SGH - Earnings call transcript Q1 2018 | Penguin Solutions, Inc.

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Operator

Good day, ladies and gentlemen. And welcome to the SMART Global Holdings’ First Quarter of Fiscal 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode [Operator Instructions]. Later, we will conduct the question-and-answer session and instructions will follow at that time.

As a reminder, today’s conference is being recorded. to host like Ms. today’s now would introduce for your conference, I Schmidt, Relations. Suzanne Investor go Ma’am, ahead. please

Suzanne Schmidt

results you, Thank discuss afternoon, MacKenzie, today’s first Good Operator. fiscal market the President call and earnings us for will who Financial quarter the begin conference business; in detail by provide and financial and on more with and guidance. joining CEO, a discussion call Jack the followed forward results. Officer, review the of to XXXX Pacheco, SMART will Operating the Chief Holdings’ and Global Iain thank you

We questions. will then open the call to your

As release will the for to site throughout attending. today’s Investor information of most we our including encourage site a under of our call Web information current the on section We reminder, go Web financial SMART’s earnings and a various the conferences on to quarter Relations accessed the the at press can Company, be be www.smartgh.com. replay you

to answers those forward-looking Before that from statement we begin including note a these or statements. to questions include that results future and to other differ remarks refers Any may future and statements. conditions, expectations, market today’s forward-looking the financial of Actual from events, call, projections is may I would statement. characterizations materially like projections forward-looking the expressed

today. in SEC, to more please speak our update filed recent the including with statements, the file most which the of obligation was refer time-to-time Risk to from Factors S-X, Company's For We these with information, secondary assume conjunction offering. we discussed as in recently documents Form no completed forward-looking which

are And in comparable be like over discussed. turn now, GAAP the Iain today's measures earnings Additionally, during financial for Reconciliation will release. this those MacKenzie. call, I'd to call to press financial directly included measures non-GAAP

Iain MacKenzie

in strength This $XXX.X of Well, earnings the $X.XX. call. off share per Thanks, of portfolio differentiated net global our continues and of of an both providing memory our sales into demand services Outside the healthy with momentum. XXXX Brazil, The Brazil products the storage is customer the Welcome to business a model. recover dynamics everyone performance and and operating improving to million financial non-GAAP our ongoing in excellent and on of positive market are economy start leverage fiscal to overall to telecom number reflects Memory business QX tailwinds the few Suzanne. competitive markets growing cycles. in for and the diluted a favor of Specialty remains a with our life the for product network landscape solutions in robust areas balanced markets our for reports of servers limited of remain industry to continuation on as focus more net And continues point our memory strength with the a these our long on supply comments from to demand as conversions. fab the in and additions the at be same due time, smartphones, dynamic the wafer capacity and demand remain market to year

being driven As added for capacity the in demand in is yields and from is ramping continue capacity the supply committed XXXX. new predominantly despite to on improving to demand and that outpace NAND, XXXX This demand. was expect declines in result enterprise declines memory unit smartphone comes XXXX price time, through for some both this storage increases and price expected may however, online, we At elasticity needs. NAND calendar additional supply as of normal

quarter Brazil. our of SMART growth. consecutive Xth just completed to Turning We

in and for only mobile player test and provider of We’re semiconductor memory with packaging, benefiting in only unique eMCP components our from Brazil. the DRAM scale of position market Brazil for the as the the programming

long-term our and supply strengthen to and us providing technology continued wafers. strategic have wafer priced competitively with stable access partnership, We to

are for we densities expect the Not our ahead ASPs are expectations, to unit increase, the improve. positively continues to memory of Additionally, impacted. growing but our the micro products do demand environment only as being

deliveries product in for XXXX, meet in continue mobile XXXX. expect to continue calendar XXXX end smartphone memory we markets, modules. to ahead manufacturing there And for as As our benefit calendar customers capacity requirements, to believe communication continues We year their step pulling we us. to beyond up as local of such the new runway entry we into local are is significant wireless and to future requirements expand growth evaluate

As for we diversified DRAM business, ahead we in Flash Memory our business both Specialty as products. and our increasingly growth and see have

the have years needs The history sticky customer designing lifecycles our or the innovation that with span support in longer. products OEM and customers. engagements to products specialty of year delivering XX long up of cycles engineering result We to a of Flash DRAM product can in our deep XX collaboration meet to

results differentiated relatively our predictable a revenue provide customers long-term position the relationship with and Our stream. in strategic

to So detail. the to you more discuss over hand financials now, I Jack in

Jack Pacheco

Great, thank you Iain.

As we quarter mentioned, ninth our in completed Iain row a growth Brazil. just in

our next are well; that the Now also sales unit has recognize as The growth sales and business, sales was close services profit prices increased and we X.X% Brazilian on the supply grow the million. first Brazilian economy to as net is the year; sales net and quarter as to supply increased to and fiscal these previous the an services that million, net ago. sales well; dropping revenue transactions. it quarter we point favorable. the accounted is selling basis is net to were but Net lowered a are Central chain in results. only year inflation our economy related GDP beginning over it's Gross between called average an XX% remained as over is the All X% signs $XXX meaning difference which a year this chain revenue $XXX.X Bank net expected for be the [Selec] for on gross over X%, while agency XX% seeing over to rate and is rebound

geography XXXX Europe sales XX%, Asia X%. net Brazil quarter Americas follows; other broken fiscal U.S. by were First XX%, XX%, down as X%,

follows; was Our industrial mobile breakdown and storage defense quarter PCs markets of aerospace, X%. net XX%, and for other XX%, telecom as and fiscal sales XX%, the to network service and end first

Non-GAAP operating last to $X.XX prior quarter. the quarter-over-quarter to of diluted $XX.X for quarter's income income gross million, fiscal million quarter Adjusted to during profit was the EBITDA or $X.XX or XX% quarter. compared we $XX.X $XX.X XX.X% the for $XX.X compared the statement, million. fiscal first discipline non-GAAP share first diluted the as per maintained in million increased rest first million quarter X.X% expenses net with to the expense as our was $XX.X the Non-GAAP per quarter. increased $XX.X million in up share Moving

to Turning working capital.

quarter is the days and the equivalents first and million Thanksgiving million last days a XXXX. XX% million last from times, totaled and XX.X outstanding in Our inventory the holiday, cost-of-good net which increased quarter. totaled calculated of quarter. customer with million memory $XXX.X quarter $XXX outstanding last for turnover which upon day our cash of compared accounts XX prior The million the basis, sold XX.X Inventory this at to $XX.X $XXX.X from fiscal are in increased and was quarter's quarter current million gross of with Thanksgiving sales our up slightly QX sales respectively on the end accounts Consistent $XXX.X an environment. collections Cash as and first quarter performance practice, receivable past was ended receivable inventory $XXX.X $XXX.X Friday million to from turns of times while quarter, the on XX.X week. for

with million cash the quarter. million flow from $XX.X quarter operations First $X in prior compared was

me let to Now, over turn guidance. our you

our on ahead XX% line previously earnings what that second quarter estimates XXXX net expected diluted our we to quarter be sales a range an stock XXXX. the expect we be margin XX%. GAAP we in fiscal guidance While the first the in earnings income will to quarter gross per diluted be $X.XX $XXX we share second second range non-GAAP share now and and quarter fiscal second of $XXX SMART amortization to based our are is tax to approximately million. $X.XX. of that quarter basis, fiscal million. will be of to range will be XX%. in for be fiscal we $XX will diluted to million, second expenditures was of XX% computing indicated Capital earnings The quarter in to between expected be used be million to per million to in $X.XX the the for expected with expected per to for number includes compensation fiscal quarter, for in quarter first accomplished non-GAAP the expense, provision $X.XX range intangible $XX fiscal expense our of the share excluding shares The believe $XX of

a reform. tax quick note Finally, on

do We’re significant will tax we evaluating believe through its not but have rate. FYXX a still impact it impact

measures financial That non-GAAP of income remarks. details. this legislation concludes develops, now to for refer section, the around EBITDA questions. will and earnings the and Please results, clarity release adjusted the press of updates. further we’re GAAP provide tables reconciliation the non-GAAP ready Operator, for As appropriate financial information in GAAP net loss my reconciliation to we

Operator

[Operator with from Ho of first Bank. Instructions] Sidney question the Deutsche comes line Our

Your line is Please now ahead. open. go

Sidney Ho

level supply be markets? And segments the ordering that the Given the supply that, versus your end numbers mean monitor have easing suggest how in that I of any you but on do Brazil do may versus double you side, could received? tight you demand, flip see DRAM NAND of by

Iain MacKenzie

in at of Yes, seeing our own the that was all. that seeing particularly no a building right build that our inventory type, inventory end of evidence Sydney, nothing at suggest customers we’re quarter,

Jack Pacheco

are the can customers fast still we saw screening inventory so are so numbers the for we’re parts No, build customer base. you mean shipping I parts. as low, for

is them. no at ordering there evidence from all So of double

Iain MacKenzie

And then supply, dynamic. we a particular have

the XD small book into quarter, in tight to continues. is a and we versus new this don’t although so plan little year if trend a NAND to of six on the So of calendar we really because is use that in capacities and NAND, single any reducing. Sidney, you’re DRAM increase And most the be hearing bit first months continues titrate and planar digit has the basically supply price this XD press we’ve NAND to [invite],

slightly we think So I a from different the dynamic headwind. see would

Sidney Ho

more X% to regards a the the than has I factory we is used what do. little lot to we you quarter. How of -- typically next to you with guidance better seasonality? your in And quarter with shutdown your How relative growth Well, the maybe that’s shutdown, as quarter should that the should Do February about would midpoint think part for to think plus much that deal be. may not quarter-over-quarter? think

Iain MacKenzie

let Yes, me clarify.

May the be year, first year step again, up, be step the that requirements the only calendar content Brazil. into up, that and year not in would would So quarter local

the was be particularly, And actually particularly we’ve is, from up. happened December $X.XX it in So pulled what quarters’ step here would last it has busy.

because we requirements try to your people maximize be immediately saying vocal we’re the you more then capacity Kansas, were and with people, and have So in And over the we linear to shipping XXXX. content need restricted to January, restricted, supply for demand.

this we’re step out we’re And at time, the as quite majoritively strength. in then and that forward. and January up it having continue full actually will go we happened So QX, with starting that’s this seeing

why in So the seeing that’s strength numbers. you're the

Sidney Ho

one gross the future? your OpEx guidance your Or to If the basis continue XX%, suggest you'll above think in margin at will of in your range I you to points run target? operating margin more, can sometime the your Do your XX% But higher XXX-XXX normalize target midpoint. slightly already than high in end. think squeeze margins operating is I

Iain MacKenzie

should any term reason I the we that to on think and in near get leverage model see OpEx margins -- will for continue I but knock why operating our down. the don't increase, even

operating think should I stay high. So margins

Operator

comes line the Curtis of Barclays. with from Blayne next Our question

line is open. now Your

Blayne Curtis

been maybe the wondering growth. you thought if high and was just now flat you you preannouncements higher to the the from improve? I just very you then a through at are level you and things through us time have to just or then could walk seeing obviously or continue guys current obviously if walk quarter, was from Maybe conservative

Iain MacKenzie

some I mean, still believe preannounced, room. and yes clearly, we'd we have

last and and more. by I I surprise. then the XX% then year continues in we're that towards walk would a of be were the that through looking almost we this saying were looking planning -- year-over-year, But However, much really $XX $XX. the quarter in moves $XX.XX We is remember at there forward quarter so at density think density, we had that

meet its requirements. would So we’ll content the ASP. mix up step a have step strong units so and to to mix, the certainly and of I units supply in number now the say, some we QX next to market But and local

Jack Pacheco

the also shipments week the saw And really we from strong specialty last quarter. of

double which are very So means ordering. it strongly, they're in mean of the ordering, parts shows the that earlier double not I the question customers pulling

strength had of also this first the we So of specialty guidance preannounced. help over the performance the to contribute that

Blayne Curtis

quite that, it segments, you up between strength maybe as the the maybe came in just specialty, the maybe specific color November the your then issue just in February and in following and then drove and perspective in just back little had a overall Specialty to And on two Brazil what Specialty? strong

Iain MacKenzie

that really and Yes, see strength QX, said Specialty it in we was I mean markets continue quarter QX due in QX in the strong and for and we expect we the in Specialty. it as back server to for are well. We that and down back the storage us here bring running can was that specialty, a to thought very strength came QX,

and that think array yes, growth -- the see see area doing in Specialty So and of really the so been the from to we've good the about talking demand we for helped And, very server that we're storage so came well server demand continue demand out seeing that people all-flash area. overall storage and we'll arrays all-flash compute good us. and from in the customers, is drive

Operator

Our Stifel. comes with next from Kevin Cassidy line of question the

now is open. line Your

Kevin Cassidy

we you that be already will going look -- next generation of and that $XX the content we Or in have for mentioned you what smartphones of then through be that the for Is smartphone. wait constant to Iain, at forward? designed? have XXXX

Iain MacKenzie

from grow appears this NAND really is taken that in it to bit to XX in NAND years be of It doesn’t the XX is cost a space the we'll has opposed old then that way, appear X a say fixed and Kevin. continuing the to that since especially per last step such to gigabytes is jump XX big couple gigs. function, What would as gigs

This going so to we're XXXX So to is through XX would start has still strong think going to point, of more ship cost very growth per XX%. been see the further XX we're a really standard I static a units. bit expected and

Kevin Cassidy

moving are all are supply concern these manufactures any the planars. of output for their more Is XD, planar towards there And as XD? of to moving

Iain MacKenzie

think so. I Yes,

However, for our over we that this is that’s contracted our we fully comes. years, then and have the when but volumes relationship volume contractor proven what XXXX,

we As the than can more. market do then get can more releases slightly we always

So the so side overall too a doing that situation use about the someone is I compute numbers. XD and our base beating that our getting am gigabyte begin But I plant think we really create the not substitute worried enhanced of product, that can overall processing meeting to we're smartphones. into NAND to and infuse that side,

Operator

the comes with question next Our of Suji from Desilva line Roth Capital.

is now line open. Your

Suji Desilva

be here mobile by had had going somewhat similar you there? than or pace, at they Specialty in going is do are think looking February. -- we the we favorite grow In quarter be both strong the Brazil to as that to What Thanks. one

Iain MacKenzie

the of going density a unit Specialty is of because grow growth. then but high-single-digit is we’re here So to on to to growth growth in more. Brazil it growth clearly both back its -- back But recovered seeing top

even look hence why the XX%, about maintain a we that Brazil think I Specialty And should add some the balance. of something discussion had Suji XX% to we’re company more as on reporting side that’s Specialty. we So to to now

Suji Desilva

business is positive of the is strong doing. then here, on there. double NVDIMM I’m Memory, very growth the And how lining So the for part Brazil wondering Specialty

that of expectations? I revise you XX tracking this think Or there. to at prior Or expectation is the you gave something $XX is an million that point? want

Jack Pacheco

not so want to much is But this competitive Doing what’s mainstream. indication. qualifications path. what’s probably, changing, on to landscape look doesn’t an of to is now, in and I very go that too like of it place yes, ever way give and going of we're don't right our annual

solid. So, yes, it look

Suji Desilva

What’s And strength the then just real PC then the PC quick and on there, DRAM in on pricing the is there? the factor. Brazil the understand to market, a underlying dynamic in obviously units going demand

Jack Pacheco

mentioned. we what that’s Yes,

unit the in market an better. getting demand better We getting have growth by overall economy the itself,

increase as as we’ve forecast seen units of the much So going XX% by up.

the units. forecast as research increasing annual for their quarter every So are companies

Jack Pacheco

ASP from the wasn’t on DRAM an is DRAM side. the came Suji, quarter, In fact in really PC the down, units. our ASP from side so flat to in There growth all growth and our any

Operator

the with [Operator Robert from of next comes & Instructions] Mertens question Company. line Our Needham

is open. line Your now

Robert Mertens

Specialty Just as a follow-up for business. Memory the

by telecom networking do strengthening down what Specialty Memory towards spoke you a You that any are are all the and And growing just that Could markets. as and elaborate you seeing follow-up, in there break markets? Thanks. products you're that in business?

Jack Pacheco

if to what -- the you of XX% don’t was Specialty -- the of We But the -- about is business business being it’s non-Brazil then thinking and XX% in to it, can Specialty was about I separately. of mean, think break whole the it mean business, have roughly come it you’re out I right. Specialty. you piece them telecoms

Iain MacKenzie

do Brazil. don’t in telecom too we Yes, much network and

Jack Pacheco

that most as the the of all mean sell we all little is that telecom Specialty, a storage, mean our into quarter, I telecom, across Yes, strength bit, of great I -- is of that the Specialty. I server well strength is products the most all and space. facilities network just most that customer all thousands base. and in seeing with mean you’re of networking But -- of of as

telecom well. got we’ve in the to so of products for and continue And and major us, they most in players so network do

continuing business. we're are get to that products so qualified and growing Our

Robert Mertens

sales compared XXXX, better I it know the looks growth. estimating be forward? are ASPs How to due down this we flat And another unit year should throughout the the Obviously you some overall or in quarter. the… are question mentioned squeeze in those to little to I expect can stepped down flat a unit DRAM, revenue of came growth to smart Brazilian to being expected and this quarter and business, bit Should that we which a than going if like just driver quarterly in, strong big TV think and you climb recovery growth just about that fourth

Jack Pacheco

Yes, we continue think grow. units to will

if I taken would be grow ASPs up at it’s down, So flattish a growth. think the whatever units decline go business unit by

we’ve So year business just when is kind for flat we look us. of at this that said always that business, a this

Iain MacKenzie

with you a of of bit Plus that in Brazil PC into can impact mix basis. little the do a an on have goes what these prices and have quarter-over-quarter

just is So the I natural variance. this think

Operator

showing am time. any And MacKenzie not to any turn at I questions to call remarks. back Mr. the for would this like queue, I further in closing

Iain MacKenzie

Thanks, Liz.

So we're certainly XXXX. memory in It’s and up well. unique serving a start constant to competitive we’re stepping is off here, improving strong conditions strong our combined market very a in Brazil, from our foundation position and business with us execution overall

looking to year season, happy friends. ahead we hope the by very a and wishing finish a will you. all Year. Thank we’re you I you forward get great with So to talk family New holiday break in us and of And

Operator

participation gentlemen, you program today's and Everyone, day. a great and have This your for thank Ladies conference. you disconnect. the may in now concludes

Penguin Solutions (PENG) 21 Dec 172018 Q1 Earnings call transcript