traditional proprietary eco market. We also grow AI to the edge and finally not inside, hardware and optimize all the way to the excellent, but most of the demanding AI workloads at a manual pace. We continue to focus on our mission to deliver the IT ministry completed solutions and resource saving platforms, including the introduction of our 1st 3rd player year on CDP pouch time. A new path forward with every data architecture. With investor attention of ESG considerations, We anticipate increased demand for our research saving solutions.
Someoneized this quarter, we were pleased to see our revenue start to be excellent. We are also pleased to be able to move forward this quarter after the next day trade targeted company. We will continue to focus on transforming server installations, but building upon our robust engineering fundamentals. Chipo Micro is great to provide a best of products to customers who are demanding innovation, quality, lower TCO and environmental brand redistribution. I will now hand the call over to Kevin to review the details over the quarter in more detail.
Thank you, Charles. Our fiscal second quarter revenue was $871,000,000, exceeding the upper end of our prior guidance range. This reflects a 9% quarter on quarter increase from the first quarter of fiscal 2020, and a 6.5% decrease in the same quarter of last year. Systems comprised 77% of total revenue, and volumes as systems on node shifts were up sequentially and year over year. However, ASPs for systems fell due to declines in commodity and plumbing problems.
Geographic performance was mixed on a challenging year over On a sequential basis, U. S. Market continued to be our strongest market with sequential growth of 12%. However, this quarter, India also grew sequentially increasing by 12%. DJ has modest sequential growth with Taiwan, Korea, in other Asia countries, offsetting weakness in China.
Working down the P and L, our gross margin on a GAAP to non GAAP basis was 15.9%. 210 basis points higher than last year, driven by lower key components costs, as well as favorable customer, geographic and product mix. Q2 operating expenses increased quarter on quarter and year on year primarily due to higher employee costs, including higher R and D expense targeting new opportunities. We had a strong sense of urgency to get current with our SEC filings, including the fiscal 'eighteen ninety and 19 10 K audit as well as the first quarter 20 10 Q review. We also completed a tax restructuring project on December 1, 2019, that results in a lower corporate tax rate of approximately 20% on a go forward basis.
Including these 3 projects increased G and A expense by approximately $6,400,000 in the December quarter, as compared to the September 4, 2019. Other income and expense was a $1,000,000 loss as compared to a $1,000,000 gain. Last quarter, are nearly related to the foreign exchange impact on our Taiwan dollar denominated term loan. Our tax rate for this quarter was 8% on a GAAP basis and 12% on a non GAAP basis. Both of which benefited from other use of reserves following the conclusion of a tax audit in the foreign jurisdiction of $1,600,000.
Lastly, our share of earnings in the joint venture was $1,000,000 loss this quarter as compared to a $1,000,000 gain in the previous quarter and a $1,800,000 loss in the same quarter a year ago. 2nd quarter non GAAP diluted earnings per share totaled $0.57 per diluted share compared to $0.68 last quarter $0.66 last year. Cash flow generated from operations totaled $82,000,000. After deducting for CapEx and investments of $11,000,000, we've generated free cash flow of $71,000,000. And our closing cash position was $309,000,000.
This quarter, our cash conversion cycle was 80 days, which is below our target of 85 to 90 days. Days sales outstanding was 38 days. Days payable at standing totaled 46 days and inventory days was 87. In summary, we are pleased to see revenues reaccelerate. We are also pleased to be able to report this quarter as a NASDAQ traded public company with stronger financial controls.
Now turning to our outlook. The company expects net sales for the quarter ending March 31, 2020, in a range of $770,000,000 to $840,000,000. In addition to typically repair seasonal trends, We are increasingly cautious given the unfolding impacts of the coronavirus outbreak. Following further significant disruption from the outbreak, we expect this quarter to represent a trough and see consecutive frames killing healthy year over year growth going forward. In particular, we are encouraged by a healthy customer pipeline supported by a number of technology refreshers and product cycles in the second half of calendar twenty twenty.
With regard to operating expenses, we will continue to invest in personnel to fuel growth. We are also aggressively remediated material weaknesses with the goal of full remediation by January 2020. Therefore, while OpEx was declined sequentially in the March quarter, a gross sequentially from the June September quarter, due to the audit of our financials and testing of our remediation efforts. We expect audit remediation costs to revert to normal methods after the September quarter. We also announced that we expect to incur additional charges of $45,000,000 to $40,000,000 in the 3rd fiscal quarter that are one time in nature.
These one time charges suggest residual cleanup matters from our extended blackout period. We are taking actions to address benefits that we're not able to be realized by certain of our long term and most dedicated key employees. Further, the board is considering an additional retention bonus to certainly raise. And lastly, our board is considering appropriate forms of compensation for both of these matters. Regarding the use of cash through the rest of fiscal 'twenty, we will apply cash to completing 2 buildings: 1 in San Jose and the other in Taiwan, which will be completed over 2 years.
As I mentioned earlier, we expect hiring and normal costs related to audit and remediation for several more quarters. Assuming this revenue range, we expect non GAAP earnings per diluted share of approximately $0.35 to $0.55 for the quarter. And as a reminder, these one time charges are not included in the non GAAP EPS range. In closing, Let me highlight an upcoming event for the financial community. We will be attending Susquehanna's Knight Annual Technology Conference in New York City on March 12.
With that, I'll turn it back to Barry for Q And A. Thank you, Kevin. I would just like to remind, shareholders who are listening in on the call. I understand that the audio may not have been very clear. I just want to remind you that the transcript will be available on our website, and that is at this time.
So if you had any questions understanding part of it, please refer to the transcript. Operator, we're now ready for questions.
Thank you, We'll take your questions in the order that you signal. And if you find your question has been asked or answered before you could ask it, Also if you're on a speaker phone, please make sure that your mute function is designated so that you We will then come back to you for additional questions. Our first question will go to Ananda Baravan with Loop Capital.
Hi, good afternoon, you guys. For taking my questions and congratulations on continued progress forward. This could be for both Charles and Kevin. Just Starting with the new revenue trajectory, you guys at least these two comments, Kevin, you said Tier 2 growth going forward. I mean, you also talked about, I think, in the second half of the year, stronger R and D expense, I'm paraphrasing here, but the fee to revenue opportunities and the guide for for the March quarter is 78% at the midpoint.
So could you talk about, how you'd like us to think about sequential revenue kind of tempo and, and trajectory in the coming quarters to the extent that you're comfortable just so we can get a sense of that. And then what some
of those upcoming revenue opportunities are? As we highlighted, this quarter, we have costs for caution a little bit with the coronavirus that is out there. What I tried to convey is that once we get through this quarter and say there are no residual effects of that then we like what we see in terms of what our new customer pipeline looks like. As well as knowing that the technology refreshes put at the end of the year. And so we don't normally give a longer term guidance but just giving a little bit color for the investment community and for yourself.
Appreciate that. And that's at the end of the calendar year?
Correct.
Got it. Great. Thanks. And then just quickly on OpEx, if I could, You mentioned OpEx increasing in this, and does that shift a couple of moving parts and samples to the OpEx? You had magnitude of OpEx increasing where you mentioned OpEx increasing in the second half
of the year. Can you give us
a sense just for modeling purposes out of the gate here? How would you like us to think about magnitude? And then, I missed the part with regard to audit costs. I think it's December quarter. It sounds like you're saying that normalizes, but
you just want to get a sense of what
the we should how we should expect the impact on when that rolls up as well or normalizes as well? Thanks.
Yes. So let's first talk about our R and D investments. So we mentioned that we continue to invest in R and D for future products. Another threat of the company is to enhance our software capabilities and some of that is really focused on software engineers. And we are signaling that we continue to invest in.
As it relates to OpEx, I understand that certainly, as we really, really focused on giving compliance in this quarter, that $6,500,000 is maybe not comprehended in modeling. And so, therefore, I wanted to address that thing that when we had our auto team looking currently on So 'eighteen, 'nineteen, as well as first year 'twenty, we went to a peak. And that's why I tried to call that out. So that $6,400,000, I think, would it say from auto that that will not occur in the March quarter? And so kind of reset your base with that in mind.
And then I was trying to give you the topology of the way audit flow thereafter So therefore, you're going to be doing in a lot of remediation activity internally. And then as time goes by we'll be working with the audit firms to both audit the 2020 results as well as the intensity of their auditing performance on internal controls, hopefully, such that will be remediated by 2020. So that's that's the shape that I tried to give you a reset into the March quarter and then kind of like increasing through the September.
Okay, great. Thanks. I appreciate it. That was helpful. It does.
I appreciate the color. Yes, thanks guys.
Thank you. We'll take our next question from Mehdi Hosseini with SIG.
Yes. Thanks for taking my question. A couple of follow ups. First one is for both Charles and Kevin. Commodity prices are on the rise and your OpEx is also going to increase June September quarter.
You're also talking about revenue opportunities. So when I look at the trend, it seems like we shouldn't really expect any margin expansion until like a year from now or early 2021. Given the commodity prices that would cap gross margin expansion and also the increasing OpEx. Am I thinking that this driver or am I missing and I have a follow-up.
Well, I think, we're always looking for ways to improve, but I think maybe increasing commodity price as a margin percentage, I think I articulated that that could be a little bit of a headwind. So I think you're on track there. So this is, since many quarters, maybe few years ago, we start to investing much more in, for more, super mega SSDs provide a loss of total solution. To our own industry customers. Not like 10 years ago, we premeditated on how they So we can teach you what my goal is to pay as a total solution company.
And within the world, we will add more value to our product.
Sure. And that's actually a good point. And it leads to my second question just for Charles. It's great that you're not current with your filing on who listed now that there's significant growth opportunity and hopefully, we did the margin expansion, it's not due to the next year. But can you share with us, Charles, what are you doing to improve governance?
What are you doing so that as you grow the business, there's also checks and balances that would help with increased confidence so that we could look forward and the past would be just a real view.
Yes, that's why you have to say, I mean, in that field, yes, we started investing more and more in our firmware software and for those solutions. So we are very busy to, focus much more on the enterprises including government and some other mission critical So, for this point of view, we feel very comfortable to, to go out and go in
Sure. That's well understood. But what are the key checks and balances that you're putting in place? So as you grow there's also a more systematic approach in scaling your business so that your top line and bottom line are consistent.
Yes, sure. So, maybe I think I can share with you that Charles has been very very forward and very supportive in terms of investing in the field and ensuring that for instance, the internal audits and the compliance group are all joined at the hip. And I will tell you that now with Donna at the helm at sales and Alex being our COO. The communication in training across the entire organization this light years ahead of what it was a year or 2 ago. And to give you a little bit of color, I think, just this quarter, we were very enhanced in terms of the way that we closed this quarter and being very interactive with the operational people to understand everything that's going on to make sure that we are fully aware of what impacts the financials.
And so, Charles certainly helps us make sure that we have all the resources to be able to do that. As you know, we have other remediation efforts that we need to attend to. You brought on a wonderful AC chair that has helped us in terms of helping to get and understand ideas of how an app scale company needs to perform revenue on a daily basis. As well as follow-up with requisite investments in IT. So there's a lot going on in the HECLTP to submit.
Yes, it's basically the SAP system has been much mature than 3 years ago or 3 years ago. In our, as in a professional headcount in Malaysia team and kind of compromising I would like to say we pretty much doubled our headcount in compliance and financial department compared with 3 years ago. So all of those kind of, genetically improve our, population and palizio function. Great. Thank you.
Thank you. We'll now move on to our next question from Aaron Ryker with Wells Fargo.
Yeah. Thanks, for taking the questions. Also congratulations on, being out, on the results and stuff. Kind of building on Mehdi's question, I'm just curious, I heard the comment in the prepared remarks about positive views on the pipeline if opportunities looking through the course of this year. And I guess the simple question of that is, you know, Kevin, how would you define pipelines?
How has the methodology around looking at the pipeline change? And again, what is pipeline to you guys given obviously the nature of your business is fairly turns oriented? I'm just curious of how you what underlies that comment? As we look forward, I do have a follow-up.
Yes. So I think it's is probably pretty traditional and that the pipeline that I was referring to is really, the targeted customers that we're trying to obtain. And understanding what's what is in front of us and the level of efforts that are trying to land new customers. So sometimes pipeline is referred to growing backlog and all those kind of things, which is not our business. What we're talking about is, land of new customers.
Yes, especially in last few years, we start to have a more enterprise account. So those enterprise, not the account, we already continue to provide the quota for me, for months, not like distribution and and regular data center, they change vendor, kind of multi in the group.
Okay. And then the follow-up question is, kind of tied to the pipeline commentary, is that you know, as we move through the course of 2020, there seems to be a little bit of a different cadence to kind of server cycle dynamics and I guess particularly around you know, the cadence of Intel's product cycles, what that means for your business. So how do you see, you know, there's a lot of discussion out there around Cascade Lake and the ramp of that going to Cooper Lake and whether or not there could be any kind of delays on ice lake how do you see the cadence of kind of the server CPU cycle through the course of this year? And how relevant has
A and B as compared with the Chrome in
the context of your business?
Yes. I mean, obviously, A and B, in the growing, quickly. And, details to have a more dynamic need for that. So basically, by the way, when they are new technology, new generation product always outperform the older product. So we had a very strong engineering team and 30 folks from, individually, the new technologies in the market.
So taking as an A and B loan or A and P, a corporate cascades and deliveries or coming, I say, we are aware of detail. And that's why we believe this calendar year, and next year, I believe we will have a good chance to grow much faster.
And just to slip in one other question, how quickly can you pass through, you know, upward pricing on a component front? As we look at component pricing potentially moving higher, I guess particularly around DRAM, as we move through the course of this year, how do I think about your guys' ability to pass through pricing on the way up? And obviously, has had an impact on ASPs on the way down. But as pricing comes back, you know, how quickly do I think in your business model, do you pass that back through from a from a pricing perspective.
Okay. Yes. Basically, we have a much stronger relationship with our vendor. Already. And so, for the amount that we are able to be correct, we also need price to without happening.
So the overall impact should be released. You're trying to understand the delay. And I think there is always a delay, but we try to be very nimble in that and we pull it frequently.
Okay. Thank you.
Thank you. We'll now move on to our next question from Nehal Chokshi with Maxim Group. Please go ahead.
All right. Thank you. Congratulations on a really strong cash from operations quarter. Looks like the drivers were across the board in terms of the cash conversion cycle. Should
is this now at a level where
you expect it to be or did
you guys actually over index a little bit on the contraction of a cash conversion cycle?
Yes, I think we had a good quarter. And I did refer to the fact that it was better than what our near term target range was. I like every new watermark, I'm not sure that we'll be there because forever because we have seasonal seasonalities that we have to live with. But, I think what we'll do now is kind of revisit our target and, over the course of time, see if, that target can be shifted a little bit better performance and we'll give an update on that.
Okay. And I apologize if this has been asked earlier. I'm having trouble hearing you guys clearly. But, did you guys give any metrics on the large enterprise customer segment?
No, we did not, we broke it down basically in terms of direct and then from direct channels.
Okay. Got a couple more questions. On the performance within the quarter, Obviously, you guys did, came in just above the high end of your guidance. So that's great to see. What do you think was the Delta relative to your performance?
Do you think it was an industry performed better or you guys performed better than what you had expected? And then We're also to the prior few quarters, Supermicro revenue year over year growth had been underperforming the industry. Do you have a sense as far as how you guys did perform relative to the industry for the December quarter?
Yes, and indeed, before we always grew, we are much faster than that industry. Like, the pay day period period was slow down. Now it's time to get back to our Puerto Rico again. So we, as we won't be able to grow updated in our industry.
Is that what's embedded in the March key guidance?
I'm sorry. Your question was a little muffled.
Yes. Charles mentioned that it's expected to grow faster than the industry going forward now. Is that embedded in the March 2 guidance?
I mean, Mark, it's a very difficult quarter. I think we're talking about, you know, beyond the March quarter, just given all of the the macro dynamics that we talked about.
Okay, good. And then, could you comment particularly on, you did mention that, geographic performance was uneven, but what was the reason behind that? Was that industry or super microspecific?
We haven't seen everyone else's industry breakout. We haven't compared this necessarily, but In Europe, I think it was a little soft from datacenter customers.
Thank you. We'll now take our next question from John Lopez with Vertical Group.
Hi, thanks so much. I agree. I hope you can bear with me. The first one, the deferred revenue continues to grow a lot and it's like comfortably over $200,000,000. Can you just remind us like what's driving that?
And then does that yields you any different or better visibility looking forward than was the case before that deferred balance really started to come up?
Yes. So I think, 1st and foremost, it's good that we're starting to get a stronger service business. Certainly, when you are attacking enterprise customers, we want that white glove performance or rather expectation. That helps do that. So it is a little bit of a proxy for that.
There's a lot going on in that deferred service revenue in terms of the length of contract that people are signing up for. Also, pricing over the course of time, investing in the service revenue line item as well. But I think you're right in terms of it growing as a healthy thing for Supermicro. And what I've said in past calls is that so far it is a small number from a revenue perspective, but it hopefully will be giving us some buffering in the margin area as time goes by. So it's also a good directional client for Super Micro and there's a proof point to a certain degree of EMEA, the increase in software and service associated company, which Charles outlined earlier.
Yes, this year, we started the service savings going in about more than 50% year. So we believe, the Trinity Health Convenience for a next many years to come.
Okay. Great. That's helpful. Thanks. My second one, if we just look at the December quarter,
I know I don't
have the exact numbers here, but
if I kind of ballpark your commentary, It looks like the non server systems business, that subsystems and accessories segment, was up a lot. Is driving that right? And B, like, what was driving that, to kind of a disproportionately high level of growth relative to server systems?
So, yes, this indirect channel was higher than what we've typically seen I just want to call out though that both the Direct and OEM business and the indirect channel business both grew sequentially. The indirect channel, we've had a number of programs that we've launched in support of the channel. That I think has been helpful. Also, we've seen that, the channel also includes, the disty part where we sell subsystems, but it also includes VARs where we have some larger customers buying systems from them. So That's primarily what we saw larger purchases through the indirect channels from some of our larger customers.
Yes. So I think the key thing there that Terry kind of broke out a little bit is that one cannot make a direct connection to systems versus subsystem and channels versus direct. It is quite a bit of a mix in there.
And that makes sense. Just thinking about the March I'm not looking for segment guidance, but would you expect that growth rate to come normalize between the two segments looking into March? I think
we'll see contribution from those probably in the same degree. Yes, that would be a sequential comment. We might see the same kind of hit when we compare year over year, however.
Okay. Got you. Thanks. The last one, I'm hoping to come back to the OpEx real quick, because there's a lot of moving pieces here, but if I could just ask it this way, The March quarter looks like you're guiding us to something in like the high 80s, excuse me, on a non GAAP basis. From there, what level of increase should we expect for the balance of the year?
And is there I'm trying to possibly rethink qualitatively. Is there a scenario where OpEx actually declines from the calendar 3rd to the calendar 4th? As some of these one time things move to completion?
Well, I'm glad you asked that question because you've misinterpreted what I said.
Okay, great.
We had an OpEx non GAAP OpEx in the quarter be a little over $100,000,000, right? And so what I tried to say is that $6,500,000 will defeat that we will come off for the March quarter. So strip off 6,500,000. And then to have from that new baseline, we would have some trending upward expense from that. So glad you asked that one.
Okay. And sorry, just the last part about, is there are you guys embedding some kind of like interim peak here in the middle to late part of the second, third quarter that then declines into the 4th, or we just continue to ramp through the year?
So it'll be continuing to ramp And then actually, first quarter 'twenty one, I think, would be a peek from the audit cost perspective.
First quarter of calendar 'twenty one?
Yes, that's when the bulk of the work of the audit is done on June
And we'll We'll take our next question from Ananda Baru with Loop Capital.
So I just want to
Hi. Thank you.
I was speaking in fiscal quarter. 1Q 'twenty one would be September of 2020.
Cool. Thanks. Hey, Kevin, just sort of sticking with that theme, this is a, more of a definitely calendar 'twenty one calendar 'twenty one going to calendar 'twenty two question. More philosophically about how we should think about how you would like to think about business model evolution. 1, what sort of all the audit costs have rolled off and you have these new programs running.
How would you like us to think about the sort of op margin, not guidance, but sort of leverage in the model? How you guys are thinking about, anecdotally and philosophically funding, funding new programs? It sounds like you have at least a handful of things you're pretty excited about right now. What's the right way for us to think about as we think about calendar 'twenty one and moving towards normalized
in different lenders? Yes, it's a little bit premature for us to be able to call that out right now. In our interactions, in the past quarter or so, we've mentioned that now that we're back on the market that we want to take a little bit of time redescribing the company and preparing for an Analyst Day in which we would then present a model going forward. So not quite ready to answer that question, please.
Okay. Got it. Are you have you guys decided upon doing an Analyst Day at some point this year?
Yes. We've kind of said late spring, early summer. Okay. And then if we would do it, we would be still in New York. As you may know, right?
I mean, from last previous, we see a super macro graduate and extend our fees to a total solution, a number I did 5 years ago from the pretty much appeal hardware company. So now we are moving to a non GAAP hardware company about total provision. We're working on a firmware starter app and service. So they were putting a moon value to our
Thank you. We'll take our next question from Nehal Chokshi.
On your last slide of your presentation deck,
you have 3.0 solutions. Management software and then global services and support that's been driving us for the past 3 years. What is the level of
your global services and support personnel to date?
Kind of, it's an idea. So in terms of Javier, for sure, we are more, computer systems Ohio Valley is even improving our security, inadequate and future and kind of the whole cloud English budget. And other than that, we started overall in site support in, some other further integration
Okay. Can you give any commentary as far as how large is the, global support
support staff at this point in time? Yes. We don't have that number on our fingertips what I can tell you is, there are some reasons that we work with, partners who are officers as well. So, you know, our strategy is to work with partners in new markets and then we'll support these where we have scale for the fleet. So I'll take that question and answer it next time.
Think you're right in that there's going to be increasing questions about our service capabilities as it becomes more meaningful to the company.
Right. Okay. Thank you. Thank you. And it appears at this time, we have no further questions at this time.
I'd like to turn the conference back over to Mr. Liang any additional or closing remarks. Thank you. Ladies and gentlemen, that does conclude the Super Micro Second Quarter fiscal 2020 earnings conference call. We do appreciate your participation.
You may disconnect at this time.