SGH - Earnings call transcript Q4 2018 | Penguin Solutions, Inc.

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Operator

Good day ladies and gentlemen and welcome to SMART Global Holding Inc. Fourth Quarter Fiscal 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to Investor conference Relations. like host, to now Schmidt, Suzanne would turn over the your I

You begin, may ma'am.

Suzanne Schmidt

call Global provide Thank you, results. will us conference begin joining thank Ajay you discuss operator. Good Chief with afternoon on everyone Shah, Chairman the today's Executive fiscal call fourth quarter the Holdings who'll the Pacheco, and Chief more Financial Officer, and review for to discussion XXXX SMART we financial the Officer, Jack detail earnings a guidance, will of Operating call questions. forward by and the after which to business followed market in the and results open and your

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

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

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

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

Ajay Shah

and a welcome $X.XX record year the we sales our around revenue as EPS. Thank of trust non-GAAP and to at pleased first work results company. net report billion dedication of world, in May the finished call. reflect of XXXX, to the employees on $X.X course, ongoing the hard We with that in in We customers. share very our XXXX. exceptional full public fiscal which finished per support and year our public and went earnings and everyone you, of the These our was I'm and Suzanne,

Non-GAAP We also model with operating delivered I non-GAAP net of ago think quarter than results the our from we've of been year execution. the was was strong quarter leverage million, totaled XX% per than sales fiscal meaningfully $X.XX and gross from able quarter, earnings million which expectations. $XX.X QX profit demonstrates ahead last the $XXX fourth our which XX% the for year's of which business higher to and derive or higher share,

of Compute Importantly, more represents in detail Computing, cornerstone Specialty we have Storage, the and Penguin the of new begun which unit, later which this will I and business integration completed the acquisition our review in presentation.

grew our first to business, we sales Memory reach to Turning million. $XXX.X a quarter. over by Net XX% great had sequentially Specialty

In billion by worldwide by be XXXX. over for Gartner we estimated the access, SSDs applications which that require industrial Behind for SMART flash-based It's memory that fiscal applications, such products. applications application-specific market Global Holdings, to industrial and intelligence $X our supplier all-flash year, also the arrays application of be artificial case this proliferation in or storage DRAM drives. compute in flash growth prominent this for our and last utilize that for drive in-memory server more will opportunity flash-based replacing a all-flash a as growth, based business. legacy SSD with and The strong as market industrial driver And represents customers becoming defense data introduced solutions hard more this solutions, customers application-specific flash-based XX products solutions. targeted is us to at continue OEM We for the storage segments. the require key are and of to a strong within arrays major be continues

Regarding we shortages. the product customer is accelerate of we buyer seeing memory market pricing, and to overall, general, improved are significant the broaden introductions and, we're are now to fewer This have and availability, allowing improved us components that a with our initiative a of components significant memory new base we our in availability seeing.

densities shipping devices. And the more where on have to NAND. far reductions to these been the stimulative DRAM designs do rapid XD that for XD NAND, in pricing based utilize components, stable we stable. new the the and very Our shipping technology DRAM With than its has design and more with continues Memory what technologies been that our around have come do today were customers regards require and NAND Specialty technologies still pricing be typically business XD price are SLC which newer utilizes just our We lagging not we Specialty business MLC XX% wins. started DDRX, has such are that of as to Memory for business, NAND new

I and customers. some high-performance as also and of as partners these core well We HPC Penguin as first to a computing high by, solutions Turning sometimes business you. Penguin market now in to was At to known primarily Penguin with Intel supply systems. segment quarter intelligence as Storage and our application-specific and partners customers. new Computing Computing this artificial Specialty review to the business technology and NVIDIA I'd users variety bit offer order so acquisition. to time solutions a our with OEM as to to saying, to This companies a business spend more designed like level, Compute system to led little design was the also and leading with providers such end

in fastest-growing engaging machine electronics supply and industry in storage together define with artificial and we're such design markets place now addressing and production. initiatives solid-state and terms operations we're Penguin's specialized putting solutions to to memory generate as in synergies Penguin, engineering the So, of But integrate solutions management the platforms, teams also to applications into our terms of in intelligence for ever-increasing in of two today. need and the memory learning, chain

wins federal well QX, and a our agencies, of to the and enterprise artificial DoE, the large to high-performance of had this and for and in DoD computing fiscal new oil contractors intelligence the number won design Department government Department labs, government enterprise as Energy, programs significant So, customers. business Defense we with segment, the within significant media We segments. new and in gas our during as segment, social both of in

for year, clusters. server products introduced large HPC new and switch new During has AI the past Ethernet Penguin products these and XX five

Brazil, Turning to solid we had quarter. another

lower than as results, stronger by we optimistic prospects expected fiscal we were about remain QX business the in Brazil. off the revenues QX in expected, While way, coming our

products the available for some producing in and have During Brazil a the for past new over significant business in alone smartphones new XXXX. We we $XXX very introduced cell-based year, memory set up to million batteries that batteries be market for polymer fiscal we estimate smartphones.

So, to XXXX. now for next while hand continue currency plans compared you to noted be discuss in growth Jack our have has the fiscal you to an the upcoming created business over detail. that and issues forecast I'll have concern, financials some more the With Brazilian headwinds weakening as year of election we may that been that review, in over to many real our continued to

Jack Pacheco

million for $XXX quarter was while gross net Ajay. you, fourth Overall, Great. fiscal sales were million. the $XXX.X revenue Thank

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

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

share the the Adjusted was down the Included year FX-related fiscal million fiscal with Non-GAAP for $X.XX Now, quarter. fourth the in Non-GAAP up XXXX the EBITDA ago moving million up FX-related of million fourth was losses quarter. as rest statement. million, million, operating quarter's million, $XX non-GAAP last $XX.X profit expenses with from $XX in $XX.X fourth quarter of were X% or million income diluted primarily in prior $X.X quarter, compared quarter or quarter. prior quarter the to ago the losses diluted and in quarter $X.XX results in while million gross to Penguin fourth $XX per from last quarter year the up million the compared $XX.X per and addition fiscal to share $X was of $XX.X are million million and GAAP or year of $X.X of $X income million the in compared for share last due quarter FX-related the ago gains $X.X diluted Computing. quarter the $X.XX approximately net million per $XX from

fourth $X.X quarter. million also expenses acquisition-related have the We of in

the diluted from fiscal totaled year Gross million grew fiscal year XX% $XXX net XXXX XXXX, $X.XX $X.X year $XXX.X an for XXXX of income of to was share. million, non-GAAP XXXX. by full while year profit basis For fiscal XX% net non-GAAP for on fiscal sales increase billion, or per

cash accounts a to for Consistent outstanding sold our totaled below XX.X quarter. million was and days last as and working dropped quarter. quarter. the to goods Cash compared flow operations quarter Turning million far fiscal sales We to calculated days an respectively quarter last receivables capital, $X.X did this our on fourth job million for with Computing. and XX.X XXXX. compared days due Fourth increased declined the inventory with quarter with the cost past quarter million receivables from prior were net at million, days million gross $XXX.X turnover outstanding $XXX.X which quarter the of negative were prior with $XXX.X Inventory quarter. other equivalents in receivable, times end positive of accounts inclusion million businesses. times compared of in sales and $XX.X turns million turns $XXX.X are the the last quarter's Inventory as $XX.X for XX.X Penguin from a cash are $XXX.X million XX.X to the collecting fiscal outstanding fourth of Penguin the in the to $XXX.X basis, than practice, from

were indicated we to Brazil accounts exposure rates. utilizing our our to in quarter, foreign exchange in our minimize cash order last to As payable early in pay we fluctuations

will recently offset some in We program, this future. the hedging implemented which exposure of have

of any first on range expected include tax share or an This the be the in to revision and will $X.XX the is first to million. first the for computing non-GAAP range in The XX%. recognition expect income $X.XX. the $X.XX. are million be fiscal be will basis, expected we of On expense, to fall the used exchange $X.XX revenue per expenditures to $XXX of fiscal per in will quarter the Now, gains XX%. is range any in fiscal that view the let currently fiscal change diluted me be includes $XX to to for to estimate net that Gross do in GAAP from XXXX of the quarter approximately million will our earnings foreign sales be non-GAAP new expect the for be losses $XXX share $X between expense, under amortization quarter compensation million. earnings be not shares quarter diluted for revenue margin million. number intangible standard. new expected $XX.X a to does diluted guidance Capital earnings quarter stock-based per our standard. share expense XX% estimated to to We XX% and material was range to turn quarter We acquisition-related first The first to guidance. excluding the not of

the In on place imports and we're any on as with recently these not material from customers for of put our China, we expect our of working impact the suppliers do business business. minimize our terms in to tariffs impact

will typically, due As QX quarter in end our for a calendar strong on year reminder, spending. seasonality government-related to be Penguin a business, our fiscal

to ending off QX As tend November lower coming fiscal such, a strong will be quarter. a in February

financial non-GAAP half Our as of we to measures results business remarks. fiscal take strong GAAP adjusted press income XXXX. typically also net in financial release and ready fiscal loss December. due concludes in now further tables my said, has information reconciliation seasonality the to we're expect for Brazil second our earnings Please Operator, of refer well section non-GAAP to in QX reconciliation on details. EBITDA the questions. our and a to the of That GAAP That a year to as holidays experienced shutdowns customer

Operator

Thank question first comes from from Curtis Blayne you. [Operator Instructions] our And Barclays.

is now line Your open.

Blayne Curtis

have might obviously, I within then, question. thought you you directionally? my if obviously, Hey guys, apologize modeling but been I'm you curious, I expected, And compare? for versus missed as seasonal, thanks kind know to maybe does said, normal it I taking but want used or color down Brazil, how just one, PC a breakout had I and that to that I didn't this, different, little if of mobile

Jack Pacheco

Okay.

question, first mobile DRAM server revenue smart we’re was DRAM, then, the the in million [DRAM] then $XXX in PC DRAM, mobile, goes $XX you talk And remember is quarter. and that million the breakout, On [ph] DRAM of about the that the quarter around TVs. in doing the DRAM, if includes cards Wi-Fi and -- into the about

Blayne Curtis

it then And Okay. digits. was -- curious kind you I'm trends, the that was substantial of obviously, down said, just double expected

Jack Pacheco

had in Yes, the our due last QX down July about talked to remember, shut a expected of the are we to fact from that for couple we QX quarter, just we weeks. -- getting down customers be just

where to be we're them taking account into we of so So, just came their kind take after days products, -- for in their to thought we going there's less shutdowns.

Blayne Curtis

the just is curious, I'm growing. business then, overall Thanks. in And just November,

out it about called big just being a contributor. should storage directionally? I computing -- down, other the You is segments that Is think

Jack Pacheco

No, QX. I had great mean, Specialty continues do well. Specialty to a

think QX. So, business the see in well fairly you'll herein should all our do I

Blayne Curtis

of highlighted an basis talking annual mean, on up just would kind that basis year-over-year. I I be curious comment. was I and Yes, I'm -- you would Brazil Okay. whether-- guess that sequential a on about it be just

Jack Pacheco

expect sequential think, be at I the a be think there. will the revenue all quarter. know understand I we I good Yes, the of look we where I basis as but think well, could compute quarter, in I storage we of high -- you made especially businesses end over the at that comment and if guide, the up and expect in

Blayne Curtis

kind side just it of maybe Brazil curious a upcoming in perspective for Okay. that? on year. a what's was the And just for Any with curious phone? look the in on big of in guys. then mobile Kind I'm environment? you the still talk just I for so for growth as the driving you the finally, driver content was the phone. Is stroke, terms of about just That broad growth unit content out

Jack Pacheco

the getting a at role, just units look in Yes. -- up step -- get are we around start One, in of we in where still expect highest XX the they're the you back things. should year, QX. a And Brazil And in Brazil, came local you've of with, the I XXX phones. so of content LPDRAM. gigabytes gigabytes and and world densities Well, if available got pretty it another to look the QX the two biggest at should the LPDRAM half world, densities of couple of you Flash lags increase considerably the we Flash for in we're gigabytes the in gigabytes out -- in smartphones. today eight if is I mean, putting phones, a Micron the of density putting smartphones probably mean,

the to start higher of we'd lags course still world, the Brazil expect Brazil. memory products producing in density over so so And the year

Blayne Curtis

Okay. Thanks Jack.

Jack Pacheco

you. Thank

Operator

you. Thank

from question from Jefferies. Lipacis Mark comes next Our

line Your open. now is

Mark Lipacis

my taking questions. for Thanks Hi.

more On Penguin from? from how kind they a was networking to I interested the where's it business, of coming solutions other? between Penguin or mean, broken the out the comments kind give side. the solutions? of the Can on about Computing kind growth us is you area coming Is -- computing what the of sense versus networking I hear one

Ajay Shah

Hi, this is Ajay.

sell don't we -- integrated. we clear, be to Just all them sell

compute. integrated to So, as of we of selling or components the at opposed are the of end day, networking a -- system

cluster, full-size in we Is components it. sell So, question? a the including your networking that that

Mark Lipacis

of networking like kind have side. but that everything what is like it driven sounded growth driven explaining it one on I and but But in other. it's just you're is sounded solution -- guess, and or -- not by elements necessarily it's this big and this, there one may misunderstood Yes, is the I a of the one both there's

Ajay Shah

introduced configuring yes, when such, have as saying what saying sell into that growth. for we what Yes, additional we integrated in them components. systems. results five not say and that We we we've we that can these additional effectively components we But are sell Ethernet switches, as new do is but we're use

Mark Lipacis

Brazil, polymer time? very that we in product ramps Okay, helpful. the business are that that's think battery Where And how how we in then, over on cycle? about should

Ajay Shah

have first expect we our this production quarter to So, shipments.

This quarter being QX.

We are optimistic ramp it'll that over the year.

have We from that what to customers that's indications want they exactly see.

year. be So, meaningful towards the in it'll small be to half back start but of quarters, first it'll the the

Jack Pacheco

these into technology, go Mark, cellphones only new the higher right. Remember, that end batteries use battery

the out So, as phones our will market broaden. come technology, could take more that

penetration in grow new So, will Brazil more these introduced get introduce the we'll phones. the more get them revenue they and as of

Mark Lipacis

enough, doing? on you're you exposure? Forex, the you Jack, hedging start that's could review going on just that the helpful. -- Fair to impacts are process And how what And the then, that for of mechanics you how managing

Jack Pacheco

Sure.

you in receive So, our invoices we we have you're if Forex hold we about in allowed our Brazil wafers think Brazil, is in dollars. -- semiconductor on that dollars. when the -- to invoices exposure remember And not

convert and buy go invoice We have then we go pay to the dollars real. the to then real all have to We from to invoice.

pay So, in trying of when minimize rate that -- what hedging swing the in, is we really dollar, going the that we to to to fix get fixed paying rate the just kind what we that at get fixed contracts the is when two, in can bill, we the invoices. in, go of we're the to so invoice

Mark Lipacis

impacts sense And how helpful. Okay, can that cost? then, give a us of you that's does that the --

Jack Pacheco

maybe roll I to haven't starting in but -- out, do mean, so should be we at $X.X million the going than cost cost right cost expect wouldn't do to on material million a is some we quarter how the we're mean, it's if that. initial now, -- depends Yes, or the to $X.X -- depends I think or really I it us for to mean, in I of be quarter. but the contracts, just really don't many going -- cost look on I and these more of them we

Mark Lipacis

you. Thank I Okay. Thanks. That's all That's had. helpful.

Operator

you. Thank

question from next Kevin Cassidy Stifel. from Our comes

line Your open. now is

Kevin Cassidy

great congratulations taking my and year. a for on question Thanks

set And Before -- a just have? it the is named and end about a deployment for talk give you when you quite Or markets a the about little color that the these business, year? maybe getting Can Specialty more just visibility you the few know lot contracts. contracts of different is? Compute do a you Are contracts?

Ajay Shah

Sure.

So, is the purchase typically And way that individual in releases or contracts pricing contracting But authority that's by a done then and there specific that. there. these is work those intention. contracting of generates this contracts a that sort that, BOA, against all of different effectively orders are then through in an come

government's the purchase anyone those so to tell you, around with that And year end. governments' the orders, will tend business as be deals clustered

And tends very so year again, picks year time. now. end, end back right that year the the then, And a drops government's This it and end is post significantly off busy to typically about be up.

So, business don't there contracts have that, is then, you if or overall a said business. Having federal you the certain to obviously, don't get that seasonality rhythm the particularly.

shouldn't give What know I release, you us don't necessarily don't get not for continue the that if give explains releases against it large a us, contract should but those. say So, that a wins then we it specific say, we very have specific that to I I better. does necessarily specific release.

Kevin Cassidy

are And that or as that and the some industry of helps with edge Is -- on on forward quite DDRX was short there products. Thank be of edge trailing maybe MLC memories, with it XD also of bit. and you. the obviously you you Yes, described the NAND keeps at SLC legacy you'll trailing a moving the any products? supply concern there then,

Ajay Shah

No. Actually,

Toshiba, have NAND new In Hionix, new probably and for from products, fact, are from you've processes fab has type from typically, Samsung. these required seen that that's into an improved. mean, announcements has gone What area wafer fabs. new I recently wafer from a XX-layer is happened that XX-layer XD that

effectively so right these products we're the we tend are interested that space some they've opened how up to And in in now. more --

businesses be margins no, business, stable there, obviously, attractive actually we've producers, tend And we helps DDRX right, have pretty tend while quite got the be for lifecycle. as the So, said and it prices are quite a heat as if not in long And natural NAND pretty fact, that the supply because, in XD anything, or major as businesses more to in volatile. memory growth generates buying. for the be it of tends a what These probably stable to situation and it. before, to

Kevin Cassidy

And Okay, would fiscal the your ask one your great. And way contracts If about Brazil's the quarter, second I it-- -- describe seasonally the Specialty could Compute? you be question is -- quarter, just second with a weaker also second other then quarter that

Jack Pacheco

correct. That's

Ajay Shah

if Jack. Yes, anything would you know I though. don't there's add

Jack Pacheco

about early in tends then, very next talked of the for a It's very, got you've the those and so we the to And and talked contract devices, is Brazil. the we slow is a -- it, set weaker them. just lot you right, Christmas think Kevin. that to consumer a we get of so government lot tend this in No, down quarter quarter, quarter to buy Brazil, December Penguin in if have it, weak quarter, they since about -- buying just season

Kevin Cassidy

Thank you. great. Okay,

Operator

Thank you.

Sidney from Bank. Deutsche comes question from next Our Ho

Your is now line open.

Sidney Ho

continue Thank decline about not Great. will you're talked from impacted clearly my very a NAND? price question. is pricing, My about declines. of is, trends first is as you price pass-through taking expect to content be some and mobile DRAM per for memory But guys have price I you well both memory much basically you may by as you growth you system here. it talk own understand one the for for in PC in guys or and that concerned the elasticity And market and as components. can make you we and our assumptions can in memory about served just

Ajay Shah

talking less that on market as And try very were we is than We, smartphone Brazilian market, Content are shipping including, content the with focused Brazilian and in their just market. smartphone question. far China. smartphones. both dependent, can smartphones memory parts other world, about in the you so of primarily growth Yes, the the memory know, we many I typical is smartphone say, think

models memory availability So, new higher out as improves or models based we of -- new XD towards, we density see are and come that to in they're first, come as starting one of availability That'll now products. out, XXXX. customers moving have two happen who adopt NAND and so second calendar quarter

segment, more so -- pricing Memory increases in our significant there And in say follows application, pricing content it's This that memory in clearly, driving memory of the overall business, are the right. sort consumption. that Specialty can't because driven in improvements by I the

If its flash network or DRAM consumption system DRAM price to switch, for based behave a on And mostly drive down. quite a necessarily into ratchet segments with lower servers, storage ratchets into has up tends memory you boot differently. and very going content coming so a pattern. up just own the that's that not have two In pricing, quickly

We I elastic. haven't the anything in is in price Jack, quite think many way, much But decline of by seen, as DRAM. price as other don't DRAM else? the segments,

Jack Pacheco

much density side, mean, roll producing Specialty products but the the that I the you're start Ajay products. higher enabled on out to comes the If density higher touched as XD down-- Flash, is so price on No, NAND we --

Ajay Shah

yes. -- at be would Price

Jack Pacheco

move we're so an down, NAND the see products, go XD XD into will these our ASP shouldn't we getting same the average either ASP stay decline or products. NAND come it as If [Indiscernible] we

Sidney Ho

feel accretive my going probability to in the to do margin it's Maybe EPS of XXXX? much in question do on to Penguin Penguin How SCSS segment things. a the don't when quarter? and side business? And you you the maybe the but I great. Okay, to the about of talk August rest about did talk follow-up or how gross your expect And be know can is have about Penguin contribute you be comparable lastly, segment, by you

Jack Pacheco

Penguin only did was, for QX. in not quarter, the the them. let's first Penguin that in them EPS integrated contribute them, part XXXX. so -- it's first the getting We into go a But in kind We're is the mean talked as that size of expect it we that, QX. us of them I to it's say, year so full We to In we the EPS accretive to in roughly quarter. of first start and of had mean, here quarter I contributing and and half year be be in would quarter calendar neutral the having them Specialty. had we

So, -- summer lower were right. we margins about its the that it gross call in Specialty, last and talked than

double have And margins get get work as so same margin you go we roughly. to same gross to to you to make so have let's the to do say Specialty the gross up, the Specialty, revenue and be the it from contribution

Ajay Shah

have aligned in business -- well and the that bring well. -- rest gross that pretty a accretive balance supply management the we a been improved and we with and for And us and it will help for the have great some how margins growth towards plan two months. half we that get there, of are chain a much sheet our with and quite so drives have operations, it's do as make plan us We opportunities, to

Sidney Ho

All right. Thank you very much.

Operator

you. from Co. And & next Gill from Thank Needham Rajvindra our question comes

line is Your open. now

Rajvindra Gill

you goes the in, you XQ, taking us much that's us, where May for it thanks are next year, local so remind again, increase your can fiscal Can how to content remind to? you said, starting of rules my Yes, questions. going

Jack Pacheco

go XX%. It should about

Ajay Shah

to January, go it's XX% Yes, starting in supposed January. up

Rajvindra Gill

what From again? what to

Ajay Shah

The confusing stake answer XX% to in XX%. XX%, you Brazil. but XX% confusing actually, current is because let me to going it's give at a

an way, little bit, in election to done. should government of say, things the terms thanks -- this being However, happens, a Sunday, the how is we that are frozen by

will hear the back supply So, quarter. this and XX% to based on not that we PPBs year, fourth ability year our for for just this reduce in next year they up, once they're XX% to through the

step-up will -- but kind right of land the been lay it of we've that's by we So, XX% now, so that next year. have the assured

probably that's part of answer. the the simple So

Rajvindra Gill

seasonality, to down, XXXX, look I know, was of Can thought thing down double-digits, going revenue for least that? to was actually what's the same up couple But be -- and -- to single-digits, I for you respect it February. at you. last but at understand of mentioned kind would the up Penguin February going help with just -- overall if kind is February couple obviously, is be down you look XXXX. February in years, back And of And kind I was of And the if me of that of Brazil process be for it there?

Jack Pacheco

I I -- Yes, the we on year, XXXX. think, mean in I talked we yes, very call by that were surprised last the know, demand

In down about the fact, of all guys PPB cellphone the well, down factory sudden because came in so really make our as typically and we had strong, behind a never were trying shut in in but and shut demand to we we talked that's XXXX, XXXX.

guys kind supply the to stuff these weren't parts the With able all that, and that DRAM, of needed. we issues like between produce Flash

up. really they so to year trying and so needed last of QX were their strong, and to And as make catch they buy numbers, was really,

lot good QX quarter they a quarter, being about the talked and in this really as had a good early, so So, we a parts bought year, here. bought they really We right, of stuff QX.

parts They're a be local where it to -- on down more their to back going they they all more our go should is, So, shut for their much effect to see getting in we're not need on this QX, to factories. quarter content. were going they're same that view In track normal year. the

the lower do in same, we and expect We demand Brazil. will probably so

Ajay Shah

for mean, in just I new around. all number middle we're of prepared to have it's right. this, models comes coming we all this a whatever In of right. the At forecasts, clear, point, be January, out

clearer of the are get most don't waiting as middle clearer. on least at election of to or people bottled up election get So, the think as I earlier, end a October. bit And to enterprise a and is have what -- was then demand explaining at I told exchange little question mark this as rate least does. items sort that till of November for bit that little you we're CapEx

round a XXth, round, going Sunday, first believe. the which is The then, to this be second and I almost is on there's certainly

a -- So, what around it'll take we'll in reality quarter a that Brazil that is. we've there the to uncertainty and I guess, see be decided just says, is probably lighter and view

Rajvindra Gill

That's helpful.

can said, much down you usually? you characterize down it's it Penguin, is how February, As

Ajay Shah

high our year, the In on between the to end. work XX%, August from we XX% have used are quarters quarter-over-quarter year remember, amazingly quarter. And engineered -- typical a different the season calendar Penguin of our

we quarters. peak quarterly have But said so won't comes getting we compared Xx well, the variation. we're months that, it. a I'm most business to are that to at see like only enterprise tends as opposed are what because not comparison easy talking not least following probably having to we So is have federal; at federal kind about that a as after quarter But of that the

Rajvindra Gill

you And at the Jack, how of do How we capital look structure? going the at kind look deleveraging forward?

Jack Pacheco

going debt mean, Brazil. amortize we business with bills in expect down I our I to wouldn't I now, help cash as we've mean change capital But cash, excess structure with I the the with the go, will to right mean, current right. forward, continue slowly and pay much. we our consumed

Rajvindra Gill

And we us you cost thinking that battery How want acquisition the some the should me, margin then what -- Penguin be on Obviously, would out? you side, the that a revenue the upfront get on you be dilutive gross of we profile. front, offset about for but sense kind on Can would few last a profile? is overall can but you also mentioned quarters it. margin to give the of would bit little question incurring that margin

Jack Pacheco

mean, I about talked Yes. that. we've

XX%, right dramatically from to the we've XX%, wouldn't change to start us quarter where right expect I margins where to Our so stay did we been, I tend XX%. XXs, low in this mean we

So, over XX%, that I continue range that in in would us expect -- range. sit time somewhere stay to XX%

Rajvindra Gill

congrats. All right, great. Thank you and

Jack Pacheco

you. Thank

Operator

from comes Thank you. Capital. next Instructions] And [Operator our question Suji from Desilva Roth

Your line is now open.

Suji Desilva

on quarter strong Hi Ajay, hi Jack. the here. Congrats

you strong I I fairly just the want year think expect in but the recently? growing Penguin. given perturbations doing understand kind of what you've two you color do versus can to know You've it's what been quarterly rate about, talked it's of a been because annual growth on next or lot

Ajay Shah

to Yes, are overall? SGH, referring you

Suji Desilva

segment. the SCSS, No. Correct. Ajay.

Jack Pacheco

Penguin? Just

Suji Desilva

Yes.

Ajay Shah

overall with consistent our plans. fairly it's Well, growth

think, for and we're I are will it I I the plans no looking different. for, So year answer think revenue much growth. looking as more And our which answer XX% question this you're to annualized is broadly, apply can the XX% to for

last course, Of year the at ball Jack XX% and hitting Iain was, the out of park.

that. going XX%, plans are tough revenue XX% we we're And but and -- a our built we've looking so around be for to growth, that's compare,

Suji Desilva

trying synergies-- helps. into that great, the And Okay, to peel then,

Ajay Shah

Forget I this year, [Indiscernible], said XX%.

Suji Desilva

the the what about to We financial okay. SGH doing module it curious XX%. products trying Is modules there Any it Penguin then, SCSS. cost And into right, of cross-selling put profile and kind talked memory color into more All I'm synergies business. sales? be SGH would for between incorporating is improving that. Penguin out? Or impact the you of peel the the synergies helpful? of

Ajay Shah

two call revenue, One is percent which At Penguin, costs. in we costs. more what which horizon, is operational the run costs, shorter there's at types. Absolutely, nonmaterial low yes, supply of costs XX-plus the which is chain, is all

of of we those separately, of synergies. the those are in take market, terms but And -- to define very engineering synergies other those, longer more significantly in that costs, of revenue-oriented all in expect and And definition And working kinds of improve. have excited have the see. we Those happen not short-term. cetera. our take of we're front-end will terms -- to et that teams then, to to plans time that that'll to product product So, about sort we very

should the and around are synergies what the be, been come that's management will our and team have we details SMART and on those management get Ultimately, very there. Penguin from. view team we the synergies aligned So, how on can where

Suji Desilva

color. Okay, Thanks appreciate guys. the

Operator

no further back questions management you. the And to any showing I am I Thank call for remarks. further to at time. like now would this turn

Ajay Shah

Thank out the you and to coming and look forward bye. engagements this many of seeing our the quarter. for you afternoon. progress you you on joining on us your for next and questions Good operator. call We all our thank to in continuing Thank on months reporting the road

Operator

your today's program. thank participation Ladies conference. today's This concludes and gentlemen, you for in

great You Everyone, disconnect. a have day. may all

Penguin Solutions (PENG) 4 Oct 182018 Q4 Earnings call transcript