Super Micro Computer, Inc. (NASDAQ:SMCI) Q3 2023 Earnings Call Transcript

Super Micro Computer, Inc. (NASDAQ:SMCI) Q3 2023 Earnings Call Transcript May 2, 2023

Operator: Ladies and gentlemen, good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer Incorporated Fiscal Third Quarter 2023 Results Conference Call. Today’s conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. And I will now turn the conference over to Michael Staiger, Vice President of Corporate Development. You may begin.

Michael Staiger: Good afternoon. And thank you for attending Supermicro’s call to discuss financial results for the third quarter, which ended March 31, 2023. With me today are Charles Liang, Founder, Chairman and Chief Executive Officer; and David Weigand, Chief Financial Officer. 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, 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 & Presentations tab. We have also published management’s 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 those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation, and future business outlook, including guidance for the fourth quarter of fiscal year 2023 and the full fiscal year 2023. There are a number of risk factors that could cause Supermicro’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 fiscal 2022 and our other SEC filings. All of these documents are available on the Investor Relations page of Supermicro’s website.

We assume no obligation to update any forward-looking statements. Most of today’s presentation will refer to non-GAAP financial results and business outlook. For an explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release 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&A session for sell-side analysts to ask questions. I’ll now turn the call over to Charles.

Charles Liang: Thank you, Michael, and good afternoon, everyone. Our revenue for the third quarter of fiscal year 2023 totaled $1.28 billion, down 5% year-on-year and below our initial guidance range as we previously announced, but our non-GAAP earnings per share grew over 5% year-on-year to $1.63, compared to $1.55 a year ago. While the quarter did not unfold as we expected, I am strongly encouraged by our current business momentum as we navigate market uncertainties with our new generation X13, H13 and H100 leading-edge products, especially in artificial intelligence. These new AI product demands from top-tier companies have led us to challenges in terms of new key components availability. Compounded with the economic headwind, our Q3 results were reflective of these difficult yet opportune conditions.

The good news is that we have already started to address these component shortage pressures over the past few months and we are in a much-improved situation going forward. We have started to produce and ship some back orders since April. Here are a few highlights for the quarter. First, record pace of GPU leading-edge design wins and growing back order, including winning at least two new global top 20 customers. Second, we refreshed our entire product portfolio based on new CPU, GPU, Storage and Fabric technologies from key partners including NVIDIA, Intel, AMD and others. And third, increased customer demands of our rack scale PnP solutions and continued expansion and transition from a server/storage hardware manufacturer to a Total IT Solutions provider.

With applications like ChatGPT that heavily count on large language models or LLM and generative AI, the state of AI infrastructure business has grown rapidly. This AI momentum has benefited Supermicro greatly as we are deploying many of the world’s leading and large-scale GPU clusters. In addition, we have built a close and collaborative relationship with NVIDIA over the years by co-developing and offering the most optimized and the fastest time-to-market GPU platform on the market. Aligning new generation product designs with partner ecosystems is highly complex. As I mentioned earlier, multiple key component shortages delayed our ability to manufacture and deliver the new systems like the Delta Next GPU system last quarter. With the improving components availability this quarter, the new GPU system shipments will ramp significantly.

Indeed, we continue to scale up our manufacturing campus in U.S., Taiwan, Netherland and Malaysia, so that we can support our revenue growth in a much larger scale in the coming quarters and years. By leveraging our in-house Building Block design and manufacturing, we are well equipped to navigate through the current economic headwinds. With our building block solutions architecture, we always deliver workload optimized new products to market faster than competitors, like with the recent NVIDIA H100, Intel Sapphire Rapids and AMD Genoa releases. The power consumption and thermal challenges of these new technologies have risen dramatically and 40KW or even 80KW rack solution demands are getting stronger and popular for computing hungry DC and industries.

Having high power efficiency and air/liquid thermal expertise has become one of our key differentiators of success. Combined with our proven green computing pedigree that saves customers much TCO costs, our time-to-market advantage and solution optimization via building block solutions, we anticipate to continue to gain many more new design wins with these new generation products in the quarters ahead. We have made solid progress in our Total IT Solutions initiative by advancing our rack-scale solutions capability. Provided there are no supply constraints, we can design, build, validate full systems and deliver turn-key rack level solutions to customers within a few weeks of placing an order instead of months from competitors. Supermicro’s one-stop shop Total IT Solutions strategy includes AI, servers, storage, networking, software, racking, cabling, power, cooling, integration, validation and management features plus services.

The idea is to let our customers focus more on their applications and new software functions, leaving the IT hardware solutions to Supermicro from cloud to edge. Currently, we are on track to support up to 4,000 racks per month of global manufacturing capacity by the calendar year end. Our business is maintaining a growth rate that is multiples of the overall IT growth rate worldwide in the same period. We are doing so by efficiently taking market share in the new and fastest growing markets. AI, Storage, on-prem Cloud, Embedded and 5G Edge are all verticals we see potential to greatly increase our TAM. We are well positioned to support these highly specialized markets by optimizing our technology, design and business automation at our U.S., Asia and EMEA campuses.

The recently added liquid-cooled rack-scale solutions and production lines, product auto configurator and online business automation will bring more value to customers quicker with better quality. We are also improving our cost structure by scaling our Taiwan and upcoming Malaysia campuses, which will be online soon with some of our key partners. While our March quarter results had some challenges, our new generation of products are in high demand, especially for AI and we anticipate more customers deploying our products in rack-scale PnP. We continue to emerge as one of the largest global suppliers of Total IT Solutions and continue to gain market share. The strength of our products and technology keeps us confident of delivering Q4 revenues in the range of $1.7 billion to $1.9 billion.

If supply conditions improve sooner, we expect to be above that range, despite some economic headwinds ahead. In other words, I continue to expect our fiscal year 2024 revenue to be at least 20% year-over-year growth and we are accelerating to reach our mid- to-long-term growth objectives of $20 billion per year. Now I will pass the call to David Weigand, our Chief Financial Officer, to provide additional details on the quarter. Thank you.

David Weigand: Thank you, Charles. Fiscal Q3, 2023 revenues were $1.28 billion, down 5% year-over-year and down 29% quarter-over-quarter, which was below our initial guidance range of $1.42 billion to $1.52 billion. The shortfall was primarily due to key new component shortages for Supermicro’s new generation server platforms which have been mostly resolved to-date. Our next generation AI platforms are driving record levels of design wins along with strong orders from top-tier customers and a record backlog. We are well positioned for a strong finish to our fiscal year 2023 as we rank up — wrap up — ramp up deliveries of our new platforms to key customers. We note that our shipments against a record backlog may be constrained by supply chain bottlenecks due to high demand for our advanced AI server platforms.

Q3 results were driven by our high growth AI/GPU and rack-scale solutions which represented approximately 29% of our total revenues and we expect significant future growth. An existing Cloud Service Provider customer represented more than 10% of revenues for the first time. On a quarter-over-quarter basis, key new platform component shortages and seasonality impacted our three end market verticals. On a year-over-year basis, we had growth in our OEM appliance and large datacenter vertical reflecting momentum with new datacenter and CSP customers. We recorded $646 million in the Enterprise and Channel vertical, representing 50% of Q3 revenues versus 53% last quarter. This was down 22% year-over-year and down 32% quarter-over-quarter due to new platform component shortages.

The OEM appliance and large datacenter vertical achieved $601 million in revenues, representing 47% of Q3 revenues versus 43% last quarter. This was up 30% — 37% year-over-year as we gained momentum with existing and new datacenter, CSP, and OEM cloud appliance customers and down 23% quarter-over-quarter due to new platform component shortages. Our emerging 5G/Telco/Edge/IoT segment achieved $36 million in revenues, which represented 3% of Q3 revenues versus 4% last quarter. Systems comprised 91% of total revenue and was up 2% year-over-year and down 30% quarter-over-quarter. Subsystems/accessories represented 9% of Q3 revenues and were down 43% year-over-year and down 16% quarter-over-quarter. On a year-over-year basis, the volume of systems and nodes shipped decreased while System node ASPs increased due to higher product ASPs, especially for AI product offerings.

On a quarter-over-quarter basis, the volume of systems and nodes shipped decreased due to lower shipments from component shortages while system node ASPs increased. Geographically, during Q3 the U.S. market represented 61% of revenues, Asia 17%, Europe 18% and Rest of World 4%. On a quarter-over-quarter basis, U.S. revenues increased 3%, Asia decreased 31%, Europe increased 11% and Rest of World decreased 29%. On a quarter-over-quarter basis, U.S. revenues decreased 28%, Asia decreased 35%, Europe decreased 27% and Rest of World decreased 20%. The Q3 non-GAAP gross margin was 17.7%, down 110 basis points quarter-over-quarter and up 210 basis points year-over-year. The decline in the non-GAAP gross margin was due to, one, our efforts to gain market share in the rapidly growing AI server platform market with aggressive pricing targeting strategic large enterprises, data center and CSP customers; secondly, lower factory efficiency from smaller sales volume and a learning curve in the production ramp of new platforms.

The company’s mainstream server business margin profiles were generally on par with last quarter. As we focus on gaining market share with our new AI platforms, we will target the optimal mix of revenue growth, gross margin and operating profit growth to create long-term value for our shareholders. Turning to operating expenses, Q3 OpEx on a GAAP basis increased by 4% quarter-over-quarter and increased 5% year-over-year to $127 million. On a non-GAAP basis, operating expenses increased 7% quarter-over-quarter and increased 6% year-over-year to $116 million. OpEx increased sequentially due to lower NRE and marketing credits for new platform launches and higher headcount. The non-GAAP operating margin was 8.7% for the quarter versus 12.8% last quarter and 7.5% a year ago due to lower revenues and lower gross margins.

Other income and expense was approximately $1.4 million in expense primarily consisting of interest expense of $1.3 million and a small FX loss, as compared to $1.8 million in interest expense and $6.3 million FX losses last quarter. Interest expense decreased sequentially as we paid down some of — some working capital loans last quarter. The tax provision for Q3 was $11 million on a GAAP basis and $15 million on a non-GAAP basis. The GAAP tax rate for Q3 was 11% and non-GAAP tax rate was 14%. Our tax rates were lower sequentially due to higher discrete tax benefits realized in Q3. Lastly, our share of income from our joint venture was a loss of $1 million this quarter, as compared to a loss of $1.4 million last quarter. We delivered Q3 non-GAAP diluted EPS of $1.63, which was up 5% year-over-year and down 50% quarter-over-quarter due to the lower revenues, lower gross margins and higher operating expenses quarter-over-quarter.

Turning to the balance sheet and working capital metrics compared to last quarter, our Q3 cash conversion cycle was 126 days versus 95 days in Q2. Days of inventory was 126, which was up by 27 as we built inventory to fulfill large new customer orders. Days sales outstanding rose 13 days quarter-over-quarter to 51 days, while days payables outstanding increased by nine days to 51 days. Working capital metrics were impacted by the — again by the new platform component shortages, which increased inventory and lengthened the cash conversion cycle as we could not fulfill all our sales demand. In fiscal Q3, we generated positive cash flow from operations of $198 million versus $161 million in Q2. Despite our Q — quarter-over-quarter revenue decline, our operating cash flow benefited from continued profitability and the conversion of accounts receivables to cash.

CapEx was $8 million for Q3 resulting in positive free cash flow of $190 million versus positive free cash flow of $151 million last quarter. The closing balance sheet cash position was $363 million. Total bank debt increased to $187 million as we increased our debt by $17 million during the quarter, while net cash increased to $176 million in Q3 from $135 million in Q2 due to strong operating cash flow. During Q3 we repurchased 1.55 million shares of our common stock for approximately $150 million leaving $50 million remaining under our current $200 million share repurchase authorization which goes until January 31, 2024. Our Board will determine the timing and amount of any future share repurchases. Now turning to the outlook for our business, we have a strong backlog of orders for new platforms entering the seasonally strong June quarter.

We are working diligently with our strategic partners and customers to fulfill their requirements and are making steady progress in easing key supply constraints. For the fourth quarter of fiscal 2023 which ended –ending June 30, 2023, we expect net sales in the range of $1.7 billion to $1.9 billion, GAAP diluted net income per share of $2.13 to $2.65 and non-GAAP diluted net income per share of $2.21 to $2.71. We expect gross margins to be approximately 17% as we focus on gaining market share with our strategic new customers and platforms. As we improve our production efficiencies on the new platforms and gain scale with our customers, we expect our gross margins to improve. However, in the current AI growth, AI market environment, we will continue to balance market share gains with gross margins.

GAAP operating expenses are expected to be $145 million, which includes approximately $10 million in expected stock-based compensation and other expenses that are excluded from non-GAAP diluted net income per common share. GAAP and non-GAAP operating expenses are expected to increase in Q4 due to lower R&D NRE credits and higher personnel and marketing costs. We expect other income and expenses, including interest expense, to be a net expense of approximately $4 million and expect a nominal loss from our joint venture. The company’s projections for GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 14.7%, a non-GAAP tax rate of 15.7% and a fully diluted share count of 56 million for GAAP and 57 million shares for non-GAAP.

The outlook for the fiscal fourth quarter of 2023 fully diluted GAAP EPS includes approximately $7 million in expected stock-based compensation and other expenses, net of tax effects that are excluded from non-GAAP diluted net income per common share. We expect CapEx for the fiscal fourth quarter of 2023 to be in the range of $11 million to $14 million. For the fiscal year 2023 ending June 30, 2023, we are tightening our guidance for revenues for a range — from a range of $6.5 billion to $7.5 billion to a range of $6.6 billion to $6.8 billion, which would represent year-over-year growth of 27% to 31%. GAAP diluted net income per share from a range of $8.50 to $11 to a range of $10.14 to $10.66 and non-GAAP diluted net income per share from a range of $9 to $11.30 to a range of $10.50 to $11.

The GAAP — the company’s projections for GAAP annual net income assume a tax rate of 14.9% and a rate of 16% for non-GAAP net income. For fiscal year 2023, we are assuming a fully diluted share count of 56 million shares for GAAP and 57 million shares for non-GAAP. The outlook for fiscal year 2023 fully diluted GAAP earnings per share includes approximately $33 million in expected stock-based compensation and other expenses, net of tax effects that are excluded from non-GAAP diluted net income per common share. For fiscal year 2024 we are expecting revenue growth of at least 20% based on strong customer demand for our best-in-class new AI platforms and Total IT solutions. We remain confident in our long-term outlook for robust revenue growth and profitability driven by our leading-edge new platforms, design wins with significant new customers, our efficient global manufacturing capacity and continued market share gains.

And Michael, we are now ready for Q&A.

Michael Staiger: Operator?

Q&A Session

Operator: Thank you. And we will take our first question from Nehal Chokshi with Northland Capital Markets. Your line is open.

Nehal Chokshi: Yeah. Thank you. Very impressive buyback rate of $150 million in the quarter to $100 a share. So a very strong statement that the shares are attractive prices and nice to see that backed up with the $1.5 to $11 share fiscal year 2023 guidance. So, with that in mind, on the at least 20% year-over-year revenue growth for fiscal year 2024, what’s your level of confidence that Supermicro can operate at the high end of the target model that you guys communicated two years ago, that being the 14% to 17% gross margin range?

David Weigand: So…

Charles Liang: Yeah. Indeed our confidence is very good. So, again, because of the economic headwinds, so we try to be more conservative here. But at least 20% year-over-year growth and we expect — we hope more than that for sure.

Nehal Chokshi: And what about with respect to gross margin?

David Weigand: Yeah. So, Nehal, we — yeah. Back two years ago, we gave a 17% to 21% — 23% topline growth. Obviously, we’re in there at a minimum of 20%. And for the gross margins, we continue to, like I said, to wrestle with taking market share and also balancing that against gross margins. But we’re confident with our new manufacturing facilities coming online that we will be able to improve our gross margins. And we also, as we come out of this quarter and we begin to ramp our new product offerings that we will be able to improve margins as well.

Nehal Chokshi: Okay. Great. And are you guys seeing any signs of general corporate IT demand weakening — weakness as the CDW preannounced has indicated?

Charles Liang: Yeah. The general IT market has slowed down a little bit, but this year we have a lot of high-end high computing, especially GPU product line that we saw a very strong demand. So, overall, our growth will be strong.

Nehal Chokshi: Okay. And then do you guys have any 10%-plus customers in the quarter and any expectations that, that would contribute within the June quarter as well?

David Weigand: So we did have a new 10% customer this quarter. They’re not a new customer, but they’re a new 10% customer. And we expect from time — from quarter-to-quarter, Nehal, depending on the delivery of these — of our design wins, we will see other customers over — achieve over 10% of our revenue. So that will continue to happen.

Nehal Chokshi: And is that the expectation that there will likely be a new 10% customer pop up within the June quarter?

David Weigand: It’s very possible.

Charles Liang: Yeah. But at the same time, we are also greatly growing our operating NIM through our channel, through retail and also through online business. So we try to balance the growth between the large accounts and a lot of small account. And so we are…

Nehal Chokshi: Thank you, guys. Best of luck. Yeah. Great. Best of luck, guys. Thank you very much.

Charles Liang: Thank you.

Operator: We will take our next question from Mehdi Hosseini with SIG. Your line is open.

Mehdi Hosseini: Yes. Thanks for taking my question. A couple of follow-ups for me. I want to better understand. I remember last earnings conference call, you discussed your confidence in the backlog, and back then, there was a little bit of a pushout of revenue opportunities from perhaps March into June, but you were very confident that as we approach June and September, it should materialize and now that the magnitude of the revenue push was more than expected. So what happened if you if you were confident with the backlog in January, what prevented you to procure the key components? And I have a follow-up.

David Weigand: Sure. There was a shift — there was a dramatic shift toward new AI solutions, Mehdi. And so therefore, it was larger than anyone expected and so the parts availability constrained the amount of shipments that we could do. Obviously, we anticipated a slower quarter, because the third quarter is seasonally slower and we also mentioned — you’re correct, we also mentioned some customers that tapped the brakes and moved out to Q2. But it was really the component shortages that hit us this quarter.

Charles Liang: Yeah. I’m going to Q1, we have some customer postponed shipping right? But at the same time, some other customers growing and they want a high-end, especially GPU product line. And for those high-end GP product line and new design, yes, we have some key component shortage, including GPU/CPU combination and kind of high power thermal solution. So we did a very big effort to prove in those components and now situation have been dramatically improved. That’s why we are pleased for June quarter.

Mehdi Hosseini: Okay. Thank you for details. And David, one that cash flow items. In the December quarter, you were able to work down inventory, but then there was one non-working capital item, which caused the decline in cash from operation, and this quarter, March, it was actually the other way. You had to purchase inventory, but there was a non — there was positive non-working capital item that came in. Can you help us understand how I should think about these dynamics in working capital and how is it going to change looking forward?

David Weigand: Yeah. I think, as we go out, Mehdi, I think, that’s a good question, because we will — working capital wise is this fourth quarter is going to be challenging for me, because we are going to be moving — acquiring a lot of inventory. And so it will — that will challenge our cash flows during this quarter. So that’s something — the timing of inventory and shipments is critical. And as going into this Q4 or ending Q3, we were building inventory, and yet at the same time, as Charles mentioned, we couldn’t ship things, because we didn’t have every — all the parts that we needed. So we’re growing inventory at the same time that we’re constrained on shipping. So what that does is it caused our working capital metrics to go down a little bit and that’s evident in our cash conversion cycle.

But I would say that in spite of that, we generated some of our best cash flow. We generated $200 — almost $200 million in cash flow and we returned $150 million of that to the shareholders. So, what I would say is that, yeah, going into Q4, we — cash flow is very important. But, I think, ultimately, the business has shown that it generates very good cash flows.

Charles Liang: Yeah. Although, like David said, recently cash flow a little bit high, but will be very safe. I would have to say, we will be super safe and a little bit tight, because we would pay — purchase a lot of components for growing June quarter and following the September quarter. I believe June and September quarter will be very strong, especially September quarter, we would say. So we had to prepare components and that’s why cash flow will be a little bit high, but will be super safe.

Mehdi Hosseini: Okay. Thank you. I will go back in the queue.

Operator: And we will take our next question from Ananda Baruah with Loop Capital. Your line is open.

Ananda Baruah: Yeah. Good afternoon, guys. Thanks for taking the question. I really appreciate it. Two, if I could. At the risk of asking maybe the, obvious, I think, 90 days ago, you guys had, Charles said on your earnings call that, you had expected in the second half of this calendar year. So September, December quarter to be in a position to start — this is the way that I interpreted Charles, making a regular part of your book of business, the layering in of larger projects from the cloud cadre from the AI cadre, like that. And I guess my question is, are you seeing — is what we’re seeing in the June quarter that you’re talking about, is that a pull forward of what 90 days ago we anticipating later this year? So is that dynamic happening sooner kind of as you would describe it holistically or is this something different than that? And then I have a follow-up. I appreciate it. Thanks.

Charles Liang: Very good question. Indeed, the June quarter, our demand is very strong, because of the component shortage. So, at this moment, we try to be conservative. So that’s why we share with you $1.7 billion to $1.9 billion. That’s based on some shortage. If we can find those parts quicker than indeed the June quarter will be much stronger than that. And September quarter, likewise you say, what — likewise your question is September quarter, we will continue to be very strong, and as well as the December quarter, I believe. So now that really problem is a shortage. So we had to build other components for inventory. At the same time, we are not quite sure how much we can grow in this quarter. But for sure, $1.7 billion to $1.9 billion should be a very safe number.

Ananda Baruah: Really appreciate that. That’s helpful context. And then I guess the follow-up is for Dave — Dave, for you. Just with regard to your gross margin comments. Any greater context you can share that’s responsible. I realize that this is sort of at the front end of beginning to mix in some of this larger footprint business. But I would love to get a better understanding of how you guys are thinking about sort of the gross margin manifestation if we think about the continued layering in of larger footprint, which may come at a slightly lower margin. Is it really that over time, we just expect a greater presence of that lower margin business with some efficiency gains or is it just in the beginning here, the margin will be lower for the new business, but then collectively, the P&L gross margin expands over time?

David Weigand: Yeah. So we’re looking at it and on — in the — your latter alternative, Ananda, and here’s why. So right now, there’s three things that we’ve been facing. We’re having to face more air transportation costs in order to make our deliveries. So that impacts our margin. And also, we’re having to pay other expedite fees. That impacts our margin. Number two, we ran a lot less through our factories than in Q3 than we did in Q2. So your margin efficiency, your ability to spread your fixed costs, it’s tremendously impacted on a smaller scale. So as we scale up, we improve our margins. Thirdly, the — as we ramped our new product offerings, there is an efficiency on these new — on the production of these new products.

So we are going to improve the efficiency of these products, which will improve the margin. And so those three things alone speak to margin improvements. But again, we are — we have — we believe we have best-of-breed AI products. And those are in high demand and people are coming to us and so we’re going to — we’re very strategic about taking the market.

Charles Liang: Yeah.

Ananda Baruah: Great. Thank you.

Charles Liang: I can add some color. I mean, as I shared, I mean, we are building a $20 billion of revenue, hopefully in midterm and that’s why a grow our capacity and support a large customer is very important to us. Once our volume becomes higher, our costs will be improved and then business operation efficiency will be higher. So we are doing better great way to grow our revenue. And so, I mean, once we start to reach that number under $10 billion to $20 billion, I guess, our gross margin will start to grow, because we won’t always invest for big growth after that.

Ananda Baruah: I appreciate that context guys. Thanks a lot.

Operator: And we will take follow-up questions from Mehdi Hosseini with SIG. Your line is open.

Mehdi Hosseini: Yes. A couple of follow-ups. David, did you say that the OpEx for the June quarter will be around $145 million?

David Weigand: Let’s see. That sounds about — on a non– we have — we gave both GAAP and non-GAAP guidance, Mehdi.

Mehdi Hosseini: Okay.

David Weigand: So our…

Mehdi Hosseini: Let’s see, the non-GAAP was $145 million.

David Weigand: Yeah. Let’s see. Just a second. Yeah. Yeah. $145 million for GAAP.

Mehdi Hosseini: Thank you.

David Weigand: Sure.

Mehdi Hosseini: I’m sorry, GAAP or non-GAAP.

David Weigand: It was — GAAP is going to be $145 million.

Charles Liang: Yeah.

David Weigand: And that includes $10 million in expected stock-based comp. So that would — that means $135 million for non-GAAP.

Mehdi Hosseini: Okay. That’s what I was looking for. Okay. And then CapEx for the June quarter?

David Weigand: Yeah. We said $11 million to $14 million.

Mehdi Hosseini: $11 million to $14 million. Okay. Thank you.

Operator: And ladies and gentlemen, this concludes our question-and-answer session and today’s conference call. We thank you for your participation and you may now disconnect.