Super Micro Computer, Inc. (SMCI) Q3 2022 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer, Inc. Fiscal Third Quarter 2022 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. It’s now my pleasure to turn the call over to Nicole Noutsios, Investor Relations. Please go ahead.

Good afternoon. And thank you for attending Super Micro’s call to discuss financial results for the third quarter, which ended March 31, 2022. With me today are Charles Liang, Founder, Chairman and Chief Executive Officer; Patrick Wang, President, East Coast and SVP, Strategy and Corporate Development; and Dave 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 on the IR section of the company’s website under 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 2022 and the full fiscal year 2022, our long-term revenue goal and the potential impact of COVID-19 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 10-K filing for fiscal 2021, the 10-Q filings made thereafter and our other SEC filings. All of these documents are available on the IR section of Super Micro’s website. We assume no obligation to update any forward-looking statements. Most of today’s presentation will refer to non-GAAP financial results and business outlook. For an explanation of our non-GAAP financial measures, please refer to the accompanying presentation 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 will have a Q&A session for sell-side analysts to ask questions. I will now turn the call over to Charles. Charles?

Thank you, Nicole, and good afternoon, everyone. Today, I am pleased to announce our quarterly revenue of $1 billion – $1.36 billion for fiscal year Q3 2022, which was 51% year-over-year growth and 16% quarter-on-quarter growth sequentially. These results are well above our guidance given three months ago and above our recently updated range given two weeks ago. The continued five quarters of strong earnings indicate our total IT solution growth strategy is working well, and we are only at the very beginning of the breakout. Now let's look at some of the key highlights from the quarter. First, again, our fiscal third quarter net revenue totaled $1.36 billion, up 51% year-on-year and up 16% quarter-on-quarter. We are above our guidance range of $1.1 billion to $1.2 billion. It's Super Micro’s fifth and 60th quarter of faster revenue progression, and we continue to execute our strong growth trajectory at three times to four times higher than the overall industry's growth rate. Our fiscal third quarter non-GAAP earnings per share was more than tripled year-over-year and was $1.55 compared to $0.50 years ago. This 210% growth was well above with the higher end of our guidance range of $0.17 to $0.19, demonstrating strong operating leverages and the customers accepting the value of our total IT solutions. Growth in our major geographies was well balanced, and our recent the Taiwan expansion has contributed to our better operation margin and meeting our growth customer demand. Our results in the past five quarters are showing that we are ahead of our $10 billion annual revenue target that was shared last year March. And our profitability has been improving greatly as well since then. Based on our current demand and capacity, we are forecasting at least $1.45 billion revenue for the coming June quarter to end the fiscal 2022 on a strong note at above $5 billion yearly revenue. Looking further ahead, I believe we will continue to have a strong fiscal year 2023 in the range of $6 billion to $7 billion annually and expect to reach our $10 billion yearly revenue at least one year than the original plan we shared back in 2021 March. The fuel that accelerates our revenue came from our success with our total IT solution in AI, enterprise, Cloud, Edge telco and customers from many other verticals. Riding on the strength and the foundation of Super Micro’s optimal building broad architecture, our total IT solutions allow customers to quickly deploy without going through the complications of design, meditation, solution and integration. This strategy also positions Super Micro very profitably changed the ongoing supply chain challenge compared to our competition. With our building growth and faster growing economy of scale, we can create and deliver workload optimized solutions to customers with time-to-market advantage, quality, performance, cost and TCO advantages. To grow our solutions and customer base faster and more efficiently, we are on track with our command-center based Auto-configurator and B2B, B2C automation platforms. Many customers have tried and like this intelligent database and wafer-based service for many quarters. This represents our next opportunity to scale up and scale out our application optimal solution to many more customers, 24/7 with no downtime and no manpower bandwidth limitation. The B2B and B2C automation program will be greatly launched nationwide in this month, indeed next week, I believe. It will dramatically improve our engineering, operations, sales and service effectiveness and customer satisfaction while accelerating our market share gains to enrich our total IT solution product portfolio, we have doubled our software engineering resource in the past few years to build new features to power our enterprise datacenter and OEM customers. Our Super cloud composer and other software products manage GPU, compute, storage and networking building broker at cloud scale, including rich analytics. So data center operators can make clinical data-driven decisions to improve workflow efficiently. In middle and long term, we see our investment in throughout datacenter management software stack will enable future infrastructure as a service and monitor as a service functionality and that will further enhance our total IT solution capability and value. Our recent Taiwan and US expansion are focusing on delivering [indiscernible] [9.53] total IT solutions in volume, capable of shipping thousands of racks per month directly from SuperMicro campuses, designed with green computing in mind. This energy saving rack-scale solutions, leveraging our latest real air cooling and liquid technologies. More and more of our customers are able to run their datacenter with PoE close to 1.06 or even better. Customers can expect lower TCO by saving energy costs, while increased performance per megawatt in their facility substantially. In some other cases, our customer increased computing capacity up to 15% with the same energy budget. Manufacturing these customers are quite happy to receive higher-quality, higher credit rating products. They are fully optimized, integrate and validate by SuperMicro. Our R&D organizations are happy and hard at work to expand our new technology product lines with the upcoming new Intel, better graphics and AMD in all our processes. We again are ready to bring time-to-market advantages to our customers. We are pleased to see a strong trend in terms of customer seeding and early deployment requests. We are especially partnered closely with NVIDIA and other leading technologies partners in the emerging Metaverse and Omniverse ecosystems and double our GPU product line to support this opportunity and immersive workloads. With all of the new technologies, including PCI-E Gen 5, CXL, CDR5 [ph], the new 350 watt CPU and 700 watt GPU, our portfolio of new platform for rack-scale total IT solution will continue to develop and become a key growth driver for our coming quarters and years. In closing, our 51% year-over-year revenue growth and $1.55 quarterly EPS proved that our total IT solution strategy has been gaining customers' preference and trust in this growing pen. We will continue to enhance our total IT solutions capability and value while continue to lower our operation costs by leveraging our Taiwan production capacity. With our strong technical foundation, dedicated employees, server building bill solutions and application optimized green computing products, we are quickly and consistently winning new customers and their satisfaction now. More importantly, we invest in command center-based B2B and B2C platforms will help us to much efficiently increase our customer base and market share. I and my team will continue to execute our growth strategies and accelerating the time line to reach $10 billion revenue target in short term and start to plan and execute our new $20 billion midterm goal as well. I will now pass the call to David Weigand, our CFO, to provide additional detail on the quarter. David?

Thank you, Charles. I'm pleased to report solid fiscal third quarter revenue of $1.36 billion, 51% year-on-year increase and 16% quarter-on-quarter increase. Our revenue exceeded our initial guidance range of $1.1 billion to $1.2 billion and our recently updated range of $1.3 billion to $1.35 billion. This was our fourth consecutive quarter of revenues exceeding $1 billion. Year-to-date revenue through our fiscal third quarter, increased 43% year-over-year. Our growth initiatives with the total IT solutions targeting fast-growing markets and customers with accelerated GPU and AI workloads, software-defined storage and networking, public and hybrid cloud and edge IoT platforms are gaining momentum. These new growth drivers complement our traditional strength with enterprise, channel and OEM customers, leading to accelerating revenue growth, expanding margins and operating leverage. Revenues for the trailing four quarters of Q4 '21 through Q3 of fiscal year '22, totaled $4.63 billion. In the third fiscal -- Super Micro recorded balanced revenues across all three of our market verticals, demonstrating the resilient nature of our diversified end markets. We achieved $846 million in organic enterprise channel and AI and revenues, representing 62% of Q3 revenues versus 64% last quarter. It was up 44% year-over-year and 12% quarter-over-quarter, with growth driven both by our growing list of large enterprise customers and new product offerings. Our OEM clients and large data center segment achieved $423 million in revenues, representing 31% of Q3 revenues, versus 23% last quarter, which was up 54% year-over-year and up 54% quarter-over-quarter, with strong growth driven by our large, new and existing data center customers and OEM appliance customers. Our 5G/telco, Edge and IoT segment achieved $86 million in revenues, representing 7% of Q3 revenues versus 12% last quarter. This was up 159% year-over-year and down 39% quarter-over-quarter. This emerging segment represents a vast long-term opportunity for us and our design win momentum and backlog continues to grow, but short-term quarter-to-quarter result can fluctuate, depending on the timing of new customer adoption and qualification cycles. Systems comprised 85% of total revenue and subsystems and accessories represented 15% of Q3 revenues. On a year-over-year basis, the volume of systems and nodes shipped as well as system node ASPs increase. On a quarter-over-quarter basis, the volume of systems shipped and system node ASPs increased, while nodes shipped were lower due to product mix. We had a balanced distribution of revenues across geographies, with the US representing 56% of revenue; Asia, including Japan, 23% and Europe 15%, while rest of the world was 6%. On a year-on-year basis, US revenues increased 53%; Asia, including Japan increased 50%, Europe increased 27%, and the rest of the world increased 184%. On a sequential basis, gross revenues increased 19%. Asia, including Japan, increased 9%. Europe increased 5% and the rest of the world increased 124%. The Q3 gross margin was 15.6%, which was up 160 basis points quarter-over-quarter from Q2 and up 180 basis points year-on-year due to price discipline, leverage from higher factory utilization and operating efficiencies, and a continually improving product/customer mix. The quarter-on-quarter and year-on-year increase in gross margins was achieved despite continued elevated freight and supply chain costs. Turning to operating expenses. Q3 OpEx on a GAAP basis increased 7% quarter-on-quarter and 14% year-on-year to $121 million. On a non-GAAP basis, operating expenses increased 6% quarter-on-quarter and increased 15% year-on-year to $110 million. Our non-GAAP operating margin increased significantly to 7.5% for the quarter versus 5.2% last quarter and 3.2% a year ago, demonstrating both improvements in gross margins and operating leverage. The year-on-year and quarter-on-quarter increases on a GAAP and non-GAAP basis were driven by higher headcount and personnel costs and lower research and development NRE credits. Other income and expense was $3.1 million, in income, consisting of $4.6 million in foreign exchange gains, offset by interest expense of $1.5 million, as compared to a $1.8 million expense last quarter. This quarter, the tax provision was $16.2 million on a GAAP basis and $19.6 million on a non-GAAP basis. Our non-GAAP tax rate was 18.7% for the quarter. Our tax rate for GAAP and non-GAAP purposes increased again this quarter, primarily due to a significant increase in pre-tax income in fiscal 2022. Lastly, our share of income from our JV was $0.39 million this quarter as compared to $0.29 million last quarter. The Q3 non-GAAP diluted earnings per share totaled $1.55, which exceeded the high-end of the original guidance range of $0.70 to $0.90, our recently updated Q3 range of $1.40 to $1.50. The increases to EPS were due to a combination of higher revenues, manufacturing efficiency, price discipline, product and customer mix and operating leverage. Cash flow used in operations for Q3 was $228 million compared to cash flow used in operations of $53 in Q2, as accounts receivable and inventories grew due to increasing demand from our customers and to mitigate the continued impact of supply chain disruptions, including CapEx of $11 million, Q3 negative free cash flow totaled $239 million. Key uses of cash during the quarter included increases to inventory and accounts receivable and/or reductions in customer prepayments. This was offset by cash provided from increased accounts payable and short-term debt. We did not repurchase any shares in the quarter. Our closing balance sheet cash position was $247 million, while bank debt was $547 million as we drew down on our bank lines of credit to increase inventory levels as we ramp production of new platforms globally. Turning to the balance sheet and working capital metrics compared to last quarter, our Q3 cash conversion cycle was unchanged at 98 days relative to Q2 and above our target range of 85 to 90 days due to higher inventory. Days of inventory was $117, representing a slight decrease of one day versus the prior quarter. Days sales outstanding was up by two days quarter-on-quarter compared to 9 days, while days payable outstanding was up by 1 day to 58 days. Now turning to the outlook for our business. We note that our Q4 June quarter is typically seasonally strong, and we are enthusiastic about several new customers and innovative new leading-edge total IT solutions ramping in multiple end markets. We are carefully watching the global macro and economic situation and impacts to the supply chain from continuing COVID-19-related disruptions. For the fourth quarter of fiscal 2022, ending June 30, 2022, we expect net sales in the range of $1.4 billion to $1.48 billion, GAAP diluted net income per share of $1.45 to $1.64 and non-GAAP diluted net income per share of $1.51 to $1.69. We expect gross margins to be similar or slightly up from Q3 levels. GAAP operating expenses are expected to be approximately $121 million and include $8 million in stock-based compensation and $1 million in other expenses not included in non-GAAP operating expenses. We expect other income and expense, including interest expense, to be a net expense of approximately $2 million and expect a nominal contribution from our JV. Non-GAAP operating expenses are forecast to be up quarter-on-quarter from continued investment in R&D and higher personnel costs. The company's projections for GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 17.4%, a non-GAAP tax rate of 19.4%, and a fully diluted share count of $54.3 million for GAAP and 55.79% shares for non-GAAP. For the fiscal year ending June 30, 2022, we are raising our revenue guidance range from $4.2 billion, $4.6 billion to a new range of $4.96 billion to $5.04 billion and raising our GAAP diluted net income per share outlook from at least $2.77 to a range of $4.16 to $4.35, and our non-GAAP diluted net income per share from lease 320 to a range of $4.53 to $4.71. The company's projections for GAAP annual net income assumes a tax rate of 16.5% and a rate of 18.7% for non-GAAP net income. For fiscal year 2022, we are assuming a fully diluted share count of 53.6 million shares for GAAP and 55.1 million shares for non-GAAP. The outlook for fiscal year 2022 fully-diluted GAAP earnings per share includes approximately $39 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. Finally, we expect CapEx for the fiscal fourth quarter of 2022 to be in the range of $10 million to $15 million. Nicole, we’re ready for Q&A.

Operator, we can now open the line up for questions.

[Operator Instructions] Your first question comes from the line of Ananda Baruah wit Loop Capital. Your line is open.

Hey, good afternoon, guys. Thanks for taking the question. Yeah, congrats on the great execution first half of this calendar year, it sounds like it's a good following through here. Two, if I could, Charles and David, what would you guys – first time we've got the chance to talk to you guys since you pre-announced. What would you guys say, you would consider to have been incremental versus 90 days ago that's leading to such strong revenue execution for both the March quarter and now the June quarter? And then I have a follow-up. Thanks a lot.

Yeah. That's been utilize because of the supply chain, because there are always some invisible factor. And that's why I mean earlier I mean in March quarter, we try to be conservative. But it's turn out, we have many customers really like our IP total solution, and we ship a lot of completed rig. Indeed, our direct scale PnP, plug and play rack solution, grew a lot year-over-year. Roughly, this year compared with last year, our rack product grew about 5 to 6 – 5 times to 6 times growth. And this momentum, I believe, will continue to be very strong in the next 12 months. So we expect another 3x to 5x direct scale PnP product line growth. So that's why, I mean, the growth has been a little bit surprised us.

That's great context, Charles. And then, Charles, I'm just going to ask you sort of what is the next probably more natural follow-ups since you just remarked that you expect another 3x to 5x. Is the 17% to 23% long-term growth rate? Is that still the appropriate growth rate -- or should it really be something stronger than that as you look out the next couple of years? Thanks.

Next couple of years can be very strong. But again, it depends on our global supply chain situation. As David has mentioned, COV19 still challenging us and also macroeconomic condition. So if in is not much worse, I believe our growth rate year-over-year virtually will continue to grow.

Okay. Thanks. Thanks a lot. I appreciate it. Thanks so much.

Thank you.

Hey, Ananda, this is Patrick. I'm just going to jump in here. You also note that Charles also talked about is expectations on fiscal 2023 and the implied growth rate there. So that's another data point.

Yes. Next year, I mean, fiscal 2023 at this moment, I believe $6 billion to $7 billion will be relatively a very conservative estimation.

Your next question comes from the line of Mehdi Hosseini with SIG. Your line is open.

Yes. And thanks for taking my question and actually, I have a couple of follow-ups. Charles, as you look into next fiscal year, how do you see seasonal trend impacting your September quarter? And I asked that because you're doing really well, especially with diversification of revenue. And I think it would really help us how we should think about seasonal factor and how you would set up the company for $6 billion to $7 billion of revenue run rate in the fiscal year 2023? And I have a follow-up.

Thank you. Very good question. Indeed, traditionally, September will be our slow season. But this time can be quite different, because we have a very strong back order now. And again, lots of customer, high-profile customers really like our rack-scale plug and play solution. So we are preparing the big growth in that segment. So I believe this year, September, we will have a great quarter. It can be even more than June quarter.

Okay. Thanks for that color. And then a question for David. You've had three consecutive quarter of cash burn. And given the strength and your backlog, should assume that you're going to burn cash again in the June quarter?

Yes, Mehdi, I think that as our expand increases, as we have to add accounts receivable and inventory, we will continue to use cash. But we're using it for customers and for inventory. So we would consider that to be really strong uses.

Okay. Thank you.

Your next question comes from the line of Nehal Chokshi with Northland Capital Markets. Your line is open,

Yes, thank you and congrats on the awesome results and amazing guidance. Would you say that the component availability situation has improved at all quarter-to-date or during the March quarter relative to the December quarter?

A few months ago, we suppose that situation will gradually improve and unfortunately, there are some parts -- I believe it continues to be very tight. That's why we still suffering supply chain ability program. Some components, yes, have been dramatically improved, but there are some other components still in a serious shortage. So, we try to improve that situation for sure.

Okay. And so clearly, guidance is indicating that there was no pull-in of demand, especially in the context of how Intel guide. And thus the share gains that you guys are putting up appear to be very sustainable. Still I'd like to hear your pushback that Super Micro's lower lead-time and better management of these constrained components are not leading to these massive share gains that you're seeing at this point in time?

Indeed, because right scale, I mean, present solution, we plan in advance both with customer understand their future demand and we plan in advance flowing all the different components in the events. And then we are able to ship the complete drag to customer kind of relatively efficient, more timing efficient than others. So, at least, I believe, is one of the reasons why we are able to grow. And we will continue to extend the customer base to offer them reg scale solution. Indeed, we have prepared to double our reg scale capacity in the coming quarter -- indeed in June quarter. So, we feel pretty strong that we will be able to continue to help customers to have their supply chain challenge.

Okay, great. And then cash consumption was actually in line with what I had expected. And I presume that was also in line with what you guys had expected given the revenue outperformance, given the cash conversion cycle was flattish Q-to-Q. A, is that correct? Was it in line with what you had expected given the revenue outperformance?

No, it was, Nehal and also, we also have to look out to Q4 and beyond in planning our inventory levels. So, it is going in line. I mean the fact that we have the high growth rate, 51% year-over-year is definitely going to continue to challenge working capital.

Yes, yes. And as such, there's been no share buybacks, right, because all the cash is needed to finance the growth at this point in time, the massive growth that you're seeing?

Yes, exactly right.

Okay. And given that the cash consumption is tracking what you would expect given the revenue growth that you're putting up, does this give you incremental confidence to utilize debt to make capitalist turn track your non-GAAP earnings as opposed to waiting for a slowdown in the business before you can really start a share repurchase program in earnest?

Well, we also have to watch the overall environment. And so we're trying to strike the balance.

Yes, we are talking about a possibility. But given the macroeconomic still have lots of unknown factors. That's why we try to be very careful.

All right, fair guys. Congratulations.

Thank you.

Your next question comes from the line of Jon Tanwanteng with CJS Securities. Your line is open.

Hi. Good afternoon, guys. Thank you for taking my question. And congrats on -- again, on a really great quarter and the outlook. First question is, well, it's great to hear your component supply is getting better. I was wondering how much of a corresponding drop you're seeing in component price? Is it that's the case? And should we think of improvement in the gross margins going forward as well, maybe towards the high end of the charge range?

Indeed, it's hard to say because of the core situation in Asia, as basically Taiwan and Mainland China is kind of very serious. So, I believe it's hard to say. So, although we are doing our bit and believe situation will be getting improved, but exactly how fast at this moment, not much idea. David Weigand?

Yeah. So the second part of your question, Jon, we did experience some gross margin expansion from higher efficiency, which means that we actually -- we had higher throughput our factories at a lower per unit cost. And so, we do expect that to continue, especially as we ramp up production in Taiwan. And so, we do look forward to further margin expansion.

Indeed, the one factor we did not share before, but I'd like to take a little chance to share with everyone. With our continuing growing in rec scale, product play rec scale product. Indeed, with our current facility in USA campus and Taiwan campus. When business continued to grow mostly the current capacity, we can support our revenue up to $12 billion. So our capacity is pretty up. So looking forward in the next many quarters, when our volume continues to grow, our gross margin and net profit will continue to gain advantage from the economical side, economical scale, I mean.

Got it. That's great color. Thank you. And it's really great to see that capacity. My second question is regarding cash flow and some people have touched on this a little bit. Is it in your interest to raise permanent financing to support the growth? Or you just continue to use the revolver? How should we think about your ability to just fund the growth that you've seen?

We are starting the possibility, kind of, depends on the macroeconomic conditions. If macroeconomic conditions continue to be healthy, then we may try to be more aggressively leveraging the money from the bank. Otherwise, we may continue to be conservative.

Okay, understood. Congrats again.

[Operator Instructions] Your next question is from the line of Ananda Baruah with Loop Capital. Your line is open.

Hey, thanks guys for taking the follow-up. I guess, sort of, piggybacking Charles off of one of the last questions. I guess, how much of the revenue upside for the March and June quarter is from new demand that you may have been conservative about relative to how much do you think was demand that you have been getting indications about, but that supply chain became available for. And really, I guess what I'm trying to get a sense of is how much how much of this is supply chain related? And is the follow-through dependent to an extent on new supply chain continuing to get released? I appreciate that both.

Yeah, very good question. Indeed, our demand continue growing, have become stronger and stronger. So the really big limitation now indeed is supply chain to us. So that's why everyday, we are spending time to figure out how to improve the supply chain. So that's the situation. The demand is strong and keeping growing, because of our better technology, total solution and getting very strong support, I suppose.

That's really helpful. And just a quick follow-up there. I've been jumping between calls a little bit to see, so I apologize if it has already been answered or spoken to. But you -- in the prepared remarks, you mentioned the total IT solutions being a catalyst for demand in general. And I think actually, you completed racks, maybe even specifically in the prepared remarks. And so any context you can give us about what you're seeing, I guess, like engagement context. I suppose, with your customers that having the sort of IT Solutions can be a real catalyst to revenue right now? Okay, it looks like it may be -- and I guess is the implication if it's showing up in an increasingly bigger way, first half of this calendar year. Thanks a lot.

Yeah. Indeed, in our supply chain. David, do you want to add something or Patrick. The supply chain has been puzzling us for many, many quarters, as you know, right? So at this moment, our current customers, existing customers and some new customers indeed all have a strong demand. And with that had to work out, David, maybe you can add something to or Patrick.

Yeah. So we're seeing Ananda, we're seeing really a lot of high demand in the AI and ML area. And so those -- the workloads that are being addressed there and the solutions that we're providing are being well received by our customers. And so the engagements that we're in, that's the driver that we're seeing that AI has led our growth over the last three to four quarters.

Yeah. This is Patrick I'll talk to that. I'll jump in here. So the supply chain topic, we've talked about quite a bit. It's not unique to us. But I think we do have to be able to kudos and sets the operations team here at Super Micro. Because without their hard work, we're not able to get the supplies we need. But on the other side, the customers just really like our product. We've got trade products. And we talked about a strong backlog, talked about targeting of top customers. And we're seeing all that stuff play out. And so the good news is that, we've got great solutions, the customers really enjoy the benefits of our product on workloads. And it just turned out to be a very good result. So we're all pretty happy here.

So I agree supply chain and cash flow. In other areas, we will continue to bigot to start how can we that space utilize or how can we further grow the supply chain and more efficiently utilize our cash flow.

Excellent. Thanks so much for the context, you guys.

There are no further questions at this time. Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You my now disconnect.