What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-07 compared with 2021-02-05 · 278 added, 223 removed, 698 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

December 31, June 30,

March 31, June 30,

Current assets:

Cash and cash equivalents $ 177,894 $ 210,533

Accounts receivable, net of allowances of $ 2,941 and $ 4,586 at December 31, 2020 and June 30, 2020, respectively (including accounts receivable from related parties of $ 15,016 and $ 8,712 at December 31, 2020 and June 30, 2020, respectively)

Accounts receivable, net of allowances of $ 2,784 and $ 4,586 at March 31, 2021 and June 30, 2020, respectively (including accounts receivable from related parties of $ 12,244 and $ 8,712 at March 31, 2021 and June 30, 2020, respectively)

407,365 403,745

Inventories 903,903 851,498

Prepaid expenses and other current assets (including other receivables from related parties of $ 12,237 and $ 19,791 at December 31, 2020 and June 30, 2020, respectively)

Prepaid expenses and other current assets (including other receivables from related parties of $ 20,298 and $ 19,791 at March 31, 2021 and June 30, 2020, respectively)

150,488 126,985

7 unchanged sentences

Current liabilities:

Accounts payable (including amounts due to related parties of $ 48,256 and $ 72,368 at December 31, 2020 and June 30, 2020, respectively)

Accounts payable (including amounts due to related parties of $ 54,072 and $ 72,368 at March 31, 2021 and June 30, 2020, respectively)

$ 465,012 $ 417,673

Accrued liabilities (including amounts due to related parties of $ 11,339 and $ 16,206 at December 31, 2020 and June 30, 2020, respectively)

Accrued liabilities (including amounts due to related parties of $ 16,026 and $ 16,206 at March 31, 2021 and June 30, 2020, respectively)

153,742 155,401

5 unchanged sentences

Long-term debt, net of debt issuance costs 27,867 5,697

Other long-term liabilities (including related party balance of $ 28 and $ 1,699 at December 31, 2020 and June 30, 2020, respectively)

Other long-term liabilities (including related party balance of $ 0 and $ 1,699 at March 31, 2021 and June 30, 2020, respectively)

41,109 41,995

6 unchanged sentences

Outstanding shares:

50,651,054 and 52,408,703 at December 31, 2020 and June 30, 2020, respectively

50,036,368 and 52,408,703 at March 31, 2021 and June 30, 2020, respectively

Issued shares:

50,651,054 and 53,741,828 at December 31, 2020 and June 30, 2020, respectively

50,036,368 and 53,741,828 at March 31, 2021 and June 30, 2020, respectively

425,489 389,972

Treasury stock (at cost), — and 1,333,125 shares at December 31, 2020 and June 30, 2020, respectively

Treasury stock (at cost), 0 and 1,333,125 shares at March 31, 2021 and June 30, 2020, respectively

Accumulated other comprehensive gain (loss) 362 ( 152 )

10 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

Net sales (including related party sales of $ 18,706 and $ 21,784 in the three months ended December 31, 2020 and 2019, respectively, and $ 38,421 and $ 49,446 in the six months ended December 31, 2020 and 2019, respectively)

Net sales (including related party sales of $ 20,432 and $ 21,528 in the three months ended March 31, 2021 and 2020, respectively, and $ 58,853 and $ 70,974 in the nine months ended March 31, 2021 and 2020, respectively)

$ 895,881 $ 772,408 $ 2,488,437 $ 2,443,155

Cost of sales (including related party purchases of $ 50,835 and $ 75,333 in the three months ended December 31, 2020 and 2019, respectively, and $ 113,034 and $ 140,366 in the six months ended December 31, 2020 and 2019, respectively)

Cost of sales (including related party purchases of $ 64,787 and $ 60,387 in the three months ended March 31, 2021 and 2020, respectively, and $ 177,821 and $ 200,753 in the nine months ended March 31, 2021 and 2020, respectively)

772,864 639,048 2,099,410 2,040,462

9 unchanged sentences

Income before income tax provision 18,465 15,965 81,653 76,706

Income tax provision ( 5,108 ) ( 2,113 ) ( 8,768 ) ( 10,681 )

Income tax benefit (provision) 227 899 ( 8,541 ) ( 9,782 )

Share of (loss) from equity investee, net of taxes ( 264 ) ( 1,057 ) ( 409 ) ( 1,066 )

11 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

8 unchanged sentences

(in thousands, except share amounts)

Three Months Ended December 31, 2020 Common Stock and

Three Months Ended March 31, 2021 Common Stock and

Additional Paid-In

5 unchanged sentences

Shares Amount Shares Amount

Balance at September 30, 2020 54,241,046 $ 400,157 ( 2,475,419 ) $ ( 50,491 ) $ 95 $ 722,812 $ 169 $ 1,072,742

Balance at December 31, 2020 50,651,054 $ 410,522 — $ — $ 396 $ 653,129 $ 173 $ 1,064,220

Exercise of stock options, net of taxes 511,801 9,577 — — — — — 9,577

3 unchanged sentences

Stock-based compensation — 7,494 — — — — — 7,494

Foreign currency translation gain — — — — 301 — — 301

Foreign currency translation loss — — — — ( 34 ) — ( 34 )

Net income — — — — — 18,428 ( 5 ) 18,423

Balance at December 31, 2020 50,651,054 $ 410,522 — $ — $ 396 $ 653,129 $ 173 $ 1,064,220

Three Months Ended December 31, 2019 Common Stock and

Balance at March 31, 2021 50,036,368 $ 425,489 — $ — $ 362 $ 627,929 $ 168 $ 1,053,948

Three Months Ended March 31, 2020 Common Stock and

Additional Paid-In

5 unchanged sentences

Shares Amount Shares Amount

Balance at September 30, 2019 51,358,810 $ 354,157 ( 1,333,125 ) $ ( 20,491 ) $ ( 220 ) $ 638,248 $ 162 $ 971,856

Exercise of stock options, net of shares withheld for withholding taxes 283,987 3,933 — — — — — 3,933

Balance at December 31, 2019 51,923,260 $ 360,060 ( 1,333,125 ) $ ( 20,491 ) $ ( 135 ) $ 661,954 $ 165 $ 1,001,553

Exercise of stock options, net of taxes 1,163,309 19,120 — — — — — 19,120

Release of shares of common stock upon vesting of restricted stock units 262,742 — — — — — — —

1 unchanged sentence

Stock-based compensation — 4,805 — — — — — 4,805

Foreign currency translation gain — — — — 85 — — 85

Foreign currency translation loss — — — — ( 31 ) — — ( 31 )

Net income — — — — — 15,807 1 15,808

Balance at December 31, 2019 51,923,260 $ 360,060 ( 1,333,125 ) $ ( 20,491 ) $ ( 135 ) $ 661,954 $ 165 $ 1,001,553

See accompanying notes to condensed consolidated financial statements.

Balance at March 31, 2020 53,248,771 $ 381,125 ( 1,333,125 ) $ ( 20,491 ) $ ( 166 ) $ 677,761 $ 166 $ 1,038,395

SUPER MICRO COMPUTER, INC.

1 unchanged sentence

(in thousands, except share amounts)

Six Months Ended December 31, 2020 Common Stock and

Nine Months Ended March 31, 2021 Common Stock and

Additional Paid-In

13 unchanged sentences

Net income — — — — — 72,703 1 72,704

Balance at December 31, 2020 50,651,054 $ 410,522 — $ — $ 396 $ 653,129 $ 173 $ 1,064,220

Six Months Ended December 31, 2019 Common Stock and

Balance at March 31, 2021 50,036,368 $ 425,489 — $ — $ 362 $ 627,929 $ 168 $ 1,053,948

Nine Months Ended March 31, 2020 Common Stock and

Additional Paid-In

12 unchanged sentences

Net income — — — — — 65,858 5 65,863

Balance at December 31, 2019 51,923,260 $ 360,060 ( 1,333,125 ) $ ( 20,491 ) $ ( 135 ) $ 661,954 $ 165 $ 1,001,553

Balance at March 31, 2020 53,248,771 $ 381,125 ( 1,333,125 ) $ ( 20,491 ) $ ( 166 ) $ 677,761 $ 166 $ 1,038,395

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

OPERATING ACTIVITIES:

5 unchanged sentences

Provision for excess and obsolete inventories 4,844 18,093

Share of income from equity investee 145 9

Share of loss from equity investee 409 1,066

Foreign currency exchange (gain) loss 1,097 311

2 unchanged sentences

Changes in operating assets and liabilities:

Accounts receivable (including changes in related party balances of $( 6,304 ) and $( 4,318 ) during the six months ended December 31, 2020 and 2019, respectively)

Accounts receivable (including changes in related party balances of $( 3,532 ) and $ 1,612 during the nine months ended March 31, 2021 and 2020, respectively)

( 3,036 ) 58,935

Inventories ( 57,249 ) ( 214,131 )

Prepaid expenses and other assets (including changes in related party balances of $ 7,554 and $( 3,673 ) during the six months ended December 31, 2020 and 2019, respectively)

Prepaid expenses and other assets (including changes in related party balances of $( 507 ) and $( 52 ) during the nine months ended March 31, 2021 and 2020, respectively)

( 25,039 ) ( 34,790 )

Accounts payable (including changes in related party balances of $( 24,112 ) and $ 16,107 during the six months ended December 31, 2020 and 2019, respectively)

Accounts payable (including changes in related party balances of $( 18,296 ) and $( 4,685 ) during the nine months ended March 31, 2021 and 2020, respectively)

45,301 103,880

1 unchanged sentence

Deferred revenue ( 13,726 ) 2,063

Accrued liabilities (including changes in related party balances of $( 4,867 ) and $ 5,249 during the six months ended December 31, 2020 and 2019, respectively)

Accrued liabilities (including changes in related party balances of $( 180 ) and $ 9,734 during the nine months ended March 31, 2021 and 2020, respectively)

( 5,807 ) 49,924

Other long-term liabilities (including changes in related party balances of $( 1,671 ) and $ 430 during the six months ended December 31, 2020 and 2019, respectively)

Other long-term liabilities (including changes in related party balances of $( 1,699 ) and $( 129 ) during the nine months ended March 31, 2021 and 2020, respectively)

( 3,295 ) ( 8,459 )

1 unchanged sentence

INVESTING ACTIVITIES:

Purchases of property, plant and equipment (including payments to related parties of $ 3,058 and $ 2,274 during the six months ended December 31, 2020 and 2019, respectively)

Purchases of property, plant and equipment (including payments to related parties of $ 5,845 and $ 4,384 during the nine months ended March 31, 2021 and 2020, respectively)

( 44,627 ) ( 34,886 )

9 unchanged sentences

Payments of obligations under finance leases 34 ( 122 )

Net cash used in financing activities ( 53,697 ) ( 2,076 )

Net cash (used in) provided by financing activities ( 48,445 ) 25,381

Effect of exchange rate fluctuations on cash 362 163

Net increase in cash, cash equivalents and restricted cash 105,094 61,913

Net (decrease) increase in cash, cash equivalents and restricted cash ( 33,318 ) 57,124

Cash, cash equivalents and restricted cash at the beginning of the period 212,390 262,140

4 unchanged sentences

Non-cash investing and financing activities:

Unpaid property, plant and equipment purchases (including due to related parties of $ 3,056 and $ 1,729 as of December 31, 2020 and 2019, respectively)

Unpaid property, plant and equipment purchases (including due to related parties of $ 1,502 and $ 215 as of March 31, 2021 and 2020, respectively)

$ 7,662 $ 12,609

New operating lease assets obtained in exchange for operating lease liabilities

Receivable from exercise of stock options — 1,229

Unpaid stock repurchases 2,690 —

11 unchanged sentences

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 six months ended December 31, 2020 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2021.

The consolidated results of operations for the three and nine months ended March 31, 2021 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2021.

Investment in a Corporate Venture

4 unchanged sentences

The Company recorded a deferred gain related to the contribution of certain technology rights.

As of December 31, 2020 and June 30, 2020, the Company had unamortized deferred gain balance of $ 2.0 million and $ 2.0 million, respectively, in accrued liabilities and $ 0.0 million and $ 1.0 million, respectively, in other long-term liabilities in the Company’s condensed

As of March 31, 2021 and June 30, 2020, the Company had unamortized deferred gain balance of $ 1.5 million and $ 2.0 million, respectively, in accrued liabilities and $ 0.0 million and $ 1.0 million, respectively, in other long-term liabilities in the Company’s condensed

consolidated balance sheets.

5 unchanged sentences

The Company is working with the Corporate Venture's management to ensure that the Corporate Venture remains in compliance with the new restrictions.

The Company does not believe that the equity investment carrying value is impacted as of December 31, 2020.

No impairment charge was recorded for the three and six months ended December 31, 2020 and 2019, respectively.

The Company sold products worth $ 13.2 million and $ 15.4 million to the Corporate Venture in the three months ended December 31, 2020 and 2019, respectively, and $ 19.6 million and $ 37.5 million for the six months ended December 31, 2020 and 2019, respectively.

The Company’s share of intra-entity profits on the products that remained unsold by the Corporate Venture as of December 31, 2020 and June 30, 2020 have been eliminated and have reduced the carrying value of the Company’s investment in the Corporate Venture.

The Company does not believe that the equity investment carrying value is impacted as of March 31, 2021.

No impairment charge was recorded for the three and nine months ended March 31, 2021 and 2020, respectively.

The Company sold products worth $ 16.8 million and $ 14.0 million to the Corporate Venture in the three months ended March 31, 2021 and 2020, respectively, and $ 36.4 million and $ 51.5 million for the nine months ended March 31, 2021 and 2020, respectively.

The Company’s share of intra-entity profits on the products that remained unsold by the Corporate Venture as of March 31, 2021 and June 30, 2020 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 $ 14.4 million and $ 7.8 million due from the Corporate Venture in accounts receivable, net as of December 31, 2020 and June 30, 2020, respectively.

The Company had $ 11.4 million and $ 7.8 million due from the Corporate Venture in accounts receivable, net as of March 31, 2021 and June 30, 2020, respectively.

SUPER MICRO COMPUTER, INC.

3 unchanged sentences

Shortages could occur in these materials due to an interruption of supply or increased demand in the industry.

One supplier accounted for 20.0 % and 28.5 % of total purchases for the three months ended December 31, 2020 and 2019, respectively, and 20.9 % and 28.6 % for the six months ended December 31, 2020 and 2019, respectively.

Ablecom and Compuware, related parties of the Company (see Note 8, "Related Party Transactions") accounted for a combined 7.3 % and 10.3 % of total cost of sales for the three months ended December 31, 2020 and 2019, respectively, and a combined 8.5 % and 10.0 % for the six months ended December 31, 2020 and 2019, respectively.

One supplier accounted for 21.4 % and 26.1 % of total purchases for the three months ended March 31, 2021 and 2020, respectively, and 21.1 % and 27.9 % for the nine months ended March 31, 2021 and 2020, respectively.

Purchases from Ablecom and Compuware, related parties of the Company (see Note 8, "Related Party Transactions") accounted for a combined 8.4 % and 9.4 % of total cost of sales for the three months ended March 31, 2021 and 2020, respectively, and a combined 8.5 % and 9.8 % for the nine months ended March 31, 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.

No single customer accounted for 10% or more of the net sales for the three and six months ended December 31, 2020 and 2019.

No customer accounted for greater than 10% of the Company's accounts receivable, net as of December 31, 2020, whereas one customer accounted for 10.1 % of accounts receivable, net as of June 30, 2020.

No single customer accounted for 10% or more of the net sales for the three and nine months ended March 31, 2021 and 2020.

No customer accounted for greater than 10% of the Company's accounts receivable, net as of March 31, 2021, whereas one customer accounted for 10.1 % of accounts receivable, net as of June 30, 2020.

Treasury Stock

12 unchanged sentences

The Company also records a specific allowance based on an analysis of individual past due balances or customer-specific information, such as a decline in creditworthiness or bankruptcy.

The new guidance has no material impact on the Company's condensed consolidated financial statements for the three and six months ended December 31, 2020.

The new guidance has no material impact on the Company's condensed consolidated financial statements for the three and nine months ended March 31, 2021.

In August 2018, the FASB issued amended guidance, Fair Value Measurement:

1 unchanged sentence

The Company adopted this guidance on July 1, 2020.

As of December 31, 2020, the Company’s investment in an auction rate security is the only Level 3 investment measured at fair value on a recurring basis.

As of March 31, 2021, the Company’s investment in an auction rate security is the only Level 3 investment measured at fair value on a recurring basis.

Changes to the disclosures in the condensed consolidated financial statements were immaterial.

18 unchanged sentences

The amendment is effective for all entities through December 15, 2022.

In January 2021, the FASB issued further guidance on this topic, which clarified the scope and application of the original guidance.

LIBOR is used to calculate the interest on borrowings under the Company's 2018 Bank of America Credit Facility and E.SUN Credit Facility.

6 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

3 unchanged sentences

Server and storage systems constitute an assembly and integration of subsystems and accessories, and related services.

Subsystems and accessories are comprised of serverboards, chassis and accessories.

Subsystems and accessories are comprised of server boards, chassis and accessories.

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 six months ended December 31, 2020 and 2019, of net sales by geographic region (in thousands):

The following is a summary for the three and nine months ended March 31, 2021 and 2020, of net sales by geographic region (in thousands):

SUPER MICRO COMPUTER, INC.

1 unchanged sentence

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

13 unchanged sentences

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.

Revenue recognized during the three and six months ended December 31, 2020, which was included in the opening deferred revenue balance as of June 30, 2020 of $ 203.8 million, was $ 26.8 million and $ 55.4 million, respectively.

Deferred revenue decreased $ 8.8 million during the six months ended December 31, 2020 because the recognition of revenue from contracts entered into in prior periods was greater than the invoiced amounts for service contracts during the period.

Revenue recognized during the three and nine months ended March 31, 2021, which was included in the opening deferred revenue balance as of June 30, 2020 of $ 203.8 million, was $ 24.1 million and $ 79.6 million, respectively.

Deferred revenue decreased $ 13.7 million during the nine months ended March 31, 2021 because the recognition of revenue from contracts entered into in prior periods was greater than the invoiced amounts for service contracts during the period.

Transaction Price Allocated to the Remaining Performance Obligations

2 unchanged sentences

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 December 31, 2020 was $ 194.9 million.

The value of the transaction price allocated to remaining performance obligations as of March 31, 2021 was $ 190.0 million.

The Company expects to recognize approximately 51 % of remaining performance obligations as revenue in the next 12 months, and the remainder thereafter.

13 unchanged sentences

Net Income Per Common Share

The following table shows the computation of basic and diluted net income per common share for the three and six months ended December 31, 2020 and 2019 (in thousands, except per share amounts):

The following table shows the computation of basic and diluted net income per common share for the three and nine months ended March 31, 2021 and 2020 (in thousands, except per share amounts):

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

5 unchanged sentences

Diluted net income per common share $ 0.35 $ 0.29 $ 1.35 $ 1.26

For the three and six months ended December 31, 2020 and 2019, 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 1,040,890 and 2,501,684 for the three months ended December 31, 2020 and 2019, respectively, and 1,113,845 and 3,171,619 for the six months ended December 31, 2020 and 2019, respectively.

For the three and nine months ended March 31, 2021 and 2020, 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 578,892 and 1,882,238 for the three months ended March 31, 2021 and 2020, respectively, and 617,807 and 2,305,538 for the nine months ended March 31, 2021 and 2020, respectively.

Balance Sheet Components

The following tables provide details of the selected balance sheet items (in thousands):

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Finished goods $ 634,032 $ 656,817

2 unchanged sentences

Total inventories $ 903,903 $ 851,498

The Company recorded a provision for excess and obsolete inventory to cost of sales totaling $ 2.5 million and $ 1.7 million in the three and six months ended December 31, 2020 and $ 6.8 million and $ 16.9 million for the three and six

SUPER MICRO COMPUTER, INC.

The Company recorded a provision for excess and obsolete inventory to cost of sales totaling $ 2.9 million and $ 4.6 million in the three and nine months ended March 31, 2021 and $ 4.7 million and $ 21.6 million for the three and nine

Table of Contents SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

months ended December 31, 2019, respectively.

These amounts exclude a provision (recovery) for adjusting the cost of certain inventories to net realizable value of $ 0.2 million and $ 1.0 million for the three and six months ended December 31, 2020, respectively, and $( 0.9 ) million and $( 2.7 ) million for the three and six months ended December 31, 2019, respectively.

months ended March 31, 2020, respectively.

These amounts exclude a provision (recovery) for adjusting the cost of certain inventories to net realizable value of $( 0.8 ) million and $ 0.2 million for the three and nine months ended March 31, 2021, respectively, and $( 0.8 ) million and $( 3.5 ) million for the three and nine months ended March 31, 2020, respectively.

The recovery is recognized when previously reserved inventories are sold.

Prepaid Expenses and Other Current Assets:

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Other receivables (1) $ 118,371 $ 96,669

6 unchanged sentences

__________________________

(1) Includes other receivables from contract manufacturers based on certain buy-sell arrangements of $ 42.9 million and $ 83.8 million as of December 31, 2020 and June 30, 2020, respectively.

(1) Includes other receivables from contract manufacturers based on certain buy-sell arrangements of $ 73.3 million and $ 83.8 million as of March 31, 2021 and June 30, 2020, respectively.

Cash, cash equivalents and restricted cash:

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Cash and cash equivalents $ 177,894 $ 210,533

3 unchanged sentences

Property, Plant, and Equipment:

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Buildings $ 86,930 $ 86,930

10 unchanged sentences

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

SUPER MICRO COMPUTER, INC.

Table of Contents SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Assets:

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Operating lease right-of-use asset $ 21,245 $ 23,784

Deferred service costs, non-current 5,531 4,632

Restricted cash, non-current 1,624 1,607

Prepaid expense, non-current 2,007 1,576

Investment in auction rate security 1,571 1,571

Deposits 955 1,201

Restricted cash, non-current 927 1,607

Non-marketable equity securities 128 128

Prepaid expense, non-current 2,017 1,576

Total other assets $ 32,363 $ 34,499

Accrued Liabilities:

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Accrued payroll and related expenses $ 43,789 $ 33,577

Contract manufacturing liabilities 38,176 36,249

Accrued warranty costs 10,904 9,984

Customer deposits 15,744 9,942

Accrued warranty costs 10,813 9,984

Operating lease liability 6,797 6,310

2 unchanged sentences

Accrued legal liabilities (Note 11) — 18,114

Others (accrued liabilities) 33,601 29,639

Others 29,749 29,639

Total accrued liabilities $ 153,742 $ 155,401

2 unchanged sentences

The Chief Executive Officer’s aggregate cash bonuses of up to $ 8.1 million are earned in two 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 the date of the agreement and ending prior to September 30, 2021 and the Chief Executive Officer remains employed with the Company through the date that such common stock price goal is determined to have been achieved and the date that the payment is made.

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 and the date that the payment is made.

During the quarter ended March 31, 2021, the target average closing prices for both tranches were met but no determination has been made if there has been adequate progress in remediating the Company’s material weaknesses in its internal control over financial reporting.

No cash payment had been made for either of the two tranches as of March 31, 2021.

Performance bonuses for a senior executive and two members of the Board are earned based on achieving a specified target average closing price for the Company’s common stock over the specified period as determined by the Board at the grant dates and continuous services through the payment dates.

A senior executive earned an aggregate cash payment of $ 0.1 million when the target average closing price was met in the fourth quarter of fiscal year 2020.

The two members of the Board can earn aggregate cash payments of $ 0.3 million in two tranches if the target average closing price reaches $ 31.61 for the first tranche

SUPER MICRO COMPUTER, INC.

The two members of the Board can earn

Table of Contents SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and $ 32.99 per share for the second tranche.

These awards expire in two equal amounts at September 30, 2021 and June 30, 2022 for the two Board members' awards.

aggregate cash payments of $ 0.3 million in two tranches if the target average closing price reaches $ 31.61 for the first tranche and $ 32.99 per share for the second tranche.

During the quarter ended March 31, 2021, the target average closing prices for both tranches were met and the cash payment of $ 0.15 million for the first tranche was made to the two Board members.

The Company accounts for the outstanding performance bonuses as liabilities and estimates fair value of payable amounts using a Monte-Carlo simulation model.

5 unchanged sentences

If it is determined to not be probable, then the Company will reverse any previously recognized expense for this award in the period when it is no longer probable that the performance condition will be achieved.

Based on the estimated fair value of these performance bonuses as of December 31, 2020 and June 30, 2020, the Company recorded a $ 4.7 million and $ 2.1 million liability, respectively, of which $ 4.7 million and $ 1.5 million, respectively, was recorded within accrued liabilities and $ 0.0 million and $ 0.6 million, respectively, was recorded within other long-term liabilities on the Company's condensed consolidated balance sheet.

An unrecognized compensation expense of $ 1.9 million will be recorded over the remaining service periods from 0.06 years to 0.67 years.

The fair value of these awards is remeasured each reporting period.

The expense recognized during the three months ended December 31, 2020 and 2019 was $ 2.5 million and $ 0.0 million, respectively, and $ 2.6 million and $ 0.0 million for the six months ended December 31, 2020 and 2019, respectively.

With the satisfaction of the target average closing price conditions in the quarter ended March 31, 2021, the Company trued up all the unpaid performance bonuses to the cash payment value.

As of March 31, 2021, the full cash value of the bonuses, except the Chief Executive Officer's first tranche performance bonus, was recorded as an accrued liability on the Company's condensed consolidated balance sheet.

The Company is still remediating its material weaknesses in its internal control over financial reporting, and estimates that it is probable that the performance condition will be met through the expiration date of the award.

Therefore, as of March 31, 2021, the Company trued up the accrued liability for the Chief Executive Officer’s first tranche award to the expected payable amount vested through the period end and the unrecognized cash value will be recorded over the remaining service period.

Based on the cash payment value and estimated fair value of these performance bonuses as of March 31, 2021 and June 30, 2020, the Company recorded a $ 7.1 million and $ 2.1 million liability, respectively, of which $ 7.1 million and $ 1.5 million, respectively, was recorded within accrued liabilities and $ 0.0 million and $ 0.6 million, respectively, was recorded within other long-term liabilities on the Company's condensed consolidated balance sheet.

An unrecognized compensation expense of $ 1.1 million will be recorded over the remaining service periods of 0.43 years.

The expense recognized during the three months ended March 31, 2021 and 2020 was $ 2.5 million and $ 0.2 million, and $ 5.1 million and $ 0.2 million for the nine months ended March 31, 2021 and 2020, respectively.

Other Long-term Liabilities:

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Operating lease liability, non-current $ 15,238 $ 18,102

3 unchanged sentences

Total other long-term liabilities $ 41,109 $ 41,995

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Product Warranties:

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

8 unchanged sentences

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

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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 December 31, 2020 and June 30, 2020.

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 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:

1 unchanged sentence

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 December 31, 2020.

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Financial Assets and Liabilities Measured on a Recurring Basis

The following table sets forth the Company’s financial instruments as of December 31, 2020 and June 30, 2020, which are measured at fair value on a recurring basis by level within the fair value hierarchy.

The following table sets forth the Company’s financial instruments as of March 31, 2021 and June 30, 2020, 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):

December 31, 2020 Level 1 Level 2 Level 3 Asset at

March 31, 2021 Level 1 Level 2 Level 3 Asset at

Money market funds (1) $ 151 $ — $ — $ 151

12 unchanged sentences

__________________________

(1) $ 0.0 million and $ 0.4 million in money market funds are included in cash and cash equivalents and $ 0.8 million and $ 0.8 million in money market funds are included in restricted cash, non-current in other assets in the condensed consolidated balance sheets as of December 31, 2020 and June 30, 2020, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

certificates of deposit are included in restricted cash, non-current in other assets in the condensed consolidated balance sheets as of December 31, 2020 and June 30, 2020, respectively.

(3) As of December 31, 2020 and June 30, 2020, the current portion of the performance awards liability of $ 4.7 million and $ 1.5 million, respectively, is included in accrued liabilities and the non-current portion of $ 0.0 million and $ 0.6 million, respectively, is included in other long-term liabilities in the condensed consolidated balance sheets.

(1) $ 0.0 million and $ 0.4 million in money market funds are included in cash and cash equivalents and $ 0.2 million and $ 0.8 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, 2021 and June 30, 2020, respectively.

(2) $ 0.2 million and $ 0.2 million in certificates of deposit are included in cash and cash equivalents, $ 0.3 million and $ 0.3 million in certificates of deposit are included in prepaid expenses and other assets, and $ 0.4 million and $ 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 March 31, 2021 and June 30, 2020, respectively.

(3) As of March 31, 2021, the Company no longer measures performance awards liability at fair value because the Company trued up the performance awards liability to the cash payment value.

As of June 30, 2020, the current portion of the performance awards liability of $ 1.5 million is included in accrued liabilities and the non-current portion of $ 0.6 million is included in other long-term liabilities in the condensed consolidated balance sheets.

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 six months ended December 31, 2020, the credit losses related to the Company’s investments was not significant.

The Company estimated the fair value of performance awards using the Monte-Carlo simulation model and classified them within Level 2 of the fair value hierarchy as estimates are based on the observable inputs.

The significant inputs used in estimating the fair value of the awards as of December 31, 2020 and June 30, 2020 are as follows:

December 31, 2020

Stock Price as of Period End Performance Period Risk-free Rate Volatility Dividend Yield

$ 31.66 0.8 - 1.49 years

0.11 % 53.55 % — %

For the three and nine months ended March 31, 2021, the credit losses related to the Company’s investments was not significant.

As of June 30, 2020, the Company estimated the fair value of performance awards using the Monte-Carlo simulation model and classified them within Level 2 of the fair value hierarchy as estimates are based on the observable inputs.

The significant inputs used in estimating the fair value of the awards as of June 30, 2020 are as follows:

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June 30, 2020

2 unchanged sentences

0.16 % 53.75 % — %

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 and six months ended December 31, 2020 and 2019.

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three and six months ended December 31, 2020 and 2019.

The following is a summary of the Company’s investment in an auction rate security as of December 31, 2020 and June 30, 2020 (in thousands):

December 31, 2020 and June 30, 2020

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three and nine months ended March 31, 2021 and 2020.

The following is a summary of the Company’s investment in an auction rate security as of March 31, 2021 and June 30, 2020 (in thousands):

March 31, 2021 and June 30, 2020

Cost Basis Gross

1 unchanged sentence

Auction rate security $ 1,750 $ — $ ( 179 ) $ 1,571

No gain or loss was recognized in other comprehensive income for the auction rate security for the three and six months ended December 31, 2020 and 2019.

No gain or loss was recognized in other comprehensive income for the auction rate security for the three and nine months ended March 31, 2021 and 2020.

The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis.

As of December 31, 2020 and June 30, 2020, total debt of $ 45.5 million and $ 29.4 million, respectively, is reported at amortized cost.

As of March 31, 2021 and June 30, 2020, total debt of $ 85.4 million and $ 29.4 million, respectively, is reported at amortized cost.

This outstanding debt is classified as Level 2 as it is not actively traded.

The amortized cost of the outstanding debt approximates the fair value.

SUPER MICRO COMPUTER, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Short-term and Long-term Debt

Short-term debt obligations as of December 31, 2020 and June 30, 2020 consisted of the following (in thousands):

December 31, June 30,

Short-term debt obligations as of March 31, 2021 and June 30, 2020 consisted of the following (in thousands):

March 31, June 30,

Line of credit:

CTBC Bank $ 18,000 $ —

E.SUN Bank 15,000 —

Total line of credit 33,000 —

CTBC Bank term loan, due August 31, 2021 $ 24,503 $ 23,704

CTBC Bank term loan, due June 4, 2030 27,867 5,697

Total term loans 52,370 29,401

Total debt 85,370 29,401

14 unchanged sentences

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 December 31, 2020 and June 30, 2020, 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 December 31, 2020 and June 30, 2020 were 3.00 %.

As of March 31, 2021 and June 30, 2020, 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 March 31, 2021 and June 30, 2020 were 3.00 %.

In October 2018, a $ 3.2 million letter of credit was issued under the 2018 Bank of America Credit Facility and in October 2019, the letter of credit amount was increased to $ 6.4 million.

No amounts have been drawn under the standby letter of credit.

The balance of debt issuance costs outstanding were $ 0.3 million and $ 0.6 million as of December 31, 2020 and June 30, 2020, respectively.

The Company has been in compliance with all the covenants under the 2018 Bank of America Credit Facility, and as of December 31, 2020, the Company's available borrowing capacity was $ 243.6 million, subject to the borrowing base limitation and compliance with other applicable terms.

The balance of debt issuance costs outstanding were $ 0.2 million and $ 0.6 million as of March 31, 2021 and June 30, 2020, respectively.

The Company has been in compliance with all the covenants under the 2018 Bank of America Credit Facility, and as of March 31, 2021, the Company's available borrowing capacity was $ 243.6 million, subject to the borrowing base limitation and compliance with other applicable terms.

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CTBC Credit Facility

2 unchanged sentences

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 0.25 % per annum which is adjusted monthly, which term loan facility also includes a 12 -month guarantee of up to NTD 100.0 million ($ 3.4 million U.S.

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equivalent) with an annual fee equal to 0.50 % per annum, (ii) a 180 -day NTD 1,500.0 million ($ 51.5 million U.S.

dollar equivalent) with an annual fee equal to 0.50 % per annum, (ii) a 180 -day NTD 1,500.0 million ($ 51.5 million U.S.

dollar equivalent) term loan facility up to 100 % of eligible accounts receivable in an aggregate amount with an interest rate equal to the lender's established NTD interest rate plus an interest rate ranging from 0.30 % to 0.50 % per annum which is adjusted monthly, and (ⅲ) a 12 -month revolving line of credit of up to 100 % of eligible accounts receivable in an aggregate amount of up to $ 50.0 million with an interest rate equal to the lender's established USD interest rate plus 0.80 % per annum which is adjusted monthly, or equal to the lender’s established NTD interest rate plus an interest rate ranging from 0.30 % to 0.50 % per annum which is adjusted monthly if the borrowing is in NTD.

In February 2021, CTBC Bank amended the USD interest rate to be the lender's established USD interest rate plus 0.70 % to 0.75 % per annum which is adjusted monthly.

The total borrowings allowed under the CTBC Credit Facility was capped at $ 50.0 million.

1 unchanged sentence

The total outstanding borrowings under the CTBC Credit Facility term loan were denominated in NTD and remeasured into U.S.

dollars of $ 24.9 million and $ 23.7 million at December 31, 2020 and June 30, 2020, respectively.

As of December 31, 2020 and June 30, 2020, the Company did no t have any outstanding borrowings under the CTBC Credit Facility revolving line of credit.

The interest rate for these loans were 0.73 % per annum as of December 31, 2020 and 0.63 % per annum as of June 30, 2020.

At December 31, 2020, the amount available for future borrowing under the CTBC Credit Facility was $ 25.1 million.

As of December 31, 2020, the net book value of land and building located in Bade, Taiwan, collateralizing the CTBC Credit Facility term loan was $ 25.1 million.

2020 CTBC Term Loan Facility

dollars of $ 24.5 million and $ 23.7 million at March 31, 2021 and June 30, 2020, respectively.

The interest rate for these loans were 0.74 % per annum as of March 31, 2021 and 0.63 % per annum as of June 30, 2020.

As of March 31, 2021 and June 30, 2020, the outstanding borrowings under the CTBC Credit Facility revolving line of credit were $ 18.0 million and $ 0.0 million, respectively.

The interest rates were from 1.03 % to 1.26 % per annum as of March 31, 2021.

As of March 31, 2021, the amount available for future borrowing under the CTBC Credit Facility was $ 7.5 million.

As of March 31, 2021, the net book value of land and building located in Bade, Taiwan, collateralizing the CTBC Credit Facility term loan was $ 25.0 million.

2020 CTBC Term Loan Facility due June 4, 2030

In May 2020, the Company entered into a ten-year , non-revolving term loan facility (“2020 CTBC Term Loan Facility”) to obtain up to NTD 1.2 billion ($ 40.7 million in U.S.

8 unchanged sentences

The Company has financial covenants requiring the Company's current ratio, debt service coverage ratio, and financial debt ratio, as defined in the agreement, to be maintained at certain levels under the 2020 CTBC Term Loan Facility.

As of December 31, 2020 and June 30, 2020, the amounts outstanding under the 2020 CTBC Term Loan Facility were $ 20.6 million and $ 5.7 million, respectively.

The interest rate for these loans were 0.45 % per annum as of December 31, 2020 and June 30, 2020.

The net book value of the property serving as collateral as of December 31, 2020 was $ 29.2 million.

As of December 31, 2020, the Company was in compliance with all financial covenants under the 2020 CTBC Term Loan Facility.

As of March 31, 2021 and June 30, 2020, the amounts outstanding under the 2020 CTBC Term Loan Facility were $ 27.9 million and $ 5.7 million, respectively.

The interest rates for these loans were 0.45 % per annum as of March 31, 2021 and June 30, 2020.

The net book value of the property serving as collateral as of March 31, 2021 was $ 38.1 million.

As of March 31, 2021, the Company was in compliance with all financial covenants under the 2020 CTBC Term Loan Facility.

E.SUN Bank Credit Facility

In December 2020, Super Micro Computer Inc, Taiwan, a Taiwan subsidiary of the Company entered into a General Credit Agreement (the “E.SUN Credit Facility”) with E.SUN Bank in Taiwan.

Such Credit Facility provides 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 $ 30.0 million.

Such Credit Facility provides for the issuance of

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loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of credit, and other types of drawdown instruments up to a credit limit of $ 30.0 million.

The term of the E.SUN Credit Facility expires on September 18, 2021.

3 unchanged sentences

There are no financial covenants associated with the E.SUN Credit Facility.

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Terms for specific drawdown instruments issued under the E.SUN 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 negotiated with E.SUN Bank.

A Notification and Confirmation of Credit Conditions agreement under the E.SUN Credit Facility was entered into on December 2, 2020 for a $ 30.0 million import loan (the “Import Loan”) with a tenor of 120 days and with an interest rate calculated based on the higher of LIBOR plus 0.75 % then divided by 0.946 or TAIFX plus 0.55 % then divided by 0.946 .

As of December 31, 2020, no drawings had been made from the Import Loan.

As of March 31, 2021, the amounts outstanding under the E.SUN Credit Facility were $ 15.0 million and the interest rates for these loans were approximately 1.0 % per annum.

At March 31, 2021, the amount available for future borrowing under the E.SUN Credit Facility was $ 15.0 million.

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 six months ended December 31, 2020 and 2019 were as follows (in thousands):

Operating lease expense recognized and supplemental cash flow information related to operating leases for the three and nine months ended March 31, 2021 and 2020 were as follows (in thousands):

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

Operating lease expense (including expense for lease agreements with related parties of $ 347 and $ 693 for the three and six months ended December 31, 2020, respectively, and $ 362 and $ 727 for the three and six months ended December 31, 2019, respectively)

Operating lease expense (including expense for lease agreements with related parties of $ 347 and $ 1,040 for the three and nine months ended March 31, 2021, respectively, and $ 359 and $ 1,086 for the three and nine months ended March 31, 2020, respectively)

$ 1,952 $ 1,605 $ 5,900 $ 4,909

Cash payments for operating leases (including payments to related parties of $ 347 and $ 693 for the three and six months ended December 31, 2020, respectively, and $ 380 and $ 737 for the three and six months ended December 31, 2019, respectively)

Cash payments for operating leases (including payments to related parties of $ 347 and $ 1,040 for the three and nine months ended March 31, 2021, respectively, and $ 369 and $ 1,106 for the three and nine months ended March 31, 2020, respectively)

$ 1,994 $ 1,667 $ 5,951 $ 5,082

During the three and six months ended December 31, 2020 and 2019, respectively, the Company's costs related to short-term lease arrangements for real estate and non-real estate assets were immaterial.

Variable payments expensed in the three and six months ended December 31, 2020 were $ 0.4 million and $ 0.8 million, respectively.

Variable payments expensed in the three months and six months ended December 31, 2019 were $ 0.4 million and $ 0.7 million, respectively.

As of December 31, 2020, the weighted average remaining lease term for operating leases was 4.1 years and the weighted average discount rate was 3.5 %.

Future minimum lease payments under noncancelable operating lease arrangements as of December 31, 2020 were as follows (in thousands):

During the three and nine months ended March 31, 2021 and 2020, the Company's costs related to short-term lease arrangements for real estate and non-real estate assets were immaterial.

Variable payments expensed in the three and nine months ended March 31, 2021 were $ 0.4 million and $ 1.2 million, respectively.

Variable payments expensed in the three months and nine months ended March 31, 2020 were $ 0.2 million and $ 0.9 million, respectively.

As of March 31, 2021, the weighted average remaining lease term for operating leases was 4.0 years and the weighted average discount rate was 3.5 %.

Future minimum lease payments under noncancelable operating lease arrangements as of March 31, 2021 were as follows (in thousands):

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Minimum lease payments

4 unchanged sentences

Present value of operating lease liabilities $ 22,035

As of December 31, 2020, commitments under short-term lease arrangements, and operating and financing leases that have not yet commenced were immaterial.

As of March 31, 2021, 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 Note 8, "Related Party Transactions," for discussion.

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Related Party Transactions

4 unchanged sentences

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 December 31, 2020.

Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Ablecom.

5 unchanged sentences

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 91.6 % and 97.5 % of the chassis included in the products sold by the Company during the three months ended December 31, 2020 and 2019, respectively, and 92.6 % and 95.4 % of the chassis included in the products sold by the Company during the six months ended December31, 2020 and 2019, respectively.

Ablecom manufactured approximately 92.5 % and 95.1 % of the chassis included in the products sold by the Company during the three months ended March 31, 2021 and 2020, respectively, and 92.5 % and 95.3 % of the chassis included in the products sold by the Company during the nine months ended March 31, 2021 and 2020, 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.

3 unchanged sentences

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.

For the components purchased from the

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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.

1 unchanged sentence

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 purchase orders from the Company to Ablecom were $ 25.4 million and $ 23.2 million at December 31, 2020 and June 30, 2020, respectively, representing the maximum exposure to financial loss.

Outstanding purchase orders from the Company to Ablecom were $ 35.5 million and $ 23.2 million at March 31, 2021 and June 30, 2020, respectively, representing the maximum 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.

2 unchanged sentences

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

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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.

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.

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.

11 unchanged sentences

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 purchase orders from the Company to Compuware were $ 26.8 million and $ 45.7 million at December 31, 2020 and June 30, 2020, respectively, representing the maximum exposure to financial loss.

Outstanding purchase orders from the Company to Compuware were $ 44.0 million and $ 45.7 million at March 31, 2021 and June 30, 2020, respectively, representing the maximum 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.

The Company’s results from transactions with Ablecom and Compuware for each of the three and six months ended December 31, 2020 and 2019, are as follows (in thousands):

The Company’s results from transactions with Ablecom and Compuware for each of the three and nine months ended March 31, 2021 and 2020, are as follows (in thousands):

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Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

4 unchanged sentences

(1) Includes principally purchases of inventory and other miscellaneous items.

The Company's net sales to Ablecom were not material for the three and six months ended December 31, 2020 and 2019.

The Company had the following balances related to transactions with Ablecom and Compuware as of December 31, 2020 and June 30, 2020 (in thousands):

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December 31, 2020 June 30, 2020

The Company's net sales to Ablecom were not material for the three and nine months ended March 31, 2021 and 2020.

The Company had the following balances related to transactions with Ablecom and Compuware as of March 31, 2021 and June 30, 2020 (in thousands):

March 31, 2021 June 30, 2020

Accounts receivable and other receivables (1) $ 6,620 $ 6,379

15 unchanged sentences

7,246,000 shares of common stock remain reserved for outstanding awards issued under the 2016 Plan at the time of adoption of the 2020 Plan.

As of December 31, 2020, the Company had 4,277,287 authorized shares available for future issuance under the 2020 Plan.

As of March 31, 2021, the Company had 3,100,300 authorized shares available for future issuance under the 2020 Plan.

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Common Stock Repurchase and Retirement

On August 9, 2020, the Board approved a share repurchase program to repurchase shares of common stock for up to an aggregate of $ 30.0 million at market prices.

On August 9, 2020, the Board approved a share repurchase program to repurchase up to an aggregate of $ 30.0 million of the Company's common stock at market prices.

The program was effective until December 31, 2020 or if earlier, until the maximum amount of common stock is repurchased.

1 unchanged sentence

Repurchased shares were recorded as treasury shares in the Company's condensed consolidated balance sheet as of September 30, 2020.

On December 11, 2020, the Board approved the retirement of 2,475,419 shares of the Company's common stock, which were recorded as treasury stock in the Company's condensed consolidated balance sheet as of September 30, 2020.

On October 31, 2020, the Board approved a share repurchase program to repurchase shares of common stock for up to an aggregate of $ 50.0 million at market prices.

The program is effective until October 31, 2021 or if earlier, until the maximum amount of common stock is repurchased.

During the three months ended December 31, 2020, 1,580,207 shares of common stock were repurchased for $ 47.0 million.

All these shares have been retired as of December 31, 2020.

On December 11, 2020, the Company retired 2,475,419 shares of common stock, which were recorded as treasury stock in the Company's condensed consolidated balance sheet as of September 30, 2020.

On October 31, 2020, the Board approved a share repurchase program to repurchase up to an aggregate of $ 50.0 million of the Company's common stock at market prices.

The program was effective until October 31, 2021 or if earlier, until the maximum amount of common stock was repurchased.

As of March 31, 2021, 1,675,746 shares of common stock were repurchased and retired for an aggregate $ 50.0 million and the program ended.

On January 29, 2021, a duly authorized subcommittee of the Board approved a share repurchase program to repurchase up to an aggregate of $ 200.0 million of the Company's common stock at market prices.

The program is effective until July 31, 2022 or if earlier, until the maximum amount of common stock is repurchased.

During the three months ended March 31, 2021, 1,155,000 shares of common stock were repurchased for $ 40.7 million.

All repurchased shares have been retired as of March 31, 2021.

During the three months ended March 31, 2021, the Company repurchased and retired 1,250,539 shares of common stock for an aggregated $ 43.7 million.

During the nine months ended March 31, 2021, the Company repurchased and retired 5,306,165 shares of common stock for an aggregated $ 120.7 million.

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

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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.

4 unchanged sentences

Risk-Free Interest Rate—The risk-free interest rate used in the Black-Scholes valuation method is based on the United States Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

The fair value of stock option grants for the three and six months ended December 31, 2020 and 2019 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

The fair value of stock option grants for the three and nine months ended March 31, 2021 and 2020 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

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0.27 % - 0.58 %

0.53 % - 1.72 %

Expected term 5.98 years 6.27 years 5.98 years 6.27 years

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50.32 % - 50.43 %

49.61 % - 50.46 %

Weighted-average fair value $ 15.91 $ 10.15 $ 13.57 $ 9.5

The following table shows total stock-based compensation expense included in the condensed consolidated statements of operations for the three and six months ended December 31, 2020 and 2019 (in thousands):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table shows total stock-based compensation expense included in the condensed consolidated statements of operations for the three and nine months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2021 2020 2021 2020

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Stock-based compensation expense, net $ 5,105 $ 1,827 $ 15,037 $ 9,681

As of December 31, 2020, $ 7.2 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 2.43 years, $ 39.7 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.54 years and $ 0.3 million of unrecognized compensation cost related to unvested PRSUs is expected to be recognized over a period of 0.61 years.

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of March 31, 2021, $ 7.2 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 4.13 years, $ 39.3 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.47 years and $ 0.3 million of unrecognized compensation cost related to unvested PRSUs is expected to be recognized over a period of 0.36 years.

Stock Option Activity

The following table summarizes stock option activity during the six months ended December 31, 2020 under all plans:

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 common stock shares to the Company’s CEO (the “2021 CEO Performance Stock Option”).

The 2021 CEO Performance Stock Option has five vesting tranches with a vesting schedule based entirely on the attainment of operational milestones (performance conditions) and market conditions, assuming (1) continued employment either as the CEO or in such capacity as agreed upon between the Company’s CEO and the Board of Directors and (2) service through each vesting date.

Each of the five 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 day trailing average, counting only trading days), has been achieved, and (ii) any one of the following five operational milestones focused on total revenue, as reported under U.S.

GAAP, have been achieved for the previous four consecutive fiscal quarters.

Upon vesting and exercise, including the payment of the exercise price of $ 45.00 per share, prior to 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.

The achievement status of the operational and stock price milestones as of March 31, 2021 was as follows:

Annualized Revenue Milestone Achievement Status Stock Price Milestone Achievement Status

(in billions)

$ 4.0 Probable $ 45 Not met

$ 4.8 Probable $ 60 Not met

$ 5.8 Probable $ 75 Not met

$ 6.8 Probable $ 95 Not met

$ 8.0 — $ 120 Not met

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 and nine months ended March 31, 2021, the Company recognized compensation expense related to the 2021 CEO Performance Stock Option of $ 0.3 million and $ 0.3 million, respectively.

No compensation expense related to the 2021 CEO Performance Stock Option was recognized during the three and nine months ended March 31, 2020.

As of March 31, 2021 and June 30, 2020, the Company had $ 11.3 million and $ 0 , respectively, in unrecognized compensation cost related to the 2021 CEO Performance Stock Option.

The unrecognized compensation cost as of March 31, 2021 is expected to be recognized over a period of five years .

The following table summarizes stock option activity during the nine months ended March 31, 2021 under all plans:

Outstanding Weighted

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Forfeited/Cancelled ( 39,790 ) $ 23.97

Balance as of December 31, 2020 4,973,231 $ 20.40 4.20

Options vested and exercisable at December 31, 2020 4,189,436 $ 19.88 3.36

Balance as of March 31, 2021 5,515,974 $ 25.16 5.22

Options vested and exercisable at March 31, 2021 3,811,698 $ 20.10 3.36

RSU and PRSU Activity

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50 % of the PRSUs vested at June 30, 2018 when performance conditions were achieved, while the remainder vest in equal amounts over the following ten quarters if the Company's Chief Executive Officer continued to be employed during those ten quarters.

As of December 31, 2020, the remaining 50 % of the PRSUs had vested in accordance with the terms of the grant.

As of March 31, 2021, the remaining 50 % of the PRSUs had vested in accordance with the terms of the grant.

In March 2020, the Compensation Committee granted a PRSU award to one of the Company's senior executives.

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No additional units were earned for fiscal year 2020 as revenue decreased from fiscal year 2019.

The following table summarizes RSU and PRSU activity during the six months ended December 31, 2020 under all plans:

The following table summarizes RSU and PRSU activity during the nine months ended March 31, 2021 under all plans:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Time-Based RSUs

7 unchanged sentences

Forfeited ( 158,215 ) $ 22.88 ( 30,000 ) $ 20.37

Balance as of December 31, 2020 2,058,326 $ 22.89 30,000 $ 20.37

Balance as of March 31, 2021 1,994,735 $ 23.91 30,000 $ 34.27

__________________________

(1) Reflects the number of PRSUs that have been earned based on the achievement of performance metrics.

SUPER MICRO COMPUTER, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company recorded a provision for income taxes of $ 5.1 million and $ 8.8 million for the three and six months ended December 31, 2020, respectively, and $ 2.1 million and $ 10.7 million for the three and six months ended December 31, 2019, respectively.

The effective tax rate was 14.9 % and 13.9 % for the three and six months ended December 31, 2020, respectively, and 7.9 % and 17.6 % for the three and six months ended December 31, 2019, respectively.

The effective tax rate for the three months ended December 31, 2020 is higher than that for the three months ended December 31, 2019, primarily due to release of uncertain tax positions after settlement of a Taiwan tax audit in 2019.

The effective tax rate for the six months ended December 31, 2020 is lower than that for the six months ended December 31, 2019, primarily due to decrease in tax reserves for uncertain tax positions and an increase in tax benefit from employees stock based compensation.

The Company recorded a benefit for income taxes of $ 0.2 million for the three months ended March 31, 2021, and a provision for income taxes of $ 8.5 million for the nine months ended March 31, 2021.

The Company recorded a benefit for income taxes of $ 0.9 million for the three months ended March 31, 2020 and a provision of $ 9.8 million for the nine months ended March 31, 2020.

The effective tax rate was ( 1.2 )% and 10.5 % for the three and nine months ended March 31, 2021, respectively, and ( 5.6 )% and 12.8 % for the three and nine months ended March 31, 2020, respectively.

The effective tax rate for the three months ended March 31, 2021 is higher than that for the three months ended March 31, 2020, primarily due to release of uncertain tax positions after settlement of a Taiwan tax audit in the prior year.

The effective tax rate for the nine months ended March 31, 2021 is lower than that for the nine months ended March 31, 2020, primarily due to Company's tax benefit arising from additional employees' exercises of stock options in the current year.

As a result of the 2017 Tax Reform Act, in December 2019, the Company realigned its international business operations and group structure.

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The CARES Act does not have a material impact on the Company.

As of December 31, 2020, the Company had gross unrecognized tax benefits of $ 39.4 million, of which, $ 14.1 million if recognized, would affect the Company's effective tax rate.

During the six months ended December 31, 2020, there was a $ 8.8 million increase in gross unrecognized tax benefits, primarily due to an uncertain tax position in a foreign jurisdiction.

As of March 31, 2021, the Company had gross unrecognized tax benefits of $ 41.1 million, of which, $ 27.0 million, if recognized, would affect the Company's effective tax rate.

During the nine months ended March 31, 2021, there was a $ 1.7 million increase in gross unrecognized tax benefits, primarily due to an uncertain tax position in a foreign jurisdiction.

The 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 December 31, 2020, the Company had accrued $ 2.4 million of interest and penalties relating to unrecognized tax benefits.

As of March 31, 2021, the Company had accrued $ 2.6 million of interest and penalties relating to unrecognized tax benefits.

Under the 2017 Tax Reform Act, starting on July 1, 2018, the Company is no longer subject to federal income tax on earnings remitted from our foreign subsidiaries.

15 unchanged sentences

These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits.

SUPER MICRO COMPUTER, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2 unchanged sentences

District Court for the Northern District of California ( Hessefort v.

Super Micro Computer, Inc., et al., No.

Super Micro Computer, Inc., et al.

18-cv-00838 and United Union of Roofers v.

Super Micro Computer, Inc., et al., No.

Super Micro Computer, Inc., et al.

18-cv-00850 ).

12 unchanged sentences

On October 28, 2020, defendants filed a supplemental motion to dismiss.

The Court has taken the motion under submission.

The Company believes the claims are without merit and intends to vigorously defend against the lawsuit.

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, and the Court has calendared a 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 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 “Derivative Action”).

Liang, et al., 20-CV-372190.

The Company was also named as a nominal defendant.

1 unchanged sentence

The plaintiffs seek unspecified compensatory damages and other equitable relief.

A case management conference has been set for late February 2021, and the matter is stayed until such time.

The parties are in the process of briefing demurrers, which are set for hearing on August 24, 2021.

The case is otherwise stayed for the time being.

The Company intends to defend the lawsuit vigorously.

On November 13, 2020, Build Group Inc.

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Per the settlement agreement, Build Group agreed to dismiss the entire action with prejudice once the Company complied with its obligations under the settlement agreement.

The Company has complied with its obligations and Build Group has submitted the dismissal, which should be granted by the court in the near term.

As of December 31, 2020, the Company recorded a liability of $ 1.6 million for the construction project expenses incurred pertaining to this matter.

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.

The Company complied with its obligations and paid $ 2.0 million in the quarter ended March 31, 2021.

Build Group submitted the dismissal, which the court has granted that concludes the matter.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

article in October 2018 concerning the Company’s products.

On August 25, 2020, to 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

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 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.

4 unchanged sentences

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 December 31, 2020 and any prior periods.

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 March 31, 2021 and any prior periods.

The Company has entered into indemnification agreements with its current and former directors and executive officers.

3 unchanged sentences

Purchase Commitments — The Company has agreements to purchase inventory and non-inventory items primarily through the next 12 months.

As of December 31, 2020, these remaining noncancelable commitments were $ 248.3 million, including $ 52.3 million for related parties.

As of March 31, 2021, these remaining noncancelable commitments were $ 306.4 million, including $ 79.5 million for related parties.

Standby Letter of Credit — In October 2018, a $ 3.2 million letter of credit was issued under the 2018 Bank of America Credit Facility and in October 2019, the letter of credit amount was increased to $ 6.4 million.

5 unchanged sentences

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

December 31, June 30,

March 31, June 30,

Long-lived assets:

3 unchanged sentences

$ 265,566 $ 233,785

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

SUPER MICRO COMPUTER, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Subsequent Event

On January 29, 2021, a duly authorized subcommittee of the Board approved a share repurchase program to repurchase shares of common stock for up to an aggregate of $ 200.0 million at market price.

The program is effective until July 31, 2022 or if earlier, until the maximum amount of common stock is repurchased.

On May 5, 2021, certain current and former directors and officers 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.

3:21-cv-03357-KAW.

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.

The Company has not yet been formally served with the complaint, but the Company intends to defend the lawsuit vigorously.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements