SGH - Earnings call transcript Q2 2018 | Penguin Solutions, Inc.

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Operator

Good day, ladies and gentlemen and thank you for your patience.

You have joined the Q2 Fiscal 2018 SMART Global Holdings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference maybe recorded. to call like host, to now Ms. would turn over the your I Relations. Schmidt, Suzanne Investor may you Ma’am, begin.

Suzanne Schmidt

the to Holdings’ Thank and you Iain call on call with for operator. MacKenzie, joining SMART you, more will Good will Jack guidance of us today’s provide afternoon the President and a Operating who earnings begin XXXX announced discussion recently financial quarter Chief Shah. we fiscal by then second from hear forward and Co-CEO Ajay thank discuss results. Officer, Global Pacheco, the few review conference business; detail market the results will in followed Financial and the successor words CEO, and company’s and a the

We will open call then the to your questions.

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

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

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

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

Iain MacKenzie

this and everyone Suzanne to welcome Thank to call. you,

$X.XX. of quarter net excellent million another diluted of report $XXX non-GAAP to pleased very and sales of with financial are We share results per earnings

three in and We drivers, demand Memory market, benefit strength growth in Brazil, Specialty for favorable solutions. SMART’s continue from ongoing strong to memory main global dynamics

in are sales trailing and XX-month strategy. on billion our a surpassed our $X continued exciting we as company net We on to an basis of for execute period growth

Our competitive all provider XX-year continued only Brazil our products efficient success. mobile offer track country, specialized for Brazil in capital our unique to record flash of providing position of position solutions us as DRAM-based scale the business in and OEMs model leverage operating of outside and significant to memory

board of the Ajay CEO coming Additionally, transition. an Shah and on announcement ensures as experienced President and orderly

increase is bit few evolving industry industry more to overall we networking cloud to less the intensive we markets data driving leading and comment and a data are comments as into OEMs the on continues than well phones favorable industry robust of more smart continue supply/demand a This average drivers DRAM coupled these as storage compute, accelerate is the that Consumption demand In end-user to and center dynamic market, flash with memory for applications orderly Now, with expansion. supply across the see find products. demand to as DRAM NAND and expert as end a economy. demand. higher cyclical memory move particular,

remained NAND increasing favorable and XX% production. performed SMART ASPs due XD have like ramping unit in second relatively memory. limited well to the shipments, exceptionally as NAND NAND industry mobile remind And you average Turning memory densities memory ASP driven is to that capacity to XD the uses stable memory Brazil trends. XD would I quarter, mobile rising the net SMART Brazil, by in Brazil rising with fiscal sales

Additionally, January X. of as increased from the benefits local manufacturing

which Brazil shipments PC are in Brazil, business memory the rose XX% quarter. also benefiting in seeing raising for mobile forecast our we in Beyond DRAM

continued as such new wireless ahead, communication modules. Looking beyond we DRAM end markets and memory evaluate mobile to

been ahead for know-how established Brazil or proven related in to us in this and execute to potential of market for local growth of We manufacturing XX position ability there as the in-country years our our having manufacturing. have having benefits is and substantial believe

Turning to business, quarter had in we another coming sales the strong specialty in million total. over the with once again memory net $XXX

by prospects Looking for positive ahead, memory remain dynamics in we about several business. our growth specialty the fueled

we memory. proportion transitions still requires us our underway and customer with of DDRX base solutions have technology to tend benefit specialized using and meaningful even to transition DDRX, DDRX First, from the that a DDRX

of the introduced growing non-volatile and use NVDIMM within flash our are and newer DRAM servers increased demand the trend arrays for towards solutions all-flash Second, being products. to leads

memory team time As in the long understand management a and business it we have well. very been for we a

growth forward. detail. We going life and of periods, have drive part hand of more you discuss gives innovative delivering solutions track a end in to long over to over product cycle in DRAM business in confidence design I very this unpredictable financials record established flash Jack but in to our long sustainable will ability the us

Jack Pacheco

Iain. Great. Thank you,

mentioned end the in robust market. The memory the strength improving quarter primarily is quarter global which economy every Brazilian was in to drive unit along driven top Iain Brazil As line demand. helping is our results by our

business our million million. for $XXX was net to In the Brazil Overall, addition, in while revenue $XXX.X continued were improve. sales we quarter second saw fiscal yields gross memory

reminder the XX.X% sales business net recognized increased sales meaning sales, as only the selling prices unit chain in an a services supply we favorable. basis profit quarter for As is agency net our which transactions. average revenue on and supply sales remained chain accounted over previous as Net that gross increased related difference net the to services and

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

the network XX%, breakdown mobile follows; XX%, servers telecom and sales second Our PCs defense end other X%. for fiscal industrial XX%, was net and quarter market of and by and as storage aerospace

these Remember, as quarter’s $XX.X income gross increased statement, operating expenses was million, Non-GAAP $XX.X our non-GAAP from the X.X% increased profit as million compared for meet second X% rest to up last to quarter PPP second share or fiscal the gains Brazilian Non-GAAP quarter share spend Included the are Moving or share. we our of Adjusted compared or quarter-over-quarter $XX.X to FX drive R&D per per in $X.XX EBITDA in quarter’s R&D for per million tax spend with requirements. we million as that revenues Brazil compared net the $X.XX and fiscal share million. our last our for income insure $X.X $X.X to quarter XX.X% quarter the the to million PADIS XX.X% prior to prior expenses X% the results $XX.X of benefits. to need quarter. related per R&D $XX.X increased on X.XX FX the or the diluted million $X.XX was to prior to quarter. million $XX.X in related or in compared approximately second fiscal million in quarter contributed loss second $XX.X of $X.XX diluted to

Turning the The million to quarter, working XX.Xx million quarter decreased days turns inventory last capital, from our declined to XX.Xx. our and of XXXX. and increased sold are to a last increase are and fiscal cost in fiscal sales gross million XX.X $XXX.X accounts is for million in the inventory as the end $XXX.X and cash were compared which with $XXX.X at of Inventory receivables activity. calculated respectively turnover XX.X second day net while $XXX.X totaled inventory our the compared with last quarter’s outstanding due to $XXX basis, from quarter prior sales Consistent equivalents days quarter support increased with of goods $XXX.X sales quarter. accounts million our million to our of for on receivable second this million past $XX.X practice, Cash quarter.

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

and the include of signed reconciliation federal non-GAAP net of to XX% corporations. elimination earnings minimum expense, include expense The quarter Jobs changes. in XXXX, these that in The be to On results to guidance, and refer and excluding key do was gains in the statements XX, fiscal quarter the will number non-GAAP legislation Act amortization company’s the information reconciliation expected XX%, Please to would measures year million quarter tax Tax exchange third per does share is quarterly expected the non-GAAP consolidated impact fiscal section of system share turn financial third material gross tax December approximately GAAP of the the XX.X. acts of to diluted the non-GAAP annual of shares be in was includes and because the On company of alternative basis, and for to of fiscal range new earnings That used our a to tables to financial known stock-based earnings a call GAAP and XX% the that the to net financial we let tax expenditures of U.S. of into XX%. income an range XXXX concludes $XX to law. U.S. guidance million. earnings intangible comments. Ajay reduction estimate expect the expect will of $XXX We fiscal to rate between per press acceleration commonly revision $XX foreign remarks. in corporate for EBITDA diluted income not share third we introduced loss XX%. current on be additional range be from on some margin to details. view compensation business Capital the and my to adjusted me Shah $X.XX. be I losses for changes federal certain XX% tax the assets will $X.XX. be $X.XX new and the for tax to to over for impact $XXX the are any GAAP in or Certain turn expensing currently will further release expected our for quarter computing third the for not incoming quarter million CEO, range $X.XX Now, as by sales per the now the Act diluted our of our million

Ajay Shah

and Thank you, thank Iain. Jack you

SMART from evident outstanding SMART driving here tremendous job rest and achievements. both is results, at these done class As an truly the organization. the is a team you of at world have

into about ahead, to achieve to so I excited am well our Operator, target the that lines execution next speaking we business be of looking take the the have to to fully demonstrated you. we capability of So will diversify you months and strong at I in over the transitioning are time. SMART leverage and with growth further over few opportunity additional forward all the to questions. on and Thank business look ready role future.

Operator

Instructions] line of Barclays. sir. question first of [Operator Our from Curtis Blayne Yes, comes the

is line Your open.

Blayne Curtis

nice taking Thanks my guys. results. for question and Hey,

the mentioned So, talked if with of difference you May, inorganic you thoughts And is there you Brazil diversification from kind about seen just the obviously about for maybe in just guidance proving efforts then organic the a have strength just segments? quite you just versus talk diversification? could any high-level that’s between about difficult,

Jack Pacheco

continuing by see mean, continuing guidance think QX to I segment, the So, we to I growth, grow. are Brazil

business, business as some specialty see but specialty – continue to you we go Brazil been will I the Our growing, think QX. this outgrow will has into

Iain MacKenzie

then and but get up the said have working On a balanced. keep we plan nicely efforts inorganic It area. been get do company this takes we to have Blayne the speed, diversification we front, started while in yes, to to as make to diligently that

Blayne Curtis

story, in one you follow-up, talked in versus And a been was saw just Brazil big Okay, wondering just February content? strength you content unit maybe the thanks. it’s about then I

Iain MacKenzie

had in mentioned end as continued and we think that end the increase the at and XXXX units calendar, up to to conference of content last local I into get people finish year. had last we the of in call the start Blayne, that year this the year, of an Yes, the tried

and units units So alone from course particular January changing XX% in weren’t then X. local in content by almost of been January increased

in ASP had density really we over there clearly density in units because with the over of then off the the were saw So in the year, and strong finished increase with higher the more as so of forms, through selling per And and going in all end the result. people case we bit. hence to XX% this the increase also fixed three the so then price sales XX% higher

Blayne Curtis

Great. Thanks guys.

Operator

Thank you.

& Company. Our next question Needham comes Gill from of Rajvindra

Your question please.

Rajvindra Gill

the could Thank if and dollars are on results, ASPs you the visibility are and congratulations little on Iain seeing that you how what dollar into a and you year and now calendar kind going talk I right wondering do the business. great great amount into increasing Yes. see them what’s Ajay about throughout ‘XX? am the maybe you the side, of

Iain MacKenzie

certainly and mentioned had that call XX-XX the year by we XX. the we in headed last we the on are were end So, range calendar of towards

at substitute of in gigabit this just same over XX% the growth. I LPDRAM in flash the of so – quarter just package. introduced So we XX It’s ASP there, in think that’s and gigabyte

to average the and flash. X.X density over clearly So these is XX LP of gigabytes although growing now of just

pretty getting to I So only a am to the smooth end the there, if of line is curve think or there smooth year. I

Rajvindra Gill

than the down a memory was you specialty that better bit year of can sequentially, seasonality, about bit On talk side, little a it the year? little say last versus but business this drivers

Iain MacKenzie

Yes. it’s on I mean then the will tough our strong fact catch or we of very parts by the month, the constrained of up. – Nothing if strong, we month in they clearer that half, are mean but to the end. still the I for so especially quarter really and come And XXth supply, get supply timing when there we have fact so first in and

So just us really for first that they gives think million $XXX over I half.

particularly we seeing that And so are is strong.

Rajvindra Gill

you Alright. congratulations. Thank and

Iain MacKenzie

Raj. Thanks

Operator

Thank you.

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

Your line is open.

Kevin Cassidy

my for and Thanks taking congratulations results. the great on question

years? On design much win old, was the we the cycles, guess your long pipeline and the how specialty say can your or has specialty from years pipeline, better understand that I that memory, many for old I of in next filling a years us help understanding how your just were production think can us let have designs very is revenue that growth past versus design maybe you you than can you X get up of the more expect X a how said memory many cycles

Jack Pacheco

expect because different year we get have continued so weather track into products growth business products ship base, grow to these increase our in is versus mean we the but last to current we as we the grow revenue, six we get fiscal the don’t we continue we the that to with mean so are design over past six we wins, want our ‘XX, in wins. I Kevin. just Sure last nice no pipeline to in see customer by over special great continue there as months much in reason continued would wins was and that I our from specialty, wins to design business. – continue seeing we to of the specialty growth time month from to

Kevin Cassidy

they that Okay. maybe Maybe turning shipments over do when those? price what be on you those idea to would selling the the an wireless will have qualified for can for mentioned, communication think you average be modules and you give us

Iain MacKenzie

with our we think be this year the ‘XX of and be price solution about before I a carried in to careful miniaturized Well, is – have initiative remember careful average selling FY getting one. wafer-based so mentioned away this is $X,

develop design it’s time. I means test really the Kevin, say develop qualified, with by show happy to a just expected the customers at which current this module, I to an have am then skills, get capability, agreements, to be of for ahead We license we the where us to for that slightly and us X, believe but the end is this skills

well sales, in but I probably know than million going at number ready don’t the less the So, sales will moment. $X be all

Kevin Cassidy

Okay, great. Thank you.

Iain MacKenzie

Kevin. Thanks,

Operator

Thank you.

question comes next Sidney Bank. Ho of the of Our line Deutsche from

line is Your open.

Sidney Ho

the on you transition? going you timeline and and question eMCPs and question and making and XD taking my about impact for using on results the is roadmap mobile think and Ajay. the we pricing My ahead start welcome, us update how can side, that when NAND congratulations strong on content should Thanks DRAM for

Iain MacKenzie

Right.

because the XX and a have timely that new well have been as you the XD on So very question, has supplier we noticed put in ask NAND just asking our roadmap. you gigabyte orders, know,

was Before never this, gigabit there a XD. XXX component in

year. is in the So calendar quarter qualify planned that third to this of

X.X So, Once we bring looks going to go. stability the we by average. we reportedly you of gigabytes The XD see towards say is currently then capacity and there. we it X perhaps hearing to high-end have in like got heard the it long going Micron are phone, that’s a down transitioned, growth are reporting NAND as continual so XX%, gigabytes what we time

that we I So slightly. think like point

to think So, we way I go. have a long

to any also no price reduction, eMCP with we we density reduction, LPDRAM of forecast the So overall expect continues but growth, to price grow. outpace the our ASP so

Sidney Ho

year, That’s to for through helpful. go have And this which half you in call to is then characterize right pricing it is you of pricing in forward quarters? feasibility, months you see two likely the the looks know first next the I I Jack is today, it better like three how like feasibility question on have your DRAM X terms next going you and of suggested track. are worse do up would next ago How

Jack Pacheco

as DRAM maybe I companies our visibility we coming view mean, flat the was it’s probably increases the quarters. next of same are seeing think I months little I it’s mean, forecast where maybe of over sharp ago. to is see not kind about or on semiconductor but talking pricing today couple are X a any we to out think declines but on I bit, I think from, pricing pricing up our is goes on our going have be the trying with it we and

Sidney Ho

I were strong, I think we can be than stronger think in is not others? right may question quarter-over-quarter maybe it, and should about Okay. more one squeeze the quarter side, guess server Maybe think which the about on you different suggested to I one how Specialty the way last Memory segments storage

Jack Pacheco

the in segment far segment specialty By right. about being portion of we the in mean, about our strongest that, telecom storage segment I specialty. talked networking, right. We specialty largest is server growing the talked the have

XX% good QX at right, for was to shows last is X on – revenue in up it mean talked at which the think kind in a month this both first kind kind X revenue – about X from growth of versus we I the X-month the sectors at I the what of you look very look of very almost had buckets. if of of quarter and year we if these you are month X So, performance year, strong we by months X look specialty last months

but telecom good might specialty storage think the as we earlier, I supply server of storage had constrained mentioned it strong little networking quarter. guess and I this in quarter, Iain have impacted some had So, revenues Servers, very are a segment. and a the

Sidney Ho

very Okay, thank much. you

Iain MacKenzie

Thanks.

Operator

you. Thank

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

line open. is Your

Suji Desilva

Iain, you hi a believe do Hi, here. one-time? or that mix Jack, shift saw prepared or there Ajay, any the on to temporal it hi mentioned the you there, color that expect you In the congratulations results Brazil high-end, smartphone effect I remarks, was strong was a to continue

Iain MacKenzie

Yes.

the So good wafers the as we of are that into is the products. end we news – all of said same kind go

So, into and and growth of don’t it’s it balanced third a different an mid will what was respond most third to and to said stayed just of we a well XX% and the gets you came between fight almost Last you really thing inventory the maybe pulled very high, with mix issue. low the same had we end. this quarter, high low have growth middle structure, through. the And so third be as

in higher to the the that that’s is I find us because that the end density seeing brings surprise ASPs the what performance. thing think little a over continued bit is

Suji Desilva

as specialty Okay, August? of half fiscal seasonality then there there into seasonality any go notable the that’s year into second for is just And helpful color in the there. we memory

Iain MacKenzie

so Christmas time, issue goes. is nothing last the No there or December until time

Suji Desilva

but ahead? and to as Okay. your question tracking early or an tracking last And segment that here, Thanks. then perhaps NVDIMM is expectations on

Iain MacKenzie

had good $XX the Yes. are track, calendar said got we about we have the Perfectly news year and we that wins table. design getting we on will we design million and wins, will on be now DDRX are DDRX

takes we solutions more design robust these a but definitely to sure mentioned our make are long adoption. yes time have customers, it and As for that to see

Suji Desilva

job on quarter the guys. Nice Great.

Iain MacKenzie

Suji. Thanks,

Operator

turn Needham any next Mr. your open. line be & Mertens please Our Company, there of Instructions] your gentlemen from comes is over appears closing un-muted. make it Robert I open, [Operator question And to the Instructions] call Iain line line like no would you. remarks. Mertens your further [Operator the MacKenzie is to to back questions, line Thank sure for of is

Iain MacKenzie

Thanks.

and these provide hard conditions to will with required. differentiated solutions that business our favor we our in Our continue are work customers

next and Our company’s business in to also the model evolution we progress to the and the continues to chapter next improve of quarter. look our reporting forward

all So for joining today. thank us you

Operator

Ladies wonderful day. Thank conclude for program. participation. that you does your and gentlemen, Have your a

Penguin Solutions (PENG) 22 Mar 182018 Q2 Earnings call transcript