SMART Global Holdings(US:SGH)2023-01-03 22:21Financial Performance - Total net sales for the three months ended November 25, 2022, were $465.5 million, a slight decrease from $469.9 million in the same period of 2021, representing a 0.5% decline[13] - Gross profit for the same period was $118.4 million, down from $122.2 million year-over-year, indicating a decrease of approximately 3.2%[13] - Operating income decreased to $17.6 million from $34.8 million, reflecting a decline of 49.5% compared to the prior year[13] - Net income attributable to SGH for the three months ended November 25, 2022, was $5.0 million, a significant drop from $20.0 million in the same period of 2021, representing a decrease of 75.1%[13] - Net income for the three months ended November 25, 2022, was $5.324 million, a decrease of 74.3% compared to $20.698 million for the same period in 2021[18] - Basic earnings per share for the quarter were $0.10, down from $0.41 in the same quarter of 2021[92] - Total segment operating income for the three months ended November 25, 2022, was $54.8 million, down from $69.2 million in the prior year[95] Expenses and Costs - Research and development expenses increased to $24.1 million, up from $17.7 million, marking a rise of 36.9% year-over-year[13] - The company reported a depreciation expense of $19.789 million for the three months ended November 25, 2022, compared to $15.813 million for the same period in 2021[18] - Share-based compensation expense for the three months ended November 25, 2022, was $10.412 million, slightly up from $9.775 million in the same period of 2021[18] - Share-based compensation expense increased to $10.4 million from $9.8 million year-over-year[79] - The company recorded a restructure charge of $2.0 million in connection with workforce reductions and project eliminations[85] Assets and Liabilities - Total assets as of November 25, 2022, were $1.8 billion, an increase from $1.6 billion as of August 26, 2022, reflecting a growth of 15.0%[12] - Long-term debt rose to $797.0 million from $591.4 million, indicating an increase of 34.8%[12] - Cash and cash equivalents decreased to $324.8 million from $363.1 million as of August 26, 2022[12] - Accounts receivable increased by $129.695 million during the three months ended November 25, 2022, while inventories decreased by $82.882 million[18] - As of November 25, 2022, total inventories amounted to $416.082 million, with raw materials at $179.520 million, work in process at $78.048 million, and finished goods at $158.514 million[35] Acquisitions and Investments - The company completed the acquisition of Stratus Technologies on August 29, 2022, for a cash purchase price of $225 million, with potential contingent consideration of up to $50 million based on performance[25] - The provisional fair value of the net assets acquired from Stratus Technologies is estimated at $263.046 million, with goodwill of $125.929 million assigned to the IPS segment[30] - The fair value of the contingent consideration (Earnout) at the acquisition date was estimated at $20.8 million, based on a Monte Carlo simulation analysis[26] - As of November 25, 2022, the fair value of the Earnout was adjusted to $24.5 million, reflecting updated estimates of Stratus Technologies' gross profit[27] - The company capitalized $126.4 million for intangible assets in the first quarter of 2023, primarily related to the acquisition of Stratus Technologies[40] Cash Flow and Financial Position - Cash flows from operating activities resulted in a net cash outflow of $73.985 million for the three months ended November 25, 2022, compared to a net cash inflow of $15.146 million for the same period in 2021[18] - Total cash, cash equivalents, and restricted cash at the end of the period was $327.621 million, down from $363.065 million at the beginning of the period[18] - The company had receivables for earned but unused financial credits of $19.0 million as of November 25, 2022, which can be utilized through December 2027[68] Market and Economic Conditions - The company anticipates continued challenges due to supply chain disruptions and macroeconomic factors affecting customer demand[7] - The company anticipates continued challenges due to macroeconomic factors, including supply chain disruptions and foreign currency fluctuations[8] Segment Performance - Memory Solutions segment reported net sales of $192.0 million, down 20% from $239.4 million in the prior year[95] - Intelligent Platform Solutions segment saw a significant increase in net sales to $211.0 million, up 78% from $118.7 million in the previous year[95] - LED Solutions segment net sales decreased to $62.5 million, down 44% from $111.9 million in the same quarter last year[95]