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 September 30, ~~2021~~2022


☐			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

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 October 31, ~~2021~~2022 there were ~~51,075,818~~52,922,886 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 SEPTEMBER 30, ~~2021~~2022

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September ~~30, 2021~~3 0 , 2022 and June 30, 20 2 ~~021~~2	1
	Condensed Consolidated Statements of Operations for the Three Months Ended September 3 0 30 , 2022 and 2021 ~~and~~2 ~~020~~	2
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 3 0 30 , ~~2021~~2022 and ~~2020~~2021	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended September 3 0 30 , ~~2021~~2022 and ~~2020~~2021	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 3 0 30 , ~~2021~~2022 and ~~2020~~2021	5
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3231
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	4340
ITEM 4.	Controls and Procedures	4441

PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	4542
ITEM 1A.	Risk Factors	4542
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4542
ITEM 3.	Defaults Upon Senior Securities	4542
ITEM 4.	Mine Safety Disclosures	4542
ITEM 5.	Other Information	4542
ITEM 6.	Exhibits	4643
	Signatures	4844

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 are the property of Super Micro Computer, Inc. or its affiliates. Other trademarks, service marks, or trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except ~~share and~~ per share amounts)

(unaudited)


		September 30,		June 30,			September 30,		June 30,
		2021		2021			2022		2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	270,047	$	232,266	Cash and cash equivalents	$	238,268	$	267,397
Accounts receivable, net of allowances of $2,461 and $2,591 at September 30, 2021 and June 30, 2021, respectively (including accounts receivable from related parties of $13,993 and $8,678 at September 30, 2021 and June 30, 2021, respectively)		458,076		463,834
Accounts receivable, net of allowance for credit losses of $510 and $1,753 at September 30, 2022 and June 30, 2022, respectively (including accounts receivable from related parties of $10,249 and $8,398 at September 30, 2022 and June 30, 2022, respectively)						Accounts receivable, net of allowance for credit losses of $510 and $1,753 at September 30, 2022 and June 30, 2022, respectively (including accounts receivable from related parties of $10,249 and $8,398 at September 30, 2022 and June 30, 2022, respectively)	736,312		834,513
Inventories	Inventories	1,184,573		1,040,964		Inventories	1,736,055		1,545,606

Prepaid expenses and other current assets (including receivables from related parties of $26,283 and $23,837 at September 30, 2021 and June 30, 2021, respectively)		124,259		130,195
Prepaid expenses and other current assets (including receivables from related parties of $34,551 and $24,412 at September 30, 2022 and June 30, 2022, respectively)						Prepaid expenses and other current assets (including receivables from related parties of $34,551 and $24,412 at September 30, 2022 and June 30, 2022, respectively)	169,245		158,799
Total current assets	Total current assets	2,036,955		1,867,259		Total current assets	2,879,880		2,806,315
Investment in equity investee	Investment in equity investee	5,161		4,578		Investment in equity investee	4,352		5,329

Property, plant and equipment, net	Property, plant and equipment, net	284,148		274,713		Property, plant and equipment, net	290,752		285,972
Deferred income taxes, net	Deferred income taxes, net	63,269		63,288		Deferred income taxes, net	89,155		69,929
Other assets	Other assets	37,160		32,126		Other assets	37,144		37,532
Total assets	Total assets	$	2,426,693	$	2,241,964	Total assets	$	3,301,283	$	3,205,077
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable (including amounts due to related parties of $77,754 and $70,096 at September 30, 2021 and June 30, 2021, respectively)		$	564,628	$	612,336
Accrued liabilities (including amounts due to related parties of $20,103 and $18,528 at September 30, 2021 and June 30, 2021, respectively)		175,221		178,850
Accounts payable (including amounts due to related parties of $94,029 and $87,355 at September 30, 2022 and June 30, 2022, respectively)						Accounts payable (including amounts due to related parties of $94,029 and $87,355 at September 30, 2022 and June 30, 2022, respectively)	$	785,025	$	655,403
Accrued liabilities (including amounts due to related parties of $28,261 and $18,676 at September 30, 2022 and June 30, 2022, respectively)						Accrued liabilities (including amounts due to related parties of $28,261 and $18,676 at September 30, 2022 and June 30, 2022, respectively)	213,521		212,419
Income taxes payable	Income taxes payable	14,273		12,741		Income taxes payable	68,411		41,743
Short-term debt	Short-term debt	233,674		63,490		Short-term debt	101,173		449,146
Deferred revenue	Deferred revenue	113,683		101,479		Deferred revenue	185,225		111,313
Total current liabilities	Total current liabilities	1,101,479		968,896		Total current liabilities	1,353,355		1,470,024
Deferred revenue, non-current	Deferred revenue, non-current	101,749		100,838		Deferred revenue, non-current	134,625		122,548
Long-term debt	Long-term debt	45,134		34,700		Long-term debt	148,551		147,618
Other long-term liabilities	Other long-term liabilities	45,533		41,132		Other long-term liabilities	39,549		39,140
Total liabilities	Total liabilities	1,293,895		1,145,566		Total liabilities	1,676,080		1,779,330
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)	0		0		Commitments and contingencies (Note 11)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock and additional paid-in capital, $0.001 par value	Common stock and additional paid-in capital, $0.001 par value					Common stock and additional paid-in capital, $0.001 par value
Authorized shares: 100,000,000; Outstanding shares: 51,071,844 and 50,582,078 at September 30, 2021 and June 30, 2021, respectively
Issued shares: 51,071,844 and 50,582,078 at September 30, 2021 and June 30, 2021, respectively		448,976		438,012
Authorized shares: 100,000; Outstanding shares: 52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively						Authorized shares: 100,000; Outstanding shares: 52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively
Issued shares: 52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively						Issued shares: 52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively	497,183		481,741

Accumulated other comprehensive income	Accumulated other comprehensive income	449		453		Accumulated other comprehensive income	514		911
Retained earnings	Retained earnings	683,197		657,760		Retained earnings	1,127,339		942,923
Total Super Micro Computer, Inc. stockholders’ equity	Total Super Micro Computer, Inc. stockholders’ equity	1,132,622		1,096,225		Total Super Micro Computer, Inc. stockholders’ equity	1,625,036		1,425,575
Noncontrolling interest	Noncontrolling interest	176		173		Noncontrolling interest	167		172
Total stockholders’ equity	Total stockholders’ equity	1,132,798		1,096,398		Total stockholders’ equity	1,625,203		1,425,747
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,426,693	$	2,241,964	Total liabilities and stockholders’ equity	$	3,301,283	$	3,205,077

See accompanying notes to condensed consolidated financial statements.

SMCI | Q1 2023 Form 10-Q | 1

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SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Net sales (including related party sales of $30,922 and $19,716 in the three months ended September 30, 2021 and 2020, respectively)		$	1,032,730	$	762,250
Cost of sales (including related party purchases of $87,687 and $58,859 in the three months ended September 30, 2021 and 2020, respectively)		894,591		632,335
Net sales (including related party sales of $25,055 and $30,922 in the three months ended September 30, 2022 and 2021, respectively)							Net sales (including related party sales of $25,055 and $30,922 in the three months ended September 30, 2022 and 2021, respectively)	$	1,852,130	$	1,032,730
Cost of sales (including related party purchases of $96,536 and $87,687 in the three months ended September 30, 2022 and 2021, respectively)							Cost of sales (including related party purchases of $96,536 and $87,687 in the three months ended September 30, 2022 and 2021, respectively)	1,504,595		894,591
Gross profit	Gross profit	138,139		129,915			Gross profit	347,535		138,139
Operating expenses:	Operating expenses:						Operating expenses:
Research and development	Research and development	65,143		54,798			Research and development	74,243		65,143
Sales and marketing	Sales and marketing	21,624		20,292			Sales and marketing	29,363		21,624
General and administrative	General and administrative	22,244		24,379			General and administrative	23,806		22,244
Total operating expenses	Total operating expenses	109,011		99,469			Total operating expenses	127,412		109,011
Income from operations	Income from operations	29,128		30,446			Income from operations	220,123		29,128
Other (expense) income, net		50		(841)
Other income, net							Other income, net	8,054		50
Interest expense	Interest expense	(804)		(674)			Interest expense	(3,938)		(804)
Income before income tax provision	Income before income tax provision	28,374		28,931			Income before income tax provision	224,239		28,374
Income tax provision	Income tax provision	(3,325)		(3,660)			Income tax provision	(38,934)		(3,325)
Share of income from equity investee, net of taxes		388		1,330
Share of (loss) income from equity investee, net of taxes							Share of (loss) income from equity investee, net of taxes	(889)		388
Net income	Net income	$	25,437	$	26,601		Net income	$	184,416	$	25,437
Net income per common share:	Net income per common share:						Net income per common share:
Basic	Basic	$	0.50	$	0.51		Basic	$	3.51	$	0.50
Diluted	Diluted	$	0.48	$	0.49		Diluted	$	3.35	$	0.48
Weighted-average shares used in calculation of net income per common share:
Weighted-average shares used in the calculation of net income per common share:							Weighted-average shares used in the calculation of net income per common share:
Basic	Basic	50,796		52,329			Basic	52,598		50,796
Diluted	Diluted	52,916		54,426			Diluted	55,017		52,916

See accompanying notes to condensed consolidated financial statements.

SMCI | Q1 2023 Form 10-Q | 2

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SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

Three Months Ended
September 30,
2021 2020
Net income $ 25,437 $ 26,601
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) (4) 247
Total other comprehensive income (loss) (4) 247
Total comprehensive income $ 25,433 $ 26,848


	Three Months Ended September 30,
	2022		2021
Net income	$	184,416	$	25,437
Other comprehensive loss, net of tax:

Foreign currency translation loss	(397)		(4)
Total other comprehensive (loss), net of tax	(397)		(4)
Total comprehensive income	$	184,019	$	25,433

See accompanying notes to condensed consolidated financial statements.

SMCI | Q1 2023 Form 10-Q | 3

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SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

Three Months Ended September 30, 2021 Common Stock and
Additional Paid-In
Capital Treasury Stock Accumulated
Other
Comprehensive
Income (Loss) Retained
Earnings Non-controlling Interest Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance at June 30, 2021 50,582,078 $ 438,012 — $ — $ 453 $ 657,760 $ 173 $ 1,096,398
Exercise of stock options, net of taxes 370,066 6,018 — — — — — 6,018
Release of common stock shares upon vesting of restricted stock units 173,771 — — — — — — —
Shares withheld for the withholding tax on vesting of restricted stock units (54,071) (2,069) — — — — — (2,069)
Stock-based compensation — 7,015 — — — — — 7,015
Foreign currency translation loss — — — — (4) — — (4)
Net income — — — — — $ 25,437 3 25,440
Balance at September 30, 2021 51,071,844 $ 448,976 — — $ 449 $ 683,197 $ 176 $ 1,132,798


Three Months Ended September 30, 2022	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)	Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance at June 30, 2022	52,311,014	$	481,741		$	911	$	942,923	$	172	$	1,425,747
Exercise of stock options, net of taxes	405,226	8,144			—		—		—		8,144
Release of common stock shares upon vesting of restricted stock units	193,532	—			—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(58,303)	(3,716)			—		—		—		(3,716)

Stock-based compensation	—	11,014			—		—		—		11,014



Other comprehensive loss	—	—			(397)		—		—		(397)
Net income (loss)	—	—			—		184,416		(5)		184,411
Balance at September 30, 2022	52,851,469	$	497,183		$	514	$	1,127,339	$	167	$	1,625,203

Three Months Ended September 30, 2020 Common Stock and
Additional Paid-In
Capital Treasury Stock Accumulated
Other
Comprehensive
Income (Loss) Retained
Earnings Non-controlling Interest Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance at June 30, 2020 53,741,828 $ 389,972 (1,333,125) $ (20,491) $ (152) $ 696,211 $ 167 1,065,707
Exercise of stock options, net of taxes 350,830 5,020 — — — — — 5,020
Release of common stock shares upon vesting of restricted stock units 217,519 — — — — — — —
Shares withheld for the withholding tax on vesting of restricted stock units (69,131) (2,005) — — — — — (2,005)
Stock repurchases and retirement — — (1,142,294) (30,000) — — — (30,000)
Stock-based compensation — 7,170 — — — — — 7,170
Foreign currency translation gain — — — — 247 — — 247
Net income — — — — — 26,601 2 26,603
Balance at September 30, 2020 54,241,046 $ 400,157 $ (2,475,419) $ (50,491) $ 95 $ 722,812 $ 169 $ 1,072,742


Three Months Ended September 30, 2021	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)	Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance at June 30, 2021	50,582,078	$	438,012		$	453	$	657,760	$	173	$	1,096,398
Exercise of stock options, net of taxes	370,066	6,018			—		—		—		6,018
Release of common stock shares upon vesting of restricted stock units	173,771	—			—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(54,071)	(2,069)			—		—		—		(2,069)

Stock-based compensation	—	7,015			—		—		—		7,015



Other comprehensive loss	—	—			(4)		—		—		(4)
Net income	—	—			—		25,437		3		25,440
Balance at September 30, 2021	51,071,844	$	448,976		$	449	$	683,197	$	176	$	1,132,798

See accompanying notes to condensed consolidated financial statements.

SMCI | Q1 2023 Form 10-Q | 4

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SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended
September 30,
2021 2020
OPERATING ACTIVITIES:
Net income $ 25,437 $ 26,601
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 7,548 7,517
Stock-based compensation expense 7,015 7,170
Recovery of allowance for doubtful accounts (124) (154)
Provision for excess and obsolete inventories 3,478 (902)
Share of income from equity investee (388) (1,330)
Foreign currency exchange gain 45 618
Deferred income taxes, net 19 (224)
Other 5 (719)
Changes in operating assets and liabilities:
Accounts receivable, net (including changes in related party balances of $(5,315) and $7,510 during the three months ended September 30, 2021 and 2020, respectively) 5,859 81,035
Inventories (147,087) 78,544
Prepaid expenses and other assets (including changes in related party balances of $(2,446) and $12,158 during the three months ended September 30, 2021 and 2020, respectively) 6,109 43,724
Accounts payable (including changes in related party balances of $7,658 and $(24,676) during the three months ended September 30, 2021 and 2020, respectively)
(54,343) (85,704)
Income taxes payable 1,532 1,625
Deferred revenue 13,115 (1,946)
Accrued liabilities (including changes in related party balances of $1,575 and $(3,577) during the three months ended September 30, 2021 and 2020, respectively) (1,330) (36,457)
Other long-term liabilities (including changes in related party balances of $0 and $(530) during the three months ended September 30, 2021 and 2020, respectively) (1,461) 1,157
Net cash provided by (used in) operating activities (134,571) 120,555
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (including payments to related parties of $400 and $2,230 during the three months ended September 30, 2021 and 2020, respectively) (10,802) (11,851)
Investment in a privately-held company (1,100) —
Net cash used in investing activities (11,902) (11,851)
FINANCING ACTIVITIES:
Proceeds from borrowings, net of debt issuance costs 269,806 6,408
Repayment of debt (89,476) (271)
Proceeds from exercise of stock options, net of taxes 6,018 5,020
Payment of withholding tax on vesting of restricted stock units (2,069) (2,005)
Stock repurchases — (28,453)
Payments of obligations under finance leases (17) (26)
Net cash provided by (used in) by financing activities
184,262 (19,327)
Effect of exchange rate fluctuations on cash (11) 185
Net increase in cash, cash equivalents and restricted cash 37,778 89,562
Cash, cash equivalents and restricted cash at the beginning of the period 233,449 212,390
Cash, cash equivalents and restricted cash at the end of the period $ 271,227 $ 301,952


	Three Months Ended September 30,
	2022		2021
OPERATING ACTIVITIES:
Net income	$	184,416	$	25,437
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation and amortization	8,547		7,548
Stock-based compensation expense	11,014		7,015


Allowance (recovery) for credit losses	233		(124)
Provision for excess and obsolete inventories	9,625		3,478

Share of loss (income) from equity investee	889		(388)
Foreign currency exchange (gain) loss	(9,203)		45
Deferred income taxes, net	(19,226)		19
Other	(306)		5
Changes in operating assets and liabilities:
Accounts receivable, net (including changes in related party balances of $(1,851) and $(5,315) during the three months ended September 30, 2022 and 2021, respectively)	94,855		5,859
Inventories	(200,074)		(147,087)
Prepaid expenses and other assets (including changes in related party balances of $(10,139) and $(2,446) during the three months ended September 30, 2022 and 2021, respectively)	(11,991)		6,109
Accounts payable (including changes in related party balances of $6,674 and $7,658 during the three months ended September 30, 2022 and 2021, respectively)	132,302		(54,343)
Income taxes payable	26,668		1,532
Deferred revenue	85,989		13,115
Accrued liabilities (including changes in related party balances of $9,585 and $1,575 during the three months ended September 30, 2022 and 2021, respectively)	8		(1,330)
Other long-term liabilities (including changes in related party balances of $(105) and $0 during the three months ended September 30, 2022 and 2021, respectively)	(159)		(1,461)
Net cash provided by (used in) operating activities	313,587		(134,571)
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (including payments to related parties of $729 and $400 during the three months ended September 30, 2022 and 2021, respectively)	(10,746)		(10,802)


Investment in a privately-held company	—		(1,100)
Net cash used in investing activities	(10,746)		(11,902)
FINANCING ACTIVITIES:
Proceeds from borrowings	79,141		269,806
Repayment of debt	(414,737)		(89,476)


Proceeds from exercise of stock options, net of taxes	8,144		6,018
Payment of withholding tax on vesting of restricted stock units	(3,716)		(2,069)

Other	(15)		(17)
Net cash (used in) provided by financing activities	(331,183)		184,262
Effect of exchange rate fluctuations on cash	(1,472)		(11)
Net (decrease) increase in cash, cash equivalents and restricted cash	(29,813)		37,778
Cash, cash equivalents and restricted cash at the beginning of the period	268,559		233,449
Cash, cash equivalents and restricted cash at the end of the period	$	238,746	$	271,227

SMCI | Q1 2023 Form 10-Q | 5

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Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest	Cash paid for interest	$	508	$	512	Cash paid for interest	$	4,076	$	508
Cash paid for taxes, net of refunds	Cash paid for taxes, net of refunds	2,732		1,204		Cash paid for taxes, net of refunds	$	27,274	$	2,732

Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Unpaid property, plant and equipment purchases (including due to related parties of $1,360 and $1,664 as of September 30, 2021 and 2020, respectively)		$	13,063	$	6,661
Unpaid property, plant and equipment purchases (including due to related parties of $3,782 and $1,360 as of September 30, 2022 and 2021, respectively)						Unpaid property, plant and equipment purchases (including due to related parties of $3,782 and $1,360 as of September 30, 2022 and 2021, respectively)	$	6,599	$	13,063
Right of use ("ROU") assets obtained in exchange for operating lease commitments	Right of use ("ROU") assets obtained in exchange for operating lease commitments	6,119		2,059		Right of use ("ROU") assets obtained in exchange for operating lease commitments	$	750	$	6,119

Unpaid stock repurchases		—		1,547

See accompanying notes to condensed consolidated financial statements.

SMCI | Q1 2023 Form 10-Q | 6

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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 Part II, Item 8, Note 1, "Organization and Summary of Significant Accounting Policies," in its Annual Report on Form 10-K, filed on August ~~27, 2021,~~29, 2022, for the year ended June 30, ~~2021.~~2022. Management's estimates ~~include,~~take into consideration, as applicable, ~~the anticipated impacts of the coronavirus ("COVID-19") pandemic.~~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, ~~2021~~2022 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, ~~2022.~~2023.

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. ~~One supplier~~Two suppliers accounted for ~~20.1%~~ 16.1% and ~~22.0%~~25.7% of total purchases for the three months ended September 30, ~~2021~~2022, and ~~2020, respectively.~~two suppliers accounted for 20.1% and 6.3% of total purchases for the three months ended September 30, 2021. Purchases from Ablecom, and Compuware, related parties of the Company (see Part I, Item 1, Note 8, "Related Party Transactions") accounted for a combined ~~9.6%~~6.4% and ~~9.2%~~9.6% of total cost of sales for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

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, investment in an auction rate security and accounts receivable. OneNo customer accounted for 21.9% of the net sales for the three months ended September 30, 2022 and no single customer accounted for 10% or more of the net sales for the three months ended September 30, ~~2021 and 2020. One customer~~2021. Two customers accounted for ~~11.7% and 13.5%~~greater than 10% of the Company's accounts receivable, net as of September 30, ~~2021~~2022 which accounted for 11.0% and 10.3%. One customer accounted for 21.7% of the Company's accounts receivable, net as of June 30, ~~2021, respectively.~~2022.

Accounting Pronouncements Recently Adopted

~~In December 2019, the FASB issued amended guidance,~~ ~~Simplifying the Accounting for Income Taxes, to remove certain exceptions to the general principles from~~ ~~ASC 740 - Income Taxes,~~ and to improve consistent application of U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The guidance is effective for the Company from July 1, 2021. The adoption of the guidance did not have a material impact on its condensed consolidated financial statements and disclosures.There were no new pronouncements recently adopted.

SMCI | Q1 2023 Form 10-Q | 7

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued authoritative guidance, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The guidance also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. The ~~amendment is~~amendments in this update do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022 that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The amendments are effective for all entities through December 31, 2022. In January 2021, the FASB issued further guidance on this topic, which clarified the scope and application of the original guidance. In April 2022, FASB issued a proposed accounting standard update for the deferral of the sunset date of Topic 848 and amendments to the definition of secured overnight financing rate (“SOFR"). The proposed amendment defers the sunset date of Topic 848 to December 31, 2024. The Company has loans and lines of credit with various financial institutions. Benchmark interest rates are used to calculate the interest on borrowings under the Chang Hwa Bank, CTBC, HSBC, Mega Bank Credit Facilities. LIBOR iswas used to calculate the interest on borrowings under the Company's 2018 Bank of America Credit Facility and E.SUN Credit Facility. The 2018 Bank of America Credit Facility was amended on June 28, 2021 ~~which provided~~to provide for a new maturity date of June 28, 2026 and fallback terms related to LIBOR replacement mechanics. On March 3, 2022, the 2018 Bank of America Credit Facility was amended to, among other items, increase the size of the facility from $200.0 million to $350.0 million and update provisions relating to payments and LIBOR replacement mechanics to SOFR. As these amendments had other contemporaneous changes to the ~~amendment had changes~~facility, including the amount of borrowings permitted under the facility and not just directly related to LIBOR replacement, optional expedients under this guidance cannot be elected. The ~~E.SUN Credit Facility will terminate on July 29, 2022 before~~Company is currently evaluating the ~~phase out~~overall impact of ~~LIBOR. Therefore,~~ the ~~Company~~adoption of this guidance and does not expect ~~the adoption of the guidance~~it to have anmaterial impact on its consolidated financial statements and disclosures.

Note 2. Revenue

Disaggregation of Revenue

The Company disaggregates revenue by type of product and by the geographical market in order to depict the nature, amount, and timing of revenue and cash flows. Service revenues, which are less than 10%, are not a significant component of total revenue, and are aggregated within the respective categories.

The following is a summary of net sales by product type (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Server and storage systems	Server and storage systems	$	849,856	$	617,788		Server and storage systems	$	1,713,056	$	849,856
Subsystems and accessories	Subsystems and accessories	182,874		144,462			Subsystems and accessories	139,074		182,874
Total	Total	$	1,032,730	$	762,250		Total	$	1,852,130	$	1,032,730

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.

SMCI | Q1 2023 Form 10-Q | 8

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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, ~~2021~~2022 and ~~2020,~~2021, of net sales by geographic region (in thousands):

Three Months Ended
September 30,
2021 2020
United States $ 560,948 $ 496,086
Asia 263,086 126,707
Europe 179,694 112,089
Other 29,002 27,368
$ 1,032,730 $ 762,250


	Three Months Ended September 30,
	2022		2021
United States	$	1,295,504	$	560,948
Asia	270,024		263,086
Europe	235,074		179,694
Other	51,528		29,002
Total	$	1,852,130	$	1,032,730

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 relate to the Company’s unconditional right to consideration for performance obligations either partially or fully completed.

~~Table of Contents~~

~~SUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

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 ~~obligation(s).~~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 advance consideration received from non-cancellable non-refundable contract liabilities relating to the sale of future products. Revenue recognized during the three months ended September 30, ~~2021,~~2022, which was included in the ~~opening~~ deferred revenue balance as of June 30, ~~2021~~2022, of ~~$202.3~~$233.8 million, was ~~$30.0~~$33.5 million.

Deferred revenue increased ~~$13.1~~$86.0 million ~~during the three months ended~~as of September 30, ~~2021~~2022 as compared to the fiscal year ended June 30, ~~2021 mainly~~2022 of which $69.6 million was due to the increase in non-cancellable non-refundable advance ~~considerations~~consideration or cash consideration received from customers which ~~precede~~preceded the Company's satisfaction of the associated performance ~~obligations.~~obligations relating to product sales expected to be fulfilled in the next 12 months.

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 ~~undelivered,~~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. The value of the transaction price allocated to remaining performance obligations as of September 30, ~~2021~~2022 was $~~215.4~~319.8 million. The Company expects to recognize approximately ~~53%~~58% of remaining performance obligations as revenue in the next 12 months, and the remainder thereafter.

SMCI | Q1 2023 Form 10-Q | 9

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Capitalized Contract Acquisition Costs and Fulfillment Cost

Contract acquisition costs are those incremental costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. Contract acquisition costs consist primarily of incentive bonuses. Contract acquisition costs are considered incremental and recoverable costs of obtaining and fulfilling a contract with a customer and are therefore capitalizable. The Company applies the practical expedient to expense incentive bonus costs as incurred if the amortization period would be one year or less, generally upon delivery of the associated server and storage systems or components. Where the amortization period of the contract cost would be more than a year, the Company applies judgment in the allocation of the incentive bonus cost asset between hardware and service performance obligations and expenses the cost allocated to the hardware performance obligations upon delivery of associated server and storage systems or components and amortizes the cost allocated to service performance obligations over the period the services are expected to be provided. Contract acquisition costs allocated to service performance obligations that are subject to capitalization are insignificant to the Company’s condensed consolidated financial statements.

Contract fulfillment costs consist of costs paid in advance for outsourced services provided by third parties to the extent they are not in the scope of other guidance. Fulfillment costs paid in advance for outsourced services provided by third parties are capitalized and amortized over the period the services are expected to be provided. Such fulfillment costs are insignificant to the Company’s condensed consolidated financial statements.

~~Table of Contents~~

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, ~~2021~~2022 and ~~2020~~2021 (in thousands, except per share amounts):

Three Months Ended
September 30,
2021 2020
Numerator:
Net income $ 25,437 $ 26,601
Denominator:
Weighted-average shares outstanding 50,796 52,329
Effect of dilutive securities 2,120 2,097
Weighted-average diluted shares 52,916 54,426
Basic net income per common share $ 0.50 $ 0.51
Diluted net income per common share $ 0.48 $ 0.49


	Three Months Ended September 30,
	2022		2021
Numerator:
Net income	$	184,416	$	25,437

Denominator:
Weighted-average shares outstanding	52,598		50,796
Effect of dilutive securities	2,419		2,120
Weighted-average diluted shares	55,017		52,916

Basic net income per common share	$	3.51	$	0.50
Diluted net income per common share	$	3.35	$	0.48

For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company had stock options, restricted stock units ("RSUs") and performance based restricted stock units ("PRSUs") 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 ~~694,211~~307,395 and ~~1,177,694~~694,211 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

SMCI | Q1 2023 Form 10-Q | 10

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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):

Inventories:


		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Finished goods	Finished goods	$	781,992	$	761,694	Finished goods	$	1,096,811	$	1,025,555
Work in process	Work in process	172,593		80,472		Work in process	333,092		209,576
Purchased parts and raw materials	Purchased parts and raw materials	229,988		198,798		Purchased parts and raw materials	306,152		310,475
Total inventories	Total inventories	$	1,184,573	$	1,040,964	Total inventories	$	1,736,055	$	1,545,606

During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded a net provision for excess and obsolete inventory to cost of sales totaling ~~$3.5~~$9.6 million and ~~$0.9~~$3.5 million, respectively. The Company classifies subsystems and

accessories that may be sold separately or incorporated into systems as finished goods.

Prepaid Expenses and Other Current Assets:


	September 30, 2022		June 30, 2022
Other receivables (1)	$	150,082	$	138,054
Prepaid expenses	7,534		5,632
Deferred service costs	6,113		5,562
Prepaid income tax	—		2,352
Restricted cash	—		251
Others	5,516		6,948
Total prepaid expenses and other current assets	$	169,245	$	158,799

(1) Other receivables are receivables from contract manufacturers based on certain buy-sell arrangements of $120.3 million and $98.9 million as of September 30, 2022 and June 30, 2022, respectively.

Cash, Cash equivalents and Restricted cash:


	September 30, 2022		June 30, 2022
Cash and cash equivalents	$	238,268	$	267,397
Restricted cash included in prepaid expenses and other current assets	—		251
Restricted cash included in other assets	478		911
Total cash, cash equivalents and restricted cash	$	238,746	$	268,559

SMCI | Q1 2023 Form 10-Q | 11

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

~~Prepaid Expenses~~Property, Plant, and ~~Other Current Assets:~~Equipment:

September 30, 2021 June 30, 2021
Other receivables (1) $ 87,269 $ 99,921
Prepaid income tax 13,797 12,288
Prepaid expenses 9,210 6,719
Deferred service costs 4,680 4,900
Restricted cash 251 251
Others 9,052 6,116
Total prepaid expenses and other current assets $ 124,259 $ 130,195

~~__________________________~~

~~(1) Includes other receivables from contract manufacturers based on certain buy-sell arrangements of~~ ~~$75.2 million~~ ~~and $76.2 million as of September 30, 2021 and June 30, 2021, respectively.~~


	September 30, 2022		June 30, 2022
Buildings	$	143,496	$	143,509
Machinery and equipment	119,978		113,665
Land	84,616		84,616
Furniture and fixtures	47,600		43,282
Building and leasehold improvements	45,709		45,169
Software	23,273		23,186
Building construction in progress	303		303
	464,975		453,730
Accumulated depreciation and amortization	(174,223)		(167,758)
Property, plant and equipment, net	$	290,752	$	285,972

~~Cash, cash equivalents and restricted cash:~~Other Assets:

September 30, 2021 June 30, 2021
Cash and cash equivalents $ 270,047 $ 232,266
Restricted cash included in prepaid expenses and other current assets 251 251
Restricted cash included in other assets 929 932
Total cash, cash equivalents and restricted cash $ 271,227 $ 233,449


	September 30, 2022		June 30, 2022
Operating lease right-of-use asset	$	22,497	$	23,679
Deferred service costs, non-current	7,518		6,316
Prepaid expense, non-current	1,949		2,011
Investment in auction rate security	1,590		1,590
Deposits	1,215		1,069
Restricted cash, non-current	478		911
Others	1,897		1,956
Total other assets	$	37,144	$	37,532

~~Property, Plant, and Equipment:~~Accrued Liabilities:

September 30, 2021 June 30, 2021
Buildings $ 143,512 $ 86,930
Land 84,602 76,421
Machinery and equipment 102,522 97,671
Building construction in progress (1) 5,919 87,438
Building and leasehold improvements 43,422 26,640
Software 23,093 22,592
Furniture and fixtures 31,782 22,843
434,852 420,535
Accumulated depreciation and amortization (150,704) (145,822)
Property, plant and equipment, net $ 284,148 $ 274,713

~~__________________________~~

~~(1) Primarily relates to the development and construction costs associated with the Company’s Green Computing Park located in San Jose, California, and a new building in Taiwan.~~


	September 30, 2022		June 30, 2022
Accrued payroll and related expenses	$	48,779	$	57,736
Contract manufacturers liabilities	48,579		41,125
Customer deposits	35,099		30,421
Accrued legal liabilities (Note 11)	18,250		18,250
Accrued cooperative marketing expenses	9,722		8,757
Accrued warranty costs	8,540		9,073
Operating lease liability	6,960		7,139
Accrued professional fees	3,130		4,281
Others	34,461		35,637
Total accrued liabilities	$	213,521	$	212,419

11SMCI | Q1 2023 Form 10-Q | 12

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

~~Other Assets:~~

September 30, 2021 June 30, 2021
Operating lease right-of-use asset $ 24,156 $ 20,047
Deferred service costs, non-current 5,576 5,421
Prepaid expense, non-current 1,890 1,973
Investment in auction rate security 1,556 1,556
Deposits 1,449 1,669
Restricted cash, non-current 929 932
Other 1,604 528
Total other assets $ 37,160 $ 32,126

~~Accrued Liabilities:~~

September 30, 2021 June 30, 2021
Accrued payroll and related expenses $ 43,912 $ 45,770
Contract manufacturing liabilities 39,206 45,319
Customer deposits 30,773 32,419
Accrued warranty costs 9,532 10,185
Accrued cooperative marketing expenses 7,811 5,652
Operating lease liability 6,400 6,322
Accrued professional fees 2,343 2,737
Other 35,245 30,446
Total accrued liabilities $ 175,221 $ 178,850

Performance Awards Liability

In March 2020, the Board of Directors (the “Board”) approved performance bonuses for the Chief Executive Officer, a senior executive and two members of the Board, which payments will be earned when specified market and performance conditions are achieved.

The Chief Executive Officer’s ~~aggregate~~total cash ~~bonuses of up to~~bonus opportunity was $8.1 million, ~~are~~divided into two equal tranches. Each tranche would be earned ~~in 2 tranches.~~ ~~The first 50% is payable~~ if the average closing price for the Company’s common stock ~~equals or exceeds $31.61 for any period of 20 consecutive trading days following~~reached specified targets. The Board retained the ~~date of~~flexibility to reduce the ~~agreement and ending prior to September 30, 2021 and~~amount payable under the ~~Chief Executive Officer remains employed with~~first tranche (but not the ~~Company through the date that such common stock~~second tranche) based on performance goals. Both price goal is determined to have been achieved. This payment can be reduced at the discretion of the Board to the extent the Company has not made adequate progress in remediating its material weaknesses in its internal control over financial reporting as determined by the Board. The second 50% is payable if the average closing price for the Company’s common stock equals or exceeds $32.99 for any period of 20 consecutive trading days following the date of the agreement and ending prior to June 30, 2022 and the Chief Executive Officer remains employed with the Company through the date that such common stock price goal is achieved.

~~During~~targets were reached during the fiscal year ended June 30, 2021, ~~the target average closing prices for both tranches were met~~ and ~~the cash payment under~~ the second tranche totaled $4.0 million was ~~made. On September 21,~~paid in full. As of June 30, 2021, the ~~Audit Committee~~Company also expected it would likely pay the first tranche in full, and therefore recorded an expense of $3.6 million since March 2020 relating to the ~~Board determined and advised the Board as to its view that~~first tranche.

In September 2021, after the Company had ~~made adequate progress in remediating~~closed its books for the ~~material weaknesses in its internal control over financial reporting. On September~~year ended June 30, 2021, the Board ~~considered and agreed with this assessment, but also considered the impact of accomplishments of Company employees other than Mr. Liang in achieving this adequate progress. The Board exercised~~decided to exercise its discretion ~~under the terms of the performance bonuses~~ to reduce the ~~payout~~amount to be paid to the Chief Executive Officer for the first tranche ~~from 50%~~ to ~~approximately 25% of $8.1 million, for an aggregate of $2.0 million. The payout of~~ $2.0 million, which was ~~made subsequent to September 30,~~paid in the quarter ended December 31, 2021.

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The Company previously expected that the full amount of the first tranche would be paid to its Chief Executive Officer and, accordingly, recorded~~ As a ~~liability of $3.6 million related to this tranche on its balance sheet as of June 30, 2021. In light~~result of the Board’s ~~action in September 2021~~decision to reduce the amount ofto be paid under the first tranche, ~~payout to $2.0 million,~~ the Company adjusted the $3.6 million expense previously recorded for the first tranche to the new amount of ~~this liability on its balance sheet as of September 30, 2021 to~~ $2.0 million, ~~and recognized~~which resulted in the Company recognizing a ~~benefit of~~ $1.6 million ~~in its consolidated statement of operations~~benefit from this adjustment during the quarter ended September 30, 2021. This performance award to the Chief Executive Officer was concluded in the year ended June 30, 2022. As such, there is no further transaction thereafter. The ~~(benefit) or expense~~benefit recognized during the three months ended September 30, 2022 and 2021 was none and ~~2020 was $(1.6) million and $0.1~~$1.6 million, respectively.

Other Long-term Liabilities:


		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Accrued unrecognized tax benefits including related interests and penalties, non-current						Accrued unrecognized tax benefits including related interests and penalties, non-current	$	19,686	$	18,866
Operating lease liability, non-current	Operating lease liability, non-current	$	18,366	$	14,539	Operating lease liability, non-current	15,218		16,661
Accrued unrecognized tax benefits including related interest and penalties		18,392		17,841
Accrued warranty costs, non-current	Accrued warranty costs, non-current	2,701		2,678		Accrued warranty costs, non-current	4,163		3,064
Other	Other	6,074		6,074		Other	482		549
Total other long-term liabilities	Total other long-term liabilities	$	45,533	$	41,132	Total other long-term liabilities	$	39,549	$	39,140

Product Warranties:


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Balance, beginning of the period	Balance, beginning of the period	$	12,863	$	12,379		Balance, beginning of the period	$	12,136	$	12,863
Provision for warranty	Provision for warranty	6,386		8,347			Provision for warranty	8,617		6,386
Costs utilized	Costs utilized	(7,199)		(7,607)			Costs utilized	(8,473)		(7,199)
Change in estimated liability for pre-existing warranties	Change in estimated liability for pre-existing warranties	183		608			Change in estimated liability for pre-existing warranties	423		183
Balance, end of the period	Balance, end of the period	12,233		13,727			Balance, end of the period	12,703		12,233
Current portion	Current portion	9,532		11,057			Current portion	8,540		9,532
Non-current portion	Non-current portion	$	2,701	$	2,670		Non-current portion	$	4,163	$	2,701

Note 5. Fair Value Disclosure

The financial instruments of the Company measured at fair value on a recurring basis are included in cash equivalents, other assets and accrued liabilities. The Company classifies its financial instruments, except for its investment in an auction rate security, 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.

SMCI | Q1 2023 Form 10-Q | 13

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The Company’s investment in an auction rate security is classified 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, ~~2021~~2022 and June 30, ~~2021.~~2022. The Company is using the discounted cash flow method to estimate the fair value of the auction rate security at each period end and 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, 2021.

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Financial Assets and Liabilities Measured on a Recurring Basis

The following table sets forth the Company’s financial instruments as of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, 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, 2021 Level 1 Level 2 Level 3 Asset at
Fair Value
Assets
Money market funds (1) $ 151 $ — $ — $ 151
Certificates of deposit (2) — 862 — 862
Auction rate security — — 1,556 1,556
Total assets measured at fair value $ 151 $ 862 $ 1,556 $ 2,569
June 30, 2021 Level 1 Level 2 Level 3 Asset at
Fair Value
Assets
Money market funds (1) $ 151 $ — $ — $ 151
Certificates of deposit (2) — 863 — 863
Auction rate security — — 1,556 1,556
Total assets measured at fair value $ 151 $ 863 $ 1,556 $ 2,570

~~__________________________~~


September 30, 2022	Level 1		Level 2		Level 3		Asset at Fair Value
Assets
Money market funds (1)	$	20,550	$	—	$	—	$	20,550
Certificates of deposit (2)	—		553		—		553
Auction rate security	—		—		1,590		1,590
Total assets measured at fair value	$	20,550	$	553	$	1,590	$	22,693


June 30, 2022	Level 1		Level 2		Level 3		Asset at Fair Value
Assets
Money market funds (1)	$	20,220	$	—	$	—	$	20,220
Certificates of deposit (2)	—		832		—		832
Auction rate security	—		—		1,590		1,590
Total assets measured at fair value	$	20,220	$	832	$	1,590	$	22,642

(1) $20.4 million and $20.0 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, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively.

(2) $0.2 million and $0.2 million in certificates of deposit are included in cash and cash equivalents, ~~$0.3~~$0.1 million and $0.3 million in certificates of deposit are included in prepaid expenses and other assets, and ~~$0.4~~$0.3 million and ~~$0.4~~$0.3 million in certificates of deposit are included in restricted cash, non-current in other assets in the condensed consolidated balance sheets as of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively.

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, and current economic conditions. For the three months ended September 30, ~~2021,~~2022, the credit losses related to the Company’s investments ~~was~~were not significant.

There was no movement in the balances of the Company's financial assets measured at fair value on a recurring basis, consisting of investment in an auction rate security, using significant unobservable inputs (Level 3) for the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following is a summary of the Company’s investment in an auction rate security as of September 30, ~~2021~~2022 and June 30, ~~2021~~2022 (in thousands):

Cost Basis Gross
Unrealized
Holding
Gains Gross
Unrealized
Holding
Losses Fair Value
Auction rate security $ 1,750 $ — $ (194) $ 1,556


	Cost Basis		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Auction rate security	$	1,750	$	—	$	(160)	$	1,590

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

No gain or loss was recognized in other comprehensive income for the auction rate security for the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis. As of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, total debt of ~~$278.8~~$249.7 million and ~~$98.2~~$596.8 million, respectively, was reported at amortized cost. This outstanding debt was classified as Level 2 as it was not actively traded. The amortized cost of the outstanding debt approximates the fair value.

Other Financial Assets - Investments into Non-Marketable Equity Securities

The Company's non-marketable equity securities are investments in privately held companies without readily determinable fair values in the amount of $1.2 million ~~and $0.1 million~~ as of September 30, ~~2021~~2022 and June 30, ~~2021, respectively.~~2022. 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. During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company did not record any upward or downward adjustments to the carrying values of the non-marketable equity securities related to observable price changes. The Company also did not record any impairment to the carrying values of the non-marketable equity securities during the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 6. Short-term and Long-term Debt

Short-term and long-term debt obligations as of September 30, ~~2021~~2022 and June 30, ~~2021~~2022 consisted of the following (in thousands):

September 30, June 30,
2021 2021
Line of credit:
Bank of America $ 110,193 $ —
CTBC Bank 68,100 18,000
E.SUN Bank 30,000 20,400
Total line of credit 208,293 38,400
Term loans:
CTBC Bank term loan, due August 31, 2022 $ 25,195 $ 25,090
CTBC Bank term loan, due June 4, 2030 39,018 34,700
CTBC Bank term loan, due December 27, 2027 1,434 —
E.SUN Bank term loan, due September 15, 2026 4,868 —
Total term loans 70,515 59,790
Total debt 278,808 98,190
Short-term debt and current portion of long-term debt 233,674 63,490
Debt, Non-current $ 45,134 $ 34,700


	September 30,		June 30,
	2022		2022
Line of credit:
2018 Bank of America Credit Facility	$	60,284	$	268,245
2022 Bank of America Credit Facility	—		9,500
Cathay Bank Line of Credit	—		30,000
2021 CTBC Credit Lines	—		84,800
HSBC Bank Credit Facility	11,000		30,000
2021 E.SUN Bank Credit Facility	9,000		7,800
Mega Bank Credit Facility	—		3,500
Total line of credit	80,284		433,845
Term loan facilities:
Chang Hwa Bank Credit Facility due October 15, 2026	31,487		33,643

CTBC Bank term loan, due June 4, 2030	37,785		40,372
2021 CTBC Credit Lines, due August 15, 2026	5,706		5,468
2021 E.SUN Bank Credit Facility, due September 15, 2026	40,304		43,064
2022 ESUN Bank Credit Facility, due August 15, 2027	16,373		—
Mega Bank Credit Facility, due September 15, 2026	37,785		40,372
Total term loans	169,440		162,919
Total debt	249,724		596,764
Short-term debt and current portion of long-term debt	101,173		449,146
Debt, non-current	$	148,551	$	147,618

~~Activities under Revolving Lines of Credit and Term Loans~~

~~Bank of America~~

~~2018 Bank of America Credit Facility~~

In April 2018, the Company entered into a revolving line of credit with Bank of America for up to $250.0 million (as amended from time to time, the "2018 Bank of America Credit Facility"). On June 28, 2021, the 2018 Bank of America Credit Facility was amended to, among other items, extend the maturity to June 28, 2026, reduce the size of the facility from $250.0 million to $200.0 million, increase the maximum amount that the Company can request the facility be increased from $100.0 million to $150.0 million, and update provisions relating to erroneous payments and LIBOR replacement mechanics. In addition, the amendment reduced both the unused line fee from 0.375% per annum to 0.2% or 0.3% per annum (depending upon amount drawn under the facility) and the interest rate applicable to the facility from LIBOR plus 2.00% or 3.00% per annum (depending upon amount drawn under the facility) to LIBOR plus 1.375% or 1.625% per annum. The amendment was accounted for as a modification and the impact was immaterial to the consolidated financial statements. Interest accrued on any loans under the 2018 Bank of America Credit Facility is due on the first day of each month, and the loans are due and payable in full on the termination date of the 2018 Bank of America Credit Facility. Voluntary prepayments are permitted without early repayment fees or penalties. Subject to customary exceptions, the 2018 Bank of America Credit Facility is secured by substantially all of Super Micro Computer’s assets, other than real property assets. Under the terms of the 2018 Bank of America Credit Facility, the Company is not permitted to pay any dividends. The 2018 Bank of America Credit Facility contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries and contains a financial covenant, which requires that the Company maintain a certain fixed charge coverage ratio, for each twelve-month period while in a Trigger Period, as defined in the agreement, is in effect.

As of September 30, 2021, the total outstanding borrowings under the 2018 Bank of America Credit Facility were $110.2 million. As of June 30, 2021, the Company had no outstanding borrowings under the 2018 Bank of America Credit Facility. The interest rates under the 2018 Bank of America Credit Facility as of September 30, 2021 and June 30, 2021 were 1.50%. The balance of debt issuance costs outstanding as of September 30, 2021 and June 30, 2021 were $0.5 million. The

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

~~Company has been in compliance with all the covenants~~Activities under ~~the 2018 Bank~~Revolving Lines of ~~America~~ Credit ~~Facility,~~and Term Loans

Available borrowings and interest rates as of September 30, ~~2021,~~2022 and June 30, 2022 consisted of the ~~Company's available borrowing capacity was~~ ~~$89.8 million, subject to the borrowing base limitation and compliance~~ ~~with other applicable terms.~~following (in thousands except for percentages):

~~CTBC Bank~~

~~2021 CTBC Credit Lines~~

The Company through its Taiwan subsidiary was party to (i) that certain credit agreement, dated May 6, 2020, with CTBC Bank Co., Ltd. (“CTBC Bank”), which provided for a ten-year, non-revolving term loan facility (the “2020 CTBC Term Loan Facility”) to obtain up to NTD1,200.0 million ($40.7 million U.S. dollar equivalent) and (ii) that certain credit agreement, dated August 24, 2020, with CTBC Bank (the “CTBC Credit Facility”), which provided for total borrowings of up to $50.0 million (collectively, the “Prior CTBC Credit Lines”).


	September 30, 2022			June 30, 2022
	Available borrowings		Interest rate	Available borrowings		Interest rate
Line of credit:
2018 Bank of America Credit Facility	$	289,716	4.03%	$	81,755	2.53%
2022 Bank of America Credit Facility	$	20,000	3.36%	$	10,500	1.85%
Cathay Bank Line of Credit	$	132,000	4.328%	$	102,000	4.004%
2021 CTBC Credit Lines	$	105,000	1.80% - 2.52%	$	20,200	1.80% - 2.52%
Chang Hwa Bank Credit Facility	$	20,000	5.14%	$	20,000	3.50%
HSBC Bank Credit Facility	$	19,000	3.84%	$	—	1.95% - 2.20%
2021 E.SUN Bank Credit Facility	$	—	1.81%	$	22,200	1.81%
2022 E.SUN Bank Credit Facility	$	21,000	4.18%	$	—	—
Mega Bank Credit Facility	$	20,000	2.55%	$	16,500	1.85%

Term loan facilities:
Chang Hwa Bank Credit Facility due October 15, 2026	$	—	1.30%	$	—	1.175%
CTBC Bank term loan, due June 4, 2030	$	—	0.95%	$	—	0.825%
2021 CTBC Credit Lines, due August 15, 2026	$	5,193	1.15%	$	6,308	1.025%
2021 E.SUN Bank Credit Facility, due September 15, 2026	$	—	1.495%	$	10,766	1.37%
2022 ESUN Bank Credit Facility, due August 15, 2027	$	—	1.495%	$	—	—
Mega Bank Credit Facility, due September 15, 2026	$	—	1.145% - 1.345%	$	—	1.02% - 1.22%

~~On July 20, 2021 (the “Effective Date”), the~~

The Company ~~through its Taiwan subsidiary~~ entered into a ~~general agreement for omnibus credit lines~~new General Credit Agreement with ~~CTBC~~ESUN Bank ~~(the “2021 CTBC Credit Lines), which replaced~~during the Prior CTBC Credit Lines in their entirety and permit borrowings, from time to time, pursuant to (i) a term loan facility of up to NTD 1,550.0 million ($55.4 million U.S. dollar equivalents) including the existing 2020 CTBC Term Loan Facility of NTD 1,200.0 million ($42.9 million~~U.S. dollar equivalents)and a new 75-month,~~ ~~non-revolving~~ ~~term loan facility of NTD 350.0 million ($12.5 million~~U.S. dollar equivalents) to use to purchase machinery and equipment for the Company’s Bade Manufacturing Facility located in Taiwan (the “2021 CTBC Machine Loan”), and (ii) a line of credit facility of up to $105.0 million (the “2021 CTBC Credit Facility”), which increased the borrowing capacity of CTBC Credit Facility. The 2021 CTBC Credit Facility provides (~~i) a 12-monthNTD 1,250.0 million ($44.7 million U.S. dollar equivalent) term loan facility secured by the land and building located in Bade,Taiwan with an interest rate equal to the lender's established NTD interest rate plus 0.50% per annum which is adjustedmonthly, which term loan facility also includes a 12-month guarantee of up to NTD 100.0 million ($3.6 million U.S. dollar~~equivalent) with an annual fee equal to 0.50% per annum, and (ii) a 12-month revolving line of credit of up to 100% of eligible accounts receivable in an aggregate amount of up to $105.0 million with an interest rate equal to the lender's established USD interest rate plus 0.70% to 0.75% per annum which is adjusted monthly.

Interest rates are to be established according to individual credit arrangements established pursuant to the 2021 CTBC Credit Lines, which interest rates shall be subject to adjustment depending on the satisfaction of certain conditions. Term loans made pursuant to the 2021 CTBC Credit Lines are secured by certain of the Taiwan subsidiary’s assets, including certain property, land, plant, and equipment. There are various financial covenants under the 2021 CTBC Credit Lines, including current ratio, debt service coverage ratio, and financial debt ratio requirements. Amounts outstanding under the Prior CTBC Credit Lines on the Effective Date were assumed by the 2021 CTBC Credit Lines.

~~As of~~three months ended September 30, ~~2021 and June 30, 2021,~~2022 with the amounts outstanding under the 2020 CTBC Term Loan Facility were $39.0 million and $34.7 million, respectively. The interest rates for these loans were 0.45% per annum as of September 30, 2021 and June 30, 2021. ~~Under the 2021 CTBC Machine Loan, the amounts outstanding were~~ ~~$1.4 million~~ ~~at September 30, 2021.~~ ~~The interest rates for these loans were 0.65% per annum as of September 30, 2021. As of June 30, 2021, there were no outstanding borrowings under the 2021 CTBC Machine Loan.~~

The total outstanding borrowings under the 2021 CTBC Credit Facility term loan were denominated in NTD and remeasured into U.S. dollars of $25.2 million and $25.1 million at September 30, 2021 and June 30, 2021, respectively. The interest rate for these loans were 0.74% and 0.75% per annum as of September 30, 2021 and June 30, 2021, respectively. As of September 30, 2021, and June 30, 2021, the outstanding borrowings of 2021 CTBC Credit Facility revolving line of credit were $68.1 million and $18.0 million, respectively. The interest rates for these loans ranged from ~~approximately~~ 0.94% to 0.95% per annum as of September 30, 2021. The interest rate was 0.98% per annum as of June 30, 2021. As of September 30, 2021, the amount available for future borrowing under the 2021 CTBC Credit Facility was $11.7 million. As of September 30, 2021, the net book value of land and building located in Bade, Taiwan, collateralizing the 2021 CTBC Credit Lines was $77.7 million.~~As of September 30, 2021, all financial covenants under the 2021 CTBC Credit Lines were satisfied.~~following terms:

E.SUN Bank

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~2021~~2022 E.SUN Bank Credit Facility

~~The Company through its Taiwan subsidiary was party to that certain General Credit Agreement, dated December 2, 2020, with~~On August 9, 2022 (the “New E.SUN Bank (“E.SUN Bank”), which provided for the issuance of loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of credit, and other types of drawdown instruments up to a credit limit of US$30 million (the “Prior E.SUN Bank Credit Facility”). The term of the Prior E.SUN Bank Credit Facility was until September 18, 2021.

~~On September 13, 2021 (the “E.SUN~~ Bank Effective Date”), the Company through its Taiwan subsidiary entered into a new General Credit Agreement with E.SUN Bank, which replaced the ~~Prior~~2021 E.SUN Bank Credit Facility (the ~~“2021~~“New E.SUN Bank Credit Facility”). The ~~2021~~New E.SUN Bank Credit Facility permits borrowings of up to (i) NTD ~~1,600.0 million~~1.8 billion ($~~57.6~~61.0 million U.S. dollar equivalent) and (ii) ~~$30.0 million as loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of credit, and other types of drawdown instruments.~~US$30.0 million. Other terms of the ~~2021~~New E.SUN Bank Credit Facility are substantially identical to the Prior E.SUN Bank Credit Facility. Generally, interest for base rate loans made under the ~~2021~~New E.SUN Bank Credit Facility are based upon an average interbank overnight call loan rate in the finance industry (such as ~~LIBOR or~~ TAIFX) plus a fixed margin, and is subject to occasional adjustment. The ~~2021~~New E.SUN Bank Credit Facility has customary default provisions permitting E.SUN Bank to terminate or reduce the credit limit, shorten the credit period, or deem all liabilities due and payable, including in the event the ~~Subsidiary~~Taiwan subsidiary has an overdue liability at another financial organization. ~~There are various financial covenants under~~The Company is not a guarantor of the ~~2021~~New E.SUN Bank Credit ~~Facility, including current ratio, net debt ratio, and interest coverage requirements.~~Facility.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Terms for specific drawdown instruments issued under the ~~2021~~New E.SUN Bank Credit Facility, such as credit amount, term of use, mode of drawdown, specific lending rate, and other relevant terms, are to be set forth in Notifications and Confirmation of Credit Conditions (a “Notification and Confirmation”) negotiated with E.SUN Bank. AUnder a Notification and Confirmation ~~was~~ entered into on the New E.SUN Bank Effective Date, ~~for (i)~~the Subsidiary and E.SUN Bank have agreed to both a ~~five-year, non-revolving~~medium term credit loan ~~facility to obtain up to~~of NTD ~~1,600.0~~680.0 million ($~~57.6~~23.0 million U.S. dollar equivalent) ~~in financing for use in research~~with a tenor of five years (the “Medium Term Loan”) and ~~development activities (the “Term Loan”), and (ii)~~ a drawdown of US $30.0 million under the E.SUN Bank Credit Facility for an import loan ~~(the “Import Loan”)~~ with a tenor of 120 ~~days. As of September 30, 2021,~~days (the “Import O/A Loan”). With respect to the ~~total outstanding borrowings under the~~Medium Term Loan, ~~were denominated in NTD~~the period of use is between April 28, 2022 and ~~remeasured into U.S. dollars of $4.9 million and the interest rates for these loans were 0.995% per annum. As of September 30, 2021 and June 30, 2021, the amounts outstanding under the Import Loan were~~ ~~$30.0~~ ~~and $20.4 million, respectively.~~April 28, 2023. The interest ~~rates for these loans ranged approximately from~~ ~~0.96%~~rate thereunder is based upon a floating annual rate plus a fixed margin, subject to ~~1.23% and 1.00%~~adjustment under certain circumstances. Interest payments are due on a monthly basis. Principal is amortized evenly on a monthly basis, with principal payments subject to ~~1.29% per annum as~~a one year grace period prior to the commencement of ~~September 30, 2021 and~~ ~~June 30, 2021, respectively.~~ ~~At September 30, 2021, the amount available for future borrowing under the Import~~repayment. The Medium Term Loan ~~was~~ ~~$0.0 million~~ ~~and all financial covenants under the 2021~~ ~~E.SUN Bank Credit Facility were satisfied~~.

~~Mega Bank~~

~~Mega Bank Credit Facilities~~

On September 13, 2021 (the “Mega Bank Effective Date”), the Company through its Taiwan subsidiary entered into a NTD 1,200.0 million ($43.2 million U.S. dollar equivalent) credit facility (the “Mega Bank Credit Facility”) with Mega International Commercial Bank (“Mega Bank”). The Mega Bank Credit Facility will be used by the Taiwan subsidiary to support its manufacturing activities (such as purchase of materials and components)~~, and to provide medium-term working capital (the “Permitted Uses”~~ (“Use of Proceeds”). ~~Drawdowns under the Mega Bank Credit Facility may be made through December 31, 2024, with the first drawdown date not later than November 5, 2021.~~ Drawdowns may be in amounts of up to 80% of ~~Permitted Uses certified~~permitted Use of Proceeds expenses. The Subsidiary is subject to various financial covenants in connection with the Medium Term Loan, including a current ratio, net debt to equity ratio, and interest coverage ratio. The current Medium Term Loan and the prior medium term loan under the Prior E.SUN Bank Credit Facility shall not exceed in aggregate NTD 1.8 billion. With respect to the ~~Bank in drawdown certificates.~~Import O/A Loan, the period of use is between April 28, 2022 and April 28, 2023. The interest rate ~~depends upon the amount borrowed under Mega Bank Credit Facility, and as of the Mega Bank Effective Date, ranged from 0.645% to 0.845% per annum. The interest rate~~thereunder is based on TAIFX3 plus a fixed margin, subject to negotiation on a monthly basis and adjustment inunder certain ~~circumstances, such as events of default.~~circumstances. Interest payments are due on a monthly basis, and principal is ~~payable monthly. Principal payments for amounts borrowed commence~~repayable on the 15th ~~day of~~due date. Neither the ~~month following two years after the first drawdown, and~~Medium Term Loan nor Import O/A loan are repaid in monthly installments over a period of three years thereafter. The Mega Bank Credit Facility is unsecured and has customary default provisions permitting Mega Bank to reduce or cancel the extension of credit, or declare all principal and interest amounts immediately due and payable.secured. As of September 30, ~~2021, there were no~~2022 the amount outstanding ~~borrowings~~ under the ~~Mega Bank Credit Facility.~~Import O/A Loan was $16.4 million. The interest rate as of September 30, 2022 was 1.495% per annum. As of September 30, 2022 and June 30, 2022, the amounts outstanding under the Import O/A Loan were $9.0 million and $7.8 million, respectively. The interest rate as of September 30, 2022 and June 30, 2022 was 4.18% and 1.81% per annum, respectively. As of September 30, 2022, the amount available for future borrowing under the Import O/A Loan was $21.0 million.

~~Chang Hwa Bank~~

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~Chang Hwa Bank Credit Facility~~

On October 5, 2021 (the “Chang Hwa Bank Effective Date”), the Company through its Taiwan subsidiary entered into a credit facility (the “Chang Hwa Bank Credit Facility”) with Chang Hwa Commercial Bank, Ltd. (“Chang Hwa Bank”). The Chang Hwa Bank Credit Facility permits borrowings of up to NTD 1,000.0 million ($36.0 million U.S. dollar equivalent), including up to $20.0 million as loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of credit, and other types of drawdown instruments. The Chang Hwa Bank Credit Facility has customary default provisions permitting the Chang Hwa Bank to terminate or reduce the credit limit, shorten the credit period, or deem all liabilities due and payable, including in cross-default provisions with respect to the other Taiwan subsidiary debt obligations. Under the Chang Hwa Bank Credit Facility, Chang Hwa Bank has the right to demand collateral for debts owed.

Terms for specific drawdown instruments issued under the Chang Hwa Bank Credit Facility, such as credit amount, term of use, mode of drawdown, specific lending rate, and other relevant terms, are to be set forth in separate loan contracts (each, a “Loan Contract”) negotiated with Chang Hwa Bank. On the Chang Hwa Bank Effective Date, 3 Loan Contracts were entered into. None of the three Loan Contracts are secured and there are no financial covenants.

Principal payments on short-term and long-term obligations are due as follows (in thousands):

Fiscal Year: Principal Payments


2022		$	233,594
2023		1,696
Remainder of 2023				Remainder of 2023	$	94,631
2024	2024	7,110		2024	37,660
2025	2025	7,110		2025	41,491
2026	2026	7,110		2026	41,491
2027 and thereafter		22,188
2027				2027	18,025
2028 and thereafter				2028 and thereafter	16,426
Total short-term and long-term debt	Total short-term and long-term debt	$	278,808	Total short-term and long-term debt	$	249,724

The Company is in compliance with all the covenants for the outstanding debt.

SMCI | Q1 2023 Form 10-Q | 18

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 7. Leases

The Company leases offices, warehouses and other premises, vehicles and certain equipment leased 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, ~~2021~~2022 and ~~2020~~2021 were as follows (in thousands):

Three Months Ended
September 30,
2021 2020
Operating lease expense (including expense for lease agreements with related parties of $246 and $347 for the three months ended September 30, 2021 and 2020, respectively) $ 2,182 $ 2,000
Cash payments for operating leases (including payments to related parties of $279 and $347 for the three months ended September 30, 2021 and 2020, respectively) $ 2,205 $ 1,966
New operating lease assets obtained in exchange for operating lease liabilities $ 6,119 $ 2,059


	Three Months Ended September 30,
	2022		2021
Operating lease expense (including expense for lease agreements with related parties of $143 and $246 for the three months ended September 30, 2022 and 2021, respectively)	$	2,110	$	2,182
Cash payments for operating leases (including payments to related parties of $130 and $279 for the three months ended September 30, 2022 and 2021, respectively)	$	2,038	$	2,205
New operating lease assets obtained in exchange for operating lease liabilities	$	750	$	6,119

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, 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, ~~2021~~2022 and ~~2020~~2021 were immaterial.

As of September 30, ~~2021,~~2022, the weighted average remaining lease term for operating leases was ~~4.3~~3.6 years and the weighted average discount rate was ~~3.2%~~3.0%. Maturities of operating lease liabilities under noncancelable operating lease arrangements as of September 30, ~~2021~~2022 were as follows (in thousands):


Fiscal Year:	Fiscal Year:	Minimum lease payments		Fiscal Year:	Maturities of operating leases
2022		$	5,682
2023	2023	6,605		2023	$	5,828
2024	2024	5,498		2024	6,664
2025	2025	5,349		2025	6,252
2026	2026	2,015		2026	2,542
2027 and beyond		1,584
2027				2027	1,563
2028 and beyond				2028 and beyond	535
Total future lease payments	Total future lease payments	26,733		Total future lease payments	23,384
Less: Imputed interest	Less: Imputed interest	(1,967)		Less: Imputed interest	(1,206)
Present value of operating lease liabilities	Present value of operating lease liabilities	$	24,766	Present value of operating lease liabilities	$	22,178

As of September 30, ~~2021,~~2022, commitments under short-term lease arrangements, and operating and financing leases that have not yet commenced were immaterial.

The Company has entered into lease agreements with related parties. See Part I, Item 1, Note 8, "Related Party Transactions," for a further discussion.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 8. 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 28.8% 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, ~~2021.~~2022. 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, a member of Compuware’s Board of Directors and a holder of a significant 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 ~~and~~nor Sara Liu ~~do not~~ own any capital stock of Compuware and the Company does not own any of Ablecom or Compuware’s capital stock.

Dealings with Ablecom

The Company has entered into a series of agreements with Ablecom, including multiple product development, production and service agreements, product manufacturing agreements, manufacturing services agreements and lease agreements for warehouse space.

~~Table of ContentsSUPER 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 ~~92.5%~~88.4% and ~~93.6%~~92.5% of the chassis included in the products sold by the Company during the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, 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 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. 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 cancellable and non-cancellable purchase orders from the Company to Ablecom on September 30, 2022 were ~~$36.7~~$37.1 million and ~~$40.2~~$28.7 million, ~~at September 30, 2021~~respectively, and outstanding cancellable and non-cancellable purchase orders from the Company to Ablecom on June 30, ~~2021,~~2022 were $39.5 million and $36.0 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.

Dealings with Compuware

The Company has entered into a distribution agreement with Compuware, under which the Company appointed Compuware as a non-exclusive distributor of the Company’s products in Taiwan, China and Australia. Compuware assumes the responsibility to install 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.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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.

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.

~~Table of ContentsSUPER 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. 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 cancellable and non-cancellable purchase orders from the Company to Compuware on September 30, 2022 were ~~$87.8~~$198.9 million and ~~$71.0~~$69.0 million, ~~at September 30, 2021~~respectively, and outstanding cancellable and non-cancellable purchase orders from the Company to Compuware on June 30, ~~2021,~~2022 were $213.3 million and $44.3 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 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 fiscal quarter of 2017 and the investment is accounted for using the equity method. As such, the Corporate Venture is also a related party.

The Company recorded a deferred gain related to the contribution of certain technology rights. As of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, the Company had no unamortized deferred gain balance ~~of $0.5 million and $1.0 million, respectively,~~ in accrued liabilities and none in other long-term liabilities in the Company’s condensed consolidated balance sheets.

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. In June 2020, the third-party parent company that controls the Corporate Venture was placed on a U.S. government export control list, along with several of ~~the third party~~such third-party parent's related entities and a separate listing for one of its subsidiaries. The Corporate Venture is not itself a restricted party. The Company has concluded that the Corporate Venture is in compliance with the new restrictions. The Company does not believe that the equity investment carrying value is impacted as of September 30, ~~2021.~~2022. No impairment charge was recorded for the three months ended September 30, ~~2021 and 2020, respectively.~~2022 or 2021.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The Company sold products worth $11.6 million and $15.2 million to the Corporate Venture for the three months ended September 30, 2022 and 2021, respectively, and the Company’s share of intra-entity profits on the products that remained unsold by the Corporate Venture as of September 30, 2022 and June 30, 2022 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 $9.4 million and $8.0 million due from the Corporate Venture in accounts receivable, net as of September 30, 2022 and June 30, 2022, respectively.

~~Dealings with Monolithic Power Systems, Inc.~~

The Company procures certain semiconductor products from Monolithic Power Systems, Inc. (“MPS”), a fabless manufacturer of high-performance analog and mixed-signal semiconductors, for use in its products. A member on the Board of Directors, also serves as an officer of MPS.

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The Company had the following balances related to transactions with its related parties as of September 30, ~~2021~~2022 and June 30, ~~2021~~2022 (in thousands):


		Ablecom				Compuware				Corporate Venture				MPS				Total					Ablecom				Compuware				Corporate Venture				Total
		September 30, 2021		June 30, 2021		September 30, 2021		June 30, 2021		September 30, 2021		June 30, 2021		September 30, 2021		June 30, 2021		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022		September 30, 2022		June 30, 2022		September 30, 2022		June 30, 2022			September 30, 2022		June 30, 2022

Accounts receivable	Accounts receivable	$	2	$	2	$	1,332	$	198	$	12,659	$	8,478	$	—	$	—	$	13,993	$	8,678	Accounts receivable	$	2	$	2	$	882	$	404	$	9,365	$	7,992		$	10,249	$	8,398
Other receivable (1)	Other receivable (1)	$	4,428	$	5,575	$	21,690	$	18,173	$	—	$	—	$	165	$	89	$	26,283	$	23,837	Other receivable (1)	$	3,540	$	4,816	$	31,011	$	19,596	$	—	$	—		$	34,551	$	24,412
Accounts payable	Accounts payable	$	40,730	$	38,152	$	37,024	$	31,944	$	—	$	—	$	—	$	—	$	77,754	$	70,096	Accounts payable	$	43,127	$	42,463	$	50,902	$	44,892	$	—	$	—		$	94,029	$	87,355
Accrued liabilities (2)	Accrued liabilities (2)	$	1,813	$	3,042	$	17,790	$	14,486	$	500	$	1,000	$	—	$	—	$	20,103	$	18,528	Accrued liabilities (2)	$	1,999	$	3,531	$	26,262	$	15,145	$	—	$	—		$	28,261	$	18,676


(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, ~~2021~~2022 and ~~2020,~~2021, are as follows (in thousands):


		Ablecom				Compuware				Corporate Venture				MPS				Total					Ablecom				Compuware				Corporate Venture				MPS (1)				Total
		Three months ended September 30,																					Three months ended September 30,
		2021		2020		2021		2020		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021		2022		2021		2022		2021

Net sales	Net sales	$	7	$	5	$	15,702	$	13,299	$	15,213	$	6,412	—		—		$	30,922	$	19,716	Net sales	$	2	$	7	$	13,760	$	15,702	$	11,293	$	15,213	$	—	$	—	$	25,055	$	30,922
Purchases - inventory	Purchases - inventory	$	50,788	$	23,871	$	35,229	$	34,197	—		—		$	1,670	$	791	$	87,687	$	58,859	Purchases - inventory	$	47,847	$	50,788	$	48,689	$	35,229	$	—	$	—	$	—	$	1,670	$	96,536	$	87,687
Purchases - other miscellaneous items	Purchases - other miscellaneous items	$	2,116	$	2,718	$	339	$	333	—		—		—		—		$	2,455	$	3,051	Purchases - other miscellaneous items	$	4,763	$	2,116	$	258	$	339	$	—	$	—	$	—	$	—	$	5,021	$	2,455

(1) MPS ceased to be a related party in the quarter ended September 30, 2022.

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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, ~~2021~~2022 and ~~2020,~~2021, are as follows (in thousands):


		Ablecom				Compuware				Corporate Venture				MPS				Total					Ablecom				Compuware				Corporate Venture				MPS (1)				Total
		Three months ended September 30,																					Three months ended September 30,
		2021		2020		2021		2020		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021		2022		2021		2022		2021

Changes in accounts receivable	Changes in accounts receivable	—		$	(27)	$	(1,134)	$	353	$	(4,181)	$	7,184	—		—		$	(5,315)	$	7,510	Changes in accounts receivable	$	—	$	—	$	(478)	$	(1,134)	$	(1,373)	$	(4,181)	$	—	$	—	$	(1,851)	$	(5,315)
Changes in other receivable	Changes in other receivable	$	1,147	$	4,243	$	(3,517)	$	7,840	—		—		$	(76)	$	75	$	(2,446)	$	12,158	Changes in other receivable	$	1,276	$	1,147	$	(11,415)	$	(3,517)	$	—	$	—	$	—	$	(76)	$	(10,139)	$	(2,446)
Changes in accounts payable	Changes in accounts payable	$	2,578	$	(14,952)	$	5,080	$	(9,724)	—		—		—		—		$	7,658	$	(24,676)	Changes in accounts payable	$	664	$	2,578	$	6,010	$	5,080	$	—	$	—	$	—	$	—	$	6,674	$	7,658
Changes in accrued liabilities	Changes in accrued liabilities	$	(1,229)	$	(203)	$	3,304	$	(3,374)	$	(500)	—		—		—		$	1,575	$	(3,577)	Changes in accrued liabilities	$	(1,532)	$	(1,229)	$	11,117	$	3,304	$	—	$	(500)	$	—	$	—	$	9,585	$	1,575
Changes in other long-term liabilities	Changes in other long-term liabilities	—		$	47	—		$	(77)	—		$	(500)	—		—		—		$	(530)	Changes in other long-term liabilities	$	—	$	—	$	(105)	$	—	$	—	$	—	$	—	$	—	$	(105)	$	—
Purchases of property, plant and equipment	Purchases of property, plant and equipment	$	338	$	2,140	$	62	$	90	—		—		—		—		$	400	$	2,230	Purchases of property, plant and equipment	$	583	$	338	$	146	$	62	$	—	$	—	$	—	$	—	$	729	$	400
Unpaid property, plant and equipment	Unpaid property, plant and equipment	$	1,360	$	1,664	—		—		—		—		—		—		$	1,360	$	1,664	Unpaid property, plant and equipment	$	3,782	$	1,360	$	—	$	—	$	—	$	—	$	—	$	—	$	3,782	$	1,360

(1) MPS ceased to be a related party in the quarter ended September 30, 2022.

Tripartite Agreement

On November 8, 2021, Super Micro Computer Inc., Taiwan (the “Subsidiary”), a Taiwan corporation and wholly-owned subsidiary of the Company, entered into a Tripartite Agreement (the “Agreement”) with Ablecom and Compuware related to a three-way purchase of land. While the Agreement is currently still in effect, Ablecom has advised that its underlying agreements to acquire land from the third-party landowners in proximity to the Company’s campus in Bade, Taiwan have been terminated.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 9. Stock-based Compensation and Stockholders' Equity

Equity Incentive Plan

On June 5, 2020, the stockholders of the Company approved the 2020 Equity and Incentive Compensation Plan (the ~~"2020~~"Original 2020 Plan"). The maximum number of shares available under the Original 2020 Plan is 5,000,000 plus 1,045,000 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.~~Plan and 7,246,000 shares of common stock remain reserved for outstanding awards issued under the Original 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 (as amended and restated, the “2020 Plan”) which, among other things, increased the number of shares available for award under the 2020 Plan by an additional 2,000,000 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, ~~2021,~~2022, the Company had ~~2,385,365~~3,095,739 authorized shares available for future issuance under the 2020 Plan.

Common Stock Repurchase

On ~~January 29, 2021,~~August 3, 2022, after the expiration of a prior share repurchase program on July 31, 2022, a duly authorized subcommittee of the Company's Board ~~of Directors~~ approved a new share repurchase program to repurchase shares of the Company’s common stock for up to ~~an aggregate of $200.0~~$200 million ofat prevailing prices in the ~~Company's common stock at market prices.~~open market. The share repurchase program is effective until ~~the earlier of July~~January 31, ~~2022~~2024 or ~~the date when~~until the maximum amount of common stock is ~~repurchased. The Company had $150.0 million of remaining availability~~repurchased, whichever occurs first. No shares were repurchased under ~~the~~any share repurchase ~~program as of September 30, 2021. There were no shares repurchased under the share repurchase program~~programs during the three months ended September 30, ~~2021.~~2022.

Determining Fair Value

The Company's fair value of RSUs and PRSUs is 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.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The fair value of stock option grants for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


		Three Months Ended September 30,						Three Months Ended September 30,
		2021			2020					2022	2021
Risk-free interest rate	Risk-free interest rate	0.81		%	0.27%				Risk-free interest rate	2.81% - 4.06%	0.81%
Expected term	Expected term	6.09 years			5.98 years				Expected term	6.07 years	6.09 years
Dividend yield	Dividend yield	—		%	—		%		Dividend yield	—%	—%
Volatility	Volatility	49.71		%	50.43%				Volatility	50.62% - 51.30%	49.71%
Weighted-average fair value	Weighted-average fair value	$	17.94		$	14.16			Weighted-average fair value	$28.67	$17.94

~~Table of ContentsSUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The following table shows total stock-based compensation expense included in the condensed consolidated statements of operations for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Cost of sales	Cost of sales	$	447	$	503		Cost of sales	$	884	$	447
Research and development	Research and development	3,880		3,702			Research and development	6,118		3,880
Sales and marketing	Sales and marketing	517		517			Sales and marketing	809		517
General and administrative	General and administrative	2,171		2,448			General and administrative	3,203		2,171
Stock-based compensation expense before taxes	Stock-based compensation expense before taxes	7,015		7,170			Stock-based compensation expense before taxes	11,014		7,015
Income tax impact	Income tax impact	(1,888)		(1,955)			Income tax impact	(1,339)		(1,888)
Stock-based compensation expense, net	Stock-based compensation expense, net	$	5,127	$	5,215		Stock-based compensation expense, net	$	9,675	$	5,127

As of September 30, ~~2021, $9.4~~2022, $14.5 million of unrecognized compensation ~~expense~~cost related to stock options is expected to be recognized over a weighted-average period of ~~3.85~~3.20 years ~~$51.2~~and $73.1 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of ~~2.77 years and less than $0.1 million of unrecognized compensation cost related to unvested PRSUs is expected to be recognized over a period of 0.11~~2.52 years. Additionally, as described below, ~~$9.6~~$4.3 million of unrecognized compensation cost related to the 2021 CEO Performance Stock Option is expected to be recognized over a period of ~~5.0~~2.75 years.

Stock Option Activity

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 1,000,000 shares of common stock ~~shares~~ to the Company’s CEO (the “2021 CEO Performance Stock Option”). The 2021 CEO Performance Stock Option has 5five 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 ~~of Directors~~ and (2) service through each vesting date. Each of the 5five vesting tranches of the 2021 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 $120.00 per share thereafter (based on a 60 ~~calendar~~trading day ~~trailing~~ average ~~counting only trading days)~~stock price), has been achieved, and (ii) any one of ~~the following 5~~five operational milestones focused on total revenue, as reported under U.S. GAAP, have been achieved for the previous 4four consecutive fiscal quarters. Upon vesting and exercise, including the payment of the exercise price of $45.00 per share, prior to March 2, 2024, the Company’s CEO must hold shares that he acquires until March 2, 2024, 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.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The achievement status of the operational and stock price milestones as of September 30, ~~2021~~2022 was as follows:


Annualized Revenue Milestone	Annualized Revenue Milestone	Achievement Status	Stock Price Milestone	Achievement Status	Annualized Revenue Milestone	Achievement Status	Stock Price Milestone	Achievement Status
(in billions)	(in billions)				(in billions)
$4.0	$4.0	Probable	$45	Not met	$4.0	Achieved	$45	Achieved (1)
$4.8	$4.8	Probable	$60	Not met	$4.8	Achieved	$60	Achieved (2)
$5.8	$5.8	Probable	$75	Not met	$5.8	Probable	$75	Not yet achieved
$6.8	$6.8	Probable	$95	Not met	$6.8	Probable	$95	Not yet achieved
$8.0	$8.0	—	$120	Not met	$8.0	Probable	$120	Not yet achieved

(1)The vesting of the first tranche of 200,000 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 200,000 option shares under the 2021 CEO Performance Stock Option representing one-fifth of such award was certified by the Company's Compensation Committee on October 25, 2022.

~~Table of Contents~~
~~SUPER MICRO COMPUTER, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

On the grant date, a Monte Carlo simulation was used to determine for each tranche (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 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 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.

During the three months ended September 30, 2022 and 2021, the Company recognized compensation expense related to the 2021 CEO Performance Stock Option of $1.3 million and $0.9 ~~million. No compensation expense related to the 2021 CEO Performance Stock Option was recognized during the three months ended September 30, 2020.~~million, respectively. As of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, the Company had ~~$9.6~~$4.3 million and ~~$10.5~~$5.6 million, respectively, in unrecognized compensation cost related to the 2021 CEO Performance Stock Option. The unrecognized compensation cost as of September 30, ~~2021~~2022 is expected to be recognized over a period of ~~five~~more than 2.75 years.

SMCI | Q1 2023 Form 10-Q | 26

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table summarizes stock option activity during the three months ended September 30, ~~2021~~2022 under all plans:

Options
Outstanding Weighted
Average
Exercise
Price per
Share Weighted
Average
Remaining
Contractual
Term (in Years)
Balance as of June 30, 2021 5,175,554 $ 26.17
Granted 114,860 $ 37.88
Exercised (389,942) $ 17.25
Forfeited/Cancelled (41,459) $ 30.47
Balance as of September 30, 2021 4,859,013 $ 27.13 5.52
Options vested and exercisable at September 30, 2021 3,099,511 $ 20.82 3.47


	Options Outstanding	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in Years)
Balance as of June 30, 2022	4,311,416	$	29.99
Granted	123,750	$	55.67
Exercised	(405,226)	$	20.10
Forfeited/Cancelled	(9,238)	$	26.61
Balance as of September 30, 2022	4,020,702	$	31.79	5.77

Options vested and exercisable at September 30, 2022	2,373,832	$	24.87	3.78

RSU and PRSU Activity

In January 2015, the Company began to grant RSUs to employees. The Company grants RSUs to certain employees as part of its regular employee equity compensation review program as well as to selected new hires. RSUs are typically service based share awards that entitle the holder to receive freely tradable shares of the Company's common stock upon vesting.

In March 2020, the Compensation Committee granted a PRSU award to one of the Company's senior executives. The award vests in 2two tranches and includes service and performance conditions. Each tranche has 15,000 RSUs that vest in May 2021 and November 2021 based on service conditions only. Additional units ~~can be~~were earned based on revenue growth percentage in fiscal year 2020 compared to fiscal year 2019, which units ~~would vest~~vested in May 2021, and based on revenue growth percentage in fiscal year 2021 compared to fiscal year 2020, which units ~~would vest~~vested in November 2021. No additional units were earned for fiscal year 2020 as revenue decreased from fiscal year 2019. An additional 2,939 units were earned for fiscal year 2021 that ~~would vest~~was vested on November 10, 2021.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The following table summarizes RSU and PRSU activity during the three months ended September 30, ~~2021~~2022 under all plans:


		Time-Based RSUs Outstanding	Weighted Average Grant-Date Fair Value per Share		PRSUs Outstanding	Weighted Average Grant-Date Fair Value per Share			Time-Based RSUs Outstanding	Weighted Average Grant-Date Fair Value per Share
Balance as of June 30, 2021		1,854,956	$	26.79	15,000	$	34.27
Balance as of June 30, 2022								Balance as of June 30, 2022	1,879,073	$	33.72
Granted	Granted	359,405	$	37.88	—	$	—	Granted	446,309	$	59.84
Released	Released	(173,771)	$	22.92	—	$	—	Released	(193,532)	$	29.61
Forfeited	Forfeited	(87,894)	$	27.54	—	$	—	Forfeited	(52,535)	$	36.99
Balance as of September 30, 2021		1,952,696	$	29.15	15,000	$	34.27
Balance as of September 30, 2022								Balance as of September 30, 2022	2,079,315	$	39.63

SMCI | Q1 2023 Form 10-Q | 27

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 10. Income Taxes

The Company recorded a provision for income taxes of ~~$3.3~~$38.9 million and ~~$3.7~~$3.3 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The effective tax rate was ~~11.7%~~17.4% and ~~12.7%~~11.7% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The effective tax rate for the three months ended September 30, ~~2021~~2022 is ~~lower~~higher than that for the three months ended September 30, ~~2020,~~2021, primarily due to ~~a decrease~~significant increase in ~~certain non-deductible expenses~~taxable income in the first quarter of fiscal year 2023, whereas the income tax deduction items such as R&D credit and ~~a decrease in~~ foreign tax ~~liability.~~deduction comparably did not increase in the same proportion.

The Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development (“R&D”) expenses in the year incurred and instead requires taxpayers to capitalize R&D expenses, including software development cost, and subsequently amortize such expenses over five years for R&D activities conducted in the United States and over fifteen years for R&D activities conducted outside of the United States beginning in the Company’s fiscal year 2023. Although Congress has considered legislation that would defer, modify, or repeal the capitalization and amortization requirement, there is no assurance the provision will be deferred, repealed, or otherwise modified.

As of September 30, ~~2021,~~2022, the Company had gross unrecognized tax benefits of ~~$45.1~~$41.7 million, of which, ~~$28.3~~$23.9 million if recognized, would affect the Company's effective tax rate. During the three months ended September 30, ~~2021,~~2022, there was a ~~$4.3~~$3.7 million increase in gross unrecognized tax benefits. The ~~Company’s~~Company's policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes on the condensed consolidated statements of operations. As of September 30, ~~2021,~~2022, the Company had accrued ~~$2.7~~$3.2 million of interest and penalties relating to unrecognized tax benefits.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES Act provides temporary relief from certain aspects of the 2017 Tax Reform Act that imposed limitations on the utilization of certain losses, interest expense deductions and alternative minimum tax credits and made a technical correction to the 2017 Tax Reform Act related to the depreciable life of qualified improvement property. The CARES Act does not have a material impact on the Company.

The Company has determined that its foreign undistributed earnings are indefinitely reinvested except for undistributed earnings related to the Company's operations in the Netherlands. The Company may repatriate certain foreign earnings from the Netherlands that have been previously taxed in the U.S. The tax impact of such repatriation is estimated to be immaterial.

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.

The federal statute of limitations remains open in general for tax years ended June 30, ~~2018~~2019 through ~~2021.~~2022. Various states statutes of limitations remain open in general for tax years ended June 30, ~~2017~~2018 through ~~2021.~~2022. Certain statutes of limitations in major foreign jurisdictions remain open in general for the tax years ended June 30, ~~2016~~2017 through ~~2021.~~2022. It is reasonably possible that ~~our~~the Company's gross unrecognized tax benefits will decrease by approximately ~~$1.0~~$3.0 million, in the next 12 months, due to the lapse of the statute of limitations. These adjustments, if recognized, would positively impact ~~our~~the Company's effective tax rate, and would be recognized as additional tax benefits.

SMCI | Q1 2023 Form 10-Q | 28

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 11. Commitments and Contingencies

Litigation and Claims— On February 8, 2018, 2two putative class action complaints were filed against the Company, the Company's Chief Executive Officer, and the Company's former Chief Financial Officer in the U.S. District Court for the Northern District of California (~~Hessefort~~(Hessefort v. Super Micro Computer, Inc., et al., No. 18-cv-00838 and United Union of Roofers v. Super Micro Computer, Inc., et al., No. ~~18-cv-00850~~)18-cv-00850). The complaints contain similar allegations, claiming that the defendants violated Section 10(b) of the Securities Exchange Act due to alleged misrepresentations and/or omissions in public statements regarding recognition of revenue. The court subsequently appointed New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund as lead plaintiff. The lead plaintiff then filed an amended complaint naming the Company's Senior Vice President of Investor Relations as an additional defendant. On June 21, 2019, the lead plaintiff filed a further amended complaint naming the Company's former Senior Vice President of International Sales, Corporate Secretary, and Director as an additional defendant. On July 26, 2019, the Company filed a motion to dismiss the complaint. On March 23, 2020, the Court granted the Company’s motion to dismiss the complaint, with leave for lead plaintiff to file an amended complaint within 30 days. On April 22, 2020, lead plaintiff filed a further amended complaint. On June 15, 2020, the Company filed a motion to dismiss the further amended complaint, the hearing for which was calendared for September 23, 2020; however, the Court held a conference on September 15 to discuss how the Court could efficiently address the recent SEC settlement agreement. The parties stipulated to allow plaintiffs to further amend the complaint solely to add allegations relating to the SEC settlement. On October 14, 2020, plaintiffs filed a Fourth Amended Complaint. On October 28, 2020, defendants filed a supplemental motion to dismiss. On March 29, 2021, the Court granted in part and denied in part defendants’ motions to dismiss. Plaintiffs’ claims under Sections 10(b) and 20 of the Exchange Act were dismissed with prejudice as against the Company’s former head of Investor Relations, Perry Hayes. Plaintiffs’ Section 10(b) claim, but not the Section 20 claim, was likewise dismissed as to Wally Liaw, a founder, former director, and former SVP of International Sales. The Court denied the motions to dismiss the Section 10(b) and Section 20 claims against the Company, Charles Liang, and Howard Hideshima, the Company’s former CFO. ~~Discovery has commenced,~~On March 11, 2022, the Company, together with the individual defendants, agreed in principle with plaintiff’s counsel to settle the action. On April 8, 2022, the parties entered into a stipulation of settlement, pursuant to which and subject to Court approval, plaintiff will dismiss with prejudice and release on behalf of a class of shareholders all claims against defendants, including the Company, in exchange for payment of $18,250,000, of which sum $2,000,000 will be funded by the Company. On May 25, 2022, the Court ~~has calendared a~~vacated the hearing on ~~class certification for January 22, 2022. The Company intends to defend the lawsuit vigorously.~~

~~On October 27, 2020, certain current and former directors and officers~~preliminary approval of the Company were named as defendants in a putative derivative lawsuit filed in the Superior Court of the State of California, County of Santa Clara (the “Court”), captioned Barry v. Liang, et al., 20-CV-372190. The Company was also named as a nominal defendant. The complaint purports to allege claimsproposed settlement scheduled for ~~breaches of fiduciary duties, waste of corporate assets, and unjust enrichment arising out of allegations~~June 2, 2022, stating that the ~~Company’s officers and directors caused~~unopposed motion was suitable for disposition without oral argument. Consequently, the Company to issue false and misleading statements about recognition of revenue and the effectiveness of its internal controls, failed to adopt and implement effective internal controls, and failed to timely file various reports with the Securities and Exchange Commission. Defendants filed demurrers, which were set for hearing on August 4, 2021, but which were continued to September 15, 2021. Following this continuance, on July 21, 2021, Plaintiffs' counsel filed an amended complaint in lieu of responding to the demurrer. The amended complaint added no new claims; primarily, the amendment added allegations describing the March 29, 2021 motion to dismiss decision in the ~~Hessefort~~ ~~class action. Defendants demurred to the amended complaint on August 24, 2021, and~~parties expect the Court ~~has calendared the~~will grant preliminary approval and calendar a future hearing for ~~January 26, 2022. The case is otherwise currently stayed. The Company intends to defend the lawsuit vigorously.~~

On May 5, 2021, certain current and former directors and 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 ~~Stein v. Liang, et al~~., Case No. 3:21-cv-03357-KAW (the “Stein Derivative Action”). The Company was also named as a nominal defendant. The complaint purports to allege claims for breaches of fiduciary duties, waste of corporate assets, unjust enrichment, and contribution for violations of federal securities laws arising out of allegations that the Company’s officers and directors caused the Company to issue false and misleading statements about recognition of revenue and the effectiveness of its internal controls, failed to adopt and implement effective internal controls, and failed to timely file various reports with the Securities and Exchange Commission. The plaintiff seeks unspecified compensatory damages and other equitable relief. Defendants filed motions to dismiss the complaint on August 6, 2021. Rather than oppose defendants’ motions, plaintiff informed defendants that plaintiff was prepared to dismiss his action with prejudice. On September 29, 2021, the parties submitted a stipulation for dismissal with prejudice as to the named plaintiff tofinal approval. This settlement, if finally approved by the Court, for its approval. On October 27, 2021, the Court issued an order for the parties to submit within 30 days a plan of notice of dismissal for the Court’s approval. The Court noted that, if no shareholder seeks to intervene during the notice period, plaintiff may file an administrative motion requesting that the Court dismiss the lawsuit with prejudice

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~SEC Matter—~~ The Company cooperated with the SEC in its investigation of marketing expenses that contained certain irregularities discovered by Company management, which irregularities were disclosed on August 31, 2015, and the Company cooperated with the SEC in its further investigation of the matters underlying the Company’s inability to timely file its Form 10-K for the fiscal year ended June 30, 2017 and concerning the publication of a false and widely discredited news article in October 2018 concerning the Company’s products. On August 25, 2020, towill fully resolve ~~all matters under investigation,~~ the Company consented to entry of an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as announced by the SEC. The Company admitted the SEC’s jurisdiction over the Company and the subject matter of the proceedings, but otherwise neither admitted nor denied the SEC’s findings, as described in the Order. The Company agreed to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and (3) of the Securities Act and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. The Company agreed and paid a civil money penalty of $17,500,000 during the three months ended September 30, 2020, which was recorded to general and administrative expense in the Company's condensed consolidated statement of operations. In addition, the Company’s Chief Executive Officer concluded a settlement with the SEC on August 25, 2020, as announced by the SEC. The Company’s Chief Executive Officer paid the Company the sum of $2,122,000 as reimbursement of profits from certain stock sales during the relevant period, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002. The settlement amount was paid during the first quarter of fiscal 2021 and the Company recorded the payment as a credit to general and administrative expense.action.

Other legal proceedings and indemnifications

From time to time, the Company has been involved in various legal proceedings arising from the normal course of business activities. The resolution of any such matters have not had a material impact on the Company’s consolidated financial condition, results of operations or liquidity as of September 30, ~~2021~~2022 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, ~~2021,~~2022, these remaining noncancelable commitments were ~~$508.2~~$512.3 million, including ~~$124.4~~$97.7 million for related parties.

Lease Commitments - See Part I, Item 1, Note 7, "Leases," for a discussion of the Company's operating lease and financing lease commitments.

SMCI | Q1 2023 Form 10-Q | 29

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 12. Segment Reporting

The Company operates in 1one operating segment that develops and provides ~~high performance~~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.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The following is a summary of property, plant and equipment, net (in thousands):


		September 30,		June 30,			September 30,		June 30,
		2021		2021			2022		2022
Long-lived assets:	Long-lived assets:					Long-lived assets:
United States	United States	$	181,189	$	180,143	United States	$	183,428	$	180,846
Asia	Asia	100,046		91,640		Asia	104,482		102,241
Europe	Europe	2,913		2,930		Europe	2,842		2,885
		$	284,148	$	274,713		$	290,752	$	285,972

The Company’s revenue is presented on a disaggregated basis in Part I, Item 1, Note 2, “Revenue,” by type of product and by geographical market.

31SMCI | Q1 2023 Form 10-Q | 30

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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. In some cases, you can identify forward-looking statements by terminology including “would,” “could,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of these terms or other comparable terminology. In evaluating these statements, you should specifically consider various factors, including the risks discussed under “Risk Factors” in Part II, Item 1A of this filing. These factors may cause our actual results to differ materially from those anticipated or implied in the forward-looking statements. We undertake no obligation to publicly update or revise any 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 included in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 (the ~~“2021~~“2022 10-K”), which includes our condensed consolidated financial statements for the fiscal years ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Overview

We are a ~~global leader and innovator~~Silicon Valley-based provider of accelerated compute platforms that are application-optimized high performance and high-efficiency server and storage systems for a variety of markets, including enterprise data centers, cloud computing, artificial intelligence, 5G and edge computing. Our ~~solutions~~Total IT Solutions include complete servers, storage systems, modular blade servers, blades, workstations, full ~~racks,~~rack scale solutions, networking devices, server sub-systems, server management ~~software,~~ and ~~server sub-systems.~~security software. We also provide global support and services to help our customers install, upgrade and maintain their computing infrastructure.

We commenced operations in 1993 and have been profitable every year since inception. Our net income for the three months ended September 30, ~~2021 decreased~~2022 increased to ~~$25.4~~$184.4 million from ~~$26.6~~$25.4 million for the corresponding period in the prior year. In order to increase our sales and profits, we believe that we must continue to develop flexible and application optimized server and storage solutions and be among the first to market with new features and products. We must also continue to expand our software and customer service and support offerings, particularly as we increasingly focus on larger enterprise customers. Additionally, we must focus on development of our sales partners and distribution channels to further expand our market share. We measure our financial success based on various indicators, including growth in net sales, gross profit margin and operating margin. 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. In this regard, we work closely with microprocessor and other key component vendors to take advantage of new technologies as they are introduced. Historically, our ability to introduce new products rapidly has allowed us to benefit from technology transitions such as the introduction of new microprocessors and storage technologies, and as a result, we monitor the introduction cycles of NVIDIA Corporation, Intel Corporation, Advanced Micro Devices, Inc., Samsung Electronics Company Limited, Micron Technology, Inc. and others closely and carefully. This also impacts our research and development expenditures as we continue to invest more in our current and future product development efforts.

~~Coronavirus (COVID-19) Pandemic Impact~~

SMCI | Q1 2023 Form 10-Q | 31

The global spread of the coronavirus (COVID-19) and the various attempts to contain it have created significant volatility, uncertainty and economic disruption for many businesses worldwide. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, including orders that govern the operations of businesses, require masks be worn and define shelter in place and social distancing protocols. We are an essential critical infrastructure (information technology) business under the relevant federal, state and county regulations. Accordingly, in late March 2020, we responded to the directives from Santa Clara County and the State of California regarding instructions to combat the spread of COVID-19. Our first priority is the safety of our workforce and we have implemented numerous health precautions and work practices to be in compliance with the law and to operate in a safe manner.

We quickly transitioned certain of our indirect labor forces to work from home at the earlier phase of the pandemic and continued to operate our local assembly in Taiwan and, after an initial period of disruption, in the United States and Europe. We operate in the critical industry of IT infrastructure and we assessed our customer base to identify priority customers who operate in critical industries. We continued to see ongoing demand and do not have significant direct exposure to industries such as retail, oil and gas and hospitality, which have been impacted the greatest. As time passes, we may discover greater indirect exposure to distressed industries through our channel partners and OEM customers.

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We have actively managed our supply chain for potential shortage risk by building inventories of critical components required for our motherboards and other system printed circuit boards in response to the early outbreak of COVID-19 in China. Since that time, we have continued to add to our inventories of key components such as CPUs, memory, SSDs and GPUs such that customer orders can be fulfilled as they are received.

Logistics has emerged as a new challenge as globally the transportation industry restricted the frequency of departures and increased logistics costs. We have experienced increased costs in freight as well as direct labor costs as we incentivized our employees to continue to work and assist us in serving our customers, many of whom are in critical industries. We expect this trend to continue for the duration of the COVID-19 pandemic.

~~We monitor the credit profile and payment history of our customers to evaluate risk in specific industries or~~

~~geographic areas where cash flow may be disrupted. While we believe that we are adequately capitalized, we actively manage~~

our liquidity needs. In June 2021, we negotiated an extension of our credit facility with Bank of America to extend the maturity date to June 2026. In July 2021, we replaced our prior credit facility and term loan facility with CTBC Bank, with a new facility for omnibus credit lines. In September 2021, we replaced our prior credit facility with E.SUN Bank, with new credit facility and term facility. In September 2021, we entered into a term loan facility with Mega Bank which will be used to support our manufacturing activities (such as purchase of materials and components) and provide medium-term working capital. In October 2021, we entered into a credit facility with Chang Hwa Bank which will be used to support the growth of our Taiwan business. See “- Liquidity and Capital Resources – Other Factors Affecting Liquidity and Capital Resources.”

Our management team is focused on guiding our company through the ongoing challenges presented by COVID-19. Currently, there are positive signs with vaccine availability and reductions in infection rates; however, with the possibility of new virus strains and vaccine supply constraints, we are unable to predict the ultimate extent to which the global COVID-19 pandemic may further impact our business operations, financial performance and results of operations within the next 12 months.

Financial Highlights

The following is a summary of our financial highlights of the first quarter of fiscal year ~~2022:~~2023:

•Net sales increased by ~~35.5%~~79.3% in the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020.~~2021.

•Gross margin ~~decreased~~increased to ~~13.4%~~18.8% in the three months ended September 30, ~~2021~~2022 from ~~17.0%~~13.4% in the three months ended September 30, ~~2020.~~2021.

•Operating expenses increased by ~~9.6%~~16.9% as compared to the three months ended September 30, ~~2020,~~2021 and were equal to ~~10.6%~~6.9% and ~~13.0%~~10.6% of net sales in the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

•Effective tax rate ~~decreased~~increased to 17.4% in the three months ended September 30, 2022 from 11.7% in the three months ended September 30, ~~2021 from 12.7% in the three months ended September 30, 2020.~~2021.

Critical Accounting Policies and 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 assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We evaluate our estimates and assumptions on an ongoing basis, and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for the judgments we make about the carrying value of assets and liabilities that are not readily apparent from other sources. 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.

~~Table of~~ ~~Contents~~

There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our ~~2021~~2022 10-K. For a description of our critical accounting policies and estimates, see Part I, Item 1, Note 1, "Summary of Significant Accounting Policies" in our notes to condensed consolidated financial statements in this Quarterly Report.

SMCI | Q1 2023 Form 10-Q | 32

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Results of Operations

The following table presents certain items of our condensed consolidated statements of operations expressed as a percentage of revenue.


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Net sales	Net sales	100.0	%	100.0	%		Net sales	100.0	%	100.0	%
Cost of sales	Cost of sales	86.6	%	83.0	%		Cost of sales	81.2	%	86.6	%
Gross profit	Gross profit	13.4	%	17.0	%		Gross profit	18.8	%	13.4	%
Operating expenses:	Operating expenses:						Operating expenses:
Research and development	Research and development	6.3	%	7.2	%		Research and development	4.0	%	6.3	%
Sales and marketing	Sales and marketing	2.1	%	2.7	%		Sales and marketing	1.6	%	2.1	%
General and administrative	General and administrative	2.2	%	3.2	%		General and administrative	1.3	%	2.2	%
Total operating expenses	Total operating expenses	10.6	%	13.0	%		Total operating expenses	6.9	%	10.6	%
Income from operations	Income from operations	2.8	%	4.0	%		Income from operations	11.9	%	2.8	%
Other (expense) income, net		—	%	(0.1)	%
Other income, net							Other income, net	0.4	%	—	%
Interest expense	Interest expense	(0.1)	%	(0.1)	%		Interest expense	(0.2)	%	(0.1)	%
Income before income tax provision	Income before income tax provision	2.7	%	3.8	%		Income before income tax provision	12.1	%	2.7	%
Income tax provision	Income tax provision	(0.3)	%	(0.5)	%		Income tax provision	(2.1)	%	(0.3)	%
Share of income from equity investee, net of taxes		—	%	0.2	%
Share of income (loss) from equity investee, net of taxes							Share of income (loss) from equity investee, net of taxes	—	%	—	%
Net income	Net income	2.5	%	3.5	%		Net income	10.0	%	2.5	%

Net Sales

Net sales consist of sales of our server and storage solutions, including systems and related services and subsystems and accessories. The main factors that impact ~~our~~ net sales of our server and storage systems are the number of compute nodes sold and the average selling prices per node. The main factors that impact ~~our~~ net sales of our subsystems and accessories are units shipped and the average selling price per unit. The prices for our server and storage systems range widely depending upon the configuration, including the number of compute nodes in a server system as well as the level of integration of key components such as SSDs and memory. The prices for our subsystems and accessories can also vary widely based on whether a customer is purchasing power supplies, server boards, chassis or other accessories.

A compute node is an independent hardware configuration within a server system capable of having its own CPU, memory and storage and that is capable of running its own instance of a non-virtualized operating system. The number of compute nodes sold, which can vary by product, is an important metric we use to track our business. Measuring volume using compute nodes enables more consistent measurement across different server form factors and across different vendors. As with most electronics-based product life cycles, average selling prices typically are highest at the time of introduction of new products that utilize the latest technology and tend to decrease over time as such products mature in the market and are replaced by next generation products. Additionally, in order to remain competitive throughout all industry cycles, we actively change our selling price per unit in response to changes in costs for key components such as CPU/GPU, memory and ~~SSDs.~~storage.

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The following table presents net sales by product type for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 (dollars in millions):


		Three Months Ended September 30,						Change				Three Months Ended September 30,		Change
		2021			2020			$		%				2022			2021			$		%
Server and storage systems	Server and storage systems	$	849.9		$	617.8		$	232.1	37.6	%		Server and storage systems	$	1,713.1		$	849.9		$	863.2	101.6	%
Percentage of total net sales	Percentage of total net sales	82.3		%	81.0		%						Percentage of total net sales	92.5		%	82.3		%
Subsystems and accessories	Subsystems and accessories	$	182.9		$	144.5		$	38.4	26.6	%		Subsystems and accessories	$	139.0		$	182.9		$	(43.9)	(24.0)	%
Percentage of total net sales	Percentage of total net sales	17.7		%	19.0		%						Percentage of total net sales	7.5		%	17.7		%
Total net sales	Total net sales	$	1,032.7		$	762.3		$	270.4	35.5	%		Total net sales	$	1,852.1		$	1,032.8		$	819.3	79.3	%

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 September ~~2021~~30, 2022 and ~~2020~~2021

The period-over-period increase in net sales of our server and storage systems was due to a ~~25.5%~~36.2% increase in the number of units of compute nodes sold and a ~~11.8%~~50.4% increase in the average selling price. ~~The increase in the number of units of compute nodes shipped was primarily due to more shipments of multinode systems compared to the same period last year.~~

The period-over-period ~~increase~~decrease in net sales offor our subsystems and accessories of 24.0% is primarily due to ~~an increase in the average selling price by 19.6%~~recent supply chain constraints and ~~an increase in number~~higher sales of ~~units by 5.9%.~~complete systems.

The following table presents net sales by geographic region for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 (dollars in millions):


		Three Months Ended September 30,						Change		Change		Three Months Ended September 30,					Change			Change
		2021			2020			$		%				2022			2021			$		%
United States	United States	$	560.9		$	496.1		$	64.8	13.1	%		United States	$	1,295.5		$	560.9		$	734.6	131.0	%
Percentage of total net sales	Percentage of total net sales	54.3		%	65.1		%						Percentage of total net sales	69.9		%	54.3		%
Asia	Asia	263.1			126.7			136.4		107.7	%		Asia	$	270.0		$	263.1		$	6.9	2.6	%
Percentage of total net sales	Percentage of total net sales	25.5		%	16.6		%						Percentage of total net sales	14.6		%	25.5		%
Europe	Europe	179.7			112.1			67.6		60.3	%		Europe	$	235.1		$	179.7		$	55.4	30.8	%
Percentage of total net sales	Percentage of total net sales	17.4		%	14.7		%						Percentage of total net sales	12.7		%	17.4		%
Others	Others	29.0			27.3			1.7		6.2	%		Others	$	51.5		$	29.0		$	22.5	77.6	%
Percentage of total net sales	Percentage of total net sales	2.8		%	3.6		%						Percentage of total net sales	2.8		%	2.8		%
Total net sales	Total net sales	$	1,032.7		$	762.3							Total net sales	$	1,852.1		$	1,032.7

Comparison of Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The period-over-period increase in overall net sales is the result of increased selling prices, led by higher GPU based products and quantities of product shipments. The increase in the United States ~~for the three months ended September 30, 2021 and 2020 was~~is primarily due to higher sales driven by ~~higher~~high demand of GPU based server and storage systems unit volume combined with higher average selling price. The period-over-period increase in net sales in Asia was due primarily to increased sales in China, Taiwan, Japan, Korea and India, partially offset by decreased sales in Singapore.systems. The increase of net sales in Europe was primarily due to ~~higher sales in Germany, United Kingdom, France and Russia, partially offset by lower sales in the Netherlands. The period-over-period increase~~increases in net sales in ~~other countries was primarily due to higher sales in Australia, Israel, UAE, Saudi Arabia,~~the Netherlands, UK and ~~South Africa, partially offset by decreased sales in Canada, Brazil, Mexico and New Zealand.~~Germany.

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Cost of Sales and Gross Margin

~~Table of~~ ~~Contents~~

Cost of sales primarily consists of the costs to manufacture our products, including the costs of materials, contract manufacturing, shipping, personnel expenses, including salaries, benefits, stock-based compensation and incentive bonuses, equipment and facility expenses, warranty costs and inventory excess and obsolescence provisions. The primary factors that impact our cost of sales are the mix of products sold and cost of materials, which include purchased parts and material costs, shipping costs, salary and benefits and overhead costs related to production. Cost of sales as a percentage of net sales may increase or decrease over time if ~~decreases~~the changes in average selling prices are not ~~offset~~matched by corresponding ~~decreases~~changes in our costs. Our cost of sales as a percentage of net sales is also impacted by the extent to which we are able to efficiently utilize our expanding manufacturing capacity. Because we generally do not have long-term fixed supply agreements, our cost of sales is subject to change based on the cost of materials and market conditions. ~~As a result, our cost of sales as a percentage of net sales in any period can increase due to significant component price increases resulting from component shortages.~~

We use several suppliers and contract manufacturers to design and manufacture subsystems in accordance with our specifications, with most final assembly and testing ~~predominantly~~ performed at our manufacturing facilities in the same region where our products are sold. We work with Ablecom, one of our key contract manufacturers and also a related party to optimize modular designs for our chassis and certain of other components. We also outsource to Compuware, also a related party, a portion of our design activities and a significant part of the manufacturing of components, particularly power supplies.

Cost of sales and gross margin for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (dollars in millions):


		Three Months Ended September 30,						Change				Three Months Ended September 30,		Change
		2021			2020			$		%				2022			2021			$		%
Cost of sales	Cost of sales	$	894.6		$	632.3		$	262.3	41.5	%		Cost of sales	$	1,504.6		$	894.6		$	610.0	68.2	%
Gross profit	Gross profit	$	138.1		$	129.9		$	8.2	6.3	%		Gross profit	$	347.5		$	138.1		$	209.4	151.6	%
Gross margin	Gross margin	13.4		%	17.0		%			(3.6)	%		Gross margin	18.8		%	13.4		%			5.4	%

Comparison of Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The period-over-period increase in cost of sales was primarily attributed to an increase of ~~$236.8~~$583.8 million in costs of materials and contract manufacturing expenses primarily related to the increase in net sales volume, a ~~$15.0~~$19.4 million increase in ~~freight charges, an~~overhead costs, a $6.2 million increase in excess and obsolete inventory charges ~~of $4.3 million,~~ and a ~~$10.0~~$0.6 million increase ~~due to lower cost recovery of cost paid~~ in ~~prior periods offset by a decrease of $4.4 million in other overhead~~freight costs.

The period-over-period ~~decrease~~increase in the gross margin percentage was primarily due to sales ~~prices increasing at a slower rate than the increase~~price increases and recent price drop in ~~the costs of sales. Since the start of~~key components. Throughout the COVID-19 pandemic, we ~~have~~ experienced an increase in costs of sales, logistics costs as well as direct labor costs ~~as we incentivize~~to retain our employees. ~~This increase in costs negatively impacts our gross margin,~~For the quarter ended September 30, 2022, the cost of freight and ~~we expect these higher costs~~some components started to ~~continue for the duration of the COVID-19 pandemic.~~decrease.

Operating Expenses

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. All research and development costs are expensed as incurred. We occasionally receive non-recurring engineering funding from certain suppliers and customers for joint development. Under these arrangements, we are reimbursed for certain research and development costs that we incur as part of the joint development efforts with our suppliers and customers. These amounts offset a portion of the related research and development expenses and have the effect of reducing our reported research and development expenses.

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, ~~costs~~cost for ~~trade-shows,~~tradeshows, independent sales representative fees and marketing programs. From time to time, we receive ~~cooperative~~ 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. The timing, magnitude and estimated usage of these programs can result in significant variations in reported sales and marketing expenses from period to period. Spending on cooperative marketing, reimbursed by our suppliers, typically increases in connection with new product releases by our suppliers.

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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, information technology, corporate governance and compliance, outside legal, audit, tax fees, insurance and bad debt reserves on accounts receivable.

Operating expenses for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (dollars in millions):


		Three Months Ended September 30,						Change				Three Months Ended September 30,		Change
		2021			2020			$		%				2022			2021			$		%
Research and development	Research and development	$	65.1		$	54.8		$	10.3	18.8	%		Research and development	$	74.2		$	65.1		$	9.1	14.0	%
Percentage of total net sales	Percentage of total net sales	6.3		%	7.2		%						Percentage of total net sales	4.0		%	6.3		%
Sales and marketing	Sales and marketing	$	21.6		$	20.3		$	1.3	6.4	%		Sales and marketing	$	29.4		$	21.6		$	7.8	36.1	%
Percentage of total net sales	Percentage of total net sales	2.1		%	2.7		%						Percentage of total net sales	1.6		%	2.1		%
General and administrative	General and administrative	$	22.2		$	24.4		$	(2.2)	(9.0)	%		General and administrative	$	23.8		$	22.2		$	1.6	7.2	%
Percentage of total net sales	Percentage of total net sales	2.2		%	3.2		%						Percentage of total net sales	1.3		%	2.2		%
Total operating expenses	Total operating expenses	$	109.0		$	99.5		$	9.5	9.5	%		Total operating expenses	$	127.4		$	109.0		$	18.4	16.9	%
Percentage of total net sales	Percentage of total net sales	10.6		%	13.0		%						Percentage of total net sales	6.9		%	10.6		%

Comparison of Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

Research and development expenses. The period-over-period increase in research and development expenses was primarily due to a ~~$8.0~~$7.6 million increase in personnel expenses ~~due to merit increases~~ and a higher headcount, a ~~$0.9~~$1.4 million ~~decrease~~increase in product development costs and $0.1 million lower research and development credits from certain suppliers and customers towards our development ~~efforts and a $0.8 million increase in product development costs.~~efforts.

Sales and marketing expenses. The period-over-period increase in sales and marketing expenses was primarily due to a ~~$2.1~~$5.6 million increase in personnel expenses asand a ~~result of an~~higher headcount and a $2.2 million increase ~~in the number of personnel, partially offset by a decrease of $1.1 million~~ in advertising and other expenses.

General and administrative expenses. The period-over-period ~~decrease~~increase in general and administrative expenses was primarily due to a ~~decrease of~~ $1.6 million increase in ~~professional fees driven by lower~~personnel expenses incurred to investigate, assess and remediate the causes that led to the delay in filing our periodic reports with the SEC and the associated restatement of certain of our previously issued financial statements and a ~~$0.6 million decrease in compensation expenses and other expenses.~~higher headcount.

Interest Expense and Other Income, ~~(Expense),~~ Net

Other income, ~~(expense),~~ net consists primarily of interest earned on our investment and cash balances and foreign exchange gains and losses.

Interest expense represents interest expense on our term loans and lines of ~~credit and increased due to higher debt outstanding.~~credit.

Interest expense and other income, ~~(expense),~~ net for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (dollars in millions):

Three Months Ended
September 30, Change
2021 2020 $ %
Other income (expense), net $ 0.1 $ (0.8) $ 0.9 (112.5) %
Interest expense (0.8) (0.7) (0.1) 14.3 %
Interest and other income (expense), net $ (0.7) $ (1.5) $ 0.8 (53.3) %

~~Comparison of Three Months Ended September 30, 2021 and 2020~~


	Three Months Ended September 30,				Change
	2022		2021		$		%
Other income, net	$	8.1	$	0.1	$	8.0	8,000.0	%
Interest expense	(3.9)		(0.8)		(3.1)		387.5	%
Interest expense and other income, net	$	4.2	$	(0.7)	$	4.9	(700.0)	%

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Comparison of Three Months Ended September 30, 2022 and 2021

The change of ~~$0.9~~$4.9 million in interest expense and other income, ~~(expense),~~ net was primarily attributable to ana $8.0 million increase ~~of $0.9 million~~ in foreign exchange gain due to favorable ~~foreign~~ currency ~~fluctuations.~~fluctuations offset by a $3.1 million increase in interest expense due to increase in average loan balances and interest rates.

~~Provision for~~ Income ~~Taxes~~Tax Provision

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.

Provision for income taxes and effective tax rates for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (dollars in millions):


		Three Months Ended September 30,						Change
		2021			2020			$		%			Three Months Ended September 30,						Change
													2022			2021			$		%
Income tax provision	Income tax provision	$	3.3		$	3.7		$	(0.4)	(10.8)	%	Income tax provision	$	38.9		$	3.3		$	35.6	1,078.8	%
Percentage of total net sales	Percentage of total net sales	0.3		%	0.5		%					Percentage of total net sales	2.1		%	0.3		%

Effective tax rate	Effective tax rate	11.7		%	12.7		%					Effective tax rate	17.4		%	11.7		%

Comparison of Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

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 income tax provision and effective tax rate for the three months ended September 30, ~~2021~~2022 is ~~lower~~higher than that for the three months ended September 30, ~~2020,~~2021, primarily due to a ~~decrease~~significant increase in ~~certain non-deductible~~annual forecasted taxable income while the deductible expenses and the quarter discrete items kept at a ~~decrease in foreign tax liabilities.~~much lower rate of growth.

Share of (Loss) Income from Equity Investee, Net of Taxes

Share of (loss) income from equity investee, net of taxes represents ~~the Company’s~~our share of income from the Corporate Venture in which ~~the Company has~~we have 30% ownership.

Share of (loss) income from equity investee, net of taxes for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (dollars in millions):


		Three Months Ended September 30,						Change			Three Months Ended September 30,		Change
		2021			2020			$		%			2022			2021			$		%
Share of income from equity investee, net of taxes		$	0.4		$	1.3		$	(0.9)	(69.2)%
Share of (loss) income from equity investee, net of taxes												Share of (loss) income from equity investee, net of taxes	$	(0.9)		$	0.4		$	(1.3)	(325.0)%
Percentage of total net sales	Percentage of total net sales	—		%	0.2		%					Percentage of total net sales	—		%	—		%

Comparison of Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The period-over-period decrease of ~~$0.9~~$1.3 million in share of (loss) income from equity investee, net of taxes was primarily due to less net income recognized by the Corporate Venture.

SMCI | Q1 2023 Form 10-Q | 37

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Liquidity and Capital Resources

We have financed our growth primarily with funds generated from operations, in addition to utilizing borrowing facilities. The credit facilities ~~particularly in relation~~were related to ~~the financing of real property acquisitions as well as~~ an increase in the need for working capital due to increasing sales, longer supply chain manufacturing and delivery ~~times.~~times as well as the financing of property, plant and equipment acquisitions. We also received funds from the exercise of employee stock options. Our cash and cash equivalents were ~~$270.0~~$238.3 million and ~~$232.3~~$267.4 million as of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively. Our cash in foreign locations was ~~$107.1~~$128.2 million and ~~$152.6~~$169.5 million as of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively.

Amounts held outside of the U.S. are generally utilized to support non-U.S. liquidity needs. Repatriations generally will not be taxable from a U.S. federal tax perspective but may be subject to state income or foreign withholding tax. Where local restrictions prevent an efficient intercompany transfer of funds, our intent is to keep cash balances outside of the U.S. and to meet liquidity needs through operating cash flows, external borrowings, or both. We do not expect restrictions or potential

~~Table of~~ ~~Contents~~

taxes incurred on repatriation of amounts held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.

We believe that our current cash, cash equivalents, borrowing capacity available from our credit facilities and internally generated cash flows will be sufficient to support our operating businesses and maturing debt and interest payments for the ~~twelve~~12 months following the issuance of these ~~condensed~~ consolidated financial statements. ~~We expect~~In August 2022, we entered into a new general credit agreement with E.SUN Bank. This New E.SUN Bank Credit Facility permits borrowings of up to ~~pay a special performance bonus~~(i) NTD 1.8 billion ($61.0 million U.S. dollar equivalent) and (ii) US$30.0 million in loans that will support the growth of ~~approximately $2.0 million to~~ our ~~CEO in the fiscal year 2022.~~Taiwan business.

On ~~January 29, 2021,~~August 3, 2022, after the expiration of a prior share repurchase program on July 31, 2022, a duly authorized subcommittee of ~~the~~our Board ~~of Directors~~ approved a new share repurchase program to repurchase shares of our common stock for up to ~~an aggregate of $200.0~~$200 million ofat prevailing prices in the ~~Company's common stock at market prices.~~open market. The share repurchase program is effective until ~~the earlier of July~~January 31, ~~2022~~2024 or ~~the date when~~until the maximum amount of common stock is ~~repurchased. The Company had $150.0 million of remaining availability under the share repurchase program as of September 30, 2021.~~repurchased, whichever occurs first.

Our key cash flow metrics were as follows (dollars in millions):

Three Months Ended
September 30, Change
2021 2020
Net cash provided by (used in) operating activities $ (134.6) $ 120.6 $ (255.2)
Net cash used in investing activities $ (11.9) $ (11.9) $ —
Net cash provided by (used in) financing activities $ 184.3 $ (19.3) $ 203.6
Net increase in cash, cash equivalents and restricted cash $ 37.8 $ 89.6 $ (51.8)


	Three Months Ended September 30,				Change
	2022		2021
Net cash provided by (used in) operating activities	$	313.6	$	(134.6)	$	448.2
Net cash (used in) investing activities	$	(10.7)	$	(11.9)	$	1.2
Net cash (used in) provided by financing activities	$	(331.2)	$	184.3	$	(515.5)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(29.8)	$	37.8	$	(67.6)

Operating Activities

Net cash provided by operating activities ~~decreased~~increased by ~~$255.2~~$448.2 million for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020.~~ 2021.The ~~decrease~~increase was primarily due to an increase inof net ~~cash required for net working capital~~income of ~~$259.6~~$160.2 million to meet customer demand, support expected business growth and mitigate supply chain risk due to the COVID-19 pandemic environment and a $1.2 million decrease in net income. These decreases are partially offset by ~~increases in~~$9.2 million of unrealized gain and $6.8 million of various non-cash items, faster collection of accounts receivable as well as the ~~non-cash charges, including a $4.4 million increase related to excess and obsolete inventories and $1.0 million related to share of income from our equity investee.~~prepayment by customers for products.

Investing Activities

Net cash used in investing activities ~~was $11.9~~increased by $1.2 million for ~~both~~the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 ~~and 2020, as~~ ~~we continued~~due to ~~invest~~an investment made in ~~expanding our manufacturing capacity and office space, including~~a privately held company in the ~~expansion of our Green Computing Park in San Jose and Bade manufacturing facility in Taiwan.~~three months ended September 30, 2021.

Financing Activities

Net cash used by financing activities for the three months ended September 30, 2022 was $331.2 million while net cash provided by financing activities for the three months ended September 30, 2021 was ~~$184.3 million~~ ~~while net cash used by financing activities for the three months ended September 30, 2020 was $19.3~~$184.3 million. The change in cash flows from financing activities was primarily due to ~~an increase~~a decrease of ~~$174.2~~$190.7 million in proceeds from borrowings ~~net~~and a decrease of $325.3 million in repayment ~~offset by a $28.5 million decrease in stock repurchases and an increase in cash receipts from exercises~~ of ~~stock options of $1.0 million.~~debt.

SMCI | Q1 2023 Form 10-Q | 38

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Other Factors Affecting Liquidity and Capital Resources

~~Table of~~ ~~Contents~~

~~2018 Bank of America Credit Facility~~

~~In April 2018, the Company entered into a revolving line of credit with Bank of America for up to $250.0 million (as amended from time to time, the "2018 Bank of America Credit Facility").~~ In June 2021, the 2018 Bank of America Credit Facility was amended to, among other items, extend the maturity to June 28, 2026 and reduce the size of the facility from $250.0 million to $200.0 million. In addition, the amendment reduced both the unused line fee from 0.375% per annum to 0.2% or 0.3% per annum (depending upon amount drawn under the facility) and the interest rate applicable to the facility from LIBOR plus 2.00% or 3.00% per annum (depending upon amount drawn under the facility) to LIBOR plus 1.375% or 1.625% per annum. As of September 30, 2021, the total outstanding borrowings under the 2018 Bank of America Credit Facility were $110.2 million and the interest rate was 1.50%. Our available borrowing capacity was $89.8 million, subject to the borrowing base limitation and compliance with other applicable ~~terms.~~The 2018 Bank of America Credit Facility is secured by substantially all of Super Micro Computer’s assets, other than real property assets. Under the terms of the 2018 Bank of America Credit Facility agreement, we are required to maintain a certain fixed charge ratio and we have been in compliance with all covenants under the 2018 Bank of America Credit Facility.

~~CTBC Credit Lines~~

We through our Taiwan subsidiary were party to (i) that certain credit agreement, dated May 6, 2020, with CTBC Bank, which provided for a ten-year, non-revolving term loan facility (the “2020 CTBC Term Loan Facility”) to obtain up to NTD1,200.0 million ($40.7 million U.S. dollar equivalent) and (ii) that certain credit agreement, dated August 24, 2020, with CTBC Bank (the “CTBC Credit Facility”), which provided for total borrowings of up to $50.0 million (collectively, the “Prior CTBC Credit Lines”).On July 20, 2021 (the “Effective Date”), we through our Taiwan subsidiary entered into a general agreement for omnibus credit lines with CTBC Bank (the “2021 CTBC Credit Lines), which replaced the Prior CTBC Credit Lines in their entirety and permit borrowings, from time to time, pursuant to (i) a term loan facility of up to NTD 1,550.0 million ($55.4 million U.S. dollar equivalents) including the existing 2020 CTBC Term Loan Facility of NTD 1,200.0 million ($42.9 million U.S. dollar equivalents)~~and a new 75-month,~~ ~~non-revolving~~ term loan facility of NTD 350.0 million ($12.5 million U.S. dollar equivalents) to use to purchase machinery and equipment for our Bade Manufacturing Facility located in Taiwan (the “2021 CTBC Machine Loan”), and (ii) a line of credit facility of up to $105.0 million (the “2021 CTBC Credit Facility”), which increased the borrowing capacity of CTBC Credit Facility. The 2021 CTBC Credit Facility provides (~~i) a 12-monthNTD 1,250.0 million ($44.7 million U.S. dollar equivalent) term loan facility secured by the land and building located in Bade,Taiwan with an interest rate equal to the lender's established NTD interest rate plus 0.50% per annum which is adjustedmonthly, which term loan facility also includes a 12-month guarantee of up to NTD 100.0 million ($3.6 million U.S. dollar~~equivalent) with an annual fee equal to 0.50% per annum, and (ii) a 12-month revolving line of credit of up to 100% of eligible accounts receivable in an aggregate amount of up to $105.0 million with an interest rate equal to the lender's established USD interest rate plus 0.70% to 0.75% per annum which is adjusted monthly.

~~As of September 30, 2021, the amounts outstanding under the 2020 CTBC Term Loan Facility were $39.0 million and the interest rates for these loans were 0.45% per annum.~~ ~~Under the 2021 CTBC Machine Loan, the amounts outstanding were $1.4 million~~ ~~and the interest rates for these loans were 0.65% per annum~~ ~~at September 30, 2021~~. As of September 30, 2021, the total outstanding borrowings under the 2021 CTBC Credit Facility term loan were denominated in NTD and remeasured into U.S. dollars of $25.2 million and the interest rate for these loans were 0.74% per annum. As of September 30, 2021, the outstanding borrowings of 2021 CTBC Credit Facility revolving line of credit were $68.1 million and the interest rates for these loans ranged from ~~approximately~~ 0.94% to 0.95% per annum. The amount available for future borrowing under the 2021 CTBC Credit Facility was $11.7 million as of September 30, 2021. The net book value of land and building located in Bade, Taiwan, collateralizing the 2021 CTBC Credit Lines was $77.7 million and ~~all financial covenants were satisfied under the 2021 CTBC Credit Lines~~ ~~as of September 30, 2021.~~

~~2021 E.SUN Bank Credit Facility~~

~~Table of~~ ~~Contents~~

We through our Taiwan subsidiary were party to that certain General Credit Agreement, dated December 2, 2020, with E.SUN Bank, which provided for the issuance of loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of credit, and other types of drawdown instruments up to a credit limit of US$30 million (the “Prior E.SUN Bank Credit Facility”). The term of the Prior E.SUN Bank Credit Facility was until September 18, 2021. On September 13, 2021 (the “E.SUN Bank Effective Date”), we through our Taiwan subsidiary entered into a new General Credit Agreement with E.SUN Bank, which replaced the Prior E.SUN Bank Credit Facility (the “2021 E.SUN Bank Credit Facility”). The 2021 E.SUN Bank Credit Facility permits borrowings of up to (i) NTD 1,600.0 million ($57.6 million U.S. dollar equivalent) and (ii) $30.0 million as loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of credit, and other types of drawdown instruments. Other terms of the 2021 E.SUN Bank Credit Facility are substantially identical to the Prior E.SUN Bank Credit Facility. Generally, interest for base rate loans made under the 2021 E.SUN Bank Credit Facility are based upon an average interbank overnight call loan rate in the finance industry (such as LIBOR or TAIFX) plus a fixed margin, and is subject to occasional adjustment. The 2021 E.SUN Bank Credit Facility has customary default provisions permitting E.SUN Bank to terminate or reduce the credit limit, shorten the credit period, or deem all liabilities due and payable, including in the event the Taiwan subsidiary has an overdue liability at another financial organization. ~~There are various financial covenants under the 2021 E.SUN Bank Credit Facility, including current ratio, net debt ratio, and interest coverage requirements~~. A Notification and Confirmation was entered into on the E.SUN Bank Effective Date for (i) a five-year, non-revolving term loan facility to obtain up to NTD 1,600.0 million ($57 million U.S. dollar equivalent) in financing for use in research & development activities (the “Term Loan”), and (ii) a $30.0 million import loan (the “Import Loan”) with a tenor of 120 days. As of September 30, 2021, the total outstanding borrowings under the Term Loan were denominated in NTD and remeasured into U.S. dollars of $4.9 million and the interest rates for these loans were 0.995% per annum. As of September 30, 2021, the amounts outstanding under the Import Loan were $30.0 million and the interest rates for these loans ranged approximately from 0.96% to 1.23% per annum. At September 30, 2021, the amount available for future borrowing under the Import Loan was $0.0 million.

~~Mega Bank Credit Facilities~~

On September 13, 2021 (the “Mega Bank Effective Date”), we through our Taiwan subsidiary entered into a NTD1,200.0 million ($43.2 million U.S. dollar equivalent) credit facility (the “Mega Bank Credit Facility”) with Mega International Commercial Bank (“Mega Bank”). The Mega Bank Credit Facility will be used to support manufacturing activities (such as purchase of materials and components), and to provide medium-term working capital (the “Permitted Uses”). Drawdowns under the Mega Bank Credit Facility may be made through December 31, 2024, with the first drawdown date not later than November 5, 2021. Drawdowns may be in amounts of up to 80% of Permitted Uses certified to the Bank in drawdown certificates. The interest rate depends upon the amount borrowed under Mega Bank Credit Facility, and as of the Mega Bank Effective Date, range from 0.645% to 0.845% per annum. The interest rate is subject to adjustment in certain circumstances, such as events of default. Interest is payable monthly. Principal payments for amounts borrowed commence on the 15th day of the month following two years after the first drawdown, and are repaid in monthly installments over a period of three years thereafter. The Mega Bank Credit Facility is unsecured and has customary default provisions permitting Mega Bank to reduce or cancel the extension of credit, or declare all principal and interest amounts immediately due and payable. As of September 30, 2021, there were no outstanding borrowings under the Mega Bank Credit Facility.

~~Chang Hwa Bank Credit Facility~~

On October 5, 2021 (the “Chang Hwa Bank Effective Date”), we through our Taiwan subsidiary entered into a credit facility (the “Chang Hwa Bank Credit Facility”) with Chang Hwa Commercial Bank, Ltd. (“Chang Hwa Bank”). The Chang Hwa Bank Credit Facility, which is being used to support our growth, permits borrowings of up to NTD 1,000.0 million ($36.0 million U.S. dollar equivalent) including up to $20.0 million as loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of credit, and other types of drawdown instruments. The Chang Hwa Bank Credit Facility has customary default provisions permitting the Chang Hwa Bank to terminate or reduce the credit limit, shorten the credit period, or deem all liabilities due and payable, including in cross-default provisions with respect to the Company's other debt obligations. Terms for specific drawdown instruments issued under the Chang Hwa Bank Credit Facility, such as credit amount, term of use, mode of drawdown, specific lending rate, and other relevant terms, are to be set forth in separate loan contracts (each, a “Loan Contract”) negotiated with Chang Hwa Bank. On the Chang Hwa Bank Effective Date, three Loan Contracts were entered into. None of the three Loan Contracts are secured and there are no financial covenants. Under the Chang Hwa Bank Credit Facility, the Chang Hwa Bank has the right to demand collateral for debts owed.

Refer to Part I, Item 1, Note 7,6, “Short-term and Long-term Debt,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further information on our outstanding debt.

Capital Expenditure Requirements

~~Table of~~ ~~Contents~~

~~We intend to continue to focus our capital expenditures in fiscal year 2022 to support the growth of our operations.~~ We anticipate our capital expenditures for the remainder of fiscal year ~~2022~~2023 will be approximately ~~$11~~ $35 million, relating primarily to costs associated with our manufacturing capabilities, including tooling for new products, new information technology investments, and facilities upgrades. We will 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) and our expected return on investment.

We intend to continue to focus our capital expenditures in fiscal year 2023 to support the growth of our operations. 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, the investments in our office facilities and our ~~information~~ systems infrastructure, the continuing market acceptance of our offerings and our planned investments, particularly in our product development efforts, applications or technologies.

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 Part I, Item 1, Note 1, “Summary of Significant Accounting Policies,” ~~in our notes~~ to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

42SMCI | Q1 2023 Form 10-Q | 39

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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.~~deposit, all of which are held for purposes other than trading. 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 September 30, ~~2021,~~2022, 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 ~~0.45%~~0.95% to ~~1.50%~~4.03% at September 30, ~~2021~~2022 and June 30, ~~2021.~~2022. Based on the outstanding principal indebtedness of ~~$278.8~~$249.7 million under our credit facilities as of September 30, ~~2021,~~2022, 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. ~~Foreign~~Realized and unrealized foreign exchange ~~(loss)~~ gain for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$ 0.1~~$7.8 million and ~~$(0.9)~~$0.1 million, respectively.

SMCI | Q1 2023 Form 10-Q | 40

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision, and with the participation, of our ~~current~~ management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), we evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, ~~2021.~~2022. Based on this evaluation, ~~of our disclosure controls and procedures,~~ our CEO and CFO have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

Under applicable SEC rules (Exchange Act Rules 13a-15(d) and 15d-15(d)), management is required to evaluate, with the participation of our CEO and CFO, any changes in internal control over financial reporting that occurred during each fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting can only provide reasonable, not absolute, assurances that its objectives will be met. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but we cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.

44SMCI | Q1 2023 Form 10-Q | 41

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this item is incorporated herein by reference to the information set forth under the ~~captions~~caption “Litigation and Claims” in Part I, Item 1, Note 11 “Commitments and Contingencies” of our notes to condensed consolidated financial statements included in this quarterly report.

Due to the inherent uncertainties of such 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 ~~2021~~2022 10-K.

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 September 30, ~~2021,~~2022, we ~~repurchased the following~~did not repurchase shares of our common ~~stock:~~stock.

Period
Total Number
of Shares
Purchased(1)
Average Price Paid per Share(1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs(2)
Month 1 (July 1, 2021 to July 31, 2021) — $ — — $150 Million
Month 2 (August 1, 2021 to August 31, 2021) 14,426 $ 35.59 — $150 Million
Month 3 (September 1, 2021 to September 30, 2021) — $ — — $150 Million
Total 14,426 $ —

~~__________________________~~

~~(1)Includes optionee's tender~~On August 3, 2022, after the expiration of ~~outstanding shares to pay the exercise price or tax withholding obligation.~~

~~(2)On January 29, 2021,~~a prior share repurchase program on July 31, 2022, a duly authorized subcommittee of ~~the Company's~~our Board approved a new share repurchase program to repurchase shares of our common stock for up to $200 million ~~of our common stock~~ at prevailing prices in the open market. The share repurchase program is effective until ~~the earlier of July~~January 31, ~~2022~~2024 or ~~the date when~~until the maximum amount of common stock is ~~repurchased.~~repurchased, whichever occurs first.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

45SMCI | Q1 2023 Form 10-Q | 42

Table of Contents

Item 6. Exhibits

(a) Exhibits.

Exhibit
Number

Description

10.1

General ~~Agreement for Omnibus~~ Credit ~~Lines~~Agreement dated as of ~~July 20, 2021~~August 9, 2022, between Super Micro Computer, Inc. Taiwan and ~~CTBC~~E.SUN Bank ~~Co., Ltd. (incorporated~~ (Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on ~~July 26, 2021)~~August 12, 2022)

10.2

Notification and Confirmation of Credit Conditions, dated as of August 9, 2022 between Super Micro Computer, Inc. Taiwan and E.SUN Bank (Incorporated by reference to Exhibit 10.2 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 12, 2022)

10.3

First Amendment to Loan Agreement dated as of August 17, 2022 by and between Cathay Bank and Super Micro Computer, Inc. (Incorporated by reference to Exhibit 10.58 from the Company’s Annual Report on 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 29, 2022)

10.4+

Second Amendment to Loan Agreement dated as of October 13, 2022 by and between Cathay Bank and Super Micro Computer, Inc.

10.5+

Agreement for Individually Negotiated Terms and Conditions dated as of October 3, 2022 between Super Micro Computer, Inc. Taiwan and CTBC Bank Co., Ltd. (supersedes the Agreement for Individually Negotiated Terms and Conditions dated as of July 20, 2021 between Super Micro Computer, Inc. Taiwan and CTBC Bank Co., Ltd. ~~(incorporated by reference~~previously filed as Exhibit 10.6 to ~~Exhibit 10.2 from~~ the Company’s ~~Current~~Quarterly Report on ~~8-K~~10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on ~~July 26, 2021)~~February 4, 2022)

~~10.3~~

Summary of Short-Term Credit Facilities and 75 Month Term Loan Facility from CTBC Bank Co., Ltd. dated as of July 7, 2021 (incorporated by reference to Exhibit 10.3 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on July 26, 2021)

~~10.4~~

~~English language translation of the Medium-to-Long Term Loan Agreement dated as of September 13, 2021 between Super Micro Computer, Inc. Taiwan and Mega International Commercial Bank~~

~~(incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 17, 2021)~~

~~10.5~~

~~General Credit Agreement dated as of September 13, 2021 between Super Micro Computer, Inc. Taiwan and E.SUN Bank~~ (~~incorporated by reference to Exhibit 10.2 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 17, 2021)~~

~~10.6~~

~~Notification and Confirmation of Credit Conditions, dated as of September 13, 2021 between Super Micro Computer, Inc. Taiwan and E.SUN Bank~~ ~~(incorporated by reference to Exhibit 10.3 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 17, 2021)~~

~~10.7~~

English language translation of the Credit Authorization Agreement dated as of October 5, 2021 between Super Micro Computer, Inc. Taiwan and Chang Hwa Commercial Bank, Ltd. (incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on October 12, 2021)

~~10.8~~

English language translation of the Imported Goods Loan Agreement dated as of October 5, 2021 between Super Micro Computer, Inc. Taiwan and Chang Hwa Commercial Bank, Ltd. (incorporated by reference to Exhibit 10.2 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on October 12, 2021)

~~10.9~~

~~English language translation of the Export Loan Agreement dated as of October 5, 2021 between Super Micro Computer, Inc. Taiwan and Chang Hwa Commercial Bank, Ltd.~~ ~~(incorporated by reference to Exhibit 10.3 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on October 12, 2021)~~

~~10.10~~

English language translation of the Loan Agreement for the Action Plan for Accelerated Investments by Domestic Corporations dated as of October 5, 2021 between Super Micro Computer, Inc. Taiwan and Chang Hwa Commercial Bank, Ltd. (incorporated by reference to Exhibit 10.4 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on October 12, 2021)

~~10.11*+~~

~~Form of Notice of Grant of Restricted Stock Units (One-Year Vesting, Pro-Rata at Termination) under 2020 Equity and Incentive Compensation Plan~~

~~10.12*+~~

~~Form of Restricted Stock Units Agreement (One-Year Vesting, Pro-Rata at Termination) under 2020 Equity and Incentive Compensation Plan~~

31.1

Certification of Charles Liang, President and Chief Executive Officer of the Registrant pursuant to Section 302, as adopted pursuant to the Sarbanes-Oxley Act of 2002

31.2

Certification of David Weigand, Chief Financial Officer of the Registrant pursuant to Section 302, as adopted pursuant to the Sarbanes-Oxley Act of 2002

~~Table of~~ ~~Contents~~

32.1

Certification of Charles Liang, President and Chief Executive Officer of the Registrant pursuant to Section 906, as adopted pursuant to the Sarbanes-Oxley Act of 2002

32.2

Certification of David Weigand, Chief Financial Officer of the Registrant pursuant to Section 906, as adopted pursuant to the Sarbanes-Oxley Act of 2002

~~101.INS~~101.INS+

XBRL Instance Document

~~101.SCH~~101.SCH+

XBRL Taxonomy Extension Schema Document

~~101.CAL~~101.CAL+

XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF~~101.DEF+

XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~101.LAB+

XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE~~101.PRE+

XBRL Taxonomy Extension Presentation Linkbase Document

~~104~~104+

The cover page from this Quarterly Report on Form 10-Q, formatted in Inline ~~XBRL.~~XBRL

~~+ Filed herewith~~

* Management contract, or compensatory plan or arrangement

+ Filed herewith

SMCI | Q1 2023 Form 10-Q | 43

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SUPER MICRO COMPUTER, INC.


Date:	November ~~5, 2021~~4, 2022	/s/ CHARLES LIANG
		Charles Liang President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)


Date:	November ~~5, 2021~~4, 2022	/s/ DAVID WEIGAND
		David Weigand Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

SMCI | Q1 2023 Form 10-Q | 44


Three Months Ended September 30, 2021	Common Stock and Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2021	50,582,078	$	438,012	—	$	—	$	453	$	657,760	$	173	$	1,096,398
Exercise of stock options, net of taxes	370,066	6,018		—	—		—		—		—		6,018
Release of common stock shares upon vesting of restricted stock units	173,771	—		—	—		—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(54,071)	(2,069)		—	—		—		—		—		(2,069)

Stock-based compensation	—	7,015		—	—		—		—		—		7,015



Foreign currency translation loss	—	—		—	—		(4)		—		—		(4)
Net income	—	—		—	—		—		$	25,437	3		25,440
Balance at September 30, 2021	51,071,844	$	448,976	—	—		$	449	$	683,197	$	176	$	1,132,798


Three Months Ended September 30, 2020	Common Stock and Additional Paid-In Capital			Treasury Stock				Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares		Amount
Balance at June 30, 2020	53,741,828	$	389,972	(1,333,125)		$	(20,491)	$	(152)	$	696,211	$	167	1,065,707
Exercise of stock options, net of taxes	350,830	5,020		—		—		—		—		—		5,020
Release of common stock shares upon vesting of restricted stock units	217,519	—		—		—		—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(69,131)	(2,005)		—		—		—		—		—		(2,005)
Stock repurchases and retirement	—	—		(1,142,294)		(30,000)		—		—		—		(30,000)
Stock-based compensation	—	7,170		—		—		—		—		—		7,170



Foreign currency translation gain	—	—		—		—		247		—		—		247
Net income	—	—		—		—		—		26,601		2		26,603
Balance at September 30, 2020	54,241,046	$	400,157	$	(2,475,419)	$	(50,491)	$	95	$	722,812	$	169	$	1,072,742


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs(2)
Month 1 (July 1, 2021 to July 31, 2021)	—	$	—	—	$150 Million
Month 2 (August 1, 2021 to August 31, 2021)	14,426	$	35.59	—	$150 Million
Month 3 (September 1, 2021 to September 30, 2021)	—	$	—	—	$150 Million
Total	14,426	$	—