UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________________

Form 10-Q

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

For the quarterly period ended December 31, 2021

or

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

For the transition period from                      to                     

Commission File Number 001-33383

__________________________________________________________________________

Super Micro Computer, Inc.

(Exact name of registrant as specified in its charter)

Delaware	77-0353939
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

980 Rock Avenue

San Jose, CA 95131

(Address of principal executive offices, including zip code)

(408) 503-8000

(Registrant’s telephone number, including area code)

__________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	SMCI	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒ No  ☐    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of January 31, 2022 there were 51,563,316 shares of the registrant’s common stock, $0.001 par value, outstanding, which is the only class of common stock of the registrant issued.

SUPER MICRO COMPUTER, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED DECEMBER 31, 2021

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of December 31, 2021 and June 30, 2021	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 31, 2021 and 2020	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 31, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	48
ITEM 4.	Controls and Procedures	49
PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	50
ITEM 1A.	Risk Factors	50
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
ITEM 3.	Defaults Upon Senior Securities	50
ITEM 4.	Mine Safety Disclosures	50
ITEM 5.	Other Information	50
ITEM 6.	Exhibits	51
	Signatures	53

    Unless the context requires otherwise, the words “Super Micro,” “Supermicro,” “we,” “Company,” “us” and “our” in this document refer to Super Micro Computer, Inc. and where appropriate, our wholly owned subsidiaries. Supermicro, the Company logo and our other registered or common law trademarks, service marks, or trade names appearing in this Quarterly Report on Form 10-Q are the property of Super Micro Computer, Inc. or its affiliates. Other trademarks, service marks, or trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

PART I: FINANCIAL INFORMATION

Item 1.        Financial Statements

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 (unaudited) 

	December 31,		June 30,
	2021		2021
ASSETS
Current assets:
Cash and cash equivalents	$	247,407	$	232,266
Accounts receivable, net of allowances of $1,949 and $2,591 at December 31, 2021 and June 30, 2021, respectively (including accounts receivable from related parties of $34,532 and $8,678 at December 31, 2021 and June 30, 2021, respectively)	497,431		463,834
Inventories	1,393,672		1,040,964
Prepaid expenses and other current assets (including receivables from related parties of $35,002 and $23,837 at December 31, 2021 and June 30, 2021, respectively)	154,778		130,195
Total current assets	2,293,288		1,867,259
Investment in equity investee	4,459		4,578
Property, plant and equipment, net	280,282		274,713
Deferred income taxes, net	61,837		63,288
Other assets	36,736		32,126
Total assets	$	2,676,602	$	2,241,964
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable (including amounts due to related parties of $96,036 and $70,096 at December 31, 2021 and June 30, 2021, respectively)	$	695,180	$	612,336
Accrued liabilities (including amounts due to related parties of $20,029 and $18,528 at December 31, 2021 and June 30, 2021, respectively)	171,010		178,850
Income taxes payable	14,464		12,741
Short-term debt	176,904		63,490
Deferred revenue	142,021		101,479
Total current liabilities	1,199,579		968,896
Deferred revenue, non-current	110,531		100,838
Long-term debt	139,032		34,700
Other long-term liabilities	40,615		41,132
Total liabilities	1,489,757		1,145,566
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock and additional paid-in capital, $0.001 par value
Authorized shares: 100,000; Outstanding shares: 51,509 and 50,582 at December 31, 2021 and June 30, 2021, respectively
Issued shares: 51,509 and 50,582 at December 31, 2021 and June 30, 2021, respectively	460,990		438,012
Accumulated other comprehensive income	549		453
Retained earnings	725,129		657,760
Total Super Micro Computer, Inc. stockholders’ equity	1,186,668		1,096,225
Noncontrolling interest	177		173
Total stockholders’ equity	1,186,845		1,096,398
Total liabilities and stockholders’ equity	$	2,676,602	$	2,241,964

See accompanying notes to condensed consolidated financial statements.

1

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited) 

	Three Months Ended December 31,				Six Months Ended December 31,
	2021		2020		2021		2020
Net sales (including related party sales of $41,616 and $18,706 in the three months ended December 31, 2021 and 2020, respectively, and $72,538 and $38,421 in the six months ended December 31, 2021 and 2020, respectively)	$	1,172,419	$	830,306	$2,205,149		$1,592,556
Cost of sales (including related party purchases of $96,728 and $51,532 in the three months ended December 31, 2021 and 2020, respectively, and $184,415 and $110,392 in the six months ended December 31, 2021 and 2020, respectively)	1,008,676		694,211		1,903,267		1,326,546
Gross profit	163,743		136,095		301,882		266,010
Operating expenses:
Research and development	65,471		52,729		130,614		107,527
Sales and marketing	21,960		20,740		43,584		41,032
General and administrative	25,263		25,261		47,507		49,640
Total operating expenses	112,694		98,730		221,705		198,199
Income from operations	51,049		37,365		80,177		67,811
Other expense, net	(607)		(2,539)		(557)		(3,380)
Interest expense	(1,150)		(569)		(1,954)		(1,243)
Income before income tax provision	49,292		34,257		77,666		63,188
Income tax provision	(7,599)		(5,108)		(10,924)		(8,768)
Share of income (loss) from equity investee, net of taxes	239		(1,475)		627		(145)
Net income	$	41,932	$	27,674	$	67,369	$	54,275
Net income per common share:
Basic	$	0.82	$	0.54	$	1.32	$	1.05
Diluted	$	0.78	$	0.52	$	1.27	$	1.00
Weighted-average shares used in calculation of net income per common share:
Basic	51,314		51,499		51,055		51,914
Diluted	53,511		53,584		53,213		54,005

See accompanying notes to condensed consolidated financial statements.

2

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited) 

	Three Months Ended December 31,				Six Months Ended December 31,
	2021		2020		2021		2020
Net income	$	41,932	$	27,674	$	67,369	$	54,275
Other comprehensive income, net of tax:
Foreign currency translation gain	100		301		96		548
Total other comprehensive income	100		301		96		548
Total comprehensive income	$	42,032	$	27,975	$	67,465	$	54,823

See accompanying notes to condensed consolidated financial statements.

3

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

Three Months Ended December 31, 2021	Common Stock and Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at September 30, 2021	51,071,844	$	448,976	—	$	—	$	449	$	683,197	$	176	$	1,132,798
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
Foreign currency translation gain	—	—		—	—		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

Three Months Ended December 31, 2020	Common Stock and Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	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
Exercise of stock options, net of taxes	332,783	5,747		—	—		—		—		—		5,747
Release of common stock shares upon vesting of restricted stock units	193,017	—		—	—		—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(60,166)	(1,713)		—	—		—		—		—		(1,713)
Stock repurchases and retirement	(4,055,626)	(122)		2,475,419	50,491		—		(97,357)		—		(46,988)
Stock-based compensation	—	6,453		—	—		—		—		—		6,453
Foreign currency translation gain	—	—		—	—		301		—		—		301
Net income	—	—		—	—		—		27,674		4		27,678
Balance at December 31, 2020	50,651,054	$	410,522	—	$	—	$	396	$	653,129	$	173	$	1,064,220

4

Six Months Ended December 31, 2021	Common Stock and Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount		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)
Shares repurchase and retirement	—			—	—		—		—		—		—
Stock-based compensation	—	16,191		—	—		—		—		—		16,191
Foreign currency translation gain	—	—		—	—		96		—		—		96
Net income	—	—		—	—		—		67,369		4		67,373
Balance at December 31, 2021	51,508,616	$	460,990	—	$	—	$	549	$	725,129	$	177	$	1,186,845

Six Months Ended December 31, 2020	Common Stock and Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2020	53,741,828	$	389,972	(1,333,125)	$	(20,491)	$	(152)	$	696,211	$	167	$	1,065,707
Exercise of stock options, net of taxes	683,613	10,767		—	—		—		—		—		10,767
Release of common stock shares upon vesting of restricted stock units	410,536	—		—	—		—		—		—		—
Shares withheld for the withholding tax on vesting of restricted stock units	(129,297)	(3,718)		—	—		—		—		—		(3,718)
Share repurchase and retirement	(4,055,626)	(122)		1,333,125	20,491		—		(97,357)		—		(76,988)
Stock-based compensation	—	13,623		—	—		—		—		—		13,623
Foreign currency translation gain	—	—		—	—		548		—		—		548
Net income	—	—		—	—		—		54,275		6		54,281
Balance at December 31, 2020	50,651,054	$	410,522	—	$	—	$	396	$	653,129	$	173	$	1,064,220

See accompanying notes to condensed consolidated financial statements.

5

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended December 31,
	2021		2020
OPERATING ACTIVITIES:
Net income	$	67,369	$	54,275
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	15,681		14,427
Stock-based compensation expense	16,191		13,623
Recovery of allowance for doubtful accounts	(636)		(476)
Provision for excess and obsolete inventories	3,691		1,740
Share of (income) loss from equity investee	(627)		145
Foreign currency exchange (gain) loss	(2,738)		2,905
Deferred income taxes, net	1,451		(883)
Other	1,045		(699)
Changes in operating assets and liabilities:
Accounts receivable, net (including changes in related party balances of $(25,854) and $(6,304) during the six months ended December 31, 2021 and 2020, respectively)	(33,491)		81,156
Inventories	(356,399)		42,327
Prepaid expenses and other assets (including changes in related party balances of $(11,165) and $7,629 during the six months ended December 31, 2021 and 2020, respectively)	(24,481)		27,426
Accounts payable (including changes in related party balances of $25,940 and $(24,112) during the six months ended December 31, 2021 and 2020, respectively)	83,188		(25,296)
Income taxes payable	1,723		5,855
Deferred revenue	50,235		(8,864)
Accrued liabilities (including changes in related party balances of $1,501 and $(4,867) during the six months ended December 31, 2021 and 2020, respectively)	(2,507)		(20,619)
Other long-term liabilities (including changes in related party balances of $0 and $(1,671) during the six months ended December 31, 2021 and 2020, respectively)	(7,417)		(3,240)
Net cash provided by (used in) operating activities	(187,722)		183,802
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (including payments to related parties of $1,770 and $3,058 during the six months ended December 31, 2021 and 2020, respectively)	(23,206)		(25,551)
Investment in a privately-held company	(1,100)		—
Net cash used in investing activities	(24,306)		(25,551)
FINANCING ACTIVITIES:
Proceeds from borrowings, net of debt issuance costs	587,719		14,669
Repayment of debt	(367,295)		(537)
Proceeds from exercise of stock options, net of taxes	11,588		10,767
Payment of withholding tax on vesting of restricted stock units	(4,801)		(3,718)
Stock repurchases	—		(74,824)
Payments of obligations under finance leases	(38)		(54)
Net cash provided by (used in) by financing activities	227,173		(53,697)
Effect of exchange rate fluctuations on cash	(9)		540
Net increase in cash, cash equivalents and restricted cash	15,136		105,094
Cash, cash equivalents and restricted cash at the beginning of the period	233,449		212,390
Cash, cash equivalents and restricted cash at the end of the period	$	248,585	$	317,484

6

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,765	$	950
Cash paid for taxes, net of refunds	7,270		(698)
Non-cash investing and financing activities:
Unpaid property, plant and equipment purchases (including due to related parties of $2,312 and $3,056 as of December 31, 2021 and 2020, respectively)	$	11,140	$	11,596
Right of use ("ROU") assets obtained in exchange for operating lease commitments	7,379		2,693
Unpaid stock repurchases	—		2,164

See accompanying notes to condensed consolidated financial statements.

7

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.        Summary of Significant Accounting Policies

Significant Accounting Policies and Estimates

No material changes have been made to the significant accounting policies of Super Micro Computer, Inc., a corporation incorporated under the laws of Delaware, and its consolidated entities (together, the “Company”), disclosed in Note 1, "Organization and Summary of Significant Accounting Policies," in its Annual Report on Form 10-K, filed on August 27, 2021, for the year ended June 30, 2021. Management's estimates include, as applicable, the anticipated impacts of the coronavirus ("COVID-19") pandemic.

Basis of Presentation

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

The unaudited condensed consolidated financial statements included herein reflect all adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The consolidated results of operations for the three and six months ended December 31, 2021 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2022.

Concentration of Supplier Risk

Certain materials used by the Company in the manufacturing of its products are available from a limited number of suppliers. Shortages could occur in these materials due to an interruption of supply or increased demand in the industry. One supplier accounted for 26.9% and 20.0% of total purchases for the three months ended December 31, 2021 and 2020, respectively, and 23.1% and 20.9% of total purchases for the six months ended December 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 9.4% and 7.3% of total cost of sales for the three months ended December 31, 2021 and 2020, respectively, and a combined 9.5% and 8.2% of total cost of sales for the six months ended December 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, 2021 and 2020. No customer accounted for greater than 10% of the Company's accounts receivable, net as of December 31, 2021, whereas one customer accounted for 13.5% of accounts receivable, net as of June 30, 2021.

Accounting Pronouncements Recently Adopted

In December 2019, the FASB issued amended guidance, Simplifying the Accounting for Income Taxes, to remove certain exceptions to the general principles from ASC 740 - Income Taxes, and to improve consistent application of U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The guidance is effective for the Company from July 1, 2021. The adoption of the guidance did not have a material impact on its condensed consolidated financial statements and disclosures.

8

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued authoritative guidance, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.  The guidance also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. 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. LIBOR is used to calculate the interest on borrowings under the Company's 2018 Bank of America Credit Facility and E.SUN Credit Facility. The 2018 Bank of America Credit Facility was amended on June 28, 2021 which provided for a new maturity date of June 28, 2026 and fallback terms related to LIBOR replacement mechanics. As the amendment had changes not related to LIBOR replacement, optional expedients under this guidance cannot be elected. The Company is currently evaluating the overall impact of adoption of the guidance on its consolidated financial statements and disclosures.

Note 2.         Revenue

Disaggregation of Revenue

The Company disaggregates revenue by type of product and by geographical market in order to depict the nature, amount, and timing of revenue and cash flows. Service revenues, which are less than 10%, are not a significant component of total revenue, and are aggregated within the respective categories.

The following is a summary of net sales by product type (in thousands):

	Three Months Ended December 31,				Six Months Ended December 31,
	2021		2020		2021		2020
Server and storage systems	$	986,052	$	642,711	$	1,835,908	$	1,260,499
Subsystems and accessories	186,367		187,595		369,241		332,057
Total	$	1,172,419	$	830,306	$	2,205,149	$	1,592,556

Server and storage systems constitute an assembly and integration of subsystems and accessories, and related services. Subsystems and accessories are comprised of server boards, chassis and accessories.

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, 2021 and 2020, of net sales by geographic region (in thousands):

	Three Months Ended December 31,				Six Months Ended December 31,
	2021		2020		2021		2020
United States	$	638,207	$	463,102	$	1,199,155	$	959,188
Asia	284,107		161,415		547,193		288,121
Europe	215,451		154,819		395,145		266,908
Other	34,654		50,970		63,656		78,339
	$	1,172,419	$	830,306	$	2,205,149	$	1,592,556

Contract Balances

Generally, the payment terms of the Company’s offerings range from 30 to 60 days. In certain instances, customers may prepay for products and services in advance of delivery. Receivables relate to the Company’s unconditional right to consideration for performance obligations either partially or fully completed.

9

SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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

Contract liabilities consist of deferred revenue and relate to amounts invoiced to or advance consideration received from customers, which precede the Company’s satisfaction of the associated performance obligation(s). The Company’s deferred revenue primarily results from customer payments received upfront for extended warranties and on-site services because these performance obligations are satisfied over time. Additionally, at times, deferred revenue may fluctuate due to the timing of advance consideration received from non-cancellable non-refundable contract liabilities relating to the sale of future products. Revenue recognized during the three and six months ended December 31, 2021, which was included in the opening deferred revenue balance as of June 30, 2021 of $202.3 million, was $26.7 million and $56.7 million, respectively.

Deferred revenue increased $50.2 million as of December 31, 2021 as compared to the fiscal year ended June 30, 2021 of which $37.8 million was due to the increase in non-cancellable non-refundable advance consideration received from customers which precedes the Company's satisfaction of the associated performance obligations relating to product sales that the Company expects to fulfill in the next 12 months.

Transaction Price Allocated to the Remaining Performance Obligations

Remaining performance obligations represent in aggregate the amount of transaction price that has been allocated to performance obligations not delivered, or only partially undelivered, as of the end of the reporting period. The Company applies the exemption to not disclose information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less. These performance obligations generally consist of services, such as on-site services, including integration services and extended warranty services that are contracted for one year or less, and products for which control has not yet been transferred. The value of the transaction price allocated to remaining performance obligations as of December 31, 2021 was $252.6 million. The Company expects to recognize approximately 56% of remaining performance obligations as revenue in the next 12 months, and the remainder thereafter.

Capitalized Contract Acquisition Costs and Fulfillment Cost

Contract acquisition costs are those incremental costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. Contract acquisition costs consist primarily of incentive bonuses. Contract acquisition costs are considered incremental and recoverable costs of obtaining and fulfilling a contract with a customer and are therefore capitalizable. The Company applies the practical expedient to expense incentive bonus costs as incurred if the amortization period would be one year or less, generally upon delivery of the associated server and storage systems or components. Where the amortization period of the contract cost would be more than a year, the Company applies judgment in the allocation of the incentive bonus cost asset between hardware and service performance obligations and expenses the cost allocated to the hardware performance obligations upon delivery of associated server and storage systems or components and amortizes the cost allocated to service performance obligations over the period the services are expected to be provided. Contract acquisition costs allocated to service performance obligations that are subject to capitalization are insignificant to the Company’s condensed consolidated financial statements.

Contract fulfillment costs consist of costs paid in advance for outsourced services provided by third parties to the extent they are not in the scope of other guidance. Fulfillment costs paid in advance for outsourced services provided by third parties are capitalized and amortized over the period the services are expected to be provided. Such fulfillment costs are insignificant to the Company’s condensed consolidated financial statements.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 3.        Net Income Per Common Share

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

	Three Months Ended December 31,				Six Months Ended December 31,
	2021		2020		2021		2020
Numerator:
Net income	$	41,932	$	27,674	$	67,369	$	54,275
Denominator:
Weighted-average shares outstanding	51,314		51,499		51,055		51,914
Effect of dilutive securities	2,197		2,084		2,159		2,091
Weighted-average diluted shares	53,511		53,584		53,213		54,005
Basic net income per common share	$	0.82	$	0.54	$	1.32	$	1.05
Diluted net income per common share	$	0.78	$	0.52	$	1.27	$	1.00

For the three and six months ended December 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 419,423 and 1,040,890 for the three months ended December 31, 2021 and 2020, respectively, and 1,501,560 and 1,113,845 for the six months ended December 31, 2021 and 2020, respectively.

Note 4.        Balance Sheet Components

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

Inventories:

	December 31, 2021		June 30, 2021
Finished goods	$	923,702	$	761,694
Work in process	220,407		80,472
Purchased parts and raw materials	249,563		198,798
Total inventories	$	1,393,672	$	1,040,964

During the three and six months ended December 31, 2021, the Company recorded a net provision for excess and obsolete inventory to cost of sales totaling $0.2 million and $3.7 million, respectively, and $2.5 million and $1.7 million for the three and six months ended December 31, 2020. respectively. The Company classifies subsystems and accessories that may be sold separately or incorporated into systems as finished goods.

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Prepaid Expenses and Other Current Assets:

	December 31, 2021		June 30, 2021
Other receivables (1)	$	120,085	$	99,921
Prepaid income tax	13,686		12,288
Prepaid expenses	6,715		6,719
Deferred service costs	5,426		4,900
Restricted cash	251		251
Others	8,615		6,116
Total prepaid expenses and other current assets	$	154,778	$	130,195

__________________________

(1) Includes other receivables from contract manufacturers based on certain buy-sell arrangements of $99.5 million and $76.2 million as of December 31, 2021 and June 30, 2021, respectively.

Cash, cash equivalents and restricted cash:

	December 31, 2021		June 30, 2021
Cash and cash equivalents	$	247,407	$	232,266
Restricted cash included in prepaid expenses and other current assets	251		251
Restricted cash included in other assets	927		932
Total cash, cash equivalents and restricted cash	$	248,585	$	233,449

Property, Plant, and Equipment:

	December 31, 2021		June 30, 2021
Buildings	$	143,509	$	86,930
Land	84,616		76,421
Machinery and equipment	108,283		97,671
Building construction in progress (1)	303		87,438
Building and leasehold improvements	44,649		26,640
Software	23,178		22,592
Furniture and fixtures	32,602		22,843
	437,140		420,535
Accumulated depreciation and amortization	(156,858)		(145,822)
Property, plant and equipment, net	$	280,282	$	274,713

__________________________

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

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SUPER MICRO COMPUTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Other Assets:

	December 31, 2021		June 30, 2021
Operating lease right-of-use asset	$	23,622	$	20,047
Deferred service costs, non-current	5,896		5,421
Prepaid expense, non-current	1,914		1,973
Investment in auction rate security	1,556		1,556
Deposits	1,243		1,669
Restricted cash, non-current	927		932
Other	1,578		528
Total other assets	$	36,736	$	32,126

Accrued Liabilities:    

	December 31, 2021		June 30, 2021
Accrued payroll and related expenses	$	45,315	$	45,770
Contract manufacturing liabilities	41,049		45,319
Customer deposits	30,002		32,419
Accrued warranty costs	8,903		10,185
Accrued cooperative marketing expenses	8,459		5,652
Operating lease liability	6,431		6,322
Accrued professional fees	2,240		2,737
Other	28,612		30,446
Total accrued liabilities	$