SGH - Earnings call transcript Q2 2021 | Penguin Solutions, Inc.

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Operator

Thank you for standing by. And welcome to the SMART Global Holdings Second Quarter Fiscal 2021 Earnings 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 [Operator Instructions] I would now like to hand the conference over to your speaker today, Suzanne Schmidt, in Investor Relations. you. Thank ma’am. ahead, go Please

Suzanne Schmidt

you, Operator. us SMART you joining And Holdings Good today’s earnings afternoon. results. on XXXX discuss quarter thank conference second for fiscal Thank call Global to

Chief are call the Chief Jack Ken call Officer. with Chief today is from Operating On at Mark being smartgh.com. and Officer; webcast me Executive Adams, Officer; Financial This Rizvi, Pacheco, our website

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

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

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

release. today’s press discussed. the comparable to earnings Reconciliations GAAP call, be are this will during measures included measures Additionally, in financial non-GAAP financial

we Rizvi, questions. a and will financials We will update will review begin the Ken which Mark Mark? guidance will with call CFO take after forward business who CEO, and then Adams provide the

Mark Adams

make ‘XX of of today. joining we strides very second on well believe and remainder growth successful had on diversification Suzanne, strategically, great operationally, continue and you, and our thanks Thank fiscal year fiscal for a you to our a We all we of where We’ve set year our initiatives. as are as significant the up for call us beyond. to quarter

the planning At During is call, we drive process. these continuing and chapter are key personal highlighted leaders. that to Jack Ken people, I earnings to Solutions been hired able the Thierry the we’ve in earnings last of of on my of Officer Pellegrino philosophy SGH, Since known pillars Solutions. performance last Group. new very Intelligent a invest our purpose, Chief I’m the driven by key Compute strengthening CFO, as our past our pleased shareholders. management and President joint with the constituents customers, progress our of made President and in employees, our the roles of suppliers We for of to addition to Storage quarter significant team as talent all attract Memory and and including terms company. several call, allowing we with is to company Solutions focus Platform of Operating level have Group our formerly Rizvi this Specialty

brings companies recall, to Claude us to Claude Products. more where you’ll years Procter we experience to LED, than with comes the And & of their pleased such Demby are Cree L&L Thierry HPC he that and lead and leadership As business. led have of as President Gamble, AI as addition XX GE from at business. Dell,

strategy. reporting Chief Cadence of Cloudera new Goldberg, Staff role General Design human various and and General to Corporation us on as roles on our our Anne will management have our held and SGH. is In with building HR a formal overall focused joined recently addition, Counsel most of Kuykendall MariaDB culture me as senior take VP General Counsel now before winning leaders April was three legal that of Bruce new Counsel and a Systems. new Anne Xst. resource for for

of as be two the and instrumental decades is VP of property is nearly brands, able the Valerie end becoming And will M&A growing markets With offerings, to intellectual us Jean excellence. outstanding differentiated recently our customer and operational worked Marketing Cree’s as after A which to and development Lam expand diversified Jean of a new major at step corporate foundation and next Office after XX relationships, and technology, Valerie integration. chapter the of at acquisition the who are the with most completion on greatly LED, in SGH leveraging second expertise joins Micron in led capabilities Transformation. us served of closed VP of industry-leading years fiscal of product her McDaniel while supplying marketing quarter. focused come our of of SGH of portfolio, us our Sassani the Cree she family just Research. beginning Joining addressable communications. strong teams we lastly, March, where our leveraging at for

will With the lines primary LED, three do of addition company of and organize Cree we now the business.

Computing Intelligent Compute and and SMART which Embedded consists Penguin Platform called SMART First, Solutions, formerly Solutions Wireless. of and Specialty Storage

and solutions, consists Memory Modular of business comprising Solutions, growth business outstanding our we three Cree which XXth, opportunities on processes, business, LED to Brazil our opportunity upcoming to market April the are Next, align largely more and hear have Specialty we leaders many positioned purpose, the of of consists you’ll our on and segments, initiatives each with people, At By our SMART better address in LED. U.S. place, ahead planning outline these from of detail. the which on in finally, as operated Memory our execute Module tremendous Technologies, to us. even these Day Analyst leadership our in and focusing strategy

the came on focused than quarter results. expected. financial and strong diversification During metrics for of fiscal quarter QX, fiscal revenue in the another and non-GAAP gross second Both key at margin All remained at of more better strategy, achieving our non-GAAP in detail guidance $XXX at our growth were high while exceeded share will we range end per the Ken XX.X%, cover respectively. call. financials in these million, guidance of the And last later end in provided coming earnings call $X.XX our high of rains.

second SMART wireless, SMART to turn starting approximately performance, total reach Platform had our Computing sequentially strong which a XX% our now million quarter very Group. and grew business Solutions Group, Intelligent of This revenues. SGH embedded XX% with along quarter. to $XX.X me Revenues includes Penguin Let or with

is Our embedded and customers performance markets vertical across energy, and providers, and computing, edge services, XX% performance evolving the been reached improved and also than continued high growth expanding across prior sequentially. key telecom. more excellent progress has solutions. up as XX.X% computing, service be the quarter, The team grew quarter in by cloud quarter. computing federal for this second fiscal Solutions by Gross from XX.X% driven Demand Intelligent making on Platform Group AI financial and services, by to which fueled software margin the in such

XG and targeted for ‘XX. half team of in These the to XX continue enterprise is AI by a are of platforms a One embedded solutions HPC Platform new slated number of are Highly AI hottest top of for recent the information garner Tundra The servers We as the one its of computing. edge proud example XXXX was which in workloads. for focused areas are Dense and fiscal second CRN, Penguin applications. new platforms and analytics, and and introduction year on as recognition the leader retail, HPC in transportation news of for technology and military, being we AP a named and solutions source

remainder this strong year. have and to continue momentum heading into QX of fiscal the We

expected Now turning the revenues Business Memory and up encompasses in slightly Solutions quarter the the year is our X% Brazil. and to previous Memory Memory million $XXX.X compared Group, from the Specialty in which as Specialty to quarter. as Module same down totaled ago quarter,

with optimism demand showing recovery, to returning industrial is are we regards market COVID potential customers. the As a from seeing

In making addition, hyperscale, such data good expanding end progress and cloud markets, transportation. we centers new are as vertical into

base continue with to surveillance such storage in memory as controller NVDIMM cybersecurity products Our traction solutions. gain applications and customer applications

is based showing driving memory which applications. need computational is designs in combined early demand are high workloads storage DDIMM AI emerging some utilizing HPC technologies. CAPI such and for Our performance memory Emerging as Open growing the success server solution with module advanced technology from memory

our DIMM life aimed operations and approximately year, and due last Module On maximizing a grew totaled Solution a and we last the In of addition, is network memory if end at with recently In business exclude flat bandwidth increasing X% notebook battery our revenue compared and High year-over-year of approximately $XXX.X unit critical data basis, million to quarter. memory. we mobile reliability, revenues sales XX% by and stronger were applications. densities Brazil introduced to new up compared was which and networking for center revenue Density related

QX We revenues both higher memory. expect in by and the driven to Brazil notebook of generate in mobile units increasing

We knowhow, capabilities catalyst business believe invest to by our Additionally, a country year and be strategic packaging supplier will our fiscal relationships. to manufacturing advanced for in XXXX. we leveraging build capabilities SSDs continue SSDs Brazil in growth in our

LED to SGH. model. progressing to thrilled as move closed Now on to integration turning we LED, is wafer The team wafers is The Cree off the carbide sapphire Cree start. transition to Xst the a acquisition plan on from is and to welcome March silicon using great to are well the outsource formally the

Over these substantially transitions. to the next of XX months, complete expect both we

applications about of fab agility, especially and markets greater a Longer this platform and which deliver we manufacturing where excited to will which technology resiliency leadership, lighting, less a we to will value focus a growth. based sapphire all transformation contribute key on drive believe profitable lighting video We accelerating proposition. will term, high-power are LED targeting and Cree such create screens, organization, as differentiated mid-power

architectural spectra, these ultraviolet. including Some lighting, include video, outdoor and the well horticulture infrared as specific in examples of applications fine as stadium and invisible and applications pitch applications,

You’ll plans Day. look to now, QX. to a new at like guidance for Ken the for And and you financials in closer CFO our our Ken? Claude Rizvi, hear more Analyst about at I’d introduce these from

Ken Rizvi

Mark. Thanks,

and execute as saying at I’m let forward working a and with am Jack CFO strategy. and how such continued I Mark, the on pivotal take at the me our the for Jack’s time diversification SGH begin to role grateful First, by on rest team of look we growth guidance to at excited SGH.

key the earlier, sales the quarter fiscal were year-over-year million, for the high quarter range. $XXX second second As increase Mark from of guidance Net XXXX. of of with mentioned of end we a XXXX strong all fiscal at reported our approximately quarter metrics XX% an

of was second In XXXX. quarter addition, came XX.X% gross for earnings $X.XX share at the fiscal margin non-GAAP per and in non-GAAP

sales saw revenue primarily XXXX $XX high of second as $XX.X to second known the XX% million Group, XXXX. Our and Specialty fiscal by Storage fiscal Solutions, formerly year-over-year was year-over-year the Compute growth quarter Intelligent Platform million from in of our Solutions in quarter driven growth which from

of by on approximately of revenues a revenues reported fiscal $XXX X% which Group In million addition, an increased million our second quarter was an approximately XXXX, revenue, the Memory Memory $XXX Memory was X% approximately year-over-year Specialty approximately which XXXX, year-over-year, Brazil which of reported of and of increase in Specialty of quarter includes second Solutions in increase X% the Brazil, basis. while fiscal year-over-year.

in Xst Non-GAAP second of $XX.X fiscal of Cree of fiscal will million in related and this million flat credit. was Brazil Cree from expected acquisition the beginning XXXX. expire our R&D which is March of along quarter including quarter reductions, This of LED LED from was our of offset R&D with closed Operating with these lower The and in majority XXXX the for vast Brazil. second credits plan other XXXX. Brazil in financial credits XXXX. move million, savings on margins financial Non-GAAP to law decrease the expenses from to helped XXXX. required the approximately the of calendar the $X.X begin the the through second the spending, credits fiscal specific of We of current gross financial from and operating $XX.X quarter programs. expenses second reporting Manaus, offset in spending to is Our third quarter were XX.X% fiscal to benefited to results benefit reduce cost for down year to quarter cost XXXX in expected we

$XX fiscal second was adjust share the sales in to Adjusted fiscal million XX% compared pricing expected to to chain $X.XX approximately per was of year-over-year, of reduced approximately sales, XXXX in XXXX. of for $X.XX XXXX. per compared for X% credits. earnings the In quarter the our million quarter the or or Non-GAAP modify second addition, EBITDA the XX% $XX.X as supply second quarter second quarter approximately plan fiscal of of share up diluted per share fiscal to XXXX the of we

Strength categories defense Our and second breakdown industrial servers follows; Cree business. telecom storage by more quarter sales approximately drove with the Please of end-market growth quarter fiscal was new XX%; net server basis. revising these XX%; was accurately and were LED’s mobile fiscal as a on will was of for for year-over-year and the be business, the storage addition XX%. and from other we third that most mix our of note network PC was reflect the and the of XX%; and to

mentioned earlier, Solutions, Solutions, Cree the discuss recasting SMART and of Wireless areas, and in addition into Solutions. with Penguin, the Memory will Platform Specialty of Intelligent which three Mark Embedded quarter businesses, is our Brazil, As be a beginning the LED, third main of Memory business LED way comprised we combination and which is we

million as a versus Inventory we with in prior last as $XXX.X fiscal the receivables Turning receivable, cost a past strategic with quarter, we million XX $XXX.X challenging XX.X sales the more and to totaled days turnover million in $XXX.X the came supply of turns in $XXX.X of environment fiscal inventory quarter. times ahead Inventory ramp prepare goods the end prior net working XX and our outstanding of sold on revenue second compared compared global totaled and are for third at calculated accounts $XXX.X added quarter. which with X.X higher our the And quarter, practices, at quarter. And million fiscal second consistent account for our inventory sales compared quarter the gross in million, quarter. capital, end at the respectively, quarter. times our of with days basis, a were second days last $XXX.X day fiscal and million, outstanding were

and quarter. sales supply was As end Cash net which reminder, profit million services only the of $XXX.X the quarter, chain we for between meaning is an net share the gross the chain purchases than are our difference of revenue lower net and services supply quarter business, on $XX and on basis, million the which second transacted. related sales is and the the a accounted to million agency reflects recognize the fiscal at that equivalents $XX.X totaled previous in as

compared a in due cash flow totaled was in capital, $XX.X million, quarter our the XX with from Second $XX.X cash flow first strategic quarter, basis, including from sequentially purchases the down primarily and to $XX.X incremental working totaled of from On operations operations trailing prior changes quarter million month inventory. million.

our margins now of net approximately amount, the $XXX quarter quarter million contribute depreciation, depreciation Cree grow sales to million. QX For CapEx XXXX was third to at We million approximately $XX our will $XXX expect tracking turning fiscal weeks in approximately those Note, of of $XX midpoint minus guidance. XXXX we Our year-over-year to our for was XX XX% Cree you and or to expected normal quarter non-GAAP for X%. million, sales Of in gross this an of have third of due to $X.X of third of be plus CapEx in currently XXXX from LED the Cree timing guidance. the XXXX and for the third that weeks, $XX And LED to the our million are increase believe our our instead quarter XXXX. transaction a XX% of of the LED closed million approximately fiscal we fiscal of XX to only quarter March,

the Our our be addition $XX expected diluted from range share-based $X.XX. XXXX, by in an in convertible share fiscal and any gains share compensation the or our third primarily of non-GAAP per LED third infrequent on as discounts expense, view asset in foreign in guidance will non-GAAP to investments of exchange we plus minus the Cree the support third amortization expected items, debt of expenditures The operating On quarter million the excluding and expenditures growth LED for million or the Platform well an plus earnings $XX will our the increase as XX%. earnings beginning and expected expense, $X driven costs are $X.XX compared third $XX tax include to expect quarter fourth folks for is the XX% per range the not for approximately does range the include to expenses or be fiscal to quarter have Cree in fiscal be of of of for basis, LED. to range of $XX of diluted losses income to intangible the week includes additional fiscal quarter be capital million Cash quarter, in unusual to million million be to a other that expected non-GAAP additional as $X.XX reminder of to provision approximately quarter. capital are minus Solution a Intelligent GAAP third $X.XX. Also, one Cree for Group. or

diluted the expected a million is XXXX of quarter XX be GAAP approximately third current shares Our to stock price. accounts share for on based

Our note non-GAAP of be for XX approximately diluted count benefit includes third capped the XXXX quarter million is to shares and expected of convertible share the our calls.

adjusted our environment, equipment, quarter as of with assessment the cash as fiscal the purchase Our will due opening such consistent based impact our The have should value to fair not the business. for requires contemplated balance may supply operating well COVID-XX third LED’s These accounting plant in the as factors the among items, guidance. been impact any U.S. to and other which EBITDA the us impact forecast sheet. pandemic. on value which have inventory QX which from we potential constraints in global is fair flows chain, property, the and in intangibles this to guidelines, contemplates the areas current finalize Cree value GAAP And

the net details. in and income Operator, the reconciliation reconciliation next to to details provide line earnings and press of please results will the XXXX. Information EBITDA adjusted non-GAAP GAAP GAAP open tables our for further quarter to measures refer release to of on earnings financial of on call Q&A. Please this for section our third further Financial We the non-GAAP

Operator

you, Your Thank from [Operator Tom the O’Malley of line presenters. Instructions] Barclays. comes with question first

open. is line Your

Tom O’Malley

and guys, and really Cree just welcome on here, Ken. I contribution, segments I on the think afternoon, Good on segments, pretty here the more other you’re us give indicating color the Solutions. midpoint of the nice results you ask some at to but a guide you’re the Memory gave little the strength, color great us congrats two heading into and wanted seeing QX million? on you where Intelligent the obviously with a Platform strong on $XXX because a Can being range Solutions

Mark Adams

for the been workloads past strengths, primarily, our calling the end our driven Between Well, strength we’re on oil federal business, in of AI And calls Thanks lot with Solutions, three in the gas, growth. are really those I’ve Embedded driving they pretty around in the as Platform space. a cloud we’ve Yeah. Penguin driven our markets energy segments, well are as bullish Intelligent seen segments question. by -- now data primarily and well center as the in met and upside business. as

up and segment scripts, up remained our As QX. mentioned in bullish we pre-recorded and quarter-over-quarter in was XX% that and QX margins were

were the see AI as a we’re compute and for I segments on to network as of design and the Memory and Side, workloads much that HPC, taking of type Specialty relative different of to wins return is very space, some quarter same we’re getting role. some memory also intensive computing where environment, starting ahead mentioned slightly forecast industrial business well we our the the the in customers in On and our from telecommunications our

from density On the benefit and increasing densities in notebook are Brazil front, down that memory we mobile environment, sales growing. as as the and the Brazil memory also we unit mentioned,

life in that the of all XX% our up of if units a now operating all you that, the was sum right of so so three And together, business about excluded environment. battery and the growth combination business are of end if you

Tom O’Malley

to the of about timeframe saw my you Could I helpful. up was LED deck and initial the gross about around margin ramp you And can the talk quickly can on the months kind get business. XXX for can us XXX more can bps high us XXs, you mentioned follow But that extra Obviously, XX little how bps talked put That’s of out, as color you XXs? the a to the guys little think improvement. profile give Great. give low transition? the was guess you transition. you in there on the margin kind there? you a up that You timeframe what of you color you

Mark Adams

Of course.

December because back actually It their was Cree’s reports classified that call, go December. a to last wasn’t Cree their If which on LED, unit reporting you call. as was September not in

September, to in that, XXX the time back And next I call our and we margins points to gross articulated I acquisition the over go XXX roughly you reinforced so, the gross months I last believe expect improvement on of basis the points at kind area XX%. the XX of margins. or If in were basis

transformation. you see an start driving let lot to transition of on But just efficiencies You’re dependent number and going transition, their outsource to a will team a -- QX of short-term second. silicon the to in margin Ken to see Specific carbide outlook of the turn manufacturing let and a this I’ll it gross bit that some talk little that the manufacturing -- Ken I a sapphire the in in got short-term. in including about in is to factors and partner other the is

Ken Rizvi

look the in probably near-term, in a we as the looking Cree at Mark. mid-XX% range the If we’re on at basis. gross margins for had Thanks, Sure. non-GAAP somewhere mentioned, Mark

that, inventories Now, of on balance the to non-GAAP day expect the of will opening part up purchase we I the as Cree’s step say, reason is accounting, price one sheet.

to that P&L should timeframe. the will in to we in go those be those or should try through range bit plus that non-GAAP over margins time. minus But will that basis, So, a and work improve a on QX XX% the then through go

Tom O’Malley

and again. Great. guys, congrats Thanks,

Mark Adams

Thank you.

Operator

comes line Chin with of Stifel. question Brian the from next Your

Your line is open.

Brian Chin

Ken thanks ask Welcome Good few us Hi, for questions. the call to a letting and afternoon. there.

Ken Rizvi

Sure.

Mark Adams

Okay.

Brian Chin

can quarter. margin break last guess I like the what lean a in curious out then how against certain point I also third follow look -- on timeframe. the question and -- to a out fiscal -- may maybe might up be OpEx starting about you revenue for gross and how that at time that the over LED. the of I the that first or again Thanks sort

Ken Rizvi

Yeah.

as in have So one have we’ll XX-weak we’ll Cree QX from QX, normal be or quarter. short on call, for Brian, shorter the going discussed, a LED week then the we’re we earlier to week here and

quarter, this I for for for So neighborhood be QX, OpEx that expect would million to Cree that $XX of business. the non-GAAP in

forward, give week to given the But Going we with additional the the Cree not one people That’s each to update terms out LED. quarter is we’re break for just OpEx QX expecting context Cree there’s will in some of businesses. LED. that point, of what get, the this given for starting an in first that will

Brian Chin

effect, ultimately in helpful. very exiting that OEMs, your this That’s base third quarter Thanks. Brazil discernible moment, use larger that seem more there quarter was the a have for circle absorb the handset market, a in in other washing this are you to one from Yeah. that out I’m back like they companies curious, Samsung, and obviously. guidance another handset or of temporary as a a two announcement does any Brazil, recent impact just just fiscal like is to seeing LG you Okay. market share? as Maybe big

Mark Adams

Correct.

Brazil. down assumptions the on. I largest Remember, spot think manufacturer in your memory we’re

in to we be D, impact the country, it’s would of very as is little supplied largest anticipate any shift to in C contemplated of the that from the makers share guidance whether of so the also many A to handset we provided. that Ken and B And

Brian Chin

one close is to you just the towards Maybe more on balance cash is Cree Ken, -- sheet us towards the acquisition? and remind needed Great. of maybe minimum Can the the Okay. run hand the what for after your accounting March question cash business? Xst maybe

Ken Rizvi

reminder. Yeah. If minimum you million we with QX cash about look basis. if a range need the on probably on a the in to $XX look normalized as the business that business We exited is million at itself, just balance of run the sheet, we $XXX cash that

Brian Chin

Great. Thank you.

Operator

of from Cassidy the line Kevin Your next comes with Rosenblatt. question

is Your line open.

Kevin Cassidy

Good to Yeah. Thanks great you welcome Ken. on for results, and question and my Ken. talk taking congratulations also again, the to

Ken Rizvi

Good to to again. talk you

Kevin Cassidy

this The inventories are environment, see quarter-over-quarter. your up -- in I

talk also Can seems -- shortage lead the handling that good well you’re getting So long what and your customers? so the accomplishment. very like what that’s about from kind publicized you in a of how visibility times that’s you’re

Mark Adams

Yeah.

at on. So our you’re Kevin, inventories, look if we spot

we the by are As to to not QX. then part grow QX we QX, nice supply environment can constrained guidance due only did strategically seeing in we looked as to QX, inventories see also uplift a into at and our but QX demand in you

so year. of fairly and large that in help team secure size And terms and projects, in Jack of job under team securing and customers able as supply who for with great has done are a supply into have chain the supply, a working to overall to this our are footprint the that those good we are us especially we move QX QX and

Kevin Cassidy

And about Brazil market. talked maybe when I surprised was Okay. Great. bit you the a

growth surprised of phone, talking average and a going of the the any memory few we’ve seeing been there per wasn’t units mention to is quarters it about You’re that’s of I for growth. increasing the to going not part that come discuss selling a the from content you but later happen bit just in Can in a year? that? factor price And that increases. was Is

Jack Pacheco

Kevin. Sure, Jack. are you Hey. doing? How is This

Kevin Cassidy

Jack. Good,

Jack Pacheco

Yeah.

around for the $XX. around for QX at something, think $XX We we so Brazil On fairly still QX finished priced ASP flat.

reality getting of huge part still yet the expensive. a phones it that are more we the growth expected not is memory a we we the and phone little on seeing and of content So

will driving in are year the for in the We to units to probably go density see into growth phones Brazil. expect up early Right start a next now little get bit more those Brazil.

Kevin Cassidy

up, helping But Okay. isn’t DRAM in going prices the…

Jack Pacheco

amount… just the We’ve started

Kevin Cassidy

…XQ?

Jack Pacheco

we’re Remember to didn’t see some Brazil QX QX starting just anything. price for Yeah. we see increase.

still of DRAM up there down it’s was in a anything from more a ASPs bit but for So ASP unit it is broke base than DRAM, little the QX on front.

Kevin Cassidy

Okay. clarifying that. Great. Thanks for

Mark Adams

bit earlier the business for accounting the other classification, quarter. the in is one a Brazil And just one -- month remember

up in show that numbers. Brazil So, probably pricing wouldn’t any that in of the QX you’re implying

Kevin Cassidy

you. Thank Okay.

Mark Adams

Thank you.

Operator

line Company. next Your Gill of comes from Raji Needham & question with the

is line open. Your

Raji Gill

and to questions $XX for Yes. think the indicated a be particularly of kind the you you we timing? taking areas about kind do going business of -- of LED? about of on some different normal think some about, about will areas Thanks Ken. of to my Question, about keep? for that normalized of rate to parts Congrats, want How exit kind it some welcome, think out business, you May quarter, for LED you’ve the the run with piece Ken, forward, I million and do quarterly we might talked might and kind want million the normalized you So LED, talked LED of, quarterly $XX how

Ken Rizvi

Okay.

provide look we in little and as of not happy although to a that’s We’re be $XX But million segments. of I mentioned, guiding $XX here range to business on any XX-week our for QX, will a business the in one long-term terms at we basis if QX. million quarter color, and for a on based context that

should QX get of a rate into we terms $XXX to next we’ll and fuller of the as and guidance end revenue -- as minus business outlook. million or the plus on in earnings a call, into of head And run and QX terms the in on is expectation be closer Cree more our we we our So the normalized bit. provide both

Raji Gill

again by segment. kind of by Okay. gross And gross That’s margins just margin you in could segments, helpful. the terms of highlight

think said drivers Specialty we SGH’s Platform gross What the segments? think margin you are for margin, and gross three do XX% Brazil margin. the was gross how margin Intelligent about the I those was business formal Solutions

Ken Rizvi

No problem. Sure. Yeah.

was in at earlier, about in Brazil in So would if you and basis. Intelligent margin we Group as Specialty go-forward look Platform ‘XX. ranges Solutions give I margins, about a XX.X% was on of Memory Brazil, terms of contexts basis, and QX the about a gross gross XX.X% on you QX some at XX.X% mentioned

a would and for those minus sorry, for I QX in reasonably and Solutions plus So provide QX business, Intelligent the flattish be Memory mid-to-high margins Specialty the will bit would range. Platform the range be both think XX% will Brazil, or Specialty I to

bit a can broader Platform may context given of around into that on gave a lumpiness I quarter, based move Intelligent why Now, a Solutions, for component in is the any the that’s just there. to services there range that see put bit, so you we

Raji Gill

How you. you a about And quarter increase of -- cloud, if on these driven oil and gas, kind in kind driving as the into May? end the the really of looking to the go -- Thank backlog of back and Is that think backlog Thank of helpful. we and you’re over backlog do revenue That’s last by Mark, talked the of summer converted of about we those XX% half at what’s being markets? going How markets? other you. some it the kind year? is to

Mark Adams

either on and I drivers think, mentioned computing, the again. federal call today the I repeat and cloud, key same segments mean, performance high with In that them for oil I’ve are it’s early happy gas. Well, and the I’m to energy us

space performance is In think computing. but that’s us telecommunications. the the in those plus Embedded and contributors transportation high exclusive, not primarily federal I and are for three big

the So backlog going continue, why it actually -- very, is for really of QX that’s in as which we back very drivers our such. the into year, us, going got back strong half and that is business, the healthier

let continuing didn’t sequential high-single referenced forecast just reference that, off a of quarter. business growth it, Ken if off increase that that QX and digits, in coming think area over QX, clarify digits low-double in the he I of to XX% me we’re an

the So AI, Intelligence topline Solutions half we remain of year confident Group. growth in back the very the in the the for

Raji Gill

Thank you.

Operator

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

Your is line open.

Sidney Ho

Great. that business. up to business, your with How about margin term. line, can Analysts on at Day, your not you that, you remarks? be about over that margin but the time? talk transitions philosophy like level, QX, fiscal welcome taking talk single-digit But And the related margin your gave. thinking maybe follow from numbers talked trying gross prepared are in mostly will based just two any the about near-term, line general to a more range, you you the technology in you mid goal Ken my Thanks. priorities operating as and little steal about that Cree to well. is related Maybe longer Mark, operating What questions Ken for the that your that thunder Thanks there, are

Mark Adams

couple There’s of a Great question. for things. asking. you Thank

focused discussed. months. the see In -- XX addition to XX transformation more more demand. in growth months a the of out projects manufacturing we’ve in We We initiative improvements to on topline see strategic

by is So limited not now the team in captive environment, North the manufacturing their capacity Carolina.

We perspective. capacity have the ability to a grow sheer just from

the is And see driving. these team opportunities terms markets so of I in better you’ll think that differentiated

for, at XX% XXX in the months next XX% if opportunity area fit points earlier suggest also that would And we points in somewhere or gross the look of piece, over margins, basis to these the I next to on XX addition the well. I see synergies I the operating XX XX months go-to-market as XXX calls, months. basis mentioned to In the over

referring significantly of So would the your operating that, culmination then I in think, you’re better drive question. results

Sidney Ho

Thanks. your the kind And Can anticipation revenue any supply for component related impacting you to about in building helpful. of up? yourself, talk in chip was behavior chip follow shortage any Maybe are buying up you guidance you is seen discussed customers pricing your going That’s but Okay. of shortages Q&A. my assuming that the memory in inventory in question the strategic have changes near-term?

Mark Adams

question. good a That’s

in as we’ve think contemplated guidance QX. I So look we that at our

customers out specific is have range provided. are in to further meet the parts. want there could of would supply we say have be we’re I -- been supply some if I think general, out. But the of reality well, upside guidance in QX all we’ve there a our bit, the in could need that to for are chips terms comfortable placing backlogs up and that we as times moved able lead or the given we get

to as Specialty bit Memory we Brazil. the are relates So starting visibility, to a in it to more especially see extent some and business

Sidney Ho

Great. Thank you.

Operator

Your of Thank question Lipacis [Operator comes Mark from with Jefferies. next the line you. Instructions]

Your line open. is

Mark Lipacis

to Ken, for good Thanks to taking my talk Hi. and you again. question,

high-single, from growth, software new just saying, of I I a think could from thinking has talk if Mark, -- But you of that that is it business, guess, near-term? you’re Platform, you understand is on is wonder what about, your the pent-up just or you’re could a have I sequential potentially. you constraints To how this. then I low-double demand share we sequential any big about software on unlimited nice upside jump appreciate from of little should really And kind bit a growth capacity kind First the and this question have versus Intelligent a high -- lot and digits of up. But trajectory services. how might the the them? follow side, But services maybe little in the the you on side and of capacity I that a about, product extent color this shared

Mark Adams

Sure.

Mark Lipacis

you. Thank

Mark Adams

QX. QX. oftentimes, describe as we these What of our relative different a But that get I’ve that to get in we significant commentary see of bit in period. in phase, gross add-on are that, platform Ken our providers gas, attractive that Ken’s cloud a largest some opportunity customer amount the guiding depending installations what well better gross and how starting in upside opportunities the on we’re contemplated mix all in customer. the that Yeah. ship the margins the and on business, in phase three a and with call work opportunities, to this business key of of in customer in through the Great. in larger in with the engagements. given sometimes, development that represents specific service of top we sell once development, mix margin working a handle software Notwithstanding customer. it We’ll services and HPC as Notwithstanding a of the we’ll as rollout a at into pretty last for see a are workloads the see a as mid-to-high this quarter around new issues are some these guidance. to tried development we give on in segments, increased noted, development scale. hardware the some And to all but little an of is you’re goes there’s at begin and as services, some on our on application shot another software That’s some customers the federal we is that identified, between those we oil constrained, of And because well terms XX% that much production our implying I happens versus in components here. on is primarily And to represents us add-on

QX So growth still are XX% the a the opportunity. business upside and QX QX, we in and some where pretty the coming of we’re in growth represents from off today about excited

Mark Lipacis

days it to how Thank but much. time that my the I you I I more five SMART side you question But between profitability previously had? you you, was of Mark. profitability not and Jack. know slight that or they I your you and exposure then it of there three or Great. don’t follow a Thank that, you did bit? And a going you you the for, lot services time little that described look And and a and those could Jack, understanding memory it’s if dynamics That’s remind during or -- you you I if sell helpful. describe very the to? constraints and had was purchase then a think guess that Jack, then all Ken up the extent is very is your constraints, that modules that them. could on us materials have a that’s like believe that I to and just Ken some support And days exposure, of just pricing think, accrues lower, from benefit remind for something guys higher raw material time maybe are the hurts for that? going If hit on I’ve the a capacity could and can there us

Ken Rizvi

Sure.

in me chime Let then will and Jack here. start

we inventory standpoint. So very on have that will if that clear, not as And we we hand we’ve to we range look achieve a the constrained provided, the based look, range receive from and our just guidance guidance at of capacity even be in we QX comfortable can on today. inventory feel we’re as we

we standpoint. from that feel So comfortable

surrounding inventory answer to Jack turn over As the the it relates and maybe question, part specific I’ll of to a second it those. to

Jack Pacheco

Yeah. Sure. Thanks, Ken.

weeks most will to Brazil, now where bit module weeks do four to have we’re will that In four weeks shore little a issue inventory When markets don’t as I going up, inventory. that a bit package. six Brazil. pricing starts in can that and the we’re going in either little the we is into anywhere a we So we down, process from the it of what us any inventory is risk benefit pricing and the into Brazil think we to multi-chip we probably a Brazil, But see for trying up longer. ample own

inventory. On the take Specialty business, on we risk typically a don’t

we we the So to have -- price pretty it the without will we we out. need sold have sell inventory much

we a risk don’t a Specialty So you at it have from on really it when look standpoint.

Mark Lipacis

Great. very Thank much. you

Mark Adams

No problem.

Operator

Adams, conference Executive the this at closing Mark questions to There time. now I Officer would are to for no hand further like Chief over remarks.

Mark Adams

for to their as second to you, Operator. at outstanding well Thank as our results. the team global thank to our quarter And all contributions of again call, you on you SGH

Given our business, the we in confident and embark as remain our diversification growth in strategy this exciting momentum SGH. new you. at we on most strong chapter Thank

Operator

for you call. participating. conference today’s Thank concludes This

may You disconnect. now

Penguin Solutions (PENG) 7 Apr 212021 Q2 Earnings call transcript