Financial Performance - Net sales increased by $156.4 million, or 55.6%, for the three months ended May 28, 2021, and by $208.1 million, or 25.2%, for the nine months ended May 28, 2021, primarily due to $101.8 million in revenue from the newly acquired LED business [270]. - The company reported a net loss of $6.7 million for the three months ended May 28, 2021, compared to a net income of $0.8 million in the same period last year [269]. - Cash provided by operating activities was $105.3 million for the nine months ended May 28, 2021, compared to $62.2 million for the same period in the prior year [281][286]. Cost and Expenses - Cost of sales rose by $126.2 million, or 55.6%, for the three months ended May 28, 2021, and by $177.6 million, or 26.7%, for the nine months ended May 28, 2021, driven by higher material costs and additional costs from the LED business [271]. - Gross profit margin remained stable at 19.3% for the three-month periods but decreased to 18.4% for the nine months ended May 28, 2021, compared to 19.4% in the prior year, mainly due to increased material costs [273]. - Research and development expenses increased by $2.3 million, or 15.8%, for the three months ended May 28, 2021, but decreased by $11.5 million, or 26.1%, for the nine months ended May 28, 2021, influenced by costs from the LED business and financial credits from Brazil [274]. - Selling, general and administrative expenses rose by $18.7 million, or 63.0%, for the three months ended May 28, 2021, and by $26.3 million, or 28.6%, for the nine months ended May 28, 2021, primarily due to costs from the LED business and higher share-based compensation [275]. Acquisition and Business Development - The company acquired the Cree LED Business for a total consideration of $50 million in cash, plus an earn-out payment of up to $125 million based on performance [266]. - The acquisition of the LED business is expected to enhance the company's product offerings and market position in the LED segment [266]. Market and Operational Challenges - The company experienced reduced sales volumes in certain product lines due to the COVID-19 pandemic, impacting operations and product development [268]. - The company anticipates ongoing challenges related to supply shortages and rising material costs due to the pandemic and increased demand in various segments [268]. Interest and Taxation - Interest expense increased by $2.0 million, or 63.2%, for the three months ended May 28, 2021, compared to the same period in the prior year [276]. - Provision for income taxes increased by $1.3 million and $4.1 million for the three and nine months ended May 28, 2021, respectively [279]. Cash Flow and Financial Position - Net cash used in investing activities was $68.4 million during the nine months ended May 28, 2021, primarily for property and equipment purchases and the LED acquisition [287]. - Net cash provided by financing activities was $1.3 million during the nine months ended May 28, 2021, with significant proceeds from borrowings and share issuances [288]. - As of May 28, 2021, the company had cash and cash equivalents of $189.0 million, with approximately $164.2 million held outside the United States [281]. - The company expects existing cash and cash equivalents, line of credit, and cash generated by operating activities to be sufficient for operations for at least the next twelve months [284]. Currency Exposure - Approximately 32% of net sales during the nine months ended May 28, 2021, originated in Brazilian reais [301]. Interest Rate Sensitivity - Each 1.0% increase in interest rates on variable rate borrowings would result in an increase in annual interest expense of $1.5 million [303].

A P R I L 6 , 2 0 2 1 Q2 FY2021 Financial Results Conference Call Disclaimer 2 This presentation and oral communications made during the course of this presentation contain "forward-looking statements" including among other things, statements regarding future events and the future financial performance of SMART Global Holdings, Inc. ("SGH), including the business outlook for the next fiscal quarter, and statements regarding growth drivers in SGH'S industries and markets. These statements are only prediction ...

SMART Global Holdings, Inc. (NASDAQ:SGH) Q2 2021 Earnings Conference Call April 6, 2021 4:30 PM ET Company Participants Suzanne Schmidt - Investor Relations Mark Adams - Chief Executive Officer Jack Pacheco - Chief Operating Officer Ken Rizvi - Chief Financial Officer Conference Call Participants Tom O’Malley - Barclays Brian Chin - Stifel Kevin Cassidy - Rosenblatt Raji Gill - Needham & Company Sidney Ho - Deutsche Bank Mark Lipacis - Jefferies Operator Thank you for standing by, and welcome to the SMART G ...

Financial Performance - Net sales for the three months ended February 26, 2021, were $304,009,000, an increase of 11.8% compared to $272,042,000 for the same period in 2020[14] - Gross profit for the six months ended February 26, 2021, was $106,099,000, slightly up from $105,826,000 for the same period in 2020[14] - Net income for the three months ended February 26, 2021, was $5,844,000, compared to a net loss of $9,720,000 for the same period in 2020[14] - Basic earnings per share for the three months ended February 26, 2021, was $0.24, a significant improvement from a loss of $0.41 per share in the same period of 2020[14] - Net income for the six months ended February 26, 2021, was $7.871 million, compared to a net loss of $9.496 million for the same period in 2020, representing a significant turnaround[23] Expenses and Cost Management - Research and development expenses decreased to $8,852,000 for the three months ended February 26, 2021, from $14,702,000 in the same period of 2020, representing a reduction of 39.0%[14] - The company paid $2.955 million in interest during the period, a decrease from $9.754 million in the same period last year, suggesting lower debt servicing costs[23] - Share-based compensation expense for the three months ended February 26, 2021, was $5.398 million, compared to $4.647 million for the same period in 2020[82] Assets and Liabilities - Total assets increased to $820,807,000 as of February 26, 2021, compared to $786,608,000 as of August 28, 2020, reflecting a growth of 4.3%[12] - Total liabilities rose to $562,248,000 as of February 26, 2021, up from $504,504,000 as of August 28, 2020, indicating an increase of 11.4%[12] - Total shareholders' equity decreased to $258,559,000 as of February 26, 2021, from $282,104,000 as of August 28, 2020[12] Cash Flow and Investments - Net cash provided by operating activities increased to $55.990 million, up from $48.601 million year-over-year, indicating improved operational efficiency[23] - Capital expenditures for the six months ended February 26, 2021, were $34.795 million, compared to $9.368 million in the prior year, reflecting increased investment in growth[23] - Cash and cash equivalents decreased to $139,803,000 as of February 26, 2021, from $150,811,000 as of August 28, 2020[12] Market Presence and Operations - The company has operations in multiple countries, including the United States, Brazil, and several Asian and European nations, indicating a broad market presence[27] - The company operates in three segments: Specialty Memory Products, Brazil Products, and Specialty Compute and Storage Solutions, diversifying its revenue streams[27] Revenue Recognition and Deferred Revenue - Gross billings to customers for the six months ended February 26, 2021, were $871,338 thousand, up 3.9% from $838,949 thousand for the same period in 2020[46] - Deferred revenue increased by $4,724 thousand from $20,124 thousand as of August 28, 2020, to $24,848 thousand as of February 26, 2021[48] - Remaining performance obligations expected to be recognized within one year amount to $20,400 thousand[51] Acquisitions and Divestitures - The Company completed the divestiture of its LED Business for a total purchase price of $50 million in cash and a $125 million promissory note, with potential earn-out payments of up to $125 million based on future performance[97] - The acquisition of SMART Embedded Computing, Inc. was completed for a base purchase price of approximately $75 million, with potential earn-out payments of up to $10 million based on revenue targets[100] - SMART Global Holdings acquired SMART Wireless Computing for a total purchase price of approximately $14.6 million, which included $3.2 million in cash and $9.1 million in shares[109] Debt and Financing - The Company recognized a loss on extinguishment of debt in other expense, net of $6.6 million due to early repayment of term loans[168] - The Amended Credit Agreement provides for $165 million of initial term loans with a maturity date of August 9, 2022, and $50 million of revolving loans with a maturity date of February 9, 2021[155] - The FINEP Credit Agreement provides a total of R$102.2 million (approximately $18.7 million) for technology innovation projects in Brazil[185] Stock Options and Compensation - The expected volatility for stock options granted was 52.07% for the six months ended February 26, 2021, compared to 46.10% for the same period in 2020[204] - The total intrinsic value of employee stock options exercised was $2.0 million for the three months ended February 26, 2021, and $2.4 million for the six months ended February 26, 2021[206] - The share-based compensation expense related to RSAs, RSUs, and PSUs was approximately $3.2 million for the three months ended February 26, 2021, and $12.2 million for the six months ended February 26, 2021[210]

J A N U A R Y 2 0 2 1 Investor Presentation Forward-looking Statements 2 This presentation and oral communications made during the course of this presentation contain statements that constitute forward-looking statements. Many of these forward-looking statements can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "plan," "intend," "estimate" and "potential," among others. Forward-looking statements include, but are not limited to, statements re ...

SMART Global Holdings, Inc. (NASDAQ:SGH) Q1 2021 Earnings Conference Call January 5, 2021 4:30 PM ET Company Participants Suzanne Schmidt - IR Mark Adams - President & CEO Jack Pacheco - EVP, COO and CFO Conference Call Participants Kevin Cassidy - Rosenblatt Securities Raji Gill - Needham & Company Brian Chin - Stifel Sidney Ho - Deutsche Bank Operator Ladies and gentlemen, thank you for standing by and welcome to the SMART Global Holdings First Quarter Fiscal 2021 Earnings Conference Call. At this time, ...

JANUARY 5, 2021 Q1 FY2021 Financial Results Conference Call GLOBAL HOLDINGS Disclaimer 2 This presentation and oral communications made during the course of this presentation contain "forward-looking statements" including among other things, statements regarding future events and the future financial performance of SMART Global Holdings, Inc. ("SGH), including the business outlook for the next fiscal quarter, and statements regarding growth drivers in SGH'S industries and markets. These statements are only ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 27, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-38102 SMART GLOBAL HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) Cayman Islands 98-1013909 ( State or other jurisdiction of incorporatio ...

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) The company designs and manufactures electronic products, specializing in memory and computing technology across three core product areas for global markets [Overview](index=4&type=section&id=Overview) - **SMART Global Holdings** is a leading designer and manufacturer of electronic products focused in **memory and computing technology** areas. We specialize in **application specific product development** and support for customers in **enterprise, government and original equipment manufacturer, or OEM, markets**[19](index=19&type=chunk) - The company operates in **three primary product areas**: **Specialty Memory Products**, **Brazil Products**, and **Specialty Compute and Storage Solutions**[19](index=19&type=chunk)[23](index=23&type=chunk) [Our Products and Services](index=5&type=section&id=Our%20Products%20and%20Services) - Specialty Memory Products: **Global leader** in serving the electronics industry for **over 30 years**, developing solutions with OEM customers for industrial, defense, networking, communications, enterprise storage, and computing markets. Offers **customized, integrated supply chain services**[19](index=19&type=chunk)[22](index=22&type=chunk)[27](index=27&type=chunk) - Brazil Products: **Largest in-country manufacturer** of memory, processing imported wafers and die to create **DRAM modules and Flash-based products** for desktops, notebooks, servers, and mobile memory for smartphones[20](index=20&type=chunk)[28](index=28&type=chunk) - Specialty Compute and Storage Solutions (SCSS): Expanded into **specialized computing platforms for AI, machine learning (ML), advanced modeling, and high-performance computing (HPC)** through Penguin Computing, SMART Embedded Computing (AEC), and SMART Wireless Computing (Inforce)[21](index=21&type=chunk)[29](index=29&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [Manufacturing and Test](index=7&type=section&id=Manufacturing%20and%20Test) - Manufacturing facilities are located in Atibaia, Brazil, Newark, California, and Penang, Malaysia, all **ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 certified**[33](index=33&type=chunk) - Brazil operations include receiving unmounted ICs in wafer form, preparing and packaging ICs into semiconductor components, and testing, making the company the **largest local manufacturer of DRAM components and modules**[35](index=35&type=chunk) - Extensive product testing capabilities ensure **low defect rates** and enable **specialized testing as an additional service**, with proprietary testing routines and advanced equipment[39](index=39&type=chunk)[40](index=40&type=chunk) [Customers](index=8&type=section&id=Customers) - Served **more than 800 end customers in fiscal 2020**, including global OEM, enterprise, and government customers[43](index=43&type=chunk) Sales to Top 10 End Customers (Percentage of Net Sales) | Fiscal Year | Percentage of Net Sales | | :---------- | :---------------------- | | **2020** | **66%** | | **2019** | **73%** | | **2018** | **84%** | Sales to Key Individual Customers (Percentage of Net Sales) | Customer | **2020** | **2019** | **2018** | | :------- | :--- | :--- | :--- | | Samsung | **17%** | **18%** | **34%** | | Nutanix | **11%** | - | - | | Cisco | - | **11%** | **12%** | | Lenovo | - | **13%** | **11%** | | Dell | - | - | **10%** | | Flex | **14%** | **17%** | **13%** | [Suppliers](index=9&type=section&id=Suppliers) - Maintains relationships with **leading semiconductor suppliers** in Asia, Europe, and the Americas, including Samsung, Micron, SK Hynix, Kioxia, Intel, AMD, Nvidia, and Qualcomm[46](index=46&type=chunk) - Purchases **almost all materials**, including wafers for Brazil memory products, on a purchase order basis, generally **without long-term commitments** from suppliers[47](index=47&type=chunk) [Sales, Support and Marketing](index=9&type=section&id=Sales%2C%20Support%20and%20Marketing) - **Primarily sells products directly to global OEMs, enterprise, and government customers** across North America, Latin America, Asia, and Europe[48](index=48&type=chunk) - Sales and marketing efforts are conducted through a direct sales force, e-commerce, customer service representatives, and on-site field application engineers (FAEs)[48](index=48&type=chunk)[49](index=49&type=chunk) - As of **August 28, 2020**, the company had **147 sales and marketing personnel worldwide**[48](index=48&type=chunk) [Research and Development](index=9&type=section&id=Research%20and%20Development) - R&D activities are conducted globally, focusing on innovations for **next-generation DRAM, mobile DRAM, hybrid memories, Flash-based products, and specialized computing platforms for AI/ML/HPC**[51](index=51&type=chunk)[52](index=52&type=chunk) Research and Development Expenses | Fiscal Year | Amount (Millions USD) | | :---------- | :-------------------- | | **2020** | **$52.1** | | **2019** | **$47.9** | | **2018** | **$39.8** | - As of **August 28, 2020**, the company had **276 research and development personnel worldwide**[55](index=55&type=chunk) [Competition](index=10&type=section&id=Competition) - The markets served are characterized by **intense competition** from large domestic and international companies with **greater resources, broader product lines, and lower cost structures**[112](index=112&type=chunk) - Competitors include specialty memory providers (e.g., Viking Technology, ATP), local Brazilian manufacturers (e.g., HT Micron, Adata), semiconductor memory IC manufacturers (e.g., Samsung, Micron), and providers of compute/storage systems (e.g., HPE, Dell) and embedded/wireless computing platforms (e.g., ADLink, Kontron)[57](index=57&type=chunk)[62](index=62&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk) - **Principal competitive factors** include **meeting customer-specific requirements, product quality, strong technical support, advanced testing capabilities, flexible delivery, reliable supply, and reasonable pricing**[56](index=56&type=chunk) [Intellectual Property](index=11&type=section&id=Intellectual%20Property) - Relies on a combination of **trade secrets, know-how, trademarks, copyright, and, to a lesser extent, patents** to protect intellectual property rights[60](index=60&type=chunk) Issued Patents (as of Oct 2, 2020) | Jurisdiction | Number of Patents | | :----------- | :---------------- | | United States | **110** | | China | **38** | | Brazil | **2** | | South Korea | **3** | | **Total** | **153** | - The **absence of patent protection** for most products means competitors can reverse-engineer and duplicate them; success largely depends on **technical expertise, customer relationships, and manufacturing/support capabilities**[63](index=63&type=chunk) [Employees](index=12&type=section&id=Employees) - As of **August 28, 2020**, the company had **1,754 full-time employees**[64](index=64&type=chunk) - Employee relations in Brazil are subject to **Brazilian labor laws and regulations**, as well as **annual collective bargaining agreements**, with **all employees represented by unions**[65](index=65&type=chunk) - The company has **never experienced a work stoppage worldwide** and considers its **employee relations to be good**[66](index=66&type=chunk) [Brazil Local Manufacturing Requirements](index=12&type=section&id=Brazil%20Local%20Manufacturing%20Requirements) - The Brazilian government has historically used **local manufacturing requirements and investment incentive programs** (**Lei da Informática—PPB/IT Program, Lei do Bem, PADIS**) to promote job creation and the IT industry[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - Following a **WTO ruling**, Brazil **revoked several local content requirements** under the PPB/IT Program effective **June 30, 2019**, and introduced a **new score-based point system for incentives**[75](index=75&type=chunk)[76](index=76&type=chunk) - Effective **April 1, 2020**, **tax reductions (IPI, PIS, COFINS)** for PPB/IT and PADIS participants were replaced with **financial credits based on R&D investments**, with multipliers and caps that decline over time[77](index=77&type=chunk) [Environmental Regulations](index=14&type=section&id=Environmental%20Regulations) - Operations are subject to **various U.S., foreign, and international environmental laws and regulations** concerning air emissions, wastewater, waste management, and hazardous materials[79](index=79&type=chunk) - **Lead contamination** has been found under a leased multi-tenant building in Brazil; the company **may be responsible for remediation** but may seek indemnification from responsible parties or the lessor[79](index=79&type=chunk) [Corporate Information](index=15&type=section&id=Corporate%20Information) - **SMART Global Holdings**, Inc. is a **Cayman Islands company** with U.S. principal executive offices located at **39870 Eureka Drive, Newark, California 94560**[80](index=80&type=chunk) - The company's principal website is http://www.smartgh.com[80](index=80&type=chunk) [Available Information](index=15&type=section&id=Available%20Information) - Annual, quarterly, and current reports on **Forms 10-K, 10-Q, and 8-K** are available **free of charge** on the company's website (www.smartgh.com) and the SEC's website (www.sec.gov)[82](index=82&type=chunk)[83](index=83&type=chunk) - **SMART Global Holdings** is a leading designer and manufacturer of electronic products focused in **memory and computing technology** areas, specializing in **application specific product development** and support for customers in **enterprise, government and original equipment manufacturer, or OEM, markets**[19](index=19&type=chunk) - The company operates in **three primary product areas**: **Specialty Memory Products**, **Brazil Products**, and **Specialty Compute and Storage Solutions (SCSS)**[19](index=19&type=chunk)[23](index=23&type=chunk) - As of **August 28, 2020**, the company had **1,754 full-time employees worldwide**[64](index=64&type=chunk) [Item 1A. Risk Factors](index=15&type=page&id=Item%201A.%20Risk%20Factors) This section outlines significant risks, including operational, market, international, financial, and governance factors, that could adversely affect the company's performance [Risks Relating to Our Business](index=16&type=section&id=Risks%20Relating%20to%20Our%20Business) - **COVID-19 pandemic** poses **significant risks**, including **disruptions to operations, supply chain, demand, and overall economic conditions**, potentially worsening in the future[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[92](index=92&type=chunk)[95](index=95&type=chunk) - Operating results are **unpredictable and may fluctuate** due to **cyclical markets, memory component price changes, customer demand shifts, and competitive developments**[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk)[104](index=104&type=chunk) - **Dependence on a small number of sole or limited source suppliers** for **critical components** (e.g., DRAM, Flash ICs, processors) creates **risks of shortages, delays, and increased costs**[136](index=136&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Risks Relating to our International Operations](index=38&type=section&id=Risks%20Relating%20to%20our%20International%20Operations) - A **significant portion of sales and operations are focused on Brazil** (**35% of net sales in FY2020**), making the company dependent on the growth and stability of the Brazilian market[207](index=207&type=chunk) - Success in Brazil relies on **government incentives for local manufacturing**, which have been **restructured post-WTO ruling**, potentially **reducing demand and profit margins** if new programs are less effective[212](index=212&type=chunk)[215](index=215&type=chunk) - Operations in Brazil and Malaysia are exposed to **political and economic instability, changes in tax policies, currency fluctuations, and import/export controls**[217](index=217&type=chunk)[218](index=218&type=chunk)[233](index=233&type=chunk)[235](index=235&type=chunk) [Risks Relating to our Debt](index=47&type=section&id=Risks%20Relating%20to%20our%20Debt) - **Indebtedness**, including convertible senior notes and credit facilities, could **impair financial condition** by requiring **significant cash flow for debt service, limiting flexibility, and increasing vulnerability to economic downturns**[249](index=249&type=chunk)[256](index=256&type=chunk) - The Amended Credit Agreement contains **restrictive covenants** limiting the company's ability to **incur additional debt, pay dividends, make investments, and sell assets**, with **failure to comply potentially leading to default**[257](index=257&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) - The **accounting method for convertible notes** may **adversely affect reported earnings and financial condition** by **increasing interest expense and potentially reducing diluted EPS** under the 'if-converted' method[263](index=263&type=chunk)[264](index=264&type=chunk)[266](index=266&type=chunk) [Risks Relating to Investments in Cayman Islands Companies](index=51&type=section&id=Risks%20Relating%20to%20Investments%20in%20Cayman%20Islands%20Companies) - As a **Cayman Islands company**, **shareholder rights under Cayman Islands law differ from U.S. law**, potentially making it **more difficult for shareholders to protect their interests**[277](index=277&type=chunk)[280](index=280&type=chunk) - It may be **difficult to enforce judgments of U.S. courts** for **civil liabilities under U.S. federal securities laws** against the company in the Cayman Islands[278](index=278&type=chunk)[279](index=279&type=chunk) [Risks Relating to Our Ordinary Shares](index=52&type=section&id=Risks%20Relating%20to%20Our%20Ordinary%20Shares) - The market price of ordinary shares may be **volatile** due to various factors, including **operating results, industry conditions, major customer changes, and analyst coverage**[283](index=283&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk) - Principal shareholders, particularly **Silver Lake (48% ownership post-IPO)**, have **significant influence over corporate matters**, potentially limiting other shareholders' influence[281](index=281&type=chunk) - The company **does not anticipate paying cash dividends in the foreseeable future**, intending to **retain earnings for debt repayment and business growth**[301](index=301&type=chunk) - The company faces risks related to the **COVID-19 pandemic**, which could **significantly disrupt operations**, including manufacturing, R&D, and sales, and negatively impact financial results[87](index=87&type=chunk)[88](index=88&type=chunk)[95](index=95&type=chunk) - Operating results have historically fluctuated and may continue to do so due to factors like market cyclicality, changes in memory component prices, customer demand, and economic conditions[96](index=96&type=chunk)[100](index=100&type=chunk)[104](index=104&type=chunk) - Sales to a limited number of key customers represent a significant portion of net sales (**66% in FY2020**), making the company vulnerable to the loss of any major customer or program[109](index=109&type=chunk)[111](index=111&type=chunk) [Item 1B. Unresolved Staff Comments](index=55&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported that there were no unresolved staff comments from the Securities and Exchange Commission (SEC) as of the filing date - **No unresolved staff comments were reported**[302](index=302&type=chunk) [Item 2. Properties](index=56&type=section&id=Item%202.%20Properties) The company maintains various leased and owned facilities globally for manufacturing, R&D, procurement, sales, and supply chain services - The company has facilities in **Newark, Fremont, Huntington Beach and Irvine California; Atibaia, Brazil; Penang, Malaysia; Gilbert and Tempe, Arizona; New Taipei City, Taiwan; Seongnam-City, South Korea; Tewksbury, Massachusetts; Bangalore and Cochin, India; East Kilbride, Scotland; and Houston, Texas**[304](index=304&type=chunk) - A **new U.S. corporate headquarters lease** for **21,365 square feet** in **Milpitas, California**, is expected to commence in the **second calendar quarter of 2021** with a **term expiring in 2031**[306](index=306&type=chunk) Key Facilities and Capabilities | Location | Facility Size (Sq. Feet) | Leased/Owned | Lease Expiration | | :---------------- | :----------------------- | :----------- | :--------------- | | Newark, CA | **79,480** | Leased | **April 2021** | | Fremont, CA | **44,256** | Leased | **July 2030** | | Atibaia, Brazil | **87,449** | Leased | **June 2032** | | Penang, Malaysia* | **86,730** | Owned | N/A | [Item 3. Legal Proceedings](index=57&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ongoing legal proceedings, including indemnification claims and Brazilian import duty tax assessments, with one claim dismissed and others under appeal - The company is currently involved in **legal proceedings, claims, and government investigations** in the ordinary course of business, including **intellectual property and tax-related matters**[308](index=308&type=chunk)[733](index=733&type=chunk) - SanDisk's indemnification claim related to alleged patent infringement from a **2013** business sale was **dismissed by court order on May 19, 2020**[308](index=308&type=chunk)[735](index=735&type=chunk) - Brazilian federal tax authorities issued a **Third Assessment** for **R$3.6 million (or $0.7 million)** for **import-related tax issues and penalties for 2012 and 2013**, which is **currently under appeal by tax authorities after a favorable ruling for SMART Brazil**[312](index=312&type=chunk)[313](index=313&type=chunk)[738](index=738&type=chunk)[739](index=739&type=chunk) [Item 4. Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company, indicating that it does not engage in mining operations or activities subject to mine safety disclosures - This item is **not applicable**[315](index=315&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=59&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's ordinary shares began trading on **NASDAQ** in **May 2017**, with no anticipated cash dividends in the foreseeable future - Ordinary shares began trading on the **NASDAQ Global Select Market** under the symbol **'SGH'** on **May 24, 2017**, with an IPO price of **$11.00 per share**[317](index=317&type=chunk) - As of **October 2, 2020**, there were **78 registered holders of record** of the company's ordinary shares[318](index=318&type=chunk) - The company **does not intend to pay any cash dividends on its ordinary shares in the foreseeable future**, prioritizing **retention of earnings for debt repayment and business growth**[319](index=319&type=chunk) - In connection with the **SMART Wireless acquisition**, **382,788** ordinary shares were issued as merger consideration, and **67,550** shares held back as security were later released, all issued under **Section 4(a)(2) of the Securities Act**[322](index=322&type=chunk)[324](index=324&type=chunk) [Item 6. Selected Financial Data](index=61&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents historical consolidated financial data for **fiscal years 2016-2020**, including key operational, balance sheet, and other financial metrics - The selected consolidated financial data is derived from **audited consolidated financial statements** and is presented for **fiscal years ended August 28, 2020, August 30, 2019, August 31, 2018, August 25, 2017, and August 26, 2016**[328](index=328&type=chunk) Consolidated Statement of Operations Data (in thousands, except per share data) | Metric | **FY 2020** | **FY 2019** | **FY 2018** | **FY 2017** | **FY 2016** | | :-------------------------- | :------------ | :------------ | :------------ | :------------ | :------------ | | Net sales | **$1,122,377** | **$1,211,999** | **$1,288,821** | **$761,291** | **$534,423** | | Cost of sales | **905,981** | **974,472** | **997,235** | **599,041** | **427,491** | | Gross profit | **216,396** | **237,527** | **291,586** | **162,250** | **106,932** | | Income from operations | **41,330** | **89,081** | **170,221** | **53,874** | **6,185** | | Net income (loss) | **$(1,143)** | **$51,332** | **$119,463** | **$(7,795)** | **$(19,960)** | | Basic EPS | **$(0.05)** | **$2.24** | **$5.42** | **$(0.49)** | **$(1.44)** | | Diluted EPS | **$(0.05)** | **$2.19** | **$5.17** | **$(0.49)** | **$(1.44)** | Consolidated Balance Sheet Data (in thousands) | Metric | **FY 2020** | **FY 2019** | **FY 2018** | **FY 2017** | **FY 2016** | | :-------------------------- | :------------ | :------------ | :------------ | :------------ | :------------ | | Cash and cash equivalents | **$150,811** | **$98,139** | **$31,375** | **$22,436** | **$58,634** | | Working capital | **274,221** | **234,360** | **226,264** | **107,115** | **90,095** | | Total assets | **786,608** | **704,137** | **672,762** | **480,028** | **458,655** | | Long-term debt | **195,573** | **182,450** | **184,190** | **154,450** | **225,587** | | Total shareholders' equity | **282,104** | **273,460** | **187,128** | **82,396** | **(1,237)** | Other Financial Data | Metric | **FY 2020** | **FY 2019** | **FY 2018** | **FY 2017** | **FY 2016** | | :-------------------------- | :------------ | :------------ | :------------ | :------------ | :------------ | | Adjusted EBITDA | **$104,211** | **$134,673** | **$195,540** | **$99,387** | **$51,760** | | Gross billings to customers | **$1,727,075** | **$2,158,302** | **$2,302,214** | **$1,625,547** | **$1,925,047** | | Days sales outstanding (DSO)| **46** | **37** | **38** | **41** | **27** | | Inventory turns | **9** | **16** | **9** | **12** | **18** | | Days payable outstanding (DPO)| **54** | **31** | **40** | **47** | **40** | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial performance, liquidity, and capital resources, detailing operating results, debt structure, and critical accounting policies [Overview](index=65&type=section&id=Overview) - The discussion and analysis of financial condition and results of operations should be read with the consolidated financial statements and notes[341](index=341&type=chunk) - The company uses a **52- to 53-week fiscal year** ending on the last Friday in August; Brazilian subsidiaries' financial information is included on a one-month lag[342](index=342&type=chunk) [Components of Operating Results](index=66&type=section&id=Components%20of%20Operating%20Results) - Net Sales: Generated predominantly from **sales of memory components, modules, and specialty compute/storage products** to OEMs and end users; **highly dependent on end-market demand and concentrated among a few customers**[343](index=343&type=chunk) - Cost of Sales: Primarily consists of **materials (DRAM and Flash components/wafers), fixed manufacturing costs, labor, depreciation, freight, and customs charges**; **susceptible to inventory write-downs and fluctuations in DRAM pricing**[344](index=344&type=chunk) - Operating Expenses: Comprise **R&D (personnel, consulting, overhead, increasing with product development)** and **SG&A (personnel, sales commissions, facilities, professional fees, increasing due to public company costs)**[346](index=346&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk) [Results of Operations](index=68&type=section&id=Results%20of%20Operations) Consolidated Statement of Operations Data (in thousands) | Metric | **FY 2020** | % of sales | **FY 2019** | % of sales | **FY 2018** | % of sales | | :------------------------------------------ | :------------ | :--------- | :------------ | :--------- | :------------ | :--------- | | Net sales | **$1,122,377** | **100%** | **$1,211,999** | **100%** | **$1,288,821** | **100%** | | Cost of sales | **905,981** | **81%** | **974,472** | **80%** | **997,235** | **77%** | | Gross profit | **216,396** | **19%** | **237,527** | **20%** | **291,586** | **23%** | | Research and development | **52,056** | **5%** | **47,920** | **4%** | **39,824** | **3%** | | Selling, general and administrative | **119,523** | **11%** | **103,226** | **9%** | **84,541** | **7%** | | Income from operations | **41,330** | **4%** | **89,081** | **7%** | **170,221** | **13%** | | Net income (loss) | **$(1,143)** | **0%** | **$51,332** | **4%** | **$119,463** | **9%** | [Comparison of the Years Ended August 28, 2020 and August 30, 2019](index=69&type=section&id=Comparison%20of%20the%20Years%20Ended%20August%2028%2C%202020%20and%20August%2030%2C%202019) Net Sales, Cost of Sales and Gross Profit (in thousands, except percentages) | Metric | **FY 2020** | **FY 2019** | Change Amount | Change % | | :----------- | :------------ | :------------ | :------------ | :------- | | Net sales | **$1,122,377** | **$1,211,999** | **$(89,622)** | **(7.4%)** | | Cost of sales| **905,981** | **974,472** | **(68,491)** | **(7.0%)** | | Gross profit | **$216,396** | **$237,527** | **$(21,131)** | **(8.9%)** | | Gross margin | **19.3%** | **19.6%** | | | - Net sales decreased by **$89.6 million (7.4%)** due to a **$147.1 million (27.4%) decrease** in Brazil product sales (lower DRAM and mobile memory ASPs), partially offset by a **$48.6 million (22.4%) increase** in SCSS revenue from acquisitions[361](index=361&type=chunk) - R&D expense increased by **$4.1 million (8.6%)** due to higher costs from SCSS acquisitions, partially offset by **$6.4 million** in Brazil financial credits. SG&A expense increased by **$16.3 million (15.8%)** due to SCSS acquisitions and integration expenses[366](index=366&type=chunk)[367](index=367&type=chunk) [Comparison of the Years Ended August 30, 2019 and August 31, 2018](index=71&type=section&id=Comparison%20of%20the%20Years%20Ended%20August%2030%2C%202019%20and%20August%2031%2C%202018) Net Sales, Cost of Sales and Gross Profit (in thousands, except percentages) | Metric | **FY 2019** | **FY 2018** | Change Amount | Change % | | :----------- | :------------ | :------------ | :------------ | :------- | | Net sales | **$1,211,999** | **$1,288,821** | **$(76,822)** | **(6.0%)** | | Cost of sales| **974,472** | **997,235** | **(22,763)** | **(2.3%)** | | Gross profit | **$237,527** | **$291,586** | **$(54,059)** | **(18.5%)** | | Gross margin | **19.6%** | **22.6%** | | | - Net sales decreased by **$76.8 million (6.0%)** due to a **$266.0 million (33.3%) decline** in Brazil sales (lower mobile memory and DRAM demand/ASPs), partially offset by **$150.4 million** additional revenue from Penguin Computing[374](index=374&type=chunk)[375](index=375&type=chunk) - Gross margin decreased to **19.6% from 22.6%** due to **higher cost of sales for SCSS and fixed manufacturing costs in Brazil**[377](index=377&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary (in thousands) | Metric | **FY 2020** | **FY 2019** | **FY 2018** | | :-------------------------------- | :------------ | :------------ | :------------ | | Cash provided by operating activities | **$87,205** | **$169,657** | **$67,907** | | Cash used in investing activities | **$(32,041)** | **$(109,440)** | **$(67,749)** | | Cash provided by financing activities | **$12,594** | **$100** | **$7,944** | | Net increase in cash and cash equivalents | **$52,672** | **$60,905** | **$7,771** | - Cash and cash equivalents increased to **$150.8 million** in **fiscal 2020**, with **$95.3 million** held outside the U.S[385](index=385&type=chunk) - In **February 2020**, the company issued **$250.0 million** in convertible senior notes, generating **$243.1 million** net proceeds, used to extinguish **$204.9 million** of long-term debt and purchase **$21.8 million** in capped calls[386](index=386&type=chunk)[387](index=387&type=chunk) [Contractual Obligations](index=75&type=section&id=Contractual%20Obligations) Contractual Obligations (in millions) | Obligation | Total | **1** year | **2-3** years | **4-5** years | After **5** years | | :-------------------------------- | :------ | :----- | :-------- | :-------- | :------------ | | Notes | **$250.0** | **$0** | **$0** | **$0** | **$250.0** | | Interest expense (Notes) | **$31.0** | **$5.6** | **$11.3** | **$11.3** | **$2.8** | | Operating leases | **$36.6** | **$7.2** | **$8.7** | **$6.5** | **$14.2** | | Non-cancellable purchase commitments | **$49.9** | **$49.9** | **$0** | **$0** | **$0** | | **Total** | **$367.5**| **$62.7**| **$20.0** | **$17.8** | **$267.0** | - As of **August 28, 2020**, gross unrecognized tax benefits, including penalties and interest, totaled **$16.5 million**, with **$0.4 million** recorded as a noncurrent liability[396](index=396&type=chunk) [Convertible Senior Notes due 2026](index=75&type=section&id=Convertible%20Senior%20Notes%20due%202026) - Issued **$250.0 million** in **2.25% convertible senior notes due 2026** in **February 2020**, bearing semi-annual interest[397](index=397&type=chunk)[398](index=398&type=chunk) - Notes are **convertible at the holder's option under specific conditions**, with the company electing to **settle conversions via a combination of cash (principal) and ordinary shares (excess conversion value)**[399](index=399&type=chunk)[400](index=400&type=chunk) - The company has the right to redeem the notes from **February 21, 2023**, at a **cash redemption price equal to the principal plus accrued interest**, subject to share price conditions[403](index=403&type=chunk) [Off-Balance Sheet Arrangements](index=77&type=section&id=Off-Balance%20Sheet%20Arrangements) - As of **August 28, 2020**, and **August 30, 2019**, the company had **no off-balance sheet arrangements** or relationships with unconsolidated entities or financial partnerships[409](index=409&type=chunk) [Critical Accounting Policies](index=77&type=section&id=Critical%20Accounting%20Policies) - Revenue recognition involves **identifying contracts, performance obligations, transaction price allocation, and recognizing revenue when control transfers to the customer**, with specific policies for **standard, customized, and NCNR products, and computing/agency services**[411](index=411&type=chunk)[412](index=412&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk)[419](index=419&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk)[424](index=424&type=chunk) - Inventory valuation involves **evaluating ending inventories for excess quantities and obsolescence** based on **sales levels, demand forecasts, market conditions, and product life cycles**, adjusting carrying values to the **lower of cost or net realizable value**[428](index=428&type=chunk) - Goodwill is **tested for impairment annually** by comparing the estimated fair value of reporting units to their carrying value, using **income and market approach methodologies** with **significant management judgments and assumptions**[431](index=431&type=chunk) - Net sales decreased by **$89.6 million (7.4%)** in **fiscal 2020** compared to **fiscal 2019**, primarily due to a **27.4% decline** in Brazil product sales, partially offset by a **22.4% increase** in SCSS revenue from acquisitions[361](index=361&type=chunk) - Gross margin remained relatively flat at **19.3%** in **fiscal 2020** (vs. **19.6%** in **fiscal 2019**), while R&D expense increased by **8.6%** and SG&A expense increased by **15.8%**, largely due to SCSS acquisitions[363](index=363&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - Cash and cash equivalents increased to **$150.8 million** in **fiscal 2020**, with **$87.2 million** from operating activities and **$12.6 million** from financing activities, including **$243.1 million** from convertible notes[385](index=385&type=chunk)[386](index=386&type=chunk)[391](index=391&type=chunk)[394](index=394&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=81&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from foreign currency exchange rate fluctuations, especially in **Brazil**, and interest rate changes on variable-rate debt - The company is subject to **foreign currency exchange rate fluctuations** due to international sales and operations, particularly in Brazil (reais), impacting **product pricing, manufacturing costs, and reported financial results**[439](index=439&type=chunk)[441](index=441&type=chunk) - Foreign exchange losses were **$3.4 million** in **fiscal 2020**, **$3.1 million** in **2019**, and **$13.2 million** in **2018**[442](index=442&type=chunk) - **Interest rate risk** arises from **variable-rate short-term debt** under the Amended Credit Agreement; a **1.0% increase** in interest rates on fully drawn revolving loans would increase annual interest expense and decrease cash flow/income before taxes by **$0.5 million**[443](index=443&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=81&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Required financial statements and supplementary data are incorporated by reference from **Part IV, Item 15** of this annual report - The financial statements and supplemental financial information required by this item are presented beginning on page F-1 in **Part IV, Item 15** of this annual report on **Form 10-K** and are incorporated herein by reference[444](index=444&type=chunk) - Supplementary data required by this item is included in **Note 15, Selected Quarterly Information**, in the notes to consolidated financial statements[444](index=444&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=82&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting principles or financial disclosure were reported - **No changes in and disagreements with accountants on accounting and financial disclosure were reported**[446](index=446&type=chunk) [Item 9A. Controls and Procedures](index=83&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of **August 28, 2020**, with no material changes in **Q4 fiscal 2020** - As of **August 28, 2020**, the company's management, including the CEO and CFO, concluded that its **disclosure controls and procedures were effective**[447](index=447&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of **August 28, 2020**, based on the **COSO 2013 Framework**, a conclusion audited by **Deloitte & Touche LLP**[448](index=448&type=chunk)[449](index=449&type=chunk)[453](index=453&type=chunk) - There were **no material changes in internal control over financial reporting** during the **fourth quarter of fiscal 2020**[450](index=450&type=chunk) [Item 9B. Other Information](index=84&type=section&id=Item%209B.%20Other%20Information) The Board approved accelerated vesting for **270,000** restricted share awards granted to Executive Chairman Ajay Shah on **October 20, 2020** - The Board approved the **acceleration of vesting** for **90,000** performance-based and **180,000** time-based **restricted share awards** granted to **Executive Chairman Ajay Shah** on **October 20, 2020**[459](index=459&type=chunk) - These awards became **fully vested, free of restrictions and non-forfeitable** on **October 20, 2020**, in consideration of Mr. Shah's **outstanding service and role in recruiting the new CEO**[459](index=459&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=84&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement for the Annual General Meeting - Information on **directors, executive officers, and corporate governance** is incorporated by reference from the **Proxy Statement for the 2020 Annual General Meeting**[460](index=460&type=chunk) - The company has adopted a **Code of Business Ethics and Conduct** applicable to **all employees, officers, and directors**, available on its Investor Relations page at www.smartgh.com[461](index=461&type=chunk) [Item 11. Executive Compensation](index=85&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the Proxy Statement for the next Annual General Meeting - Information on **executive compensation** is incorporated by reference to the **Proxy Statement for the next Annual General Meeting**, to be filed **within 120 days of the fiscal year ended August 28, 2020**[462](index=462&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=85&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Security ownership information for beneficial owners and management is incorporated by reference from the Proxy Statement for the next Annual General Meeting - Information on **security ownership of certain beneficial owners and management and related shareholder matters** is incorporated by reference to the **Proxy Statement for the next Annual General Meeting**[463](index=463&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=85&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related transactions and director independence is incorporated by reference from the Proxy Statement for the next Annual General Meeting - Information on **certain relationships and related transactions, and director independence** is incorporated by reference to the **Proxy Statement for the next Annual General Meeting**[464](index=464&type=chunk) [Item 14. Principal Accounting Fees and Services](index=85&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the Proxy Statement for the next Annual General Meeting - Information on **principal accounting fees and services** is incorporated by reference to the **Proxy Statement for the next Annual General Meeting**[465](index=465&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=85&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and various exhibits filed as part of the annual report - The **Consolidated Financial Statements** are filed as part of this report under **Item 8 'Financial Statements and Supplementary Data'**[467](index=467&type=chunk) Consolidated Financial Statements Included | Document | Page | | :------------------------------------------ | :--- | | Report of Independent Registered Public Accounting Firm | F-2 | | Consolidated Balance Sheets | F-5 | | Consolidated Statements of Operations | F-6 | | Consolidated Statements of Comprehensive Income (Loss) | F-7 | | Consolidated Statements of Shareholders' Equity | F-8 | | Consolidated Statements of Cash Flows | F-9 | | Notes to Consolidated Financial Statements | F-10 | - Exhibits, including **merger agreements, organizational documents, and various other agreements**, are listed on the **Exhibit Index** at the end of the report[468](index=468&type=chunk)[755](index=755&type=chunk)[756](index=756&type=chunk)[757](index=757&type=chunk)[758](index=758&type=chunk)[759](index=759&type=chunk)[760](index=760&type=chunk) [Item 16. Form 10-K Summary](index=85&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company, indicating that a separate Form 10-K summary is not provided or required - This item is **not applicable**[468](index=468&type=chunk) [SIGNATURES](index=91&type=section&id=SIGNATURES) The report is duly signed by the President and CEO, Mark Adams, along with other directors and officers, on **October 22, 2020** - The report is **duly signed** on behalf of **SMART Global Holdings**, Inc. by its **President and Chief Executive Officer, Mark Adams**, and **other directors and officers**[763](index=763&type=chunk)[764](index=764&type=chunk)[768](index=768&type=chunk) - The signing date for the report is **October 22, 2020**[764](index=764&type=chunk)

SMART Global Holdings, Inc. (NASDAQ:SGH) Q4 2020 Earnings Conference Call October 1, 2020 4:30 PM ET Company Participants Ajay Shah - Chairman Mark Adams - CEO Jack Pacheco - CFO Suzanne Schmidt - IR Conference Call Participants Rajvi Gill - Needham & Company Brian Chin - Stifel, Nicolaus & Company Kevin Cassidy - Rosenblatt Securities Sidney Ho - Deutsche Bank Blayne Curtis - Barclays Mark Lipacis - Jefferies Operator Ladies and gentlemen, thank you for standing by and welcome to the SMART Global Holdings ...