01—Abstract
Summary
Summary of the 10-Q filed February 25, 2025. Cited figures are marked; the original filing is the authoritative source.
Super Micro Computer, Inc. filed this Quarterly Report on Form 10-Q for the three and six months ended December 31, 2024, which was delayed by an independent review and the resignation of its former auditor, Ernst & Young LLP.
The Special Committee's review concluded on December 2, 2024 without finding substantial concerns about management integrity or the Audit Committee, and the Company appointed BDO USA, P.C. as its new independent registered public accounting firm on November 18, 2024. The filing's Item 4 states that disclosure controls were not effective due to material weaknesses in internal control over financial reporting, including IT general controls, segregation of duties, manual journal entries, and documentation of control procedures. Financially, net sales for the three months ended December 31, 2024 were $5.68 billiona, up from $3.66 billion, and net income was $320.6 million, compared with $296.0 million a year earlier.
Gross margin fell to 11.8% from 15.4%, reflecting competitive pricing and a shift in product and customer mix. For the six months, net sales reached $11.62 billionb and net income $744.9 million. Cash and cash equivalents declined to $1.43 billion, and operating cash flow was $169.1 million for the six months, versus a $324.6 million outflow a year earlier.
Total debt was $208.4 millionc, and the 2029 Convertible Notes carried a value of $1.70 billion. Subsequent events include a February 20, 2025 amendment of the 2029 Convertible Notes, which added a 3.50% interest rate and reset the conversion price to approximately $83.44 per share, and the issuance of $700.0 million of 2.25% Convertible Senior Notes due 2028. The Company also disclosed several pending shareholder class actions and derivative lawsuits, as well as subpoenas from the Department of Justice and the Securities and Exchange Commission, with no charges brought as of the filing date.
02—Key points
Key Highlights
- Net sales for the three months ended December 31, 2024 were $5.68 billion, compared with $3.66 billion in the prior-year quarter, with server and storage systems making up $5.49 billion of that total.
- Gross margin declined to 11.8% in the quarter from 15.4%, which the filing attributes to competitive pricing strategy, increased competition, and a change in product and customer mix.
- Net income was $320.6 million for the quarter and $744.9 million for the six months, compared with $296.0 million and $453.0 million in the prior-year periods.
- Management concluded that disclosure controls were not effective due to material weaknesses in internal control over financial reporting, with remediation plans still in progress.
- Operating cash flow was $169.1 million for the six months ended December 31, 2024, compared with a $324.6 million outflow a year earlier, while cash and equivalents fell to $1.43 billion from $1.67 billion.
- In February 2025, the Company amended the 2029 Convertible Notes and issued $700.0 million of 2.25% Convertible Senior Notes due 2028.
- The Company faces multiple securities class actions and derivative lawsuits and is cooperating with DOJ and SEC subpoenas, though it states it cannot estimate possible losses at this stage.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Super Micro Computer kept $0.06.
- Revenue$5.68B100.0%
- Cost of revenue−$5.01B88.2%
- Gross profit$670.0M11.8%
- Operating costs−$301.4M5.3%
- Operating income$368.6M6.5%
- Interest, other & tax−$48.0M0.8%
- Net income$320.6M5.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed February 25, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $5.68B$3.66B | +54.9% |
| Cost of Revenue | $5.01B$3.10B | +61.5% |
| Gross Profit | $670.02M$564.32M | +18.7% |
| R&D Expenses | $158.23M$108.82M | +45.4% |
| Operating Expenses | $301.40M$192.86M | +56.3% |
| Operating Income | $368.62M$371.46M | −0.8% |
| Net Income | $320.60M$295.97M | +8.3% |
| EPS (Basic) | $0.54$0.55 | −1.8% |
| EPS (Diluted) | $0.51$0.51 | 0.0% |
| Shares Outstanding (Basic) | 592.51M541.35M | +9.4% |
| Shares Outstanding (Diluted) | 636.05M580.78M | +9.5% |
05—Questions
Frequently Asked Questions
Why was this quarterly report filed late?
The filing explains that Ernst & Young LLP raised concerns about governance, transparency, and internal control over financial reporting in July 2024, and then resigned on October 24, 2024. A Special Committee review followed and concluded on December 2, 2024. Nasdaq granted an exception allowing the delinquent reports to be filed by February 25, 2025.
What drove the growth in revenue this quarter?
The filing attributes the increase in server and storage systems sales to higher customer demand for GPU servers, high performance computing, and rack-scale solutions, which carry higher average selling prices. Net sales in the United States, Asia, and Europe all increased compared with the prior-year quarter.
Why did gross margin decline?
The filing states that the decline was primarily due to a strategy of offering competitive pricing to gain market share, increased competition, and a change in product and customer mix.
How much debt does the Company carry and what changed after the quarter?
Total lines of credit and term loans were $208.4 million as of December 31, 2024. The 2029 Convertible Notes were carried at $1.70 billion. After the quarter, on February 20, 2025, the 2029 notes were amended to bear 3.50% interest with a conversion price of about $83.44, and $700.0 million of 2.25% Convertible Senior Notes due 2028 were issued.
Does the Company disclose material weaknesses in its internal controls?
Yes. The filing lists material weaknesses covering IT general controls, segregation of duties, controls over manual journal entries, documentation of information used in financial reporting, and timely recording and disclosure of new leases and related party transactions. Management is implementing remediation steps, including hiring additional accounting personnel and upgrading IT systems.
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