SGH - Earnings call transcript Q3 2018 | Penguin Solutions, Inc.

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Operator

Good day, ladies and gentlemen and welcome to the Third Quarter Fiscal 2018 SMART Global Holdings Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Schmidt. Suzanne begin. may you Ma’am,

Suzanne Schmidt

Chairman which results we Officer, for in you. and market Good us SMART the open you attendance Chief joining Jack a Financial who Ajay and Holdings’ forward begin Officer our will the call the MacKenzie, afternoon guidance the today’s earnings business in the everyone with Operating Shah, results. on XXXX discuss of quarter CEO. is thank call Chief to after detail more the call financial will conference Executive and the of third Also will your provide Pacheco, review the for Iain outgoing discussion fiscal Thank Q&A and questions. and call Global portion available by to followed and

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

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

including obligation of which these recent XX-K. as more statements, today. in the file factors time-to-time the most discussed please speak documents Form the SEC, we to no from forward-looking to risk assume For that with We update information, refer our

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

Ajay Shah

honored we I'm saying also I'd CEO the and quarter by to here, continue my first of years. offerings position leadership continue for XX his be and MacKenzie, to grown exciting SMART to take and leader full CEO like everyone who I'm to a growth our worldwide. the has base. begin as very phase valued Suzanne, welcome served SMART, Iain Under pleased on past SMART a OEM an you, our as as call. broaden great to Thank customer from to very at partner customers this and into

looking success closely opportunity on exciting tremendous as With Directors company's to many building have position of continue on new the opportunities. now forward to I'm this pursue continuing Board we he to at to SMART. the and the to remains work Iain date with

was while May the to or ago EPS terms Xx quarter Turning non-GAAP XXX% model continue than a reported [audio moves, Meanwhile, a We ago at XX% before. Non-GAAP million the turning positioning we late longer-term in we concluded strategic marked our direction. and fiscal which by strategic unique we of gap] different execute our to business, business well third our in across all of point income leveraging of the $X.XX or period. over $XXX share net came year units. operating year with higher about million and of another business quarter roughly in higher per diluted $XX.X sales strong than year competitive

also more to financials our us which turning of in Penguin guidance for announced for call recently cover the and areas by and growing the and our comment Our business our on quarter. acquisition a review before detailed each results the of our memory these driven in continue to of be fourth Jack Computing business new puts specialty I'll business a both fiscal Brazil. over

solid had in the of consecutive excess $XXX we business, quarter. quarter memory specialty our million third with for sales to another Moving very net

us the are drive several provide the of memory in sustained area. knowledge this predictable growth and Our extensive visibility and this outlook customer to relationships factors. markets deep Underpinning our

that OEM to DRAM We these and different a to whole solutions. major customers supplier for we flash-based require supplier application-specific our memory trusted key range be continue are the a of and to partner specialized customers products and

newer expansion. of we increased solutions have steady. multiple in for mix along DRAM see to part as utilizing product constructive of to equipment storage with In flash we supply-demand servers continue memory our of while supply market such solutions. major have shipping arrays demand today dynamic with to been both mix that a Additionally, of on MLC mentioned drivers us, new for health the for prices designs NAND In of orderly relevant and our many be utilized flash DRAM within particular, past flash stable we is nonvolatile the quarters, very NVDIMM and driving SLC market, overall all demand the Also have a are DRAM XD our and backdrop continues devices based as the the DDRX technologies. NAND

and Penguin types acquisition our acquisition the are greatly the Moving markets customers both participate we now of and through specialty and recent via of in Computing, storage high reach applications to computing open state-of-the-art learning and serve also compute architectures. increasing target that machine this and the we we using artificial in Penguin's These advanced performance products services and technologies leading and solutions. intelligence, position in technologies

business to SCSS Specialty excited Penguin by SMART for shared very leveraging the us further our integrate scale of as on will Storage to our broad we platform and which cornerstone a and business, as proven new infrastructure Compute ability which businesses. serve call Solutions have to build unit We the are or and

in than we strong of the expect we been exceptionally In our second strong we We've of XXXX. terms quarter. continue and first investing is term fiscal Brazil, top begin the stronger our extremely shipments thanks the results, manufacturing phones. that this to third to to as fiscal concluded we expected and quarter fiscal on in processes part had another had the as success lines well unit business other referring Longer the quarter markets. communications required came in or we and to we smart early. focused Wi-Fi in customers event discuss Cup Finally, the our staffing that in in for markets Things in which the our target details. such to that, business in you prepare as on the support more on With IoT partnered building create modules a devices batteries Internet Jack Bluetooth new business a by have our products memory of as other little I'll slowdown Brazil to areas Brazil in including World to for to now over hand the Building during in financials for production pull-ins Brazil, recently

Jack Pacheco

Ajay. you, Thank

topline quarter by both memory global continued were memory Overall sales by specialty $XXX.X were while net dynamics for driven our businesses Brazil and market. healthy our mentioned, the revenue $XXX.X As million. million fiscal was results Ajay third supported the in gross

a our As meaning to supply ago agency for the sales accounted sales year is has the we supply reminder, the net difference Net services profit quarter over that net basis, previous services related X% transactions. increased chain XX% over gross on the business and as as by which only between and quarter. net chain revenue sales the an recognize by

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

Brazil As focus to Ajay for business we launched on it clear, smartphones. battery made have new in assembly a

million we along and of approximately our we 'XX. R&D support expect With startup new $X in space, invest expect fiscal proven leveraging are mobile establishing the QX quarter to secured have with our in contribute with to this Similar record initiative DRAM partnership us XX-year FY this $X initiatives, the growing Samsung this and track revenue SCI. a in in Brazil. investment fourth We businesses million leader memory and our to costs in to to to of

Non-GAAP gross of fiscal of $XX.X forward expertise for foreign and moving Beginning We having compared $XX.X $X.XX quarter's diluted quarter excluded million or prior Adjusted the diluted $X.XX the million manufacturing. million a $XX.X the to $XX.X year last share third was $XX per FX expenses quarter quarter. $X.X results, net and the remain related of continuing related the compared per the in income million last when in manufacturing our year this in $X XXXX $XX.X unchanged advantages non-GAAP or Non-GAAP ago fiscal million customers we third million and for are million to gains last and quarter. along share exchange the earnings was we've fiscal in in ago our million or $X.X the from losses quarter third quarter year utilizing of income the while up quarter in in non-GAAP for and income the to to share X% quarter. statement. operating the million million XX.X now country related prior compared of from losses. effect $XX.X local GAAP And had ago FX FX quarter our gains the non-GAAP million diluted our that third per quarter. losses as with contributed share quarter quarter with profit $X.XX the EBITDA or was million approximately net of Including rest $XX.X in compared per

third outstanding the accounts outstanding this XX.X net compared capital, and $XXX.X $XXX.X the times. quarter million while goods prior a Cash of million million of XX.X Inventory the $XXX.X gross to equivalents the Turning quarter. quarter the are our last accounts $XXX.X past $XX.X to calculated turn for sales cost as fiscal XXXX. fiscal million increased million Consistent sales slightly $XXX.X quarter. million respectively days practice, XX.X last and for quarter compared working and receivable at with to XX.X receivable which in of totaled on last third days and $XXX.X to quarter from million sold with are end basis, turnover with our days from increased cash quarter's inventory inventory decreased to times day

Third quarter pull-ins to strong Cup. saw $XX.X million in even We very the the million stronger we World from was due operations $XX.X quarter. QX fiscal prior cash compared which some as with from QX made was a had flow

a of customers QX Our pulled-in couple mobile are they some in demand. down their shutting for weeks so

record half XX% profitability. terms over profit over over of and second be revenue in XX% will SMART EPS and a from grow Our first This half for year our XX%. growing gross the revenues will with non-GAAP

Now let me to turn guidance. our

$XXX The June currently which stock X in recent our per computing fourth view quarter guidance does sales be any will earlier. Ajay in the that we expect will Penguin expense, GAAP $XXX closed on to to between to basis We Our to or the amortization losses income includes our XX%. estimate to $X.XX that the and excluding an net and million. $X.XX. fiscal earnings million share XXXX quarter diluted the for the of not compensation On fourth provision $X.XX. fiscal a Gross be foreign $X.XX we based discussed be is acquisition range guidance includes XX% quarter for XX%. expected range margin in range approximately non-GAAP is be to per of XX% include of intangible estimated of tax share acquisition expense, gains non-GAAP to expense, expected on be to diluted earnings

reconciliation also $XX.X of financial The determining the not we That be million. Penguin GAAP million press to for information will price fiscal expected share purchase loss used EBITDA expenditures tables $XX refer fourth as take in per GAAP earnings non-GAAP net in for non-GAAP the are shares the the concludes the adjusted of a We financial for now Operator, quarter are appropriate income remarks. adjustments fiscal we the ready in are needed of range details. questions. was measures adjustments. of the stage reconciliation and acquisition release further to $XX reflected the in number the of million. to section to quarter in have Capital to my earnings computing and diluted Please be fourth results our initial to

Operator

you. Instructions] Kevin comes Our Cassidy first with [Operator from question Stifel. Thank

is now open. line Your

Kevin Cassidy

included can what what Thank is you and least us Penguin is how of that? your and break But – you revenue guidance, little results. congratulations good your much it in the a in in bit on at for guidance down

Ajay Shah

quite to Right prepared now do we're not that.

all been to the have different that adjustments figure to We out Penguin acquisition. related the trying are

give So we right earlier, to lot to hard detail of as have there we estimations Jack the you made best can, now. a said but it's

Jack Pacheco

It's kind yet. want Kevin, very now firm that and level of estimates we detail nothing a right but up to high

Kevin Cassidy

you can you reporting of in a in if the maybe say only and change as that non-GAAP Okay can FX GAAP was also what and decision?

Jack Pacheco

guide we mean never I can't gains losses, guidance. or FX it in Sure, was our

sense some in it it this the have so results looked and their include to and investors investors for peers to peers made starting easier non-GAAP confusion we do guidance had kind at EPS not thought And space it we so to cause look a make this, basis. we out just in them quarter-by-quarter the did not our have on with and and the other our in the we'd take it more non-GAAP calculations, or a and it at comparison for people

Ajay Shah

if clear results. to this for operating view Just that, operating to very results looking you you’re think add and a gives you our our of about

in the Now, rates and or get our less that every move provide exchange they you quarter gain loss. over more each do even a multiple shows Actually they quarter analysis out, but years a volatility. or

the of movement. volatility to currency reduce So will a trying volatility we’re from there and then that provide some look which course is

Kevin Cassidy

atmosphere Brazil are operating rate economic seeing or of yes. picking up May Brazil? I in understood, expenses that change inflation going the be the to one can affect is any on Okay, even these just your in you any ask more if

Jack Pacheco

When issues I really, their May bank can. down mean so indicators in that was small. inflation the strong. is changing has the I of at indicators last they in there country. really right, but have the really Brazil It it the really weakening so mean real still or look indicators the been us mean so any mean of on I be aren’t I slowing there kind only seeing rate mean, I the was at as the pace so X.XX%, – I stayed in I are a to X.X%, picked the tad, Bovespa we same inflows down kept other Real Brazil the year, up nothing mean tells in moving

Kevin Cassidy

you. Thank great. Okay,

Operator

Thank you.

Our next question Barclays. comes from Blayne Curtis with

now open. is line Your

Blayne Curtis

if I'm question. ramps Thanks curious is the about had of seasonality quantify it's I'm Mobile. these had for comments the track maybe the just lately that all minus the my if in particularly you've year? over you've could curious content gains Hey what you you hard pull-in given guys. obviously Mobile taking seasonality of and last to August in some

Jack Pacheco

picked that phones month weeks of say who down that a wouldn't couple have July a but is produce - last they building of going of when pacing ahead and to lose the we we right, we sales this what our are so in a just because it's down have weeks typically quarter quarter the our shut piece Yes, couple we shutting were revenue think customers shutdown. quarter, we're this we up for seasonality people of in seen mobile in and

Blayne Curtis

just battery then up that that And the want you and in I do okay. would extent of it, framework I be Got the was to some that and ask step just included also content in would the the on that then what with CapEx be there to investment curious investment so is? potential just

Jack Pacheco

from in Yes, going in extra so I $X the just so business or the about $X P&L million costs, million we're mean, cost pure battery the costs, and to battery QX they're business. have

the And business line we year. far on backend next bit kind million that some to CapEx is did bit a happens plan when that It until comes X% to the are little pay in million but CapEx of as with as the as in a CapEx when loaded. It waiting loaded. going year more X%, well. to mean our just it for backend we under of to guidance. have for more in business. will revenue for have CapEx our have QX spend batteries is $XX I we just $XX on We're little the We our revenues still be

Blayne Curtis

Okay, thanks guys.

Operator

you. Thank

Deutsche Sidney next Our comes with Bank. from Ho question

open. Your is now line

Sidney Ho

Yes, question. thanks taking for my

talk the you next to calendar question QX on about on margin the based and on you the you Penguin, can just following up disclosed in totally guys what non-GAAP quarter? expecting EPS talk seasonality be with little a also that the least at numbers, basis it QX will you are whether the and/or be can believe accretive versus about you up down previous Just or

Ajay Shah

revenues. a Let a From part of do standpoint we me try expect revenue that. the

So the comparisons are difficult.

quarter have Penguin August. first as year on the we explain a on our which me you would fiscal in operated Let quarter operated fiscal calendar end and is that know

now our comparing into So previous their restated having fiscal now been quarter. you're quarter with

So, opposed quarters our quarter. when fiscal their it, it as to we report report fiscal we

right is to little this exactly we closed. but this know days that I acquisition So, a that model week now, having difficult from and is more just a literally one few are away

you quarters that's to to expect trying fiscal And our us what everything all restate do. because so we're would into

So with to as those more Penguin for be a numbers what really up premature to be we little we would will as exactly happy guidance a expected firmed lot stage at a little this you. it is to of be providing get you get

tried looked in We results. revenue overall to how or the numbers at we of have be careful terms

Sidney Ho

give switching think to that's to and forward you guys? the market to of content that expect battery there subject business Okay, fair. going memory Maybe any you how size things us side the kind of requirements idea again, you local about similar can help are will that of the that an

Jack Pacheco

Yes, than of market market course local of $XXX the we couple ASPs regulations I we a that market as hopefully… has peg today million in - peg and I probably around mean market today so that content total XX% lower - are mean and

Ajay Shah

are what X in I mean XX prices just the in there selling the XX? million the range? smartphones $XX average to Smartphone category and are

Jack Pacheco

lower Yes, seen today, we've ASPs so that so….

Ajay Shah

around share. million get being overall and we the fair by our market So $XXX hope million, gives to you $XXX that own

Sidney Ho

is ASP possible a end are to bill quickly mobile more this signs of memory color the the moving ASP great? about two, you is Brazil in One are trending certainly content on one are any and will not Okay, by direction squeeze percentage as materials year. right too or any modules in side. expensive that $XX of seeing of and the getting is be I’d [indiscernible] that you The as talk like and the

Ajay Shah

Well, I had didn't customer complain about never who have a price. the with conversation a

So I'll that. start with

mean those We continue the using people are see different they're some customers there to and I the dramatic not an are so kind The price change exchange and that be overall rate is memory, rather we're they different memory seeing points would way, applications than range, the segments far a was for course moved but about change but we to of going bigger less of really on are within segments thing only question far Because rate. driving memory the the with exchange affect picture, - probably the change, worry keep where applications content. eye and continue require we requirement to prices. so than memory enough has for segments not affordability, big not the in if exchange look that the the to rate to other but that's

Jack Pacheco

Sidney, buying highest quarter we in shipped high less last than, more Brazil the the are percentage memory we And not the of so eMCPs ever, last they had highest, quarter. content

Sidney Ho

lot. helpful. Thanks very Okay, a

Operator

Thank you.

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

line open. Your now is

Rajvindra Gill

also be similar mobile question specific expand mentioned in the IoT rule those on that? Brazil, you you're you have I products and can The to local and local PCs, memory Bluetooth you. and on batteries in content Thank mentioned targeting products content XX% and may for also modules WiFi phones, believe rules you that did

Ajay Shah

have up built local Bluetooth some would a and enact talk wouldn't grew as a type rules WiFi that the anticipate but and getting thing is rules but that. we that they which content of as today country little capabilities production PC's more the the we in based IoT for around probably some it's solution we ramped our not So about board that lot, we does little

Jack Pacheco

in from lot There's verticals. particularly government promoting IoT agencies of for been of a related a variety interest

different that they providers want to make interest actually So for there's area actually related IoT put these. they out of paper of aquaculture, a to city’s, have in and domestic they for a Smart management lot white so couple have sure that energy areas,

Rajvindra Gill

we're core And trying dilemma and in business the then not I sense is understand going doing you're quarter. a of to forecasting to back get in what and a and future the but just just that Penguin the

May, But is fiscal know looking does So year. rate I August up. I growth the call next million. kind The model $XX about, do what like it implied we we in Penguin the And for revenue future color quarters. is I'm model kind at year what ’XX of look it don't look it it, the million mean we at $XXX.X moved you in OpEx OpEx be for will as the February, up how revenue OpEx, increase. said how any of November,

Ajay Shah

was to That be going the guess.

Rajvindra Gill

provide XX%, We're that more going wondering million model otherwise ’XX any to in fiscal $XXX if grow so going detail have to I you're a did you take by you that, on was that? can

Jack Pacheco

with like mean come get a be in more variability hands we saw we're numbers to out a and really have Penguin. to stable at a will to business I little the then aren’t get aren't get more first use trying something the with the worst worst handles I'd to on and little today, mean quarter definitely we're probably what's what on more basis hands most trying so quarterly a valleys around thing our use numbers on basis. business. quarter, quarter on. numbers quarterly more that we first going Yes, information tends you you you as to say I once have the But you They that, in need to know that if our they little get could. probably around and – a the peaks our our that's their But

Rajvindra Gill

effect higher the more doesn't had has people phones PC from see demand as It demand making so - I more in PCs. the an currency, from any just obviously wondering, real pull Got unit impact a there that? against Brazil. it. of a the is can buying expensive the were of loss, phones expensive, in to talk appear and on that to a in demand mean putting helpful. about the by the prospective Okay. That's be And terms or able the did depreciated GAAP just so P&L dollar you you offset you're a density in perspective if phones, you wondering from I'm that

Ajay Shah

we did perceived in not and and in was any higher I in due enough, mean demand quarter the quarter. we pull-in had talked real real the slow the from we fact now weakness weakened see down. this anticipated it good it's the the we've demand we had to so an Cup, the than shutdown about got demand for so World kind quarter of could the that the quarter In this anomaly in

to going see it's little the think Real. demand the what a based to I while take happens with on

Ajay Shah

push well have then Yes, manufacturers some significantly count, so which the seeing point here, we're we're impact that mean completely force speculative impact both has phone it's change prices we're any, not the off what - grand customer look the might to hearing purely would it is weaken to shelf of not total from I at as the a anecdotally of chooses in of when on at change an possible, going by kind and that things, were picture. this unit scheme the that's the a demand not the Brazilian specific we it's about not as I terms Real the but far. from and in happened year-to-date Real If far mean perspective XX% so for to

Jack Pacheco

sold you think more ones. we Ajay see phone higher we sell as might in you more cost might And expect. look the than the do what mentioned higher at mean The that lower last if – have. you than memory results our cell the happen quarter I Yes, we

grow mean first, expect at we talked as versus the right. the business in half results overall about look we'll you all If we second I that call, the

will the I even the versus weakened. the business overall second second year half the So real first mean be half have in half up will the though of

Rajvindra Gill

it. thank I Great, you appreciate much. very

Operator

Thank you.

question next Mark comes from Lipacis with Our Jefferies.

now is line You open.

Mark Lipacis

you for the for maybe COGS losses to the what exposure topline, Thank on you spell the the Real the thank Hi, OpEx Real cost taking is review the line percentage perhaps how us the my exposed the item? question. and of and could Forex structures you. just on to your manifest of mechanics just out you just that is the have Jack,

Jack Pacheco

right. I mean, that’s

mean we in start dollars where invoices are when the an FX we get back from take purchase and them So those if loss the Real into USD. I them in wafers convert that you go Real have convert we all them and really FX of perspective we we to then pay exposed into to them is our to when

bigger And way the loss an QX going you FX it that dramatically moved goes are do had other period much FX time in where Real we we if get have we it so has FX the in to an a in this and loss like quarter before. right did could QX and it seen weak we've shown

FX pure a from last exposure stand biggest our point. really that's So

priced the our we in C&L on customers dollars. Now

but better have we across have the not impact it Real, exposure do amount. there know, And to from our convert Real mean So some weakens dollars to or strengthens will is then revenue, I dramatic a real you we in weaker on of rest when get Real? would fairly look our bit are in costs little at cost a at and weekends P&L of if structure benefit local the you the with our a a

Mark Lipacis

Okay, thank you.

And is Real? more the and based OpEx the weighted mostly is is to dollar heavily so COGS, that the it COGS is

Ajay Shah

Our and our wafers USD. on in material going Samsung materials to COGS coming is our are are XX% of based the be that most base right

Mark Lipacis

you. Thank helpful. That's you. Got

Operator

comes Desilva Roth Capital. Thank next from question Suji Our you. with [Operator Instructions]

is now line open. Your

Suji Desilva

and few that that might of margin not with dampen up material? acquisition on Jack through here. the results on Ajay, was A Hi, or gross the that mark quarters questions Penguin needs congratulations couple any to inventory the did have you the flow next

Ajay Shah

up – have and we will yet not to has will Suji, inventory that's the it have to but go. we're know that, we just marked we of some of have We get it haven't do sure stuff determined where to

Suji Desilva

your does encompass margin at that this point? gross effect But not

Ajay Shah

Correct.

Suji Desilva

reporting this segment as Will may Got thoughts this will now a also will Any report think will I stay I'll then you The it it be it. be in but good. SCSS how have the be memory? combined Okay way Will you segments question on well, anyway. separate line? way? it is there Thanks. premature especially And helpful. ask

Ajay Shah

Yes, that's it. about Suji. We've thought said, premature as you

come yet definite Brazil determine there's have you now. conclusion that starting lot haven't we're have you of and to - to what analysis to a still analysis, segment a do We from have a we're do to so perspective we

Suji Desilva

is percentage stable? Okay, specialty what today that quick great dramatically staying last memory, DDRX versus DDRX and question on shifting or

Ajay Shah

DDRX XX% It's probably today. about

Suji Desilva

Thanks Okay, guys. great.

Ajay Shah

you. Thank

Operator

showing this I'm you. any further over Shah to back time. now to questions for I further turn Ajay remarks. not would any call Thank at the like

Ajay Shah

Well, you operator. you look you you the road progress us quarter. for coming all on and our and the goodbye. this on call we We seeing for your months reporting joining out forward interest to this in again you thank on to Once afternoon. of thank next Thank again,

Operator

Ladies and a day. This for participating you today's gentlemen, does great Everyone have disconnect. conference. in conclude today's thank you and program all may

Penguin Solutions (PENG) 22 Jun 182018 Q3 Earnings call transcript