filings.toolsSuper Micro Computer 10-Q 2025-03-31
Filed 2025-05-12. 8 sections, 252K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________________
Form 10-Q
__________________________________________________________________________
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2025
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-33383
__________________________________________________________________________
Super Micro Computer, Inc.
(Exact name of registrant as specified in its charter)
_________________________________________________________________________
| Delaware | 77-0353939 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
980 Rock Avenue
San Jose, CA 95131
(Address of principal executive offices, including zip code)
(408) 503-8000
(Registrant’s telephone number, including area code)
__________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| Common Stock, $0.001 par value per share | SMCI | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | x | Accelerated filer | ☐ | |||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 30, 2025, there were 596,817,646 shares of the registrant’s common stock, $0.001 par value, outstanding, which is the only class of common stock of the registrant issued.
SUPER MICRO COMPUTER, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2025
TABLE OF CONTENTS
Unless the context requires otherwise, the words “Super Micro,” “Supermicro,” “we,” “Company,” “us” and “our” in this document refer to Super Micro Computer, Inc. and where appropriate, our wholly owned subsidiaries. Supermicro, the Company logo and our other registered or common law trademarks, service marks, or trade names appearing in this Quarterly Report on Form 10-Q (this “Quarterly Report”), are the property of Super Micro Computer, Inc. or its affiliates. Other trademarks, service marks, or trade names appearing in this Quarterly Report are the property of their respective owners.
The information contained on our website, or available by hyperlink from our website, is not incorporated into this Quarterly Report or other documents we file with, or furnish to, the Securities and Exchange Commission (the “SEC”). We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the “Investor Relations” section of our website. Accordingly, investors should monitor that section of our website, in addition to following our press releases, investor presentations, SEC filings and public conference calls and webcasts.
FORWARD STOCK SPLIT
On September 30, 2024, we filed an amendment to our Amended and Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to effect a ten-for-one forward split (the “Stock Split”) of our common stock without any change to its par value. The Amendment also effected a proportionate increase in the number of shares of authorized common stock from 100,000,000 to 1,000,000,000. Pursuant to Section 242(d) of the General Corporation Law of the State of Delaware, stockholder approval was not required in connection with the foregoing.
The Stock Split became effective at 5:00 p.m. Eastern Time on September 30, 2024. Trading in the common stock on the Nasdaq Global Select Market commenced on a Stock Split-adjusted basis at the market open on October 1, 2024, under the existing trading symbol “SMCI.”
As a result of the Stock Split, every one (1) share of common stock issued and outstanding was automatically divided into ten (10) shares of common stock. The Stock Split did not modify any rights or preferences of the shares of the common stock. Proportionate adjustments were automatically made to the number of shares of common stock underlying our outstanding equity awards, equity incentive plans, and other existing agreements, as well as exercise or conversion prices, as applicable.
Unless noted, 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.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value per share amounts)
(unaudited)
| March 31, | June 30, | ||||||||||
| 2025 | 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,536,101 | $ | 1,669,766 | |||||||
| Accounts receivable, net of allowance for credit losses of $67 and $73 at March 31, 2025 and June 30, 2024, respectively (including accounts receivable from related parties of $316 and $6,194 at March 31, 2025 and June 30, 2024, respectively) | 2,642,556 | 2,737,331 | |||||||||
| Inventories | 3,870,243 | 4,333,029 | |||||||||
| Prepaid expenses and other current assets (including receivables from related parties of $14,721 and $11,939 at March 31, 2025 and June 30, 2024, respectively) | 464,689 | 191,834 | |||||||||
| Total current assets | 9,513,589 | 8,931,960 | |||||||||
| Property, plant and equipment, net | 492,565 | 414,008 | |||||||||
| Deferred income taxes, net | 481,216 | 365,172 | |||||||||
| Other assets | 251,155 | 114,952 | |||||||||
| Total assets | $ | 10,738,525 | $ | 9,826,092 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable (including amounts due to related parties of $115,304 and $165,295 at March 31, 2025 and June 30, 2024, respectively) | $ | 643,050 | $ | 1,472,381 | |||||||
| Accrued liabilities (including amounts due to related parties of $741 and $170 at March 31, 2025 and June 30, 2024, respectively) | 344,679 | 259,674 | |||||||||
| Income taxes payable | 23,633 | 18,268 | |||||||||
| Lines of credit and current portion of term loans | 63,971 | 402,346 | |||||||||
| Deferred revenue | 352,803 | 193,052 | |||||||||
| Total current liabilities | 1,428,136 | 2,345,721 | |||||||||
| Deferred revenue, non-current | 312,994 | 223,324 | |||||||||
| Term loans, non-current | 43,003 | 74,083 | |||||||||
| Convertible notes | 2,385,320 | 1,697,716 | |||||||||
| Other long-term liabilities | 189,593 | 67,878 | |||||||||
| Total liabilities | 4,359,046 | 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: 596,765 and 588,087 at March 31, 2025 and June 30, 2024, respectively | 2,939,276 | 2,830,820 | |||||||||
| Accumulated other comprehensive income | 663 | 706 | |||||||||
| Retained earnings | 3,439,380 | 2,585,680 | |||||||||
| Total Super Micro Computer, Inc. stockholders’ equity | 6,379,319 | 5,417,206 | |||||||||
| Non-controlling interest | 160 | 164 | |||||||||
| Total stockholders’ equity | 6,379,479 | 5,417,370 | |||||||||
| Total liabilities and stockholders’ equity | $ | 10,738,525 | $ | 9,826,092 |
See accompanying notes to condensed consolidated financial statements.
SMCI | Q3 2025 Form 10-Q | 1
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net sales (including related party sales of $7,647 and $25,804 in the three months ended March 31, 2025 and 2024, respectively, and $33,799 and $58,980 in the nine months ended March 31, 2025 and 2024, respectively) | $ | 4,599,913 | $ | 3,850,066 | $ | 16,215,131 | $ | 9,634,662 | |||||||||||||||
| Cost of sales (including related party purchases of $115,519 and $130,397 in the three months ended March 31, 2025 and 2024, respectively, and $491,680 and $355,948 in the nine months ended March 31, 2025 and 2024, respectively) | 4,159,695 | 3,252,698 | 14,329,311 | 8,119,281 | |||||||||||||||||||
| Gross profit | 440,218 | 597,368 | 1,885,820 | 1,515,381 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 162,857 | 116,226 | 453,329 | 336,077 | |||||||||||||||||||
| Sales and marketing | 59,978 | 49,691 | 208,400 | 133,775 | |||||||||||||||||||
| General and administrative | 70,603 | 53,137 | 199,488 | 123,241 | |||||||||||||||||||
| Total operating expenses | 293,438 | 219,054 | 861,217 | 593,093 | |||||||||||||||||||
| Income from operations | 146,780 | 378,314 | 1,024,603 | 922,288 | |||||||||||||||||||
| Other (expense) income, net | (18,313) | 10,035 | 1,879 | 8,762 | |||||||||||||||||||
| Interest expense | (13,402) | (6,246) | (37,291) | (16,240) | |||||||||||||||||||
| Income before income tax provision | 115,065 | 382,103 | 989,191 | 914,810 | |||||||||||||||||||
| Income tax (provision) benefit | (5,843) | 19,983 | (137,544) | (61,735) | |||||||||||||||||||
| Share of (expense) income from equity investee, net of taxes | (445) | 373 | 2,053 | 2,347 | |||||||||||||||||||
| Net income | $ | 108,777 | $ | 402,459 | $ | 853,700 | $ | 855,422 | |||||||||||||||
| Net income per common share: | |||||||||||||||||||||||
| Basic | $ | 0.18 | $ | 0.71 | $ | 1.44 | $ | 1.57 | |||||||||||||||
| Diluted | $ | 0.17 | $ | 0.66 | $ | 1.37 | $ | 1.45 | |||||||||||||||
| Weighted-average shares used in the calculation of net income per common share: | |||||||||||||||||||||||
| Basic | 595,041 | 564,780 | 592,349 | 545,620 | |||||||||||||||||||
| Diluted | 621,809 | 614,310 | 625,272 | 588,890 | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
SMCI | Q3 2025 Form 10-Q | 2
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | ---
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Quarterly Report contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that involve risks and uncertainties. These statements relate to future events or our future financial performance based on management’s beliefs and assumptions and on information currently available to management. In some cases, you can identify forward-looking statements by terminology including “would,” “could,” “may,” “will,” “goal,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “project,” “estimate,” “predict,” “potential,” “probable of achievement,” or “continue,” the negative of these terms or other comparable terminology. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risks discussed under the heading “Risk Factors” in Part II, Item 1A of this filing and in Part I, Item IA of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (the “2024 10-K”). Given these risks, uncertainties, and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, whether as a result of new information, future events or otherwise. We cannot guarantee future results, levels of activity, performance or achievements.
The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our condensed consolidated financial statements and related footnotes included elsewhere in this Quarterly Report and our 2024 10-K, which includes our consolidated financial statements for the fiscal years ended June 30, 2024 and 2023.
Overview
We are a global leader in Application-Optimized Total IT Solutions. Founded and operating in San Jose, California, we are committed to delivering first-to-market innovation for Enterprise, Cloud, AI, and 5G Telco/Edge IT Infrastructure. We are a Total IT Solutions manufacturer with server, AI, storage, IoT, switch systems, software, and support services. Supermicro's motherboard, power, and chassis design expertise further enables our development and production, enabling next-generation innovation from cloud to edge for our global customers. Our products are designed and manufactured in-house (in the United States, Taiwan, and the Netherlands), leveraging global operations for scale and efficiency and optimized to improve TCO and reduce environmental impact (Green Computing). The award-winning portfolio of Server Building Block Solutions allows customers to optimize for their exact workload and application by selecting from a broad family of systems built from our flexible and reusable building blocks that support a comprehensive set of form factors, processors, memory, graphic processing units (“GPUs”), storage, networking, power, and cooling solutions (air-conditioned, free air cooling or liquid cooling).
We commenced operations in 1993 and have been profitable every year since inception. For the three months ended March 31, 2025 and 2024, our net income was $108.8 million and $402.5 million, respectively. For the nine months ended March 31, 2025 and 2024, our net income was $853.7 million and $855.4 million, respectively.
In order to increase our sales and profits, we believe that we must continue to develop flexible application optimized server and storage solutions while being among the first to market with new features and products. Our focus is on delivering Total IT Solutions that integrate, validate, and deliver server, storage, networking and software at the rack and cluster (multi-rack) level. Additionally, we will continue to expand our software offering and customer service and support, particularly as we focus more on large enterprise and data center customers. A key component of our strategy is our Data Center Building Block Solutions, which significantly reduces data center build time and supports the full integration of AI computing, server, storage, networking, rack, cabling, liquid cooling, end-to-end management software, onsite deployment services and maintenance. We must also develop our sales partners and distribution channels to further expand our market share.
SMCI | Q3 2025 Form 10-Q | 40
We measure our financial success based on various indicators, including growth in net sales, gross profit margin, operating margin, and growth in net income per common share. Among the key non-financial indicators of our success is our ability to rapidly introduce new products and deliver the latest application-optimized server and storage solutions. To achieve this, we work closely with the developers and manufacturers of key components, ensuring we leverage emerging technologies as they become available. Historically, our ability to quickly introduce new products has allowed us to capitalize on technology transitions such as the launch of new GPUs, microprocessors and storage technologies. As a result, we closely monitor the product introduction cycles of industry leaders, including NVIDIA Corporation, Intel Corporation, Advanced Micro Devices, Inc., Broadcom Inc., Samsung Electronics Company Limited, Micron Technology, Inc. and others. This focus also influences our research and development expenditures as we continue to invest in both our current and future product development efforts.
Artificial Intelligence and Data Centers
The growing use of artificial intelligence (“AI”), which requires enhanced datacenter capabilities, has substantially increased demand for our products. We expect this trend to continue, with further demand for datacenter expansion driven by the AI market. As a result, we will continue to enhance our product capabilities and expand our service offerings to address the growing demand in the AI market and datacenter markets. We believe that our ability to tailor certain products to the unique needs of these sectors sets us apart from many competitors and positions us to capture an even greater market share going forward.
Macroeconomic Factors
Our business, results of operations, and financial outlook have been, and may continue to be, impacted by adverse macroeconomic conditions and uncertainties. These challenges include labor shortages, global supply chain disruptions, tariffs, inflation, higher interest rates, fluctuations in capital markets, and ongoing global economic and geopolitical developments. These challenges could, among other things, impact demand for our products as well as our ability to supply products, both of which could impact net sales, affect our operating costs due to foreign exchange rate movements and impact our margins due to exogenous factors such as new and increased tariffs. While many of these macroeconomic factors could have a long-term impact, others may have a short-term impact which could lead to our financial results not being comparable on a period to period basis.
Financial Highlights
The following is a summary of our financial highlights for the three months ended March 31, 2025 and 2024:
-
Net sales increased by 19.5% in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.
-
Gross margin decreased to 9.6% in the three months ended March 31, 2025 from 15.5% in the three months ended March 31, 2024.
-
Operating expenses increased by 33.9% as compared to the three months ended March 31, 2024 and were equal to 6.4% and 5.6% of net sales in the three months ended March 31, 2025 and 2024, respectively.
-
Effective tax rate increased to 5.1% in the three months ended March 31, 2025 from (5.2)% in the three months ended March 31, 2024.
SMCI | Q3 2025 Form 10-Q | 41
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, net sales and expenses. We evaluate our estimates on an on-going basis based on a) historical experience, and b) assumptions we believe to be reasonable under the circumstances and are not readily apparent from other sources, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and statement of cash flows.
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our 2024 10-K.
Results of Operations
Components of Results of Operations
Net Sales
Net sales primarily consist of sales of our server and storage solutions, including systems and related services, subsystems, and accessories. The key factors that impact net sales of our server and storage systems are the number of servers and racks sold and the average selling prices per server or rack. For subsystems and accessories, the main drivers of net sales are the number of units shipped and the average selling price per unit. The prices for our server and storage systems can vary widely depending on the configuration, including factors such as speed, functionality and performance of key components, including central processing units (“CPUs”), GPUs, solid state drives (“SSDs”), cooling systems and memory. Similarly, the prices for our subsystems and accessories fluctuate depending on the relative value of the specific item being purchased. such as power supplies, server boards, chassis or other accessories.
Cost of Sales, Gross Profit and Gross Margin
Cost of sales primarily consists of the costs to manufacture our products, which includes: the costs of components and materials, contract manufacturing, shipping, personnel expenses (salaries, benefits, stock-based compensation and incentive bonuses), equipment and facility expenses, warranty costs and inventory reserve charges.
Research and Development
Research and development expenses consist of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our research and development personnel, as well as product development costs such as materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to our research and development activities.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our sales and marketing personnel, cost for trade shows, sales representative fees and marketing programs. From time to time, we receive marketing development funding from certain suppliers. Under these arrangements, we are reimbursed for certain marketing costs that we incur as part of the joint promotion of our products and those of our suppliers. These amounts offset a portion of the related expenses and have the effect of reducing our reported sales and marketing expenses.
SMCI | Q3 2025 Form 10-Q | 42
General and Administrative
General and administrative expenses consist primarily of general corporate costs, including personnel expenses such as salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our general and administrative personnel, financial reporting, corporate governance and compliance, outside legal, audit, tax fees, insurance and credit losses on accounts receivable.
Other (Expense) Income, Net and Interest Expense
Other (expense) income, net consists primarily of interest earned on our investments, cash balances and foreign exchange gains and losses. Interest expense represents interest expense on our term loans and lines of credit and amortization of the 2029 Convertible Notes and 2028 Convertible Notes issuance costs.
Income Tax (Provision) Benefit
Our income tax provision is based on our taxable income generated in the jurisdictions in which we operate, which primarily include the United States, Taiwan, and the Netherlands. Our effective tax rate differs from the statutory rate primarily due to research and development tax credits, certain non-deductible expenses, tax benefits from foreign derived intangible income and stock-based compensation.
SMCI | Q3 2025 Form 10-Q | 43
The following table presents certain items of our condensed consolidated statements of operations for the three and nine months ended March 31, 2025 and 2024 (dollars in millions):
| Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net sales | $ | 4,599.9 | $ | 3,850.1 | $ | 16,215.1 | $ | 9,634.7 | |||||||||||||||
| Cost of sales | 4,159.7 | 3,252.7 | 14,329.3 | 8,119.3 | |||||||||||||||||||
| Gross profit | 440.2 | 597.4 | 1,885.8 | 1,515.4 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 162.9 | 116.2 | 453.3 | 336.1 | |||||||||||||||||||
| Sales and marketing | 60.0 | 49.7 | 208.4 | 133.8 | |||||||||||||||||||
| General and administrative | 70.5 | 53.1 | 199.5 | 123.2 | |||||||||||||||||||
| Total operating expenses | 293.4 | 219.1 | 861.2 | 593.1 | |||||||||||||||||||
| Income from operations | 146.8 | 378.3 | 1,024.6 | 922.3 | |||||||||||||||||||
| Other (expense) income, net | (18.3) | 10.0 | 1.9 | 8.8 | |||||||||||||||||||
| Interest expense | (13.4) | (6.2) | (37.3) | (16.2) | |||||||||||||||||||
| Income before income tax provision | 115.1 | 382.1 | 989.2 | 914.9 | |||||||||||||||||||
| Income tax (provision) benefit | (5.8) | 20.0 | (137.5) | (61.7) | |||||||||||||||||||
| Share of income from equity investee, net of taxes | (0.5) | 0.4 | 2.0 | 2.2 | |||||||||||||||||||
| Net income | $ | 108.8 | $ | 402.5 | $ | 853.7 | $ | 855.4 |
*Totals may not sum due to rounding.
The following table presents certain items of our condensed consolidated statements of operations expressed as a percentage of revenue for the three and nine months ended March 31, 2025 and 2024:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
| Cost of sales | 90.4 | % | 84.5 | % | 88.4 | % | 84.3 | % | ||||||||||||||||||
| Gross profit | 9.6 | % | 15.5 | % | 11.6 | % | 15.7 | % | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | 3.5 | % | 2.9 | % | 2.8 | % | 3.4 | % | ||||||||||||||||||
| Sales and marketing | 1.3 | % | 1.3 | % | 1.3 | % | 1.4 | % | ||||||||||||||||||
| General and administrative | 1.6 | % | 1.4 | % | 1.2 | % | 1.3 | % | ||||||||||||||||||
| Total operating expenses | 6.4 | % | 5.6 | % | 5.3 | % | 6.1 | % | ||||||||||||||||||
| Income from operations | 3.2 | % | 9.9 | % | 6.3 | % | 9.6 | % | ||||||||||||||||||
| Other (expense) income, net | (0.4) | % | 0.3 | % | 0.0 | % | 0.1 | % | ||||||||||||||||||
| Interest expense | (0.3) | % | (0.2) | % | (0.2) | % | (0.2) | % | ||||||||||||||||||
| Income before income tax provision | 2.5 | % | 10.0 | % | 6.1 | % | 9.5 | % | ||||||||||||||||||
| Income tax (provision) benefit | (0.1) | % | 0.5 | % | (0.8) | % | (0.6) | % | ||||||||||||||||||
| Share of income from equity investee, net of taxes | — | % | ***** | — | % | ***** | — | % | ***** | — | % | ***** | ||||||||||||||
| Net income | 2.4 | % | 10.5 | % | 5.3 | % | 8.9 | % |
*Represents an amount less than 0.1%.
SMCI | Q3 2025 Form 10-Q | 44
Nets Sales by Product Type
The following table presents net sales by product type for the three and nine months ended March 31, 2025 and 2024 (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Server and storage systems | $ | 4,458.9 | $ | 3,698.5 | $ | 760.4 | 20.6 | % | $ | 15,693.8 | $ | 9,100.7 | $ | 6,593.1 | 72.4 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 96.9 | % | 96.1 | % | 96.8 | % | 94.5 | % | |||||||||||||||||||||||||||||||||||||||
| Subsystems and accessories | $ | 141.0 | $ | 151.6 | $ | (10.6) | (7.0) | % | $ | 521.3 | $ | 534.0 | $ | (12.7) | (2.4) | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 3.1 | % | 3.9 | % | 3.2 | % | 5.5 | % | |||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 4,599.9 | $ | 3,850.1 | $ | 749.8 | 19.5 | % | $ | 16,215.1 | $ | 9,634.7 | $ | 6,580.4 | 68.3 | % |
Server and storage systems constitute an assembly and integration of subsystems and accessories and related services. Subsystems and accessories are comprised of server-boards, chassis and accessories.
Comparison of Three Months Ended March 31, 2025 and 2024
The $760.4 million increase in net sales of our server and storage systems was primarily driven by an increase in the demand from customers for GPU servers, high performance computing (“HPC”), and rack-scale solutions which are generally more complex and of higher value, resulting in an increase of average selling price (“ASP”).
The $10.6 million decrease in net sales for our subsystems and accessories of 7.0% was primarily due to the focus on allocating certain supply chain constrained components to build and ship server and storage systems rather than selling them as parts of subsystems and accessories.
Comparison of Nine Months Ended March 31, 2025 and 2024
The $6,593.1 million increase in net sales of our server and storage systems was primarily driven by an increase in the demand from customers for GPU servers, HPC, and rack-scale solutions which are generally more complex and of higher value, resulting in an increase of ASP.
The $12.7 million decrease in net sales for our subsystems and accessories of 2.4% was primarily due to the focus on allocating certain supply chain constrained components to build and ship server and storage systems rather than selling them as parts of subsystems and accessories.
Nets Sales by Geography
The following table presents net sales by geographic region for the three and nine months ended March 31, 2025 and 2024 (dollars in millions):
| Three Months Ended March 31, | Change | Change | Nine Months Ended March 31, | Change | Change | ||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| United States | $ | 2,768.2 | $ | 2,685.2 | $ | 83.0 | 3.1 | % | $ | 10,856.5 | $ | 6,910.3 | $ | 3,946.2 | 57.1 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 60.2 | % | 69.7 | % | 67.0 | % | 71.7 | % | |||||||||||||||||||||||||||||||||||||||
| Asia | $ | 1,354.3 | $ | 764.6 | $ | 589.7 | 77.1 | % | $ | 3,077.2 | $ | 1,646.3 | $ | 1,430.9 | 86.9 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 29.4 | % | 19.9 | % | 19.0 | % | 17.1 | % | |||||||||||||||||||||||||||||||||||||||
| Europe | $ | 290.1 | $ | 297.7 | $ | (7.6) | (2.6) | % | $ | 1,869.7 | $ | 777.0 | $ | 1,092.7 | 140.6 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 6.3 | % | 7.7 | % | 11.5 | % | 8.1 | % | |||||||||||||||||||||||||||||||||||||||
| Others | $ | 187.3 | $ | 102.6 | $ | 84.7 | 82.6 | % | $ | 411.7 | $ | 301.1 | $ | 110.6 | 36.7 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 4.1 | % | 2.7 | % | 2.5 | % | 3.1 | % | |||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 4,599.9 | $ | 3,850.1 | $ | 16,215.1 | $ | 9,634.7 |
SMCI | Q3 2025 Form 10-Q | 45
Comparison of Three Months Ended March 31, 2025 and 2024
The $749.8 million increase in overall net sales is driven by an increase in demand from customers for GPU servers, HPC, and rack-scale solutions which have higher ASPs, especially for large enterprise and data center customers from Asia where these customers have experienced significant growth. The $589.7 million increase of net sales in Asia is mainly due to an increase in net sales in Japan, and Thailand.
Comparison of Nine Months Ended March 31, 2025 and 2024
The $6,580.4 million increase in overall net sales is driven by an increase in demand from customers for GPU servers, HPC, and rack-scale solutions which have higher ASPs, especially for large enterprise and data center customers from the United States, Asia and Europe where these customers have experienced significant growth. The increase of net sales in Europe and Asia is mainly due to an increase in net sales in the United Kingdom, Sweden, Spain, Japan, Singapore and Thailand.
Cost of Sales
Cost of sales and gross margin for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Cost of sales | $ | 4,159.7 | $ | 3,252.7 | $ | 907.0 | 27.9 | % | $ | 14,329.3 | $ | 8,119.3 | $ | 6,210.0 | 76.5 | % | |||||||||||||||||||||||||||||||
| Gross profit | $ | 440.2 | $ | 597.4 | $ | (157.2) | (26.3) | % | $ | 1,885.8 | $ | 1,515.4 | $ | 370.4 | 24.4 | % | |||||||||||||||||||||||||||||||
| Gross margin | 9.6 | % | 15.5 | % | (5.9) | % | 11.6 | % | 15.7 | % | (4.1) | % |
Comparison of Three Months Ended March 31, 2025 and 2024
The $907.0 million increase in cost of sales can primarily be attributed to an increase of $772.5 million in costs of materials, contract manufacturing expenses, and the expedited recognition of costs in order to accelerate time-to-market for new products that primarily resulted in the increase in net sales volume. Additionally, there was a $109.6 million increase in inventory write-down adjustment, mainly from prior generations of GPUs and related components, along with additional reserves established during the period. Further, overhead costs increased by $18.0 million and freight costs increased by a $6.9 million, primarily due to the increase in net sales volume.
The 5.9% decrease in the gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition, a shift in product focus towards modular system designs that offer scalability and flexibility to meet the diverse needs of data centers, and a change in customer mix, including an increased presence in international markets.
Comparison of Nine Months Ended March 31, 2025 and 2024
The $6,210.0 million increase in cost of sales can primarily be attributed to an increase of $5,978.6 million in costs of materials, contract manufacturing expenses, and expedited costs to accelerate time-to-market for new products primarily related to the increase in net sales volume. Additionally, there was a $131.4 million increase in inventory write-down adjustment, mainly from prior generations of GPU and related components, along with additional reserves established during the period. Further, overhead costs increased by $59.1 million and freight costs increased by $40.9 million, primarily due to the increase in net sales volume.
The 4.1% decrease in the gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition, a shift in product focus towards modular system designs that offer scalability and flexibility to meet the diverse needs of data centers, and a change in customer mix, including an increased presence in international markets.
SMCI | Q3 2025 Form 10-Q | 46
Operating Expenses
Operating expenses for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 162.9 | $ | 116.2 | $ | 46.7 | 40.2 | % | $ | 453.3 | $ | 336.1 | $ | 117.2 | 34.9 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 3.5 | % | 2.9 | % | 2.8 | % | 3.4 | % | |||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 60.0 | $ | 49.7 | $ | 10.3 | 20.7 | % | $ | 208.4 | $ | 133.8 | $ | 74.6 | 55.8 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 1.3 | % | 1.3 | % | 1.3 | % | 1.4 | % | |||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 70.5 | $ | 53.1 | $ | 17.4 | 32.8 | % | $ | 199.5 | $ | 123.2 | $ | 76.3 | 61.9 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 1.5 | % | 1.4 | % | 1.2 | % | 1.3 | % | |||||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 293.4 | $ | 219.1 | $ | 74.3 | 33.9 | % | $ | 861.2 | $ | 593.1 | $ | 268.1 | 45.2 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | 6.3 | % | 5.6 | % | 5.3 | % | 6.1 | % |
Comparison of Three Months Ended March 31, 2025 and 2024
Research and development expenses. The $46.7 million increase in research and development expenses was driven by a $41.9 million increase in employee-related costs driven by our planned workforce expansion as we continue to invest in key talent, primarily comprised of additional stock compensation expense and salary increases. In addition, there was a $5.1 million increase in product development costs to support next generation products and technologies. We believe that research and development expenses will continue to increase as we continue to expand our workforce and invest in key talent to stay at the forefront of development of next generation products and technologies.
Sales and marketing expenses. The $10.3 million increase in sales and marketing expenses was primarily driven by a $8.6 million increase in employee-related costs, driven by increased strategic hiring across sales and marketing functions to support our growth and sales strategy, primarily comprised of additional stock-based compensation expense and salary increases. In addition, there was $13.8 million increase in advertising and other expenses, which was partially offset by a $12.1 million increase in marketing development funds received.
General and administrative expenses. The $17.4 million increase in general and administrative expenses was driven by a $19.0 million increase in professional and service fees primarily from additional external accounting, tax, legal, and advisory services necessary to support our external reporting related activities. This was partially offset by a $3.1 million decrease in employee-related costs, primarily due to lower stock-based compensation expense. We believe that general and administrative expenses will continue to increase as we continue to expand our workforce and invest in key talent.
SMCI | Q3 2025 Form 10-Q | 47
Comparison of Nine Months Ended March 31, 2025 and 2024
Research and development expenses. The $117.2 million increase in research and development expenses was driven by a $100.4 million increase in employee-related costs driven by our planned workforce expansion as we continue to invest in key talent, primarily comprised of stock-based compensation expense and salary increases. In addition, there was a $22.1 million increase in product development costs to support next generation products and technologies, which was partially offset by a $5.3 million increase in research and development credits received from certain suppliers and customers. We believe that research and development expenses will continue to increase as we continue to expand our workforce and invest in key talent to stay at the forefront of developing next generation products and technologies.
Sales and marketing expenses. The $74.6 million increase in sales and marketing expenses was primarily driven by a $47.2 million increase in employee-related costs, driven by increased strategic hiring across sales and marketing functions to support our growth and sales strategy, primarily comprised of additional stock-based compensation expense and salary increases. In addition, there was a $45.0 million increase in advertising and other expenses, which was partially offset by a $17.6 million increase in marketing development funds received.
General and administrative expenses. The $76.3 million increase in general and administrative expenses was driven by a $55.1 million increase in professional and service fees primarily from additional external accounting, tax, legal, and advisory services necessary to support our external reporting related activities. In addition, there was a $13.2 million increase in employee-related costs driven by increased strategic hiring across various finance and other functions, comprised primarily of stock-based compensation expense and salary increases, and an $8.0 million increase in facilities related expenses. We believe that general and administrative expenses will continue to increase as we continue to expand our workforce and invest in key talent.
Other (Expense) Income, Net and Interest Expense
Other (expense) income, net and Interest expense for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Other (expense) income, net | $ | (18.3) | $ | 10.0 | $ | (28.3) | (283.0) | % | $ | 1.9 | $ | 8.8 | $ | (6.9) | (78.4) | % | |||||||||||||||||||||||||||||||
| Interest expense | (13.4) | (6.2) | (7.2) | 116.1 | % | (37.3) | (16.2) | (21.1) | 130.2 | % | |||||||||||||||||||||||||||||||||||||
| Other (expense) income, net and interest expense | $ | (31.7) | $ | 3.8 | $ | (35.5) | (934.2) | % | $ | (35.4) | $ | (7.4) | $ | (28.0) | 378.4 | % |
Comparison of Three Months Ended March 31, 2025 and 2024
The $28.3 million decrease in other (expense) income, net and interest expense was primarily driven by a $30.3 million loss on extinguishment of the 2029 convertible notes due to the amendment of the existing notes (see Note 7 “Convertible Notes”), and a $6.2 million decrease in foreign exchange gain. The decrease was partially offset by a $9.8 million increase in interest income.
The increase in interest expense of $7.2 million was primarily driven by interest charges on the 2029 Convertible Notes and 2028 Convertible Notes of $11.5 million, which was partially offset by decrease in interest expenses associated with the Company's reduced utilization of its lines of credit of $4.3 million.
Comparison of Nine Months Ended March 31, 2025 and 2024
The $6.9 million decrease in other (expense) income, net and interest expense was primarily attributable to a $30.3 million decrease from the loss on extinguishment of the 2029 convertible notes due to the amendment of the existing notes (see Note 7 “Convertible Notes”), partially offset by a $22.9 million increase in interest income.
The increase in interest expense of $21.1 million was primarily driven by interest charges on the 2029 Convertible Notes and 2028 Convertible Notes of $14.4 million, as well as an increase in interest expenses associated with the Company's line of credit of $6.7 million.
SMCI | Q3 2025 Form 10-Q | 48
Income Tax (Provision) Benefit
Income tax (provision) benefit and effective tax rates for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Income tax (provision) benefit | $ | (5.8) | $ | 20.0 | $ | (25.8) | (129.0) | % | $ | (137.5) | $ | (61.7) | $ | (75.8) | 122.9 | % | |||||||||||||||||||||||||||||||
| Percentage of total net sales | (0.1) | % | 0.5 | % | (0.8) | % | (0.6) | % | |||||||||||||||||||||||||||||||||||||||
| Effective tax rate | 5.1 | % | (5.2) | % | 13.9 | % | 6.7 | % |
Comparison of Three Months Ended March 31, 2025 and 2024
Our quarterly effective income tax rate is based on the estimated annual income tax rate forecast and discrete tax items recognized in the period. The effective tax rate for the three months ended March 31, 2025, was higher than that for the three months ended March 31, 2024, primarily due to a decrease in the stock compensation tax deduction for the three months ended March 31, 2025 driven by the decrease in our stock price.
Comparison of Nine Months Ended March 31, 2025 and 2024
The income tax provision for the nine months ended March 31, 2025 was higher than that for the nine months ended March 31, 2024, primarily due to a decrease in the stock compensation tax deduction for the nine months ended March 31, 2025 driven by the decrease in our stock price.
Liquidity and Capital Resources
We have financed our growth primarily through funds generated from operations, borrowing facilities, the sale of our common stock, and the issuance of convertible notes. Recent factors contributing to changes in liquidity include an increased need for working capital to support higher inventory levels required for our growing revenues and, to a lesser extent, longer supply chain lead times for certain key components. Our cash and cash equivalents were $2.5 billion and $1.7 billion as of March 31, 2025 and June 30, 2024, respectively. Of these amounts, cash and cash equivalents held in foreign locations were $728.1 million and $337.3 million as of March 31, 2025 and June 30, 2024, respectively.
Amounts held outside of the U.S. are typically used to meet non-U.S. liquidity needs. Repatriations of these funds is generally not subject to U.S. federal income tax, though state income or foreign withholding taxes may apply. In cases where local restrictions prevent the intercompany transfer of funds, our strategy is to retain cash balances outside the U.S. and meet liquidity needs through operating cash flows, external borrowings, or both. We do not expect restrictions or potential taxes on the repatriation of amounts held outside the U.S. to materially affect our overall liquidity, financial condition, or results of operations.
We believe that our current cash, cash equivalents, borrowing capacity from available credit facilities and internally generated cash flows will be sufficient to support our operating activities, as well as maturing debt and interest payments, for the 12 months following the filing of this Quarterly Report. We continue to assess financing options that may be necessary to support the growth of our business.
Our key cash flow metrics were as follows (dollars in millions):
| Nine Months Ended March 31, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | $ | ||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 795.9 | $ | (1,838.2) | $ | 2,634.1 | ||||||||||||||||||||
| Net cash used in investing activities | $ | (104.5) | $ | (138.0) | $ | 33.5 | ||||||||||||||||||||
| Net cash provided by financing activities | $ | 174.6 | $ | 3,652.8 | $ | (3,478.2) | ||||||||||||||||||||
| Effect of exchange rate fluctuations on cash | $ | 0.8 | $ | (1.6) | $ | 2.4 | ||||||||||||||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 866.8 | $ | 1,675.0 | $ | (808.2) |
SMCI | Q3 2025 Form 10-Q | 49
Operating Activities
Net cash provided by operating activities increased by $2,634.1 million for the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024. This increase was primarily driven by a $2,505.0 million increase in working capital and a $130.8 million increase in non-cash items, comprised of stock-based compensation expense and the loss on extinguishment of our 2029 convertible notes. The increase in working capital was due to a $3,136.9 million increase in inventory in anticipation of planned future shipments. Accounts receivable increased by $596.7 million due to stronger cash collections in the current period, partially offset by a $1,121.3 million decrease in accounts payable, resulting from the timing of vendor payments during the current period. Other operating assets and liabilities decreased by $107.3 million, driven by movements in prepaid expenses, income tax payable, accrued liabilities, and deferred revenue.
Investing Activities
Net cash used in investing activities decreased by $33.5 million for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 primarily due to a reduction in investments in marketable securities by $27.7 million, and a decrease in capital expenditures on property, plant, and equipment of $5.8 million.
Financing Activities
Net cash provided by financing activities decreased by $3,478.2 million for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024. The decrease was primarily driven by a $2,314.0 million reduction in proceeds from the issuance of common stock, net of issuance costs. In addition, net proceeds from convertible notes decreased by $901.2 million, reflecting the difference between the issuances of the 2029 Convertible Notes in February 2024 and the 2028 Convertible Notes in February 2025, net of the purchase of capped calls. There was also a $252.7 million decrease in proceeds from borrowings, net of repayment compared to the prior period.
Other Factors Affecting Liquidity and Capital Resources
Refer to Note 6 “Lines of Credit and Term Loans”, in our notes to the condensed consolidated financial statements in this Quarterly Report for further information on our outstanding bank debt.
On February 20, 2025, we (i) closed the offering of $700.0 million aggregate principal amount of 2028 Convertible Notes and (ii) executed a first supplemental indenture and second supplemental indenture governing to the 2029 Convertible Notes, pursuant to which, among other things, the Company amended certain terms of, and obtained waivers with respect to, the Original 2029 Convertible Notes. Refer to Note 7 “Convertible Notes”, in our notes to the condensed consolidated financial statements in this Quarterly Report for further information on the issuance of the 2028 Convertible Notes and the amendment of the terms of the 2029 Convertible Notes.
Capital Expenditure Requirements
We anticipate our capital expenditures for the remainder of fiscal year 2025 will be in range of $45.0 million to $55.0 million, relating primarily to costs associated with our global manufacturing capabilities, including tooling for new products, new information technology investments, and facilities upgrades and expansion. We will also continue to evaluate new business opportunities and new markets. As a result, our future growth within the existing business or new opportunities and markets may dictate the need for additional facilities and capital expenditures to support that growth. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention).
Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced software and services offerings and investments in our manufacturing and office facilities and enhancements to our IT system infrastructure.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Note 1 “Summary of Significant Accounting Policies”, in our notes to the condensed consolidated financial statements in this Quarterly Report.
SMCI | Q3 2025 Form 10-Q | 50
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Interest Rate Risk
The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing the risk. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in money market funds and certificates of deposit. Our investment in an auction rate security has been classified as non-current due to the lack of a liquid market for these securities. Since our results of operations are not dependent on investments, the risk associated with fluctuating interest rates is limited to our investment portfolio, and we believe that a 10% change in interest rates would not have a significant impact on our results of operations. As of March 31, 2025, our investments were in money market funds, certificates of deposits and auction rate securities.
We are exposed to changes in interest rates as a result of our borrowings under our term loans and revolving lines of credit. The interest rates for the term loans and the revolving lines of credit ranged from 1.33% to 5.95% at March 31, 2025 and 1.33% to 7.33% at June 30, 2024. Based on the outstanding principal indebtedness of $107.0 million under our credit facilities as of March 31, 2025, we believe that a 10% change in interest rates would not have a significant impact on our results of operations.
Foreign Currency Risk
To date, our international customer and supplier agreements have been denominated primarily in U.S. dollars and accordingly, we have limited exposure to foreign currency exchange rate fluctuations from customer agreements, and do not currently engage in foreign currency hedging transactions. The functional currency of our subsidiaries in the Netherlands and Taiwan is the U.S. dollar. However, certain loans and transactions in these entities are denominated in a currency other than the U.S. dollar, and thus we are subject to foreign currency exchange rate fluctuations associated with re-measurement to U.S. dollars. Such fluctuations have not been significant historically, and a 10% change in foreign currency exchange rates would not have a significant impact on the results of operations. Realized and unrealized foreign exchange gain for the three and nine months ended March 31, 2025 was $0.3 million and $4.2 million, respectively. Realized and unrealized foreign exchange loss for the three and nine months ended March 31, 2024 was $6.5 million and $4.1 million, respectively.
SMCI | Q3 2025 Form 10-Q | 51
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that their objectives are met. Because of the inherent limitations in all control systems, no evaluation of disclosure controls and procedures can provide absolute assurance that all disclosure control issues, if any, have been detected. We carried out an evaluation under the supervision of and with the participation of management, including Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report due to the material weaknesses in our internal control over financial reporting described below.
Material Weaknesses in Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2024. In making this assessment, our management used the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected in a timely basis.
As previously reported in our Annual Report on Form 10-K, we identified the following material weaknesses in internal control over financial reporting as of June 30, 2024, which are unremdiated as of March 31, 2025:
(i) information technology general controls for certain systems that support the Company's financial reporting process that were not appropriately identified, designed or implemented; (ii) controls to address segregation of duties conflicts which were not properly designed and appropriately implemented; (iii) controls and documentation thereof, over the review and approval of manual journal entries that were not properly designed and appropriately implemented to prevent unauthorized access to post journal entries; (iv) controls over the completeness and accuracy of information produced by the entity impacting multiple financial statement areas that were not properly documented; and (v) management did not design, implement and retain appropriate documentation of control procedures to achieve timely, complete and accurate recording and disclosures across multiple financial statement areas including the timely identification and disclosure of new leasing arrangements and new related party transactions.
Notwithstanding the material weaknesses in internal control over financial reporting described above, management believes and has concluded that the condensed consolidated financial statements included in this Quarterly Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
(b) Remediation Plan
We have identified and are implementing actions intended to improve the effectiveness of our internal control over financial reporting and disclosure controls and procedures and will continue to do so until such remediation is complete. During the quarter ended March 31, 2025, we began to implement changes designed to improve our internal controls over financial reporting and to remediate the material weaknesses, including, but not limited to:
SMCI | Q3 2025 Form 10-Q | 52
- Enhancing our Accounting organization’s competencies, by adding additional qualified leadership personnel with strong technical accounting, external reporting and governance experience; specifically;
◦identified and hired a Vice President who is qualified to lead our technical accounting, external reporting and global internal controls compliance functions;
◦reassessing our accounting procedures and related information provided by entity documentation, and, as part of the financial reporting process, are implementing the use of supplementary checklists as well as conducting additional reviews and evaluations of transactions to improve the accuracy and reliability of our financial information; and
◦replaced certain existing financial personnel with appropriate qualified resources in the quarter ended March 31, 2025 to ensure that procedures are implemented, adequate reviews are performed, and financial information as presented is accurate.
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The design of a global learning management and communication system, including working with various service providers to develop appropriate trainings, across various areas, including Finance, Compliance, Information Technology and Sales, to our global workforce to ensure that our accounting and finance personnel stay current on a wide-variety of areas, and are focused on sufficiently documenting our internal control over the completeness and accuracy of the information we use to support our financial reporting.
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Establishing standardized policies and procedures for manual journal entry creation and posting, including clear documentation and approval requirements based on the risk profile of the financial statement line item impacted, and analyzing manual journal entry approval workflow requirements against SAP functionality and automation solutions, including enforcing user roles and access controls to ensure oversight and prevent unauthorized entries.
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Reviewing our IT architecture and organization, with an increased emphasis on automation of manual processes, thereby strengthening our overall information technology related processes and controls.
The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and regulatory environments. Further, we are required to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above.
While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. Additional time is required to complete the implementation and to assess and ensure the long-term sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
However, as noted above, we will be implementing changes to our internal control over financial reporting to address the material weakness described above.
SMCI | Q3 2025 Form 10-Q | 53
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The information required by this item is incorporated herein by reference to the information set forth in Note 12 “Commitments and Contingencies” of our notes to the condensed consolidated financial statements included in this Quarterly Report.
Due to the inherent uncertainties of legal proceedings, we cannot predict the outcome of the proceedings at this time, and we can give no assurance that they will not have a material adverse effect on our financial position or results of operations.
Item 1A. Risk Factors
Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in Part I, Item 1A “Risk Factors” of our 2024 10-K. There have been no material changes in our risk factors as described in such documents.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
During the three months ended March 31, 2025, we did not repurchase shares of our common stock.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Insider Trading Arrangements
During the three months ended March 31, 2025, the following officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| Name | Action | Adoption/Termination Date | Trading Arrangement | Total Shares of Common Stock to be Sold | Expiration Date | |||||||||||||||||||||||||||||||||
| Rule 10b5-1* | Non-Rule 10b5-1** | |||||||||||||||||||||||||||||||||||||
| Charles Liang (President, Chief Executive Officer, and Chairman) | Adoption | February 28, 2025 | X | 500,000 | December 31, 2025 |
- Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
** “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.
SMCI | Q3 2025 Form 10-Q | 54
Item 6. Exhibits
(a) Exhibits.
+ Filed herewith
SMCI | Q3 2025 Form 10-Q | 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SUPER MICRO COMPUTER, INC. |
| Date: | May 12, 2025 | /s/ CHARLES LIANG | |||||||||
| Charles Liang President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
| Date: | May 12, 2025 | /s/ DAVID WEIGAND | |||||||||
| David Weigand Senior Vice President, Chief Financial Officer (Principal Financial Officer) |
| Date: | May 12, 2025 | /s/ KENNETH CHEUNG | |||||||||
| Kenneth Cheung Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) |
SMCI | Q3 2025 Form 10-Q | 56