Super Micro Computer, Inc. 10-Q

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 2019 Comprehensive 10-K. In addition to the risk factors disclosed therein, we identified an additional risk factor, as described below. The effects of the COVID-19 pandemic has, and will continue to an increasing degree, to adversely affect our business operations, financial condition and results of operations, and severity of which remains uncertain. The novel strain of the coronavirus identified in Wuhan, China in late 2019 (COVID-19) has spread throughout the world and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners. We have taken steps to protect our employees, including temporarily closing our offices in the United States, the Netherlands and to a lesser extent in Taiwan. We continue our manufacturing operations and customers’ orders processing and services at each location, although our productivity has slowed especially in the United States and in the Netherlands. Travel restrictions and schedules’ disruptions have impacted our supply chain and shipments to our customers. We have invested our capital to procure key components so we can maintain reasonable lead times to fulfill orders for our customers. The extent to 47 Table of Contents which the effects of the pandemic will impact our business, operations, financial condition and results of operations is uncertain, rapidly changing and hard to predict, and will depend on numerous evolving factors that we may not be able to control or predict, including: • the duration and scope of the COVID-19 pandemic; • the extent and effectiveness of responsive actions by authorities and the impact of these and other factors on our employees, customers and vendors; • the rate of spending on server and storage solutions, including delays in prospective customers’ purchasing decisions, delays the provisioning of our products; • the rate at which our suppliers develop and release new components such as microprocessors and memory; • the length of heightened unemployment and economic recession pressures; • the health impact of the pandemic on our employees, including key personnel; • the impact on the liquidity of our sales partners and end customers, including lengthening of customers payment terms and potential bankruptcies; • our continued ability to execute on business continuity plans for the maintenance of our critical business processes and managing our liquidity and access to credit facilities on terms acceptable to us. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and suppliers. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed. We have significant international sales and operations and face risks related to health epidemics, including the recent coronavirus outbreak, that could adversely impact the operations of our company, our manufacturers or our customers, as well as our sales and financial results. Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of respiratory illness caused by a novel coronavirus first identified in Wuhan, China (COVID-19). Any outbreak of contagious diseases, and other adverse public health developments, could have a material and adverse effect on our business operations. These could include disruptions or restrictions on our ability to travel or to distribute our products, as well as temporary closures of our facilities, or the facilities of our manufacturers or customers. Any disruption of our manufacturers or customers would likely impact our sales and operating results. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our end customers’ products and likely impact our operating results. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Mine Safety Disclosures Not applicable.