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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 September 30, 2022
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
__________________________________________________________________________

smci-20220930_g1.jpg
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 classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareSMCINASDAQ 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 filerx  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 October 31, 2022 there were 52,922,886 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 SEPTEMBER 30, 2022

TABLE OF CONTENTS
 
  Page
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.

    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.


Table of Contents
PART I: FINANCIAL INFORMATION

Item 1.        Financial Statements

SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 (unaudited) 
September 30,June 30,
20222022
ASSETS
Current assets:
Cash and cash equivalents$238,268 $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)
736,312 834,513 
Inventories1,736,055 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)
169,245 158,799 
Total current assets2,879,880 2,806,315 
Investment in equity investee4,352 5,329 
Property, plant and equipment, net290,752 285,972 
Deferred income taxes, net89,155 69,929 
Other assets37,144 37,532 
Total assets$3,301,283 $3,205,077 
LIABILITIES AND STOCKHOLDERS’ EQUITY
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)
$785,025 $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)
213,521 212,419 
Income taxes payable68,411 41,743 
Short-term debt101,173 449,146 
Deferred revenue185,225 111,313 
Total current liabilities1,353,355 1,470,024 
Deferred revenue, non-current134,625 122,548 
Long-term debt148,551 147,618 
Other long-term liabilities 39,549 39,140 
Total liabilities1,676,080 1,779,330 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock and additional paid-in capital, $0.001 par value
Authorized shares: 100,000; Outstanding shares: 52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively
Issued shares: 52,851 and 52,311 at September 30, 2022 and June 30, 2022, respectively
497,183 481,741 
Accumulated other comprehensive income514 911 
Retained earnings1,127,339 942,923 
Total Super Micro Computer, Inc. stockholders’ equity1,625,036 1,425,575 
Noncontrolling interest167 172 
Total stockholders’ equity1,625,203 1,425,747 
Total liabilities and stockholders’ equity$3,301,283 $3,205,077 

See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2023 Form 10-Q | 1

Table of Contents
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited) 
 Three Months Ended
September 30,
 20222021
Net sales (including related party sales of $25,055 and $30,922 in the three months ended September 30, 2022 and 2021, respectively)
$1,852,130 $1,032,730 
Cost of sales (including related party purchases of $96,536 and $87,687 in the three months ended September 30, 2022 and 2021, respectively)
1,504,595 894,591 
Gross profit347,535 138,139 
Operating expenses:
Research and development 74,243 65,143 
Sales and marketing29,363 21,624 
General and administrative23,806 22,244 
Total operating expenses127,412 109,011 
Income from operations220,123 29,128 
Other income, net 8,054 50 
Interest expense(3,938)(804)
Income before income tax provision224,239 28,374 
Income tax provision(38,934)(3,325)
Share of (loss) income from equity investee, net of taxes(889)388 
Net income$184,416 $25,437 
Net income per common share:
Basic$3.51 $0.50 
Diluted$3.35 $0.48 
Weighted-average shares used in the calculation of net income per common share:
Basic52,598 50,796 
Diluted55,017 52,916 


See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2023 Form 10-Q | 2

Table of Contents
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited) 
 Three Months Ended
September 30,
 20222021
Net income$184,416 $25,437 
Other comprehensive loss, net of tax:
Foreign currency translation loss (397)(4)
Total other comprehensive (loss), net of tax(397)(4)
Total comprehensive income $184,019 $25,433 

See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2023 Form 10-Q | 3

Table of Contents
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)

Three Months Ended September 30, 2022Common Stock and
Additional Paid-In
Capital		Accumulated
Other
Comprehensive Income (Loss)		Retained
Earnings		Non-controlling InterestTotal
Stockholders’
Equity
SharesAmount
Balance at June 30, 202252,311,014 $481,741 $911 $942,923 $172 $1,425,747 
Exercise of stock options, net of taxes405,226 8,144 — — — 8,144 
Release of common stock shares upon vesting of restricted stock units193,532 — — — — — 
Shares withheld for the withholding tax on vesting of restricted stock units(58,303)(3,716)— — — (3,716)
Stock-based compensation— 11,014 — — — 11,014 
Other comprehensive loss— — (397)— — (397)
Net income (loss)— — — 184,416 (5)184,411 
Balance at September 30, 202252,851,469 $497,183 $514 $1,127,339 $167 $1,625,203 


Three Months Ended September 30, 2021Common Stock and
Additional Paid-In
Capital		Accumulated
Other
Comprehensive Income (Loss)		Retained
Earnings		Non-controlling InterestTotal
Stockholders’
Equity
SharesAmount
Balance at June 30, 202150,582,078 $438,012 $453 $657,760 $173 $1,096,398 
Exercise of stock options, net of taxes370,066 6,018 — — — 6,018 
Release of common stock shares upon vesting of restricted stock units173,771 — — — — — 
Shares withheld for the withholding tax on vesting of restricted stock units(54,071)(2,069)— — — (2,069)
Stock-based compensation— 7,015 — — — 7,015 
Other comprehensive loss— — (4)— — (4)
Net income— — — 25,437 3 25,440 
Balance at September 30, 202151,071,844 $448,976 $449 $683,197 $176 $1,132,798 



See accompanying notes to condensed consolidated financial statements.
SMCI | Q1 2023 Form 10-Q | 4

Table of Contents
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
September 30,
 20222021
OPERATING ACTIVITIES:
Net income$184,416 $25,437 
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation and amortization8,547 7,548 
Stock-based compensation expense11,014 7,015 
Allowance (recovery) for credit losses233 (124)
Provision for excess and obsolete inventories9,625 3,478 
Share of loss (income) from equity investee889 (388)
Foreign currency exchange (gain) loss(9,203)45 
Deferred income taxes, net(19,226)19 
Other(306)5 
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)
94,855 5,859 
Inventories(200,074)(147,087)
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)
(11,991)6,109 
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)
132,302 (54,343)
Income taxes payable26,668 1,532 
Deferred revenue85,989 13,115 
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)
8 (1,330)
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)
(159)(1,461)
Net cash provided by (used in) operating activities313,587 (134,571)
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)
(10,746)(10,802)
Investment in a privately-held company— (1,100)
Net cash used in investing activities(10,746)(11,902)
FINANCING ACTIVITIES:
Proceeds from borrowings79,141 269,806 
Repayment of debt(414,737)(89,476)
Proceeds from exercise of stock options, net of taxes8,144 6,018 
Payment of withholding tax on vesting of restricted stock units(3,716)(2,069)
Other(15)(17)
Net cash (used in) provided by financing activities(331,183)184,262 
Effect of exchange rate fluctuations on cash(1,472)(11)
Net (decrease) increase in cash, cash equivalents and restricted cash(29,813)37,778 
Cash, cash equivalents and restricted cash at the beginning of the period268,559 233,449 
Cash, cash equivalents and restricted cash at the end of the period$238,746 $271,227 
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Supplemental disclosure of cash flow information:
Cash paid for interest$4,076 $508 
Cash paid for taxes, net of refunds$27,274 $2,732 
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)
$6,599 $13,063 
Right of use ("ROU") assets obtained in exchange for operating lease commitments $750 $6,119 


See accompanying notes to condensed consolidated financial statements.

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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 Part II, Item 8, Note 1, "Organization and Summary of Significant Accounting Policies," in its Annual Report on Form 10-K, filed on August 29, 2022, for the year ended June 30, 2022. Management's estimates take into consideration, as applicable, general macroeconomic conditions, inflation, changes in interest rates and geopolitical events.

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 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.

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. 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.

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

Accounting Pronouncements Recently Adopted

There were no new pronouncements recently adopted.

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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 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. 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. 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. LIBOR was 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 to provide for a new maturity date of June 28, 2026 and fallback terms related to LIBOR replacement mechanics. On March 3, 2022, the 2018 Bank of America Credit Facility was amended to, among other items, increase the size of the facility from $200.0 million to $350.0 million and update provisions relating to payments and LIBOR replacement mechanics to SOFR. As these amendments had other contemporaneous changes to the facility, including the amount of borrowings permitted under the facility and not just directly related to LIBOR replacement, optional expedients under this guidance cannot be elected. The Company is currently evaluating the overall impact of the adoption of this guidance and does not expect it to have material impact on its consolidated financial statements and disclosures.

Note 2.         Revenue

Disaggregation of Revenue

The Company disaggregates revenue by type of product and by the 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
September 30,
 20222021
Server and storage systems$1,713,056 $849,856 
Subsystems and accessories139,074 182,874 
Total$1,852,130 $1,032,730 

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.

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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):

 Three Months Ended
September 30,
 20222021
United States$1,295,504 $560,948 
Asia270,024 263,086 
Europe235,074 179,694 
Other51,528 29,002 
Total$1,852,130 $1,032,730 

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.

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 obligations. 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 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.

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 delivered, 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 September 30, 2022 was $319.8 million. The Company expects to recognize approximately 58% of remaining performance obligations as revenue in the next 12 months, and the remainder thereafter.

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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.

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 months ended September 30, 2022 and 2021 (in thousands, except per share amounts): 

 Three Months Ended
September 30,
 20222021
Numerator:
Net income$184,416 $25,437 
Denominator:
Weighted-average shares outstanding52,598 50,796 
Effect of dilutive securities2,419 2,120 
Weighted-average diluted shares55,017 52,916 
Basic net income per common share$3.51 $0.50 
Diluted net income per common share$3.35 $0.48 

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.

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 4.        Balance Sheet Components

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

Inventories:
September 30, 2022June 30, 2022
Finished goods$1,096,811 $1,025,555 
Work in process333,092 209,576 
Purchased parts and raw materials306,152 310,475 
Total inventories$1,736,055 $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. 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, 2022June 30, 2022
Other receivables (1)
$150,082 $138,054 
Prepaid expenses7,5345,632
Deferred service costs6,1135,562
Prepaid income tax— 2,352
Restricted cash— 251 
Others5,516 6,948 
Total prepaid expenses and other current assets$169,245 $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.


Cash, Cash equivalents and Restricted cash:
 September 30, 2022June 30, 2022
Cash and cash equivalents$238,268 $267,397 
Restricted cash included in prepaid expenses and other current assets— 251 
Restricted cash included in other assets478 911 
Total cash, cash equivalents and restricted cash$238,746 $268,559 

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Property, Plant, and Equipment:
 September 30, 2022June 30, 2022
Buildings$143,496 $143,509 
Machinery and equipment119,978 113,665 
Land84,616 84,616 
Furniture and fixtures47,600 43,282 
Building and leasehold improvements45,709 45,169 
Software23,273 23,186 
Building construction in progress303 303 
464,975 453,730 
Accumulated depreciation and amortization(174,223)(167,758)
Property, plant and equipment, net$290,752 $285,972 


Other Assets:
 September 30, 2022June 30, 2022
Operating lease right-of-use asset$22,497 $23,679 
Deferred service costs, non-current7,518 6,316 
Prepaid expense, non-current1,949 2,011 
Investment in auction rate security1,590 1,590 
Deposits1,215 1,069 
Restricted cash, non-current478 911 
Others1,897 1,956 
Total other assets$37,144 $37,532 

Accrued Liabilities:    
September 30, 2022June 30, 2022
Accrued payroll and related expenses$48,779 $57,736 
Contract manufacturers liabilities48,579 41,125 
Customer deposits35,099 30,421 
Accrued legal liabilities (Note 11)18,25018,250 
Accrued cooperative marketing expenses9,722 8,757 
Accrued warranty costs8,540 9,073 
Operating lease liability6,960 7,139 
Accrued professional fees3,130 4,281 
Others34,461 35,637 
Total accrued liabilities$213,521 $212,419 

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Performance Awards Liability

In March 2020, the Board of Directors (the “Board”) approved performance bonuses for the Chief Executive Officer, a senior executive and two members of the Board, which payments will be earned when specified market and performance conditions are achieved.

The Chief Executive Officer’s total cash bonus opportunity was $8.1 million, divided into two equal tranches. Each tranche would be earned if the average closing price for the Company’s common stock reached specified targets. The Board retained the flexibility to reduce the amount payable under the first tranche (but not the second tranche) based on performance goals. Both price targets were reached during the fiscal year ended June 30, 2021, and the second tranche totaled $4.0 million was paid in full. As of June 30, 2021, the Company also expected it would likely pay the first tranche in full, and therefore recorded an expense of $3.6 million since March 2020 relating to the first tranche.

In September 2021, after the Company had closed its books for the year ended June 30, 2021, the Board decided to exercise its discretion to reduce the amount to be paid to the Chief Executive Officer for the first tranche to $2.0 million, which was paid in the quarter ended December 31, 2021. As a result of the Board’s decision to reduce the amount to be paid under the first tranche, the Company adjusted the $3.6 million expense previously recorded for the first tranche to the new amount of $2.0 million, which resulted in the Company recognizing a $1.6 million benefit from this adjustment during the quarter ended September 30, 2021. This performance award to the Chief Executive Officer was concluded in the year ended June 30, 2022. 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.
Other Long-term Liabilities:
September 30, 2022June 30, 2022
Accrued unrecognized tax benefits including related interests and penalties, non-current$19,686 $18,866 
Operating lease liability, non-current15,21816,661
Accrued warranty costs, non-current4,163 3,064 
Other482 549 
Total other long-term liabilities$39,549 $39,140 

Product Warranties:
Three Months Ended
September 30,
 20222021
Balance, beginning of the period$12,136 $12,863 
Provision for warranty8,617 6,386 
Costs utilized(8,473)(7,199)
Change in estimated liability for pre-existing warranties423 183 
Balance, end of the period12,703 12,233 
Current portion8,540 9,532 
Non-current portion$4,163 $2,701 

Note 5.        Fair Value Disclosure

The financial instruments of the Company measured at fair value on a recurring basis are included in cash equivalents, other assets and accrued liabilities. The Company classifies its financial instruments, except for its investment in an auction rate security, within Level 1 or Level 2 in the fair value hierarchy because the Company uses quoted prices in active markets or alternative pricing sources and models using market observable inputs to determine their fair value.

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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: (i) the expected yield based on observable market rate of similar securities, (ii) the security coupon rate that is reset monthly, (iii) the estimated holding period and (iv) a liquidity discount. The liquidity discount assumption is based on the management estimate of lack of marketability discount of similar securities and is determined based on the analysis of financial market trends over time, recent redemptions of securities and other market activities.

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

September 30, 2022Level 1Level 2Level 3Asset at
Fair Value
Assets
Money market funds (1)
$20,550 $— $— $20,550 
Certificates of deposit (2)
— 553 — 553 
Auction rate security— — 1,590 1,590 
Total assets measured at fair value$20,550 $553 $1,590 $22,693 
June 30, 2022Level 1Level 2Level 3Asset at
Fair Value
Assets
Money market funds (1)
$20,220 $— $— $20,220 
Certificates of deposit (2)
— 832 — 832 
Auction rate security— — 1,590 1,590 
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.    

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

SMCI | Q1 2023 Form 10-Q | 14

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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): 
 Cost BasisGross
Unrealized
Holding
Gains		Gross
Unrealized
Holding
Losses		Fair Value
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.
    
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. This outstanding debt was classified as Level 2 as it was not actively traded. The amortized cost of the outstanding debt approximates the fair value.

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 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.



SMCI | Q1 2023 Form 10-Q | 15

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Note 6.        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,
 20222022
Line of credit:
2018 Bank of America Credit Facility$60,284 $268,245 
2022 Bank of America Credit Facility— 9,500 
Cathay Bank Line of Credit— 30,000 
2021 CTBC Credit Lines— 84,800 
 HSBC Bank Credit Facility11,000 30,000 
2021 E.SUN Bank Credit Facility9,000 7,800 
Mega Bank Credit Facility— 3,500 
Total line of credit80,284 433,845 
Term loan facilities:
Chang Hwa Bank Credit Facility due October 15, 202631,487 33,643 
CTBC Bank term loan, due June 4, 203037,785 40,372 
2021 CTBC Credit Lines, due August 15, 20265,706 5,468 
2021 E.SUN Bank Credit Facility, due September 15, 202640,304 43,064 
2022 ESUN Bank Credit Facility, due August 15, 202716,373 — 
Mega Bank Credit Facility, due September 15, 202637,785 40,372 
Total term loans169,440 162,919 
Total debt249,724 596,764 
Short-term debt and current portion of long-term debt101,173 449,146 
Debt, non-current$148,551 $147,618 

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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, 2022June 30, 2022
Available borrowingsInterest rateAvailable borrowingsInterest rate
Line of credit:
2018 Bank of America Credit Facility$289,716 4.03%$81,755 2.53%
2022 Bank of America Credit Facility$20,000 3.36%$10,500 1.85%
Cathay Bank Line of Credit$132,000 4.328%$102,000 4.004%
2021 CTBC Credit Lines$105,000 
1.80% - 2.52%
$20,200 
1.80% - 2.52%
Chang Hwa Bank Credit Facility$20,000 5.14%$20,000 3.50%
 HSBC Bank Credit Facility$19,000 3.84%$— 
1.95% - 2.20%
2021 E.SUN Bank Credit Facility$— 1.81%$22,200 1.81%
2022 E.SUN Bank Credit Facility$21,000 4.18%$— —
Mega Bank Credit Facility$20,000 2.55%$16,500 1.85%
Term loan facilities:
Chang Hwa Bank Credit Facility due October 15, 2026$— 1.30%$— 1.175%
CTBC Bank term loan, due June 4, 2030$— 0.95%$— 0.825%
2021 CTBC Credit Lines, due August 15, 2026$5,193 1.15%$6,308 1.025%
2021 E.SUN Bank Credit Facility, due September 15, 2026$— 1.495%$10,766 1.37%
2022 ESUN Bank Credit Facility, due August 15, 2027$— 1.495%$— —
Mega Bank Credit Facility, due September 15, 2026$— 
 1.145% - 1.345%
$— 
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:

E.SUN Bank

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”). The New E.SUN Bank Credit Facility permits borrowings of up to (i) NTD 1.8 billion ($61.0 million U.S. dollar equivalent) and (ii) US$30.0 million. Other terms of the New E.SUN Bank Credit Facility are substantially identical to the Prior E.SUN Bank Credit Facility. Generally, interest for base rate loans made under the New E.SUN Bank Credit Facility are based upon an average interbank overnight call loan rate in the finance industry (such as TAIFX) plus a fixed margin, and is subject to occasional adjustment. The New E.SUN Bank Credit Facility has customary default provisions permitting E.SUN Bank to terminate or reduce the credit limit, shorten the credit period, or deem all liabilities due and payable, including in the event the Taiwan subsidiary has an overdue liability at another financial organization. The Company is not a guarantor of the New E.SUN Bank Credit Facility.

SMCI | Q1 2023 Form 10-Q | 17

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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”). With respect to the Medium Term Loan, the period of use is between April 28, 2022 and April 28, 2023. The interest rate thereunder is based upon a floating annual rate plus a fixed margin, subject to adjustment under certain circumstances. Interest payments are due on a monthly basis. Principal is amortized evenly on a monthly basis, with principal payments subject to a one year grace period prior to the commencement of repayment. The Medium Term Loan will be used by the Taiwan subsidiary to support its manufacturing activities (such as purchase of materials and components) (“Use of Proceeds”). 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 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. With respect to the Import O/A Loan, the period of use is between April 28, 2022 and April 28, 2023. The interest rate thereunder is based on TAIFX3 plus a fixed margin, subject to negotiation on a monthly basis and adjustment under certain circumstances. Interest payments are due on a monthly basis, and principal is repayable on the due date. 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.


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

Fiscal Year: Principal Payments
Remainder of 2023$94,631 
202437,660 
202541,491 
202641,491 
202718,025 
2028 and thereafter16,426 
Total short-term and long-term debt$249,724 

The Company is in compliance with all the covenants for the outstanding debt.

SMCI | Q1 2023 Form 10-Q | 18

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SUPER MICRO COMPUTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 7.        Leases
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, 2