SMART Global Holdings(SGH) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Total Q3 revenues were $301 million, in line with the midpoint of guidance [19][35] - Non-GAAP gross margin was 32.3%, up from 31.6% YoY and 31.5% sequentially, driven by improved mix within IPS and higher service revenue [20][35] - Non-GAAP diluted EPS was $0.37, above the midpoint of guidance [19][35] - Cash and short-term investments totaled $468 million at the end of Q3 [35] - Inventory turns improved to 8.4x in Q3 from 6.8x in Q2, primarily due to timing of receipts and shipments [21] Business Line Performance Intelligent Platform Solutions (IPS) - IPS revenue was $145 million, representing 48% of total revenue [43] - Achieved multi-million dollar non-hardware win, providing only software and managed services [79] - Secured follow-on orders from hyperscaler, defense, and education verticals [79] - Biggest wins to-date with ztC Edge and ztC Endurance fault-tolerant computing platforms [79] Memory Solutions - Memory revenue was $92 million, representing 30% of total revenue [16][43] - Received first 8 DIMM CXL Add-In Card production sale to an AI compute vendor [17] - Introduced E3.S non-volatile CXL design combining DRAM and NAND devices [17] LED Solutions - LED revenue grew 6% sequentially to $64 million, representing 21% of total revenue [40][43] - Backlog and channel visibility are improving [40] - Cree LED's advanced R&D capabilities and robust IP portfolio set the stage for sustained innovation [41] Market Data and Key Metrics - Memory pricing has started to recover, with inventory normalizing at largest customers heading into Q4 [4] - The broader LED market environment suggests consolidation is likely in the sector at some point [41] Company Strategy and Industry Competition - The company is uniquely positioned to enable companies across the technology ecosystem in AI design, build, deploy, and management [12] - 25 years of deep experience in high-performance computing (HPC) differentiates the company as a partner that can rapidly and reliably deploy advanced systems [13] - The company is committed to delivering exceptional value to customers and stakeholders as it continues to innovate and strengthen its position in AI and HPC [27] Management Commentary on Operating Environment and Future Outlook - The company expects Q4 revenues to be approximately $325 million at the midpoint, with IPS revenues up in the low double-digits sequentially [47] - Memory revenues are expected to be up slightly in the low-single digits sequentially, while LED revenues are expected to be up slightly in the low-single digit range [81] - The company is navigating a challenging environment with global macroeconomic headwinds and ongoing supply chain constraints, especially in the IPS business [26] Other Important Information - The company retired $75 million of its term loan in Q3, bringing down the principal amount by $112 million since Q1 to $425 million [23] - The company has $77.7 million available for future share repurchases under its authorizations [22] - The company will hold its Investor Day on July 16 in New York City at the NASDAQ MarketSite [6] Q&A Session Question: How is IPS' go-to-market strategy changing? - The company has brought on new sales leadership over the last 6-12 months and hired Dave Osborne as SVP of Partnership and Alliances to expand reach and capabilities [29][65] - The company is seeing success in oil and gas and financial institutions, with a broader set of markets attracted to its reliable solutions [58] Question: Can you speak more about the largest wins for ztC Edge and Endurance? - The primary markets adopting these systems are oil and gas and financial institutions, with implementation time frames varying based on customer needs [58] Question: What was Stratus' contribution in the quarter? - The company does not break out brands like Stratus on a go-forward basis, but any product sold at the Edge and back in the data center on-prem environment includes software and services along with the hardware platform [82] Question: Can you give us an idea of the puts and takes of the margin pressure you're seeing? - The margin pressure is primarily due to a mix issue, with more hardware shipped in the quarter than software services [69][70] Question: What are you seeing near term and further out in the memory business? - The enterprise Memory Solutions business is less volatile than the high-volume consumer business in memory, with demand forecasts for Q4 and beyond looking strong [71]