Super Micro Computer, Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosure About Market Risk Interest Rate Risk The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing the risk. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in money market funds and certificates of deposit, all of which are held for purposes other than trading. Our investment in an auction rate security has been classified as non-current due to the lack of a liquid market for these securities. Since our results of operations are not dependent on investments, the risk associated with fluctuating interest rates is limited to our investment portfolio, and we believe that a 10% change in interest rates would not have a significant impact on our results of operations. As of September 30, 2023, our investments were in money market funds, certificates of deposits and auction rate securities. We are exposed to changes in interest rates as a result of our borrowings under our term loans and revolving lines of credit. The interest rates for the term loans and the revolving lines of credit ranged from 1.2% to 7.5% at September 30, 2023 and 1.20% to 7.08% at June 30, 2023. Based on the outstanding principal indebtedness of $146.2 million under our credit facilities as of September 30, 2023, we believe that a 10% change in interest rates would not have a significant impact on our results of operations. Foreign Currency Risk To date, our international customer and supplier agreements have been denominated primarily in U.S. dollars and accordingly, we have limited exposure to foreign currency exchange rate fluctuations from customer agreements, and do not currently engage in foreign currency hedging transactions. The functional currency of our subsidiaries in the Netherlands and Taiwan is the U.S. dollar. However, certain loans and transactions in these entities are denominated in a currency other than the U.S. dollar, and thus we are subject to foreign currency exchange rate fluctuations associated with re-measurement to U.S. dollars. Realized and unrealized foreign exchange gain for the three months ended September 30, 2023 and 2022 was $7.5 million and $7.8 million, respectively. SMCI | Q1 2024 Form 10-Q | 35 Table of Contents