SGH - Earnings call transcript Q4 2020 | Penguin Solutions, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the SMART Global Holdings Fourth Quarter and Fiscal 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. [Operator instructions]. Please be advised that today's conference is being recorded. instructions]. [Operator like Schmidt, conference Investor now speaker to hand Suzanne today, Relations. to would over the your I Thank you. Please go ahead, ma’am.

Suzanne Schmidt

discuss earnings Thank and you, XXXX call results. today's full-year thank everyone, Holdings to conference you for quarter operator. joining us fiscal Good and SMART Global afternoon fourth on

website Chairman Officer. webcast Officer; On Pacheco, and with Executive Chief are SMARTgh.com. This Mark being Board; at Operating Ajay today call the our Adams, Financial call Jack from is the Shah, and me of Chief Executive

In We go slide quarter press website participating addition, the information an and presentation on financial accompanying the information current various our website be encourage in. contains conferences on the earnings including will the for throughout through release. the most to company, you our we

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

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

will the Shah. discussed. over to measures included press of are during Chairman that, release. earnings this non-GAAP financial Ajay now GAAP Board, call Additionally, the in comparable will turn our Executive measures I Reconciliations call, to the financial today's be With

Ajay Shah

and take to member I'd of this Board CEO, call, Suzanne. Directors. you to Mark of our appointed is this everyone to all you, like welcome Adams. Mark Thank a opportunity newly introduce to and

about capacity joined Mark the as to and team roughly in two-thirds of and forward the our ongoing to transformation excited We the I goal help stepped my management SMART, the base When into of he's team, Board. Brazil. XX look of CEO years memory years, rest are I very the two over role Executive that Chairman My to lead supporting past of was had the back, team the that business built its of from in in of sales into build take improved gross to revenue grow with company provided At this built had scale new margins, new has stage, tremendous We’ve to time, and go-to-market and market us that our base our exciting further markets, mix, strengths. leveraging and compute strength company improve profile our areas business specialty and organization, positioning. and opportunity and up operational our diversify revenue a Since come while revenue storage has to a our long a this we've which the that the transformed our way. to now the grow.

more it technology more move we to management much With Mark SMART great of experience, introduction, of recently think I I enthusiasm that forward years, Mark and board new gotten have this the forward. know brings that personally. be benefit right Mark as to tremendous wealth a to I'll known for that that'll have our as take have, the a the is network and to I he and industry CEO. He person turn Mark. and many will share over

Mark Adams

Ajay. you, Thank

and more my working excited growth which brief our our actually foremost, of was valued the to of years. and the time ran to lead acquisition me Crucial, for of only the far. customer. the team members, and In Digital through built to team and of with Lexar, entrusting Media a SMART he on what I known thank rest I've Group, Lexar competitor dedicated for And Ajay president with When a the as later and as served I have so I a Micron many like diversification Micron, board First I've strategy. management I'd SMART joined SMART. global combination was carry and team become

operations our the the platform SMART impressed a team. with a the presents join knew along Holdings had core led, competencies. coupled so embedded appreciate search recently prior operating I'm transformation appreciation performance very In different is management with organization's life. What Jack I Global overall computing, more the with very than good and that and success, Penguin’s for on wireless also and focused SMART a company, to runs company, the operating in company Brazil, during strong that company with time business. a contributors more AJAY of into growing I'm I US, Malaysia. strong are I've and strong to discipline. short, So with combined the world-class in has memory SMART to growth my diversification, mindset, high is the excited computing the a at even process, the grown during

operating strategic business, continued looking to forward during leveraging diversification. our my in Beyond our activity background I'm M&A

today, semiconductor the (laboratories), increasingly at companies well to as more as industry facing advanced unique that difficult look landscape it’s more and develop packaging I clear of are capabilities. As use challenges

we extremely assets very compute, integration The as embedded very align is When our applications a the analytics. as storage. terms and that these valued of well Additionally, learning, are look future critical the compute memory positioned taking data to serve, is partner of capabilities, have SMART segments and with all increasingly in and AI, high-performance resources grow ecosystem on bright. well markets more you at they in we in such customers. computing, the to growth areas role machine

earnings a globe which strong expected, employees is to these coming share believe which on per during unprecedented note, times. with update, financial to Jack our who non-GAAP after call our better Fiscal across in a provide look net and we closer sales me XXXX at testament Let than will over for a and guidance. I a turn business the forward now results the ended excelled

executing our business made position mix our In several excellent and strengths remain trends addition, transformed we diversification particular, In that strategy, our an past in to capitalize and has progress growth years. dramatically play globally. over to the business longer-term on have good

two balanced net a ago, years sales of by XXXX. of now XXXX year with mix more We Brazil much dominated for fiscal was business at benefits. our fiscal Just enter XX%

For business Definitely the a to full-year our was as fiscal will XXXX, Brazil storage continue compute was memory and XX%, and fiscal specialty specialty revenue. XX%, storage of XXXX. grow of percentage overall in and overall was XX% compute

strategic importantly, growing XX% fourth and service driven each contribution and the increase is from the increase The of Penguin fourth memory, these memory, future. of we of memory. which the the This million software of meet focus. was Penguin's comprising good power federal scale key computing pools real-time of to the prior quarter $XX from Penguin’s a types primarily cost-effectively a the applications. XX% specialty example for into look representing for for of turn closer virtualizing One good by me successes software-defined announcing a some infrastructure. specialty Intel's compute to moves overall example Revenues are areas memory offering of new many And the quarter, demand more our review recent approximately applications Optane persistent to quarter, an revenue. quarter is increasing HPC compute. in of totaled our as forms offerings, Let spending, of of in launch of of with and it to I'll massive using and start solution forward of terabytes resumption businesses quarter. a in the

prior were driving the network, greatly history of partner, We pleased serving and in AMD is our Penguin update of as addition as that forward first be such the to of OEM the that, row and that and the and researchers. third capacity evolving for just customers. quarter, ago, COVID-XX fight which participating this the to between a needs the our center, from to in reflects endeavor. of weeks compute to available important AMD online an this year the by selected universities Penguin around to and in petaflop announced strategic appreciate We partnership data support our partner now long to look of innovation achieving our NVidia, partner distinction. two its continuing labs the recognition enabling preferred ways In research in announced we HPC year, We

Our recent Penguin’s continues the given of increasingly are we're we demand largest And to ago. XXXX. weeks strengthen, getting into receipt highlighted optimistic, customers signals by two going order pipeline our ever the just from

in Now, on to the our specialty previous memory, quarter. the revenue, quarter with totaling which line million XX% of XXX roughly quarter, was in fourth

Some of due to demand a seeing and our weakness. are customers reduction macroeconomic in and COVID-XX end-customer general industrial enterprise

defense wins However, our in the networking, activity markets. with strong, telecom, end new remains compute, and design

headquartered in our formation broaden We of Western the a Europe operation, geographically, reach also with sales to continue Germany.

the the on customers to a there new market SMART. in deep requirements has gain industrial market of ability this are team our we in region. the the for And Our of share optimistic understanding ground about and

higher-value XX% the of our the front, recently $XXX net we developing our and advanced and and as testing This Brazil Gen-Z solution sequentially. memory. our up totaled And move of and stack customers. which for quarterly easiest XX% generated a the to our complex shared OEM smallest the announced solutions designs remote ability and Gen-Z meet manager leading product kit, approximately the for create more up business, customers, fabric development needs industry's On increasingly we technology to demonstrates use finally, to and sales, software to million, deliver

the in recovery unit expected, an sales. by both Brazil, in and ASPs of average we As increase our in driven a the memory, improved density

ongoing our ASPs. still Brazil see in densities world continue memory mobile in averages, improvement to we As lag

customers, to sales, Additionally, in continued for positioning start fiscal our the a recovery latest us forecast XXXX. from a unit show solid

of help which advance to customers. leading like of technology our mobile Brazil our continue our stack our provide XX development began customers. major technology die Investments this, recently in qualification our in-country at operations, support We

indicated favorable points-based other memory favorable last the of we the less rules new to quarter, to and As have business. parts manufacturing been

strategic to and on a We made have recently areas, exit refocus SSD. business growth our the and and IoT, investments decision two efforts battery

update on our there. progress to continue will We

the comments. coming look for Jack? will financials, I provide Now a turn the before to to call closing back closer Jack over at

Jack Pacheco

million, Mark. driven million the end over and year, XX%, networking, financial XX.X% PC, and $XXX.X business than Thanks, network our share, We reported at fiscal model. the previous by net improvements sales XX.X% the The is quarter, specialty breakdown demonstrating grew key and the previous which by for follows; by end and the and of sequentially, Brazil. the mobile metrics. of EPS strong net higher fourth compute leverage higher $XXX XXXX fiscal market $XX as fiscal quarter. increased quarter, was defense, in servers Great. million increased telecom, of income net by XX%. Strength solid X.X% in server was all with sales and in industrial, and equivalents storage to financial quarter telecom, per a Non-GAAP the XX%, Fourth defense, end sales Cash storage, $X.XX reaching non-GAAP to offset sequentially, and other, and storage mobile the industrial, and markets. XX%, more than in PC, lower quarter,

change quarter Now, by fourth quarter, was Non-GAAP to around Brazilian of or XX%, margins moving last due to our gross expenses accounting profit profit In impacted Without with encouraging income government is XX%, was operating fourth QX, net memory, $XX.X is impact in manner. compute the and follows; had the sales, Non-GAAP the manufacturing. related of was how both is $XX.X margin for this to than that were the our compared of and operating X% the would higher. million, been XX%. in rest storage, for a similar and change to XX.X% profit Brazil Brazil, as net change, specialty local as it quarter’s million, guidance expected specialty gross business reflected also have statement. group lower expenses income, This the which no an sales. net gross XX.X% accounting

points-based system to is batteries. As favorable the Mark less mentioned earlier,

the a $XX.X was and compared in operating share have previous $XX.X alluded million, share, previous made of or prior $XX.X with quarter. operation decision totaled $X.XX battery resulted quarter million, fiscal a Non-GAAP quarter. $XX.X the $X.XX per discontinue compared quarter per expenses $XX.X with income diluted We our of million in $XX compared or million, Non-GAAP And million our adjusted net fourth for in the $X.X were in with million. million EBITDA quarter. business, the just-completed to the Brazil charge

was Our non-GAAP which than effective XX.X%, around was quarter rate expected. higher X% tax the for

estimate an well as packaging company many beginning calculated, geography, tax our domiciled. you rates for will full X% geography way taxes made be As upon different to know, will Example, year company profits There fiscal and are our a has what income based of where as net XX% the tax Brazil, rate, rate. companies for of while the a within at the has company be as in tax within is the by geographies, geography. or a are a module year

country Our we our quarter. full were year had profits forecasted to different and go fourth what by than into company,

million, Turning to receivable totaled working compared last accounts capital, with quarter. $XXX.X $XXX.X our net million

outstanding calculated nine the practice, $XXX.X quarter. and $XXX.X the sales goods million essentially for with were third a fourth quarter with $XXX.X Inventory around million both XX flat, remained of quarters. totaled remained gross day turns accounts outstanding, turns, respectively Consistent and sales which and on Our the cost for with are past days. at last fourth days the $XXX sold Inventory end receivables, million quarter. million at end of inventory basis, the compared at of quarter, flat

difference to position an $XX.X the quarter, meaning reminder, million to which $XXX.X supply accounted at $XX.X the increased services recognize a net for services last agency million Fourth the with chain a only supply the the at $XX.X cash with with of very business, from the year of cash flow and revenue profit operations a is and gross prior year. compared that in We net quarter. basis, prior on of our exited equivalents, as our net million million, end $XXX.X sales, chain sales, on of fiscal strong cash related the cash between is we As quarter compared transaction. million and end

was improved in exited operations the $XX.X from well sheet, our convertible million. the vastly structure, very as capital note restructuring quarter debt fourth a repayment and year. with We totaled that a balance year, thanks executed strong subsequent capital the and for as earlier For of

me our For guidance. now quarter, and And million the and $X.X provide million. those context of depreciation with fiscal tracking some our you let you depreciation, to QX was CapEx to with first $X.X for CapEx turning was XXXX, respect

to approximately income. basis, our XXXX. earnings per we made we expected be share fiscal in quarter, an foreign Our decreased for to guidance range $XX Please in or margin quarter, million. The approximately EBITDA any the XX% financial On first press gross financial XX%. fiscal and $X.XX. share to expenditures the impact non-GAAP is is reflects for to take of earnings $X.XX the plus reconciliations losses, earnings non-GAAP net for our will net with fourth $X.XX. income fiscal minus the provision GAAP - quarter of is quarter or are to plus accounting million. expenses, the release, quarter information $XX that or expected estimated minus for include the guidance be of XX% quarter, the for estimate $XXX diluted fiscal $X.XX, section, suggested further to of GAAP as be be questions. in includes per on does With share, first The margin, our Operator, view reconciliation a no share, compensation $XX per expense, to results, GAAP range convertible first and are of as million share-based the expense, the and OID the for the We tables let measures, which as intangible the not million to well range to to and change used million. per income of other we in asset items, shares debt discount, gains backdrop, expect excluding our Brazil, fees, operating estimate Capital the first turn non-GAAP exchange non-GAAP fiscal me amortization ready that sales Gross expected of of number details. the in our in the be first guidance be range tax and currently XX%. refer $XXX quarter net diluted to infrequent or unusual will to now earnings diluted to

Operator

roster. Instructions]. [Operator the Q&A compile by Please while we stand

of line Rajvi comes question from from Needham. first Our the Gill

is now open. Your line

Rajvi Gill

Yes. taking it. questions. appreciate Thank I you for my

go about we little should level Jack, And of the on bit what's more of if a the type margin change thinking change. specifically. and on be OpEx Wondered driving a gross accounting Just, basis? in you this accounting type clarification this detail, go-forward can

Jack Pacheco

Sure, Rajvi.

of answer question, the your part to last yes. So,

we by expenses and we about So margin gross - impact operating that gross expect about will talked this X%.

expect So gross a and to of decrease. margin lower we have in because would future, the operating expenses this also

in more competitive. points-based So rules been Brazil, to have also and they've the changing the manufacturing because of system,

had you and a to the to more So of competitive. as your into our for credit local what there out, to was give they a We the expenses. out made contract that goods at said took which looked the call for law manufacturing them rule and a expenses of the financial change to then operating this it accountants they they sold. make When reduce credit - companies this cost put operating other to adjust credit, to to had came

it’s so no it a we same on expect income, impact be to just basis. and impact two. of has reclass to go-forward It net the between And the a

Rajvi Gill

Okay.

kind just the one moving next? of bucket to it So from

Jack Pacheco

Correct, yes.

Rajvi Gill

zero. (inaudible) And

Yes. Okay.

Okay. Thank you.

just in you We to the future. - with welcome, forward of in working terms Now, and fundamentals look the Mark.

Computing, mentioned some we specialty it going as it In growth, like. the also many has that resumed now Penguin but drove should federal the some terms you forward. SCIF traction Inforce, segments Penguin and business kind mentioned - Artesyn Penguin. of contains wondering think and with how business, contains that of Is business spending about different the had I’m that

that the into fiscal are drivers go as ‘XX? So, of kind I'm we in thinking segment the year of kind growth - I'm what wondering,

Mark Adams

well. as you So, yes, to appreciate look forward and the working with question

very order does we Penguin. specialty the at you But about questions backlog up. the and And each noted, I compute built mentioned business think in they're out as storage at in a terms as up. Penguin And category. to funnel can end comment the of specifically broken did of them, those largest unique actually It call come markets. I has on our today ever be

I commercial think that, sector. the in both and at look terms government we of

sector, Within there fund for and and our driving and to a the And had you with applications telecommunications, on-premise, investment get having commercial as analytics. manufacturing technology customer largest opportunities closer with then gas, in management who's are oil IoT data using SMART provider Inforce We've you our Edge around areas academics, SMART hedge embedded that and like that commercial, chain and are to in do banking. advanced of Artesyn business, actually see driven business around our around applications. are wireless, related, around and of more our opportunities education, terms government, and segments one supply

And wireless more away innovative. some applications, as driven it's consumer further get in the you a role performance really that technology so solutions. providing IoT high from are pretty great applications environment, playing We're compute even

easier it's end to So broad application we're to of think used and why standpoint that it's a can from said into for it ecosystem, providing But end work. opportunities now break architecture a customers. a terms solution probably to is an way biggest one go that's having an businesses strategic of environment the I that down our that, in

really can those provide a for is growth. development the in customer point IoT, assets, high-performance our where a the of to SMART place have to and they're using that And managed using our increasing the We with unique out customer. the analytics for around services, strategic right gas that they're compute behavior, solutions customer computing capabilities of at the think more consolidating we technology reason carve IoT high-performance of future interface now and our investment

Rajvi Gill

markets. Is we're memory, this mentioned that spending there? and Excellent. saw enterprise had, color thinking of reduction view quarter a you're about telco? are how design and the Can offsetting there networking your the the next had and little Micron it? impact and wins How then in about any telecom specialty that and COVID Okay. seeing they echoed in bit by you enterprise talk We you a spending. And specific on

Mark Adams

like a and commentary, the there question. had. little Good memory in felt into just some. the of by fall. decade typical reaction I was by I the to a I’d side the the thought customers to inventory And a on And kind heading propped summer was perspective up did Micron have I the provide hit, demand way, grab the because COVID When the and like I

we're pretty Now, as projections said the having solid that, have we're from see that quarter. a confident going pretty can provided you Jack to strong QX, for

in Now, not case that announced. has semis broader the that been already have

softness not going dynamics And back just and so think to, business, to We're pertaining burn, profile seeing for the of that some what into I pertaining there's calendar that, relative Huawei, dramatic our a some in some inventory example, it's half been demand. like - the we COVID, unusual to their demand looked see year.

of a the good seeing has called So some maybe We dynamics other growth going suggests, position put but certain in a we're softness out pretty as lot in us certainly, areas, different number on. it in areas QX. because for

Rajvi Gill

Thank you.

Operator

Thank you.

comes the question of next Brian Stifel. Our Chin from from line

now Your line open. is

Brian Chin

just just first, role. Maybe afternoon. my luck Hi Mark, thank well. your you the to And quarter want there. you, best question, November terms in first in I for as Good of Ajay, aboard and of welcome revenue compute new maybe guidance, the granular, little a look what memory? implying to specialty at question. of sequential and - of bit specialty And also Brazil that's trend, terms in your part just you are more be

of is seeing, And are commercial you terms that that federal the The shift that? that what big confidence getting, market? it in is signals to in the trend? compute, or Kind in order that timing revenue specialty against other you're those Mark, more directed near other the part was what's you're term of gives

Mark Adams

to Yes, I The order our referred good indeed was part federal question. of spending.

on business seeing increased since terms in of we're resulted the is should had environment, business. a in scale, there, in continue our find we're opportunities ever this demand, to backlog landscape healthiest about very as pretty and market the new both drivers about and position, Penguin But long our the are you is kind spending there. And in you the say and the expenditure. that. and across HPC And federal has But because think so probably about of I had SMART. excited we've competitive think an we when end uptick the this commercial, segment at funnel history And our

said, hot sure, data analytics. high now, we're applications around providing getting very seeing you're a out demand. type investment to aware, quick Like starting in with Machine world even that. as I AI for and people learning develop As right and is further of investment the HPC resulting a lot performance, are of area, kind that models into in rope an analysis data

So per while benchmark you necessarily had funnel sure a we're specifically. we've want bigger you do se per we to have not giving for about we a much as we're doing number that to of the look, make some se, kind since for But had owned I funnel the that, not as a business. that implementations successful And very beachhead we've We optimistic funnel, a the further we we’re growth. of see best understand.

Brian Chin

been in Mark. SMART compute strategic of specialty the but directed the understand and to existing do past right Maybe maybe services, sort mix look with the thanks. expansion infrastructure? augment additional evident days outside need or high balance specifically, achieve to looking the Clearly, question the you, company at market, offerings, Yes, early performance for it's of you to I into of customers, the has product, you, Okay. compute another years. few at

Mark Adams

I think that's right.

this plus on margins in there's acquisition Day margins recall, think And those upon day the think I one, approaching to XX%, two gross kind areas are minus. or one maybe margin about business There day that one. think since the of improved were if is, now I roughly I XX% it. XX% margin. we've

set different have kind necessarily software to an to likes we'd we'd but Intel think to. AMD business us think others, of think from be of layer through which a for like partnerships, of of core and the of Now, to we of to that value going having or capabilities kind terms in said have two I that, things, application today, software, what don't activities And services a that is with and and either capabilities partner we partnerships, good with but a inorganic like we expansion. so critical co-development, more add add have that roadmap I develop and existing NVidia that's get be just it's I you the that's going a us think a at to platform servicing in on opportunity opportunity XX that this. deserve got at one big hardware and company, pretty espouse is strategy up in. go only invest we sophisticated more Penguin. as is have to about forward, This is I what margin tell said for software again, for reflect on you, going and going do of I'll great based more. this it, and and think the stack It's to would leg we we to - We've days get going of layer top the our architecture

Brian Chin

in content local Maybe it's company's content, been a I in color. site, had was terms and corner? in just pricing phone market of the you on curious, ahead you pricing, what trends? the all confidence and favor. the thing the great. Putting since a expecting the are for quick or seeing changes Brazil. the together growth what turned that also gives that we to content quarters Thanks while Brazil has That's units, one working in And

Jack Pacheco

now mean, in-call. I call, XX So that's to Yes, I and we've talked now - right? the we’ve gigabyte about see gig in Mark we're starting as product I on, again think XXX think in the densities a mentioned we've grow call, developed that early Brazil, last

and go it's amount four based we've going flash XXX would used, that that Brazil look on So doubling is guys. This don't XX, density we in Remember, the right? up we under sell are need, the qualification. try qualify and qualify and these what the if be product that cellphone product. they it, We've times, on the and ever a It’s of already at the our with you then worked products Brazil, you in new go is to right? go roadmap. So

the world the density right? they're Brazil we Brazil when about know moving in is behind of we're also So lags the the products. remember, And densities talking way to phones. balance So world, higher the

So seeing and at talks our cellphones densities they even improvements, bit go from being like a up, to were. they And up. where things that, the slowly number we're go up of Brazil, in sold They're about look starting when will if it little we data catch it turned corner. the

growth cellphones unit in in seeing PCs we're Brazil. and in down So

turned both little both. bit on better it's for getting in Brazil. a demand So down The is

Mark Adams

up of Yes. going is The the the just going platform requirement that's to with consumer. in hands the And globally. on technology driven couple because that raw evolution expanded get we use and of memory of performance

where may and to lag, good application line. like drivers. to of there other position advantage Brazil So pretty and things capture ASP a We're going eventually it’s drive in to trend higher the be going additional XG the

Brian Chin

Thank you. Great.

Operator

you. Thank

Our comes from the Kevin next line question Securities. Rosenblatt Cassidy of from

line open. now Your is

Kevin Cassidy

congratulations, on you Thanks I'll give then. maybe taking first Yes. my Welcome, question. also Mark. Jack, the question for promotion. And Jack, your But

stuck gross the On the specialty XX% that margin? some range. to … in be discuss gross to margins What’s you memory, a seem there Is bit? opportunity Can little that increase

Jack Pacheco

that you're increase. bottoming to No, gross new the opportunities specialty we've I some out And been there. qualified. think have for seeing Definitely, products margins had

of ASP margins. new you qualify kind you translates And sometimes have lower when a product, products, higher which into

go improve get historically. on margins impact year, the have we they back some had margins and as the to and year is been through our to that. specialty going closer view will back for of forward, But next we've where So half definitely get

think specialty go to at now this maybe the improve - for low will they they start in And quarter, quarter. next will we're again, Kevin. I here margins right area

Kevin Cassidy

get Okay. to XX% Are it thinking say like up Or to range? you back XX%? can

Jack Pacheco

Yes.

in there. get teens maybe the I think high and then slowly up up

get excited, but. too not Let’s

Kevin Cassidy

the enterprise, is Mark hoarding the demand down? is of issue? it there you some to that how let on happened an Or now kind Okay. about in like said, run inventory what just And that early have inventory and

Jack Pacheco

Yes, I mean, our some of right. look think so. I at you customers,

memory. demand, the large some been for bit in be space, Some would our demand. If our little our to you of down be what spend specialty follow guiding guiding down right? right, customers a are customers definitely they've enterprise the going to QX in impact That's large of within going

they early little issue had issue up think our to built demand for translates question inventories of customers, as I bit And some back the which us well. it's think in a on demand I is, the a maybe summer.

Kevin Cassidy

the on this report Congratulations for Thanks. great. environment. Okay, good

Operator

you. Thank

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

open. now is line Your

Sidney Ho

Thanks for taking question. my

changes? I'll toss any to question on, And Maybe to more all, it's little direction, that focus are of weeks talk strategic announced early. guys that there Can there that, a or are changes there you welcome importance related you the want ago. aboard, to areas of a those organizational you. you some Are the about areas to first you Mark. First in maybe want changes few emphasize? whether

Mark Adams

let course. Of Maybe me take strategy. the

and then that you SMART at delivering you when has the think I solutions, segments the specialty computing, with you embedded point, specialty I a high-performance defined this been businesses. end and its all differentiate of markets say Brazil specialization continue if unique that businesses, we And look set our markets in Obviously, strategy to memory. think have. about of wireless of versus capabilities the own with they is of in segments in kind across would where can diverse

specialty So what is. in core developing subsystem, is solutions strategy the kind of at theme around common the of our

Now, prompt kind organically look expansion development, differentiation. to both make little on want of as to this our capabilities us developing also that talked inorganic acquisition but on bring both we bit additional and we've to strategically customers through around to technologies go-to-market to sure call, And more we're that on a allow opportunities. will

different not opportunity see I what the side standpoint, I strategy sit execution two, would very least on the it's the am year we and an from a of bullish the not is, over running grown Penguin, And as it, there's so But think today. business, leveraging I I say last the I as there. operating wildly us. yet or here Penguin at mean, well, platform companies really hasn't for

is right there's really true go-forward a much wireless the that same embedded our opportunity a great to energy place think I on and basis. the and business. drive in focus business a And to with better

of at supply not manufacturing, go-to-market. business. we to you enough is that maintain those some And we accretively platform find go business, and a also out scale core types where in about there's and low-cost look go focus, will chain, that want terms as to acquire very the platform the side. differentiation opportunities business. grow and right for I we us to is to think think of unique about specialty SMART's leverages We're that more competency where so operation And leverage just opportunities. the that M&A, we and business of looking unique. the And leadership around then differentiation we’ll And when give market We have, have end the it the execution have operating and application markets,

are, we're leadership, we right Penguin, these to example, one is an KiWan, and that company leaderships company on right really like an team a forward, strong them And areas. the these for we make highest want think what the in you a ways will the the the both in we company, will And to and inside a And to standpoint, these organization at incoming that I business, place, standpoint, where have top And to margins. structure at know leadership go-forward of similar give providing our a where company. the days. businesses, our businesses, to change, because to a that think have next emphasis focused you be whole the have the satisfied CEO, would we put to that’s value because think grow, continue as Yes, XX to the I that, not expand example, we're to managed as so think put on allow to slide, and because of the expand go message them as want And in think be driving the and the to us. and exactly outside for leg PowerPoint that's find providing an while opportunities the grow to us my we we going margins, to we got sure broad we to stool our I customers And that's in And type business outstanding the of we this and as leadership and and That's today, much might grow going margins we want KiWan forward differentiation And we make that's critical tangible, but I'm to a in strategy to would above and in, look are it's the don't other like to want right development more lot where reflect of do able the And support to a unit established person imagine, he's on we embedded business we for outstanding that drive for right new there's the have the leadership leadership them. beyond, value. we but right the at an build of when Micron, the services, as to an very going Brazil. establish. win XX execution solutions Jack that's of career the the kind Specific to businesses, right or our did capabilities, place priorities we for as that want guys these believe of an executive earned trying sure to place, will a to in we positions in capabilities you past, mentalities. to business these has go drive business. capabilities his execute. really on on a these nice of that businesses my expansion has be crafted across you’ve as I well it's to in memory announcement the have be to we're from And demonstrated of this to And of are side, Jack all clone plans, going got go-to-market. over set have basis, he about as strategy. accountability leadership that from right and grow develop

Sidney Ho

Thanks Great. that for detailed answer.

the Moving talked a was quarter, of terms few generally I pockets on compute you pretty strong, commercial maybe of business, the weaknesses it think in with guys about last specialty contracts, to little back in results came your prepared end I a talked would federal bit. markets. Yet you remarks, a And QX coming than fiscal the about have lower in expected. little business

mix can a Thank give of you normal guys some few initial markets? of fiscal us a surprises do federal and versus end when that terms you - commercial we questions contracts lastly, in federal will you. how some Is there there of have So, visibility was color? in Second, come any contracts negative these environment? you the pickup any here. kind One, August? back after about between should saw the And QX think in end-market

Mark Adams

relative what our a and great lot will But that's the in company. said part. of major terms business this in administration demand, see up a to for first can design second unknown government federal what in of orders. obviously, of there's per the take the the bit that, se picked happen we from - and November. opportunity Having I'll some wins for has area an inbound The us

we're but specifics, Certainly, and one specifically we so that in on of is I’ll we're color that hesitation in give win And and some long-term - let that to bullish cycle the opportunities embedded some have of with bullish. generally the area. are following but terms may believe also some not that. We we that business. area. And know, through more exciting, with a impact got have We’ve just the Penguin growth - fruition, we ride our solutions just and November because we're in of can again, the prognosis. little that And Jack pretty the through that but design don't come

Jack Pacheco

We in was right we we anticipated. was. - think don't didn't I in it QX, Penguin we think as thought it business where - weaker Back We than the federal thought. we think performed Yes. came

listening better tell bit will QX you Penguin So be statement, that right? than think, to in we than a little Mark’s thought, we maybe stronger in anticipated. had a doing would little I it potentially probably originally QX,

sooner business some popping So is a maybe that little of thought. think the than back we I

Penguin So QX for out good pretty the we're group. looking a of

Sidney Ho

Okay. Thank you.

Operator

you. Thank

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

line is open. Your now

Blayne Curtis

just thanks Hey, was curious. of because taking question. It’s actually in my good for a lead kind I

doing. will prior be what asked segments about look to As the question November, you

good. be will specialty said You

mix square moving the trying gross be just the think was that margin, I said is you be would compute, up. would it specialty You with that margin guess, down. to And if up. which to would

walk you just that. if So me through

Jack Pacheco

Sure.

think specialty But margin. yes, we That And - and compute, with up. then we at, the right. look mean, the Brazil, that all a higher Brazil will in So, be I change overall gross you're has that.

compute will Brazil have down bit I do come So, the will little drive bit think, Brazil, bit, margin better in quarter QX Brazil Blayne, a margin a that in the little potentially. see But the potentially and down margins also a But the - quarter. margin in a little will will help drag specialty you'll QX, on specialty bit, memory the little be on while in specialty us side.

Blayne Curtis

Okay.

from accounting at change to the OpEx as And implemented? right benefit therefore fully So, is it? that some way well? should it in not look Is you see the

Jack Pacheco

were as there. we No, implemented. go-to-market we’re down driving just It's the anticipating in margins Brazil it's certain that in factors, quarter. based fully in QX Those some volume business QX, on lower the

to We negatively be little a impacted expect in margins QX in Brazil.

Blayne Curtis

you. guess Got on of kind then Brazil a market. the two-part I And

system, growth the and story, good like Brazil. batteries. unit mean, there's And then kind just driver. strategic densities I the people of the as editing you nature mentioned new the in I'm of just and of there's curious, a density. how there's credits kind You you're use had onto

people memory is growth well. that category may use as in more, that clearly, drive you said would and have the So

those you - look have and kind the there growth. has to there out, other factors Brazil, quarters, of as at the as is should segments just curious, future that and part batteries I’m but memory? driven continue you you So at I areas, guess what then we or think think over couple look most wireless could areas other just the last are just any of And look to you about any for modules used you

Mark Adams

their bullish of we're very IoT. developing believe starting two for comments memory an some work we’re memory traction. SSD in procurement around is products, it which One scale development I in-country. is some around. And attractive SSD other pretty with around in get that, in a been opportunity component development revenue to share to for that on of the commented in we're exciting us, makes terms We customers in the starting early those given We've in-country. product getting actually and our and

some So be go-to-market we'll take cultivate product as well. develop and some that I and around IoT, able as think capabilities we SSD first, in-country then to of

more one So think as I so, for We think SSD business standpoint. a out scale, we was and a over found where and and are difficult our not shifting battery IoT to us production time, that's from the local where direction. advantaged we're

Blayne Curtis

Thanks. Okay.

Operator

Thank you.

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

is open. line Your now

MarkLipacis

the two Hi, questions taking thanks all thank for new for much very you for role. help. questions. my the Mark, all, I on Ajay, And, have first congrats of Mark.

the about companies? exploring the of for Mark, M&A a appetite And equals, equity? a was have view about more. an or lever one, transformative and of little you tuck-ins like the you you First a with kind your like fill hoping merger deal, you or extent maybe the some issue in willingness the terms thinking debt to of out share spot you I up to could are on and talk framework M&A, started that to size on of Can bit bit your of sweet a

Mark Adams

Yes, sure.

a and in a and with period, those to and help financial think a of great is some gave four in job So, five provide great done acquisitions you those the obviously, have about memory me times us during turbulent argue the or of the for who company I Micron you then built And continuing industry. that platform life, some in how a the when Ajay year acquisitions, so knew prior team, And on. to we really did engineering, would major opportunity, the growth. survived, speak, that XX

to today, the business sit company, today. the activity that activity, some around additional M&A think I spaces inorganic SMART, could we core as really use tangential

embedded got so memory you've wireless. in of areas And confused

sure, we specialty approach transformative at you at less well, these massive of businesses. because where in to think from our some got subsystems what that, because have SMART, business go-to-market do add the very and these holding a consummated. customer team could standpoint, when said don't to equals be overlapping but lot products think growth taking And to Having to they're that of expanding the those Penguin think interesting, individual develop company much. memory current I this point, should there's these adjacencies market, so a Ajay model markets, and deliver company from. manufacturing in I of And unique a merger you've to be that necessarily the well, value and areas, opportunities set, acquisitions already can come is from a so and not

expand take that mergers built we'd are made we yet has the some Again, I allow is our criteria specialty advantage reach of be manufacturing just these and services, don't businesses I platform. three And successful advantage think really markets. expertise, has adjacent criteria at necessarily specifically. been that type equal question SMART of about that there chain us industries So your out operating significant new that businesses are what could end those adjacent capabilities today, is upon. a but our go-to-market, exploring answer solutions good support that, industries our require a and think number And that operating different I more I the But quality. discipline industry. of the we And necessarily those in look And think there's defendable, supply that to see as should opportunities about, be at differentiated in same of have again, for I in transactions take to of competencies of SMART. for have thinking that me into markets Again, discipline. the criteria

MarkLipacis

investing CapEx explored into that you yourself services that as the think have to also, what wondering, solution was or there? if mentioned extent like an Penguin, that yourself, Do for that offering application developing layer the you. a And that may. follow in I improving hosting On there's and enter believe I profitability. there's system you looks the you very software opportunity providing up Thank the the I a (inaudible)? is yourself, view helpful. That's I'll capability. it

Mark Adams

didn't out. of a apologize. calling I good I do Yes, job that

the the And But advanced Penguin on in POD, earlier. I services those performance, compute that you we platform, Well, Demand, think all technology and coupled P-O-D, would referring develop services, really service was memory as Sorry company. when today. us. an capabilities, to it'd the growth comment to power business go for assets very software the and what unique about - When part high business of desire for and storage. business have roof are driver integration to be those a it's of on terms SMART about with type was On of under based enhanced of a high that our

on right And about leadership, the make good And I And it in go going so in an focus they because example as and the in well. my sure place right companies I in in what we're great right go have pan of need and place, a and right out there a plan, into go great them that. for to board execute. staff we we plans out execute and lose opportunity and it earlier execute to and seen flush run to in which that a said team place necessarily team is, them I I've these my the takes good to skillsets go get that, to quick those, team we basis as believe place is, like the focus. in and allow What don't is, go-forward like is the lives you’d commitment that off these to and We’ve prior ideas to have we larger businesses. think got a opportunity as

grow are we around that services of software solutions invest the margin. and in architecture, will Penguin like or software capabilities on top And things to layered POD the those

MarkLipacis

Got you. That's very have. helpful. I that. Thanks That's clarifying all for

Operator

would to At to further you. remarks. like this for over call Thank CEO, turn showing back time, Adams, no I I'm closing Mark the questions.

Mark Adams

you, note a times. summary, challenging In these on amidst Thank fiscal concluded strong Operator. has XXXX

And support I'm months that both in growth, to strong through position I of you We for balance the multiple are the and meeting outstanding and the the portfolio and evolution. in the the believe our phase sheet, work company, optimistic globe. growth an opportunistic lie look SMART’s of and you of about organically I vectors, interest we're our for accretive forward employees differentiated With in and working M&A Thank excellent ahead. technologies, opportunities across of ahead. drive to next and with grateful

Operator

Thanks this Ladies today's participating. and conference concludes call. gentlemen, for

disconnect. You may now

Penguin Solutions (PENG) 1 Oct 202020 Q4 Earnings call transcript