Super Micro Computer, Inc. - Annual Report: 2019 (Form 10-K)

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•	Global technology vendors such as Cisco, Dell, Hewlett-Packard Enterprise, Huawei, IBM, and Lenovo; and

•	ODMs, such as Inspur, Quanta Computer, and Wiwynn Corporation.

•	First to market with new emerging technologies;

•	High product performance, efficiency and reliability;

•	Early identification of emerging opportunities;

•	Cost-effectiveness;

•	Interoperability of products;

•	Scalability; and

•	Localized and responsive customer support on a worldwide basis.

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•	We may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which would adversely affect the accuracy and timing of our financial reporting;

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Failure to timely file our SEC reports and make our current financial information available, has placed, and will continue to place, downward pressure on our stock price and result in the continued inability of our employees to sell the shares of our common stock underlying their awards granted pursuant to our equity compensation plans, which has adversely affected, and may continue to adversely affect, hiring and employee retention;

•	Further delay in the filing of our SEC reports will delay our ability to seek the relisting of our common stock on a national securities exchange, and as a result, may continue to reduce the liquidity of our common stock;

•	Litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports on a timely basis, including the reasons and causes for such failure to file, will continue to divert management attention and resources from the operation of our business;

•	We may not be able to recapture lost business or business opportunities due to ongoing reputational harm; and

•	Negative reports or actions on our commercial credit ratings would increase our costs of, or reduce our access to, future commercial credit arrangements and limit our ability to refinance existing indebtedness.

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•	The liquidity of our common stock;

•	The market price of our common stock;

•	The number of institutional and other investors that will consider investing in our common stock;

•	The availability of information concerning the trading prices and volume of our common stock;

•	The number of broker-dealers willing to execute trades in shares of our common stock; and

•	Our ability to obtain equity or debt financing for the continuation of our operations.

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•	Fluctuations based upon seasonality, with the quarters ending March 31 and September 30 typically being weaker;

•	Fluctuations in the timing and size of large customer orders;

•	Variability of our margins based on the mix of server and storage systems, subsystems and accessories we sell and the percentage of our sales to internet data center, cloud computing customers or certain geographical regions;

•	Fluctuations in availability and costs associated with key components, particularly memory, storage solutions, and other materials needed to satisfy customer requirements;

•	The timing of the introduction of new products by leading microprocessor vendors and other suppliers;

•	Changes in our product pricing policies, including those made in response to new product announcements;

•	Mix of whether customer purchases are of partially or fully integrated systems or subsystems and accessories and whether made directly or through our indirect sales channel partners;

•	The effect of mergers and acquisitions among our competitors, suppliers, customers, or partners;

•	General economic conditions in our geographic markets;

•	Geopolitical tensions, including trade wars, tariffs and/or sanctions in our geographic markets;

•	Impact of regulatory changes on our cost of doing business; and

•	Costs associated with the circumstances leading to the restatement of our previously issued financial statements, and our efforts to investigate, assess and remediate those matters, as well as related legal proceedings.

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•	Greater name recognition and deeper market penetration;

•	Longer operating histories;

•	Larger sales and marketing organizations and research and development teams and budgets;

•	More established relationships with customers, contract manufacturers and suppliers and better channels to reach larger customer bases and larger sales volume allowing for better costs;

•	Larger customer service and support organizations with greater geographic scope;

•	A broader and more diversified array of products and services; and

•	Substantially greater financial, technical and other resources.

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•	Heightened price sensitivity from customers in emerging markets;

•	Our ability to establish local manufacturing, support and service functions, and to form channel relationships with value added resellers in non-United States markets;

•	Localization of our systems and components, including translation into foreign languages and the associated expenses;

•	Compliance with multiple, conflicting and changing governmental laws and regulations;

•	Foreign currency fluctuations;

•	Limited visibility into sales of our products by our channel partners;

•	Greater concentration of competitors in some foreign markets than in the United States;

•	Laws favoring local competitors;

•	Weaker legal protections of intellectual property rights and mechanisms for enforcing those rights;

•	Market disruptions created by public health crises in regions outside the United States, such as Avian flu, SARS and other diseases;

•	Import and export tariffs;

•	Difficulties in staffing and the costs of managing foreign operations, including challenges presented by relationships with workers’ councils and labor unions; and

•	Changing regional economic and political conditions.

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•	The risk that we are not able to relist our common stock on a national securities exchange;

•	The outcome of litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports on a timely basis, the circumstances leading to the need to restate certain of our previously issued financial statements, and our efforts to investigate, assess and remediate related matters;

•	Actual or anticipated variations in our operating results, including failure to achieve previously provided guidance;

•	Announcements of technological innovations, new products or product enhancements, strategic alliances or significant agreements by us or by our competitors;

•	Changes in recommendations by any securities analysts that elect to follow our common stock;

•	The financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•	False or misleading press releases or articles regarding our company or our products;

•	The loss of a key customer;

•	The loss of key personnel;

•	Technological advancements rendering our products less valuable;

•	Lawsuits filed against us, including those described in Part I, Item 3, “Legal Proceedings”

•	Changes in operating performance and stock market valuations of other companies that sell similar products;

•	Price and volume fluctuations in the overall stock market;

•	Market conditions in our industry, the industries of our customers and the economy as a whole; and

•	Other events or factors, including those resulting from war, incidents of terrorism, political instability or responses to these events.

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•	Establish a classified Board of Directors so that not all members of our Board are generally elected at one time, provided that in our next annual meeting we will elect all of the members of our Board due to our inability to hold annual meetings for the preceding two fiscal years;

•	Require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;

•	Authorize the issuance of “blank check” preferred stock that our Board could issue to increase the number of outstanding shares and to discourage a takeover attempt;

•	Limit the ability of our stockholders to call special meetings of stockholders;

•	Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

•	Provide that our Board is expressly authorized to adopt, alter or repeal our bylaws; and

•	Establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

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Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

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•	Net sales increased by 4.2% and 35.2% in fiscal years 2019 and 2018, respectively, as compared to fiscal years 2018 and 2017, respectively.

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Gross margin increased to 14.2% in fiscal year 2019 from 12.8% in fiscal year 2018, primarily due to lower prices for key components, a favorable geographic mix with less competitive pricing, and increased service revenues that have higher margins. Gross margin in fiscal year 2018 decreased by 130 basis points from 14.1% in fiscal year 2017 primarily due to higher costs of key components resulting from shortages of memory and SSDs, higher volume of server and storage systems sales configured with these key components and a less favorable geographical mix of sales resulting in a higher cost of sales.

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Operating expenses increased by 18.8% and 31.4% in fiscal years 2019 and 2018, respectively, as compared to fiscal years 2018 and 2017, respectively. The increase in both fiscal years was primarily due to an increase in professional fees incurred to investigate, assess and begin remediating the causes that led to the delay in filing our periodic reports with the SEC and the associated restatement of certain of our previously issued financial statements, as well as an increase in the number of employees to support our growth.

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Net income increased to $71.9 million as compared to $46.2 million in fiscal year 2018, which was primarily due to a reduction in our effective tax rate to 16.6% as compared to 43.6% in fiscal year 2018 and a $1.3 million increase in income before taxes. Net income in fiscal year 2018 decreased by $20.7 million from $66.9 million in fiscal year 2017 primarily due to an increase in our effective tax rate to 43.6% in fiscal year 2018, in part due to the remeasurement of our deferred tax assets under the 2017 Tax Reform Act, as compared to 26.7% in fiscal year 2017.

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Our cash and cash equivalents were $248.2 million, $115.4 million and $110.6 million at the end of fiscal years 2019, 2018, and 2017, respectively. In fiscal year 2019, we generated net cash of $141.8 million, of which $262.6 million was generated from operating activities related to increased net income and improved working capital management while we invested $24.8 million primarily in new manufacturing capacity and used $95.8 million in financing activities primarily to repay outstanding loans. In fiscal year 2018, we generated net cash of $7.6 million, of which $84.3 million was generated from operating activities related to improved working capital management while we invested $25.9 million primarily in new manufacturing capacity and used $50.8 million in financing activities to primarily repay outstanding loans.

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(1)	Amount reflects total anticipated cash payments, including anticipated interest payments based on the interest rates under our 2018 Bank of America Credit Facility and 2019 CTBC Credit Facility at June 30, 2019.

(2)	Amount reflects total gross purchase commitments under our manufacturing arrangements with third-party contract manufacturers or vendors. See Part II, Item 8, Note 15, “Commitments and Contingencies” to the consolidated financial statements in this Annual Report for a discussion of purchase commitments.

(3)

The table above excludes liabilities for deferred revenue of $203.4 million, $5.0 million of deferred gain related to our remaining performance obligations in association with the contribution of certain technology rights to a privately-held company located in China, and unrecognized tax benefits and related interest and penalties accrual of $20.1 million. Deferred revenue represents billed services in advance which include extended warranty, on-site technical support, and software maintenance. We have not provided a detailed estimate of the payment timing of unrecognized tax benefits due to the uncertainty of when the related tax settlements will become due. See Part II, Item 8, Note 14, “Income Taxes” to the consolidated financial statements in this Annual Report for a discussion of income taxes.

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•	We evaluated and tested whether the arrangements are accurately considered and that arrangements have been included in the consideration by comparing those related parties we had identified during our audit procedures for proper inclusion in the Company’s evaluation and performed inspection of source documents on a sample basis.

•	We tested management’s assertion that it does not have the power to direct the activities that are most significant to, or obligation to absorb the losses of, Ablecom and Compuware by reviewing all agreements and transactions between the parties.

•	We obtained confirmations directly from Ablecom and Compuware regarding the nature of their business relationships with the Company, the extent of power, if any, held by the Company over the most significant activities of Ablecom and Compuware’s businesses, and the existence of any implicit arrangements that may have a bearing on the Company’s ability to have power over Ablecom and Compuware.

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•	We gained an understanding and evaluated the Company’s methodology for determining inventory that is excess or obsolete and the key assumptions and judgments made as part of the process.

•	We evaluated the assumptions used by the Company to define what is considered aged inventory by assessing historical trends in the Company’s product life cycle as well as evaluating the underlying calculations applied to the aged inventory.

•	We evaluated the inventory valuation utilizing the methodology above to assess the inventory reserve rate applied to different aging buckets.

•	We selected a sample of product sales from the period immediately preceding the Company’s fiscal year end and obtained the invoice, purchase order, customer contract or agreement, packing list, bill of lading, proof of delivery, and evidence of cash collection, in order to evaluate whether revenue was recognized in the appropriate fiscal year.

•	We selected a sample of product sales for the year and obtained the related contract to identify whether customer acceptance clauses existed that delayed the timing of revenue recognition.

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We selected a sample of credit memos from the period immediately subsequent to the Company’s fiscal year end and obtained the credit memo and the related invoice, return merchandise authorization form, and shipping documents, as applicable and among others, to evaluate whether revenue was recognized in the fiscal year ended June 30, 2019 before control was transferred to the customer or customer acceptance was certain.

•	We obtained and evaluated internal certifications provided by the Company’s employees related to sales transactions in order to identify the existence of side agreements that could impact the timing of revenue recognition. We also selected a sample of employees and conducted interviews to corroborate the accuracy and completeness of the information provided in the certifications.

•	We selected a sample of the Company’s top customers and confirmed the terms and conditions of the master sales

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•	Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•	Level 2 - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

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•	Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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•	Marketable equity securities that have a readily determinable fair value are measured and recorded at fair value.

•	Non-marketable equity securities that do not have a readily determinable fair value and for which the Company does not control the investee nor is it able to exert significant influence over the investee are measured using a measurement alternative recorded at cost less any impairment, plus or minus changes resulting from qualifying observable price changes.

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•	Equity method investments are equity securities for which the Company does not control the investee but is able to exert significant influence over the investee. These investments are measured at cost less any impairment, plus or minus the Company's share of equity method investee income or loss.

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(1)	Reflects the number of PRSUs that have been earned based on the achievement of performance metrics.

(2)	The number of shares released excludes 172,857 RSUs that were vested but not released in fiscal year 2019. The number of shares released also excludes 24,000 and 60,000 PRSUs that were vested but not released in fiscal years 2019 and 2018, respectively. These vested RSUs and PRSUs will be released upon the effectiveness of the Company's registration statement on Form S-8.

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•	Our internal controls did not consistently identify and properly account for certain key non-standard contract or arrangement terms for sales transactions.

•	Our internal controls failed to consistently identify transactions where the terms of the sales arrangements with our customers were not properly documented in a form that fully reflected the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction.

•	Our internal controls failed to consistently identify, resolve, document, and allow for proper accounting where there were inconsistencies among the various documents underlying our sales transactions, and we did not always communicate the existence or resolution of those inconsistencies to our accounting organization to enable the proper recognition of revenue.

•	Internal controls intended to establish a consistent approach for reviewing pricing and establishing supportable estimates of standalone selling price in allocating revenue between multiple performance obligations have not been implemented for a sufficient period of time to demonstrate the controls were operating effectively.

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We have a decentralized approach to developing IT policies and practices and to monitoring our IT controls. As a result, our internal procedures for granting and monitoring employee access, and managing changes to various applications and infrastructure layers relevant to our financial reporting are not consistent across those applications and infrastructure layers. In addition, some of our internally-developed applications relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes. We have also authorized certain users with broad access, both as a user and as an administrator, to all parts of our primary accounting system without adequate monitoring or recording of how they used that access. As a result of these factors, we have material weaknesses related to access controls and change management. The fact that we have material weaknesses related to access controls and change management means that it is possible that our business process controls that depend on the affected information systems, or that depend on data or financial reports generated from the affected information systems, could be adversely affected due to the access control and change management issues, although we have identified no instances of any adverse effect due to these deficiencies.

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•	Restructured our sales organization, which resulted in the resignations of the Senior Vice President of International Sales, the Senior Vice President of Worldwide Sales, the Vice President, Strategic Accounts, the Vice President, Strategic Sales, the Vice President, Business Development and certain other sales personnel.

•	Appointed experienced professionals to key accounting and finance and compliance leadership positions, including the appointments of a new Chief Financial Officer and a new Corporate Controller in January 2018, and the creation of, and appointments to, two newly established roles of Chief Compliance Officer and Vice President of Internal Audit in May 2018 and August 2018, respectively.

•	Reviewed and amended our Code of Conduct to align with the organizational changes described above and to strengthen certain provisions regarding compliance and reporting violations of the Code of Conduct.

•	Adopted an Internal Audit Charter setting forth the responsibilities of the internal audit function and establishing that the Vice President of Internal Audit reports directly to the Audit Committee and that the Audit Committee has authority to provide adequate funding for this function.

•	Changed our organizational structure to narrow the scope of responsibilities of certain of our senior executives and to revise various reporting relationships, which included the appointment of a new Senior Vice President of Worldwide Sales, and a new Senior Vice President of Operations.

•	Conducted training in the following areas:

–	Revenue recognition training for our global sales force, various operations personnel, and certain senior executives, including our CEO, which included detailed examples of acceptable and unacceptable sales practices,

–	Reviewed with our senior management team our amended Code of Conduct,

–	Reviewed with our CEO enhanced processes for periodic evaluations by the CEO and the CFO of the effectiveness of our disclosure controls and procedures, and the periodic assessments by the CEO and the CFO of the effectiveness of our internal control over financial reporting, and other compliance matters, and

–	Shipping and cut-off training for accounting and operations personnel that included new requirements for quarter-end procedures.

•	Enhanced the sales sub-certification document that supports our CEO’s and CFO’s financial statement certifications and expanded the sub-certification participation population to the global sales force.

•	Upgraded our accounting department to include the new roles of Senior Director of Tax, Financial Audit Director and Information Technology Audit Director, as well as replaced certain of our accounting personnel with more experienced individuals, including rebuilding and expanding our revenue recognition team.

•	Enhanced the financial statement risk assessment and fraud risk assessment which are a foundational element of our Sarbanes-Oxley compliance program.

•	Implemented a sequence of meetings around our processes to prepare and report on the consolidated financial statements that promotes cross-functional communication and broadens the accountability for internal controls.

•	Implemented new revenue recognition processes and controls to:

–	Effect an appropriate cutoff of shipping activity

–	Increase the alignment of invoicing with physical shipment

–	Identify and account for transactions that may not have met revenue recognition criteria

–	Appropriately account for the allocation of revenue among performance obligations

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•	Assigned accountability for certain internal controls to our Compliance Department, such as our organizational-wide quarterly sales certification process.

•	Conducted a process by which employees re-certified their understanding of, and compliance with, the Company’s Code of Conduct.

•	Adopted a charter for our compliance program to promote an organizational culture that encourages the highest standards of ethical business conduct and compliance with the law, exercises appropriate due diligence to prevent and detect unlawful conduct, and protects the Company’s reputation.

•	Developing and implementing an ongoing compliance training program regarding significant accounting and financial reporting matters, as well as broad compliance matters, for accounting, financial reporting, sales and operations personnel, as well as for our CEO, our other corporate executives and the Board.

•	Integrating the responsibility for internal controls across business functions to assign accountability for internal controls beyond the accounting and finance team.

•	Increasing standardization and automation within accounting processes to improve the reliability of information used by existing accounting personnel.

•	Implementing a governance committee for our Sarbanes-Oxley compliance program and assigning individual accountability for internal controls.

•	Redesigning and implementing necessary changes to the existing system of internal controls in the context of the revised and more comprehensive risk assessment.

•	Updating selected policies and assigning accountable policy owners related to revenue recognition.

•	Reevaluating the boundary applications that interface with our primary accounting and reporting application and redesigning logical access and program change controls to enhance the reliability of information used to conduct other internal controls.

•	Implementing and/or enhancing IT general controls and segregation of duties controls:

–	Monitoring instances in which individuals are granted broad access

–	Strengthening provisioning of privileged access roles

–	Developing change management capabilities in certain boundary applications and implementing new change management controls

•	Identifying and properly accounting for non-standard terms, including increased information sharing between Sales and other departments on sales transactions

•	Identifying and resolving instances in which customer contracts and purchase orders have conflicting terms, including the new processes to ensure customer master data is complete, accurate and updated as needed on a timely basis

•	Enhancing procedures to ensure contracts create enforceable rights and obligations, including standardizing the method by which we accept customer purchase orders.

•	Developing a system of daily reports related to revenue recognition that enable ongoing monitoring for non-standard transactions and the appropriate allocation of revenue among performance obligations.

•	Testing of sufficient instances of the performance of controls to determine operational effectiveness.

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•	Internal controls did not consistently identify and properly account for certain key non-standard contract or arrangement terms for sales transactions.

•	Internal controls failed to consistently identify transactions where the terms of the sales arrangements with customers were not properly documented in a form that fully reflected the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction.

•	Internal controls failed to consistently identify, resolve, document, and allow for proper accounting where there were inconsistencies among the various documents underlying sales transactions, and the Company did not always communicate the existence or resolution of those inconsistencies to the accounting organization to enable the proper recognition of revenue.

•	Internal controls intended to establish a consistent approach for reviewing pricing and establishing supportable estimates of standalone selling price in allocating revenue between multiple performance obligations have not been implemented for a sufficient period of time to demonstrate the controls were operating effectively.

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The Company has a decentralized approach to developing IT policies and practices and to monitoring our IT controls. As a result, the Company’s internal procedures for granting and monitoring employee access and managing changes to various applications and infrastructure layers relevant to financial reporting are not consistent across those applications and infrastructure layers. In addition, some of the Company’s internally-developed applications relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes. The Company has also authorized certain users with broad access, both as a user and as an administrator, to all parts of the primary accounting system without adequate monitoring or recording of how they used that access. As a result of these factors, the Company has material weaknesses related to access controls and monitoring for changes to applications. The fact that the Company had material weaknesses related to access controls and change management means that it is possible that business process controls that depend on the affected information systems, or that depend on data or financial reports generated from affected information systems, could be adversely affected due to the access control and change management issues, although the Company has identified no instances of any adverse effect due to these deficiencies.

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(1)

Because we did not, prior to the filing of this Annual Report, file our Annual Reports on Form 10-K for fiscal years 2017 and 2018 in a timely manner, we were unable to hold our annual meetings following the fiscal years 2017 and 2018.. We are not able to hold an annual meeting until such time as we have filed all delinquent Annual Reports on Form 10-K and our Annual Report on Form 10-K for the most recently completed fiscal year. The Class II Directors’ terms were originally to expire at the annual meeting following fiscal 2017, the Class III Directors’ terms were originally to expire at the annual meeting following 2018 and the Class I Directors' terms will expire at the annual meeting following fiscal year 2019, which we expect to hold in the first half of calendar 2020. We expect that the Class I Directors, Class II Directors and Class III Directors will all come up for election at that annual meeting.

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(1)	Committee Chairperson

•	Appoints, retains and approves the compensation of our independent auditors, and the review and evaluation of the auditors’ qualifications, independence and performance;

•	Oversees the independent auditors’ audit work and reviews and pre-approves all audit and non-audit services that may be performed by them;

•	Discusses with the independent auditors any audit problems, difficulties and management’s response, and matters that the Public Company Accounting Oversight Board and the SEC require to be discussed with the committee;

•	Reviews and discusses with management press releases regarding our financial results, as well as financial information and earnings guidance provided to securities analysts and rating agencies;

•	Reviews and approves the planned scope of our annual audit;

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•	Monitors the rotation of partners of the independent auditors on our engagement team as required by law;

•	Reviews our financial statements and discusses with management and the independent auditors the results of the annual audit and the review of our quarterly financial statements;

•	Reviews our critical accounting policies and estimates;

•	Oversees the adequacy of our financial controls;

•	Periodically reviews with management and the independent auditors our disclosure controls and procedures and internal control over financial reporting;

•	Reviews and approves the internal audit function’s (i) audit plan, (ii) all major changes to the audit plan, (iii) the scope, progress and results of executing the internal audit plan, and (iv) the annual performance of the internal audit function

•	Reviews and approves all related party transactions;

•	Establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters and oversees enforcement, compliance and remedial measures under our Code of Business Conduct and Ethics;

•	Initiates investigations and hire legal, accounting and other outside advisors or experts to assist the Audit Committee, as it deems necessary to fulfill its duties;

•	Periodically discusses with management our major financial risk exposures and steps management has taken to monitor and control the exposures, including our risk assessment and risk management guidelines and policies; and

•	Reviews and evaluates, at least annually, the adequacy of the Audit Committee charter and recommends any proposed changes to the Board for approval.

•	Periodically reviews and advises the Board concerning our overall compensation philosophy, policies and plans, including a review and approval of a group of companies for general executive compensation competitive comparisons, approval of target pay and performance objectives against this group, and monitoring of our executive compensation levels and their performance relative to this group;

•	Reviews and approves corporate goals and objectives relevant to compensation of the Chief Executive Officer and other executive officers;

•	Evaluates the performance of the Chief Executive Officer and other executive officers in light of those goals and objectives, including generally against the overall performance of executive officers at comparable companies, all while taking into account our risk management policies and practices;

•	Reviews and approves the compensation of the Chief Executive Officer and other executive officers;

•	Reviews and approves our incentive compensation plans and equity compensation plans;

•	Monitors and assesses risks associated with our compensation policies, including whether such policies could lead to unnecessary risk-taking behavior, and consults with management regarding such risks;

•	Administers the issuance of restricted stock grants, stock options and other equity awards to executive officers, directors and other eligible individuals under our equity compensation plans; and

•	Reviews and evaluates, at least annually, the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter and the adequacy of the Compensation Committee charter.

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•	Identifies individuals qualified to become directors;

•	Evaluates and selects, or recommends to the Board, director nominees for each election of directors;

•	Develops and recommends to the Board criteria for selecting qualified director candidates in the context of the current make-up of the Board;

•	Considers any nominations of director candidates validly made by our stockholders;

•	Reviews committee structures and compositions and recommends to the Board concerning qualifications, appointment and removal of committee members;

•	Develops, recommends for approval by the Board and reviews on an ongoing basis the adequacy of the corporate governance principles applicable us;

•	Develops and recommends to the Board our Corporate Governance Guidelines;

•	Reviews, on a periodic basis, the adequacy of our Corporate Governance Guidelines and recommends any proposed changes to the Board;

•	Oversees compliance with our Corporate Governance Guidelines and reports on such compliance to the Board;

•	Assists the Board in the evaluation of the Board and each committee; and

•	Periodically reviews the scope of responsibilities of the Governance Committee and the committee's performance of its duties.

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(1)	Messrs. Hideshima, Chou and Liaw resigned effective January 30, 2018. None of them received any severance or other enhanced benefits in connection with their termination of employment.

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•	Base salary;

•	Bonuses; and

•	Equity-based incentive compensation consisting of grants of: (1) for fiscal year 2019, stock options and/or time-based restricted stock units (“RSUs”) to certain named executive officers; and (2) for fiscal year 2018, stock options, time-based RSUs and/or PRSUs to certain named executive officers.

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(1)	Mr. Hideshima, Mr. Chou and Mr. Liaw resigned effective January 30, 2018.

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(1)	Amounts disclosed under "Salary" for fiscal year 2019 includes leave pay earned by the named executive officers for fiscal year 2019.

(2)	Amounts disclosed under “Bonus” for fiscal year 2019 reflect primarily fixed amounts per the terms of employment offer letters or upon promotion, quarterly profit sharing and/or our sales bonus program.

(3)	Amounts disclosed for fiscal year 2019 represent the grant date fair value of RSU awards granted during fiscal year 2019 calculated in accordance with ASC Topic 718 and are based on the closing market price of our common stock on the date of grant.

(4)

Amounts disclosed for fiscal year 2019 represent the grant date fair value of each stock option award granted during fiscal year 2019 calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model. Assumptions used in the calculation of these amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 13 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2019 included in this Annual Report.

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(1)	Represents the fair value of the stock options and RSU awards as of the date of grant, computed in accordance with ASC Topic 718.

(2)	This RSU award vested at the rate of 25% on May 16, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

(3)	This stock option grant vested at the rate of 25% on May 1, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

(4)	This stock option grant vested at the rate of 25% on October 30, 2019 and generally will vest at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 30, 2022.

(5)	This stock option grant vested at the rate of 25% on April 30, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

(6)	This RSU award vested at the rate of 25% on May 16, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

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(1)	Represents the closing stock price per share of our common stock as of June 30, 2019 ($19.35) multiplied by the number of shares underlying RSUs that had not vested or that were unearned as of June 30, 2019.

(2)	These nonqualified stock options vested at the rate of 12.5% on August 2, 2017 and generally vested (or will vest) at a rate of 1/36th per month thereafter, such that the granted options will be fully vested on August 2, 2020.

(3)

These RSUs were originally granted as PRSUs and were earned based on performance during fiscal year 2018 at a rate of 200% of the target number of PRSUs (a total of 120,000 PRSUs for this award). 50% of the earned PRSUs (60,000) vested on June 30, 2018 and the remainder of the earned PRSUs (60,000) will vest ratably over the following ten fiscal quarters based on Mr. Liang’s continued employment with the Company. As of June 30, 2019, an additional 24,000 PRSUs had vested, leaving 36,000 unvested PRSUs.

(4)	These incentive stock options vested at the rate of 25% on January 11, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

(5)	These nonqualified stock options vested at the rate of 25% on January 11, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

(6)	These nonqualified stock options vested at the rate of 20% on January 11, 2018 and vested (or generally will vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

(7)	These nonqualified stock options vested at the rate of 20% on January 11, 2018 and vested (or generally will vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

(8)	These RSUs vested at the rate of 25% on February 16, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on February 16, 2021.

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(9)	These incentive stock options vested at the rate of 25% on April 17, 2017 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 17, 2020.

(10)	These incentive stock options vested at the rate of 25% on May 1, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

(11)	These nonqualified stock options vested at the rate of 25% on May 1, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

(12)	These RSUs vested at the rate of 25% on May 16, 2017 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2020.

(13)	These RSUs vested at the rate of 25% on May 16, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

(14)	These incentive stock options vested at the rate of 25% on October 12, 2017 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 12, 2020.

(15)	These nonqualified stock options vested at the rate of 25% on October 12, 2017 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 12, 2020.

(16)	These incentive stock options vested at the rate of 25% on October 30, 2019 and generally will vest at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 30, 2022.

(17)	These nonqualified stock options vested at the rate of 25% on October 30, 2019 and generally will vest at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 30, 2022.

(18)	These RSUs vested at the rate of 25% on November 16, 2017 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on November 16, 2020.

(19)	These incentive stock options vested at the rate of 25% on April 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

(20)	These nonqualified stock options vested at the rate of 25% on April 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

(21)	These RSUs vested at the rate of 25% on May 16, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

(1)	The value is the closing price of our common stock on the date of vesting, multiplied by the number of shares vested, , except that in Mr. Liang’s case, the value is the closing price of our common stock on the June 30, 2019 ($23.65), which is the date the shares vested. Since our registration statement on Form S-8 was not effective, those vested shares for Mr. Liang have not been released.

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(1)	Amounts disclosed under "Salary" for fiscal year 2018 include leave pay earned by the named executive officers for fiscal year 2018.

(2)	Amounts disclosed under “Bonus” for fiscal year 2018 reflect fixed bonuses per the terms of an employment offer letter and our profit sharing program.

(3)

Amounts disclosed for fiscal year 2018 represent the grant date fair value of RSU or PRSU awards granted during fiscal year 2018 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC Topic 718"), and are based on the closing market price of our common stock on the date of grant. Assuming the highest level of performance is achieved for the PRSUs granted in fiscal year 2018, the grant date fair value of the PRSU awards would have been $3,252,000 for Mr. Liang’s one-year PRSUs and $1,626,000 for Mr. Liang’s two-year PRSUs.

(4)

Amounts disclosed for fiscal year 2018 represent the grant date fair value of each stock option award calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model. Assumptions used in the calculation of these amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 13 “Stock-based Compensation and Stockholders’ Equity,” to our consolidated financial statements for fiscal year 2018 included in this Annual Report.

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(1)	Represents the fair value of the stock options and RSU and PRSU awards as of the date of grant, computed in accordance with ASC Topic 718.

(2)	This stock option grant vested at the rate of 12.5% on August 2, 2017 and then generally vested (or vests) at a rate of 1/36th per month thereafter, such that the granted options will be fully vested on August 2, 2020.

(3)

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 200% of the target depending on revenue growth and minimum operating profit for fiscal year 2018. Of the PRSUs earned based on performance, 50% vested as of June 30, 2018 and the remainder of the earned PRSUs vested (or will vest) ratably over the following 10 fiscal quarters based on Mr. Liang’s continued employment with the Company. The Company’s performance for fiscal 2018 resulted in 120,000 PRSUs being earned under this award.

(4)

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 100% of the target depending on average non-GAAP operating margin over a two-year period consisting of fiscal year 2018 and fiscal year 2019. Non-GAAP operating margin is defined as net income from operations, less stock-based compensation expense, divided by net sales (all as shown on the Company’s audited financial statements for such fiscal years). PRSUs earned based on performance, if any, would be 50% vested as of June 30, 2019, with the remainder vesting ratably over the following six fiscal quarters based on Mr. Liang’s continued employment with the Company. As of June 30, 2018, the performance period for this PRSU had not been completed, and it was not then determinable whether any of such PRSUs would be earned and/or vested.

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(1)	Represents the closing stock price per share of our common stock as of June 30, 2018 ($23.65) multiplied by the number of shares underlying RSUs that had not vested or that were unearned as of June 30, 2018.

(2)	These nonqualified stock options vested at the rate of 25% on November 1, 2015 and at a rate of 1/16th per quarter thereafter, such that the granted options were fully vested on November 1, 2018.

(3)	These nonqualified stock options vested at the rate of 12.5% on August 2, 2017 and generally vested (or vest) at a rate of 1/36th per month thereafter, such that the granted options will be fully vested on August 2, 2020.

(4)

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 200% of the target depending on revenue growth and minimum operating profit for fiscal year 2018, as shown in the Company’s audited financial statements. Of the PRSUs earned based on performance, 50% vested as of June 30, 2018 and the remainder of the earned PRSUs vested (or will vest) ratably over the following 10 fiscal quarters based on Mr. Liang’s continued

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(5)

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 100% of the target generally depending on performance during the performance period of July 1, 2017 to June 30, 2019. In addition, 50% of the award vested on June 30, 2019 and the remainder of the award generally vested (or will vest), depending on final performance, at a rate of quarterly over the following six Company fiscal quarters. The performance achievement determination and number of PRSUs actually earned are based on the audited financial statements of the Company for the fiscal years ended June 30, 2019 and 2018, but was not determinable as of June 30, 2018. These PRSUs were not earned as of June 30, 2019.

(6)	These incentive stock options vested at the rate of 25% on January 11, 2018 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

(7)	These nonqualified stock options vested at the rate of 25% on January 11, 2018 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

(8)	These nonqualified stock options vested at the rate of 20% on January 11, 2018 and generally vested (or vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

(9)	These nonqualified stock options vested at the rate of 20% on January 11, 2018 and generally vested (or vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

(10)	These RSUs vested at the rate of 25% on February 16, 2018 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on February 16, 2021.

(11)	These nonqualified stock options vested at the rate of 25% on December 12, 2016 and at a rate of 1/16th per quarter thereafter, such that the granted options were fully vested on December 12, 2019.

(12)	These RSUs vested at the rate of 25% on February 10, 2017 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on February 10, 2020.

(1)	The value is the closing price of our common stock on the date the vested shares are released, except in Mr. Liang’s case, the value is the closing price of our common stock on the June 30, 2018 ($23.65), which is the date the shares vested. Since our registration statement on Form S-8 was not effective, those vested shares for Mr. Liang have not been released.

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(1)	This column consists of annual director fees, non-employee committee chairman fees and other committee member fees earned for fiscal year 2019.

(2)

The dollar amounts in this column represent the aggregate grant date fair values of the awards granted during fiscal year 2019 calculated in accordance with ASC Topic 718. Assumptions used in the calculation of the grant date fair value amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Item II, Part 8, Note 13, “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for fiscal year 2019 included in this Annual Report.

(3)	Laura Black resigned from the Board on June 26, 2019

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(1)	This column consists of annual director fees, non-employee committee chairman fees and other committee member fees earned for fiscal year 2018.

(2)

The dollar amounts in this column represent the aggregate grant date fair values of the awards granted during fiscal year 2018 calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model. Assumptions used in the calculation of the grant date fair value amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Item II, Part 8, Note 13, “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for fiscal year 2018 included in this Annual Report.

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•	Each of the named executive officers during fiscal year 2019;

•	Each of our directors;

•	All directors and executive officers as a group; and

•	All person known to us beneficially own 5% or more of our outstanding common stock.

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(1)	Except as otherwise indicated, to our knowledge the persons named in this table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws applicable and to the information contained in the footnotes to this table.

(2)	Under the SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options or RSUs subject to vesting.

(3)	Calculated on the basis of 50,085,282 shares of common stock outstanding as of November 30, 2019, provided that any additional shares of Common Stock that a stockholder has the right to acquire within 60 days after November 30, 2019 are deemed to be outstanding for the purposes of calculating that stockholder’s percentage of beneficial ownership.

(4)

Includes 637,891 options exercisable within 60 days after November 30, 2019. Also includes 96,000 PRSUs that have been earned and will be vested within 60 days after November 30, 2019, none of which have been yet released. Also includes 3,175,002 shares jointly held by Mr. Liang and Sara Liu, his spouse, 472,890 shares held directly by Ms. Liu and 61,000 options exercisable within 60 days after November 30, 2019. See footnote 13.

(5)	Includes 52,499 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

(6)	Includes 39,020 options exercisable or 2,250 RSUs exercisable within 60 days after November 30, 2019.

(7)	Includes 17,735 options exercisable or RSUs subject to vesting, both within 60 days after November, 2019.

(8)	Includes 7,500 options exercisable or 3,750 RSUs exercisable within 60 days after November 30, 2019.

(9)	Includes 27,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

(10)	Includes 40,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

(11)	Includes 18,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

(12)	Includes 40,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

(13)

Includes 61,000 options exercisable within 60 days after November 30, 2019. Also includes 3,175,002 shares jointly held by Ms. Liu and Mr. Liang, her spouse, 3,969,793 shares held by Charles Liang, Ms. Liu’s spouse and 637,891 shares issuable upon the exercise of options within 60 days after November 30, 2019. Also includes 96,000 PRSUs held by Mr. Liang that have been earned and will be vested within 60 days after November 30, 2019, none of which have been yet released. See footnote 4.

(14)	Includes 1,042,645 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

(15)

The information with respect to the holdings of Dimensional Fund Advisors LP ("Dimensional Fund Advisors") is based solely on Schedule 13G filed on February 8, 2019 by Dimensional Fund Advisors. Dimensional Fund Advisors has the sole power to dispose or to direct the disposition of all of such shares. Dimensional Fund Advisors has the sole power to direct the vote of 3,355,723 of such shares. The address for Dimensional Fund Advisors is Building One 6300 Bee Cave Road, Austin, Texas 78746.

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(1)	This number includes 7,374,635 shares subject to outstanding options, 1,873,102 shares subject to outstanding RSU awards, and 36,000 shares subject to outstanding PRSU awards.

(2)	The weighted average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs and PRSUs, which have no exercise price.

(3)	The weighted-average remaining contractual term of our outstanding options as of June 30, 2019 was 3.82 years.

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(1)	Audit fees consist of the aggregate fees for professional services rendered for the audit of our consolidated financial statements, review of interim condensed consolidated financial statements and certain statutory audits.

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+	Filed herewith

(1)	Incorporated by reference to the same number exhibit filed with the Registrant’s Registration Statement on Form S-1 (Registration No. 333-138370), declared effective by the Securities and Exchange Commission on March 28, 2007.

(2)	Incorporated by reference to the Company’s registration statement on Form S-8 (Commission File No. 333-142404) filed with the Securities and Exchange Commission on April 27, 2007.

(3)	Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on June 29, 2007.

(4)	Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 2, 2008.

(5)	Incorporated by reference to the Company’s Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on December 2, 2008.

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(6)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on May 7, 2010.

(7)	Incorporated by reference to Exhibit 10.34 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 7, 2010.

(8)	Incorporated by reference to Appendix A from the Company’s Definitive Proxy Statement on Schedule 14A (Commission File No. 001-33383) filed with the Securities and Exchange Commission on January 18, 2011.

(9)	Incorporated by reference to the Company's Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on November 7, 2011.

(10)	Incorporated by reference to the Company's Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 24, 2013.

(11)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on November 7, 2013.

(12)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on February 9, 2015.

(13)	Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 10, 2015.

(14)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on November 16, 2015.

(15)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on February 4, 2016.

(16)	Incorporated by reference to the Company's Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on March 14, 2016.

(17)	Incorporated by reference to the Company's registration statement on Form S-8 (Commission File No.333-210881) filed with the Securities and Exchange Commission on April 22, 2016.

(18)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on May 6, 2016.

(19)	Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 26, 2016.

(20)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-33383) filed with the Securities and Exchange Commission on May 10, 2017.

(21)	Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on October 31, 2017.

(22)	Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on January 17, 2018.

(23)	Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on March 13, 2018.

(24)	Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on September 12, 2018.

(25)	Incorporated by reference to Exhibit 14.1 from the Company’s Current Report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on February 5, 2019.

(26)	The certifications attached as Exhibit 32.1 and 32.2 accompany the Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by Super Micro Computer, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

(27)	Incorporated by reference to the Company's Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on May 17, 2019.

(28)	Incorporated by reference to Exhibit 10.1 from the Company's Current report on 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on July 2, 2019.

*	Management contract, or compensatory plan or arrangement

‡	Certain portions of this document, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy, have been redacted in accordance with Regulation S-K Item 606(a)(6).

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