SGH - Earnings call transcript Q1 2020 | Penguin Solutions, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SMART Global Holdings First Quarter Fiscal 2020 Earnings Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions]

I'd now like to hand the conference over to your speaker today, Ms. Relations. Investor Schmidt, Suzanne ma'am. ahead, go Please

Suzanne Schmidt

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

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

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

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

release. measures are in those comparable measures directly non-GAAP during included Additionally, for this press earnings GAAP our will be Reconciliations financial discussed. call, today's financial

Shah. over to the With that, and Chairman call I CEO, will turn Ajay now

Ajay Shah

at businesses, the fiscal our We on XXXX the Suzanne. performing Memory Brazil or you, to memory And Specialty quarter above our of Thank are and expectations. both completed Products first memory, with call. welcome which everyone

due to Our Penguin expectations the in some delays the business Compute in Computing as some our orders SCSS below Group in budget for delays. Storage came we government and or Specialty quarter saw of

guidance area previously, business came our share. to SCSS in be revenue. revenue net $XXX for from EPS we've this lumpy million, to the in is our of at lower quarter This some and the profitability total, contributed $XXX programs, at As shortfall can slightly exposed previous just first for In communicated the expected of million below quarters than range sales quarter's large government non-GAAP than previous higher quarter, below per $X.XX and resulting $X.XX the but quarter-to-quarter.

XX% from XXXX, and Specialty XX% stability In business Brazil this and a from from businesses of first Specialty meaningful very Computing which came Products, our way. of revenues very quarter of of business, Products served markets provide approximately in balance a fiscal and revenue XX% our Memory our overall good expands is

provide edge, of and systems a that we industrial, So, networking, balanced to transforming solutions of our on components telecom, requirements development. well are set through enterprise are and into for the high and center, broad systems. defense transportation, for data our ability these businesses and unique our the chain address underpinned for far a supply large way as well to by embedded performance our delivery All components for applications, systems scientific AI variety and businesses customers' computing go-to-market efficient as

successfully IT systems, as integrating quarter, and chain as progress the here has our supply into and our tremendous SGH our team Financial During made new Systems. at in operations two well acquisitions into

well marketing integration as management on We and work into and design our as to general development, organizations. continue sales

Wireless Computing which the in or main have of three million. Computing, me main approximately our of each to with Penguin products. three our we lines of is which SCSS a I've Computing as detailed $XX XX% line our the Now let more Embedded of represented, Inside specialty of sales beginning areas business, computing, review mentioned, quarter, EC, turn Group, and net

Penguin a increase sales in its Computing has seen meaningful pipeline.

dedicated in As particularly now of computing or second HPC AI HPC high-performance America. systems, largest North supplier we the systems are

expectations past fell programs quarter. this our results in the quarter However, some government for budget reasons pushed for of short out and

quarter our in Penguin's this seasonal than more previous basis revenues a quarter As one, government a doubled the fiscal segment. sequentially fourth to in from the had reminder, the strongest is as

highlight Intel One enhanced intelligence partnership Supercomputer, new last for the lab. Penguin HPC for a in the that from quarter major system developed with an technology, artificial Magma Penguin national is by

HPC Platinum that of platform XXXX accelerate one for and We are of scientist Intel's AI first processors. integrates proud Series Xeon data our modeling of this it's converged to the customers deployments

as computing one the world. qualifies HPC system top of systems in XXX the The

our addition, In received size. stack. upgrade released it well as clusters of That's by to to customers any been our a major software, XX software them very during ClusterWare virtually the quarter, enables scale we our

or Embedded in full both first businesses. for the part Our quarter our Computing with EC expectations Computing Wireless businesses, and performed line of as

Malaysia In and EC's particular, was locations, We our a transition are earlier of expected. integration. plan U.S. overall completed into manufacturing on well than manufacturing month which ahead EC's

emerging a for we are space, developed merged further, optimistic well Penguin platform-based business more HPC a combined efficiency, computing EC synergies in between and we And as some the the about of model strategy, develop go-to-market for and edge AI the as as organizational applications. the functions

the than in represented the $XXX.X were we million demand is weaker And expected. business, to quarter, which of net major the sales as our for Specialty Net still Turning and customers sales previous revenue. was same roughly note, now quarter. about our XX% Memory

this in sales customers. However, base that segment X developing into is we of channels. more make Tier and sales to and Tier in progress of and X customers increased are a continuing resulting And broader domestic international

for range internal this – development advantage will be firmware both take we our on Also, embedded SSDs, NVMe, made and broad able our and based on so in-house major our SATA of market in to own developments release progress of products controller-agnostic soon a great we've opportunity. firmware of

last We a combination last XX% approximately memory and unit quarter sales, price moderate million. market. with line our of improving compared domestic totaled the of to the XX% an company higher Brazil, quarter Brazil $XX total Finally, due declines over of and economy in in sequentially business represented demand net grew

in this important in first earlier new local we business to bottomed our manufacturing memory Brazil and confidence than out note, based rules, It's have quarter of this our that score the forecast gives performed full better our that us business.

Although, is holidays. Brazil fiscal QX a period weak with Christmas the in seasonally

In addition grew seeing to also products, quarter. PC and we which in the Brazil, our are battery well traction mobile business in memory with quite solid

we but Embedded with with seasonality our as our combination a this delay see normal the guidance to will which pronounced enter summary, XXXX more fiscal call, Computing we the businesses and for later we quarter, in was our a of business. time in awarded this Overall, quarter more fiscal program, our detail address healthy Jack begin of in second be defense

technology out economy position fiscal the new to strengthens rest and XG are as systems the such now year, and optimistic we a stronger Looking business demand. drive AI the that as of our in drivers, is incremental

discussion our like as by with and reiterating way year new that I'd under is expanded unfolds. progress look reporting products the markets, my well to on continued addressable transformation forward we our conclude to execution

and for call the Jack? a of guidance. me Jack to our Let financials our turn over review

Jack Pacheco

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

the the the business, meaning an which that profit and sales, recognize agency services between related is gross chain services on reminder, As basis, a chain revenue is accounted only we net to supply transactions. net supply for sales net difference our

storage Our market telecom XX%. by mobile the XX%; breakdown fiscal end follows: and and first sales was network of servers and net XX%; for as quarter PC's

and defense aerospace industrial be largest other XX%. the With at end our continuing market to

full statement. businesses. Non-GAAP million acquisitions. were first $XX.X million, Now, million, the due moving quarter $XX.X operating an expenses income of quarter to to our the last increase recent gross memory our compared the from primarily to profit with of $XX.X Non-GAAP primarily was $XX.X two the The previous increase million, was quarter. due in rest for quarter's a

the income totaled for previous quarter. net per the share the in million fiscal prior $X.XX or per $X.XX quarter with Non-GAAP EBITDA diluted diluted with million Adjusted in was quarter. $XX.X $XX.X compared compared million million, or $XX.X $XX.X share first

capital. working to Turning

increased with million days quarter. million day accounts quarter our increased days to net last XX from $XXX.X XX Our sales outstanding last for compared quarter, to receivable $XXX.X and this

first fiscal and of $XXX the XX.X turns quarter, totaled last quarter times end at as Inventory fourth from end chain the in times some an Inventory million compared quarter. programs. at of inventory $XXX added the recent we fiscal with the acquisitions inventory the dropped two from for million supply to X.X our increase

calculated days which the respectively, receivable, and XXXX. and outstanding are cost first turnover and a $XXX inventory sold Consistent basis, of gross for practice, of million, $XXX goods million sales on with quarter were fiscal accounts past

from the quarter, taking will term $X.X quarter the cash debt. amortization on million $XXX.X XXXX at cash basis. a to increase and Cash fiscal increased with of of we million the quarter, debt into of an equivalents fiscal this payments – $XX.X of quarterly Beginning after end million account reduce make to fourth

We those making holiday have for been payments fiscal in a granted XXXX.

$X.X $XX.X was cash depreciation tracking CapEx prior quarter quarter. the you Fourth in $XX.X with those was from million million, compared CapEx for and totaled of million. depreciation, flow the And for quarter operations $X.X and million

the me some financial let on of dynamics. touch Now,

As working our of Ajay federal timing mentioned on. Computing been certain the we in Group that delay have has earlier, some programs Specialty seen

quarter With that turn let second guidance to as backdrop, to We the well. second our the now of fiscal XXXX. this expect for impact fiscal quarter as me a

currently gross to the Gross in our approximately XXXX estimated We XX% range is margin estimate to our decrease $XXX quarter Brazil. margin to $XXX fiscal mainly the of million net sales in quarter is weak due million. in to be second that this seasonally will period XX%, be for

intangible $X.XX, compensation we $X.XX. $X.XX. is diluted asset expense, diluted per earnings excluding $X.XX, earnings share expense or and minus minus per GAAP non-GAAP share be plus On to or non-GAAP be basis, plus amortization expect to share-based expected

the to an diluted shares for tax foreign not quarter fiscal any of $XX or to expected X%. in guidance and estimate include per fiscal to provision X% on earnings view second gains for share losses, The does includes exchange quarter million. range The of used the number is be income the the second

earnings fiscal the be in press financial Capital results to of range the the are for the to Please information expected section and tables for net million reconciliation to details. adjusted and release GAAP the of refer non-GAAP second million. further to measures in non-GAAP GAAP to reconciliation of income $X $XX expenditures EBITDA quarter financial

Operator, we're take ready now questions. to

Operator

the [Operator Instructions] Chin Our Stifel. of Brian from comes with question line first

open. Your line is now

Brian Chin

me Hi there. Can you now? hear

Jack Pacheco

hear you now. can we Yes,

Brian Chin

the of our Micron as Sorry did the that or shortfall. about reason much yesterday federal Thanks lowlighted of so kind modules. questions. Penguin the good afternoon. start DRAM with in terms high-density taking I highlighted talk revenue But Maybe shortages of kind of about that. to business, Hi, with for you, that. for understand, – some

in all any of at curious factor customers? project timing your terms for Just was that whether a constraining of

Ajay Shah

We waiting and of understand, – agencies that which to don't the to I that What was the say, based issue. on for result. government understanding, passed, have think been very labs No. a we have I and as budget be the follow closely appropriations bill I many our

you believe, that have can and might hopefully be tracked right Senate White So, – shortly. you but that, now the through, the going through as approved, I is House will

do orders. budgetary is order So, waiting green these been all these but a now release to light mostly for has the issue that of delayed and we're approved, programs is have talking what they about are releases, the with

Brian Chin

Got it.

revenues, So, Perhaps? the little of more maybe year. steer the fiscal at back this half could maybe

Ajay Shah

it's government expectation the is that year the other Yes. forecast. that pen top is House. three, don't half – goes fiscal best will our time, business we This the a our It stack everything some months, will on always of this way all stronger means And there by will expect the unfortunately, to in – any just is but four of out back this anyway. of period we maybe, slide White

Jack Pacheco

programs that start, on but I said, but have they top. they once Ajay go, like don't are start, mean, you some to of they add these don't,

if some to So, that just amount quarter, this of start want you lose doesn't on that's quarterly, top it starts next start. X amount

Ajay Shah

It out. just pushes

Jack Pacheco

months the six out program. pushes just end three, in five, another the to of four, Everything

Brian Chin

Sure.

of by one business? on are Specialty you year just question start of But one the given Maybe of then targeting here Just softer of terms the end terms the fiscal I that business. year. operating margins more that targeting in even have what in fiscal you, sort the maybe more are Compute in revenue, exiting this kind question and the other of

Ajay Shah

In the Penguin business?

Brian Chin

Yes. overall. The Storage business Compute and Specialty

Ajay Shah

Yes. break our various I margins the by mean, out areas. we typically don't

digits – If maybe we will look kind this if company, you mid-to-high year mean, in of SMART the expect at you the at overall, of I with look single start end kind our somewhere we'd have. operating the

Brian Chin

I'd flattish memory of up qualitatively Specialty somewhat given helpful. or sort yeah. down, sequentially. the Brazil Compute And revenue Okay. sequentially, say, guide I down plus maybe minus then guess especially, – That's And so, then Q-on-Q.

corresponding to of bottom comment in we quarter of past already right in Specialty sort kind about market? of Do And could so, revenue that you February sort of end? momentum sort And the Memory your quarter, be sort right of now? beginning bottom in see the think you to build did the

Ajay Shah

Yes.

think, I think I our with of we bit starting see of specialty, we're definitely as we larger to some customers. little QX OEM – quarter in exited traction the a

for of So, was QX were – that we the kind bottom business. we expect the

Jack Pacheco

Yes.

do level there's with the our is customers. business major So, two One here, at comments to right?

in for be recovery coming slow of major Our and been a been couple customers, a it's to quarters honest. expecting we've

explain, So, base that continuing X, year into in declining attempting and essentially as decline. to to have to broadening base. customers to ago us ASP prices our was Tier customer allowed Tier has our Memory started And revenues, a continue even is over in what we deliver environment, flat I to product X invest

specific Now, the lead are going the from declining, of pretty going stop bit getting hopefully, indication are and indication, a times the markets. fact, up it's out. And prices we prices little NAND will in actually because that's definitely our memory a

even other with if And customers, one down, yet Specialty then going knows Memory be customers answer up. going if are legs, our so, optimistic know you looking of being our God new or prices design then maybe started for. that's we those wins. that a stronger And not business the new being that both another little tailwind. major to I would don't be were And the

I think it is.

Brian Chin

Yes. much. It's so very helpful. Thanks

Operator

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

is Your now open. line

Rajvi Gill

And specific because slightly being in do uplifted because business The once points volume about actually basis came drivers that of And of around mix question the so this in November primarily gross of we expect it an as sequentially, Is margin we lower the the revenue you. of a kind function to margin? fiscal the any guiding have go programs the came – thank the lower and guiding are down are of if returns, other kind of that commentary Yes, lower delayed? year? the margin, so, into government on next in kind of expectations. below XX just

Jack Pacheco

our fixed of I had out mean, Brazil QX, gross the is and driver basis really, there of the the is so, Brazil, we're an impact in down we margin where we decline of kind it's we're actually forecasting margin but a Brazil. Brazil, that right? main bottoming saying X.X really had cost we have And somewhere, a – in quarter would seasonally gross impact taking we're Brazil high in it's the enough weak is, thought be. – it QX it on

business. Compute in So, Specialty the targeted the to more than Brazil it's even mix, really

Rajvi Gill

the QX Okay. guidance. your came But below – gross in in in fiscal margins QX,

Jack Pacheco

… Yes, that was Correct.

Rajvi Gill

XXX basis points.

Jack Pacheco

Penguin a by Compute that, – impacted thought business, it some we our we this forecast. higher kind this having didn't in orders to of some we Specialty was business Group get going get gross that That were Correct. margin was

Rajvi Gill

Right.

Okay.

Ajay Shah

so And stay I the reduced lower fixed, mean, we OCOGs, but the is the gross with revenue it, underutilization, up the a end so-called margin. costs you materials call as

Rajvi Gill

the of new rules the moderate will one rules. sequential than penetration? as quarter factors? the I there full just there the of could that these in that you? have granted full commentary wondering, Is on it if actually that said, forward kind Brazil, systems is a the thought. just that have now Or, said going if better a is that just content now is your you upside to you've Is than the or new new Brazil wondering that business declines? in of, thought, your potential you other help better really growth a rules, to the point in better you that new drive be business based mainly you know to and higher function of was higher upside a demand good performed – there And was curious could I'm I'm because you you it unit So, about quarter price perform new is rules? visibility you of Brazil.

Ajay Shah

new be have in dynamic much I think address think how explain us we allow was the rules – to – of I I terms the the as we to last rules trying time were business. that this more new well

We certain floor there therefore, are ceiling. a must And customer percentage a that constrained no longer was buy. the and by a

in the the not you but customer terms constrained the in a I what constrained as way a of if now is is floor, same same way mean. he not However, know in ceiling

and And so, them concentrate active for on lowest making of their we've turns terms through both memory. I've memory cost out our item. most of been customers our really as to the per any easy level, mentioned in talking to very before, And service persuading points of be to point it them major

So, think drive the us gives as ability we result, the to that further. business actually that a

So, to revenue or market figure rather your position come allows vendors these work with we call front versus can our to to ourselves to in and best we back play how it versus us want to of profitability And share as margin. gross well customers. out growth that question, try

business net-net Increased for look the to further. that ability at reasons. flexibility, we news as the good various So, grow

try upside think, to so, your simpler question. some give it and answer Yes, And a possibilities. I to you creates

Rajvi Gill

last map year. of about housekeeping how tax you going over of that? about been think It's that The rate we How Jack. question, forward? just do the And think a all X%, kind do

Jack Pacheco

for thank that. accounting regulators can our You

think, rate go we've just back low of we forecast we a we where pretty guided profits to with and tax kind thought our we QX – we I our up QX, be. as into but But will Okay. to be should – in think get QX I QX where how

Rajvi Gill

Okay. and We in QX, should model a rate X%? QX what something higher tax than

Jack Pacheco

Yes. between about we talked we years. XX% XX% kind to, I of somewhere back said I for to think kind is mean, the of

looking So, in to we half back modeled – to range something at get quarters. of we that kind more started

Rajvi Gill

I see.

you. Okay. Thank

Jack Pacheco

welcome. You're

Ajay Shah

you. Thank

Operator

Our next of Mark line with question comes Jefferies. from Lipacis the

is Your now line open.

Mark Lipacis

questions. for taking my Thanks Hi.

some – the in Is – do happened that's industry? one that Ajay, you had there some mentioned near-term First consolidation view you to can this the step a give function the the on Computing due a for really that to prosecute are – good, I on looked this? there and are gains that first sustainable Penguin the the next despite new And that? as business. pipeline have guys pushouts. like Is is color kind share of you of through like Are guys several and as Thanks. years? programs we because kinds of question you you follow-up. That's able you go

Jack Pacheco

you, One and but Thank it's – know, include maybe government. because sort In to vendors. you different systems. That – of government, the than – is two more Government Mark. and at may of sectors. HPC three large a there really AI we'll Yes. right, exactly now is not, least three two as maybe may certainly have is different as take a requirement

cutout, we customer on many on where of have these now in for programs. so, we And are might the been

way, don't I some to it. certainly larger in So, hopefully, the that the opportunities, and by And significant want helping very and pipeline. is jinx

very couple that's for a positioned think Then large really the we're opportunities. sector. I government of well

investing the Then the processors. developing in around we've sector, been that of particularly Intel-based, lot are new products of some efforts some commercial systems to in of the related our Intel a newer

system. one have As largest Magna I our we shipped ever, mentioned systems of before, the

particularly commercial And those with so, the through are opportunities seeing product customer areas base. we increased

about of has actual creating. you're easily, customer AI, I – in this resonate other talked the In not driven terms and about configurations always integrating very seeing it customer been Penguin in And up the we simply but the finally, we words, I mean, may that ended were which solutions wants. past

AI that we've what we call such opportunity. And now for kind is, packs we different for of example, applications, doing pipeline a us are However, different automation. what these applications, and solution solution some retail been those packs offer of productizing give certain as a now

well. the build of So, helping that's really along question as pipeline the the asked? that Is you to lines

Mark Lipacis

follow-up, the That's does of a I very is big you help the sense if on that in OCOGs, And there in business where your ramp? you business Does How absorb separately that Can to described in separate a Yes. And battery that from business of memory battery that? Brazil? OCOGS are Brazil may, you us the as grows? Brazil. – or have helpful. that offset existing to the does give a fixed is set cost, in you for module higher

Jack Pacheco

Yes. I'll take that one.

mean, and about looking when in when So, started of we – kind million to of million to the said an that thing yes, back the remember it's is I $XX first this we we've $XX kind said you year opportunity opportunity. that way be

so, on get way our that the And on battery in business. we're this range to well QX, year for

problem of it's fixed the has is packaging part is fixed operation. the the really It huge – a cost On it. to not OCOG for the OCOG now

near on separate so, when a weak down units quarter, gross It's battery And equipment. it packaging a drags type of the of our whole not anywhere set fixed the is business definitely cost go The operation. margin. seasonally the

much So, side is the OCOG have the of it's than from you lower on packaging house. impact what

Mark Lipacis

the Okay. chain, you're may. in downstream can question, I That's about in a – helpful. very supply seeing The last from inventory, if And what you yourselves? talk

Jack Pacheco

When you mean at downstream, you say …

Mark Lipacis

or like your customers Your …

Jack Pacheco

we're it been some issue of more they larger customers, the we've burn that increased have and starting channel. lots looks slowly been seeing but some it mean, the downstream they've like through inventory get demand guys to channels our their of that for are those specialty in off, of I the of having is

declining so, in their be should the downstream. And inventory

Ajay Shah

is to being our this but we've happen be, and happening. it should – major hoping some mean, of than customers It frankly predictions being I going by was been faster – that given

that's for actually, right So, a us disappointment now. of somewhat

Jack Pacheco

disappointment. it has Yes. been a Historically

chain going that a bit parts, business, for of in of seeing in we're the little are some supply more our building looking – and shortages more are of CM. a We maybe more they bit out seeing kind little which means

which what there. see less but inventory, should actually So, translate and we'll into happens wait

Mark Lipacis

much. enough. Fair Thank very you

Ajay Shah

Thank you.

Operator

question next comes Sidney Deutsche Our with from Ho Bank.

Your line open. now is

Sidney Ho

my question My you understand or first the in the help contribution what your anchor the we us quarter, guidance of as can acquisitions to And question. market is, exposure about taking rate for does end as use dollar, whole, terms can the growth prefer something that revenue three or a from in and it separate point? an related mean to rate, Thanks Great. you that how going of that, segment segment for the we think forward? what seasonality should in

Jack Pacheco

I'm group for When mean bought And want question. of right, I type would that them – heck … sure of but million good answer a we said $XX but be it, questions. Excellent us. somewhere business million companies, to I a new $XXX this to we not between

Ajay Shah

basis. quarterly a On

Jack Pacheco

little tracking two the they're the ahead of Small $XX a note, ones, new $XXX to mean. million bit I million, that,

from – it a to we XX% had those going Penguin QX we So, grow XXXX at businesses. XXXX, with you look to if XX%. said Penguin, to it's should good grow

is, took Penguin. So, of growth where of that's you kind the kind rate it if of

both acquired very did the be, business were you they two kind where well. of in you we can So, thought maybe to came but plans, we right they where to for want the quarter both for get

of would way wireless company kind the it business on so $XX and we million a that first in business, wireless said, should of be that double on the revenue we we're achieving that business. to the quarter The well

Sidney Ho

… And Yes.

Jack Pacheco

year, Overall, the million Specialty $XXX Computing is plus looking the it's segments for like right? worth

Ajay Shah

Roughly there. Yes. around

Jack Pacheco

And that as for give the gross visibility that you to segments, for those decided the I million $XXX you now our that we margins you'll for report pieces into Q of each see think. in Q we've About tomorrow, so the see together. – by will year three the more

Ajay Shah

Yes.

Sidney Ho

Can and Specialty you working Okay. doing In the synergies Maybe kind Penguin. share that of your a with little what you're you're business. there between us? on on revenue And I'll prepared there? you EC mentioned you stay bit elaborate the with are Compute can milestones remarks any

Ajay Shah

that interesting area, with you edge a because Yes, to about it's opportunity market has that's Absolutely. asked primarily very one, I'm glad – do computing. And the Sidney.

about either in that think sort mostly in what business or we terms was of used mechanical, high of do, physical terms you software customized deep were then Computing in systems Embedded different or for focused on acquired if that it So, availability applications. ways the embedded of the the to aspects

Meanwhile, Penguin to large thousand systems, of which high-performance sometimes a servers, tend of servers. and of as computing nodes racks sells many as couple racks be

for were do has with into be so often now the skill efficient platforms take very Computing So, the are have, applications. to and very latest the as servers, them and we we able customize able set to with competitive team able which at we those already server that to and and Embedded the is side

area at automation range of retail computing, gaining look as payment, The first and particularly around applications, on. edge is a interesting we so

interesting area the has some that that's potential. So,

you three of So, hasn't and been trying – with customer this. we've there been say, to to But of months, are been all that to lot come we long enough opportunities, opportunities interesting got we've a number of successful it's interest. Wow, back so only really it very

of for That's more one a that area. develop is terms we example, And of with in the to, computing lot performance – team experience synergies for doing. then in lot switch able Computing being have a is a that field high of synergy Embedded is our product, that the in and and

that develop AI ability switching high the particular and performance computing backplanes into to So, applications. platforms, we have now go

So, I can go on, but hopefully I flavor give you there. a

Sidney Ho

question thought you you the into the rules guys more better quarter. the – customers Brazil that side. last Last me giving super visibility from with the Maybe for on and guys helpful. last more requirements, their quarter and what local Yes. obviously, you mentioned That's one content you than new did are

moment? that Is about guys going you characterize past visibility? that, for quarters. big in few months? this that a And forward the you a you to few would maybe ASP headwind aboard How at in been How has think related ASP

Jack Pacheco

tackle first. ASP I'll So,

this So, about to in phone drop getting to ASPs Yes, from XX% products months in expect good are create QX, have mobile, up. a the pretty ASPs go start mobile going in six definitely but new to to early we good that to is we quarter, our we our in go content pretty per we visibility up saw and getting will in – visibility start customers. the process. we We're get as

get will start we QX, so, we into higher customers. to our as products And phone – our shipping we density

QX. to ASPs So, we our we start get increase expect to again into as

Ajay Shah

or been that's maybe up, to but is the memory we've this down, the predicting into densities goes the in long been. memory go wishing prices a see indication will go QX start it hadn't up. that we overdue, come And And of first that Right? phone amount as that

Now, we visibility, – as their customers much our obviously, have to get do the down. pretty ability good I move forecast and just up

are clear, it's to be fixed to just nevertheless, than visibility it great So, better like not forecast, six-month and these it's but used be.

Sidney Ho

Great. Thank much. you very

Operator

from of [Operator question Instructions] Our with Desilva the line Suji ROTH Capital. next comes

open. is now line Your

Suji Desilva

came growth for we there you follow now levels up that question of Jack. Sidney's pricing have that we what year-over-year now given a versus obviously on a a from ask, current normalized the kind and maybe they've better about can visibility. Hi, Brazil down have pricing? Is year thought Hi, that process Ajay. XX% of stabilized expect last kind environment, To to the more

Jack Pacheco

saying for You're Brazil? year-over-year

Suji Desilva

Correct, correct.

growth? more out, reasonable you’ve leveled expectation year-over-year that Now for what's a

Jack Pacheco

XXXX. of mean, not versus was just mean, right? will year at Brazil, a remember, year-over-year $XXX mean, quarter. of I you XXXX in grow. million look I XXXX that Brazil if I QX year fiscal Well, almost revenue monster we did in And fiscal

… So

Suji Desilva

kind four Jack, quarter-to-quarter quarters out say, from … this of to I was referring quarter, more

Jack Pacheco

if Brazil, then into we – maybe we Right? QX. for yet growing mean start start think start at it look that can QX, Maybe even I you maybe. QX as looking I X%,XX% you will business out

Ajay Shah

Quarter-over-quarter.

Jack Pacheco

Quarter-over-quarter.

out good news that, as I are I looking falling year, think, I is for on we at could unit looking business Brazil the how that. we're around least. densities of and which completely, memory cyclicality, of really what that neutralize bad don't the is XX% a grow result, per we think, a to bit, take know dependent if but but do ASPs, to XX% say overall, somewhere growth sort to cost that, is And you you at

we XX-ish cycles show so, the kind of that would the way. of growth. And of type numbers annual that don't percent course, expect But,

Suji Desilva

actually we that now can appreciate ask question. I Okay.

fold businesses better improvement So, way. what together, then, and that versus Inforce there put Global? are Specialty across acquisition gross Compute in the gross a kind or more expand it's just margin already from to those target Penguin, and on also margin, the into And is Artesyn integration, environment you've Smart where room bringing are of we the acquired you you and the there

Ajay Shah

And to We've look made I a lot of XXX progress to they points. basis XXX on gross in gone range. up continue have mean, points, Penguin. basis margins that be

efficiency kind gross part a So, related large we've gotten of margin of improvements.

need means to get to to that is that, to have provide component more add up we Now, services we able solutions is as percent to has revenue. gross business margin our come What the approach. value be that related our improvements. of What a to model that, means

so, better and on no management, well, manufacturing, And so and on. better chain so supply it's – better longer,

of terms the but for margin kind gross very, the businesses, that's forecast. expect those still respect news huge very where of bad they good mean, margin I so, didn't we are in we two we with early, is, to businesses. improvement and Penguin. are With And didn't to respect other

and already through a bunch our gain we We costs. overhead of add which own by we was we've a transfer accomplished. – would we in external manufacturing the had to factories to much third-party business – we take Embedded not for out where And the Artesyn simply good have a our factories that – extent from gained Computing modeled

Suji Desilva

SSD that one then know opportunity certain relative and size then opportunity, Thanks. And is I you mentioned that question, of strategy last controllers And there opportunity, elements. meaningful have recap guess, just trying you can the that is to, neutral a the to what's Helpful. be that Okay. you to I revenue? and small a

Ajay Shah

range to been point, in About year, biggest we've up the firmware. where engineers] we've [strong for ago, only did our range last I have product, own what not be but opportunities quarter of of is a our to defense, a one today, over invest And using firmware, a applications trying team have particular Till that pretty networking a year need a over a you like is investment which good built control extent It our applications started a the to say. over an in like of is including and that significant we like opportunity. XX just to not been industrial, year seminal plus. third-party and to starting up a telecom, SSD was now requirement. this controllers, that is Medical, is It tuned

which tailor as and introduce you've will and control that to two to functionality lower of the has our gives applications, start much a the other through to over us significant of is, we One we has ability with – the it year respect the we in part And last cost, our the because seen destiny months, control the products and different that. own that next framework. better products these a specific been controllers to the firmware benefits. is, because we investment, few now our flash So, business, control

So, for it's significant very milestone a us.

we the – but machine the in then to advance wins, get leads, products. we design it's design our marketing get the have get get Obviously, going, products get meaningful out, a wins, get to very before

Suji Desilva

Thanks. Ajay. helpful, Very

Ajay Shah

you. Thank

Operator

call I'm Shah showing at remarks. in this I'd Ajay time. no closing further to questions to back turn queue like for the

Ajay Shah

Conference of coming many We your for on you, progress you Thank all all the again January. there like CES, Needham coming coming year. wish conferences, Happy the once to our interest. months be look you to in operator. a the at the your Well, I interest. you you're for you in thank if going of Holidays Growth forward or any and best and up Thank reporting all to at for the meeting

Operator

Ladies participating. for conference this today’s and Thank concludes gentlemen, call. you

now may disconnect. You

Penguin Solutions (PENG) 20 Dec 192020 Q1 Earnings call transcript