To The Moon

ESG understanding

Environmental

The Innovative Resource-Saving Architecture™, at the heart of Supermicro's commitment, achieves a remarkable 40-45% reduction in hardware refresh costs, contributing to a significant reduction in e-waste and up to 50% reduction in electricity and carbon footprint. Recognized as a pioneer in energy-efficient computing, the firm is committed to achieving Energy Star certification for all solutions by the end of fiscal year 2023, emphasizing environmental, social, and governance (ESG) best practices. Supermicro implements green manufacturing standards in its operations in the United States, Taiwan, and the Netherlands, including factory automation and alternative energy sources like solar.

Supermicro places sustainability at the heart of their business processes. The company actively releases GHG emissions data for Scope 1, 2, and 3, exhibiting transparency and responsibility. The Nominating & Governance Committee's facilitation of board oversight on ESG-related issues demonstrates a commitment to environmental responsibility. Supermicro promotes carbon-free electricity by purchasing wind renewable energy certificates (RECs). The company is a responsible mineral source, and its engagement in The Green Grid Consortium, where it heads the Liquid Cooling Group, demonstrates leadership in promoting industry-wide data center efficiency improvements. Supermicro's commitment to adopting sustainable practices into company operations is exemplified by the incorporation of solar panels into the Taiwan Campus, with ongoing investigations for additional Green investments.

Social

Supermicro prioritizes the inclusion of veterans and underrepresented ethnicities in its focused recruitment campaigns, creating diversity throughout their workforce. The fact that more than 60% of employees have access to restricted stock pay demonstrates the company's dedication to recognizing and rewarding its workforce. Supermicro not only improves its corporate culture by fostering an inclusive atmosphere, but it also assures that employees are vital to its success. This emphasis on human capital is consistent with the company's overall commitment to ethical and responsible business practices, which contributes to a positive and sustainable workplace culture.

Governance

The governance principles of Supermicro stress transparency, independence, and accountability. With 71% independence, the Board of Directors demonstrates a commitment to unbiased decision-making. The board's over 30% female presence stresses diversity and inclusivity. The "One Share, One Vote" structure maintains shareholder equity, and an annual Say-on-Pay Proposal reinforces CEO salary accountability. Supermicro's dedication to responsible governance is further demonstrated by robust risk mitigation tools, such as the power to take back executive salary. Collectively, these activities contribute to a governance framework that promotes justice, openness, and ethical behavior.

Risk Analysis

Super Micro Computer, Inc. (SMCI) has conducted a risk assessment, with a focus on its debt profile and general financial health. The following are essential points that summarize the risk analysis:

1. Overview of Debt:

Over a year, SMCI's total debt climbed dramatically, rising from US$98.2 million to US$596.8 million. Net debt is roughly US$329.4 million after deducting the cash reserve of $267.4 million.

1. Balance Sheet Stability:

The total liabilities due within a year are $1.47 billion, with additional liabilities of $309.3 million due after that. These debts are offset by $267.4 million in cash and US$972.6 million in receivables due in the next 12 months. The company's liabilities are $539.4 million greater than its cash and short-term receivables.

1. Concerns about free cash flow:

Super Micro Computer spent a lot of money over the last three years, showing a reliance on free cash flow to pay off debt. The ability of the corporation to reverse this cash burn is a critical aspect in analyzing its debt risk.

1. Overall Evaluation:

Despite significant liabilities, the company's market capitalization of US$2.83 billion appears to provide a cushion against large debt problems. The company's capacity to cover interest expenses and achieve excellent EBIT growth are both favorable indicators of its debt management capabilities. However, prudence is urged, and the balance sheet should be monitored on an ongoing basis.

1. Investment Risk:

According to the above, SMCI can manage its debt very well, with the possibility for improved shareholder returns owing to leverage. The negative risk includes the necessity for diligent balance sheet monitoring and the company's capacity to reverse its history of burning cash.

References: Yahoo Finance. (© 2023). SMCI - Super Micro Computer Inc. (SMCI) Stock Price, Quote, History & News. Yahoo Finance. https://finance.yahoo.com/quote/SMCI/

Simply Wall St. (© 2023). Super Micro Computer Inc. (NASDAQ:SMCI) - Share price, News & Analysis. Simply Wall St. https://simplywall.st/stocks/us/tech/nasdaq-smci/super-micro-computer

*Do note that all of this is for information only and should not be taken as investment advice. If you should choose to invest in any of the stocks, you do so at your own risk.

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