Super Micro Computer, Inc. (NASDAQ: SMCI) has announced the completion of a review by an independent special committee formed by the company's board of directors. The special committee, supported by outside counsel Cooley LLP and forensic accounting firm Secretariat Advisors, LLC, found no evidence of misconduct on the part of management or the board of directors, and no restatement of reported financials is expected.
The key findings of the special committee include: No substantial concerns about the integrity of the company’s senior management or audit committee were raised. The audit committee demonstrated appropriate independence and oversight over financial reporting matters. * The tone at the top of the company was appropriate with regard to rehiring certain former employees and financial reporting.
The review, which took over three months, involved extensive document collection, review, and analysis of roughly 4.1 terabytes of data, consisting of over 9 million documents from 89 individuals. Additionally, 68 witness interviews were conducted, and more than 50 attorneys from Cooley and outside contract review attorneys were employed, along with a team of forensic accounting specialists from Secretariat.
The special committee's detailed findings for specific issues investigated include: Rehiring employees: The special committee regarded the lack of any finding in the 2017 audit committee investigation that the rehired individuals had engaged in misconduct as an important factor. Lapses in the rehiring process were identified, primarily attributed to the former chief financial officer/chief compliance officer (CFO/CCO). Revenue recognition and sales practices: The special committee did not disagree with the company’s revenue recognition conclusions and did not find evidence of any substantial concerns about management's commitment to accurate financial statements. Export control matters: No evidence suggesting circumvention of export control regulations or violations was found. Related party disclosures: The special committee concluded that related parties were disclosed as required.
As a result of the findings, the special committee recommended measures to strengthen the company's governance, including the transition to a new chief financial officer, appointment of a chief accounting officer and chief compliance officer, expansion of the legal department, and improvement of training and guardrail monitoring.
The company has adopted all of the special committee’s recommendations, including appointing a new chief accounting officer, accelerating the search for a chief compliance officer and general counsel, and expanding and enhancing its training programs.
In terms of financial reporting, the company believes it will be able to complete its annual report on Form 10-K for the year ended June 30, 2024, and its quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2024, and become current with its periodic reports within the discretionary period available to the NASDAQ staff to grant. The company does not anticipate any restatements of its quarterly reports for the fiscal year 2024 ended June 30, 2024, or for prior fiscal years. As a result of these announcements, the company's shares have moved 15.3% on the market, and are now trading at a price of $37.63. For the full picture, make sure to review Super Micro Computer's 8-K report.
