Super Micro Computer, Inc. [SMCI] Filings

10-Q 1 smci-20240331.htm 10-Q smci-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________________

Form 10-Q

__________________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			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 April 30, 2024 there were 58,556,527 shares of the registrant’s common stock, $0.001 par value, outstanding, which is the only class of common stock of the registrant issued.

SUPER MICRO COMPUTER, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2024

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 31, 202 4 and June 30, 2023	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 202 4 and 202 3	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 202 4 and 20 23	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 20 24 and 20 23	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 202 4 and 20 23	6
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	44
ITEM 4.	Controls and Procedures	45

PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	46
ITEM 1A.	Risk Factors	46
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
ITEM 3.	Defaults Upon Senior Securities	48
ITEM 4.	Mine Safety Disclosures	48
ITEM 5.	Other Information	48
ITEM 6.	Exhibits	49
	Signatures	50

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.

The information contained on our website, or available by hyperlink from our website, is not incorporated into this Quarterly Report on Form 10-Q or other documents we file with, or furnish to, the SEC. We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the "Investor Relations" section of our website. Accordingly, investors should monitor that section of our website, in addition to following our press releases, investor presentations, SEC filings and public conference calls and webcasts.

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value per share amounts)

(unaudited)


	March 31,		June 30,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	2,115,476	$	440,459
Accounts receivable, net of allowance for credit losses of $75 and $82 at March 31, 2024 and June 30, 2023, respectively (including accounts receivable from related parties of $1,110 and $5,473 at March 31, 2024 and June 30, 2023, respectively)	1,650,153		1,148,259
Inventories	4,124,587		1,445,564

Prepaid expenses and other current assets (including receivables from related parties of $30,249 and $27,732 at March 31, 2024 and June 30, 2023, respectively)	173,716		145,144
Total current assets	8,063,932		3,179,426


Property, plant and equipment, net	385,566		290,240
Deferred income taxes, net	330,248		162,654
Other assets	83,035		42,409
Total assets	$	8,862,781	$	3,674,729
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable (including amounts due to related parties of $102,582 and $89,134 at March 31, 2024 and June 30, 2023, respectively)	$	1,092,445	$	776,831
Accrued liabilities (including amounts due to related parties of $18,798 and $14,017 at March 31, 2024 and June 30, 2023, respectively)	290,370		163,865
Income taxes payable	20,021		129,166
Lines of credit and current portion of term loans	81,566		170,123
Deferred revenue	233,293		134,667
Total current liabilities	1,717,695		1,374,652
Deferred revenue, non-current	203,198		169,781
Term loans	85,646		120,179
Convertible notes	1,696,255		—
Other long-term liabilities	65,831		37,947
Total liabilities	3,768,625		1,702,559
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock and additional paid-in capital, $0.001 par value
Authorized shares: 100,000; Issued and outstanding shares: 58,552 and 52,901 at March 31, 2024 and June 30, 2023, respectively	2,805,008		538,352


Accumulated other comprehensive income	549		639
Retained earnings	2,288,436		1,433,014
Total Super Micro Computer, Inc. stockholders’ equity	5,093,993		1,972,005
Noncontrolling interest	163		165
Total stockholders’ equity	5,094,156		1,972,170
Total liabilities and stockholders’ equity	$	8,862,781	$	3,674,729

See accompanying notes to condensed consolidated financial statements.

SMCI | Q3 2024 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 March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Net sales (including related party sales of $25,804 and $9,188 in the three months ended March 31, 2024 and 2023, respectively, and $58,980 and $54,316 in the nine months ended March 31, 2024 and 2023, respectively)	$	3,850,066	$	1,283,296	$	9,634,662	$	4,938,621
Cost of sales (including related party purchases of $130,397 and $87,732 in the three months ended March 31, 2024 and 2023, respectively, and $355,948 and $283,010 in the nine months ended March 31, 2024 and 2023, respectively)	3,252,698		1,056,937		8,119,281		4,027,305
Gross profit	597,368		226,359		1,515,381		911,316
Operating expenses:
Research and development	116,226		77,515		336,077		222,458
Sales and marketing	49,691		25,312		133,775		83,120
General and administrative	53,137		24,450		123,241		71,351
Total operating expenses	219,054		127,277		593,093		376,929
Income from operations	378,314		99,082		922,288		534,387
Other income (expense), net	10,035		(78)		8,762		1,641
Interest expense	(6,246)		(1,288)		(16,240)		(6,982)
Income before income tax provision	382,103		97,716		914,810		529,046
Income tax benefit (provision)	19,983		(10,857)		(61,735)		(79,364)
Share of income (loss) from equity investee, net of taxes	373		(1,013)		2,347		(3,253)
Net income	$	402,459	$	85,846	$	855,422	$	446,429
Net income per common share:
Basic	$	7.13	$	1.61	$	15.68	$	8.42
Diluted	$	6.56	$	1.53	$	14.53	$	8.00
Weighted-average shares used in the calculation of net income per common share:
Basic	56,478		53,280		54,562		53,011
Diluted	61,431		56,233		58,889		55,796

See accompanying notes to condensed consolidated financial statements.

SMCI | Q3 2024 Form 10-Q | 2

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SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Net income	$	402,459	$	85,846	$	855,422	$	446,429
Other comprehensive (loss) income, net of tax:

Foreign currency translation (loss) gain	(108)		71		(90)		(228)
Total other comprehensive (loss) income, net of tax	(108)		71		(90)		(228)
Total comprehensive income	$	402,351	$	85,917	$	855,332	$	446,201

See accompanying notes to condensed consolidated financial statements.

SMCI | Q3 2024 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 March 31, 2024	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)	Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2023	55,917,304	$	1,190,276		$	657	$	1,885,977	$	164	$	3,077,074
Exercise of stock options	436,901	15,540			—		—		—		15,540
Release of common stock upon vesting of restricted stock units	291,428	—			—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(93,737)	(78,391)			—		—		—		(78,391)
Issuance of common stock in a public offering, net of issuance costs	2,000,000	1,731,186			—		—		—		1,731,186
Purchase of capped calls, net of tax	—	(109,710)			—		—		—		(109,710)
Stock-based compensation	—	56,107			—		—		—		56,107

Other comprehensive loss	—	—			(108)		—		—		(108)
Net income (loss)	—	—			—		402,459		(1)		402,458
Balance at March 31, 2024	58,551,896	$	2,805,008		$	549	$	2,288,436	$	163	$	5,094,156


Three Months Ended March 31, 2023	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income	Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	53,400,301	$	514,559		$	612	$	1,303,506	$	165	$	1,818,842
Exercise of stock options	452,835	9,495			—		—		—		9,495
Release of common stock upon vesting of restricted stock units	275,890	—			—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(91,935)	(8,938)			—		—		—		(8,938)
Share repurchases, retirement and related taxes	(1,553,350)	(489)			—		(149,907)		—		(150,396)
Stock-based compensation	—	13,652			—		—		—		13,652
Other comprehensive income	—	—			71		—		—		71
Net income	—	—			—		85,846		1		85,847
Balance at March 31, 2023	52,483,741	$	528,279		$	683	$	1,239,445	$	166	$	1,768,573

SMCI | Q3 2024 Form 10-Q | 4

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Nine Months Ended March 31, 2024	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, 2023	52,901,358	$	538,352		$	639	$	1,433,014	$	165	$	1,972,170
Exercise of stock options	778,310	25,114			—		—		—		25,114
Release of common stock upon vesting of restricted stock units	802,450	—			—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(245,327)	(119,285)			—		—		—		(119,285)
Issuances of common stock in public offerings, net of issuance costs	4,315,105	2,313,990			—		—		—		2,313,990
Purchase of capped calls, net of tax	—	(109,710)			—		—		—		(109,710)
Stock-based compensation	—	156,547			—		—		—		156,547
Other comprehensive loss	—	—			(90)		—		—		(90)
Net income (loss)	—	—			—		855,422		(2)		855,420
Balance at March 31, 2024	58,551,896	$	2,805,008		$	549	$	2,288,436	$	163	$	5,094,156


Nine Months Ended March 31, 2023	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	1,205,727	24,822			—		—		—		24,822
Release of common stock upon vesting of restricted stock units	759,893	—			—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(239,543)	(19,442)			—		—		—		(19,442)
Share repurchases, retirement and related taxes	(1,553,350)	(489)			—		(149,907)		—		(150,396)
Stock-based compensation	—	41,647			—		—		—		41,647
Other comprehensive loss	—	—			(228)		—		—		(228)
Net income (loss)	—	—			—		446,429		(6)		446,423
Balance at March 31, 2023	52,483,741	$	528,279		$	683	$	1,239,445	$	166	$	1,768,573

See accompanying notes to condensed consolidated financial statements.

SMCI | Q3 2024 Form 10-Q | 5

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SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended March 31,
	2024		2023
OPERATING ACTIVITIES:
Net income	$	855,422	$	446,429
Reconciliation of net income to net cash (used in) provided by operating activities:
Depreciation and amortization	29,174		25,932
Stock-based compensation expense	156,547		41,647





Share of (income) loss from equity investee	(2,347)		3,253
Unrealized foreign currency exchange gain	(282)		(2,497)
Deferred income taxes, net	(144,485)		(78,629)
Other	3,186		(649)
Changes in operating assets and liabilities:
Accounts receivable, net (including changes in related party balances of $4,363 and $6,367 during the nine months ended March 31, 2024 and 2023, respectively)	(507,870)		165,883
Inventories	(2,679,023)		5,187
Prepaid expenses and other assets (including changes in related party balances of $(2,517) and $(8,573) during the nine months ended March 31, 2024 and 2023, respectively)	(25,673)		15,088
Accounts payable (including changes in related party balances of $13,448 and $(11,242) during the nine months ended March 31, 2024 and 2023, respectively)	309,613		(9,120)
Income taxes payable	(99,824)		50,855
Accrued liabilities (including changes in related party balances of $4,781 and $(324) during the nine months ended March 31, 2024 and 2023, respectively)	123,937		(62,639)
Deferred revenue	132,043		76,062
Other long-term liabilities (including changes in related party balances of $(178) and $(241) during the nine months ended March 31, 2024 and 2023, respectively)	5,424		(3,883)
Net cash (used in) provided by operating activities	(1,844,158)		672,919
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (including payments to related parties of $9,132 and $6,325 during the nine months ended March 31, 2024 and 2023, respectively)	(110,296)		(28,618)


Investment in equity securities	(21,673)		—

Net cash used in investing activities	(131,969)		(28,618)
FINANCING ACTIVITIES:
Proceeds from lines of credit and term loans	1,818,850		164,326
Repayment of lines of credit and term loans	(1,939,590)		(570,446)
Proceeds from exercise of stock options	25,114		24,822
Payment of withholding tax on vesting of restricted stock units	(119,285)		(19,442)
Stock repurchases	—		(146,526)
Issuances of common stock in public offerings, net of issuance costs	2,313,990		—
Proceeds from issuance of 2029 convertible notes, net of issuance costs	1,695,768		—
Purchase of capped calls	(142,140)		—
Other	76		(25)
Net cash provided by (used in) financing activities	3,652,783		(547,291)
Effect of exchange rate fluctuations on cash	(1,634)		(2,269)
Net increase in cash, cash equivalents and restricted cash	1,675,022		94,741
Cash, cash equivalents and restricted cash at the beginning of the period	440,960		268,559
Cash, cash equivalents and restricted cash at the end of the period	$	2,115,982	$	363,300

SMCI | Q3 2024 Form 10-Q | 6

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Supplemental disclosure of cash flow information:
Cash paid for interest	$	14,813	$	7,223
Cash paid for taxes, net of refunds	$	300,596	$	107,054


Non-cash investing and financing activities:
Unpaid property, plant and equipment purchases (including due to related parties of $1,492 and $1,391 as of March 31, 2024 and 2023, respectively)	$	9,345	$	2,885
Right of use ("ROU") assets obtained in exchange for operating lease commitments	$	24,140	$	1,679

Unpaid stock repurchases	$	—	$	3,472
Investment obtained in exchange for an asset	$	6,000	$	—

See accompanying notes to condensed consolidated financial statements.

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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 28, 2023, for the year ended June 30, 2023. Management's estimates take into consideration, as applicable, general macroeconomic conditions, inflation, changes in interest rates and geopolitical events.

Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations.

The unaudited condensed consolidated financial statements included herein reflect all adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The consolidated results of operations for the three and nine months ended March 31, 2024 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2024.

Certain prior year amounts within cash from operating activities in the condensed consolidated statements of cash flows have been reclassified to conform to current year presentation. These changes in presentation do not affect previously reported results.

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. Supplier A accounted for 69.8% and supplier B accounted for 5.1% of total purchases for the three months ended March 31, 2024, and supplier A accounted for 26.9% and supplier B accounted for 16.9% of total purchases for the three months ended March 31, 2023. Supplier A accounted for 65.8% and supplier B accounted for 7.1% of total purchases for the nine months ended March 31, 2024, and supplier A accounted for 23.6% and supplier B accounted for 15.8% of total purchases for the nine months ended March 31, 2023. The increase in the concentration of the Company's total purchases from supplier A for 69.8% and 65.8% of total purchases for the three and nine months ended March 31, 2024, respectively, is as a result of the purchase of key components to build its solutions for the Company's customers. Purchases from Ablecom, and Compuware, related parties of the Company (see Part I, Item 1, Note 9, "Related Party Transactions") accounted for a combined 4.0% and 8.3% of total cost of sales for the three months ended March 31, 2024 and 2023, respectively, and a combined 4.4% and 7.0% of total cost of sales for the nine months ended March 31, 2024 and 2023, respectively.

Concentration of Credit and Customer Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable.

Customer A accounted for 27.9%, customer E accounted for 18.1% and customer B accounted for 15.4% of accounts receivable, net as of March 31, 2024. Customer A accounted for 22.9% and customer B accounted for 19.3% of accounts receivable, net as of June 30, 2023. These accounts receivable represent a concentration of credit risk to the Company.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Customer A accounted for 21.2% and customer B accounted for 16.8% of the net sales for the three months ended March 31, 2024 and customer A accounted for 23.7% of the net sales for the nine months ended March 31, 2024. Customer A accounted for 10.7% of the net sales for the three months ended March 31, 2023, and customer C accounted for 11.8% of the net sales for the nine months ended March 31, 2023.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This ASU requires that a public entity provide additional segment disclosures on an interim and annual basis. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements unless impracticable. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating this guidance and the impact it may have on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning July 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating this guidance and the impact it may have on its financial statement disclosures.

Note 2. Revenue

Disaggregation of Revenue

The Company disaggregates revenue by type of product and by the geographical market. 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 March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Server and storage systems	$	3,698,446	$	1,163,723	$	9,100,616	$	4,537,710
Subsystems and accessories	151,620		119,573		534,046		400,911
Total	$	3,850,066	$	1,283,296	$	9,634,662	$	4,938,621

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 | Q3 2024 Form 10-Q | 9

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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 and nine months ended March 31, 2024 and 2023, of net sales by geographic region (in thousands):


	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
United States	$	2,685,213	$	785,548	$	6,910,312	$	3,172,444
Asia	764,614		214,363		1,646,302		815,098
Europe	297,653		228,531		776,949		776,138
Other	102,586		54,854		301,099		174,941
Total	$	3,850,066	$	1,283,296	$	9,634,662	$	4,938,621

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.

Contract assets are rights to consideration in exchange for goods or services that the Company has transferred to a customer when such right is conditional on something other than the passage of time. Such contract assets are insignificant to the Company’s condensed consolidated financial statements.

Contract liabilities consist of deferred revenue and relate to amounts invoiced to or advance consideration received from customers, which precede the Company’s satisfaction of the associated performance obligations. The Company’s deferred revenue primarily results from customer payments received upfront for extended warranties and on-site services because these performance obligations are satisfied over time. Additionally, at times, deferred revenue may fluctuate due to the timing of advance consideration received from non-cancellable non-refundable contract liabilities relating to the sale of future products. Revenue recognized during the three and nine months ended March 31, 2024, which was included in the opening deferred revenue balance as of June 30, 2023, of $304.4 million, was $28.9 million and $104.1 million, respectively.

Deferred revenue increased $132.0 million as of March 31, 2024 as compared to the fiscal year ended June 30, 2023. This increase was mainly due to deferral on invoiced amounts for service contracts during the period exceeding the recognized revenue from contracts entered into in prior periods. This was accompanied by a $24.7 million increase in non-cancellable non-refundable advance consideration or cash consideration received from customers which preceded the Company's satisfaction of the associated performance obligations relating to product sales expected to be fulfilled in the next 12 months.

Transaction Price Allocated to the Remaining Performance Obligations

Remaining performance obligations represent in aggregate the amount of transaction price that has been allocated to performance obligations not delivered, or only partially delivered, as of the end of the reporting period. The Company applies the exemption to not disclose information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less. These performance obligations generally consist of services, such as on-site services, including integration services and extended warranty services that are contracted for one year or less, and products for which control has not yet been transferred. The value of the transaction price allocated to remaining performance obligations as of March 31, 2024 was approximately $436.5 million. The Company expects to recognize approximately 53% of remaining performance obligations as revenue in the next 12 months, and the remainder thereafter.

SMCI | Q3 2024 Form 10-Q | 10

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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 and nine months ended March 31, 2024 and 2023 (in thousands, except per share amounts):


	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Numerator:
Net income - basic	$	402,459	$	85,846	$	855,422	$	446,429
Convertible notes interest charge, net of tax	385		—		385		—
Net income - diluted	$	402,844	$	85,846	$	855,807	$	446,429

Denominator:
Weighted-average shares outstanding - basic	56,478		53,280		54,562		53,011
Effect of dilutive convertible notes	471		—		155		—
Effect of dilutive securities	4,482		2,953		4,172		2,785
Weighted-average shares outstanding - diluted	61,431		56,233		58,889		55,796

Net income per common share - basic	$	7.13	$	1.61	$	15.68	$	8.42
Net income per common share - diluted	$	6.56	$	1.53	$	14.53	$	8.00

For the three and nine months ended March 31, 2024 and 2023, the Company had stock options and restricted stock units ("RSUs") outstanding that could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted net income per share in the periods presented, as their effect would have been anti-dilutive. The anti-dilutive common share equivalents resulting from outstanding equity awards were 8,804 and 187,358 for the three months ended March 31, 2024 and 2023, respectively, and 310,463 and 235,494 for the nine months ended March 31, 2024 and 2023, respectively.

Potentially dilutive common shares issuable upon conversion of our outstanding convertible notes are determined using the if-converted method.

SMCI | Q3 2024 Form 10-Q | 11

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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):

Cash, Cash Equivalents and Restricted Cash:


	March 31, 2024		June 30, 2023
Cash and cash equivalents	$	2,115,476	$	440,459

Restricted cash included in other assets	506		501
Total cash, cash equivalents and restricted cash	$	2,115,982	$	440,960

Inventories:


	March 31, 2024		June 30, 2023
Finished goods	$	2,984,698	$	1,045,177
Work in process	640,525		71,874
Purchased parts and raw materials	499,364		328,513
Total inventories	$	4,124,587	$	1,445,564

Property, Plant, and Equipment:


	March 31, 2024		June 30, 2023
Land	$	149,394	$	86,642
Buildings	163,510		143,496
Machinery and equipment	145,549		130,151
Building and leasehold improvements	65,185		59,634
Furniture and fixtures	40,429		36,303
Software	23,935		23,098
Building construction in progress	6,432		303
	594,434		479,627
Accumulated depreciation and amortization	(208,868)		(189,387)
Property, plant and equipment, net	$	385,566	$	290,240

Accrued Liabilities:


	March 31, 2024		June 30, 2023
Customer deposits	$	73,786	$	16,577
Accrued payroll and related expenses	54,745		53,439
Contract manufacturers liabilities	27,496		23,634

Accrued cooperative marketing expenses	13,536		9,744
Accrued warranty costs	10,028		9,079

Operating lease liability	8,154		7,292


Other	102,625		44,100
Total accrued liabilities	$	290,370	$	163,865

SMCI | Q3 2024 Form 10-Q | 12

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Product Warranties:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Balance, beginning of the period	$	16,616	$	13,276	$	14,859	$	12,136
Provision for warranty	13,176		9,419		36,220		26,969
Costs utilized	(12,423)		(8,100)		(33,813)		(25,126)
Change in estimated liability for pre-existing warranties	273		377		376		993
Balance, end of the period	17,642		14,972		17,642		14,972
Current portion	10,028		9,704		10,028		9,704
Non-current portion	$	7,614	$	5,268	$	7,614	$	5,268

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.

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 March 31, 2024 and June 30, 2023. 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.

Financial Instruments Measured on a Recurring Basis

The following table sets forth the Company’s financial instruments as of March 31, 2024 and June 30, 2023, 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):


March 31, 2024	Level 1		Level 2		Level 3		Asset at Fair Value
Assets
Money market funds (1)	$	313	$	—	$	—	$	313
Certificates of deposit	—		489		—		489
Investment in marketable equity security	2,652		—		—		2,652
Auction rate security	—		—		1,843		1,843
Total assets measured at fair value	$	2,965	$	489	$	1,843	$	5,297


June 30, 2023	Level 1		Level 2		Level 3		Asset at Fair Value
Assets
Money market funds (1)	$	20,823	$	—	$	—	$	20,823
Certificates of deposit	—		462		—		462
Auction rate security	—		—		1,843		1,843
Total assets measured at fair value	$	20,823	$	462	$	1,843	$	23,128

SMCI | Q3 2024 Form 10-Q | 13

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

(1) $0.1 million and $20.6 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 March 31, 2024 and June 30, 2023, respectively.

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, other assets, accounts payable and accrued liabilities approximate their fair values. The investment in marketable equity security is carried at fair value using values available on a public exchange and is based on a Level 1 input. The unrealized gains and losses of the investment is included in earnings. The condensed consolidated statement of operations for the three and nine months ended March 31, 2024, includes an unrealized loss of $1.5 million and $2.3 million, respectively, which have been recorded in Other income, net.

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 and nine months ended March 31, 2024, the credit losses related to the Company’s investments were not material.

There was immaterial 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 and nine months ended March 31, 2024 and 2023.

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three and nine months ended March 31, 2024 and 2023.

The following is a summary of the Company’s investment in an auction rate security as of March 31, 2024 and June 30, 2023 (in thousands):


	Cost Basis		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Auction rate security	$	1,750	$	287	$	(194)	$	1,843

No gain or loss was recognized in other comprehensive income for the auction rate security for the three and nine months ended March 31, 2024 and 2023.

The Company measures the fair value of outstanding lines of credit and term loans for disclosure purposes on a recurring basis. As of March 31, 2024 and June 30, 2023, total lines of credit and term loans of $167.2 million and $290.3 million, respectively, was reported at amortized cost. This outstanding balance was classified as Level 2 as it was not actively traded. The amortized cost of the outstanding lines of credit and term loans approximates the fair value.

Convertible notes

The estimated fair value of the Company's 0% convertible senior notes due 2029 (the "Convertible Notes") was $1,911.6 million as of March 31, 2024. The Company measures the fair value of its convertible notes for disclosure purposes on a recurring basis. The estimated fair value of the Convertible Notes was determined through consideration of quoted market prices. The fair value of the Convertible Notes are categorized in Level 2 of the fair value hierarchy.

Other Financial Assets - Investments in 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 $22.6 million and $1.7 million as of March 31, 2024 and June 30, 2023, respectively. 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 and nine months ended March 31, 2024, the Company performed a qualitative assessment and identified impairment indicators. The Company recorded a $0.0 million and $1.8 million impairment during the three and nine months ended March 31, 2024, respectively, in Other income, net on the condensed consolidated statement of operations. The Company did not have any impairment to the carrying values of the non-marketable equity securities during the three and nine months ended March 31, 2023.

SMCI | Q3 2024 Form 10-Q | 14

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 6. Lines of Credit and Term Loans

Short-term and long-term loan obligations as of March 31, 2024 and June 30, 2023 consisted of the following (in thousands):


	March 31,		June 30,
	2024		2023
Line of credit:
2018 Bank of America Credit Facility	$	—	$	—
2022 Bank of America Credit Facility	—		—
Cathay Bank Line of Credit	—		131,583
2024 CTBC Credit Lines	24,994		—
Chang Hwa Bank Credit Facility	—		—
2023 HSBC Bank Credit Lines	8,217		—
2022 E.SUN Bank Credit Facility	—		—
Mega Bank Credit Facility	7,186		—
Total line of credit	40,397		131,583
Term loan facilities:
Chang Hwa Bank Credit Facility due October 15, 2026	20,178		26,853
CTBC Term Loan Facility, due June 4, 2030	33,029		38,208
2021 CTBC Credit Lines, due August 15, 2026	3,493		4,721
2021 E.SUN Bank Credit Facility, due September 15, 2026	24,995		33,513
2022 ESUN Bank Credit Facility, due August 15, 2027	13,877		16,756
Mega Bank Credit Facility, due September 15, 2026	31,243		38,668
Total term loans	126,815		158,719
Total lines of credit and term loans	167,212		290,302
Lines of credit and current portion of term loans	81,566		170,123
Term loans, non-current	$	85,646	$	120,179

SMCI | Q3 2024 Form 10-Q | 15

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Activities under Revolving Lines of Credit and Term Loans

Available borrowings and interest rates as of March 31, 2024 and June 30, 2023 consisted of the following (in thousands except for percentages):


	March 31, 2024			June 30, 2023
	Available borrowings		Interest rate	Available borrowings		Interest rate
Line of credit:
2018 Bank of America Credit Facility	$	350,000	7.06%	$	350,000	6.57%
2022 Bank of America Credit Facility	$	20,000	6.49%	$	20,000	3.36%
Cathay Bank Line of Credit	$	132,000	7.50%	$	417	7.08%
2022 CTBC Credit Lines	$	—	—	$	105,000	3.33%
2024 CTBC Credit Lines	$	160,006	1.94% - 6.26%	$	—	—
Chang Hwa Bank Credit Facility	$	20,000	6.30%	$	20,000	6.58%
2023 HSBC Bank Credit Lines	$	41,783	2.03% - 6.37%	$	50,000	4.50%

2022 E.SUN Bank Credit Facility	$	30,000	6.67%	$	30,000	4.18%
Mega Bank Credit Facility	$	12,814	1.90% - 1.91%	$	20,000	2.55%

Term loan facilities:
Chang Hwa Bank Credit Facility due October 15, 2026	$	—	1.68%	$	—	1.55%
CTBC Term Loan Facility, due June 4, 2030	$	—	1.33%	$	—	1.20%
2021 CTBC Credit Lines, due August 15, 2026	$	—	1.53%	$	—	1.40%
2021 E.SUN Bank Credit Facility, due September 15, 2026	$	—	1.87%	$	7,734	1.75%
2022 ESUN Bank Credit Facility, due August 15, 2027	$	—	1.87%	$	—	1.75%
Mega Bank Credit Facility, due September 15, 2026	$	—	1.52% - 1.72%	$	—	1.40% - 1.60%

See “Part II. Item 8. Financial Statements and Supplementary Data – Note 7. Short-term and Long-term Debt” of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 for a more complete description of the Company's credit facilities.

The Company entered into new agreements during the nine months ended March 31, 2024 with the following terms:

SMCI | Q3 2024 Form 10-Q | 16

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CTBC Bank

2024 CTBC Bank Credit Lines

On February 16, 2024 (the “Effective Date”), the Company's Taiwan subsidiary entered into a new general agreement for omnibus credit lines with CTBC Bank. This agreement (which changed arrangements which had been entered into with CTBC Bank in September 2023), increased the aggregate total borrowings under the various individual credit arrangements with CTBC Bank from $105.0 million to $185.0 million. The credit arrangements under such general agreement now include the previous issued long and medium term loan facility of NTD 1,550.0 million entered in 2021 and 2020 (the “Long and Medium Loan Facility”), and each of (i) a short-term loan and guarantee line providing credit of up to NTD1,250.0 million and NTD100.0 million, respectively (the “NTD Short Term Loan/Guarantee Line”), (ii) a short-term loan providing a line of credit of up to $40.0 million (the “USD Short Term Loan Line”), (iii) an export/import o/a loan line providing a line of credit of up to $105.0 million for exports and $50.0 million for imports (the “Export/Import Line”) and (iv) an import o/a loan line of credit of up to $80.0 million available through August 31, 2024 (the “Incremental Import Line,” and, together with the NTD Short Term Loan/Guarantee Line, the USD Short Term Loan Line, and the Export/Import Line, the “Increased CTBC Credit Lines”). Aggregate borrowings under all the Increased CTBC Credit Lines is subject to a cap of $185.0 million.

Interest rates under each of the individual Increased CTBC Credit Lines are to be established according to individual credit arrangements, which interest rates shall be subject to adjustment depending on the satisfaction of certain conditions. Each of the NTD Short Term Loan/Guarantee Line and USD Short Term Loan Line continue to be secured by certain of the Company's Taiwan subsidiary’s assets, including certain property, land, and plant. The tenor of the Incremental Import Line provides for availability until August 31, 2024 with a final drawdown date of October 30, 2024. Such Incremental Import Line, which is reviewed quarterly for cancellation by the CTBC Bank, is also subject to an average usage requirement and fee for retaining the underutilized portion of such line. For the Long and Medium Loan Facility, the Taiwan subsidiary is subject to various financial covenants, including current ratio, debt service coverage ratio, and financial debt ratio requirements. In the event the Taiwan subsidiary does not satisfy such financial covenants, CTBC Bank is permitted to, among other things, reduce the permitted total borrowings to a cap of $70.0 million from $105.0 million. Additional covenants require, among other things, the Company to maintain ownership of all of the capital stock of the Taiwan subsidiary and prohibit secondary mortgages on certain assets securing various of the Increased CTBC Credit Lines. The Increased CTBC Credit Lines have customary default provisions permitting CTBC Bank to suspend the extension of credit, reduce the credit line, shorten the credit extension term, or declare all principal and interest amounts immediately due and payable.

The Company's Taiwan subsidiary intends to use borrowings under the Increased CTBC Credit Lines in connection with financing of eligible accounts receivable and accounts payable (vendor invoices).

As of March 31, 2024, the outstanding borrowings under the 2024 CTBC Bank Credit Lines were $25.0 million. The interest rate for these loans were 1.94% - 6.26% per annum as of March 31, 2024.

SMCI | Q3 2024 Form 10-Q | 17

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

HSBC Bank

2023 HSBC Bank Credit Lines

On December 7, 2023, the Company's Taiwan subsidiary entered into a new Facility Letter with the Taiwan affiliate of HSBC Bank. The New Facility Letter is substantially identical to the prior Facility Letter entered into with HSBC Bank on February 7, 2023. The New Facility Letter permits borrowings up to a combined aggregate limit of $50 million which may be comprised of borrowings under a New Taiwan Dollar revolving facility with a sub-limit of NTD 300 million (the “NTD Revolver”) and an export/seller facility with a sub-limit of $50 million (the “Export/Seller Facility”, and together with the NTD Revolver, the "HSBC Bank Credit Lines"). Interest under both the NTD Revolver and Export/Seller Facility is based on HSBC Bank’s base rate plus a fixed margin, subject to adjustment under certain circumstances. Interest payments thereunder are due on a monthly basis, or such other interest period as agreed by HSBC Bank, and principal is repayable on the due date.

Amounts due under the New Facility Letter are currently not secured, but subject to HSBC Bank’s right of set-off and right to repayment on demand and call for cash coverage.

As of March 31, 2024, the outstanding borrowings under HSBC Bank Credit Lines were $8.2 million. The interest rates for these loans were 2.03% - 6.37% per annum as of March 31, 2024.

Principal payments on lines of credit and term loans are due as follows (in thousands):

Fiscal Year Principal Payments


Remainder of 2024	$	50,690
2025	41,169
2026	41,169
2027	17,886
2028	6,033
2029 and thereafter	10,265
Total lines of credit and term loans	$	167,212

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

SMCI | Q3 2024 Form 10-Q | 18

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 7. Convertible Notes

2029 Convertible Notes

In February 2024, the Company issued $1,725.0 million aggregate principal amount of Convertible Notes. The Company received net proceeds from the offering of approximately $1,695.8 million. The Company used approximately $142.1 million of the net proceeds to fund the cost of entering into the Capped Call Transactions described below. The Convertible Notes will mature on March 1, 2029.

The Convertible Notes do not bear regular interest, and the principal amount of the Convertible Notes do not accrete. The Convertible Notes are convertible into cash, shares of the Company’s common stock, or a combination of cash and shares of common stock, at the Company’s election, at an initial conversion rate of 0.7455 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of $1,341.38 per share of common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the Convertible Notes (the "Indenture"). Special interest and additional interest will accrue on the Convertible Notes in the circumstances and at the rates described in the Indenture. The debt issuance costs are amortized to interest expense. The Convertible Notes do not contain financial maintenance covenants.

Holders may convert their Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2024, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock, as described in the Indenture; (4) if the Company calls such notes for redemption; and (5) at any time from, and including, September 1, 2028 until the close of business on the second scheduled trading day immediately before the maturity date.

If the Company undergoes a fundamental change (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes, at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid special interest and additional interest, if any, up to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their Convertible Notes in connection with such corporate event or during the relevant redemption period.

The Convertible Notes are redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after March 1, 2027 and on or before the 20th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid special and additional interest, if any, to, but excluding, the redemption date.

The Convertible Notes have customary provisions relating to the occurrence of “events of default” (as defined in the Indenture). The occurrence of such events of default may result in the acceleration of all amounts due under the Convertible Notes. The Convertible Notes were not eligible for conversion as of March 31, 2024. No sinking fund is provided for the Convertible Notes.

SMCI | Q3 2024 Form 10-Q | 19

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The Convertible Notes are general unsecured obligations of the Company and rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment with all of the Company’s existing and future senior, unsecured indebtedness; effectively subordinated to any of the Company’s existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity if any, of the Company’s current or future subsidiaries. As of March 31, 2024, none of the conditions permitting the holders of the Convertible Notes to convert their notes early had been met. Therefore, the Convertible Notes are classified as long-term.

The Company accounted for the issuance of the Convertible Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

The carrying value of the Convertible Notes, net of unamortized issuance costs of $28.7 million, was $1,696.3 million as of March 31, 2024. Interest expense related to the amortization of debt issuance costs was $0.5 million for the quarter ended March 31, 2024. The effective interest rate is 0.34%.

Capped Calls

In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated capped call transactions (collectively, the “Capped Call Transactions”) with certain financial institutions (the “Capped Call Counterparties”). The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon conversion of the Convertible Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of the Convertible Notes, as the case may be, with such reduction and/or offset, in each case subject to a cap.

The Capped Call Transactions have an initial strike price of $1,341.38 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Notes. The cap price of the Capped Call Transactions was initially $1,951.04 per share of common stock, representing a premium of approximately 100% above the last reported sale price of $975.52 per share of common stock on February 22, 2024, and is subject to certain adjustments under the terms of the Capped Call Transactions.

For accounting purposes, each Capped Call Transaction is a separate transaction, and not part of the terms of the Convertible Notes. As these transactions meet certain accounting criteria, the Capped Call Transactions of $142.1 million are recorded in stockholders’ equity and are not accounted for as derivatives. The Capped Call Transactions will not be remeasured as long as they continue to meet the conditions for equity classification. The Convertible Notes and the Capped Call Transactions will be integrated for tax purposes. The accounting impact of this tax treatment results in the Capped Call Transactions being deductible with the cost of the Capped Call Transactions qualifying as original issue discount for tax purposes over the term of the Convertible Notes.

SMCI | Q3 2024 Form 10-Q | 20

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 8. Leases

The Company leases offices, warehouses and other premises, vehicles and certain equipment leased under non-cancelable operating leases. Operating lease expense recognized and supplemental cash flow information related to operating leases for the three and nine months ended March 31, 2024 and 2023 were as follows (in thousands):


	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Operating lease expense (including expense for lease agreements with related parties of $86 and $139 for the three months ended March 31, 2024 and 2023, respectively, and $363 and $422 for the nine months ended March 31, 2024 and 2023, respectively)	$	2,538	$	2,129	$	7,076	$	6,354
Cash payments for operating leases (including payments to related parties of $75 and $134 for the three months ended March 31, 2024 and 2023, respectively, and $333 and $391 for the nine months ended March 31, 2024 and 2023, respectively)	$