Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer Incorporated Fourth Quarter Fiscal 2019 Business Update Conference Call. The company's news releases issued earlier today are available from its website at www dotsupermicro.com. During the company's presentation, all participants will be in a listen only mode.
Afterwards, securities 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, August 15, 2019. A replay of the call will be accessible until midnight Thursday, August 29, 2019, by dialing 1-eight 40four-five twelve-two 1921. And entering replay pin 5,585,132. International callers should dial 1 412-317-6671.
With us today are Charles Liang, Chairman and Chief Executive Officer Kevin Ballas, Senior Vice President And Chief Financial Officer and Perry Hayes, Senior Vice President, Investor Relations. And now, I would like to turn the conference over to Mr. Hayes. Mr. Hayes, please go ahead, sir.
Good afternoon and thank you for attending Super Micro's business update conference call for the fourth quarter fiscal 2019. Which ended June 30, 2019. During today's conference call, Super Micro will address the company's preliminary financial results for the fourth quarter of fiscal 2019 and the company's efforts to become more current with its remaining SEC filings. References to any financial results are preliminary and subject to change based on finalized results contained in future filings with the SEC. By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available on the company's 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 ten K filing for 2017. And our other SEC filings. All of those documents are available from 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. 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 Bien, Chairman and Chief Executive Officer.
Thank you, Perry, and good afternoon, everyone. Our first quarter revenue will be in the range of $125,000,000 to $835,000,000, which 18, the midpoint of our quarterly guidance of ASMEA. It is 15% lower than last year. And 11% higher than last quarter. For our fiscal year revenue was approximately 3,500,000,000 and represents an increase of approximately 4% from last year.
Non GAAP earnings per share will be in the range of $0.57 to $0.61 compared to the range of $7.5 to $0.17 last year and a range of $0.48 to $0.52 last quarter. System revenue was approximately 81% of total revenue. Season, ASP were a bit lower year over year, mostly due to lower DRAM and then price, which impact revenue. We launched a comprehensive portfolio of over 100 games service and storage systems. Supporting the new UTA 2nd generation Geo Scalable Processes, Kone Cascade Lake.
The new product brings world record performance and efficiency improvement to enterprise cloud 5G and AI workloads with up to 50% data TCO. We have seen strong interest in this new product and address our new product outpaced polyamide transition. It was a challenging period for a traditional strong quarter. Volatile market conditions where document, trader, pension and some key component price reductions impacts our quarterly revenue. However, the trade challenge including tariff impact was minimized by our strong USA manufacturing credit and our distributed global manufacturing footprint in USA, Taiwan and Netherlands, We also see positive signs with our key product lines such as between and cheaper brands.
Which achieved higher sales on both quarterly and yearly basis. Importantly, we see great opportunity as our long term investment in operation and improve internal efficiency. And below cities. And the growth of our key product lines assume the mass demand for application optimized high performance service products and market clients. On the product side, We remain focused on delivering solutions based on our new resource saving architecture.
The Super Micro's unique architecture is aggregate, major subsystems separating, compute, storage, IO, top and cooling. Each resource can be different our upgrade independently, allowing data centers to reduce new recycled costs and their impact to the environment by reducing power consumption and waste. Some components such as longevity power supplies, enclosures and IO devices can remain in deployment for up to 12 years Folozaving are achieved through share of power and cooling as well as 3 air cooling solutions. On a typical 3 to 4 year refresh cycle, Chipotle Resource Savings delivered up to 30% net hardware cost spending on each new frequency cycle. We continue to deliver 1st to market product introducing the first server and storage system that supports all flash EPSFF storage drive.
This optimized NVMe drive, deliver up to 6x most local and up to 5x latency reduction. Over traditional fresh storage, which is ideal for a high performing workload or application. Requiring high IR apps such as autonomous driving, search engine, mission critical database, artificial intelligence, HPC, scientific research, and more. We believe EBSFF will become the main common storage form factor in the near future. For 5G, Chipo Micro is committed to providing the most advanced solution for each remote micro data center.
And co network that provide security, IoT, multiple access edge communities Okay. Open radio access network. The need for powerful server across a wide variety our implementation. We're only increased with the continuing of the rollout of 5G network. Chipotle Edge service and to transform enterprise and empower them with intelligent connectivity from IoT device to cloud.
AI on HD is also made possible as we provide optimized and validated NVIDIA GPU cloud ready and DGX platform edge computing solution to our customer Stepping the pace for last, let me have a brief read of our branding architectures with many innovation for high speed connectivity design. This new product line are checking on doubling the system connectivity bandwidth. And computing power and computing density. 2 of these new X86 projects are called Hyper Rockmart and going to its servers. The early availability is a target of 30 Q1 2020.
In summary, we see tremendous potential opportunities in our enterprise Cloud, 5G, and AI that will benefit the Pharmaceutical Micro's ResourceM solution. I'm very confident in the strength of our product offerings and the continued improvement of our operating fundamentals. Regardless of market cycles, our business model of first to market design That delivers breakthrough innovation in performance decreases and key CEO. We have achieved long term success Moreover, we will continue to invest more people in our strategic relationships to build a stronger presence in key markets and targeted vertical customers. I expect this action where resulting continued market share growth and improvement of our financial performance.
And now, I will hand the section over to Kevin. Thank you, Charles.
First, I will address the current health of the business providing an overview of our financial performance for the fourth quarter of 2019. I will then make a few comments about our progress on our SEC filings. As Charles mentioned earlier, we estimate our fiscal 4th quarter revenue was within the range of $825,000,000 to $835,000,000. Our geographies were lower on a year over year basis with EMEA approximately 14% lower Asia, 19% lower and the U. S.
14% lower. Our estimated range of gross margin on both a GAAP to non GAAP basis was from 14.7 percent to 14.9 percent. Our margins have steadily improved since last year and have benefited from improved customer mix. Product mix and better component pricing. Operating expenses were slightly lower this quarter due to lower reserves for bad debt offset by higher sales and marketing expense.
Of $0.57 approximately $81,000,000. After deducting CapEx of $11,000,000, we estimate free cash flow of approximately $70,000,000 for the quarter. On a cumulative basis over the last 4 quarters, we estimate free cash flow was approximately $259,000,000. This quarter, our cash conversion cycle decreased to 91 days. The decrease was primarily due to a 21 day decrease in inventory days to 92 days.
Actual inventory on a dollar basis declined sequentially. Our cash conversion cycle target remains 85 to 90 days. Now, let me comment on our progress on our remaining delinquent SEC filings. We recently completed our work on the fiscal 2018 financials and have submitted them for audit. We are now working on fiscal 2019, inclusive of the efforts finalized revenue under both the 605 and 606 revenue recognition standards.
We will be under a 2 year engagement with our auditors for both fiscal years 2018 2019 that will enable some efficiency. The team remains focused on becoming fully current. On our SEC filings.
As indicated previously, we will have a
Q and A session, which does by the analysts, we'll be permitted to ask questions.
Will be conducted electronically We will take your questions in the order that you signal and in the order that you signal. And if you have found your question has been asked and answered before could ask it or would like to remove yourself from the queue, please press star 2. Also, if you are on a speaker phone, please make sure that your mute function is disengaged so that your signal can reach our until all And we'll go first to Mehdi Hosseini from Susquehanna Financial Group. Please go ahead,
Just a quick question on gross margins. I believe they were down from the prior quarter. I guess from around 15.5to14.7to14.9. Just wondering what the dynamics were over there. Obviously, revenue ticked up components, prices probably take down.
So just wondering what was driving the decline? And I had a follow-up.
Sure. No problem. This is Kevin. Last quarter, when we highlighted the fact that we were in the mid-fifteen We've cautioned the group that we, looked like we had a very good quarter in terms of everything aligning up perfectly. And as we talked to this same question last quarter, we highlighted the fact that we were in the mid 13th, not too long ago, had broached fourteen towards the mid year of 2019, and we're in between 14 15.
And so we highlighted that as being some steady progress. As we went through the through the quarters. So, we highlighted that last quarter, things lined up very, very well. So I don't necessarily think it's decline. I think that our continued progress is not perfectly linear.
And perhaps maybe you can talk about the overall server pricing environment and maybe provide an overview of just demand trends that you're seeing in the current quarter and what your outlook is moving forward? I'd appreciate that. And then a follow-up.
Yes. I mean, I you know, Matthew, there will be a choppy and macroeconomics that we saw. However, our solution outperform others especially with our CapEx, a very big product line that's all available. So we expect our business with the continuum in Brumie, although maybe not very fast, but the trend will be improving. And especially, I mean, and the new technology will be, positive side for RPD.
Yes. This is Kevin.
I think if we put our lens a little bit shorter in, in time as we looked at this quarter's guidance. Certainly, we are observing are part of the macro situation that many of our competitors have already voiced out. Usually this quarter is seasonally down. And when the macro conditions are like this, sometimes visibility is poor. And so, we have those 3 elements that were in our mind as we set guidance for this next quarter.
Got it. Thanks. And then just last one, would love to get an update on where you are in your enterprise efforts. This is something you've mentioned in the past as far as building out the enterprise effort, services, software, maybe Fortune 500 accounts. Just would love an update there.
Maybe new customer account figures? Anything there would be helpful. Thank you.
Yes, it's Terry. So, yes, our G2K portion of our business, which includes that enterprise section, was approximately 20 a little bit better than 20% of the overall revenue. Within that, the enterprise section was actually up year over year by about 12%. So, we're making steady progress in there with the number of customers that we have and the business that we're doing.
We'll take our next question from Nehal Chokshi from Maxim Group. Please go ahead.
Thanks. And congrats on what I think is that fiscal year that represents records on cash from operations and non GAAP net income. So you now have a $36,000,000 net cash position. That's 29% of your market cap. And based on, I think, on your trailing 12 month, midpoint EPS, that you've provided for the past 12 months, it looks like you're trading at 5x EBITDA net income.
So are you guys willing to put that net cash to work in terms of buybacks, once you're able to, I. E, once the 10 Ks are indeed up to date?
I think if you look at the cash that we have now, certainly we have harvested some of that from the balance sheet. I think roughly out of that $259,000,000, working capital, harvesting was roughly about $70,000,000 of that. And we know that we're going to need that soon when we continue to grow again. So, I know this is a question that came up last time. We are just going to continue to plot forward in terms of understanding what our working capital needs are, as growth returns.
We feel pretty strongly about that.
Okay. And then, that's great that you've submitted fiscal year Canadian financials for finalization by your auditors. Can you confirm that the submitted financials are within the previously announced revenue and EPS ranges?
Yes. No, I'm not going to be able to confirm that. That's not something to address at this moment. Okay.
I will get back in the queue. Thanks.
Our next question comes from John Lopez of Vertical Group. Please go ahead.
Hi, thanks. I just had a couple of clarifications first. Did you guys give us or would you give the number the service system number please or the percentage of the business that was service systems?
Yeah. We said in the, script of Charles's script that was about 81% with services. I'm sorry, the servers.
81. Okay, 81. I'm sorry I missed that. Thanks. My second question, we don't really have all the moving pieces, I guess, but it looks like OpEx was kind of flattish sequentially.
A, I'm wondering if you can confirm that. And then B, just any thoughts on how that ought to trend obviously you guys noted the environment is not terrific right now. So I'm wondering if you guys are doing anything proactive for the balance of the year on the OpEx side.
So it was relatively flattish. We talked about the 2 components that wiggled. I think as we look forward, we will we have confidence in our long term business to invest in. I don't see that we're going to large, increases in OpEx that are in line with what we think needs to be investment for the future.
Got you. Okay, helpful. I would this implies that one of the comments you guys made I apologize. I can't remember who made it, but some version of the Cascade Lake pacing is ahead of prior generations. I'm wondering if you could just flush that out a little bit, maybe not entirely consistent with what we're picking up elsewhere.
So I'm wondering if it's specific to your mix your SKUs. So if you guys could just spend a second on that. And then in doing so, I know you're not going to give guidance. I'm not asking for it, but as you about trending toward the end of the calendar year, any thoughts on just seasonality how applicable that may be given the environment and given what you're seeing with the cascade based projects?
Yes. Thank you. I mean, as you know, we are technology leading company. So when they are, whenever they are a new technology, we had a chance to grow better. Given the macroeconomic, where it would be choppy in the coming months, So we try to be conservative.
However, our Cascade Lake has been growing very well, especially new platform, including Big Twin, and there have been container growing. And Chipotle, with the resource saving start to gain more and more attraction. And like I just mentioned, we recently just launched another tool, a new credit form, including a brand print and hyper block mask. So, although it's in early stage, now we believe in long run, those new technologies where we have all those geometrical.
And if I could just follow-up on that, you make a good point, which is you guys have put a lot of SKUs out around Cascade Lake. It appears as though significantly more on a relative than your peers have. And so I'm wondering, do you would you view Cascade Lake as perhaps an opportunity for maybe like disproportionate share gain move this cycle like I. E. Are your competitors perhaps less focused on this, excuse me, on this iteration of or this portion of the Intel platform than you guys are?
Yes. As you know, there are lots of technology, kind of just available, including I just mentioned, EDSFS and Samsung NF1. Those product lines continue to gain much share, although they are busy new technology. But we see a big pressure in middle term kind of data this year or early next year. There will be a big change we believe and, cut us to cascade.
We feel our signal to go.
Our next question comes from Mehdi Hosseini of Susquehanna Financial Group. Please go ahead.
Hi, David Ryzhik for Mehdi again. Thanks for taking the follow-up Just back to gross margins, I guess moving forward with lower component prices, should we expect that to serve as a tailwind to gross margins moving forward?
Well, I think the reduction in counter price obviously has slowed down. So we've gone through a pretty steep ramp as we went through the last few quarters. We're not going to have that same kind of ramp on a go forward basis. So, I think in terms of it helping us as one of the components in terms of improving our gross margins. I don't see that that's going to be an insane uplift because those prices are the reduction in those prices is flattening out.
Has that altered your decision making around inventory management as far as memory are you strategically adding components given the flattening out?
I would never say we have been contouring where in this DRAM and then price drop period. So, we are container monitor very closely.
Great. And then, just a question on storage. Would you be able to share the growth in next gen storage versus traditional storage and overall storage?
Yes, indeed, especially our new storage form factor, the NF1, especially the EPS they face, we have a bounty of a new platform and we have a good feeling of our, in those product in near UGI in the meter.
And just lastly, Charles, would love to get your take on what you're seeing in in hyperscale or internet data center? I know that's part of the G2000, but we'd love to hear what trends you're seeing amongst your customers there.
Not a little bit, but in light of what we share with you, we continue to grow our economical scale in Taiwan and also in USA. So when our scale continue to grow, we will be more competitive to beat those larger scale data centers. And we are prepared enough.
Our next question comes from Nehal Chokshi of Maxim Group. Please go ahead.
Yes. So I think you stated that you expected to have gained market share during the quarter. So what do you think the market actually did? Because until the asset of group revenue was down 10% year over year about their enterprise and government was down 31% year over year and you just said that you guys were up 12% year over year on the enterprise side. So just maybe give a sense as far as what do you think the market did and what portions of that Intel data center group metric are probably actually most relevant for gauging super micro performance?
Anyhow, it's, we don't always track 1 to 1 with what their group does. I mean, again, if you look at what they're tracking to and a lot of it would be hyperscale, etcetera, and what that that's not a major part of our business, although we have some customers there, the enterprise would be a preference for the group there. Okay. Thank you. Yes, but would I
just say, overall, I mean, we saw our economic scale continue to improve we will be more aggressive in both enterprise and she will be a data center.
Got it. Thank you.
It appears at this time that we have no further questions. I'd like to turn the call back over to Mr. Liang for any additional or closing comments.
Thank you for joining us today and have a great day.
Thank you, ladies and gentlemen. That does conclude the Super Micro 4th Quarter Fiscal 2019 Business Update Conference Call. We do appreciate your participation.