What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-02-03 compared with 2022-11-04 · 258 added, 171 removed, 670 unchanged (39% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

September 30, June 30,

(in thousands, except par value per share amounts)

December 31, June 30,

Current assets:

Cash and cash equivalents $ 304,595 $ 267,397

Accounts receivable, net of allowance for credit losses of $ 510 and $ 1,753 at September 30, 2022 and June 30, 2022, respectively (including accounts receivable from related parties of $ 10,249 and $ 8,398 at September 30, 2022 and June 30, 2022, respectively)

Accounts receivable, net of allowance for credit losses of $ 180 and $ 1,753 at December 31, 2022 and June 30, 2022, respectively (including accounts receivable from related parties of $ 5,220 and $ 8,398 at December 31, 2022 and June 30, 2022, respectively)

768,167 834,513

Inventories 1,421,817 1,545,606

Prepaid expenses and other current assets (including receivables from related parties of $ 34,551 and $ 24,412 at September 30, 2022 and June 30, 2022, respectively)

Prepaid expenses and other current assets (including receivables from related parties of $ 47,337 and $ 24,412 at December 31, 2022 and June 30, 2022, respectively)

154,924 158,799

7 unchanged sentences

Current liabilities:

Accounts payable (including amounts due to related parties of $ 94,029 and $ 87,355 at September 30, 2022 and June 30, 2022, respectively)

Accounts payable (including amounts due to related parties of $ 88,106 and $ 87,355 at December 31, 2022 and June 30, 2022, respectively)

$ 559,962 $ 655,403

Accrued liabilities (including amounts due to related parties of $ 28,261 and $ 18,676 at September 30, 2022 and June 30, 2022, respectively)

Accrued liabilities (including amounts due to related parties of $ 19,527 and $ 18,676 at December 31, 2022 and June 30, 2022, respectively)

169,866 212,419

12 unchanged sentences

Outstanding shares:

52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively

53,400 and 52,311 at December 31, 2022 and June 30, 2022, respectively

Issued shares:

52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively

53,400 and 52,311 at December 31, 2022 and June 30, 2022, respectively

514,559 481,741

12 unchanged sentences

Three Months Ended

September 30,

Net sales (including related party sales of $ 25,055 and $ 30,922 in the three months ended September 30, 2022 and 2021, respectively)

December 31, Six Months Ended

2022 2021 2022 2021

Cost of sales (including related party purchases of $ 96,536 and $ 87,687 in the three months ended September 30, 2022 and 2021, respectively)

Net sales (including related party sales of $ 20,073 and $ 41,616 in the three months ended December 31, 2022 and 2021, respectively, and $ 45,126 and $ 72,538 in the six months ended December 31, 2022 and 2021, respectively)

$ 1,803,195 $ 1,172,419 $ 3,655,325 $ 2,205,149

Cost of sales (including related party purchases of $ 98,743 and $ 96,728 in the three months ended December 31, 2022 and 2021, respectively, and $ 195,279 and $ 184,415 in the six months ended December 31, 2022 and 2021, respectively)

1,465,773 1,008,676 2,970,368 1,903,267

Gross profit 337,422 163,743 684,957 301,882

5 unchanged sentences

Income from operations 215,182 51,049 435,305 80,177

Other income, net 8,054 50

Other (expense) income, net ( 6,335 ) ( 607 ) 1,719 ( 557 )

Interest expense ( 1,756 ) ( 1,150 ) ( 5,694 ) ( 1,954 )

15 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Net income $ 176,167 $ 41,932 $ 360,583 $ 67,369

Other comprehensive loss, net of tax:

Foreign currency translation loss ( 397 ) ( 4 )

Total other comprehensive (loss), net of tax ( 397 ) ( 4 )

Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss) 98 100 ( 299 ) 96

Total other comprehensive income (loss), net of tax 98 100 ( 299 ) 96

Total comprehensive income $ 176,265 $ 42,032 $ 360,284 $ 67,465

4 unchanged sentences

(in thousands, except share amounts)

Three Months Ended September 30, 2022 Common Stock and

Three Months Ended December 31, 2022 Common Stock and

Additional Paid-In

Capital Accumulated

Comprehensive Income (Loss) Retained

Comprehensive Income Retained

Earnings Non-controlling Interest Total

1 unchanged sentence

Shares Amount

Balance at June 30, 2022 52,311,014 $ 481,741 $ 911 $ 942,923 $ 172 $ 1,425,747

Balance at September 30, 2022 52,851,469 $ 497,183 $ 514 $ 1,127,339 $ 167 $ 1,625,203

Exercise of stock options, net of taxes 347,666 7,183 — — — 7,183

2 unchanged sentences

Stock-based compensation — 16,981 — — — 16,981

Other comprehensive loss — — ( 397 ) — — ( 397 )

Other comprehensive income — — 98 — — 98

Net income (loss) — — — 176,167 ( 2 ) 176,165

Balance at December 31, 2022 53,400,301 $ 514,559 $ 612 $ 1,303,506 $ 165 $ 1,818,842

Three Months Ended December 31, 2021 Common Stock and

Additional Paid-In

Capital Accumulated

Comprehensive Income Retained

Earnings Non-controlling Interest Total

Stockholders’

Shares Amount

Balance at September 30, 2021 51,071,844 $ 448,976 $ 449 $ 683,197 $ 176 $ 1,132,798

Three Months Ended September 30, 2021 Common Stock and

Exercise of stock options, net of taxes 299,337 5,570 — — — 5,570

Release of common stock shares upon vesting of restricted stock units 199,825 — — — — —

Shares withheld for the withholding tax on vesting of restricted stock units ( 62,390 ) ( 2,732 ) — — — ( 2,732 )

Stock-based compensation — 9,176 — — — 9,176

Other comprehensive income — — 100 — — 100

Net income — — — 41,932 1 41,933

Balance at December 31, 2021 51,508,616 $ 460,990 $ 549 $ 725,129 $ 177 $ 1,186,845

Six Months Ended December 31, 2022 Common Stock and

Additional Paid-In

10 unchanged sentences

Other comprehensive loss — — ( 299 ) — — ( 299 )

Net income (loss) — — — 360,583 ( 7 ) 360,576

Balance at December 31, 2022 53,400,301 $ 514,559 $ 612 $ 1,303,506 $ 165 $ 1,818,842

SMCI | Q2 2023 Form 10-Q | 4

Six Months Ended December 31, 2021 Common Stock and

Additional Paid-In

Capital Accumulated

Comprehensive Income Retained

Earnings Non-controlling Interest Total

Stockholders’

Shares Amount

Balance at June 30, 2021 50,582,078 $ 438,012 $ 453 $ 657,760 $ 173 $ 1,096,398

Exercise of stock options, net of taxes 669,403 11,588 — — — 11,588

Release of common stock shares upon vesting of restricted stock units 373,596 — — — — —

Shares withheld for the withholding tax on vesting of restricted stock units ( 116,461 ) ( 4,801 ) — — — ( 4,801 )

Stock-based compensation — 16,191 — — — 16,191

Other comprehensive income — — 96 — — 96

Net income — — — 67,369 4 67,373

Balance at September 30, 2021 51,071,844 $ 448,976 $ 449 $ 683,197 $ 176 $ 1,132,798

Balance at December 31, 2021 51,508,616 $ 460,990 $ 549 $ 725,129 $ 177 $ 1,186,845

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Three Months Ended

September 30,

Six Months Ended

OPERATING ACTIVITIES:

6 unchanged sentences

Share of loss (income) from equity investee 2,240 ( 627 )

Foreign currency exchange (gain) loss ( 9,203 ) 45

Foreign currency exchange (gain) ( 4,614 ) ( 2,738 )

Deferred income taxes, net ( 25,812 ) 1,451

1 unchanged sentence

Changes in operating assets and liabilities:

Accounts receivable, net (including changes in related party balances of $( 1,851 ) and $( 5,315 ) during the three months ended September 30, 2022 and 2021, respectively)

Accounts receivable, net (including changes in related party balances of $ 3,178 and $( 25,854 ) during the six months ended December 31, 2022 and 2021, respectively)

68,035 ( 33,491 )

Inventories 98,366 ( 356,399 )

Prepaid expenses and other assets (including changes in related party balances of $( 10,139 ) and $( 2,446 ) during the three months ended September 30, 2022 and 2021, respectively)

Prepaid expenses and other assets (including changes in related party balances of $( 22,925 ) and $( 11,165 ) during the six months ended December 31, 2022 and 2021, respectively)

518 ( 24,481 )

Accounts payable (including changes in related party balances of $ 6,674 and $ 7,658 during the three months ended September 30, 2022 and 2021, respectively)

Accounts payable (including changes in related party balances of $ 751 and $ 25,940 during the six months ended December 31, 2022 and 2021, respectively)

( 90,908 ) 83,188

1 unchanged sentence

Deferred revenue 46,243 50,235

Accrued liabilities (including changes in related party balances of $ 9,585 and $ 1,575 during the three months ended September 30, 2022 and 2021, respectively)

Other long-term liabilities (including changes in related party balances of $( 105 ) and $ 0 during the three months ended September 30, 2022 and 2021, respectively)

Accrued liabilities (including changes in related party balances of $ 851 and $ 1,501 during the six months ended December 31, 2022 and 2021, respectively)

( 44,092 ) ( 2,507 )

Other long-term liabilities (including changes in related party balances of $( 168 ) and $ 0 during the six months ended December 31, 2022 and 2021, respectively)

( 3,040 ) ( 7,417 )

Net cash provided by (used in) operating activities 474,674 ( 187,722 )

INVESTING ACTIVITIES:

Purchases of property, plant and equipment (including payments to related parties of $ 729 and $ 400 during the three months ended September 30, 2022 and 2021, respectively)

Purchases of property, plant and equipment (including payments to related parties of $ 4,514 and $ 1,770 during the six months ended December 31, 2022 and 2021, respectively)

( 20,631 ) ( 23,206 )

9 unchanged sentences

Effect of exchange rate fluctuations on cash ( 1,693 ) ( 9 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 29,813 ) 37,778

Net increase in cash, cash equivalents and restricted cash 36,529 15,136

Cash, cash equivalents and restricted cash at the beginning of the period 268,559 233,449

Cash, cash equivalents and restricted cash at the end of the period $ 305,088 $ 248,585

SMCI | Q1 2023 Form 10-Q | 5

Supplemental disclosure of cash flow information:

Cash paid for interest $ 6,084 $ 1,765

SMCI | Q2 2023 Form 10-Q | 6

Cash paid for taxes, net of refunds $ 96,156 $ 7,270

Non-cash investing and financing activities:

Unpaid property, plant and equipment purchases (including due to related parties of $ 3,782 and $ 1,360 as of September 30, 2022 and 2021, respectively)

Unpaid property, plant and equipment purchases (including due to related parties of $ 1,764 and $ 2,312 as of December 31, 2022 and 2021, respectively)

$ 3,333 $ 11,140

13 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 months ended September 30, 2022 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2023.

The consolidated results of operations for the three and six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2023.

Concentration of Supplier Risk

1 unchanged sentence

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

Two suppliers accounted for 16.1 % and 25.7 % of total purchases for the three months ended September 30, 2022, and two suppliers accounted for 20.1 % and 6.3 % of total purchases for the three months ended September 30, 2021.

Purchases from Ablecom, and Compuware, related parties of the Company (see Part I, Item 1, Note 8, "Related Party Transactions") accounted for a combined 6.4 % and 9.6 % of total cost of sales for the three months ended September 30, 2022 and 2021, respectively.

Two suppliers accounted for 14.1 % and 17.6 % of total purchases for the three months ended December 31, 2022, and two suppliers accounted for 22.1 % and 6.5 % of total purchases for the three months ended December 31, 2021.

Two suppliers accounted for 15.3 % and 22.3 % of total purchases for the six months ended December 31, 2022, and two suppliers accounted for 21.2 % and 6.4 % of total purchases for the six months ended December 31, 2021.

Purchases from Ablecom, and Compuware, related parties of the Company (see Part I, Item 1, Note 8, "Related Party Transactions") accounted for a combined 6.7 % and 9.4 % of total cost of sales for the three months ended December 31, 2022 and 2021, respectively, and a combined 6.6 % and 9.5 % of total cost of sales for the six months ended December 31, 2022 and 2021, 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.

One customer accounted for 21.9 % of the net sales for the three months ended September 30, 2022 and no single customer accounted for 10% or more of the net sales for the three months ended September 30, 2021.

Two customers accounted for greater than 10% of the Company's accounts receivable, net as of September 30, 2022 which accounted for 11.0 % and 10.3 %.

No single customer accounted for 10% or more of the net sales for the three months ended December 31, 2022, and one customer accounted for 15.8 % of the net sales for the six months ended December 31, 2022.

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

No single customer accounted for greater than 10% of the Company's accounts receivable, net as of December 31, 2022.

One customer accounted for 21.7 % of the Company's accounts receivable, net as of June 30, 2022.

9 unchanged sentences

The amendments in this update do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022 that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship.

The amendments are effective for all entities through December 31, 2022.

The amendment is effective for all entities through December 31, 2022.

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

In April 2022, FASB issued a proposed accounting standard update for the deferral of the sunset date of Topic 848 and amendments to the definition of secured overnight financing rate (“SOFR").

The proposed amendment defers the sunset date of Topic 848 to December 31, 2024.

In December 2022, FASB issued an Accounting Standards Update (ASU) for the deferral of the sunset date of Topic 848 and amendments to the definition of secured overnight financing rate (“SOFR").

The ASU defers the sunset date of Topic 848 to December 31, 2024.

The Company has loans and lines of credit with various financial institutions.

Benchmark interest rates are used to calculate the interest on borrowings under the Chang Hwa Bank, CTBC, HSBC, Mega Bank Credit Facilities.

Benchmark interest rates are used to calculate the interest on borrowings under the Chang Hwa Bank, CTBC, HSBC and Mega Bank Credit Facilities.

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

8 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Server and storage systems $ 1,660,931 $ 986,052 $ 3,373,987 $ 1,835,908

7 unchanged sentences

International net sales are based on the country and geographic region to which the products were shipped.

The following is a summary for the three months ended September 30, 2022 and 2021, of net sales by geographic region (in thousands):

The following is a summary for the three and six months ended December 31, 2022 and 2021, of net sales by geographic region (in thousands):

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

United States $ 1,091,391 $ 638,207 $ 2,386,895 $ 1,199,155

12 unchanged sentences

Additionally, at times, deferred revenue may fluctuate due to the timing of advance consideration received from non-cancellable non-refundable contract liabilities relating to the sale of future products.

Revenue recognized during the three months ended September 30, 2022, which was included in the deferred revenue balance as of June 30, 2022, of $ 233.8 million, was $ 33.5 million.

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

Revenue recognized during the three and six months ended December 31, 2022, which was included in the deferred revenue balance as of June 30, 2022, of $ 233.8 million, was $ 27.5 million and $ 61.0 million, respectively.

Deferred revenue increased $ 46.2 million as of December 31, 2022 as compared to the fiscal year ended June 30, 2022 and was mainly due to the deferral on invoiced amounts for service contracts during the period exceeded the recognition of revenue from contracts entered into in prior periods.

The service contracts deferral increase was offset partly by a $ 2.4 million decrease in non-cancellable non-refundable advance consideration or cash consideration received from customers which preceded the Company's satisfaction of the associated performance obligations relating to product sales expected to be fulfilled in the next 12 months.

Transaction Price Allocated to the Remaining Performance Obligations

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 September 30, 2022 was $ 319.8 million .

The value of the transaction price allocated to remaining performance obligations as of December 31, 2022 was $ 280.0 million .

The Company expects to recognize approximately 43 % 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 months ended September 30, 2022 and 2021 (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 six months ended December 31, 2022 and 2021 (in thousands, except per share amounts):

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Net income $ 176,167 $ 41,932 $ 360,583 $ 67,369

4 unchanged sentences

Diluted net income per common share $ 3.14 $ 0.78 $ 6.51 $ 1.27

For the three months ended September 30, 2022 and 2021, the Company had stock options, restricted stock units ("RSUs") and performance based restricted stock units ("PRSUs") outstanding that could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted net income per share in the periods presented, as their effect would have been anti-dilutive.

The anti-dilutive common share equivalents resulting from outstanding equity awards were 307,395 and 694,211 for the three months ended September 30, 2022 and 2021, respectively.

For the three and six months ended December 31, 2022 and 2021, the Company had stock options, restricted stock units ("RSUs") and performance based restricted stock units ("PRSUs") outstanding that could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted net income per share in the periods presented, as their effect would have been anti-dilutive.

The anti-dilutive common share equivalents resulting from outstanding equity awards were 211,729 and 419,423 for the three months ended December 31, 2022 and 2021, respectively, and 259,562 and 1,501,560 for the six months ended December 31, 2022 and 2021, respectively.

SMCI | Q2 2023 Form 10-Q | 11

3 unchanged sentences

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

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

Finished goods $ 972,150 $ 1,025,555

2 unchanged sentences

Total inventories $ 1,421,817 $ 1,545,606

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

During the three and six months ended December 31, 2022, the Company recorded a net provision for excess and obsolete inventory to cost of sales totaling $ 15.8 million and $ 25.4 million, respectively, and $ 0.2 million and $ 3.7 million, for the three and six months ended December 31, 2021, respectively.

The Company classifies subsystems and accessories that may be sold separately or incorporated into systems as finished goods.

Prepaid Expenses and Other Current Assets:

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

Other receivables (1)

4 unchanged sentences

Restricted cash — 251

Others 5,516 6,948

Other 5,757 6,948

Total prepaid expenses and other current assets $ 154,924 $ 158,799

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

(1) Other receivables are receivables from contract manufacturers based on certain buy-sell arrangements of $ 116.3 million and $ 98.9 million as of December 31, 2022 and June 30, 2022, respectively.

Cash, Cash Equivalents and Restricted Cash:

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

Cash and cash equivalents $ 304,595 $ 267,397

6 unchanged sentences

Property, Plant, and Equipment:

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

Buildings $ 143,496 $ 143,509

9 unchanged sentences

Other Assets:

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

Operating lease right-of-use asset $ 20,827 $ 23,679

1 unchanged sentence

Prepaid expense, non-current 1,935 2,011

Investment in auction rate security 1,590 1,590

Deposits 1,685 1,069

Investment in auction rate security 1,590 1,590

Restricted cash, non-current 493 911

Others 1,897 1,956

Other 1,841 1,956

Total other assets $ 37,246 $ 37,532

Accrued Liabilities:

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

Accrued payroll and related expenses $ 51,400 $ 57,736

6 unchanged sentences

Accrued professional fees 2,497 4,281

Others 34,461 35,637

Other 31,636 35,637

Total accrued liabilities $ 169,866 $ 212,419

13 unchanged sentences

As such, there is no further transaction thereafter.

The benefit recognized during the three months ended September 30, 2022 and 2021 was none and $ 1.6 million, respectively.

There was no benefit recognized during the three and six months ended December 31, 2022.

The benefit recognized during the three and six months ended December 31, 2021 was none and $ 1.6 million, respectively.

Other Long-term Liabilities:

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

Accrued unrecognized tax benefits including related interests and penalties, non-current $ 18,315 $ 18,866

5 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Balance, beginning of the period $ 12,703 $ 12,233 $ 12,136 $ 12,863

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s investment in an auction rate security is classified within Level 3 of the fair value hierarchy as the determination of its fair value was not based on observable inputs as of September 30, 2022 and June 30, 2022.

The Company is using the discounted cash flow method to estimate the fair value of the auction rate security at each period end and the following assumptions:

2 unchanged sentences

Financial Assets and Liabilities Measured on a Recurring Basis

The following table sets forth the Company’s financial instruments as of September 30, 2022 and June 30, 2022, 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 December 31, 2022 and June 30, 2022, which are measured at fair value on a recurring basis by level within the fair value hierarchy.

These are classified based on the lowest level of input that is significant to the fair value measurement (in thousands):

September 30, 2022 Level 1 Level 2 Level 3 Asset at

December 31, 2022 Level 1 Level 2 Level 3 Asset at

Money market funds (1)

9 unchanged sentences

Total assets measured at fair value $ 20,220 $ 832 $ 1,590 $ 22,642

(1) $ 20.4 million and $ 20.0 million in money market funds are included cash and cash equivalents and $ 0.2 million and $ 0.2 million in money market funds are included in restricted cash, non-current in other assets in the condensed consolidated balance sheets as of September 30, 2022 and June 30, 2022, respectively.

(2) $ 0.2 million and $ 0.2 million in certificates of deposit are included in cash and cash equivalents, $ 0.1 million and $ 0.3 million in certificates of deposit are included in prepaid expenses and other assets, and $ 0.3 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 September 30, 2022 and June 30, 2022, respectively.

(1) $ 20.3 million and $ 20.0 million in money market funds are included cash and cash equivalents and $ 0.1 million and $ 0.2 million in money market funds are included in restricted cash, non-current in other assets in the condensed consolidated balance sheets as of December 31, 2022 and June 30, 2022, respectively.

On a quarterly basis, the Company also evaluates the current expected credit loss by co nsidering factors such as historical experience, market data, issuer-specific factors, and current economic conditions.

For the three months ended September 30, 2022, the credit losses related to the Company’s investments were not significant.

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

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

Based on this assessment during the three and six months ended December 31, 2022, there were no indications that the Company’s investments had credit losses.

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three and six months ended December 31, 2022 and 2021.

SMCI | Q2 2023 Form 10-Q | 15

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The following is a summary of the Company’s investment in an auction rate security as of December 31, 2022 and June 30, 2022 (in thousands):

Cost Basis Gross

1 unchanged sentence

Auction rate security $ 1,750 $ — $ ( 160 ) $ 1,590

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

No gain or loss was recognized in other comprehensive income for the auction rate security for the three and six months ended December 31, 2022 and 2021.

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

As of September 30, 2022 and June 30, 2022, total debt of $ 249.7 million and $ 596.8 million, respectively, was reported at amortized cost.

As of December 31, 2022 and June 30, 2022, total debt of $ 170.1 million and $ 596.8 million, respectively, was reported at amortized cost.

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

1 unchanged sentence

Other Financial Assets - Investments into Non-Marketable Equity Securities

The Company's non-marketable equity securities are investments in privately held companies without readily determinable fair values in the amount of $ 1.2 million as of September 30, 2022 and June 30, 2022.

The Company's non-marketable equity securities are investments in privately held companies without readily determinable fair values in the amount of $ 1.2 million as of December 31, 2022 and June 30, 2022.

The Company accounts for these investments at cost less impairment, if any, plus or minus changes from observable price changes in orderly transactions for the identical or similar investments by the same issuer.

During the three months ended September 30, 2022 and 2021, the Company did not record any upward or downward adjustments to the carrying values of the non-marketable equity securities related to observable price changes.

The Company also did not record any impairment to the carrying values of the non-marketable equity securities during the three months ended September 30, 2022 and 2021.

During the three and six months ended December 31, 2022 and 2021, the Company did not record any upward or downward adjustments to the carrying values of the non-marketable equity securities related to observable price changes.

The Company also did not record any impairment to the carrying values of the non-marketable equity securities during the three and six months ended December 31, 2022 and 2021.

SMCI | Q2 2023 Form 10-Q | 16

2 unchanged sentences

Short-term and Long-term Debt

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

September 30, June 30,

Short-term and long-term debt obligations as of December 31, 2022 and June 30, 2022 consisted of the following (in thousands):

December 31, June 30,

Line of credit:

3 unchanged sentences

2021 CTBC Credit Lines — 84,800

2022 CTBC Credit Line — —

HSBC Bank Credit Facility — 30,000

17 unchanged sentences

Activities under Revolving Lines of Credit and Term Loans

Available borrowings and interest rates as of September 30, 2022 and June 30, 2022 consisted of the following (in thousands except for percentages):

September 30, 2022 June 30, 2022

Available borrowings and interest rates as of December 31, 2022 and June 30, 2022 consisted of the following (in thousands except for percentages):

December 31, 2022 June 30, 2022

Available borrowings Interest rate Available borrowings Interest rate

4 unchanged sentences

2021 CTBC Credit Lines $ — — $ 20,200 1.80 % - 2.52 %

$ 20,200 1.80 % - 2.52 %

2022 CTBC Credit Line $ 105,000 3.33 %

Chang Hwa Bank Credit Facility $ 20,000 5.88 % $ 20,000 3.50 %

11 unchanged sentences

$ — 1.02 % - 1.22 %

The Company entered into a new General Credit Agreement with ESUN Bank during the three months ended September 30, 2022 with the following terms:

See “Part II.

Financial Statements and Supplementary Data – Note 9.

Short-term and Long-term Debt” of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 for a more complete description of the Company's credit facilities.

The Company entered into a new General Credit Agreement with ESUN Bank during the six months ended December 31, 2022 with the following terms:

SMCI | Q2 2023 Form 10-Q | 18

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2022 E.SUN Bank Credit Facility

On August 9, 2022 (the “New E.SUN Bank Effective Date”), the Company through its Taiwan subsidiary entered into a new General Credit Agreement with E.SUN Bank, which replaced the 2021 E.SUN Bank Credit Facility (the “New E.SUN Bank Credit Facility”).

On August 9, 2022 (the “New E.SUN Bank Effective Date”), the Company through Super Micro Computer Inc., Taiwan, a Taiwan corporation and wholly-owned subsidiary of the Company (the “Taiwan Subsidiary”), entered into a new General Credit Agreement with E.SUN Bank, which replaced the 2021 E.SUN Bank Credit Facility (the “New E.SUN Bank Credit Facility”).

The New E.SUN Bank Credit Facility permits borrowings of up to (i) NTD 1.8 billion ($ 61.0 million U.S.

4 unchanged sentences

The Company is not a guarantor of the New E.SUN Bank Credit Facility.

SMCI | Q1 2023 Form 10-Q | 17

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Terms for specific drawdown instruments issued under the New E.SUN Bank Credit Facility, such as credit amount, term of use, mode of drawdown, specific lending rate, and other relevant terms, are to be set forth in Notifications and Confirmation of Credit Conditions (a “Notification and Confirmation”) negotiated with E.SUN Bank.

Under a Notification and Confirmation entered into on the New E.SUN Bank Effective Date, the Subsidiary and E.SUN Bank have agreed to both a medium term credit loan of NTD 680.0 million ($ 23.0 million U.S.

dollar equivalent) with a tenor of five years (the “Medium Term Loan”) and a drawdown of US $ 30.0 million under the E.SUN Bank Credit Facility for an import loan with a tenor of 120 days (the “Import O/A Loan”).

Under a Notification and Confirmation entered into on the New E.SUN Bank Effective Date, the Taiwan Subsidiary and E.SUN Bank have agreed to both a medium term credit loan of NTD 680.0 million ($ 23.0 million U.S.

dollar equivalent) with a tenor of five years (the “Medium Term Loan”) and a drawdown of US $ 30.0 million under the New E.SUN Bank Credit Facility for an import loan with a tenor of 120 days (the “Import O/A Loan”).

With respect to the Medium Term Loan, the period of use is between April 28, 2022 and April 28, 2023.

4 unchanged sentences

Drawdowns may be in amounts of up to 80 % of permitted Use of Proceeds expenses.

The Subsidiary is subject to various financial covenants in connection with the Medium Term Loan, including a current ratio, net debt to equity ratio, and interest coverage ratio.

The Taiwan Subsidiary is subject to various financial covenants in connection with the Medium Term Loan, including a current ratio, net debt to equity ratio, and interest coverage ratio.

The current Medium Term Loan and the prior medium term loan under the Prior E.SUN Bank Credit Facility shall not exceed in aggregate NTD 1.8 billion.

3 unchanged sentences

Neither the Medium Term Loan nor Import O/A loan are secured.

As of September 30, 2022 the amount outstanding under the Import O/A Loan was $ 16.4 million.

The interest rate as of September 30, 2022 was 1.495 % per annum.

As of September 30, 2022 and June 30, 2022, the amounts outstanding under the Import O/A Loan were $ 9.0 million and $ 7.8 million, respectively.

The interest rate as of September 30, 2022 and June 30, 2022 was 4.18 % and 1.81 % per annum, respectively.

As of September 30, 2022, the amount available for future borrowing under the Import O/A Loan was $ 21.0 million.

As of December 31, 2022, the amount outstanding under the Import O/A Loan was denominated in NTD and remeasured into US dollars of $ 55.8 million.

The interest rate as of December 31, 2022 was 1.62 % per annum.

As of December 31, 2022 and June 30, 2022, the amounts outstanding under the Import O/A Loan were $ 0.0 million and $ 7.8 million, respectively.

The interest rate as of December 31, 2022 and June 30, 2022 was 4.18 % and 1.81 % per annum, respectively.

As of December 31, 2022, the amount available for future borrowing under the Import O/A Loan was $ 30.0 million.

2022 CTBC Credit Line

Pursuant to banking practices in Taiwan to confirm loan agreements annually, on October 3, 2022, the Company through the Taiwan Subsidiary entered into an Agreement for Individually Negotiated Terms and Conditions with CTBC Bank Co., Ltd.

(“CTBC Bank”) (such credit line, the “2022 CTBC Credit Line”) related to the prior 2021 CTBC credit lines (the “2021 CTBC Credit Lines”).

The terms of the 2022 CTBC Credit Line remain substantially similar to the 2021 CTBC Credit Line, except the 2022 CTBC Credit Line made certain minor amendments to the monthly interest payment date.

The total borrowing cap under the whole arrangement is $ 105.0 million and NTD 1,550.0 million ($ 55.4 million U.S.

dollar equivalent).

SMCI | Q2 2023 Form 10-Q | 19

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company, through the Taiwan Subsidiary, was party to that certain credit agreement, dated May 6, 2020, with CTBC Bank, which provided for a ten-year , non-revolving term loan facility (the “2020 CTBC Term Loan Facility”) to obtain up to NTD 1,200.0 million ($ 40.7 million U.S.

dollar equivalent).

As of December 31, 2022 and June 30, 2022, the amounts outstanding under the 2020 CTBC Term Loan Facility were $ 38.9 million and $ 40.4 million, respectively.

The interest rates for these loans were 1.075 % per annum as of December 31, 2022 and 0.825 % as of June 30, 2022.

The 2021 Credit Lines permitted borrowings, from time to time, pursuant to (i) a term loan facility of up to NTD 1,550.0 million ($ 55.4 million U.S.

dollar equivalent) including the previously-existing ten-year , non-revolving term loan facility of NTD 1,200.0 million ($ 42.9 million U.S.

dollar equivalent) and a new 75-month , non-revolving term loan facility of NTD 350.0 million ($ 12.5 million U.S.

dollar equivalent) to use to purchase machinery and equipment for the Company’s Bade Manufacturing Facility located in Taiwan (the “2021 CTBC Machine Loan”), and (ii) a line of credit facility of up to $ 105.0 million (the “2021 CTBC Credit Facility”).

As of December 31, 2022 and June 30, 2022, under the 2021 CTBC Machine Loan, the amounts outstanding were $ 5.5 million and $ 5.5 million, respectively.

The interest rates for these loans were 1.275 % per annum as of December 31, 2022 and 1.025 % as of June 30, 2022.

The 2021 CTBC Credit Facility term loan was repaid on October 26, 2021.

As of December 31, 2022 and June 30, 2022, the outstanding borrowings under the 2021 CTBC Credit Facility revolving line of credit were none and $ 84.8 million, respectively.

The interest rates for these loans was 3.33 % per annum as of December 31, 2022 and ranged from 1.80 % to 2.52 % as of June 30, 2022.

As of December 31, 2022, the amount available for future borrowing under the 2022 CTBC Credit Line was $ 105 million.

As of December 31, 2022, the net book value of land and building located in Bade, Taiwan, collateralizing the 2022 CTBC Credit Line was $ 76.1 million.

The Company was in compliance with all financial covenants under 2022 CTBC Credit Line as of December 31, 2022.

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

8 unchanged sentences

The Company leases offices, warehouses and other premises, vehicles and certain equipment leased under non-cancelable operating leases.

Operating lease expense recognized and supplemental cash flow information related to operating leases for the three months ended September 30, 2022 and 2021 were as follows (in thousands):

Operating lease expense recognized and supplemental cash flow information related to operating leases for the three and six months ended December 31, 2022 and 2021 were as follows (in thousands):

Three Months Ended

September 30,

Operating lease expense (including expense for lease agreements with related parties of $ 143 and $ 246 for the three months ended September 30, 2022 and 2021, respectively)

December 31, Six Months Ended

2022 2021 2022 2021

Cash payments for operating leases (including payments to related parties of $ 130 and $ 279 for the three months ended September 30, 2022 and 2021, respectively)

Operating lease expense (including expense for lease agreements with related parties of $ 140 and $ 284 for the three and six months ended December 31, 2022, respectively, and $ 179 and $ 425 for the three and six months ended December 31, 2021, respectively)

$ 2,115 $ 1,983 $ 4,225 $ 4,166

Cash payments for operating leases (including payments to related parties of $ 127 and $ 257 for the three and six months ended December 31, 2022, respectively, and $ 211 and $ 490 for the three and six months ended December 31, 2021, respectively)

$ 2,025 $ 2,008 $ 4,063 $ 4,213

New operating lease assets obtained in exchange for operating lease liabilities $ 274 $ 1,260 $ 1,024 $ 7,379

During the three months ended September 30, 2022 and 2021, the Company's costs related to short-term lease arrangements for real estate and non-real estate assets were immaterial.

Non-lease variable payments expensed in the three months ended September 30, 2022 and 2021 were immaterial .

As of September 30, 2022, the weighted average remaining lease term for operating leases was 3.6 years and the weighted average discount rate was 3.0 %.

Maturities of operating lease liabilities under noncancelable operating lease arrangements as of September 30, 2022 were as follows (in thousands):

During the three and six months ended December 31, 2022 and 2021, the Company's costs related to short-term lease arrangements for real estate and non-real estate assets were immaterial.

Non-lease variable payments expensed in the three and six months ended December 31, 2022 were $ 0.4 million and $ 0.9 million, respectively.

Non-lease variable payments expensed in the three and six months ended December 31, 2021 were $ 0.2 million and $ 0.5 million, respectively.

As of December 31, 2022, the weighted average remaining lease term for operating leases was 3.4 years and the weighted average discount rate was 2.9 %.

Maturities of operating lease liabilities under noncancelable operating lease arrangements as of December 31, 2022 were as follows (in thousands):

Maturities of operating leases

Remainder of 2023 $ 4,168

2028 and beyond 535

2 unchanged sentences

Present value of operating lease liabilities $ 21,041

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

As of December 31, 2022, commitments under short-term lease arrangements, and operating and financing leases that have not yet commenced were immaterial.

The Company has entered into lease agreements with related parties.

9 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 September 30, 2022.

Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors 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 88.4 % and 92.5 % of the chassis included in the products sold by the Company during the three months ended September 30, 2022 and 2021, respectively.

Ablecom manufactured approximately 95.5 % and 88.3 % of the chassis included in the products sold by the Company during the three months ended December 31, 2022 and 2021, respectively, and 91.8 % and 90.3 % of the chassis included in the products sold by the Company during the six months ended December 31, 2022 and 2021, respectively.

With respect to design activities, Ablecom generally agrees to design certain agreed-upon products according to the Company’s specifications, and further agrees to build the tools needed to manufacture the products.

7 unchanged sentences

The Company’s exposure to financial loss as a result of its involvement with Ablecom is limited to potential losses on its purchase orders in the event of an unforeseen decline in the market price and/or demand of the Company’s products such that the Company incurs a loss on the sale or cannot sell the products.

Outstanding cancellable and non-cancellable purchase orders from the Company to Ablecom on September 30, 2022 were $ 37.1 million and $ 28.7 million, respectively, and outstanding cancellable and non-cancellable purchase orders from the Company to Ablecom on June 30, 2022 were $ 39.5 million and $ 36.0 million, respectively, effectively representing the exposure to financial loss.

Outstanding cancellable and non-cancellable purchase orders from the Company to Ablecom on December 31, 2022 were $ 27.4 million and $ 26.8 million, respectively, and outstanding cancellable and non-cancellable purchase orders from the Company to Ablecom on June 30, 2022 were $ 39.5 million and $ 36.0 million, respectively, effectively representing the exposure to financial loss.

The Company does not directly or indirectly guarantee any obligations of Ablecom, or any losses that the equity holders of Ablecom may suffer.

Since Ablecom manufactures substantially all the chassis that the Company incorporates into its products, if Ablecom were to suddenly be unable to manufacture chassis for the Company, the Company’s business could suffer if the Company is unable to quickly qualify substitute suppliers who can supply high-quality chassis to the Company in volume and at acceptable prices.

Dealings with Compuware

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

Compuware assumes the responsibility to install the Company's products at the site of the end customer, if required, and administers customer support in exchange for a discount from the Company's standard price for its purchases.

SMCI | Q2 2023 Form 10-Q | 22

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Dealings with Compuware

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 cancellable and non-cancellable purchase orders from the Company to Compuware on September 30, 2022 were $ 198.9 million and $ 69.0 million, respectively, and outstanding cancellable and non-cancellable purchase orders from the Company to Compuware on June 30, 2022 were $ 213.3 million and $ 44.3 million, respectively, effectively representing the exposure to financial loss.

Outstanding cancellable and non-cancellable purchase orders from the Company to Compuware on December 31, 2022 were $ 170.2 million and $ 70.1 million, respectively, and outstanding cancellable and non-cancellable purchase orders from the Company to Compuware on June 30, 2022 were $ 213.3 million and $ 44.3 million, respectively, effectively representing the exposure to financial loss.

The Company does not directly or indirectly guarantee any obligations of Compuware, or any losses that the equity holders of Compuware may suffer.

5 unchanged sentences

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

As of September 30, 2022 and June 30, 2022, the Company had no unamortized deferred gain balance in accrued liabilities and none in other long-term liabilities in the Company’s condensed consolidated balance sheets.

As of December 31, 2022 and June 30, 2022, the Company had no unamortized deferred gain balance in accrued liabilities and none in other long-term liabilities in the Company’s condensed consolidated balance sheets.

SMCI | Q2 2023 Form 10-Q | 23

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company monitors the investment for events or circumstances indicative of potential impairment and makes appropriate reductions in carrying values if it determines that an impairment charge is required.

3 unchanged sentences

The Company has concluded that the Corporate Venture is in compliance with the new restrictions.

The Company does not believe that the equity investment carrying value is impacted as of September 30, 2022.

No impairment charge was recorded for the three months ended September 30, 2022 or 2021.

SMCI | Q1 2023 Form 10-Q | 21

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company sold products worth $ 11.6 million and $ 15.2 million to the Corporate Venture for the three months ended September 30, 2022 and 2021, respectively, and the Company’s share of intra-entity profits on the products that remained unsold by the Corporate Venture as of September 30, 2022 and June 30, 2022 have been eliminated and have reduced the carrying value of the Company’s investment in the Corporate Venture.

The Company does not believe that the equity investment carrying value is impacted as of December 31, 2022.

No impairment charge was recorded for the three and six months ended December 31, 2022 or 2021.

The Company sold products worth $ 6.0 million and $ 38.3 million to the Corporate Venture during the three months ended December 31, 2022 and 2021, respectively, and sold products worth $ 17.3 million and $ 53.5 million to the Corporate Venture during the six months ended December 31, 2022 and 2021, respectively.

The Company’s share of intra-entity profits on the products that remained unsold by the Corporate Venture as of December 31, 2022 and June 30, 2022 have been eliminated and have reduced the carrying value of the Company’s investment in the Corporate Venture.

To the extent that the elimination of intra-entity profits reduces the investment balance below zero, such amounts are recorded within accrued liabilities.

The Company had $ 9.4 million and $ 8.0 million due from the Corporate Venture in accounts receivable, net as of September 30, 2022 and June 30, 2022, respectively.

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

The Company had $ 5.0 million and $ 8.0 million due from the Corporate Venture in accounts receivable, net as of December 31, 2022 and June 30, 2022, respectively.

The Company had the following balances related to transactions with its related parties as of December 31, 2022 and June 30, 2022 (in thousands):

Ablecom Compuware Corporate Venture Total

September 30, 2022 June 30, 2022 September 30, 2022 June 30, 2022 September 30, 2022 June 30, 2022 September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022 December 31, 2022 June 30, 2022 December 31, 2022 June 30, 2022 December 31, 2022 June 30, 2022

Accounts receivable $ 2 $ 2 $ 267 $ 404 $ 4,951 $ 7,992 $ 5,220 $ 8,398

6 unchanged sentences

(2) Includes current portion of operating lease liabilities included in other current liabilities.

The Company's results from transactions with its related parties for each of the three months ended September 30, 2022 and 2021, are as follows (in thousands):

The Company's results from transactions with its related parties for each of the three months ended December 31, 2022 and 2021, are as follows (in thousands):

Ablecom Compuware Corporate Venture MPS (1)

Three months ended September 30, Three months ended September 30, Three months ended September 30, Three months ended September 30, Three months ended September 30,

Three months ended December 31, Three months ended December 31, Three months ended December 31, Three months ended December 31, Three months ended December 31,

2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s cash flow impact from transactions with its related parties for each of the three months ended September 30, 2022 and 2021, are as follows (in thousands):

The Company's results from transactions with its related parties for each of the six months ended December 31, 2022 and 2021, are as follows (in thousands):

Ablecom Compuware Corporate Venture MPS (1)

Three months ended September 30, Three months ended September 30, Three months ended September 30, Three months ended September 30, Three months ended September 30,

Six months ended December 31, Six months ended December 31, Six months ended December 31, Six months ended December 31, Six months ended December 31,

2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

Net sales $ 3 $ 10 $ 27,872 $ 19,004 $ 17,251 $ 53,524 $ — $ — $ 45,126 $ 72,538

Purchases - inventory $ 94,562 $ 98,309 $ 100,717 $ 82,050 $ — $ — $ — $ 4,056 $ 195,279 $ 184,415

Purchases - other miscellaneous items $ 7,526 $ 4,983 $ 537 $ 686 $ — $ — $ — $ — $ 8,063 $ 5,669

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

The Company’s cash flow impact from transactions with its related parties for each of the six months ended December 31, 2022 and 2021, are as follows (in thousands):

Ablecom Compuware Corporate Venture MPS (1)

Six months ended December 31, Six months ended December 31, Six months ended December 31, Six months ended December 31, Six months ended December 31,

2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

Changes in accounts receivable $ — $ 1 $ 137 $ ( 66 ) $ 3,041 $ ( 25,789 ) $ — $ — $ 3,178 $ ( 25,854 )

8 unchanged sentences

On November 8, 2021, Super Micro Computer Inc., Taiwan (the “Subsidiary”), a Taiwan corporation and wholly-owned subsidiary of the Company, entered into a Tripartite Agreement (the “Agreement”) with Ablecom and Compuware related to a three-way purchase of land.

While the Agreement is currently still in effect, Ablecom has advised that its underlying agreements to acquire land from the third-party landowners in proximity to the Company’s campus in Bade, Taiwan have been terminated.

Ablecom has advised that its underlying agreements to acquire land from the third-party landowners in proximity to the Company’s campus in Bade, Taiwan have been terminated, and during the quarter ended December 31, 2022, the Agreement was terminated.

SMCI | Q2 2023 Form 10-Q | 25

13 unchanged sentences

25 % at the end of one year and one sixteenth per quarter thereafter.

As of September 30, 2022, the Company had 3,095,739 authorized shares available for future issuance under the 2020 Plan.

As of December 31, 2022, the Company had 2,711,240 authorized shares available for future issuance under the 2020 Plan.

Common Stock Repurchase

1 unchanged sentence

The share repurchase program is effective until January 31, 2024 or until the maximum amount of common stock is repurchased, whichever occurs first.

No shares were repurchased under any share repurchase programs during the three months ended September 30, 2022.

No shares were repurchased under any share repurchase programs during the three and six months ended December 31, 2022.

Determining Fair Value

10 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value of stock option grants for the three months ended September 30, 2022 and 2021 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 six months ended December 31, 2022 and 2021 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Risk-free interest rate 4.16 % - 4.25 %

Expected term 6.07 years 6.09 years

2.81 % - 4.25 %

0.81 % - 0.45 %

Expected term 6.07 years 6.09 years 6.07 years 6.09 years

Dividend yield — % — % — % — %

Volatility 51.64 % - 51.68 %

50.62 % - 51.68 %

49.69 % - 49.71 %

Weighted-average fair value $ 36.37 $ 17.94 $ 34.60 $ 17.59

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

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, 2022 and 2021 (in thousands):

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Cost of sales $ 1,486 $ 471 $ 2,370 $ 918

5 unchanged sentences

Stock-based compensation expense, net $ 13,600 $ 6,866 $ 23,275 $ 11,993

As of September 30, 2022, $ 14.5 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 3.20 years and $ 73.1 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.52 years.

As of December 31, 2022, $ 17.0 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 3.01 years and $ 78.8 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.63 years.

Additionally, as described below, $ 2.4 million of unrecognized compensation cost related to the 2021 CEO Performance Stock Option is expected to be recognized over a period of 1.50 years.

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Annualized Revenue Milestone Achievement Status Stock Price Milestone Achievement Status

(in billions)

The achievement status of the operational and stock price milestones as of December 31, 2022 was as follows:

Annualized Revenue Milestone (in billions) Achievement Status Stock Price Milestone Achievement Status

$ 4.0 Achieved $ 45 Achieved (1)

$ 4.8 Achieved $ 60 Achieved (2)

$ 5.8 Probable $ 75 Not yet achieved

$ 5.8 Achieved $ 75 Achieved (3)

$ 6.8 Probable $ 95 Not yet achieved

1 unchanged sentence

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

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

(3) The vesting of the third tranche of 200,000 option shares under the 2021 CEO Performance Stock Option representing one-fifth of such award was certified by the Company's Compensation Committee on January 4, 2023.

On the grant date, a Monte Carlo simulation was used to determine for each tranche (i) a fixed expense amount for such tranche and (ii) the future time when the market price milestone for such tranche was expected to be achieved, or its “expected market price milestone achievement time.” Separately, based on a subjective assessment of the Company’s future financial performance, each quarter, the Company will determine whether achievement is probable for each operational milestone that has not previously been achieved or deemed probable of achievement, and, if so, the future time when the Company expects to achieve that operational milestone, or its “expected operational milestone achievement time.” When the Company first determines that an operational milestone has become probable of being achieved, the Company will allocate the entire expense for the related tranche over the number of quarters between the grant date and the then-applicable “expected vesting time.” The “expected vesting time” at any given time is the later of (i) the expected operational milestone achievement time (if the related operational milestone has not yet been achieved) and (ii) the expected market price milestone achievement time (if the related market price milestone has not yet been achieved).

1 unchanged sentence

Each quarter thereafter, the Company will recognize the prorated portion of the then-remaining expense for the tranche based on the number of quarters between such quarter and the then-applicable expected vesting time, except that upon vesting of a tranche, all remaining expenses for that tranche will be immediately recognized.

During the three months ended September 30, 2022 and 2021, the Company recognized compensation expense related to the 2021 CEO Performance Stock Option of $ 1.3 million and $ 0.9 million, respectively.

As of September 30, 2022 and June 30, 2022, the Company had $ 4.3 million and $ 5.6 million, respectively, in unrecognized compensation cost related to the 2021 CEO Performance Stock Option.

The unrecognized compensation cost as of September 30, 2022 is expected to be recognized over a period of more than 2.75 years.

During the three and six months ended December 31, 2022, the Company recognized compensation expense related to the 2021 CEO Performance Stock Option of $ 1.9 million and $ 3.2 million, respectively.

During the three and six months ended December 31, 2021, the Company recognized compensation expense related to the 2021 CEO Performance Stock Option of $ 2.9 million and $ 3.8 million, respectively.

As of December 31, 2022 and June 30, 2022, the Company had $ 2.4 million and $ 5.6 million, respectively, in unrecognized compensation cost related to the 2021 CEO Performance Stock Option.

The unrecognized compensation cost as of December 31, 2022 is expected to be recognized over a period of more than 1.50 years.

SMCI | Q2 2023 Form 10-Q | 28

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The following table summarizes stock option activity during the six months ended December 31, 2022 under all plans:

Outstanding Weighted

5 unchanged sentences

Forfeited/Cancelled ( 15,541 ) $ 25.10

Balance as of September 30, 2022 4,020,702 $ 31.79 5.77

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

Balance as of December 31, 2022 3,782,985 $ 33.93 5.89

Options vested and exercisable at December 31, 2022 2,302,409 $ 27.48 4.18

RSU and PRSU Activity

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

The award vests in two tranches and includes service and performance conditions.

Each tranche has 15,000 RSUs that vest in May 2021 and November 2021 based on service conditions only.

Additional units were earned based on revenue growth percentage in fiscal year 2020 compared to fiscal year 2019, which units vested in May 2021, and based on revenue growth percentage in fiscal year 2021 compared to fiscal year 2020, which units vested in November 2021.

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

An additional 2,939 units were earned for fiscal year 2021 that was vested on November 10, 2021.

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

The following table summarizes RSU and PRSU activity during the six months ended December 31, 2022 under all plans:

Time-Based RSUs

5 unchanged sentences

Forfeited ( 77,613 ) $ 38.22

Balance as of September 30, 2022 2,079,315 $ 39.63

Balance as of December 31, 2022 2,063,394 $ 43.49

SMCI | Q2 2023 Form 10-Q | 29

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company recorded a provision for income taxes of $ 38.9 million and $ 3.3 million for the three months ended September 30, 2022 and 2021, respectively.

The effective tax rate was 17.4 % and 11.7 % for the three months ended September 30, 2022 and 2021, respectively.

The effective tax rate for the three months ended September 30, 2022 is higher than that for the three months ended September 30, 2021, primarily due to significant increase in taxable income in the first quarter of fiscal year 2023, whereas the income tax deduction items such as R&D credit and foreign tax deduction comparably did not increase in the same proportion.

The Company recorded a provision for income taxes of $ 29.6 million and $ 68.5 million for the three and six months ended December 31, 2022, respectively, and $ 7.6 million and $ 10.9 million for the three and six months ended December 31, 2021, respectively.

The effective tax rate was 14.3 % and 15.9 % for the three and six months ended December 31, 2022, respectively, and 15.4 % and 14.1 % for the three and six months ended December 31, 2021, respectively.

The effective tax rate for the three months ended December 31, 2022 is lower than that for the three months ended December 31, 2021, primarily due to an increase in the tax deduction for stock compensation, and a tax reserve release in the three months ended December 31, 2022.

The effective tax rate for the six months ended December 31, 2022 is higher than that for the six months ended December 31, 2021, primarily due to the significant increase in taxable income in the first two quarters of fiscal year 2023, while the income tax deductions for items such as the R&D credit and foreign tax deduction in those quarters did not increase in the same proportion.

The Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development ("R&D") expenses in the year incurred and instead requires taxpayers to capitalize R&D expenses, including software development cost, and subsequently amortize such expenses over five years for R&D activities conducted in the United States and over fifteen years for R&D activities conducted outside of the United States beginning in the Company's fiscal year 2023.

Although Congress has considered legislation that would defer, modify, or repeal the capitalization and amortization requirement, there is no assurance the provision will be deferred, repealed, or otherwise modified.

As of September 30, 2022, the Company had gross unrecognized tax benefits of $ 41.7 million, of which, $ 23.9 million if recognized, would affect the Company's effective tax rate.

During the three months ended September 30, 2022, there was a $ 3.7 million increase in gross unrecognized tax benefits.

Although Congress has considered legislation that would defer, modify, and repeal the capitalization and amortization requirement, there is no assurance the provision will be deferred, repealed, or otherwise modified.

As of December 31, 2022, the Company had gross unrecognized tax benefits of $ 41.1 million, of which, $ 23.4 million if recognized, would affect the Company's effective tax rate.

During the six months ended December 31, 2022, there was a $ 3.9 million decrease in gross unrecognized tax benefits.

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 September 30, 2022, the Company had accrued $ 3.2 million of interest and penalties relating to unrecognized tax benefits.

As of December 31, 2022, the Company had accrued $ 3.3 million of interest and penalties relating to unrecognized tax benefits.

The Company believes that it has adequately provided reserves for all uncertain tax positions;

however, amounts asserted by tax authorities could be greater or less than the Company’s current position.

Accordingly, the Company’s provision on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or as the underlying matters are settled or otherwise resolved.

however, amounts that may be asserted by tax authorities could be greater or less than the Company's current position.

Accordingly, the Company's provision for federal, state, and foreign tax related matters to be recorded in the future may change as revised estimates are made or as the underlying matters are settled or otherwise resolved.

The federal statute of limitations remains open in general for tax years ended June 30, 2019 through 2022.

33 unchanged sentences

On May 25, 2022, the Court vacated the hearing on preliminary approval of the proposed settlement scheduled for June 2, 2022, stating that the unopposed motion was suitable for disposition without oral argument.

Consequently, the parties expect the Court will grant preliminary approval and calendar a future hearing for final approval.

All settlement funds have been transferred into an account controlled by the settlement’s escrow agent.

No settlement funds will be distributed until the Court grants final approval.

On November 8, 2022, the Court granted preliminary approval and calendared a hearing on March 2, 2023 for final approval.

This settlement, if finally approved by the Court, will fully resolve the action.

1 unchanged sentence

From time to time, the Company has been involved in various legal proceedings arising from the normal course of business activities.

The resolution of any such matters have not had a material impact on the Company’s consolidated financial condition, results of operations or liquidity as of September 30, 2022 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 December 31, 2022 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 September 30, 2022, these remaining noncancelable commitments were $ 512.3 million, including $ 97.7 million for related parties.

As of December 31, 2022, these remaining noncancelable commitments were $ 422.9 million, including $ 97.0 million for related parties.

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

6 unchanged sentences

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

September 30, June 30,

December 31, June 30,

Long-lived assets:

6 unchanged sentences

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