filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value per share amounts)
(unaudited)
| September 30, | June 30, | ||||||||||
| 2024 | 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,088,718 | $ | 1,669,766 | |||||||
| Accounts receivable, net of allowance for credit losses of $71 and $73 at September 30, 2024 and June 30, 2024, respectively (including accounts receivable from related parties of $7,991 and $6,194 at September 30, 2024 and June 30, 2024, respectively) | 2,731,740 | 2,737,331 | |||||||||
| Inventories | 4,930,623 | 4,333,029 | |||||||||
| Prepaid expenses and other current assets (including receivables from related parties of $15,074 and $11,939 at September 30, 2024 and June 30, 2024, respectively) | 100,503 | 191,834 | |||||||||
| Total current assets | 9,851,584 | 8,931,960 | |||||||||
| Property, plant and equipment, net | 451,060 | 414,008 | |||||||||
| Deferred income taxes, net | 411,723 | 365,172 | |||||||||
| Other assets | 137,016 | 114,952 | |||||||||
| Total assets | $ | 10,851,383 | $ | 9,826,092 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable (including amounts due to related parties of $202,019 and $165,295 at September 30, 2024 and June 30, 2024, respectively) | $ | 1,682,968 | $ | 1,472,381 | |||||||
| Accrued liabilities (including amounts due to related parties of $400 and $170 at September 30, 2024 and June 30, 2024, respectively) | 308,777 | 259,674 | |||||||||
| Income taxes payable | 79,708 | 18,268 | |||||||||
| Lines of credit and current portion of term loans | 493,808 | 402,346 | |||||||||
| Deferred revenue | 305,840 | 193,052 | |||||||||
| Total current liabilities | 2,871,101 | 2,345,721 | |||||||||
| Deferred revenue, non-current | 252,342 | 223,324 | |||||||||
| Term loans | 65,733 | 74,083 | |||||||||
| Convertible notes | 1,699,177 | 1,697,716 | |||||||||
| Other long-term liabilities | 86,113 | 67,878 | |||||||||
| Total liabilities | 4,974,466 | 4,408,722 | |||||||||
| Commitments and contingencies (Note 12) | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock and additional paid-in capital, $0.001 par value | |||||||||||
| Authorized shares: 1,000,000; Issued and outstanding shares: 590,997 and 588,087 at September 30, 2024 and June 30, 2024, respectively | 2,865,947 | 2,830,820 | |||||||||
| Accumulated other comprehensive income | 800 | 706 | |||||||||
| Retained earnings | 3,010,007 | 2,585,680 | |||||||||
| Total Super Micro Computer, Inc. stockholders’ equity | 5,876,754 | 5,417,206 | |||||||||
| Noncontrolling interest | 163 | 164 | |||||||||
| Total stockholders’ equity | 5,876,917 | 5,417,370 | |||||||||
| Total liabilities and stockholders’ equity | $ | 10,851,383 | $ | 9,826,092 |
See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2025 Form 10-Q | 1
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net sales (including related party sales of $14,875 and $17,396 in the three months ended September 30, 2024 and 2023, respectively) | $ | 5,937,256 | $ | 2,119,672 | |||||||||||||||||||
| Cost of sales (including related party purchases of $240,051 and $113,107 in the three months ended September 30, 2024 and 2023, respectively) | 5,161,676 | 1,765,981 | |||||||||||||||||||||
| Gross profit | 775,580 | 353,691 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 132,243 | 111,027 | |||||||||||||||||||||
| Sales and marketing | 68,854 | 37,230 | |||||||||||||||||||||
| General and administrative | 65,284 | 32,924 | |||||||||||||||||||||
| Total operating expenses | 266,381 | 181,181 | |||||||||||||||||||||
| Income from operations | 509,199 | 172,510 | |||||||||||||||||||||
| Other income, net | 7,233 | 6,613 | |||||||||||||||||||||
| Interest expense | (17,354) | (1,863) | |||||||||||||||||||||
| Income before income tax provision | 499,078 | 177,260 | |||||||||||||||||||||
| Income tax provision | (74,732) | (20,215) | |||||||||||||||||||||
| Share of loss from equity investee, net of taxes | (19) | (50) | |||||||||||||||||||||
| Net income | $ | 424,327 | $ | 156,995 | |||||||||||||||||||
| Net income per common share: | |||||||||||||||||||||||
| Basic | $ | 0.72 | $ | 0.30 | |||||||||||||||||||
| Diluted | $ | 0.67 | $ | 0.27 | |||||||||||||||||||
| Weighted-average shares used in the calculation of net income per common share: | |||||||||||||||||||||||
| Basic | 589,558 | 530,928 | |||||||||||||||||||||
| Diluted | 639,148 | 571,853 | |||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2025 Form 10-Q | 2
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net income | $ | 424,327 | $ | 156,995 | |||||||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Foreign currency translation gain | 94 | 12 | |||||||||||||||||||||
| Total other comprehensive income, net of tax | 94 | 12 | |||||||||||||||||||||
| Total comprehensive income | $ | 424,421 | $ | 157,007 |
See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2025 Form 10-Q | 3
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)
| Three Months Ended September 30, 2024 | Common Stock and Additional Paid-In Capital | Accumulated Other Comprehensive Income | Retained Earnings | Non-controlling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | 588,087,410 | $ | 2,830,820 | $ | 706 | $ | 2,585,680 | $ | 164 | $ | 5,417,370 | ||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 1,330,560 | 6,527 | — | — | — | 6,527 | |||||||||||||||||||||||||||||||||||||||||
| Release of shares of common stock upon vesting of restricted stock units | 2,264,940 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares withheld for withholding taxes related to settlement of equity awards | (685,850) | (35,537) | — | — | — | (35,537) | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 64,137 | — | — | — | 64,137 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | 94 | — | — | 94 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 424,327 | (1) | 424,326 | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | 590,997,060 | $ | 2,865,947 | $ | 800 | $ | 3,010,007 | $ | 163 | $ | 5,876,917 |
| Three Months Ended September 30, 2023 | Common Stock and Additional Paid-In Capital | Accumulated Other Comprehensive Income | Retained Earnings | Non-controlling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | 529,013,580 | $ | 538,352 | $ | 639 | $ | 1,433,014 | $ | 165 | $ | 1,972,170 | ||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 1,889,570 | 4,288 | — | — | — | 4,288 | |||||||||||||||||||||||||||||||||||||||||
| Release of shares of common stock upon vesting of restricted stock units | 2,976,560 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares withheld for withholding taxes related to settlement of equity awards | (929,730) | (25,301) | — | — | — | (25,301) | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 57,379 | — | — | — | 57,379 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | 12 | — | — | 12 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 156,995 | (4) | 156,991 | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | 532,949,980 | $ | 574,718 | $ | 651 | $ | 1,590,009 | $ | 161 | $ | 2,165,539 | ||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2025 Form 10-Q | 4
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 424,327 | $ | 156,995 | |||||||
| Reconciliation of net income to net cash provided by operating activities: | |||||||||||
| Depreciation, amortization and non-cash interest | 14,080 | 9,155 | |||||||||
| Stock-based compensation expense | 64,014 | 57,379 | |||||||||
| Share of loss from equity investee | 19 | 50 | |||||||||
| Unrealized foreign currency exchange loss (gain) | 924 | (6,192) | |||||||||
| Deferred income taxes, net | (46,552) | (23,021) | |||||||||
| Other | (3,346) | 2,657 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net (including changes in related party balances of $(1,797) and $4,138 during the three months ended September 30, 2024 and 2023, respectively) | 15,288 | 302,501 | |||||||||
| Inventories | (597,717) | (607,241) | |||||||||
| Prepaid expenses and other assets (including changes in related party balances of $(3,135) and $2,827 during the three months ended September 30, 2024 and 2023, respectively) | 86,774 | 19,990 | |||||||||
| Accounts payable (including changes in related party balances of $36,724 and $2,981 during the three months ended September 30, 2024 and 2023, respectively) | 220,353 | 302,973 | |||||||||
| Accrued liabilities (including changes in related party balances of $230 and $2,487 during the three months ended September 30, 2024 and 2023, respectively) | 25,974 | (13,019) | |||||||||
| Income taxes payable | 61,440 | 32,229 | |||||||||
| Deferred revenue | 141,806 | 36,055 | |||||||||
| Other long-term liabilities (including changes in related party balances of $237 and $(80) during the three months ended September 30, 2024 and 2023, respectively) | 1,520 | (46) | |||||||||
| Net cash provided by operating activities | 408,904 | 270,465 | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchases of property, plant and equipment (including payments to related parties of $3,129 and $826 during the three months ended September 30, 2024 and 2023, respectively) | (44,300) | (2,631) | |||||||||
| Investment in equity securities | — | (5,000) | |||||||||
| Net cash used in investing activities | (44,300) | (7,631) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Proceeds from lines of credit and term loans | 1,185,034 | — | |||||||||
| Repayment of lines of credit and term loans | (1,106,178) | (138,938) | |||||||||
| Proceeds from exercise of stock options | 6,527 | 4,288 | |||||||||
| Payment for withholding taxes related to settlement of equity awards | (35,537) | (25,301) | |||||||||
| Other | 8 | 10 | |||||||||
| Net cash provided by (used in) financing activities | 49,854 | (159,941) | |||||||||
| Effect of exchange rate fluctuations on cash | 4,500 | (203) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | 418,958 | 102,690 | |||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 1,670,273 | 440,960 | |||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | 2,089,231 | $ | 543,650 | |||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | 11,454 | $ | 2,214 | |||||||
| Cash paid for taxes, net of refunds | $ | 3,336 | $ | 8,999 | |||||||
SMCI | Q1 2025 Form 10-Q | 5
| Non-cash investing and financing activities: | |||||||||||
| Unpaid property, plant and equipment purchases (including due to related parties of $4,059 and $3,672 as of September 30, 2024 and 2023, respectively) | $ | 21,190 | $ | 8,032 | |||||||
| Right of use ("ROU") assets obtained in exchange for operating lease commitments | $ | 17,782 | $ | 9,177 | |||||||
| Transfer of inventory to property, plant and equipment, net | $ | 122 | $ | — | |||||||
See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2025 Form 10-Q | 6
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Significant Accounting Policies and Estimates
No material changes have been made to the significant accounting policies of Super Micro Computer, Inc., a corporation incorporated under the laws of Delaware, and its consolidated entities (together, the “Company”), disclosed in Note 1, "Organization and Summary of Significant Accounting Policies," in its Annual Report on Form 10-K, filed on February 25, 2025, for the year ended June 30, 2024 (the "2024 10-K"). Management's estimates take into consideration, as applicable, general macroeconomic conditions, inflation, changes in interest rates and geopolitical events.
Basis of Presentation
The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations.
The unaudited condensed consolidated financial statements included herein reflect all adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The consolidated results of operations for the three months ended September 30, 2024 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2025. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the 2024 10-K.
Forward Stock Split
On September 30, 2024, the Company completed a 10-for-1 forward split of its common stock. Trading on a split-adjusted basis commenced on October 1, 2024. All references to shares of common stock and per share amounts contained in this Quarterly Report have been retroactively adjusted to reflect the stock split.
Concentration of Supplier Risk
Certain materials used by the Company in the manufacturing of its products are available from a limited number of suppliers. Shortages could occur in these materials due to an interruption of supply or increased demand in the industry.
| September 30, 2024 | September 30, 2023 | |||||||
| Percentage of total purchases | ||||||||
| Supplier A | 65.1% | 55.1% | ||||||
| Supplier B | 5.6% | 10.3% |
The increase in the concentration of the Company's total purchases from supplier A to 65.1% of total purchases for the three months ended September 30, 2024, is a result of the purchase of key components to build its solutions for the Company's customers.
Purchases from Ablecom Technology, Inc. (“Ablecom”) and Compuware Technology, Inc. (“Compuware”), which are both related parties of the Company (see Note 9, "Related Party Transactions"), accounted for a combined 4.6% and 6.4% of total cost of sales for the three months ended September 30, 2024 and 2023, respectively.
SMCI | Q1 2025 Form 10-Q | 7
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. The Company deposits cash with high-quality financial institutions. These deposits are guaranteed by the federal deposit insurance corporation up to an insurance limit.
Significant customer information is as follows:
| September 30, 2024 | June 30, 2024 | |||||||
| Percentage of accounts receivable | ||||||||
| Customer A | 32.7% | 15.4% | ||||||
| Customer B | 34.6% | * | ||||||
| Customer G | * | 44.8% |
*Below 10%
These accounts receivable represent a concentration of credit risk to the Company.
Concentration of Customer Risk
Customer A accounted for 20.8%, customer B accounted for 28.7% and customer G accounted for 11.9% of the net sales for the three months ended September 30, 2024. Customer A accounted for 25.0% of the net sales for the three months ended September 30, 2023. Other customers were individually below 10% of the net sales for the three months ended September 30, 2024 and 2023.
Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This ASU requires that a public entity provide additional segment disclosures on an interim and annual basis. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements unless impracticable. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The ASU is effective for the Company’s fiscal year beginning July 1, 2024, and for the interim period beginning July 1, 2025. The Company is currently evaluating this pronouncement and the impact it may have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and should be applied prospectively, with retrospective application permitted. The ASU is effective for the Company’s fiscal year beginning July 1, 2025. The Company is currently evaluating this pronouncement and the impact it may have on its financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement, but it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The ASU may be applied prospectively or retrospectively and is effective for fiscal years beginning after December 15, 2026 and for the interim periods beginning after December 15, 2027. Early adoption is permitted. The ASU is effective for the Company’s fiscal year beginning July 1, 2027, and for the interim period beginning July 1, 2028. The Company is currently evaluating this pronouncement and the impact it may have on its financial statement disclosures.
SMCI | Q1 2025 Form 10-Q | 8
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 2. Revenue
Disaggregation of Revenue
The Company disaggregates revenue by type of product and geographical region to depict the nature, amount, and timing of revenue and cash flows. Service and software revenues, which are less than 10%, are not a significant component of total revenue and are aggregated with server and storage systems revenue.
The following is a summary of net sales by product type (in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Server and storage systems | $ | 5,747,781 | $ | 1,966,608 | |||||||||||||||||||
| Subsystems and accessories | 189,475 | 153,064 | |||||||||||||||||||||
| Total | $ | 5,937,256 | $ | 2,119,672 |
Server and storage systems constitute an assembly and integration of subsystems and accessories, software, and related services. Subsystems and accessories are comprised of server boards, chassis and accessories.
Revenue related to services for the three months ended September 30, 2024 and 2023 was $50.1 million and $35.1 million, respectively, which is recognized over time ratably over the contract term.
International net sales are based on the country and geographic region to which the products were shipped. The following is a summary for the three months ended September 30, 2024 and 2023, of net sales by geographic region (in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| United States | $ | 4,241,349 | $ | 1,619,514 | |||||||||||||||||||
| Asia | 954,574 | 225,468 | |||||||||||||||||||||
| Europe | 645,842 | 190,848 | |||||||||||||||||||||
| Other | 95,491 | 83,842 | |||||||||||||||||||||
| Total | $ | 5,937,256 | $ | 2,119,672 |
Contract Balances
Generally, the payment terms of the Company’s offerings range from 30 to 60 days. In certain instances, customers may prepay for products and services in advance of delivery. Receivables represent the Company’s unconditional right to consideration for performance obligations either partially or fully completed.
Contract assets are rights to consideration in exchange for goods or services that the Company has transferred to a customer when such right is conditional on something other than the passage of time. Such contract assets are insignificant to the Company’s condensed consolidated financial statements.
Contract liabilities consist of deferred revenue and relate to amounts invoiced to or advance consideration received from customers, which precede the Company’s satisfaction of the associated performance obligations. The Company’s deferred revenue primarily results from customer payments received upfront for extended warranties and on-site services because these performance obligations are satisfied over time. Additionally, at times, deferred revenue may fluctuate due to the timing of non-refundable advance consideration received from non-cancelable contracts relating to the sale of future products. Revenue recognized during the three months ended September 30, 2024, which was included in the opening deferred revenue balance as of June 30, 2024, of $416.4 million, was $68.2 million. Revenue recognized during the three months ended September 30, 2023, which was included in the opening deferred revenue balance as of June 30, 2023, of $304.4 million, was $43.7 million.
SMCI | Q1 2025 Form 10-Q | 9
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Deferred revenue increased $141.8 million as of September 30, 2024 as compared to June 30, 2024. This increase was mainly due to a $81.6 million increase in non-refundable advance consideration or cash consideration received from customers which preceded the Company's satisfaction of the associated performance obligations relating to product sales expected to be fulfilled in the next 12 months. This was accompanied by a $39.9 million increase in deferral on invoiced amounts for service contracts during the period exceeding the recognized revenue from contracts entered into in prior periods.
Transaction Price Allocated to the Remaining Performance Obligations
Remaining performance obligations represent in aggregate the amount of transaction price that has been allocated to performance obligations not delivered, or only partially delivered, as of the end of the reporting period. The Company applies the exemption to not disclose information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less. These performance obligations generally consist of services, such as on-site services, including integration services and extended warranty services that are contracted for one year or less, and products for which control has not yet been transferred. For contracts with a duration of more than one year, the value of the transaction price allocated to deferred revenue as of September 30, 2024 was approximately $558.2 million. The Company expects to recognize approximately 55% of this deferred revenue in the next 12 months, and the remainder thereafter.
Note 3. Net Income Per Common Share
The following table shows the computation of basic and diluted net income per common share for the three months ended September 30, 2024 and 2023 (in thousands, except per share amounts):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income - basic | $ | 424,327 | $ | 156,995 | |||||||||||||||||||
| Convertible Notes interest charge, net of tax | 2,749 | — | |||||||||||||||||||||
| Net income - diluted | $ | 427,076 | $ | 156,995 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares outstanding - basic | 589,558 | 530,928 | |||||||||||||||||||||
| Effect of dilutive Convertible Notes | 12,860 | — | |||||||||||||||||||||
| Effect of dilutive securities | 36,730 | 40,925 | |||||||||||||||||||||
| Weighted-average shares outstanding - diluted | 639,148 | 571,853 | |||||||||||||||||||||
| Net income per common share - basic | $ | 0.72 | $ | 0.30 | |||||||||||||||||||
| Net income per common share - diluted | $ | 0.67 | $ | 0.27 |
For the three months ended September 30, 2024 and 2023, the Company had stock options and restricted stock units ("RSUs") outstanding that could potentially dilute basic earnings per share in the future but were excluded from the computation of diluted net income per share in the periods presented, as their effect would have been anti-dilutive. The anti-dilutive common share equivalents resulting from outstanding equity awards were 3,585,934 and 3,377,300 for the three months ended September 30, 2024 and 2023, respectively.
Potentially dilutive shares of common stock issuable upon conversion of the Company's outstanding 0.00% Convertible Senior Notes due 2029 (the "2029 Convertible Notes") are determined using the if-converted method. For the three months ended September 30, 2024, all such shares issuable upon conversion of the 2029 Convertible Notes were dilutive.
SMCI | Q1 2025 Form 10-Q | 10
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 4. Balance Sheet Components
The following tables provide details of the selected balance sheet items (in thousands):
Cash, Cash Equivalents and Restricted Cash:
| September 30, 2024 | June 30, 2024 | ||||||||||
| Cash and cash equivalents | $ | 2,088,718 | $ | 1,669,766 | |||||||
| Restricted cash included in other assets | 513 | 507 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 2,089,231 | $ | 1,670,273 |
Inventories:
| September 30, 2024 | June 30, 2024 | ||||||||||
| Finished goods | $ | 3,559,481 | $ | 3,312,768 | |||||||
| Work in process | 757,925 | 450,993 | |||||||||
| Purchased parts and raw materials | 613,217 | 569,268 | |||||||||
| Total inventories | $ | 4,930,623 | $ | 4,333,029 |
During the three months ended September 30, 2024 and 2023, the Company recorded a net provision for excess and obsolete inventory to cost of sales totaling $9.1 million and $4.5 million, respectively.
Property, Plant and Equipment, net:
| September 30, 2024 | June 30, 2024 | ||||||||||
| Land | $ | 160,558 | $ | 150,137 | |||||||
| Machinery and equipment | 163,988 | 156,496 | |||||||||
| Buildings | 163,764 | 163,764 | |||||||||
| Building and leasehold improvements | 89,444 | 72,075 | |||||||||
| Furniture and fixtures | 48,153 | 46,241 | |||||||||
| Software | 24,665 | 24,363 | |||||||||
| Building construction in progress | 22,924 | 14,828 | |||||||||
| 673,496 | 627,904 | ||||||||||
| Accumulated depreciation and amortization | (222,436) | (213,896) | |||||||||
| Property, plant and equipment, net | $ | 451,060 | $ | 414,008 |
Depreciation and amortization expense for the three months ended September 30, 2024 and 2023 was $9.0 million and $7.0 million, respectively.
SMCI | Q1 2025 Form 10-Q | 11
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Accrued Liabilities:
| September 30, 2024 | June 30, 2024 | ||||||||||
| Customer deposits | $ | 96,852 | $ | 46,942 | |||||||
| Accrued payroll and related expenses | 68,947 | 62,006 | |||||||||
| Accrued cooperative marketing expenses | 20,236 | 15,967 | |||||||||
| Operating lease liability | 10,654 | 9,248 | |||||||||
| Accrued warranty costs | 9,872 | 10,009 | |||||||||
| Accrued professional fees | 7,992 | 1,699 | |||||||||
| Other | 94,224 | 113,803 | |||||||||
| Total accrued liabilities | $ | 308,777 | $ | 259,674 |
Product Warranties:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Balance, beginning of the period | $ | 17,815 | $ | 14,859 | |||||||||||||||||||
| Provision for warranty | 11,534 | 12,529 | |||||||||||||||||||||
| Costs utilized | (10,999) | (11,804) | |||||||||||||||||||||
| Change in estimated liability for pre-existing warranties | (397) | 45 | |||||||||||||||||||||
| Balance, end of the period | 17,953 | 15,629 | |||||||||||||||||||||
| Current portion | 9,872 | 9,107 | |||||||||||||||||||||
| Non-current portion | $ | 8,081 | $ | 6,522 |
Accrued warranty costs are included as a component of accrued liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheets.
Note 5. Financial Instruments and Fair Value Measurements
The Company classifies its financial instruments, except for its investment in an auction rate security and other investments in privately held companies, within Level 1 or Level 2 in the fair value hierarchy because the Company uses quoted prices in active markets or alternative pricing sources and models using market observable inputs to determine their fair value.
Financial Instruments Measured on a Recurring Basis
The financial instruments of the Company measured at fair value on a recurring basis are included in cash equivalents and other assets. The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, other assets, accounts payable and accrued liabilities approximate their fair values due to their relatively short maturities.
SMCI | Q1 2025 Form 10-Q | 12
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
The following table sets forth the Company’s financial instruments as of September 30, 2024 and June 30, 2024, which are measured at fair value on a recurring basis by level within the fair value hierarchy. These are classified based on the lowest level of input that is significant to the fair value measurement (in thousands):
| September 30, 2024 | Level 1 | Level 2 | Level 3 | Asset at Fair Value | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Money market funds (1) | $ | 334 | $ | — | $ | — | $ | 334 | |||||||||||||||
| Certificates of deposit | — | 491 | — | 491 | |||||||||||||||||||
| Investment in marketable equity security | 5,112 | — | — | 5,112 | |||||||||||||||||||
| Auction rate security | — | — | 1,829 | 1,829 | |||||||||||||||||||
| Total assets measured at fair value | $ | 5,446 | $ | 491 | $ | 1,829 | $ | 7,766 | |||||||||||||||
| June 30, 2024 | Level 1 | Level 2 | Level 3 | Asset at Fair Value | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Money market funds (1) | $ | 340 | $ | — | $ | — | $ | 340 | |||||||||||||||
| Certificates of deposit | — | 486 | — | 486 | |||||||||||||||||||
| Investment in marketable equity security | 3,686 | — | — | 3,686 | |||||||||||||||||||
| Auction rate security | — | — | 1,829 | 1,829 | |||||||||||||||||||
| Total assets measured at fair value | $ | 4,026 | $ | 486 | $ | 1,829 | $ | 6,341 | |||||||||||||||
(1) $0.1 million and $0.1 million in money market funds are included cash and cash equivalents and $0.2 million and $0.2 million in money market funds are included in restricted cash, non-current in Other assets in the condensed consolidated balance sheets as of September 30, 2024 and June 30, 2024, respectively.
The carrying amounts of money market funds and certificates of deposit approximate their fair values due to their relatively short maturities.
The investment in marketable equity security is carried at fair value using values available on a public exchange, is based on a Level 1 input, and is recorded in Prepaid expenses and other current assets in the condensed consolidated balance sheets. The unrealized gains and losses of the investment are included in earnings. For the three months ended September 30, 2024 and 2023, an unrealized gain of $1.4 million and unrealized loss of $1.1 million, respectively, has been recorded in Other income, net in the condensed consolidated statements of operations.
The Company’s investment in an auction rate security is classified as an available for sale security within Level 3 of the fair value hierarchy as the determination of its fair value was not based on observable inputs as of September 30, 2024 and June 30, 2024. The Company is using the discounted cash flow method to estimate the fair value of the auction rate security at each period end and using the following assumptions: (i) the expected yield based on observable market rate of similar securities, (ii) the security coupon rate that is reset monthly, (iii) the estimated holding period and (iv) a liquidity discount. The liquidity discount assumption is based on the management estimate of lack of marketability discount of similar securities and is determined based on the analysis of financial market trends over time, recent redemptions of securities and other market activities. The Company performed a sensitivity analysis and applying a change of either plus or minus 100 basis points in the liquidity discount does not result in a significantly higher or lower fair value measurement of the auction rate security as of September 30, 2024.
For the three months ended September 30, 2024 and 2023, the unrealized gains and losses for the auction rate security in other comprehensive income are immaterial.
On a quarterly basis, the Company also evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, current economic conditions, and reasonable economic forecasts that affect collectability. For the three months ended September 30, 2024 and 2023, the credit losses related to the Company’s investments were not material.
SMCI | Q1 2025 Form 10-Q | 13
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three months ended September 30, 2024 and 2023.
Financial Instruments Measured at Fair Value on a Non-Recurring Basis
The Company's non-marketable equity securities consist of investments in privately held companies without readily determinable fair values and are classified as Level 2 in the fair value hierarchy. There were no additional investments during the three months ended September 30, 2024 and 2023. The Company accounts for these investments at cost less impairment, if any, plus or minus changes from observable price changes in orderly transactions for the identical or similar investments by the same issuer.
The Company performed a qualitative assessment to identify impairment indicators and recorded an impairment of $0.0 million and $1.6 million for the three months ended September 30, 2024 and 2023, respectively, in Other income, net on the condensed consolidated statement of operations.
As of September 30, 2024 and June 30, 2024, the Company had $54.6 million of investments in privately held companies recorded in Other assets on the condensed consolidated balance sheets for which the measurement alternative was elected.
Financial Instruments Not Recorded at Fair Value
The Company estimates the fair value of outstanding debt and its 2029 Convertible Notes for disclosure purposes on a recurring basis.
As of September 30, 2024 and June 30, 2024, total debt of $559.5 million and $476.4 million, respectively, is reported at amortized cost. The outstanding debt was categorized as Level 2 as it is not actively traded. The carrying value approximates fair value.
The estimated fair value of the 2029 Convertible Notes was $1,386.3 million as of September 30, 2024. The estimated fair value of the 2029 Convertible Notes was determined through consideration of quoted market prices. The 2029 Convertible Notes are categorized as Level 2 since their fair value was based on Level 2 inputs of quoted prices.
SMCI | Q1 2025 Form 10-Q | 14
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 6. Lines of Credit and Term Loans
Short-term and long-term loan obligations as of September 30, 2024 and June 30, 2024 consisted of the following (in thousands):
| September 30, | June 30, | ||||||||||
| 2024 | 2024 | ||||||||||
| Line of credit: | |||||||||||
| CTBC Credit Lines | $ | 68,253 | $ | 184,573 | |||||||
| Chang Hwa Bank Credit Lines | 9,470 | 9,215 | |||||||||
| HSBC Bank Credit Lines | — | 30,000 | |||||||||
| E.SUN Bank Credit Lines | — | 60,000 | |||||||||
| Mega Bank Credit Lines | 50,000 | 50,000 | |||||||||
| First Bank Credit Lines | 28,084 | 28,084 | |||||||||
| Yuanta Bank Credit Lines | 47,000 | — | |||||||||
| Total line of credit | 202,807 | 361,872 | |||||||||
| Term loan facilities: | |||||||||||
| Bank of America Term Loan | 249,407 | — | |||||||||
| Chang Hwa Bank Credit Facility due October 15, 2026 | 16,440 | 17,918 | |||||||||
| CTBC Term Loan Facility, due June 4, 2030 | 30,664 | 31,155 | |||||||||
| CTBC Term Loan Facility, due August 15, 2026 | 2,799 | 3,079 | |||||||||
| E.SUN Bank Term Loan Facility, due September 15, 2026 | 20,202 | 22,116 | |||||||||
| E.SUN Bank Term Loan Facility, due August 15, 2027 | 11,969 | 12,645 | |||||||||
| Mega Bank Term Loan Facility, due October 3, 2026 | 25,253 | 27,644 | |||||||||
| Total term loans | 356,734 | 114,557 | |||||||||
| Total lines of credit and term loans | 559,541 | 476,429 | |||||||||
| Lines of credit and current portion of term loans | 493,808 | 402,346 | |||||||||
| Term loans, non-current | $ | 65,733 | $ | 74,083 |
SMCI | Q1 2025 Form 10-Q | 15
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Activities under Revolving Lines of Credit and Term Loans
Available borrowings and interest rates as of September 30, 2024 and June 30, 2024 consisted of the following (in thousands except for percentages):
| September 30, 2024 | June 30, 2024 | ||||||||||||||||||||||
| Available borrowings | Interest rate | Available borrowings | Interest rate | ||||||||||||||||||||
| Line of credit: | |||||||||||||||||||||||
| 2018 Bank of America Credit Facility | $ | 280,000 | 6.82% | $ | 350,000 | 6.82% | |||||||||||||||||
| 2022 Bank of America Credit Facility | $ | 20,000 | 6.49% | $ | 20,000 | 6.49% | |||||||||||||||||
| Cathay Bank Line of Credit | $ | 132,000 | 7.16% | $ | 132,000 | 7.33% | |||||||||||||||||
| CTBC Credit Lines | $ | 116,747 | 2.15% - 6.03% | $ | 427 | 2.09% - 6.13% | |||||||||||||||||
| Chang Hwa Bank Credit Lines | $ | 20,000 | 1.88% - 5.70% | $ | 20,000 | 1.88% - 6.33% | |||||||||||||||||
| HSBC Bank Credit Lines | $ | 50,000 | 2.03% - 6.25% | $ | 20,000 | 2.03% - 6.28% | |||||||||||||||||
| E.SUN Bank Credit Lines | $ | 60,000 | 2.02% - 6.17% | $ | — | 2.02% - 6.17% | |||||||||||||||||
| Mega Bank Credit Lines | $ | — | 1.90% - 5.56% | $ | — | 1.90% - 5.80% | |||||||||||||||||
| First Bank Credit Lines | $ | 1,916 | 2.03% - 6.19% | $ | 1,916 | 2.03% - 6.19% | |||||||||||||||||
| Yuanta Bank Credit Lines | $ | 1,927 | 2.32% - 5.95% | $ | 47,610 | 2.32% - 6.33% | |||||||||||||||||
| Term loan facilities: | |||||||||||||||||||||||
| Bank of America Term Loan | $ | 250,000 | 6.63% | $ | — | n/a | |||||||||||||||||
| Chang Hwa Bank Credit Facility due October 15, 2026 | $ | — | 1.68% | $ | — | 1.68% | |||||||||||||||||
| CTBC Term Loan Facility, due June 4, 2030 | $ | — | 1.33% | $ | — | 1.33% | |||||||||||||||||
| CTBC Term Loan Facility, due August 15, 2026 | $ | — | 1.53% - 2.03% | $ | — | 1.53% | |||||||||||||||||
| E.SUN Bank Term Loan Facility, due September 15, 2026 | $ | — | 1.87% - 2.17% | $ | — | 1.87% | |||||||||||||||||
| E.SUN Bank Term Loan Facility, due August 15, 2027 | $ | — | 1.87% | $ | — | 1.87% | |||||||||||||||||
| Mega Bank Term Loan Facility, due October 3, 2026 | $ | — | 1.52% - 1.72% | $ | — | 1.52% - 1.72% |
See Note 7 "Short-term and Long-term Debt” and Note 16 "Subsequent Events" of the Company’s 2024 10-K for a more complete description of the Company's credit facilities.
The Company entered into new agreements during the three months ended September 30, 2024 with the following terms:
Bank of America
Bridge Term Loan Facility
On July 19, 2024, the Company entered into a Term Loan Credit Agreement, by and among the Company, the lenders
party thereto,and Bank of America, N.A., as the administrative agent (the “Term Loan Agent”), which provided for a $500 million term loan facility (the “Bridge Term Loan Facility”). On September 27, 2024, the Company entered into Amendment No. 1 to Term Loan Credit Agreement (the “Term Loan Amendment”), by and among the Company, the lenders party thereto, and the Term Loan Agent, which amended the Bridge Term Loan Facility to, among other things, extend the date by which the Company was required to deliver its audited financial statements for its fiscal year 2024 under the Bridge Term Loan Facility from September 28, 2024 to November 27, 2024 and required the Company to prepay $250 million of the term loans outstanding thereunder.
SMCI | Q1 2025 Form 10-Q | 16
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
2018 Bank of America Credit Facility
On July 19, 2024, the Company entered into an Eighth Amendment to Loan and Security Agreement, by and among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent for the lenders (the “ABL Agent”), which amends the Loan and Security Agreement, dated as of April 19, 2018 (the “ABL Agreement”) to, among other things, allow for the Company’s entry into and borrowing under the Term Loan Facility.
On September 27, 2024, the Company entered into the Ninth Amendment to the ABL Agreement, by and among the Company, the lenders party thereto, and the ABL Agent, which amended the ABL Agreement to, among other things, extend the date by which the Company was required to deliver its audited financial statements for its fiscal year ended June 30, 2024 under the ABL Agreement and added a $70 million availability block to the U.S borrowing base thereunder.
HSBC Bank
HSBC Bank Credit Lines
On September 9, 2024, the Company repaid the balance of $50 million under the Loan Agreement entered into by Super Micro Computer, Inc. Taiwan (“Taiwan Subsidiary”), a wholly-owned subsidiary of the Company, and the Taiwan affiliate of HSBC Bank, and the loan had remained undrawn since such date.
Principal payments on short-term and long-term debt obligations are due as follows as of September 30, 2024 (in thousands):
Fiscal Year Principal Payments
| Remainder of 2025 | $ | 483,409 | ||||||
| 2026 | 41,594 | |||||||
| 2027 | 18,071 | |||||||
| 2028 | 6,095 | |||||||
| 2029 | 5,411 | |||||||
| 2030 and thereafter | 4,961 | |||||||
| Total lines of credit and term loans | $ | 559,541 |
As of September 30, 2024, the Company was in compliance with all the covenants for the revolving lines of credit and term loans identified in this Note 6.
SMCI | Q1 2025 Form 10-Q | 17
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 7. Convertible Notes
2029 Convertible Notes
In February 2024, the Company issued $1,725.0 million aggregate principal amount of the 2029 Convertible Notes. The Company received net proceeds from the offering of approximately $1,695.8 million. The Company used approximately $142.1 million of the net proceeds to fund the cost of entering into the Capped Call Transactions described below. The 2029 Convertible Notes will mature on March 1, 2029, unless earlier converted, redeemed or repurchased. On February 20, 2025, the Company executed a first supplemental indenture and second supplemental indenture related to the 2029 Convertible Notes that implemented amendments to the 2029 Convertible Notes. Refer to Note 14, “Subsequent Events,” in the notes to the condensed consolidated financial statements below.
The 2029 Convertible Notes, when issued, did not bear regular interest, and the principal amount of the 2029 Convertible Notes did not accrete. Because the Company did not file its Annual Report on Form 10-K for the fiscal year ended June 30, 2024 in a timely manner, it elected to accrue special interest on the 2029 Convertible Notes and accrued additional interest on the 2029 Convertible Notes in accordance with the indenture governing the 2029 Convertible Notes (the “2029 Convertible Notes Indenture”). Interest expense recognized was $2.2 million for the three months ended September 30, 2024. The 2029 Convertible Notes are convertible into cash, shares of the Company’s common stock, or a combination of cash and shares of common stock, at the Company’s election, at an initial conversion rate of 7.455 shares of common stock per $1,000 principal amount of 2029 Convertible Notes, which is equivalent to an initial conversion price of approximately $134.14 per share of common stock. The conversion rate is subject to customary adjustments for certain events as described in the 2029 Convertible Notes Indenture. Special interest and additional interest will accrue on the 2029 Convertible Notes in the circumstances and at the rates described in the 2029 Convertible Notes Indenture and have accrued on the 2029 Convertible Notes subsequent to June 30, 2024 as described above. The debt issuance costs are amortized to interest expense. The 2029 Convertible Notes do not contain financial maintenance covenants.
Holders may convert their 2029 Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock, as described in the 2029 Convertible Notes Indenture; (4) if the Company calls such notes for redemption; and (5) at any time from, and including, September 1, 2028 until the close of business on the second scheduled trading day immediately before the maturity date.
If the Company undergoes a fundamental change (as defined in the 2029 Convertible Notes Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2029 Convertible Notes, at a fundamental change repurchase price equal to 100% of the principal amount of the 2029 Convertible Notes to be repurchased, plus any accrued and unpaid special interest and additional interest, if any, up to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2029 Convertible Notes in connection with such corporate event or during the relevant redemption period.
The 2029 Convertible Notes are redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after March 1, 2027 and on or before the 20th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid special and additional interest, if any, to, but excluding, the redemption date.
SMCI | Q1 2025 Form 10-Q | 18
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
The 2029 Convertible Notes have customary provisions relating to the occurrence of “events of default” (as defined in the 2029 Convertible Notes Indenture). The occurrence of such events of default may result in the acceleration of all amounts due under the 2029 Convertible Notes. The 2029 Convertible Notes were not eligible for conversion as of September 30, 2024. No sinking fund is provided for the 2029 Convertible Notes.
The 2029 Convertible Notes are general unsecured obligations of the Company and rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2029 Convertible Notes; equal in right of payment with all of the Company’s existing and future senior, unsecured indebtedness; effectively subordinated to any of the Company’s existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity if any, of the Company’s current or future subsidiaries. As of September 30, 2024, none of the conditions permitting the holders of the 2029 Convertible Notes to convert their notes early had been met. Therefore, the 2029 Convertible Notes are classified as long-term debt.
The Company accounted for the issuance of the 2029 Convertible Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.
The carrying value of the 2029 Convertible Notes, net of unamortized issuance costs of $25.8 million, was $1,699.2 million as of September 30, 2024. Interest expense related to the amortization of debt issuance costs was $1.5 million for the quarter ended September 30, 2024. The effective interest rate is 0.34%.
Capped Calls
In connection with the issuance of the 2029 Convertible Notes, the Company entered into privately negotiated capped call transactions (collectively, the “Capped Call Transactions”) with certain financial institutions (the “Capped Call Counterparties”). The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon conversion of the 2029 Convertible Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of the 2029 Convertible Notes, as the case may be, with such reduction and/or offset, in each case subject to a cap. In connection with the amendment of the 2029 Convertible Notes, the Company entered into agreements to amend certain terms of the Capped Call Transactions. Refer to Note 14, “Subsequent Events,” below.
The Capped Call Transactions initially have a strike price of $134.14 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2029 Convertible Notes. The cap price of the Capped Call Transactions was initially $195.10 per share of common stock subject to certain adjustments under the terms of the Capped Call Transactions.
For accounting purposes, each Capped Call Transaction is a separate transaction, and not part of the terms of the 2029 Convertible Notes. As these transactions meet certain accounting criteria, the Capped Call Transactions of $142.1 million are recorded in stockholders’ equity and are not accounted for as derivatives. The Capped Call Transactions will not be remeasured as long as they continue to meet the conditions for equity classification. The 2029 Convertible Notes and the Capped Call Transactions have been integrated for tax purposes. The accounting impact of this tax treatment results in the Capped Call Transactions being deductible with the cost of the Capped Call Transactions qualifying as original issue discount for tax purposes over the term of the 2029 Convertible Notes.
SMCI | Q1 2025 Form 10-Q | 19
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 8. Leases
The Company leases offices, warehouses and other premises, vehicles and certain equipment under non-cancelable operating leases. Operating lease expense recognized and supplemental cash flow information related to operating leases for the three months ended September 30, 2024 and 2023 were as follows (in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Operating lease expense (including expense for lease agreements with related parties of $165 and $139 for the three months ended September 30, 2024 and 2023, respectively) | $ | 3,226 | $ | 2,184 | |||||||||||||||||||
| Cash payments for operating leases (including payments to related parties of $165 and $128 for the three months ended September 30, 2024 and 2023, respectively) | $ | 2,863 | $ | 2,083 | |||||||||||||||||||
| New operating lease assets obtained in exchange for operating lease liabilities | $ | 17,782 | $ | 9,177 |
During the three months ended September 30, 2024 and 2023, the Company’s costs related to short-term lease arrangements for real estate and non-real estate assets were immaterial. Non-lease variable payments expensed in the three months ended September 30, 2024 and 2023 were immaterial.
As of September 30, 2024, the weighted average remaining lease term for operating leases was 6.1 years and the weighted average discount rate was 5.2%. As of September 30, 2023, the weighted average remaining lease term for operating leases was 3.5 years and the weighted average discount rate was 4.1%. The short-term portion of the lease liability is included in accrued liabilities and the long-term portion of the lease liability is included in other long-term liabilities on the condensed consolidated balance sheets. Maturities of operating lease liabilities under non-cancelable operating lease arrangements as of September 30, 2024 were as follows (in thousands):
| Fiscal Year: | Maturities of operating leases (1) | |||||||
| Remainder of 2025 | $ | 7,233 | ||||||
| 2026 | 10,394 | |||||||
| 2027 | 9,488 | |||||||
| 2028 | 8,241 | |||||||
| 2029 | 7,598 | |||||||
| 2030 and beyond | 19,496 | |||||||
| Total future lease payments | 62,450 | |||||||
| Less: Imputed interest | (10,951) | |||||||
| Present value of operating lease liabilities | 51,499 | |||||||
| Less: Current portion | (10,654) | |||||||
| Long-term portion of operating lease liabilities | $ | 40,845 |
(1) The table does not include amounts pertaining to leases that have not yet commenced.
SMCI | Q1 2025 Form 10-Q | 20
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Lease executed but not commenced
In June 2024, the Company entered into a lease agreement for a 21 megawatt data center co-location space located in Vernon, California (the “Data Center Space”) that will expire on August 31, 2035. As this lease has not yet commenced, it is not reflected in the condensed consolidated balance sheets or in the table above. Concurrently, the Company sublicensed this space to an unrelated party (the “Sublicensee”) for the same term expiring on August 31, 2035, which also has not yet commenced. Pursuant to the sublicense, the Company will sublicense the Data Center Space lease to the Sublicensee, and the Sublicensee will assume all rights and obligations with respect to the Data Center Space lease. The Company expects to account for the lease as an operating lease and the sublicense as a sublease under ASC 842. The future undiscounted fixed non-cancelable payment obligation pertaining to the data center lease is approximately $411.8 million and future minimum sublicense receipts are approximately $436.5 million.
The Company holds an equity investment of $42.5 million in the sublicensee, which is classified under investments in privately held companies and recorded in Other assets on the condensed consolidated balance sheets. The sublicensee does not meet the criteria of a related party. Additionally, the sublicensee has been a customer of the Company, and the Company concluded that equity investment agreements and sub-licensing agreement are separate from revenue contracts as all transactions have been recorded at the respective fair values.
Related party leases
The Company has entered into lease agreements with related parties. See Note 9, "Related Party Transactions" for further discussion.
Note 9. Related Party Transactions
The Company has a variety of business relationships with Ablecom and Compuware. Ablecom and Compuware are both Taiwan corporations. Ablecom is one of the Company’s major contract manufacturers; Compuware is both a distributor of the Company’s products and a contract manufacturer for the Company. Ablecom’s Chief Executive Officer, Steve Liang, is the brother of Charles Liang, the Company’s President, Chief Executive Officer and Chairman of the Board. Steve Liang and his family members owned approximately 35.0% of Ablecom’s stock and Charles Liang and his spouse, Sara Liu, who is also an officer and director of the Company, collectively owned approximately 10.5% of Ablecom’s capital stock as of September 30, 2024. Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors of Ablecom. Bill Liang is also the Chief Executive Officer of Compuware, Chairman of Compuware’s Board of Directors and a holder of equity interest in Compuware. Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware. Neither Charles Liang nor Sara Liu own any capital stock of Compuware and the Company does not own any of Ablecom or Compuware’s capital stock. In addition, a sibling of Yih-Shyan (Wally) Liaw, who is the Company's Senior Vice President, Business Development and a director of the Company, owns approximately 11.7% of Ablecom’s capital stock and 8.7% of Compuware’s capital stock.
In October 2018, the Company's Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang. The loan is unsecured, has no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to 0.25% effective March 1, 2020. The loan was originally made at Mr. Liang's request to provide funds to repay margin loans to two financial institutions, which loans had been secured by shares of the Company's common stock that he held. The lenders called the loans in October 2018, following the suspension of the Company's common stock from trading on NASDAQ in August 2018 and the decline in the market price of the Company's common stock in October 2018. As of September 30, 2024 and June 30, 2024, the amount due on the unsecured loan (including principal and accrued interest) was approximately $16.5 million and $16.4 million respectively.
Dealings with Ablecom
The Company has entered into a series of agreements with Ablecom, including multiple product development, production and service agreements, credit agreements, product manufacturing agreements, manufacturing services agreements and lease agreements for warehouse space.
SMCI | Q1 2025 Form 10-Q | 21
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Under these agreements, the Company outsources to Ablecom a portion of its design activities and a significant part of its server chassis manufacturing as well as an immaterial portion of other components. Ablecom manufactured approximately 96.8% and 85.5% of the chassis included in the products sold by the Company during the three months ended September 30, 2024 and 2023, respectively. With respect to design activities, Ablecom generally agrees to design certain agreed-upon products according to the Company’s specifications, and further agrees to build the tools needed to manufacture the products. The Company pays Ablecom for the design and engineering services, and further agrees to pay Ablecom for the tooling. The Company retains full ownership of any intellectual property resulting from the design of these products and tooling.
With respect to the manufacturing aspects of the relationship, Ablecom purchases most of the materials needed to manufacture the chassis from third parties and the Company provides certain components used in the manufacturing process (such as power supplies) to Ablecom through consignment or sales transactions. Ablecom uses these materials and components to manufacture the completed chassis and then sell them back to the Company. For the components purchased from the Company, Ablecom sells the components back to the Company at a price equal to the price at which the Company sold the components to Ablecom. There is no revenue recognized by the Company from these transactions. The Company and Ablecom frequently review and negotiate the prices of the chassis the Company purchases from Ablecom. In addition to inventory purchases, the Company also incurs other costs associated with design services, tooling and other miscellaneous costs from Ablecom.
The Company’s exposure to financial loss as a result of its involvement with Ablecom is limited to potential losses on its purchase orders in the event of an unforeseen decline in the market price and/or demand of the Company’s products such that the Company incurs a loss on the sale or cannot sell the products. Outstanding cancelable and non-cancelable purchase orders from the Company to Ablecom on September 30, 2024 were $24.8 million and $48.4 million, respectively, and outstanding cancelable and non-cancelable purchase orders from the Company to Ablecom on June 30, 2024 were $99.0 million and $58.8 million, respectively, effectively representing the exposure to financial loss. The Company does not directly or indirectly guarantee any obligations of Ablecom, or any losses that the equity holders of Ablecom may suffer. Since Ablecom manufactures substantially all the chassis that the Company incorporates into its products, if Ablecom were to suddenly be unable to manufacture chassis for the Company, the Company’s business could suffer if the Company is unable to quickly qualify substitute suppliers who can supply high-quality chassis to the Company in volume and at acceptable prices. The Company has extended a $10.0 million trade credit line with a net 30 days payment terms to Ablecom through a credit agreement that outlines the terms and conditions governing their business dealings.
Dealings with Compuware
The Company appointed Compuware as a non-exclusive authorized distributor of the Company’s products in Taiwan, China and Australia. Compuware assumes the responsibility of installing the Company's products at the site of the end customer, if required, and administers customer support in exchange for a discount from the Company's standard price for its purchases.
The Company also has entered into a series of agreements with Compuware, including multiple product development, production and service agreements, product manufacturing agreements, and lease agreements for office space. The Company has extended a $65.0 million trade credit line with a net 60 days payment terms to Compuware through a credit agreement that outlines the terms and conditions governing their business dealings.
Under these agreements, the Company outsources to Compuware a portion of its design activities and a significant part of its power supplies manufacturing as well as an immaterial portion of other components. With respect to design activities, Compuware generally agrees to design certain agreed-upon products according to the Company’s specifications, and further agrees to build the tools needed to manufacture the products. The Company pays Compuware for the design and engineering services, and further agrees to pay Compuware for the tooling. The Company retains full ownership of any intellectual property resulting from the design of these products and tooling. With respect to the manufacturing aspects of the relationship, Compuware purchases most of materials needed to manufacture the power supplies from outside markets and uses these materials to manufacture the products and then sell those products to the Company. The Company and Compuware frequently review and negotiate the prices of the power supplies the Company purchases from Compuware.
SMCI | Q1 2025 Form 10-Q | 22
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Compuware also manufactures motherboards, backplanes and other components used on printed circuit boards for the Company. The Company sells to Compuware most of the components needed to manufacture the above products. Compuware uses the components to manufacture the products and then sells the products back to the Company at a purchase price equal to the price at which the Company sold the components to Compuware, plus a “manufacturing value added” fee and other miscellaneous material charges and costs, including overhead and labor. There is no revenue recognized by the Company from these transactions. The Company and Compuware frequently review and negotiate the amount of the “manufacturing value added” fee that will be included in the price of the products the Company purchases from Compuware. In addition to the inventory purchases, the Company also incurs costs associated with design services, tooling assets, and miscellaneous costs.
The Company’s exposure to financial loss as a result of its involvement with Compuware is limited to potential losses on its purchase orders in the event of an unforeseen decline in the market price and/or demand of the Company’s products such that the Company incurs a loss on the sale or cannot sell the products. Outstanding cancelable and non-cancelable purchase orders from the Company to Compuware on September 30, 2024 were $117.2 million and $88.3 million, respectively, and outstanding cancelable and non-cancelable purchase orders from the Company to Compuware on June 30, 2024 were $129.7 million and $93.5 million, respectively, effectively representing the exposure to financial loss. The Company does not directly or indirectly guarantee any obligations of Compuware, or any losses that the equity holders of Compuware may suffer.
Dealings with Leadtek Research Inc.
In October 2023, Ablecom and Compuware acquired an approximately 30% interest in Leadtek Research Inc. (“Leadtek”), a Taiwan company specializing in providing professional graphics cards and workstation solutions (the “Leadtek Investment”). Prior to the Leadtek Investment, none of the Company’s related parties had direct or indirect material interests in any transactions in which the Company was a participant with Leadtek. Commencing with the closing of the Leadtek Investment, Steve Liang and Bill Liang have served as two of the seven members of the Leadtek board of directors. At the time of Leadtek Investment, Leadtek was, and it continues to be, an authorized reseller of the Company. During the three months ended September 30, 2024, the Company engaged in transactions in which it sold $0.1 million of servers to Leadtek and purchased $0.4 million of graphics cards from Leadtek.
Dealings with Investment in a Corporate Venture
In October 2016, the Company entered into agreements pursuant to which the Company contributed certain technology rights in connection with an investment in a privately-held company (the “Corporate Venture”) located in China to expand the Company’s presence in China. The Corporate Venture is 30% owned by the Company and 70% owned by another company in China. The transaction was closed in the third quarter of the fiscal year ended June 30, 2017, and the investment is accounted for using the equity method. As such, the Corporate Venture is also a related party.
The Company monitors the investment for events or circumstances indicative of potential impairment and makes appropriate reductions in carrying values if it determines that an impairment charge is required. The carrying value of the equity investment in the corporate venture was $5.0 million and $4.6 million as of September 30, 2024 and June 30, 2024, respectively, recorded in Other assets on the condensed consolidated balance sheets. The Company performed its impairment analysis on this investment and concluded the carrying value is not impaired as of September 30, 2024 and June 30, 2024. No impairment charge was recorded for the three months ended September 30, 2024 and 2023.
The Company sold products worth $4.8 million and $0.8 million to the Corporate Venture during the three months ended September 30, 2024 and 2023, respectively. The Company’s share of intra-entity profits on the products that remained unsold by the Corporate Venture as of September 30, 2024 and June 30, 2024 have been eliminated and have reduced the carrying value of the Company’s investment in the Corporate Venture. To the extent that the elimination of intra-entity profits reduces the investment balance below zero, such amounts are recorded within accrued liabilities. The Company had $0.9 million and $5.1 million due from the Corporate Venture in accounts receivable, net as of September 30, 2024 and June 30, 2024, respectively.
SMCI | Q1 2025 Form 10-Q | 23
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Other Transactions
For the three months ended September 30, 2024, the Company had immaterial chargebacks from Green Earth Liang’s Inc. (“Green Earth”), an entity affiliated with the Company’s Chief Executive Officer. As of September 30, 2024, the amounts due from Green Earth are immaterial. As of June 30, 2024, the amounts due to and from Green Earth are immaterial.
The Company had the following balances related to transactions with its related parties as of September 30, 2024 and June 30, 2024 (in thousands):
| Ablecom | Compuware | Corporate Venture | Leadtek | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | June 30, 2024 | September 30, 2024 | June 30, 2024 | September 30, 2024 | June 30, 2024 | September 30, 2024 | June 30, 2024 | September 30, 2024 | June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Accounts receivable | $ | 2 | $ | 1 | $ | 7,037 | $ | 142 | $ | 933 | $ | 5,075 | $ | 19 | $ | 976 | $ | 7,991 | $ | 6,194 | |||||||||||||||||||||||||||||||||
| Other receivable (1) | $ | 2,393 | $ | 1,927 | $ | 12,681 | $ | 10,012 | $ | — | $ | — | $ | — | $ | — | $ | 15,074 | $ | 11,939 | |||||||||||||||||||||||||||||||||
| Accounts payable | $ | 128,628 | $ | 98,629 | $ | 73,220 | $ | 66,436 | $ | — | $ | — | $ | 171 | $ | 230 | $ | 202,019 | $ | 165,295 | |||||||||||||||||||||||||||||||||
| Accrued liabilities (2) | $ | 300 | $ | — | $ | 100 | $ | 170 | $ | — | $ | — | $ | — | $ | — | $ | 400 | $ | 170 |
| (1) Other receivables include receivables from vendors included in prepaid and other current assets. | ||
| (2) Includes current portion of operating lease liabilities included in other current liabilities. | ||
The Company’s results from transactions with its related parties for each of the three months ended September 30, 2024 and 2023, are as follows (in thousands):
| Ablecom | Compuware | Corporate Venture | Leadtek | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Three months ended September 30, | Three months ended September 30, | Three months ended September 30, | Three months ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 2 | $ | 2 | $ | 9,975 | $ | 16,606 | $ | 4,827 | $ | 788 | $ | 71 | $ | — | $ | 14,875 | $ | 17,396 | ||||||||||||||||||||||||||||||||||||
| Purchases - inventory | $ | 137,507 | $ | 46,614 | $ | 102,117 | $ | 66,493 | $ | — | $ | — | $ | 427 | $ | — | $ | 240,051 | $ | 113,107 | ||||||||||||||||||||||||||||||||||||
| Purchases - other miscellaneous items | $ | 6,354 | $ | 4,759 | $ | 737 | $ | 417 | $ | — | $ | — | $ | — | $ | — | $ | 7,091 | $ | 5,176 |
SMCI | Q1 2025 Form 10-Q | 24
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
The Company’s cash flow impact from transactions with its related parties for each of the three months ended September 30, 2024 and 2023, are as follows (in thousands):
| Ablecom | Compuware | Corporate Venture | Leadtek | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Three months ended September 30, | Three months ended September 30, | Three months ended September 30, | Three months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Changes in accounts receivable | $ | (2) | $ | (2) | $ | (6,895) | $ | 2,436 | $ | 4,142 | $ | 1,704 | $ | 958 | $ | — | $ | (1,797) | $ | 4,138 | |||||||||||||||||||||||||||||||||
| Changes in other receivable | $ | (466) | $ | 558 | $ | (2,669) | $ | 2,269 | $ | — | $ | — | $ | — | $ | — | $ | (3,135) | $ | 2,827 | |||||||||||||||||||||||||||||||||
| Changes in accounts payable | $ | 29,999 | $ | 8,765 | $ | 6,784 | $ | (5,784) | $ | — | $ | — | $ | (59) | $ | — | $ | 36,724 | $ | 2,981 | |||||||||||||||||||||||||||||||||
| Changes in accrued liabilities | $ | 300 | $ | (745) | $ | (70) | $ | 3,232 | $ | — | $ | — | $ | — | $ | — | $ | 230 | $ | 2,487 | |||||||||||||||||||||||||||||||||
| Changes in other long-term liabilities | $ | 237 | $ | — | $ | — | $ | (80) | $ | — | $ | — | $ | — | $ | — | $ | 237 | $ | (80) | |||||||||||||||||||||||||||||||||
| Purchases of property, plant and equipment | $ | 2,925 | $ | 782 | $ | 204 | $ | 44 | $ | — | $ | — | $ | — | $ | — | $ | 3,129 | $ | 826 | |||||||||||||||||||||||||||||||||
| Unpaid property, plant and equipment | $ | 3,906 | $ | 3,672 | $ | 153 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 4,059 | $ | 3,672 |
SMCI | Q1 2025 Form 10-Q | 25
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 10. Stock-based Compensation and Stockholders’ Equity
Preferred Stock
The Company has 10,000,000 shares of undesignated preferred stock, $0.001 par value per share, authorized but not issued with rights and preferences determined by the Company’s Board of Directors at the time of issuance of such shares. As of September 30, 2024 and 2023, there were no shares of preferred stock issued and outstanding.
Common Stock
The Company may issue up to 1,000,000,000 shares of common stock, $0.001 par value per share. The holders of our Company's common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.
Equity Incentive Plan
On June 5, 2020, the stockholders of the Company approved the 2020 Equity and Incentive Compensation Plan (the “Original 2020 Plan”). The maximum number of shares available under the Original 2020 Plan was 50,000,000, plus 10,450,000 shares of common stock that remained available for future awards under the 2016 Equity Incentive Plan (the “2016 Plan”), at the time of adoption of the Original 2020 Plan. No other awards can be granted under the 2016 Plan and 72,460,000 shares of common stock remained reserved for outstanding awards issued under the 2016 Plan at the time of adoption of the Original 2020 Plan. On May 18, 2022, the stockholders of the Company approved an amendment and restatement of the Original 2020 Plan which, among other things, increased the number of shares available for award under the 2020 Plan by an additional 20,000,000 shares.
On January 22, 2024, the stockholders of the Company approved a further amendment and restatement of the Original 2020 Plan (as amended and restated from time to time, the “2020 Plan”) which, among other things, further increased the number of shares available for award under the 2020 Plan by an additional 15,000,000 shares.
Under the 2020 Plan, the Company can grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, the Company’s common stock. The exercise price per share for incentive stock options granted to employees owning shares representing more than 10% of the Company’s outstanding voting stock at the time of grant cannot be less than 110% of the fair value of the underlying shares on the grant date. Nonqualified stock options and incentive stock options granted to all other persons are granted at a price not less than 100% of the fair value. Options generally expire ten years after the date of grant. Stock options and RSUs generally vest over four years; 25% at the end of one year and one sixteenth per quarter thereafter.
As of September 30, 2024, the Company had 9,926,450 authorized shares available for future issuance under the 2020 Plan.
Offerings of Common Stock
On December 5, 2023, the Company completed a public offering of 24,158,050 shares of the Company's common stock at $26.20 per share, with 23,151,050 shares sold by the Company and 1,007,000 shares sold by selling stockholders.
The Company received net proceeds of approximately $582.8 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The Company did not receive any proceeds from the sale of the shares of common stock by the selling stockholders.
On March 22, 2024, the Company completed a public offering of 20,000,000 shares of the Company's common stock at $87.50 per share. The Company received net proceeds of $1,731.5 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.
SMCI | Q1 2025 Form 10-Q | 26
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Determining Fair Value
The fair value of the Company's RSUs are based on the closing market price of the Company's common stock on the date of grant. The Company estimates the fair value of stock options granted using the Black-Scholes-option-pricing model. This fair value is then amortized ratably over the requisite service periods of the awards, which is generally the vesting period. The key inputs in using the Black-Scholes-option-pricing model were as follows:
Expected Term—The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on the Company’s historical experience.
Expected Volatility—Expected volatility is based on the Company’s implied and historical volatility.
Expected Dividend—The Black-Scholes valuation model calls for a single expected dividend yield as an input and the Company has no plans to pay dividends.
Risk-Free Interest Rate—The risk-free interest rate used in the Black-Scholes valuation method is based on the United States Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.
The fair value of stock option grants for the three months ended September 30, 2024 and 2023 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Risk-free interest rate | 3.82% - 4.00% | 4.15% - 4.32% | |||||||||||||||||||||
| Expected term | 3.00 years - 5.98 years | 3.00 years - 5.99 years | |||||||||||||||||||||
| Dividend yield | —% | —% | |||||||||||||||||||||
| Volatility | 63.67% - 69.97% | 56.87% - 58.27% | |||||||||||||||||||||
| Weighted-average fair value of options | $40.71 | $18.83 |
The following table shows total stock-based compensation expense included in the condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023 (in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Cost of sales | $ | 3,959 | $ | 5,904 | |||||||||||||||||||
| Research and development | 36,527 | 35,710 | |||||||||||||||||||||
| Sales and marketing | 7,763 | 5,665 | |||||||||||||||||||||
| General and administrative | 15,765 | 10,100 | |||||||||||||||||||||
| Stock-based compensation expense before taxes | 64,014 | 57,379 | |||||||||||||||||||||
| Income tax impact | (15,873) | (16,049) | |||||||||||||||||||||
| Stock-based compensation expense, net | $ | 48,141 | $ | 41,330 |
During the three months ended September 30, 2024, stock-based compensation expense capitalized to our condensed consolidated balance sheets was $0.1 million. No stock-based compensation expense was capitalized for the three months ended September 30, 2023.
SMCI | Q1 2025 Form 10-Q | 27
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
As of September 30, 2024, $191.3 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 3.12 years and $551.1 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.65 years.
Stock Option Activity
2021 CEO Performance Award
In March 2021, the Company’s Compensation Committee of the Board of Directors (the “Compensation Committee”) approved the grant of a stock option award for 10,000,000 shares of common stock to the Company’s CEO (the “2021 CEO Performance Stock Option”). As of September 30, 2024, the 2021 CEO Performance Stock Option had fully vested based upon achievement of operational and stock price milestones as follows:
| Annualized Revenue Milestone (in billions) | Achievement Status | Stock Price Milestone | Achievement Status | |||||||||||||||||||||||
| $4.0 | Achieved | $4.50 | Achieved (1) | |||||||||||||||||||||||
| $4.8 | Achieved | $6.00 | Achieved (2) | |||||||||||||||||||||||
| $5.8 | Achieved | $7.50 | Achieved (3) | |||||||||||||||||||||||
| $6.8 | Achieved | $9.50 | Achieved (4) | |||||||||||||||||||||||
| $8.0 | Achieved | $12.00 | Achieved (5) | |||||||||||||||||||||||
(1)The vesting of the first tranche of 2,000,000 option shares under the 2021 CEO Performance Stock Option, representing one-fifth of such award, was certified by the Company’s Compensation Committee in August 2022.
(2)The vesting of the second tranche of 2,000,000 option shares under the 2021 CEO Performance Stock Option representing one-fifth of such award was certified by the Company’s Compensation Committee in October 2022.
(3)The vesting of the third tranche of 2,000,000 option shares under the 2021 CEO Performance Stock Option representing one-fifth of such award was certified by the Company’s Compensation Committee in January 2023.
(4)The vesting of the fourth tranche of 2,000,000 option shares under the 2021 CEO Performance Stock Option representing one-fifth of such award was certified by the Company’s Compensation Committee in September 2023.
(5)The vesting of the fifth tranche of 2,000,000 option shares under the 2021 CEO Performance Stock Option representing one-fifth of such award was certified by the Company’s Compensation Committee in February 2024.
During the three months ended September 30, 2024 and 2023, the Company recognized compensation expense related to the 2021 CEO Performance Stock Option of $0.0 million and $0.2 million, respectively. As of September 30, 2024 and June 30, 2024, the Company had no unrecognized compensation cost related to the 2021 CEO Performance Stock Option.
SMCI | Q1 2025 Form 10-Q | 28
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
2023 CEO Performance Award
In November 2023, the Compensation Committee approved the grant of a stock option award for 5,000,000 shares of common stock to the Company’s CEO (the “2023 CEO Performance Stock Option”). The 2023 CEO Performance Stock Option has five vesting tranches with a vesting schedule based entirely on the attainment of operational milestones (performance conditions) and market conditions, assuming (1) continued employment either as the CEO or in such capacity as agreed upon between the Company’s CEO and the Board and (2) service through each vesting date. Each of the five vesting tranches of the 2023 CEO Performance Stock Option will vest upon certification by the Compensation Committee that both (i) the market price milestone for such tranche, which begins at $45.00 per share for the first tranche and increases up to $110.00 per share thereafter (based on a 60 trading day average stock price), has been achieved, and (ii) any one of five operational milestones focused on total revenue, as reported under U.S. GAAP, have been achieved for the previous four consecutive fiscal quarters. Upon vesting and exercise, including the payment of the exercise price of $45.00 per share, prior to November 14, 2026, the Company’s CEO must hold shares that he acquires until November 14, 2026, other than those shares sold pursuant to a cashless exercise where shares are simultaneously sold to pay for the exercise price and any required tax withholding.
The achievement status of the operational and stock price milestones as of September 30, 2024 was as follows:
| Annualized Revenue Milestone (in billions)(1) | Achievement Status | Stock Price Milestone(1) | Achievement Status | |||||||||||||||||
| $13.0 | Probable | $45.00 | Achieved (2) | |||||||||||||||||
| $15.0 | Probable | $60.00 | Achieved (3) | |||||||||||||||||
| $17.0 | Probable | $75.00 | Achieved (4) | |||||||||||||||||
| $19.0 | Probable | $90.00 | Achieved (5) | |||||||||||||||||
| $21.0 | Probable | $110.00 | Not yet achieved |
(1)Under the terms of the 2023 CEO Performance Stock Option, the annualized revenue milestones and stock price milestones set forth in the table above must be achieved by December 31, 2028 and March 31, 2029, respectively.
(2)On March 2, 2024, the Compensation Committee certified achievement of the $45 stock price milestone based upon the 60 trading day average stock price from November 29, 2023 through February 26, 2024.
(3)On April 1, 2024, the Compensation Committee certified achievement of the $60 stock price milestone based upon the 60 trading day average stock price from December 15, 2023 through March 13, 2024.
(4)On April 1, 2024, the Compensation Committee certified achievement of the $75 stock price milestone based upon the 60 trading day average stock price from January 4, 2024 through April 1, 2024.
(5)On May 5, 2024, the Compensation Committee certified achievement of the $90 stock price milestone based upon the 60 trading day average stock price from January 31, 2024 through April 25, 2024.
SMCI | Q1 2025 Form 10-Q | 29
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
During the three months ended September 30, 2024, the Company recognized compensation expense related to the 2023 CEO Performance Stock Option of $7.7 million. As of September 30, 2024, the Company had $11.2 million in unrecognized compensation cost related to the 2023 CEO Performance Stock Option. The unrecognized compensation cost as of September 30, 2024 is expected to be recognized over a period of 2.25 years.
On the respective grant dates of each of the 2021 CEO Performance Award and the 2023 CEO Performance Award, a Monte Carlo simulation was used to determine for each tranche of each award (i) a fixed expense amount for such tranche and (ii) the future time when the market price milestone for such tranche was expected to be achieved, or its “expected market price milestone achievement time.” Separately, based on a subjective assessment of the Company’s future financial performance, each quarter, the Company will determine, using a Monte Carlo simulation, whether achievement is probable for each operational milestone that has not previously been achieved or deemed probable of achievement, and, if so, the future time when the Company expects to achieve that operational milestone, or its “expected operational milestone achievement time.” When the Company first determines that an operational milestone has become probable of being achieved, the Company will allocate the entire expense for the related tranche over the number of quarters between the grant date and the then-applicable “expected vesting time.” The “expected vesting time” at any given time is the later of (i) the expected operational milestone achievement time (if the related operational milestone has not yet been achieved) and (ii) the expected market price milestone achievement time (if the related market price milestone has not yet been achieved). The Company will immediately recognize a catch-up expense for all accumulated expenses from the respective grant date through the quarter in which the operational milestone was first deemed probable of being achieved. Each quarter thereafter, the Company will recognize the prorated portion of the then-remaining expense for the tranche based on the number of quarters between such quarter and the then-applicable expected vesting time, except that upon vesting of a tranche, all remaining expenses for that tranche will be immediately recognized.
The following table summarizes stock option activity during the three months ended September 30, 2024 under all plans:
| Options Outstanding | Weighted Average Exercise Price per Share | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (in Years) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | 35,443,550 | $ | 17.57 | |||||||||||||||||||||||||||||
| Granted | 1,084,500 | $ | 66.41 | $40.71 | ||||||||||||||||||||||||||||
| Exercised | (1,330,560) | $ | 4.91 | |||||||||||||||||||||||||||||
| Forfeited/Cancelled | (179,250) | $ | 22.61 | |||||||||||||||||||||||||||||
| Balance as of September 30, 2024 | 35,018,240 | $ | 19.53 | 6.99 | ||||||||||||||||||||||||||||
| Options vested and expected to vest as of September 30, 2024 | 35,018,240 | $ | 19.53 | |||||||||||||||||||||||||||||
| Options exercisable as of September 30, 2024 | 19,316,140 | $ | 5.18 | 5.49 |
The total pretax intrinsic value of options exercised during the three months ended September 30, 2024 and 2023 was $63.1 million and $45.9 million, respectively.
SMCI | Q1 2025 Form 10-Q | 30
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
RSU Activity
The following table summarizes RSU activity during the three months ended September 30, 2024 under all plans:
| Time-Based RSUs Outstanding | Weighted Average Grant-Date Fair Value per Share | |||||||||||||||||||||||||
| Balance as of June 30, 2024 | 21,272,990 | $ | 24.19 | |||||||||||||||||||||||
| Granted | 2,111,600 | $ | 66.53 | |||||||||||||||||||||||
| Released | (2,264,940) | $ | 13.63 | |||||||||||||||||||||||
| Forfeited | (274,200) | $ | 33.62 | |||||||||||||||||||||||
| Balance as of September 30, 2024 | 20,845,450 | $ | 29.51 |
SMCI | Q1 2025 Form 10-Q | 31
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 11. Income Taxes
The Company recorded a provision for income taxes of $74.7 million and $20.2 million for the three months ended September 30, 2024 and 2023, respectively. The effective tax rate was 15.0% and 11.4% for the three months ended September 30, 2024 and 2023, respectively. The effective tax rate for the three months ended September 30, 2024 was higher than that for the three months ended September 30, 2023, primarily due to the decreases in the stock-based compensation tax deduction and research tax credit and the increase in state tax liability in the three months ended September 30, 2024. The effective tax rates for the first three months of fiscal years 2025 and 2024 were lower than the U.S. federal statutory rate of 21% primarily due to tax benefits from the foreign-derived intangible income deduction, stock-based compensation, and the U.S. federal research tax credit.
The Company believes that it has adequately provided reserves for all uncertain tax positions; however, amounts asserted by tax authorities could be greater or less than the Company’s current position. Accordingly, the Company’s provision on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or as the underlying matters are settled or otherwise resolved.
In general, the federal statute of limitations remains open for tax years ended June 30, 2021 through 2024. Various states' statutes of limitations remain open in general for tax years ended June 30, 2020 through 2024. Certain statutes of limitations in major foreign jurisdictions remain open for the tax years ended June 30, 2019 through 2024. It is reasonably possible that the Company's gross unrecognized tax benefits will decrease by approximately $4.1 million, in the next 12 months, due to the lapse of the statute of limitations. These adjustments, if recognized, would positively impact the Company's effective tax rate, and would be recognized as additional tax benefits.
Note 12. Commitments and Contingencies
Litigation and claims
On August 30, 2024, three putative class action complaints were filed against the Company, the Company’s Chief Executive Officer, and the Company’s Chief Financial Officer in the U.S. District Court for the Northern District of California (Averza v. Super Micro Computer, Inc., et al., No. 5:24-cv-06147, Menditto v. Super Micro Computer, Inc., et al., No. 3:24-cv-06149, and Spatz v. Super Micro Computer, Inc., et al., No. 5:24-cv-06193). On October 4, 2024, a fourth putative class action complaint was filed in the same court (Norfolk County Retirement System v. Super Micro Computer, Inc., et al., No. 5:24-cv-06980). On October 18, 2024, a fifth putative class action complaint was filed in the same court (Covey Financial Inc., et al. v. Super Micro Computer, Inc., et al., No. 5:24-cv-07274). The complaints contain similar allegations, claiming that (i) each of the defendants violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder and (ii) each of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer violated Section 20(a) of the Securities Exchange Act as controlling persons of the Company for the alleged violations under (i), due (in each case) to alleged misrepresentations and/or omissions in public statements regarding the Company’s financial results and its internal controls and procedures. On October 28, 2024, the Spatz plaintiff voluntarily dismissed the Spatz complaint without prejudice against all Defendants, ending the suit. On November 21, 2024, the Averza Court entered a Stipulation and Order extending Defendants’ time to respond to the Averza complaint until after the Court appoints a lead plaintiff, which hearing is set for March 6, 2025. A similar stipulation was entered among the parties as to the Covey Financial complaint. On January 9, 2025, the Menditto plaintiff voluntarily dismissed the Menditto complaint without prejudice against all Defendants, ending the suit. The Company has not been served with the Norfolk County Retirement System complaint. These matters are too preliminary to form a judgment as to whether the likelihood of an adverse outcome is probable and the Company is unable to estimate the possible loss or range of loss, if any.
On September 11, 2024, certain current and former directors and certain current officers of the Company were named as defendants in a putative derivative lawsuit filed in the U.S. District Court for the Northern District of California, captioned Hollin v. Liang, et al., Case No. 5:24-cv-06410 (the “Hollin Action”). Four additional putative derivative lawsuits have been filed in the same court, captioned Latypov v. Liang, et al., Case No. 5:24-cv-06779 (filed Sept. 26, 2024), Keritsis v. Liang, et al., Case No. 5:24-cv-07753 (filed Nov. 6, 2024), Roy v. Liang, et al., Case No. 5:24-cv-08006 (filed Nov. 14, 2024), and Jha v. Liang, et al., No. 5:24-cv-08792 (filed Dec. 5, 2024) (together with the Hollin Action, the “Federal Derivative Litigation”). On November 20, 2024, certain current and former directors and certain current officers of the Company were named as defendants
SMCI | Q1 2025 Form 10-Q | 32
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
in a putative derivative lawsuit filed in the Superior Court of California, County of Santa Clara, captioned Spatz v. Liang, et al., Case No. 24CV452241 (the “Spatz Action”). Two additional putative derivative lawsuits have been filed in the same court, captioned Clark v. Liang, et al., Case No. 24CV454416 (filed Dec. 17, 2024) and Carter, et al. v. Liang, et al., Case No. 24CV454689 (filed Dec. 20, 2024) (together with the Spatz Action, the “State Court Derivative Litigation,” and together with the Federal Derivative Litigation, the “Derivative Litigation”). The Company was named as a nominal defendant in the Derivative Litigation. The Federal Derivative Litigation purports to allege claims for breaches of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934, as amended, and Rules 10b-5 and 14a-9 promulgated thereunder, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and contribution arising out of allegations that the Company’s officers and directors caused the Company to issue materially false and misleading statements concerning the Company’s business operations and financial results. The State Court Derivative Litigation purports to allege claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, waste of corporate assets, unjust enrichment, and insider trading arising out of similar allegations as the Federal Derivative Litigation. The plaintiffs in the Derivative Litigation seek unspecified money damages, in addition to punitive damages and other relief. On November 5, 2024, the Court in the Hollin Action entered a Stipulation and Order staying all proceedings in Hollin and any related federal derivative actions, which includes the Federal Derivative Litigation. The Court in the State Court Derivative Litigation stayed all proceedings until case management conferences were held in each suit, with the first conference scheduled for April 24, 2025 in Spatz. These matters are too preliminary to form a judgment as to whether the likelihood of an adverse outcome is probable and the Company is unable to estimate the possible loss or range of loss, if any.
On November 22, 2024, a putative class action claim was filed against the Company in Ontario Superior Court of Justice, Canada, captioned 1000099739 Ontario Ltd. v. Super Micro Computer, Inc., No. CV-24-00731863-OOCP. The claim alleges that the Company violated Common Law (primary and secondary market misrepresentations) and the Ontario Securities Act, due to alleged misrepresentations and/or omissions in public statements regarding the Company’s financial results and its internal controls and procedures. A case management judge was assigned in December 2024, but no case conference has been scheduled and no timetable for subsequent procedural steps has been set. The matter is too preliminary to form a judgment as to whether the likelihood of an adverse outcome is probable and the Company is unable to estimate the possible loss or range of loss, if any.
In late 2024, the Company received subpoenas from the Department of Justice and the Securities and Exchange Commission seeking a variety of documents following the publication in a short seller report which was published in August 2024. The Company is cooperating with these document requests and no charges have been brought as of the date of this filing.
Other legal proceedings and indemnifications
In addition to the matters described above, from time to time, the Company has been involved in various legal proceedings, disputes, claims, and regulatory or governmental inquiries and investigations arising from the normal course of business activities. The resolution of any such matters have not had a material impact on the Company’s condensed consolidated financial condition, results of operations or liquidity as of September 30, 2024 and any prior periods.
The Company has entered into indemnification agreements with its current and former directors and executive officers. Under these agreements, the Company has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or officers and to advance expenses incurred by such individuals in connection with related legal proceedings. It is not possible to determine the maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each claim. However, the Company maintains directors and officers liability insurance coverage to reduce its exposure to such obligations.
Purchase Commitments - The Company has agreements to purchase inventory and non-inventory items primarily through the next 12 months. As of September 30, 2024, these remaining non-cancelable commitments were $4.9 billion, including $136.7 million for related parties. The Company also reviews and assesses the need for expected loss liabilities on a quarterly basis for all products it does not expect to sell for but has committed purchases from suppliers. There were no loss liabilities recognized as of September 30, 2024 and $26.4 million of loss liabilities were recognized in Accrued liabilities in the condensed consolidated balance sheets from purchase commitments as of June 30, 2024.
Lease Commitments - See Note 8, "Leases," for a discussion of the Company's operating lease commitments.
SMCI | Q1 2025 Form 10-Q | 33
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 13. Segment Reporting
The Company operates in one operating segment that develops and provides high performance server solutions based upon an innovative, modular and open-standard architecture. The Company’s chief operating decision maker is the Chief Executive Officer.
The following is a summary of property, plant and equipment, net (in thousands):
| September 30, | June 30, | ||||||||||
| 2024 | 2024 | ||||||||||
| Long-lived assets: | |||||||||||
| United States | $ | 295,095 | $ | 281,874 | |||||||
| Taiwan | 112,228 | 107,878 | |||||||||
| Other | 43,737 | 24,256 | |||||||||
| $ | 451,060 | $ | 414,008 |
The table above excludes other assets, goodwill and intangible assets. Operating lease assets in the United States and the Netherlands were $39.5 million and $6.6 million as of September 30, 2024, respectively. Operating lease assets in the United States were $29.3 million as of June 30, 2024. Operating lease assets in all other countries were less than 10% as of September 30, 2024 and June 30, 2024.
For the three months ended September 30, 2024 and 2023, 71.4% and 76.4% of the Company’s revenues were from the United States. Other countries were individually less than 10%. The Company’s revenue by geographic region is based on where the products were shipped to for the three months ended September 30, 2024 and 2023.
Note 14. Subsequent Events
Cathay Bank Line of Credit
On October 28, 2024, the Company entered into a Third Amendment to Loan Agreement, by and among the Company and Cathay Bank, which amended the Cathay Bank Loan Agreement to, among other things, (a) extend the date by which the Company was required to deliver its (i) audited financial statements for its fiscal year 2024 under the Cathay Bank Loan Agreement from October 28, 2024 to December 31, 2024 and (ii) balance sheet and income statement for its fiscal quarter ending September 30, 2024 under the Loan Agreement from November 29, 2024 to December 31, 2024 and (b) added a covenant requiring that the Company maintain at least $150 million of unrestricted cash at all times. On November 15, 2024, the Company also entered into a Fourth Amendment to Loan Agreement, by and between the Company and Cathay Bank, which amended the Cathay Bank Loan Agreement to, among other things, reduce the revolving line and letter of credit sublimit under the Cathay Bank Loan Agreement to $458,000. On November 20, 2024, the Company prepaid in full and terminated its obligations under the Cathay Bank Loan Agreement.
Bank of America Bridge Term Loan Facility
On November 1, 2024, the Company prepaid in full and terminated its obligations under the Term Loan Credit Agreement, dated as of July 19, 2024, by and among the Company, the lenders party thereto, and Bank of America, N.A., as the administrative agent, as amended or otherwise modified.
E.SUN Bank Term Loan Facilities and Credit Lines
On November 14, 2024, the Company’s Taiwan subsidiary (the “Subsidiary”) entered into amendments (the “E.SUN Amendments”) of various Notifications and Confirmations of Credit Agreements (the “Notifications and Confirmations”) previously entered into with E.SUN Bank, which among other things, extended the time period for the financial statements
SMCI | Q1 2025 Form 10-Q | 34
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
issued by the Subsidiary for its fiscal year 2024 to be reviewed by E.SUN Bank from October 31, 2024 to December 31, 2024. In addition, the Notifications and Confirmations included various financial commitments applicable to the Subsidiary related to current ratio, net debt ratio, and interest coverage multiple. If such financial commitments are not achieved, the amortization period for the current balances thereunder will be shortened to one year starting from the 31st of the review month. The Company submitted the financial statements prior to December 31, 2024.
2018 Bank of America Credit Facility
On November 20, 2024, the Company prepaid in full and terminated its obligations under the 2018 Bank of America Credit Facility.
2022 Bank of America Credit Facility
On November 20, 2024, the Company, through its Taiwan subsidiary, terminated its obligations under the 2022 Bank of America Credit Facility with respect to the credit lines with Bank of America – Taipei Branch.
HSBC Bank Credit Lines
On December 20, 2024, the General Loan, Export/Import Financing, Overdraft Facilities, and Securities Agreement which the Company, through its Taiwan subsidiary, had entered into with the Taiwan affiliate of HSBC Bank (the “Loan Agreement”) was terminated and not renewed. The balance under this $50 million Loan Agreement had been fully repaid on September 9, 2024, and had remained undrawn since such date.
Amendment of 2029 Convertible Notes and associated capped calls
On February 20, 2025, the Company amended the terms of the 2029 Convertible Notes pursuant to a first supplemental indenture and a second supplemental indenture, in each case by and between the Company and U.S. Bank Trust Company, National Association as trustee. The terms of the 2029 Convertible Notes were amended to (i) bear interest from February 20, 2025 at an annual rate of 3.50%, payable semi-annually in arrears on each March 1 and September 1, beginning on September 1, 2025 and (ii) include an updated initial conversion rate of 11.9842 shares of the Company's common stock per $1,000 principal amount of 2029 Convertible Notes (equivalent to an initial conversion price of approximately $83.44 per share of the Company’s common stock). The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events. The remaining terms of the 2029 Convertible Notes remain substantially unchanged.
In connection with the amendment of the terms of the 2029 Convertible Notes, the Company amended the capped call transactions entered into in connection with the initial issuance of the 2029 Convertible Notes in February 2024. The amendments, among other things, make certain adjustments to the economic terms of the capped call transactions, including the cap price. The cap price, after giving effect to the amendments, is initially $94.1666 per share of the Company's common stock, and is subject to certain adjustments under the terms of the amended capped calls.
SMCI | Q1 2025 Form 10-Q | 35
SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Issuance of 2028 Convertible Notes
On February 20, 2025, the Company issued $700.0 million aggregate principal amount of 2.25% Convertible Senior Notes due 2028 (the “2028 Convertible Notes”) pursuant to an indenture, dated as of February 20, 2025 by and between the Company and U.S. Bank Trust Company, National Association, as trustee for gross proceeds of $700 million and approximately $50 million of issuance cost. The 2028 Convertible Notes were sold to investors pursuant to privately negotiated agreements. The 2028 Convertible Notes will mature on July 15, 2028, unless earlier redeemed, repurchased or converted. The 2028 Convertible Notes have an initial conversion rate of 16.3784 shares of the Company’s common stock per $1,000 principal amount of the 2028 Convertible Notes, which is equivalent to an initial conversion price of approximately $61.06 per share of the Company’s common stock, in each case subject to adjustment upon the occurrence of certain events. Prior to January 15, 2028, the 2028 Convertible Notes will be convertible only upon the satisfaction of certain conditions and during certain periods, and on and after January 15, 2028, at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, the 2028 Convertible Notes will be convertible regardless of these conditions. The Company will settle conversions of the 2028 Convertible Notes by paying or delivering cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock at the Company’s election.
SMCI | Q1 2025 Form 10-Q | 36
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