SMART Global Holdings(SGH) - 2025 Q4 - Annual Report

PART I Business Overview Penguin Solutions, formerly SMART Global Holdings, Inc., is an end-to-end technology company specializing in computing, memory, and LED solutions, strategically focused on AI, U.S. Domestication, and key acquisitions and divestitures Company Overview Penguin Solutions is an end-to-end technology company with over two decades of experience in computing, memory, and LED solutions - Penguin Solutions is an end-to-end technology company with over two decades of experience in computing, memory, and LED solutions[19] - The company rebranded from 'SMART Global Holdings, Inc.' to 'Penguin Solutions, Inc.' on October 15, 2024, and changed its Nasdaq ticker symbol from 'SGH' to 'PENG'[22] - The U.S. Domestication of the parent company from the Cayman Islands to Delaware was consummated on June 30, 2025[23] Business Segments The company has transformed its business to focus on delivering leading-edge solutions for AI complexity across three segments - The company has transformed its business to focus on delivering leading-edge solutions for AI complexity[26] - Current business segments are Advanced Computing, Integrated Memory, and Optimized LED[26] Divestiture of SMART Brazil The company completed the divestiture of an 81% interest in SMART Brazil, which is now presented as discontinued operations - Completed the divestiture of an 81% interest in SMART Modular Technologies do Brasil ('SMART Brazil') on November 29, 2023[27] - SMART Brazil operations are presented as discontinued operations for all periods in the financial reports[28] Acquisition of Stratus Technologies Stratus Technologies was acquired for $225.0 million cash plus a contingent earnout, enhancing the company's portfolio - Acquired Stratus Technologies on August 29, 2022, for a cash purchase price of $225.0 million, plus a contingent earnout of up to $50.0 million (paid in Q2 2024)[29] Our Products and Services Penguin Solutions offers a diverse range of products and services across Advanced Computing, Integrated Memory, and Optimized LED segments Advanced Computing Net Sales | Year | Net Sales (Millions USD) | | :--- | :--- | | 2025 | $648.4 | | 2024 | $554.6 | | 2023 | $749.7 | - Advanced Computing offers HPC and AI solutions under Penguin Solutions, Penguin Computing, Stratus, and Penguin Edge brands[30] - The Penguin Edge product portfolio is expected to be fully discontinued by approximately the end of calendar 2025 due to obsolescence[36] Integrated Memory Net Sales | Year | Net Sales (Millions USD) | | :--- | :--- | | 2025 | $464.2 | | 2024 | $356.4 | | 2023 | $443.3 | - Integrated Memory provides specialty DRAM modules (including CXL Memory) and flash storage solutions under the SMART Modular Technologies brand, along with SMART Supply Chain Services[37][42][43] Optimized LED Net Sales | Year | Net Sales (Millions USD) | | :--- | :--- | | 2025 | $256.1 | | 2024 | $259.8 | | 2023 | $248.3 | - Optimized LED, under the Cree LED brand, offers application-optimized LED chips and packaged components for various lighting and display applications[44][46][47] Manufacturing and Test The company's manufacturing and testing facilities are globally located and certified, utilizing third-party contract manufacturers and extensive product testing - Manufacturing and testing facilities are primarily located in the United States, Malaysia, and China, with certifications including ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, and IATF16949:2016[48] - The company utilizes third-party contract manufacturers, builds products to order, and configures products to order, with extensive product testing capabilities[50][49] Customers Penguin Solutions serves a diversified global customer base, with a significant portion of net sales from its top ten end customers - Serves a diversified base of global OEM, enterprise, and government customers directly and through third-party channels[56] - Sales to the ten largest end customers accounted for 66% of total net sales in 2025, 58% in 2024, and 60% in 2023[60] Suppliers The company maintains relationships with leading global suppliers, but faces supply constraints and increased material costs due to macroeconomic headwinds - Maintains relationships with leading suppliers and contract manufacturers in Asia, Europe, and the Americas, including major memory manufacturers (Samsung, Micron, SK hynix) and computing/graphics providers (Intel, AMD)[61][62] - Global macroeconomic headwinds and industry dynamics have led to supply constraints, increased material costs, and affected delivery timelines[64] Sales, Support and Marketing Sales and marketing efforts are integrated, leveraging a direct sales force, e-commerce, and a network of partners - Sales and marketing efforts are integrated, utilizing a direct sales force, e-commerce, customer service, field application engineers (FAEs), and a network of independent sales representatives, distributors, integrators, and resellers[65] Research and Development R&D activities are conducted globally, focusing on innovation across Advanced Computing, Integrated Memory, and Optimized LED segments R&D Expenses | Year | R&D Expenses (Millions USD) | | :--- | :--- | | 2025 | $79.8 | | 2024 | $81.5 | | 2023 | $90.6 | - R&D activities are conducted globally, focusing on innovation in Advanced Computing (HPC, AI, high-availability servers), Integrated Memory (next-gen DRAM, CXL, flash products), and Optimized LED (next-gen LED products)[69][70][71] - Approximately 430 R&D personnel worldwide as of August 29, 2025[73] Competition The company operates in highly competitive markets against numerous global and local firms, with key competitive factors including product quality and technical support - The company competes in highly competitive markets with numerous global and local companies, including large international firms with greater resources[74][78] - Principal competitive factors include meeting customer-specific requirements, product quality, strong technical support, and technologically advanced products[74] Intellectual Property Penguin Solutions protects its intellectual property through a combination of patents, copyrights, trade secrets, trademarks, and contractual restrictions - Owns or exclusively licenses approximately 1,650 patents and has 442 pending patent applications as of August 29, 2025[79] - Relies on a combination of patent, copyright, trade secret, and trademark laws, along with contractual restrictions, to protect intellectual property[80] Human Capital The company prioritizes a "people first" culture, focusing on employee engagement, development, and competitive compensation for its global workforce - Focuses on a 'people first' culture, emphasizing employee engagement, development, inclusion, belonging, wellness, health, safety, and competitive compensation and benefits[82][84][85][87][88] - Had approximately 2,900 full-time employees worldwide as of August 29, 2025[83] Environmental Regulations Operations are subject to various environmental laws and regulations, with potential for substantial costs and liabilities from non-compliance - Operations are subject to various federal, state, local, foreign, and international environmental laws and regulations[89] - Non-compliance or unforeseen environmental conditions could lead to substantial costs and liabilities[90] Available Information Annual, Quarterly, and Current Reports are publicly available on the company's and SEC's websites - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K are available free of charge on the company's website (www.penguinsolutions.com) and the