SMART Global Holdings(US:SGH)2021-07-06 21:17Financial 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].