01—Abstract
Summary
Summary of the 10-K filed February 25, 2025. Cited figures are marked; the original filing is the authoritative source.
Super Micro Computer, Inc. (Nasdaq: SMCI) filed this Form 10-K for fiscal year ended June 30, 2024 on February 25, 2025, after missing its original filing deadline following the resignation of its former auditor Ernst & Young LLP in October 2024.
A Special Committee review completed December 2, 2024 found no substantial concerns about senior management's integrity or the Audit Committee, and the Company received a Nasdaq exception to file all delinquent reports by February 25, 2025. BDO USA, P.C. was appointed as the new auditor; BDO issued an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting, and management identified five material weaknesses that had not been remediated as of the filing date. Fiscal 2024 results were strong on the top line: net sales rose to $14.99 billiona from $7.12 billion (up 110.4%), and net income reached $1.15 billion, compared with $640.0 million in fiscal 2023.
However, gross margin fell to 13.8% from 18.0%, which management attributed to competitive pricing to gain share, product and customer mix, and higher manufacturing costs. Operating cash flow was negative $2.49 billionb, driven by a $3.0 billion increase in inventories and a $1.28 billion increase in accounts receivable. Total debt rose to approximately $2.2 billion at June 30, 2024, including $1.7 billion of 2029 Convertible Notes, and the Company issued $700.0 million of 2.25% 2028 Convertible Notes on February 20, 2025.
The filing also discloses a U.S. Department of Justice and SEC subpoena, multiple securities class actions and derivative suits, and a Vernon, California data center lease with an estimated obligation of over $600 millionc that has been sublicensed to a third party. Customer concentration increased: one customer accounted for 20% of net sales in fiscal 2024, and one supplier accounted for 65.4% of total purchases.
02—Key points
Key Highlights
- Net sales of $14,989.2 million in fiscal 2024, up 110.4% from $7,123.5 million in fiscal 2023.
- Gross margin declined to 13.8% from 18.0%, attributed to competitive pricing, product and customer mix, and higher manufacturing expenses.
- Net income of $1,152.7 million, versus $640.0 million in fiscal 2023; diluted EPS of $1.92.
- Net cash used in operating activities of $2,486.0 million, driven by inventory increase of $3,000.0 million and accounts receivable increase of $1,277.3 million.
- Internal control over financial reporting was not effective at June 30, 2024; BDO issued an adverse ICFR opinion, and five material weaknesses remained unremediated as of the filing date.
- Total debt of approximately $2.2 billion at June 30, 2024, plus $700.0 million of 2.25% 2028 Convertible Notes issued February 20, 2025, following amendments to the 2029 Convertible Notes that set a 3.50% interest rate from February 20, 2025.
- One customer accounted for 20% of net sales and one supplier for 65.4% of total purchases in fiscal 2024; the Company received DOJ and SEC subpoenas in late 2024 and faces multiple securities class actions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2024, Super Micro Computer kept $0.08.
- Revenue$14.99B100.0%
- Cost of revenue−$12.93B86.2%
- Gross profit$2.06B13.8%
- Operating costs−$850.6M5.7%
- Operating income$1.21B8.1%
- Interest, other & tax−$58.1M0.4%
- Net income$1.15B7.7%
Where FY2024 revenue went
$14.99B- Cost of revenue: $12.93B, 86% of revenue
- Net income: $1.15B, 7.7% of revenue
- R&D: $463.5M, 3.1% of revenue
- Other operating costs: $387.1M, 2.6% of revenue
Kept 7.7% as net incomeNet income $1.15B · 7.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2024filed February 25, 2025Financial Statements
FY2024 against FY2023
| Line item | FY2024FY2023 | Change |
|---|---|---|
| Revenue | $14.99B$7.12B | +110.4% |
| Cost of Revenue | $12.93B$5.84B | +121.3% |
| Gross Profit | $2.06B$1.28B | +60.7% |
| R&D Expenses | $463.55M$307.26M | +50.9% |
| Operating Expenses | $850.64M$521.87M | +63.0% |
| Operating Income | $1.21B$761.14M | +59.1% |
| Net Income | $1.15B$640.00M | +80.1% |
| EPS (Basic) | $2.07$1.21 | +71.1% |
| EPS (Diluted) | $1.92$1.14 | +68.4% |
| Shares Outstanding (Basic) | 555.88M529.25M | +5.0% |
| Shares Outstanding (Diluted) | 602.15M559.70M | +7.6% |
05—Questions
Frequently Asked Questions
Why was this annual report filed late, and is the Company now compliant with its SEC reporting obligations?
EY resigned on October 24, 2024, after raising concerns about governance, transparency and internal controls, which delayed the audit. A Special Committee review completed December 2, 2024 found no substantial concerns about senior management or the Audit Committee. Nasdaq granted an exception allowing the Company to file all delinquent reports by February 25, 2025, and the filing states that all Delinquent Reports were filed on or before that date.
What drove the revenue growth and the decline in gross margin?
Net sales growth was driven by strong demand for GPU-based rack-scale solutions, including liquid-cooled and air-cooled servers, which carry higher average selling prices. Gross margin fell to 13.8% from 18.0%, primarily due to a strategy of offering competitive pricing to gain market share, increased competition, and a change in product and customer mix.
Why was operating cash flow negative despite record net income?
Net cash used in operating activities was $2,486.0 million in fiscal 2024, mainly because of working capital needs: inventories increased $3,000.0 million and accounts receivable increased $1,277.3 million, partly offset by a $552.1 million increase in accounts payable. Management attributed the inventory build to customer demand and the need to hold more inventory given supply chain conditions.
What are the main legal and regulatory risks disclosed?
The Company and certain current and former executives face putative securities class actions filed in August through October 2024 and several derivative lawsuits. In late 2024 the Company received subpoenas from the Department of Justice and the SEC, and it is cooperating with those requests with no charges brought as of the filing date. The Company has incurred professional fees of $18.6 million through January 31, 2025 related to these matters.
How much leverage and near-term financing exposure does the Company have?
At June 30, 2024 the Company had approximately $2.2 billion of consolidated indebtedness, including $1.7 billion principal of 2029 Convertible Notes. The Company issued $700.0 million of 2028 Convertible Notes on February 20, 2025, and terminated several bank facilities in November and December 2024. Management believes current cash, borrowing capacity and internally generated cash flows will be sufficient for the next 12 months.
06—Continue