Dive Brief:

• San Jose, California-based Super Micro Computer filed its delayed 10-K for the fiscal year ended June 30 and 10-Qs for fiscal Q1 and Q2 of 2025, meeting the extended deadline Nasdaq granted in December that allowed the company more time to file its reports without the risk of delisting, according to a company release and securities filings. The AI server maker’s shares jumped about 12% Wednesday on the news to close at $51.11. 
• A report from the company’s registered public accounting firm BDO included in the 10-K stated that their audit found that the balance sheet and related consolidated financial statements “present fairly, in all material respects, the financial position of the company at June 30 2024” and conform with generally accepted accounting principles. However, BDO gave an “adverse opinion” on the company’s internal control over financial reporting as of that same date. 
• An adverse opinion on internal controls is not ideal but it’s much less of a significant issue than a material misstatement as it’s simply a means by which an auditor flags policies and systems at a company that are lacking and which could lead to accounting problems not being detected, according to Jack Castonguay, associate professor of accounting at Hofstra University in New York. “What an adverse opinion on internals means at its most simplest is there’s a high risk that a material misstatement would not be prevented or detected,” Castonguay said in an interview, noting that the finding was made last year and could have been fixed by now. 

Dive Insight:

Super Micro in its release stated that there were no restatements of previously filed financial statements and that its filings of the reports Tuesday put it back into compliance with Nasdaq filing requirements. “The matter is now closed,” stated the release, which included a statement calling it an “important milestone,” from President and CEO Charles Liang. 

“With our financial reporting now current, we can now fully focus on executing our proven winning growth strategy through technology, product and solution innovations, time-to-market advantage, global footprint, and green computing,” Liang said. 

The AI server maker’s accounting has drawn scrutiny in the wake of a highly critical report from the now defunct Hindenburg Research on Aug. 27. Subsequently, the company delayed its 10-K filing for its fiscal 2024 to assess internal controls and its auditor EY resigned and was replaced with BDO. 

In December the company’s outlook appeared to brighten when the SEC granted it an extension to file this month without risking delisting and separately, an internal probe of the integrity of the company’s audit committee and management found “no evidence of misconduct” even as it recommended the company “transition to a new CFO.”  

Still, some uncertainties still appear to loom for Super Micro, which noted in a filing earlier this month that it had received subpoenas late last year from the Department of Justice and the Securities and Exchange Commission which were seeking certain documents following the publication of allegations in the short seller report. 

Castonguay said that adverse opinions from auditors flagging internal control failures happen occasionally and are preferred to adverse opinions that flag concerns about the financial statements themselves. In theory, he said companies want an unqualified opinion on both areas but would much rather an internal control issue than a financial statement presentation issue.

He likened an internal control matter at a company to a person who has left their house unlocked and open overnight during which time no one stole anything. “That was your internal controls failing but it doesn’t mean someone actually robbed your house,” he said.

Super Micro and BDO did not immediately respond to requests for comment.