SMART Global Holdings(SGH) - 2025 Q3 - Quarterly Results

Q3 Fiscal 2025 Financial Performance Penguin Solutions delivered solid Q3 FY2025 results, marked by increased net sales and improved Non-GAAP profitability Financial Highlights 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] 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 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 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 Penguin Solutions updated its FY2025 guidance, raising the midpoint for both GAAP and Non-GAAP diluted EPS Full-Year Guidance 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 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 This section provides a comprehensive overview of the company's consolidated statements of operations, balance sheets, and cash flows Consolidated Statements of Operations 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 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 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 This section details the adjustments made to reconcile GAAP financial results to Non-GAAP measures Reconciliation of Key Metrics 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] - 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] Corporate Updates and Other Information This section covers the company's recent U.S. domestication and important disclosures regarding forward-looking statements U.S. Domestication 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][16] Forward-Looking Statements & Non-GAAP Measures 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][9] - The company utilizes non-GAAP measures, excluding items like share-based compensation and amortization, to provide supplemental information on its core operating results[12] - The long-term projected non-GAAP effective tax rate was lowered from 28% to 25% due to changes in the geographic earnings mix[13]