Financial Data and Key Metrics Changes - SGH reported revenue of $10.7 billion, up 1% year-on-year, with EBIT increasing by 8% to $1.54 billion, aligning with high single-digit EBIT growth guidance [3][26] - NPAT rose by 9% to $924 million, while operating cash flow surged by 49% to $1.95 billion, reflecting strong cash conversion across the business [4][5] - EBITDA margins expanded to 19% and EBIT margins to 14.3%, driven by increased profitability at Boral and higher contributions from equity-accounted earnings [4][26] Business Line Data and Key Metrics Changes - Westrac's revenue increased by 4% to $6.1 billion, with EBIT rising by 2% to $639 million, supported by strong capital sales [11][12] - Boral's revenue was up 1% to $3.6 billion, with EBIT growing by 26% to $468 million, reflecting pricing discipline and operational efficiencies [13][14] - Coats experienced a 9% decline in revenue to $1 billion, with EBIT down 9% on a normalized basis, impacted by lower customer activity in the South [17][18] - Beach's production increased by 9% to 19.7 million BOEs, with revenue rising by 13% to $2 billion, and NPAT up 32% to $451 million [21][22] Market Data and Key Metrics Changes - Australian commodity export volumes increased by 3% in FY 2025, with iron ore exports expected to grow in the medium term [13] - Construction activity remained elevated, supporting customer demand into FY 2026, particularly in infrastructure projects [16][39] Company Strategy and Development Direction - SGH's strategy focuses on sectors with long-duration demand tailwinds, including mining, infrastructure, and energy, aiming for sustainable value creation and TSR outperformance [2][39] - The company plans to enhance sales effectiveness, operating leverage, and innovation to drive performance in FY 2026 [37][39] Management's Comments on Operating Environment and Future Outlook - Management noted mixed market conditions but expressed confidence in strong customer activity and demand, particularly in Westrac and Boral [48][50] - The outlook for Coats remains positive in the medium term, supported by macroeconomic settings and the execution of the Grow30 strategy [39][40] Other Important Information - SGH completed the acquisition of the remainder of Boral, further solidifying its position as a leading diversified operating company [5] - The company achieved a 27% uplift in cash conversion to 95%, supporting a 10% deleveraging of the business [5][30] Q&A Session Summary Question: Westrak and parts pricing dynamics - Management indicated a mid-single-digit price increase expected for July, with a potential slight reduction in the second half due to currency mix [42] Question: Coats' time utilization improvement - Management noted gradual improvement in time utilization, tracking closer to the target of 60% [43][44] Question: Westrak's service revenue performance - Management acknowledged strong customer activity but noted some work deferment impacting service revenue in the second half [48][49] Question: Boral's margin targets - Management expressed confidence in achieving mid-teen margin targets despite flat volume expectations, focusing on operational efficiencies [56][57] Question: Coats' southern region performance - Management observed stabilization in southern regions, with expectations for recovery in the second half of FY 2026 [55] Question: LNG cargo marketing plans - Management outlined plans to market LNG cargoes starting in FY 2026, with expected significant earnings contributions from the Krux project [90][92]

Financial Data and Key Metrics Changes - SGH reported revenue of $10.7 billion, up 1% year-on-year, with EBIT increasing by 8% to $1.54 billion, aligning with guidance for high single-digit EBIT growth [3][26] - NPAT rose by 9% to $924 million, while operating cash flow surged by 49% to $1.95 billion, reflecting strong cash conversion [4][5] - EBITDA margin expanded to 19% and EBIT margin to 14.3%, driven by increased profits at Boral and higher equity accounted earnings [4][26] Business Line Data and Key Metrics Changes - Westrac's revenue increased by 4% to $6.1 billion, with EBIT rising 2% to $639 million, supported by strong capital sales [11][12] - Boral's revenue was $3.6 billion, up 1%, with EBIT growing 26% to $468 million, reflecting pricing discipline and operational efficiencies [13][14] - Coats experienced a 9% decline in revenue to $1 billion, with EBIT down 9% to $290 million due to lower customer activity [17][19] - Beach's production increased by 9% to 19.7 million BOEs, with revenue rising 13% to $2 billion, and NPAT up 32% to $451 million [21][22] Market Data and Key Metrics Changes - Australian commodity export volumes increased by 3% in FY 2025, with iron ore exports expected to grow in the medium term [13] - Construction activity remained elevated, supporting customer demand into FY 2026 [13][40] - The advertising market for Seven West Media declined by 4%, but digital performance improved significantly with a 26% increase in revenue [24] Company Strategy and Development Direction - SGH's strategy focuses on owning and operating leading businesses in sectors with long-duration demand tailwinds, including mining, infrastructure, and energy [2] - The company aims for TSR outperformance and sustainable value creation through disciplined capital allocation and execution [2][38] - The "Grow30" strategy at Coats targets incremental share of the $1.7 trillion infrastructure and construction pipeline, focusing on renewables and utilities [20][91] Management's Comments on Operating Environment and Future Outlook - Management noted mixed market conditions but expressed confidence in continued growth, particularly in Westrac and Boral, while expecting normalization in capital sales [40] - The outlook for Coats is positive in the medium term, supported by macro settings and the execution of the Grow30 strategy [40] - SGH anticipates low to mid-single-digit EBIT growth for FY 2026, supported by margin expansion and core sector exposure [41] Other Important Information - SGH completed the acquisition of the remainder of Boral, further solidifying its position as a leading diversified operating company [5] - The company achieved a 27% uplift in cash conversion to 95%, supporting a 10% deleveraging of the business [5][34] - Safety remains a core priority, with significant improvements in safety metrics reported [9] Q&A Session Summary Question: Westrak and parts pricing dynamics - Management indicated a mid-single-digit price increase expected for July, with a potential slight reduction in the second half due to currency mix [44] Question: Coats' time utilization improvement - Management noted gradual improvement in time utilization, tracking closer to the target of 60% [46] Question: Westrak's service revenue and volume expectations - Management acknowledged strong macro demand but noted customer focus on costs leading to work deferment, impacting service revenue [51][52] Question: Boral's mid-teen margin target - Management expressed confidence in achieving margin improvements through operational efficiencies despite flat volume expectations [59][60] Question: Coats' southern regions stabilization - Management observed stabilization in southern regions, with expectations for recovery in the second half of the year [58] Question: LNG cargo marketing plans - Management plans to market LNG cargoes in 2026, expecting significant EBIT contributions from the Krux project [94][96]

Financial Performance - SGH's revenue increased by 1% to $10744 million[12] - EBIT increased by 8% to $1537 million[12] - NPAT increased by 9% to $924 million[12] - Operating cash flow increased significantly by 49% to $1951 million[12] - The company's final dividend increased by 17% to 62cps[22] Business Unit Performance - WesTrac's revenue increased by 4% to $6100 million[39] - Boral's revenue increased by 1% to $3603 million, with EBIT up by 26% to $468 million[57] - Coates' revenue decreased by 9% to $1041 million[76] - Beach Energy's revenue increased by 13% to $1997 million, with production up by 9% to 197 million barrels of oil equivalent (mmboe)[93] Safety and Sustainability - Lost Time Injury Frequency Rate (LTIFR) and Total Recordable Injury Frequency Rate (TRIFR) improved by 38% and 31% respectively[35] Capital Management - Adjusted Net Debt to EBITDA (Leverage) decreased by 10% year-over-year, falling below 2x[22]

[PART I. Financial Information](index=5&type=section&id=PART%20I.%20Financial%20Information) [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Financial statements for May 30, 2025, reflect increased assets, cash, and net income, driven by preferred share issuance and sales growth [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows significant increases in cash, total assets, and equity, primarily due to a preferred share issuance Consolidated Balance Sheet Highlights (in thousands) | Account | May 30, 2025 | August 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $709,871 | $383,147 | | Total current assets | $1,249,896 | $867,704 | | Goodwill | $150,585 | $161,958 | | Total assets | $1,802,782 | $1,474,506 | | **Liabilities & Equity** | | | | Total current liabilities | $476,744 | $327,596 | | Long-term debt | $639,562 | $657,347 | | Total liabilities | $1,207,859 | $1,075,298 | | Total equity | $594,923 | $399,208 | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) The statement of operations shows a significant increase in net sales and a return to net income from continuing operations Statement of Operations Summary (in thousands, except per share data) | Metric | Nine Months Ended May 30, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Total net sales | $1,030,872 | $859,648 | | Gross profit | $297,543 | $253,690 | | Operating income | $45,687 | $9,504 | | Net income (loss) from continuing operations | $18,285 | $(17,993) | | Net income (loss) attributable to Penguin Solutions | $15,960 | $(27,925) | | Diluted EPS from continuing operations | $0.18 | $(0.38) | - The company recorded a goodwill impairment charge of **$5.3 million** in Q3 2025 and **$11.4 million** in the first nine months of 2025, compared to zero in the prior year periods[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show a substantial increase in operating and financing cash, driven by preferred share issuance and improved net income Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended May 30, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $179,517 | $89,341 | | Net cash provided by investing activities | $2,606 | $115,863 | | Net cash provided by (used for) financing activities | $144,587 | $(160,221) | | Net increase in cash, cash equivalents and restricted cash | $326,710 | $43,727 | - Financing activities in the first nine months of 2025 were primarily driven by **$191.2 million** in net proceeds from the issuance of preferred shares, partially offset by **$49.2 million** in share repurchases. This is a significant shift from the prior year, which saw **$126.6 million** in debt repayments[22](index=22&type=chunk) [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail redomiciliation to Delaware, SMART Brazil divestiture, a **$200 million** SKT investment, and a **$11.4 million** goodwill impairment - On June 30, 2025, the company completed its redomiciliation from the Cayman Islands to Delaware, with Penguin Solutions, Inc. (Delaware) becoming the publicly traded parent company[23](index=23&type=chunk)[119](index=119&type=chunk) - The company completed the divestiture of an **81%** interest in SMART Brazil on November 29, 2023. The results of SMART Brazil are now presented as discontinued operations for all periods[26](index=26&type=chunk)[32](index=32&type=chunk) - On December 13, 2024, the company received a **$200 million** investment from an affiliate of SK Telecom Co., Ltd. through the sale of **200,000** convertible preferred shares[29](index=29&type=chunk)[71](index=71&type=chunk) - Goodwill for the Penguin Edge business was impaired by **$5.3 million** in Q3 2025 and **$11.4 million** in the first nine months of 2025 due to the planned wind-down of the business. The remaining **$4.7 million** of goodwill is expected to be fully impaired by the end of calendar 2025[53](index=53&type=chunk)[56](index=56&type=chunk) - Subsequent to the quarter end, on June 24, 2025, the company entered into a new **$400 million** revolving credit facility and used a **$100 million** draw plus cash on hand to repay its **$300 million** term loan A facility[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **19.9%** revenue growth driven by AI and memory demand, a slight gross margin decrease, and enhanced liquidity from the SKT investment [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Results show **19.9%** total net sales growth, primarily from Advanced Computing and Integrated Memory, with a slight gross margin decline Net Sales by Segment (in thousands) | Segment | Nine Months Ended May 30, 2025 | Nine Months Ended May 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Advanced Computing | $510,081 | $405,197 | +25.9% | | Integrated Memory | $332,090 | $260,594 | +27.4% | | Optimized LED | $188,701 | $193,857 | -2.7% | | **Total net sales** | **$1,030,872** | **$859,648** | **+19.9%** | - Gross margin for the first nine months of 2025 decreased to **28.9%** from **29.5%** in the prior year, primarily due to an unfavorable product mix from higher product revenue in the Advanced Computing business[147](index=147&type=chunk) - A goodwill impairment charge of **$11.4 million** was recorded in the first nine months of 2025 related to the planned wind-down of the Penguin Edge business within the Advanced Computing segment[155](index=155&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly improved with **$735.5 million** in cash and increased operating cash flow, supported by the SKT investment and new credit facility - As of May 30, 2025, the company had cash, cash equivalents, and short-term investments of **$735.5 million**[162](index=162&type=chunk) - Operating cash flow from continuing operations for the first nine months of 2025 was **$183.6 million**, a significant increase from **$117.7 million** in the prior-year period, driven by higher net income and favorable changes in working capital[182](index=182&type=chunk)[183](index=183&type=chunk) - On June 24, 2025, the company entered a new **$400 million** revolving credit facility and used proceeds to repay its **$300 million** Amended 2022 TLA, which is expected to result in a loss on extinguishment of debt of **$3.3 million**[166](index=166&type=chunk)[168](index=168&type=chunk) - The company received **$191.2 million** in net proceeds from the SKT convertible preferred share investment in December 2024[177](index=177&type=chunk)[187](index=187&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency and interest rate fluctuations, with potential impacts of **$2.2 million** and **$4.0 million** respectively - A **10%** adverse change in foreign currency exchange rates versus the U.S. dollar would result in a revaluation loss of approximately **$2.2 million** based on monetary assets and liabilities as of May 30, 2025[194](index=194&type=chunk) - Following the refinancing on June 24, 2025, the company is subject to interest rate risk on its new **$400 million** variable-rate 2025 Credit Facility. A **1.0%** increase in interest rates would increase annual interest expense by **$4.0 million**, assuming the facility is fully drawn[195](index=195&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of May 30, 2025, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of May 30, 2025[197](index=197&type=chunk) - No changes in internal control over financial reporting occurred during the third quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[198](index=198&type=chunk) [PART II. Other Information](index=52&type=section&id=PART%20II.%20Other%20Information) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) New and updated risks include those from U.S. Domestication, anti-takeover provisions, trade restrictions, and restrictive covenants in the new credit agreement - The company may not realize the anticipated benefits of its U.S. Domestication, and the process could have a material adverse effect on business, results, or financial condition[201](index=201&type=chunk) - As a Delaware corporation, the company is now subject to anti-takeover provisions, including a classified board and provisions of Delaware General Corporation Law Section 203, which could delay or prevent a change in control[206](index=206&type=chunk)[208](index=208&type=chunk) - The new 2025 Credit Agreement contains restrictive covenants that limit the company's ability to, among other things, incur additional debt, sell assets, pay dividends, and make certain acquisitions[220](index=220&type=chunk)[222](index=222&type=chunk) - The company faces risks from tariffs and trade restrictions, particularly in its LED business, which could increase costs, reduce demand, and adversely impact financial results[219](index=219&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **1,822,300** shares for **$29.8 million** in Q3 2025, with **$36.8 million** remaining for future repurchases Issuer Purchases of Equity Securities (Q3 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 1 - March 28, 2025 | — | $— | | March 29 - April 25, 2025 | 1,425,200 | $16.03 | | April 26 - May 30, 2025 | 397,100 | $17.53 | | **Total** | **1,822,300** | **$16.36** | - As of May 30, 2025, **$36.8 million** remained available for repurchase under the company's share repurchase authorization[224](index=224&type=chunk) [Other Information](index=56&type=section&id=Item%205.%20Other%20Information) Executive Vice President Jack Pacheco adopted a Rule 10b5-1 trading plan for the potential sale of up to **63,447** shares - Executive Vice President Jack Pacheco adopted a Rule 10b5-1 trading plan on April 21, 2025, for the sale of up to **63,447** shares, starting July 21, 2025[228](index=228&type=chunk)

[Q3 Fiscal 2025 Financial Performance](index=1&type=section&id=Q3%20Fiscal%202025%20Financial%20Performance) Penguin Solutions delivered solid Q3 FY2025 results, marked by increased net sales and improved Non-GAAP profitability [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Penguin Solutions reported solid Q3 FY2025 results with 7.9% net sales growth and 27% Non-GAAP diluted EPS increase - The CEO emphasized the company's focus on developing AI software and services, expanding go-to-market resources, and driving long-term stockholder value[2](index=2&type=chunk) Q3 FY2025 Key Financial Metrics (vs. Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $324.3M | $300.6M | +7.9% | | GAAP Gross Margin | 29.3% | 29.6% | -30 bps | | Non-GAAP Gross Margin | 31.7% | 32.3% | -60 bps | | GAAP Diluted EPS | $(0.01) | $0.10 | - | | Non-GAAP Diluted EPS | $0.47 | $0.37 | +27.0% | [Segment Performance](index=1&type=section&id=Segment%20Performance) Integrated Memory segment's 42.0% growth drove Q3 FY2025 net sales, offsetting declines in Advanced Computing and Optimized LED segments Net Sales by Segment (in thousands) | Segment | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Advanced Computing | $132,498 | $144,968 | -8.6% | | Integrated Memory | $130,124 | $91,629 | +42.0% | | Optimized LED | $61,629 | $63,983 | -3.7% | | **Total net sales** | **$324,251** | **$300,580** | **+7.9%** | [Profitability Analysis](index=1&type=section&id=Profitability%20Analysis) GAAP profitability declined in Q3 FY2025, but Non-GAAP operating income and diluted EPS significantly improved Q3 FY2025 Profitability Metrics (GAAP vs. Non-GAAP, in thousands) | Metric | GAAP Q3-25 | GAAP Q3-24 | Non-GAAP Q3-25 | Non-GAAP Q3-24 | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $95,083 | $88,906 | $102,753 | $96,962 | | Operating Income | $9,843 | $11,511 | $38,474 | $33,325 | | Net Income Attributable to Penguin | $2,661 | $5,616 | $31,128 | $20,221 | | Diluted EPS | $(0.01) | $0.10 | $0.47 | $0.37 | [FY2025 Business Outlook](index=2&type=section&id=FY2025%20Business%20Outlook) Penguin Solutions updated its FY2025 guidance, raising the midpoint for both GAAP and Non-GAAP diluted EPS [Full-Year Guidance](index=2&type=section&id=Full-Year%20Guidance) Penguin Solutions raised its full-year fiscal 2025 GAAP and Non-GAAP diluted EPS guidance while maintaining net sales growth forecast New FY2025 Financial Outlook | Metric | GAAP Outlook | Non-GAAP Outlook | | :--- | :--- | :--- | | Net Sales Growth | 17% YoY +/- 2% | 17% YoY +/- 2% | | Gross Margin | 29% +/- 0.5% | 31% +/- 0.5% | | Operating Expenses | $340M +/- $5M | $260M +/- $5M | | Diluted EPS | $0.04 +/- $0.05 | $1.80 +/- $0.05 | [Comparison to Prior Outlook](index=2&type=section&id=Comparison%20to%20Prior%20Outlook) The company significantly raised its FY2025 GAAP and Non-GAAP diluted EPS guidance while tightening the net sales growth range Changes in FY2025 Full-Year Guidance | Metric | New Outlook | Prior Outlook | | :--- | :--- | :--- | | Net Sales Growth | 17% YoY +/- 2% | 17% YoY +/- 3% | | GAAP Diluted EPS | $0.04 +/- $0.05 | -$0.02 +/- $0.10 | | Non-GAAP Diluted EPS | $1.80 +/- $0.05 | $1.60 +/- $0.10 | [Detailed Financial Statements](index=6&type=section&id=Detailed%20Financial%20Statements) This section provides a comprehensive overview of the company's consolidated statements of operations, balance sheets, and cash flows [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For the nine months ended May 30, 2025, total net sales increased to $1.03 billion, with a significant turnaround to net income of $16.0 million Nine Months Ended Financial Summary (in thousands) | Metric | Nine Months Ended May 30, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Total Net Sales | $1,030,872 | $859,648 | | Gross Profit | $297,543 | $253,690 | | Operating Income | $45,687 | $9,504 | | Net Income (Loss) Attributable to Penguin | $15,960 | $(27,925) | | Diluted EPS | $0.18 | $(0.53) | [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) As of May 30, 2025, the company's balance sheet strengthened with total assets reaching $1.80 billion and cash increasing significantly Key Balance Sheet Items (in thousands) | Account | May 30, 2025 | August 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $709,871 | $383,147 | | Total current assets | $1,249,896 | $867,704 | | Total assets | $1,802,782 | $1,474,506 | | Total current liabilities | $476,744 | $327,596 | | Total liabilities | $1,207,859 | $1,075,298 | | Total equity | $594,923 | $399,208 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first nine months of fiscal 2025, operating cash flow significantly increased, contributing to a substantial net increase in cash Nine Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended May 30, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $179,517 | $89,341 | | Net cash provided by (used for) investing activities | $2,606 | $115,863 | | Net cash provided by (used for) financing activities | $144,587 | $(160,221) | [GAAP to Non-GAAP Reconciliation](index=7&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliation) This section details the adjustments made to reconcile GAAP financial results to Non-GAAP measures [Reconciliation of Key Metrics](index=7&type=section&id=Reconciliation%20of%20Key%20Metrics) The company provides detailed GAAP to Non-GAAP reconciliations, highlighting significant adjustments for share-based compensation and amortization - For Q3 FY2025, GAAP operating income of **$9.8 million** was adjusted by a total of **$28.6 million** for items including share-based compensation, amortization, goodwill impairment, and redomiciliation costs to arrive at a Non-GAAP operating income of **$38.5 million**[20](index=20&type=chunk) - To reconcile GAAP net income of **$2.7 million** to Non-GAAP net income of **$31.1 million** for Q3 FY2025, the company made numerous adjustments, with the largest being share-based compensation (**$10.3M**), amortization of intangibles (**$8.4M**), and goodwill impairment (**$5.3M**)[21](index=21&type=chunk) [Corporate Updates and Other Information](index=3&type=section&id=Corporate%20Updates%20and%20Other%20Information) This section covers the company's recent U.S. domestication and important disclosures regarding forward-looking statements [U.S. Domestication](index=4&type=section&id=U.S.%20Domestication) Penguin Solutions completed its corporate redomiciliation on June 30, 2025, moving its parent entity from the Cayman Islands to Delaware - The company completed its redomiciliation from the Cayman Islands to Delaware on **June 30, 2025**, making a Delaware corporation the new publicly traded parent company[15](index=15&type=chunk)[16](index=16&type=chunk) [Forward-Looking Statements & Non-GAAP Measures](index=3&type=section&id=Forward-Looking%20Statements%20%26%20Non-GAAP%20Measures) The report includes forward-looking statements and explains the use of non-GAAP financial measures, noting a reduced long-term effective tax rate - The report contains forward-looking statements regarding future financial performance and strategic objectives, which are subject to significant risks and uncertainties[8](index=8&type=chunk)[9](index=9&type=chunk) - The company utilizes non-GAAP measures, excluding items like share-based compensation and amortization, to provide supplemental information on its core operating results[12](index=12&type=chunk) - The long-term projected non-GAAP effective tax rate was lowered from **28%** to **25%** due to changes in the geographic earnings mix[13](index=13&type=chunk)

PART I. Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company achieved significant revenue growth and profitability in Q2 and H1 FY2025, bolstered by a $200 million SK Telecom investment [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet strengthened significantly by February 28, 2025, with cash and total equity substantially increasing due to preferred share issuance Consolidated Balance Sheet Highlights (in thousands) | Account | Feb 28, 2025 | Aug 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $621,682 | $383,147 | +$238,535 | | Total current assets | $1,244,765 | $867,704 | +$377,061 | | Total assets | $1,811,344 | $1,474,506 | +$336,838 | | Total current liabilities | $473,705 | $327,596 | +$146,109 | | Total liabilities | $1,199,453 | $1,075,298 | +$124,155 | | Total equity | $611,891 | $399,208 | +$212,683 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Strong Q2 FY2025 performance saw net sales grow 28.3% to $365.5 million, reversing prior-year operating loss to an $18.5 million income Q2 Fiscal 2025 vs Q2 Fiscal 2024 Performance (in thousands, except per share data) | Metric | Q2 FY2025 | Q2 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total net sales | $365,519 | $284,821 | +28.3% | | Gross profit | $104,648 | $81,934 | +27.7% | | Operating income (loss) | $18,488 | $(3,312) | N/A | | Net income (loss) attributable to Penguin Solutions | $8,082 | $(13,620) | N/A | | Diluted EPS | $0.09 | $(0.26) | N/A | Six Months Fiscal 2025 vs Six Months Fiscal 2024 Performance (in thousands, except per share data) | Metric | Six Months FY2025 | Six Months FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total net sales | $706,621 | $559,068 | +26.4% | | Gross profit | $202,460 | $164,784 | +22.9% | | Operating income (loss) | $35,844 | $(2,007) | N/A | | Net income (loss) attributable to Penguin Solutions | $13,299 | $(33,541) | N/A | | Diluted EPS | $0.19 | $(0.64) | N/A | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly improved in H1 FY2025, with financing activities providing $175.1 million, primarily from preferred share issuance Six Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | Feb 28, 2025 | Mar 1, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,696 | $9,561 | | Net cash provided by (used for) investing activities | $(23,271) | $110,792 | | Net cash provided by (used for) financing activities | $175,096 | $(86,908) | | Net increase in cash | $238,521 | $32,265 | - The primary driver of financing cash inflow was the **$191.2 million** in net proceeds from the issuance of preferred shares[18](index=18&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key notes detail the SMART Brazil divestiture, a $200 million SK Telecom investment, and segment performance, impacting financial reporting - On November 29, 2023, the company completed the divestiture of an **81%** interest in SMART Brazil. The results of SMART Brazil are now presented as discontinued operations for all periods shown[20](index=20&type=chunk)[26](index=26&type=chunk) - On December 13, 2024, the company closed a **$200 million** investment from an SK Telecom affiliate through the sale of **200,000** convertible preferred shares at **$1,000** per share[23](index=23&type=chunk)[61](index=61&type=chunk) - During Q2 2025, the company recorded a **$6.1 million** goodwill impairment charge related to its plan to wind down manufacturing of legacy products in the Penguin Edge business within the Advanced Computing segment[47](index=47&type=chunk) Segment Net Sales (in thousands) | Segment | Q2 FY2025 | Q2 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Advanced Computing | $200,157 | $141,405 | +41.5% | | Integrated Memory | $105,260 | $83,297 | +26.4% | | Optimized LED | $60,102 | $60,119 | -0.03% | | **Total** | **$365,519** | **$284,821** | **+28.3%** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q2 2025 revenue growth of 28.3% was driven by Advanced Computing and Integrated Memory segments, with liquidity significantly enhanced by strategic investments [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q2 2025 net sales rose 28.3% due to strong Advanced Computing and Integrated Memory performance, despite a slight gross margin decline and goodwill impairment - Advanced Computing net sales increased by **41.5%** in Q2 and **45.1%** in the first six months of 2025, primarily due to higher hardware sales driven by increased demand for AI solutions and high-performance computing[108](index=108&type=chunk) - Integrated Memory net sales increased by **26.4%** in Q2 and **19.5%** in the first six months of 2025, mainly due to higher sales volumes of DRAM products[108](index=108&type=chunk) - Gross margin decreased slightly in Q2 2025 to **28.6%** from **28.8%** in Q2 2024, primarily due to an unfavorable mix from higher product revenue in the Advanced Computing business[110](index=110&type=chunk) - A goodwill impairment charge of **$6.1 million** was recorded in Q2 2025 related to the plan to wind down manufacturing and sales of certain legacy products in the Penguin Edge business[117](index=117&type=chunk) [Non-GAAP Measure of Segment Operating Income](index=37&type=section&id=Non-GAAP%20Measure%20of%20Segment%20Operating%20Income) Non-GAAP segment operating income significantly increased to $49.1 million in Q2 2025, with all segments showing improved profitability GAAP to Non-GAAP Operating Income Reconciliation (Q2, in thousands) | Description | Q2 FY2025 | Q2 FY2024 | | :--- | :--- | :--- | | GAAP operating income (loss) | $18,488 | $(3,312) | | Non-GAAP Adjustments | $30,602 | $29,826 | | **Non-GAAP operating income** | **$49,090** | **$26,514** | Non-GAAP Operating Income by Segment (Q2, in thousands) | Segment | Q2 FY2025 | Q2 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Advanced Computing | $36,933 | $22,291 | +65.7% | | Integrated Memory | $10,970 | $6,016 | +82.3% | | Optimized LED | $1,187 | $(1,793) | N/A | | **Total** | **$49,090** | **$26,514** | **+85.1%** | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is strong, with $647.0 million in cash and equivalents, bolstered by the SKT investment and SMART Brazil divestiture proceeds - As of February 28, 2025, the company had cash, cash equivalents, and short-term investments of **$647.0 million**[124](index=124&type=chunk) - In December 2024, the company received aggregate proceeds of **$200.0 million** from the SKT Investment in convertible preferred shares[130](index=130&type=chunk) - In November 2023, the company received net cash of **$143.0 million** from the sale of an **81%** interest in SMART Brazil[129](index=129&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and interest rate changes, potentially impacting earnings by millions - A hypothetical **10%** adverse change in foreign exchange rates versus the U.S. dollar would result in an estimated loss of **$2.2 million** as of February 28, 2025[144](index=144&type=chunk) - The company has **$300.0 million** in variable-rate debt. A **1.0%** increase in interest rates would result in an increase in annual interest expense of **$5.5 million**, assuming the **$250.0 million** revolver was also fully drawn[145](index=145&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures as of February 28, 2025, with no material changes in internal controls - Management concluded that the company's disclosure controls and procedures were **effective** as of February 28, 2025[147](index=147&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[148](index=148&type=chunk) PART II. Other Information [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company may face legal matters in the normal course of business, with no specific material proceedings detailed in this section - The company states it may be involved in legal matters from time to time in the normal course of business, but no specific material proceedings are detailed in this section[59](index=59&type=chunk)[150](index=150&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) Key risks include adverse impacts from tariffs and trade restrictions, and the potential unrealized benefits of the planned redomiciliation to Delaware - Tariffs and trade restrictions, particularly related to China, could negatively impact demand or increase costs for the company's products, especially within the LED business[152](index=152&type=chunk) - The company announced a plan to redomicile from the Cayman Islands to Delaware, but warns that the anticipated benefits of this U.S. Domestication may not be realized[153](index=153&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 167,046 shares at an average of $19.70, with $66.6 million remaining for future repurchases under authorization Issuer Purchases of Equity Securities (Q2 FY2025) | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Nov 30, 2024 - Dec 27, 2024 | 167,046 | $19.70 | | Dec 28, 2024 - Jan 24, 2025 | — | $— | | Jan 25, 2025 - Feb 28, 2025 | — | $— | - As of February 28, 2025, **$66.6 million** remained available for share repurchases under the company's current authorization[155](index=155&type=chunk) [Exhibits](index=45&type=section&id=Item%206%20Exhibits) The exhibits section lists key documents including the Certificate of Designation for Convertible Preferred Shares and the Investor Agreement - Key exhibits filed include the Certificate of Designation for the Convertible Preferred Shares and the Investor Agreement related to the SKT investment[162](index=162&type=chunk)

Q2 Fiscal 2025 Financial Results Overview Penguin Solutions reported strong Q2 FY2025 financial results with significant revenue growth and a turnaround in profitability, alongside an announcement regarding a key executive's retirement [Q2 FY2025 Financial Performance](index=1&type=section&id=Second%20Quarter%20Fiscal%202025%20Highlights) Penguin Solutions reported strong Q2 FY2025 results with total net sales of $365.5 million, a 28.3% increase year-over-year, demonstrating a significant turnaround in profitability Q2 FY2025 Key Financial Results (GAAP) | Metric (in thousands, except EPS) | Q2 FY2025 | Q2 FY2024 | Change | | :--- | :--- | :--- | :--- | | **Total Net Sales** | $365,519 | $284,821 | +28.3% | | **Gross Profit** | $104,648 | $81,934 | +27.7% | | **Operating Income (Loss)** | $18,488 | $(3,312) | Turnaround | | **Net Income (Loss) Attributable to Penguin** | $8,082 | $(13,620) | Turnaround | | **Diluted EPS** | $0.09 | $(0.26) | Turnaround | Q2 FY2025 Key Financial Results (Non-GAAP) | Metric (in thousands, except EPS) | Q2 FY2025 | Q2 FY2024 | Change | | :--- | :--- | :--- | :--- | | **Gross Profit** | $112,408 | $89,735 | +25.3% | | **Operating Income** | $49,090 | $26,514 | +85.1% | | **Net Income Attributable to Penguin** | $33,836 | $14,141 | +139.3% | | **Diluted EPS** | $0.52 | $0.27 | +92.6% | - All business segments reported year-over-year revenue growth, with Advanced Computing leading at **$200.2 million**, up from **$141.4 million**[3](index=3&type=chunk) [Management Changes](index=2&type=section&id=Jack%20Pacheco%20to%20Retire) The company announced the planned retirement of Jack Pacheco, Executive Vice President, Chief Operating Officer, and President of Integrated Memory, effective December 31, 2025, with a succession planning process initiated - Jack Pacheco, EVP, COO and President of Integrated Memory, is set to retire on **December 31, 2025**[10](index=10&type=chunk) - Mr. Pacheco has a long tenure with the company, having served in various leadership roles for nearly **25 years**, including as CFO[12](index=12&type=chunk)[13](index=13&type=chunk) - The company has started a succession process and Mr. Pacheco will support the transition, potentially as a special advisor and consultant[10](index=10&type=chunk)[11](index=11&type=chunk) Business Outlook Following strong Q2 performance, Penguin Solutions raised its full-year fiscal 2025 revenue growth outlook and updated its Non-GAAP diluted EPS guidance [Fiscal Year 2025 Outlook](index=2&type=section&id=Fiscal%20Year%202025%20Outlook) Following a strong start to the fiscal year, Penguin Solutions raised its full-year revenue growth outlook and updated its Non-GAAP diluted EPS guidance Updated FY2025 Financial Outlook vs. Prior Outlook | Metric | New Outlook | Prior Outlook | | :--- | :--- | :--- | | **Net Sales Growth (YoY)** | 17% +/- 3% | 15% +/- 5% | | **GAAP Gross Margin** | 29% +/- 1% | 30% +/- 1% | | **Non-GAAP Gross Margin** | 31% +/- 1% | 32% +/- 1% | | **GAAP Diluted EPS** | $-0.02 +/- $0.10 | $0.10 +/- $0.20 | | **Non-GAAP Diluted EPS** | $1.60 +/- $0.10 | $1.50 +/- $0.20 | - The CEO attributed the raised outlook to a strong start to the fiscal year and the company's capabilities in managing AI complexity for customers[3](index=3&type=chunk) Financial Statements The financial statements reflect Penguin Solutions' improved financial health in Q2 FY2025, showing a return to profitability, increased assets, and strong cash generation [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The income statement for the three months ended February 28, 2025, shows a net income attributable to Penguin Solutions of $8.1 million, a significant improvement from the $13.6 million net loss in the same period last year Income Statement Highlights (in thousands) | Metric | Three Months Ended Feb 28, 2025 | Three Months Ended Mar 1, 2024 | Six Months Ended Feb 28, 2025 | Six Months Ended Mar 1, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Net Sales** | $365,519 | $284,821 | $706,621 | $559,068 | | **Gross Profit** | $104,648 | $81,934 | $202,460 | $164,784 | | **Operating Income (Loss)** | $18,488 | $(3,312) | $35,844 | $(2,007) | | **Net Income (Loss) Attributable to Penguin** | $8,082 | $(13,620) | $13,299 | $(33,541) | [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) As of February 28, 2025, the company's balance sheet strengthened, with total assets increasing to $1.81 billion from $1.47 billion at the end of fiscal 2024, primarily driven by a significant rise in cash and cash equivalents Balance Sheet Highlights (in thousands) | Metric | Feb 28, 2025 | Aug 30, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $621,682 | $383,147 | | **Total current assets** | $1,244,765 | $867,704 | | **Total assets** | $1,811,344 | $1,474,506 | | **Total liabilities** | $1,199,453 | $1,075,298 | | **Total equity** | $611,891 | $399,208 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended February 28, 2025, the company generated $86.7 million in cash from operating activities, a significant increase from the prior-year period, resulting in a net increase in cash of $238.5 million Cash Flow Summary - Six Months Ended (in thousands) | Metric | Feb 28, 2025 | Mar 1, 2024 | | :--- | :--- | :--- | | **Net cash from operating activities** | $86,696 | $9,561 | | **Net cash used for investing activities** | $(23,271) | $110,792 | | **Net cash from (used for) financing activities** | $175,096 | $(86,908) | | **Net increase in cash** | $238,521 | $32,265 | - Financing activities in Q2 FY2025 were highlighted by **$191.2 million** in net proceeds from the issuance of convertible preferred shares[26](index=26&type=chunk) Non-GAAP Financial Measures This section clarifies the company's use of non-GAAP financial measures, providing reconciliations to GAAP results for a clearer view of core operating performance [Statement Regarding Use of Non-GAAP Financial Measures](index=4&type=section&id=Statement%20Regarding%20Use%20of%20Non-GAAP%20Financial%20Measures) The company explains its use of non-GAAP financial measures, believing they provide useful supplemental information by excluding certain items to facilitate analysis of core operating performance - Management uses non-GAAP measures to supplement GAAP results, analyze operations, and make future plans[17](index=17&type=chunk) - Key exclusions from GAAP results include share-based compensation, amortization of acquisition-related intangibles, restructuring charges, and other infrequent items[17](index=17&type=chunk) - The company utilizes a long-term projected non-GAAP effective tax rate of **28%** for its non-GAAP reporting[18](index=18&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section provides detailed tables reconciling GAAP results to non-GAAP figures, adjusting for items like share-based compensation and amortization of intangibles Q2 FY2025 GAAP to Non-GAAP Net Income Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP net income attributable to Penguin** | **$8,082** | | Share-based compensation expense | $11,580 | | Amortization of acquisition-related intangibles | $8,839 | | Impairment of goodwill | $6,079 | | Redomiciliation costs | $2,359 | | Other adjustments | $2,728 | | Income tax effects | $(5,822) | | **Non-GAAP net income attributable to Penguin** | **$33,836** | Q2 FY2025 GAAP to Non-GAAP Operating Income Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP operating income** | **$18,488** | | Total adjustments | $30,602 | | **Non-GAAP operating income** | **$49,090** | Other Information This section provides details on the Q2 FY2025 earnings conference call, important forward-looking statement disclaimers, and an overview of Penguin Solutions' business focus [Conference Call Information](index=2&type=section&id=Second%20Quarter%20Fiscal%202025%20Earnings%20Conference%20Call) Penguin Solutions scheduled a conference call and webcast to discuss its Q2 FY2025 results on April 2, 2025, at 1:30 p.m. Pacific Time, providing access details for interested parties - A conference call was held on **April 2, 2025**, at **1:30 p.m. PT (4:30 p.m. ET)** to discuss the financial results[9](index=9&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Use%20of%20Forward-Looking%20Statements) The press release includes a standard safe harbor statement cautioning that forward-looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from expectations - The report contains forward-looking statements concerning future financial performance and business outlook[13](index=13&type=chunk) - These statements are subject to risks including global economic conditions, geopolitical uncertainty, supply chain disruptions, and competitive factors[14](index=14&type=chunk) [About Penguin Solutions](index=5&type=section&id=About%20Penguin%20Solutions) Penguin Solutions positions itself as a company that helps customers adopt challenging technological advancements across its computing, memory, and LED lines of business - Penguin Solutions operates across three lines of business: **computing, memory, and LED**[20](index=20&type=chunk)

PART I [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Penguin Solutions, Inc.'s unaudited consolidated financial statements for the quarter ended November 29, 2024, including balance sheets, income statements, cash flows, and detailed notes [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) Core financial statements show a profitability turnaround with $6.0 million net income, total assets growing to $1.58 billion, but operating cash flow decreased due to increased inventory | Financial Metric | Nov 29, 2024 (in thousands) | Aug 30, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | $995,579 | $867,704 | ▲ | | Total Assets | $1,583,015 | $1,474,506 | ▲ | | Total Current Liabilities | $426,886 | $327,596 | ▲ | | Total Liabilities | $1,174,066 | $1,075,298 | ▲ | | Total Equity | $408,949 | $399,208 | ▲ | | Income Statement Item | Q1 FY2025 (in thousands) | Q1 FY2024 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Sales | $341,102 | $274,247 | +24.4% | | Gross Profit | $97,812 | $82,850 | +18.1% | | Operating Income | $17,356 | $1,305 | +1230% | | Net Income (Loss) | $5,964 | ($19,360) | Turnaround | | Diluted EPS | $0.10 | ($0.38) | Turnaround | | Cash Flow Item | Q1 FY2025 (in thousands) | Q1 FY2024 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $13,819 | $31,478 | ▼ | | Net cash (used for) investing activities | ($18,922) | $115,298 | ▼ | | Net cash used for financing activities | ($7,763) | ($26,756) | ▲ | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail significant events like the SMART Brazil divestiture, a $200 million post-quarter investment from SK Telecom, and provide breakdowns of revenue, debt, and share repurchase activity - On November 29, 2023, the company completed the divestiture of an **81% interest in SMART Brazil**, with its results now presented as **discontinued operations** for all periods shown[19](index=19&type=chunk)[26](index=26&type=chunk) - Subsequent to the quarter end, on December 13, 2024, the company closed a **$200 million investment** from an affiliate of SK Telecom Co., Ltd. through the sale of **200,000 convertible preferred shares**[22](index=22&type=chunk) | Debt Instrument | Carrying Value (Nov 29, 2024) | | :--- | :--- | | Amended 2027 TLA | $297,561 | | 2030 Notes | $193,066 | | 2029 Notes | $147,581 | | 2026 Notes | $19,862 | | **Total Long-term debt** | **$658,070** | | Segment | Net Sales Q1 FY25 (in thousands) | Net Sales Q1 FY24 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Advanced Computing | $177,426 | $118,824 | +49.3% | | Integrated Memory | $96,706 | $85,668 | +12.9% | | Optimized LED | $66,970 | $69,755 | -4.0% | | **Total** | **$341,102** | **$274,247** | **+24.4%** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the 24.4% revenue growth driven by Advanced Computing, gross margin decline, operational factors, and the company's strong liquidity position bolstered by a $200 million post-quarter investment [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Net sales increased by $66.9 million (24.4%) year-over-year, primarily from a 49.3% rise in Advanced Computing sales, leading to significantly higher operating income despite gross margin contraction - Net sales increased by **24.4%** in Q1 2025 compared to the prior year, primarily due to a **49.3%** increase in the Advanced Computing segment driven by demand for AI solutions and high-performance computing[98](index=98&type=chunk) - Gross margin decreased to **28.7%** in Q1 2025 from **30.2%** in Q1 2024, primarily due to an unfavorable product mix with higher product revenue in the Advanced Computing business[99](index=99&type=chunk) - Research and development expense decreased by **7.4%** due to lower personnel-related expenses and subcontract services, while Selling, general and administrative expense increased by **5.8%** due to rebranding efforts and higher personnel costs[105](index=105&type=chunk)[106](index=106&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of November 29, 2024, the company held $393.7 million in cash and equivalents, with management confident in sufficient liquidity, further bolstered by a $200 million post-quarter investment from SK Telecom - The company had cash, cash equivalents, and short-term investments of **$393.7 million** as of November 29, 2024[115](index=115&type=chunk) - On December 13, 2024, after the quarter's end, the company closed a **$200 million investment** from an affiliate of SKT through the sale of convertible preferred shares[121](index=121&type=chunk) | Cash Flow Summary (Continuing Operations) | Q1 FY2025 (in thousands) | Q1 FY2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,819 | $59,713 | | Net cash used for investing activities | ($18,922) | ($3,640) | | Net cash used for financing activities | ($7,763) | ($26,150) | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies foreign exchange risk from international operations and interest rate risk from variable-rate debt as its primary market exposures - A hypothetical 10% adverse change in foreign exchange rates versus the U.S. dollar would result in an estimated loss of **$2.2 million** based on monetary assets and liabilities as of November 29, 2024[136](index=136&type=chunk) - A **1.0%** increase in interest rates would result in an estimated **$5.5 million** increase in annual interest expense, assuming the $300.0 million term loan is outstanding and the $250.0 million revolver is fully drawn[137](index=137&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of November 29, 2024, with no material changes to internal control over financial reporting - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of November 29, 2024[139](index=139&type=chunk) - No changes in internal control over financial reporting occurred during the first quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[140](index=140&type=chunk) PART II. Other Information [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the 'Commitments and Contingencies' note and 'Risk Factors' section for details on legal proceedings - For discussion of legal proceedings, the report refers to the Notes to Consolidated Financial Statements and Risk Factors[142](index=142&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended August 30, 2024, have been identified - There have been no material changes to the risks described in the company's Annual Report on Form 10-K for the fiscal year ended August 30, 2024[142](index=142&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details share repurchase activities, noting 467,040 shares repurchased during the quarter and $69.9 million remaining for future repurchases | Period | Total Shares Purchased | Average Price Paid | Value of Shares for Future Purchase | | :--- | :--- | :--- | :--- | | Aug 31 - Sep 27, 2024 | — | $— | $77,698,000 | | Sep 28 - Oct 25, 2024 | — | $— | $77,698,000 | | Oct 26 - Nov 29, 2024 | 467,040 | $16.68 | $69,906,000 | | **Total** | **467,040** | **$16.68** | | [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) The company discloses that a board member adopted a Rule 10b5-1 trading plan for the potential sale of up to 2,728 ordinary shares commencing February 10, 2025 - On November 7, 2024, a member of the Board of Directors, Penelope Herscher, adopted a Rule 10b5-1 trading arrangement for the sale of up to 2,728 ordinary shares[149](index=149&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents

[Performance Highlights](index=1&type=section&id=Performance%20Highlights) Penguin Solutions achieved strong Q1 FY2025 results with a 24.4% net sales increase, driven by a 49% surge in Advanced Computing - The CEO highlighted that the **49% YoY growth** in Advanced Computing revenue is a direct result of the company's strategy to assist customers with the complexities of AI infrastructure implementation[2](index=2&type=chunk) Q1 FY2025 Key Financial Metrics vs. Prior Year Quarter (Q1 FY24) | Metric | Q1 FY2025 | Q1 FY2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $341.1M | $274.2M | +24.4% | | GAAP Gross Margin | 28.7% | 30.2% | -150 bps | | Non-GAAP Gross Margin | 30.8% | 33.3% | -250 bps | | GAAP Diluted EPS | $0.10 | $(0.23) | +$0.33 | | Non-GAAP Diluted EPS | $0.49 | $0.24 | +104.2% | [Financial Results](index=1&type=section&id=Financial%20Results) The company achieved $341.1 million in net sales and returned to GAAP profitability with $5.2 million net income in Q1 FY2025 [Key Financial Metrics (Q1 FY2025)](index=1&type=section&id=Key%20Financial%20Metrics%20(Q1%20FY2025)) Quarterly Financial Results (in thousands, except per share amounts) | Metric | Q1 FY25 (GAAP) | Q1 FY24 (GAAP) | Q1 FY25 (Non-GAAP) | Q1 FY24 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $341,102 | $274,247 | $341,102 | $274,247 | | Gross Profit | $97,812 | $82,850 | $105,122 | $91,277 | | Operating Income | $17,356 | $1,305 | $40,918 | $26,679 | | Net Income (Loss) | $5,217 | $(11,773) | $26,518 | $12,538 | | Diluted EPS (Loss) | $0.10 | $(0.23) | $0.49 | $0.24 | [Segment Performance](index=1&type=section&id=Segment%20Performance) Net Sales by Segment (in thousands) | Segment | Q1 FY25 | Q1 FY24 | YoY Change | | :--- | :--- | :--- | :--- | | Advanced Computing | $177,426 | $118,824 | +49.3% | | Integrated Memory | $96,706 | $85,668 | +12.9% | | Optimized LED | $66,970 | $69,755 | -4.0% | [Business Outlook (FY2025)](index=2&type=section&id=Business%20Outlook%20(FY2025)) Penguin Solutions projects 15% YoY net sales growth and Non-GAAP diluted EPS of $1.50 +/- $0.20 for FY2025 Fiscal Year 2025 Financial Outlook | Metric | GAAP Outlook | Non-GAAP Outlook | | :--- | :--- | :--- | | Net Sales | 15% YoY Growth +/- 5% | 15% YoY Growth +/- 5% | | Gross Margin | 30% +/- 1% | 32% +/- 1% | | Operating Expenses | $335M +/- $15M | $275M +/- $15M | | Diluted EPS | $0.10 +/- $0.20 | $1.50 +/- $0.20 | | Diluted Shares | 56.3 million | 56.3 million | - The total projected Non-GAAP adjustments for FY2025 amount to approximately **$79 million**, primarily consisting of share-based compensation, amortization of acquisition-related intangibles, and other adjustments, offset by estimated income tax effects[7](index=7&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) The unaudited consolidated financial statements detail the company's financial position, performance, and cash flows, showing a return to profitability [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 FY2025 Income Statement Highlights (in thousands) | Line Item | Three Months Ended Nov 29, 2024 | | :--- | :--- | | Total net sales | $341,102 | | Gross profit | $97,812 | | Total operating expenses | $80,456 | | Operating income | $17,356 | | Net income attributable to Penguin Solutions | $5,217 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Key Balance Sheet Items (in thousands) | As of | Nov 29, 2024 | Aug 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $370,295 | $383,147 | | Inventories | $246,952 | $151,213 | | Total current assets | $995,579 | $867,704 | | Total assets | $1,583,015 | $1,474,506 | | Long-term debt | $658,070 | $657,347 | | Total liabilities | $1,174,066 | $1,075,298 | | Total equity | $408,949 | $399,208 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY2025 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Nov 29, 2024 | | :--- | :--- | | Net cash provided by operating activities | $13,819 | | Net cash used for investing activities | $(18,922) | | Net cash used for financing activities | $(7,763) | | Net decrease in cash | $(12,866) | [Reconciliation of GAAP to Non-GAAP Measures](index=6&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) The company reconciles GAAP to non-GAAP measures, with significant adjustments for share-based compensation and amortization of intangibles Q1 FY2025 Reconciliation of GAAP to Non-GAAP Operating Income (in thousands) | Description | Amount | | :--- | :--- | | **GAAP operating income** | **$17,356** | | Share-based compensation expense | $11,531 | | Amortization of acquisition-related intangibles | $9,755 | | Other adjustments | $1,376 | | **Non-GAAP operating income** | **$40,918** | Q1 FY2025 Reconciliation of GAAP to Non-GAAP Net Income (in thousands) | Description | Amount | | :--- | :--- | | **GAAP net income (loss) attributable to Penguin Solutions** | **$5,217** | | Share-based compensation expense | $11,531 | | Amortization of acquisition-related intangibles | $9,755 | | Other adjustments (net) | $3,257 | | Income tax effects | $(4,242) | | **Non-GAAP net income attributable to Penguin Solutions** | **$26,518** | [Supplementary Information](index=2&type=section&id=Supplementary%20Information) This section provides supplementary details including conference call information, forward-looking statements, and non-GAAP measure explanations [Conference Call Information](index=2&type=section&id=Conference%20Call%20Information) - Penguin Solutions will host a conference call and webcast to discuss Q1 FY2025 results on January 8, 2025, at 1:30 p.m. Pacific Time[8](index=8&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) - The press release includes forward-looking statements concerning future financial performance, strategic priorities, and business outlook. These statements are subject to significant risks and uncertainties, including global economic conditions, supply chain disruptions, and competitive factors[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) [Statement Regarding Use of Non-GAAP Financial Measures](index=3&type=section&id=Statement%20Regarding%20Use%20of%20Non-GAAP%20Financial%20Measures) - The company uses non-GAAP measures to supplement GAAP results, believing they provide useful information for analyzing core operating performance. These measures exclude items such as share-based compensation, amortization of acquisition-related intangibles, and restructuring charges[13](index=13&type=chunk) - For non-GAAP reporting, the company utilizes a long-term projected non-GAAP effective tax rate of **28%**, which it expects to use through fiscal 2025[14](index=14&type=chunk)

Financial Performance - Net sales for fiscal year 2024 were $1.2 billion, down from $1.4 billion in fiscal year 2023[3] - Q4 FY24 net sales were $311 million, down 1.7% compared to the year-ago quarter[3] - Penguin Solutions reported total net sales of $1,170.8 million for the year ended August 30, 2024, compared to $1,441.3 million in the previous year, representing a decrease of 18.8%[17] - The company's gross profit for the year ended August 30, 2024, was $340.8 million, down from $415.2 million in the previous year, a decline of 17.9%[17] - Operating income for the year ended August 30, 2024, was $18.3 million, compared to $8.7 million in the previous year, an increase of 109.4%[17] - Net loss attributable to Penguin Solutions for the year ended August 30, 2024, was $52.5 million, compared to a net loss of $187.5 million in the previous year, an improvement of 72.0%[17] - Net income (loss) from continuing operations was $(23.792) million for the three months ended August 30, 2024[24] Gross Margin and Profitability - GAAP gross margin for fiscal year 2024 was 29.1%, up 30 basis points from fiscal year 2023[3] - Non-GAAP gross margin for fiscal year 2024 was 31.9%, up 20 basis points from fiscal year 2023[3] - Non-GAAP gross profit for the three months ended August 30, 2024, was $96,007 thousand, compared to $96,962 thousand for the three months ended May 31, 2024[18] - Non-GAAP gross margin for the three months ended August 30, 2024, was 30.9%, compared to 32.3% for the three months ended May 31, 2024[18] Earnings Per Share (EPS) - GAAP EPS for fiscal year 2024 was $(0.85), compared to $0.15 in fiscal year 2023[3] - Non-GAAP EPS for fiscal year 2024 was $1.25, compared to $2.52 in fiscal year 2023[3] - Non-GAAP diluted earnings per share for the three months ended August 30, 2024, was $0.37, compared to $0.37 for the three months ended May 31, 2024[20] Segment Performance - Intelligent Platform Solutions segment net sales for fiscal year 2024 were $554.6 million, down from $749.7 million in fiscal year 2023[4] - Memory Solutions segment net sales for fiscal year 2024 were $356.4 million, down from $443.3 million in fiscal year 2023[4] - LED Solutions segment net sales for fiscal year 2024 were $259.8 million, up from $248.3 million in fiscal year 2023[4] - Penguin Solutions' Intelligent Platform Solutions segment generated $554.6 million in net sales for the year ended August 30, 2024, a decrease of 26.0% compared to the previous year[17] - The Memory Solutions segment reported net sales of $356.4 million for the year ended August 30, 2024, down 19.6% from the previous year[17] - The LED Solutions segment generated $259.8 million in net sales for the year ended August 30, 2024, an increase of 4.6% compared to the previous year[17] Expenses - Research and development expenses for the year ended August 30, 2024, were $81.5 million, down 10.0% from the previous year[17] - Selling, general and administrative expenses for the year ended August 30, 2024, were $233.9 million, a decrease of 10.3% compared to the previous year[17] - Share-based compensation expense for the three months ended August 30, 2024, was $10,359 thousand, compared to $11,192 thousand for the three months ended May 31, 2024[22] - Amortization of acquisition-related intangibles for the three months ended August 30, 2024, was $9,747 thousand, compared to $9,766 thousand for the three months ended May 31, 2024[22] - Restructure charge for the three months ended August 30, 2024, was $325 thousand, compared to $465 thousand for the three months ended May 31, 2024[22] - Depreciation and amortization expenses totaled $15.381 million for the three months ended August 30, 2024[24] Cash Flow and Liquidity - Cash and cash equivalents increased to $383.147 million in 2024 from $365.563 million in 2023[23] - Accounts receivable, net rose to $251.743 million in 2024 from $219.247 million in 2023[23] - Inventories decreased to $151.213 million in 2024 from $174.977 million in 2023[23] - Total current liabilities dropped to $327.596 million in 2024 from $426.250 million in 2023[23] - Long-term debt reduced to $657.347 million in 2024 from $754.820 million in 2023[23] - Net cash used for operating activities was $(12.156) million for the three months ended August 30, 2024[24] - Capital expenditures and deposits on equipment amounted to $(5.795) million for the three months ended August 30, 2024[24] - Net cash used for financing activities from continuing operations was $49.88 million for the period ending August 30, 2024, compared to $73.31 million for the previous quarter[25] - Total repayments of debt amounted to $224.7 million for the period ending August 30, 2024, a significant increase from $7.21 million in the same period last year[25] - Proceeds from debt issuance were $192.69 million for the period ending August 30, 2024, compared to $0 in the previous quarter[25] - Net cash decrease in cash, cash equivalents, and restricted cash was $70.31 million for the period ending August 30, 2024, compared to a net increase of $11.46 million in the previous quarter[25] - Cash, cash equivalents, and restricted cash at the end of the period were $383.48 million, down from $453.79 million at the beginning of the period[25] - Payments to acquire ordinary shares totaled $3.32 million for the period ending August 30, 2024, compared to $2.13 million in the previous quarter[25] - Proceeds from issuance of ordinary shares were $1.75 million for the period ending August 30, 2024, down from $3.82 million in the previous quarter[25] - Net cash provided by financing activities from discontinued operations was $0 for the period ending August 30, 2024, compared to a net use of $0.43 million in the same period last year[25] - Effect of changes in currency exchange rates was $0 for the period ending August 30, 2024, compared to a negative impact of $0.08 million in the previous quarter[25] - Cash, cash equivalents, and restricted cash at the beginning of the period were $453.79 million, up from $442.33 million in the previous quarter[25] Outlook and Projections - Fiscal year 2025 net sales outlook is 15% YoY growth +/- 5%, with a GAAP gross margin of 30% +/- 1%[6] - The company's non-GAAP effective tax rate for fiscal 2024 is projected to be 28%, which may be subject to change due to various factors[14] Non-GAAP Metrics - Non-GAAP operating income for the three months ended August 30, 2024, was $33,739 thousand, compared to $33,325 thousand for the three months ended May 31, 2024[18] - Adjusted EBITDA for the three months ended August 30, 2024, was $39,293 thousand, compared to $38,825 thousand for the three months ended May 31, 2024[21] - Non-GAAP net income attributable to Penguin Solutions for the three months ended August 30, 2024, was $20,007 thousand, compared to $20,221 thousand for the three months ended May 31, 2024[22] - GAAP net income (loss) attributable to Penguin Solutions for the three months ended August 30, 2024, was $(24,547) thousand, compared to $5,616 thousand for the three months ended May 31, 2024[22]