Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer Incorporated Fourth Quarter and Fiscal 2016 Conference Call. The company's news release issued earlier today is available from its website at www.supermicro.com. In addition, during today's call, the company will refer to a slide presentation that is made available to participants, which can be accessed in a downloadable PDF format on its website at www.supermicro.com in the Investor Relations section under the Events & Presentations tab. During the company's presentation, all participants will be in a listen-only mode. Afterwards, securities analysts and institutional portfolio managers 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 4, 2016. A replay of the call will be accessible until midnight, Thursday, August 18, 2016, by dialing 1-877-870-5176 and entering replay pin 1154709. International callers should dial 1-858-384-5517. With us today are Charles Liang, Chairman and Chief Executive Officer; Howard Hideshima, Chief Financial Officer; and Perry Hayes, Senior Vice President, Investor Relations. And now, I'd like to turn the conference over to Mr. Hayes. Mr. Hayes, please go ahead, sir.

Thank you. Good afternoon, and thank you for attending Super Micro's conference call on financial results for the fourth quarter and fiscal year 2016, which ended June 30, 2016. By now, you should have received a copy of today's news release 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. Please turn to slide two. 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 Form 10-K for fiscal 2015, 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 we'll refer to non-GAAP financial results and outlooks. For an explanation of our non-GAAP financial measures, please refer to slide three of this 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. Now, I'll turn the call over to Charles Liang, Chairman and Chief Executive Officer.

Thank you, Perry, and good afternoon, everyone. Please refer to slide four through slide six. Let me provide you with the summary of our fiscal fourth quarter. Revenue was $524 million. It's 1.6% lower from last quarter and 8.6% lower year-over-year. Non-GAAP net income was $10.4 million. It's 45.4% lower from last quarter and 65.4% lower year-over-year. Non-GAAP earnings per share was $0.20 per diluted share, compared to $0.36 last quarter and $0.57 last year. As previously announced, this quarter, our results was below expectation. While we continue to grow in middle-size accounts, our business has become more depend on large datacenter customers. And we had two specific large datacenter customer project that impact the quarter, reduce business from our large datacenter customers result revenue volatility, which in turn lower our manufacturing utilization globally by 14%, which had negative impact to margin and profitability. We are undergoing the restructure of our operational infrastructure, including our global SAP implementation, new global tax restructure and bonded warehouse. These investments will help to streamline the business, improve efficiency and increase profitability in long-term. But unfortunately, to lower our (05:42) costs from business is traction and slowdown in the quarter, that impact execution and pricing flexibility. We expect to complete the whole restructuring in the December quarter this year, and after that, we will be more efficient than ever before. Last quarter, system sales were 65.5% of revenue, compared to 61.7% last year, as we continue to see success in our efforts to grow the higher value total system business. The two key vertical that drive our system business are: first, Internet cloud data center, comprise 18% of total revenue, but had been temporarily slow in the past two quarters; and storage, which was 19% of total revenue, down 15% from last year. However,…

Thank you, Charles, and good afternoon, everyone. I will focus my remarks on earnings, gross margins, operating expenses and similar items on a non-GAAP basis, which reflects adjustments to exclude stock compensation expenses. Reconciliation of GAAP to non-GAAP is included in the financial statements of the company in today's earnings release and in the supplemental detail in the slide presentation accompanying this conference call. Let me begin with a review of the fourth quarter income statement. Please turn to slide nine. Revenue was $524.3 million, down 8.6% from the same quarter a year ago and down 1.6% sequentially. The decrease in revenue from last year was primarily due to our decrease in subsystems and accessories, which was down 17.6%, and a decrease in sales to distributors which was down 14.8%. These are offset in part by growth in HPC, cloud Internet datacenter and next-gen storage of 93%, 6% and 9% respectively. On a geographical basis, we had a decrease in Europe of 15.9%, followed by U.S. at 8.6%, while Asia was about flat. The sequential decrease in revenue was primarily due to weakness in server solutions, which was down 7.8% due to less sales from our cloud Internet datacenter segment, which was down 31%, offset in part by strength in our subsystems business, which was up 12.9%. In addition, next-gen storage grew at 10.8%. On a geographical basis, we had a decrease in the other regions of 31%, primarily due to our cloud Internet datacenter projects. Europe was down 1.8%. U.S. was flat while Asia was up 5.2%. Slide 10, turning to product mix, the proportion of revenues from server systems was 65.5% of the total revenues, which was up from 61.7% the same quarter a year ago and down from 69.9% last quarter. ASP for servers was $4,100 per…

Thank you, Howard. For the entire fiscal year, we saw 11% revenue growth for the year, which means Super Micro is still one of the fastest-growing company in the IT industry. We are much better positioned with our new global SAP implementation, new global operation, and corporate tax restructure and bonded warehouse. Despite softening of our revenue and the temporary setback of our operation this quarter, our long-term growth trend remain intact, based on our even stronger product portfolio, and we are looking forward to a strong new fiscal year. Operator, at this time, we are ready for questions.

Thank you, sir. Ladies and gentlemen, our question-and-answer session will be conducted electronically. And we'll go first to Mehdi Hosseini with SIG.

Yes. Thanks for taking my question. My first question is for Charles. I'm looking at your slide number seven, and I don't see the new server CPU architecture like a Skylake-M. Is that having an impact on your ability to forecast? And how this changes in both CPU and graphics are impacting your server business? And I have a follow-up.

Okay. Thank you. I mean, we have a lots of new design just available like Intel Xeon Phi. We will start to ship high volume now and also like NVIDIA Pascal, we have a product fully ready to ship about this month, I mean, August. And as to Skylake, yes, we have very strong product portfolio, which is also a new architecture. And, unfortunately, it's a product for next year. We have been developing this product line for almost nine months, while daily (28:59) production it will be next year, maybe around summer timeframe.

Okay. And then follow-up question for Howard. Can you please provide some color on a unit and ASP for both server and subsystem segments?

Sure. On the units side of it, for servers, Mehdi, it was 84,000 units for server units shipped during the quarter. The ASPs were about $4,100. On the units for our subsystem and accessories that was about 1,164,000 and quite frankly, I didn't divide out the numbers there with regards to that. It's a mix of number of different things that's really hard to gauge with the ASP there. So we've never given that out.

Sure. And so, did you 1,160,000 units?

1,164,000 units.

Okay. Thank you.

Sure.

And we'll take our next question from Aaron Rakers with Stifel. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Yeah, thanks. Thanks for taking the questions. Two as well, real quick. So first of all, as you guys go through – it sounds like a realignment and focus on operational efficiencies. Can you just remind us again where you stand in terms of your manufacturing footprint? And whether or not these efforts have included any reduction of that manufacturing footprint at this point?

Yes. Thank you for the question. Basically, it's a big transition, right? Not just SAP implementation global-wide, but also a big impact from our restructure for our production, operation and also global tax, new season. And we also created a bonded warehouse, new bonded warehouse that kind of limited a lot of production decision (30:55). And I would have to say that most impact that people had to pay attention to the new system, prepare (31:03) product here and there, and that's why it slowdown our business a little bit. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Okay.

But as for our position, especially, we already finished, I'd rather say that at least 90% job already finished. And in next few months, we will finish everything. And hopefully, the system becomes perfect in early Q4 this year, and after that, our operations should be much more efficient thereafter. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Okay. Maybe to ask it a little bit differently. Your updated two-year kind of target models 15% to 17% gross margin, can you help us frame of, what it would take to get to the midpoint of that gross margin range from a utilization perspective from your manufacturing?

So I think – as you look at my utilization numbers this past quarter, we had gone to about 70% last year about the same quarter in the fourth quarter. And that's moving down to about 50%. This past quarter, you saw about 30 basis points of movement there. So as you go forward, Aaron, as we increase our efficiencies and what have you, you can see that type of impact to our margins with regard to as we increase our utilization and improve our utilization. So I'd frame it in that way going forward. Anywhere from 30 basis points to 50 basis points, I think, you see them wide spreads on the – in my commentary on utilization. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Okay. And I'll flip one final thing and just housekeeping, no 10% customers in this quarter, did I hear that correctly?

That is correct. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Okay. Thank you.

And we'll take our next question from Mark Kelleher with D.A. Davidson. Mark D. Kelleher - D. A. Davidson & Co.: Great. Thanks for taking the questions. I want to focus on the storage side. I'm not sure, I heard everything you were saying about that. Down 15% year-over-year, I think you said, and hyper-converged was strong, I think I heard. Could you just review what you're seeing in storage and what your expectations are going forward?

Yeah. The drop of overall storage revenue, I believe, major is about two customers. So we compete with aggressive price from our competition. And because of SAP implementation, I would have to say we are a little bit too slow to dynamically respond to the price competition. So we lost to some big peer there. And this will be (33:38) the reason I believe. However, for hyper-converged, in our software-defined storage, we'll be globally (33:48) though basically. And I believe we will continue to grow very strong in hyper-convergence in software-defined storage. Even for regular storage, I believe, we will recover to peak growth very soon. Mark D. Kelleher - D. A. Davidson & Co.: So that was more of a market share loss there rather than a weakness on the...

Yes. In last quarter, we kind of a little bit too slow in an enterprise response. Mark D. Kelleher - D. A. Davidson & Co.: Okay. Great. Thanks.

Thank you.

And we'll take our next question from Rich Kugele with Needham & Company. Rich J. Kugele - Needham & Co. LLC: Thank you. In terms of the Internet datacenter side, do you believe that now with a different margin profile, you would be able to regain business on that side. And how does it work from an ordering cadence? Do they typically order transactionally active every quarter or is it more lumpy than that?

Yeah. Rich, this is Howard. With regards to that, we've always said that the cloud Internet datacenter has been more project-based, as we're bringing up datacenters from quarter to quarter, or what have you, so it is project based per se. And some of that accounts for some of the – what range that we put on this quarter. We do have some projects that are either going to be this quarter or next quarter, and we're still waiting to see if – when those are going to occur. But it is project based. Rich J. Kugele - Needham & Co. LLC: Yeah. And the business that you lost in the quarter, they don't have any issues with your technology or your value proposition right? Is this entirely just basically price or being responsive?

Yes. I would like to say in term of technology, in term of product portfolio, we feel much stronger than before. But yes, in term of price competition, especially dynamic price support, dynamic local support we were (35:51) in that quarter. Rich J. Kugele - Needham & Co. LLC: Okay. And, well, I'll take it – all fine. Thanks. Take care.

And we'll take our next question from Brian Alger with ROTH Capital Partners.

Good afternoon, guys. Kind of want to follow-up on the same train of thought. Just trying to get an understanding of what really went on in the prior quarter. It sounds as though pricing was the primary issue here and you weren't responsive to the changes in the marketplace. I'm trying to understand what shifted from the competitive landscape and what lesson has been learned that it won't happen in the future?

I believe the relationship has to be further improved. Kind of when customer asking for lower price, our people did not response quickly enough. And because it's the first time we faced such a big impact, so we then (36:54) – the whole company (36:57). We – come our new system. The good thing is new SAP system now we have with us, much easier to calculate our (37:05), so we can response to customer quicker as well. And with our capacity now much bigger, right, so we are more willing to support certain product much more aggressively.

Okay. So I guess I'm looking at a bit of history here and that the hyperscale customers that have driven a lot of a growth for your company over the past couple of years, they have a track record of being very aggressive on pricing. And what I guess, I'm hearing, and I want to make sure I'm hearing it correctly is that, in the future, you're going to be better positioned to react to that price aggression, which may allow us to retain the revenues but would that not negatively impact the gross margin profile of the future revenues?

I think – Brian, this is Howard. With regards to that, again, given that we have some excess capacity or additional capacity right now, it allows us to kind of balance out some of those. We may give up a bit on pricing, but we will fill up the plant and reduce the overhead burden that we have by filling it up.

Okay. And, Howard, do you get the sense that anything has shifted from the competitive landscape in that your competitors' ability to customize or to deliver feature-rich products has shifted such that your – the advantages – the strategic advantages of the business and its flexibility have altered at all?

Yeah, with regards to our products, I think, Charles has said already. We still believe we provide the best solutions and best values out there, bar none, from any of our competitors out there.

Especially, like NVMe, kind of like a dual-port (39:04) NVMe, kind of a like BigTwin (39:06) our new accelerator is coming very soon. And, kind of, I just mentioned that our Super Rack Scale Design (sic) [Supermicro Rack Scale Design] (39:12) [indiscernible] (39:14) and indeed we saw customer engage very well with our new design.

Okay. Great. I appreciate the candor, guys. Thank you.

Thank you.

We'll go next to Alex Kurtz with Pacific Crest Securities.

Hey, guys. Can you hear me, okay?

Yes.

Okay. Great. I just want to follow-up on Brian's question, because I think it's really important that – well, first of all, was the competitive loss in the quarter really localized to one or two customers? I jumped on the call late, so I'm sorry if I missed that. Or was it misses across a host of customers in the web scale market?

Yeah. It was just a couple of customers, Alex.

Okay. And, Howard, I think, as Brian alluded to, and I think it's a really great question is, historically, you guys have always positioned yourself as the application-optimized technology that would maybe be next to an ODM kind of server, right? And you guys added more value. And I guess, what I'm trying to understand here is, was there some very specific situations with those two accounts in the quarter, or is there a sort of like a bigger trend happening with that business, and with that vertical?

I guess, for that couple customer, it's purely because of our – I would like to say, a little bit too relax. Sorry to say that, but we should response more aggressively and more dynamically, in term of what customer really need. But to answer your question of application-optimized, yes, we, indeed we've become much stronger than before even, like our NVMe, now the strongest product line in the world, that our (41:13) between the (41:16) design. All kind of, we show customer the advantage from Super Micro. And also I mentioned about our IoT product line, which we grew about 30% last year. This exactly a better margin, a better profit margin product line. And we started to invest aggressively about three years ago, and last year – first year we see a such a strong growth. And we believe in the next coming many years, we will continue to invest more on IoT embedded.

Okay. We'll talk a little bit more offline. Thank you very much.

Thank you.

And we'll take our next question from Nehal Chokshi with Maxim Group.

Thank you. I do have a few questions, and I will move to the question of the day. But before I do that, I think you did provide some color around what you expect for OpEx for next quarter. Can you just review that again?

Hi. I mentioned that we are – we do expect to see a decrease in our op expenses for next quarter.

Okay. And so, should we be thinking that gross margin will be effectively flat Q-over-Q, or are you guys trying – still trying to say, given you have a very large range for revenue and EPS, but if we take the midpoint, are you guys trying to imply that we should expect gross margin to move up slightly Q-over-Q, or should that be flat to actually down?

Well, I think we haven't given gross margin guidance out there. Certainly, we have – we're doing our best to maintain gross margins, but as Charles mentioned, we're going to be looking at our pricing and our flexibility there as well, to grow our market share, as we always have.

Okay.

But I guess start from December quarter, right? Start from October, for example, as our SAP global re-org become much more stable, become more ready. Our iteration (43:26) will grow and our volume per share will grow.

Okay.

And that will improve our profit margin...

That's correct.

...and overall profitability.

Right. And then, you have a wider-than-usual revenue guidance, and I assume that's a result of a reduced visibility. Can you talk about what parts of the business are you seeing that reduced visibility with?

Still, I mean, that our big data center customer, we try to be more cautious this time, because from last quarter, we experienced the first time bigger impact, we tried to be more conservative.

Okay. Now, with respect to the question about being more nimble with your pricing, are you explicitly just simply talking about lowering your pricing, get your utilization up, and therefore that will offset some of your – that will (44:24) allow you to basically have that volume without actually impacting the overall gross margin, because you'll be driving your utilization up, or are you actually talking about more nimbly configuring the products to what the customer needs, to what the competition has out there, to be more optimal in terms of your COGS configuration, and therefore still win the deal?

I guess it is a combination, plus, now, we have a much stronger manufacture capacity in offshore. So once we are able to leverage that need for CET (45:01) in offshore, then we will know our overall operation and manufacture cost.

Okay, all right. And then Howard, that financial framework that you gave out for gross margin and operating margin, did I hear that correctly, 15% to 17% and operating margin of 6% to 8% over the next two years?

That's correct.

Okay. And now, when you say over the next two years, are you essentially saying that this is something that we should be thinking about for fiscal year 2018, and fiscal year 2017 will represent an on-ramp towards that model?

It's a target model out there two years.. now.

Okay. All right. And while you didn't have a 10% customer within the quarter, did you still have a 10% customer for the full fiscal year?

Yes. We did.

Okay. Thank you.

And we have a follow-up question from Mehdi Hosseini with SIG.

Yes. Just looking at the revenue mix, your datacenter revenues have been declining and for the two consecutive quarters. And I'm just trying to better understand, is the ASP pressure coming from this is specific segment or is it more in the core server business? And I have one more follow-up.

Mehdi, this is Howard. With regards to the ASPs, again it's a combination of all of our business. 18% of our business to the (46:34) was Internet datacenter part of it, and you know, there is still another 80%, 82% that's other business areas. So again, it's a combination of all. With regards to that, the last couple of quarters from 26% to 18% (46:49), again we haven't lost any customers, we're still competitive, it's just projects.

Okay. And then...

And then, we said, we would try to win those customer back and create more new customer.

That's correct.

I believe that once our global operations system really stabilize, we will become a bit aggressive in that area.

Okay. And then with the embedded segment becoming 10% of your revenue, are you going break this out going forward so we could better model this?

Yeah. IoT will be a very strong territory for us. Again, with our application-optimized as building blocks vision (47:38), we are in a very good position to grow in IoT embedded market. And last year, again, first time we separated product line.

Yes.

And we saw a 30% growth. This year, no reason we cannot grow more than 30%.

So we'll be providing color going forward on and as a separate product line.

Okay. Great. And Howard one for you, the cash cycle went up by three days. Any particular reason here?

It's more align to the lower balances underneath, the dividers. We had lower revenues.

Okay.

Yeah.

Got it. Thank you.

And we have a question from Brian Alger with ROTH Capital Partners.

As a follow-up on the declining revenues from the datacenter segment, that end-market itself hasn't seen a decline in demand. Obviously, it's been one of the fastest-growing segments within IT hardware in general, which clearly implies that you guys are losing share to someone, somewhere, even if it's project oriented. Who is gaining market share at your expense and is it purely on price?

I guess a combination of price and also our response to customer demand. So we have really learned a big lesson how to work with customer closer to response customer demand quicker. So that area, for sure, we very aggressively done and I believe we are ready for that. As to the cost price competition, and that's another reason why we restructured our global operation and production facility. And pretty much, we already are, I would like to say 90% finish. So within next few months, we will have a much stronger operation manufacturer facility and cost structure in Asia. So then we will support our growth in large datacenter business.

I guess, Charles, the question I have is, who is winning if you're losing? Is it the traditional large OEMs like Dell and HP that historically have been lethargic and unresponsive and not having dynamic product portfolios? Are they winning now-a-days? Or have we seen the lower, more simpler ODMs, the Compals, Foxconns, Hon Hai et cetera of the worlds improve in terms of their system expertise, moving up the food chain, to be more competitive against you?

Basically we saw some from Asia.

Okay. Thank you. I appreciate the help.

Yeah. Thank you.

And we'll take our final question today from Aaron Rakers with Stifel. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Yeah. Thanks for the follow-up. Two real quick questions. First of all, can you talk – there has been a lot of talk in the market about component pricing, particularly around drives, but also in the memory space. Have we seen pressures and would you expect pressures from an upward pricing environment on the components to the gross margin line over the next couple of quarters?

Yeah. We see some change. I mean, it looks like the market is kind of – nothing is stable, right? So Q3, maybe, the cost will be a little bit higher, but how much we are higher and what would be the trend, we still pay a close watch. And we try to – we are prepared, I believe, as the market is changing. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Okay. And then the final question for me would be, in the past, you've talked about kind of the trajectory of how you thought you could grow your revenue. And I think in the framework of the model that you provided 2015 to 2017 at 6% to 8%, I'm curious of how you see, if you look out over the next couple of years, what kind of revenue levels supports let's say the midpoint or even the low-end of that target model range?

Yeah, I mean we still are very – we'll try to be very aggressive to grow our revenue, and that's by end of 2017, we still try to (52:15) revenue, and then we'll have the scale, we will have our cost. And also by a transition production, expanding to Asia now we have our cost (52:28) as well. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: So I'm really clear here, so you're saying, you expect to be at an annual run rate of $3 billion exiting fiscal 2017.

By December, December 2017. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Of the calendar year, okay?

Calendar year, yes. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Yeah, thank you.

And that does conclude the question-and-answer session of our conference. I'd like to turn the conference back over to Mr. Liang for any closing remarks.

Yes, thank you for joining us today, and we look forward to talking to you again at the end of this quarter. Thank you, everyone. Have a great day.

Thank you, ladies and gentlemen. That does conclude the Super Micro fourth quarter and fiscal year 2016 conference call. We do appreciate your participation. You may disconnect at this time. Thank you.