Super Micro Computer(US:SMCI)2025-08-28 21:00PART I Item 1. Business Super Micro Computer delivers AI and HPC optimized rack-scale IT solutions, focusing on rapid innovation and global manufacturing - Company provides total IT solutions for AI, HPC, enterprise, cloud, and edge computing, emphasizing rack-scale, liquid-cooled solutions151623 - Strategy focuses on continuous R&D, rapid product innovation (leveraging Building Block Solutions®), and capitalizing on new technologies like AI, cloud, and 5G/edge computing192122 - Key product developments in FY2025 include AI-focused solutions for NVIDIA's Hopper (H100/H200) and Blackwell (GB200/B200/RTX Pro 6000) platforms, Data Center Building Block Solutions (DCBBS) for liquid-cooled AI factories, and DLC-2 for energy efficiency23 - Global operations include headquarters in Silicon Valley, facilities in Taiwan and the Netherlands, and a new facility in Malaysia to expand capacity1827 International Sales as % of Net Sales | Fiscal Year | Percentage | | :---------- | :--------- | | 2025 | 40.6% | | 2024 | 32.0% | | 2023 | 32.1% | - Competes with global technology vendors (Cisco, Dell, Hewlett-Packard Enterprise, and Lenovo) and ODMs (Foxconn, Quanta Computer, and Wiwynn Corporation) based on time-to-market, product breadth, performance, and cost-effectiveness4849 - As of June 30, 2025, the company employed 6,238 employees, with over 3,200 in R&D, and emphasizes talent development, equal opportunity, and a comprehensive total rewards program606466 Item 1A. Risk Factors The company faces significant risks from SEC reporting, global operations, regulatory compliance, and financial indebtedness - Past SEC reporting delinquencies (FY2024 10-K, Q1/Q2 2025 10-Q) led to significant expenses, negative publicity, and potential impact on financial reporting accuracy and stock price868788 - Identified material weaknesses in internal control over financial reporting as of June 30, 2025, which could affect timely and accurate financial reporting if not remediated9192 - Sales are concentrated in a few large customers; four customers accounted for 10% or more of net sales in FY2025, and one in FY2024, increasing dependency and risk of revenue decrease99100 - Vulnerable to volatility in core component markets (e.g., GPUs, CPUs, memory), supply chain disruptions, and increased costs, which can impact product delivery, warranty claims, and financial results107108 - Geopolitical conditions, particularly U.S.-China trade tensions and export control restrictions on AI-related technologies (e.g., GPUs), significantly impact business, supply chains, and ability to serve international markets113115161 - Subject to complex and evolving domestic and international data privacy and protection laws (e.g., GDPR, CCPA, CPRA), increasing compliance costs and potential for penalties or reputational harm174175177 - Indebtedness of approximately $4.8 billion as of June 30, 2025, including convertible notes, could limit cash flow, restrict financing options, and dilute existing stockholders190193 - Conflicts of interest may arise with related parties Ablecom and Compuware, who are major contract manufacturers and distributors, due to shared family ownership and management ties125128132 Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC Item 1C. Cybersecurity The company maintains an information security program aligned with industry standards, with Board oversight of cybersecurity - Cybersecurity risk management includes infrastructure, systems, policies, and procedures for proactive and reactive threat addressing, following industry standards204 - The Board and Audit Committee provide oversight of cybersecurity matters, receiving regular updates from management209 - No cyber incidents in the past had a material adverse effect on business strategy, operations, or financial conditions208 Item 2. Properties As of June 30, 2025, the company owned 3.16 million sq ft and leased 1.54 million sq ft globally Owned and Leased Space (as of June 30, 2025) | Category | Square Footage (approx.) | | :------- | :----------------------- | | Owned | 3,157,000 | | Leased | 1,539,000 | - Long-lived assets outside the U.S. represented 37.8% of total value in fiscal year 2025212 - Key facilities are in San Jose, California (headquarters, R&D, production), Taiwan (manufacturing, R&D, service, warehouse), Netherlands (European headquarters, manufacturing, service), and a new facility in Malaysia (manufacturing)213214215 Item 3. Legal Proceedings The company faces multiple class action and derivative lawsuits, plus DOJ and SEC subpoenas, with uncertain outcomes - Facing multiple putative class action and derivative lawsuits alleging misrepresentations in financial statements and internal controls, with outcomes currently not estimable673676 - Received subpoenas from the Department of Justice and SEC following a short seller report, and is cooperating with document requests678 Item 4. Mine Safety Disclosures This item is not applicable to the company PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities SMCI common stock trades on Nasdaq, underwent a 10-for-1 split, expects no dividends, and repurchased shares - Common stock (SMCI) trades on Nasdaq Global Select Market; 10-for-1 forward stock split effective September 30, 2024221224 - As of July 31, 2025, there were 594,273,308 shares of common stock outstanding6 - No cash dividends are expected to be paid in the foreseeable future226 Issuer Purchases of Equity Securities (Q4 FY2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----- | :------------------------------- | :--------------------------- | | June 2025 | 4,891,171 | $40.89 | - The repurchase in June 2025 was for approximately $200.0 million, conducted concurrently with the 2030 Convertible Notes offering, and the shares were retired236 Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Super Micro Computer, profitable since 1993, focuses on AI and data center IT solutions, with financial results detailed - Company has been profitable every year since inception in 1993242 - Strategic focus on Application-Optimized Total IT Solutions, integrating server, storage, networking, and software at rack and cluster levels, with a key component being DCBBS for liquid-cooled AI factories241243 - AI and data center demand is a substantial driver for product demand, and the company plans to enhance product capabilities and service offerings in these areas245 Financial Highlights (in millions) | Metric | FY2025 | FY2024 | Change (YoY) | % Change (YoY) | | :----- | :----- | :----- | :----------- | :------------- | | Net sales | $21,972.0 | $14,989.2 | $6,982.8 | 46.6% | | Gross profit | $2,429.9 | $2,061.4 | $368.5 | 17.9% | | Total operating expenses | $1,176.9 | $850.6 | $326.3 | 38.4% | | Income from operations | $1,253.0 | $1,210.8 | $42.2 | 3.5% | | Net income | $1,048.9 | $1,152.7 | $(103.8) | (9.0)% | | Net income per diluted share | $1.68 | $1.92 | $(0.24) | (12.5)% | - Gross margin decreased to 11.1% in fiscal year 2025 from 13.8% in fiscal year 2024 due to competitive pricing, product/customer mix changes, and higher manufacturing expenses251285 - Operating expenses increased by 38.4% in fiscal year 2025, primarily due to higher headcount, salaries, and stock-based compensation251290291 Net Sales by Product Type (in millions) | Product Type | FY2025 | FY2024 | FY2023 | 2025 vs 2024 % Change | 2024 vs 2023 % Change | | :----------- | :----- | :----- | :----- | :-------------------- | :-------------------- | | Server and storage systems | $21,311.6 | $14,185.2 | $6,569.8 | 50.2% | 115.9% | | Subsystems and accessories | $660.4 | $804.0 | $553.7 | (17.9)% | 45.2% | | Total net sales | $21,972.0 | $14,989.2 | $7,123.5 | 46.6% | 110.4% | - Server and storage systems sales increased by 50.2% in fiscal year 2025, driven by strong demand for GPU servers, HPC, and rack-scale solutions, with a 34% increase in average selling price276 Net Sales by Geographic Region (in millions) | Region | FY2025 | FY2024 | FY2023 | 2025 vs 2024 % Change | 2024 vs 2023 % Change | | :----- | :----- | :----- | :----- | :-------------------- | :-------------------- | | United States | $13,052.6 | $10,187.2 | $4,834.1 | 28.1% | 110.7% | | Asia | $5,494.1 | $2,912.6 | $1,050.8 | 88.6% | 177.2% | | Europe | $2,727.0 | $1,294.0 | $1,003.1 | 110.7% | 29.0% | | Others | $698.3 | $595.4 | $235.5 | 17.3% | 152.8% | | Total net sales | $21,972.0 | $14,989.2 | $7,123.5 | 46.6% | 110.4% | - Net cash provided by operating activities was $1,659.5 million in fiscal year 2025, a significant increase from $(2,486.0) million in fiscal year 2024, driven by increased cash collection from customers and reduced inventory purchases311312 - Cash and cash equivalents increased to $5,169.9 million as of June 30, 2025, from $1,669.8 million in fiscal year 2024308 - Issued $700.0 million in 2028 Convertible Notes and $2.3 billion in 2030 Convertible Notes in fiscal year 2025104314 - Anticipates capital expenditures of $180.0 million to $200.0 million for fiscal year 2026, primarily for global manufacturing, tooling, IT investments, and facility upgrades316 Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate and foreign exchange risks, with minimal expected impact from 10% rate changes - Exposed to interest rate risk on fixed-rate investments and variable-rate debt (term loans, revolving lines of credit), but a 10% change is not expected to have a significant impact321323 - Direct exposure to foreign exchange rate fluctuations is minimal as most sales and purchases are in U.S. dollars; a 10% change is not expected to have a significant impact324 Item 8. Financial Statements and Supplementary Data This section presents audited consolidated financial statements for FY2025-2023, including balance sheets and cash flows - Consolidated financial statements for FY2025, FY2024, and FY2023 are presented, audited by BDO USA, P.C. (2025, 2024) and Deloitte & Touche LLP (2023)329345 - BDO USA, P.C. expressed an adverse opinion on the effectiveness of internal control over financial reporting as of June 30, 2025331 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :----- | :------------ | :------------ | | Total current assets | $12,301,654 | $8,931,960 | | Total assets | $14,018,429 | $9,826,092 | | Total current liabilities | $2,344,792 | $2,345,721 | | Total liabilities | $7,716,558 | $4,408,722 | | Total stockholders' equity | $6,301,871 | $5,417,370 | Consolidated Statements of Operations Highlights (in thousands) | Metric | FY2025 | FY2024 | FY2023 | | :----- | :----- | :----- | :----- | | Net sales | $21,972,042 | $14,989,251 | $7,123,482 | | Gross profit | $2,429,922 | $2,061,410 | $1,283,012 | | Income from operations | $1,252,994 | $1,210,774 | $761,142 | | Net income | $1,048,854 | $1,152,666 | $639,998 | | Diluted EPS | $1.68 | $1.92 | $1.14 | Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | FY2025 | FY2024 | FY2023 | | :----- | :----- | :----- | :----- | | Net cash provided by (used in) operating activities | $1,659,524 | $(2,485,972) | $663,580 | | Net cash used in investing activities | $(183,214) | $(194,248) | $(39,486) | | Net cash provided by (used in) financing activities | $2,024,045 | $3,911,724 | $(448,293) | - Inventories increased to $4.68 billion in fiscal year 2025 from $4.33 billion in fiscal year 2024. Write-down adjustments for excess and obsolete inventory totaled $232.0 million in fiscal year 2025, up from $83.0 million in fiscal year 2024468 - Total revenue from service and software increased to $330.5 million in fiscal year 2025 from $228.3 million in fiscal year 2024449 - Four customers accounted for 10% or more of net sales in fiscal year 2025 (Customer A: 20.9%, Customer B: 11.5%, Customer C: 11.3%, Customer D: 11.1%)419 - Two suppliers accounted for a significant portion of total purchases in fiscal year 2025 (Supplier A: 64.4%, Supplier B: 5.1%)414 - Convertible notes outstanding include $1.7 billion of 2029 Convertible Notes, $700.0 million of 2028 Convertible Notes, and $2.3 billion of 2030 Convertible Notes536550560 - Related party transactions with Ablecom and Compuware (contract manufacturing, distribution) represented 3.3% of cost of sales in fiscal year 2025416 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure EY resigned as auditor in October 2024, citing governance concerns, but a Special Committee found their conclusions unsupported - EY resigned as independent auditor in October 2024, citing concerns about governance, transparency, internal controls, and inability to rely on management/Audit Committee representations705 - EY's resignation led to delinquent filings of the FY2024 10-K and Q1/Q2 FY2025 10-Qs, which were subsequently filed by February 25, 2025708 - A Special Committee review concluded that EY's resignation and conclusions were not supported by the facts examined, finding no substantial concerns about senior management integrity or Audit Committee oversight712 Item 9A. Controls and Procedures Disclosure controls were ineffective as of June 30, 2025, due to material internal control weaknesses, with remediation underway - Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting710 - Identified material weaknesses include: (i) IT general controls for certain financial reporting systems, (ii) segregation of duties conflicts, (iii) completeness and accuracy of information, and (iv) documentation of control procedures for timely recording and disclosure, including related party transactions715 - Remediation plan includes enhancing accounting competencies, implementing standard policies for manual journal entries, completing a risk-based review of IT architecture, and redesigning ERP system security721724 - BDO USA, P.C. issued an adverse opinion on the effectiveness of internal control over financial reporting as of June 30, 2025729734 Item 9B. Other Information This section discloses Rule 10b5-1 trading arrangements adopted by executive officers and directors in Q4 FY2025 - David Weigand (SVP, CFO, CCO) adopted a Rule 10b5-1 trading arrangement on May 30, 2025, for 50,000 shares739 - Sara Liu (Co-Founder, SVP, Director) adopted a Rule 10b5-1 trading arrangement on May 29, 2025, for 600,000 shares739 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company has no disclosures regarding foreign jurisdictions that prevent inspections PART III Item 10. Directors, Executive Officers and Corporate Governance This section lists executive officers and directors, detailing Board composition, governance, and independent committees - Charles Liang serves as President, CEO, and Chairman; Sara Liu as Co-Founder, SVP, and Director; Yih-Shyan (Wally) Liaw as Co-Founder, SVP Business Development, and Director744749750 - Six of nine current Board members (Judy Lin, Robert Blair, Scott Angel, Sherman Tuan, Susan Mogensen, Tally Liu) are independent767 - The Board has three standing committees (Audit, Compensation, Governance), all composed solely of non-employee, independent directors777 - Tally Liu was re-appointed as lead independent director for a one-year term expiring January 2026774 - Scott Angel, appointed March 2025, is an "audit committee financial expert" with extensive audit and technology industry experience753778 Item 11. Executive Compensation Executive compensation links NEO pay to corporate performance, with CEO Charles Liang's compensation almost entirely performance-based - Executive compensation philosophy links a significant portion of NEO compensation to corporate performance, reducing reliance on fixed compensation800 - CEO Charles Liang's compensation is almost entirely performance-based, with a $1 annual salary and no cash bonuses, tied to the 2021 and 2023 CEO Performance Awards801802803 - As of June 30, 2025, all five tranches of the 2021 CEO Performance Award (10,000,000 shares) had vested801819 - For the 2023 CEO Performance Award (5,000,000 shares), four of five stock price goals ($45, $60, $75, $90) and all five revenue goals ($13.0B, $15.0B, $17.0B, $19.0B, $21.0B) were achieved by August 2025, resulting in 4,000,000 shares vested804831835 - Other NEOs (Weigand, Clegg, Kao) participate in the FY2025 Performance Program, which includes Base Salary, Fixed Bonus, and a Performance Incentive Award (mix of cash and service-based RSUs) tied to individualized KPIs (e.g., stock price, revenue growth, customer growth, inventory)800809849 FY2025 Summary Compensation for NEOs (in thousands) | Name | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Total ($) | | :--- | :--------- | :-------- | :--------------- | :---------------- | :----------------------------------------- | :-------- | | Charles Liang | 1 | — | — | — | — | 442 | | David Weigand | 557,958 | 180,979 | 1,166,317 | — | 55,638 | 1,961,333 | | Don Clegg | 426,474 | 109,384 | 661,883 | — | 139,534 | 1,337,716 | | George Kao | 417,823 | 69,822 | 813,363 | 510,915 | 58,851 | 1,871,315 | - The CEO pay ratio for fiscal year 2025 was 0.16 to 1, with CEO compensation of $13,518 and median employee compensation of $86,832928 - The company adopted a new compensation clawback policy (effective Oct 25, 2023) compliant with Nasdaq and SEC rules, allowing recovery of excess incentive-based compensation in case of accounting restatements890 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership of common stock for NEOs, directors, and major stockholders as of July 31, 2025 Beneficial Ownership as of July 31, 2025 | Owner Category | Amount of Beneficial Ownership | Percent of Common Stock Outstanding | | :------------- | :----------------------------- | :-------------------------------- | | Charles Liang & Sara Liu | 82,071,594 | 13.5% | | All directors and executive officers as a group | 98,904,662 | 16.2% | | BlackRock, Inc. | 41,338,350 | 7.0% | | The Vanguard Group | 61,946,070 | 10.4% | - As of June 30, 2025, 55,276,780 shares were subject to outstanding options and RSU awards, with 17,217,058 shares remaining available for future issuance under equity compensation plans958 Item 13. Certain Relationships and Related Transactions and Director Independence The Audit Committee reviews related party transactions, with significant business relationships with Ablecom and Compuware - Audit Committee is responsible for reviewing and approving related person transactions, with specific procedures to ensure independence and alignment with company interests960 - Significant related party transactions with Ablecom and Compuware, where Charles Liang and Sara Liu (CEO and Director) have ownership in Ablecom, and other family members hold positions/ownership in both969970 - Purchases from Ablecom totaled $321.9 million in fiscal year 2025 (vs. $269.3 million in FY2024), and from Compuware totaled $328.3 million in fiscal year 2025 (vs. $280.8 million in FY2024)976977 - Outstanding non-cancelable purchase orders to Ablecom were $30.6 million and to Compuware were $118.3 million as of June 30, 2025978979 - CEO Charles Liang has an unsecured loan of approximately $16.8 million (including interest) from Steve Liang's spouse, dating back to October 2018985 Item 14. Principal Accountant Fees and Services BDO USA, P.C. was appointed as the independent auditor for FY2024 onwards, with all services pre-approved - BDO USA, P.C. was appointed as the independent registered public accounting firm starting fiscal year 2024987 Independent Registered Public Accounting Firm Fees (in thousands) | Fee Type | FY2025 | FY2024 | | :------- | :----- | :----- | | Audit Fees | $8,263 | $8,578 | - The Audit Committee pre-approves all audit and permissible non-audit services to ensure auditor independence990 PART IV Item 15. Exhibits and Financial Statement Schedules This item lists all documents filed as part of the 10-K report, including financial statements and exhibit index Item 16. Form 10-K Summary This item is marked "None," indicating no summary is provided