SMART Global Holdings(SGH) - 2025 Q2 - Quarterly Results

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 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] Management Changes 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] - Mr. Pacheco has a long tenure with the company, having served in various leadership roles for nearly 25 years, including as CFO[12][13] - The company has started a succession process and Mr. Pacheco will support the transition, potentially as a special advisor and consultant[10][11] 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 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] 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 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 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 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] 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 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] - Key exclusions from GAAP results include share-based compensation, amortization of acquisition-related intangibles, restructuring charges, and other infrequent items[17] - The company utilizes a long-term projected non-GAAP effective tax rate of 28% for its non-GAAP reporting[18] Reconciliation of GAAP to Non-GAAP Measures 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 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] Forward-Looking Statements 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] - These statements are subject to risks including global economic conditions, geopolitical uncertainty, supply chain disruptions, and competitive factors[14] About Penguin Solutions 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]