SGH - Earnings call transcript Q3 2021 | Penguin Solutions, Inc.

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Operator

Good day and thank you for standing by. Welcome to the SGH Third Quarter Fiscal 2021 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Suzanne Schmidt with Investor Relations. Please go ahead.

Suzanne Schmidt

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

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

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

earnings Before the presentation. certain that would these forward-looking present we like these Please included forward-looking statements I that of that read our made may are information that the expectations to differ have events we and everyone press and call begin statements actual earnings call, materially. statements results in statements note to may the constitute today the remind and or release

discuss of or not measures for be consider when performance. We will isolation you should Non-GAAP GAAP We substitute in included a press reconciliation non-GAAP encourage analyzing both measures. financial also today’s measures results. as A release. to from, to considered GAAP measures our superior to all non-GAAP and is our GAAP in

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

Mark Adams

US you today’s July and of weekend hope joining Thank of you, appreciate Suzanne. listeners enjoyed our Xth the We call. all

last quarter. with of the fiscal and strong our to $X.XX present for results as Business achieved excited quarter. fiscal non-GAAP share financial share compared our improved approximately the for revenues and generated our exceeded companies quarter execution up we in outlook margins our all We to approximately results expectations. was million. $XXX record $X.XX share non-GAAP We XX%, are across in fourth earnings you quarter from We to quarterly XX.X% gross per third QX of per

on In revenues. which our first of remains Solutions, or SGH, growth are total mix. Solutions, revenue Brazil, XX% part in at Within of LED Solutions accounted Memory SGH total QX. Specialty team and was Cree and revenues. execution was diversified Memory and IPS total XX% of of and of XX% Memory focused Brazil we XX% our more Memory Specialty was Our includes revenues the revenues reporting full with as Platform of SGH Solutions in a for LED quarter XX% diversification Intelligent came total revenues of strategy.

Let businesses. me highlights each our for now some cover of

same approximately ago. Our the focus strong areas quarter million, of IPS a cloud. revenue than of last growth Group XX% in and line growth double-digit edge our These in XX% another core, higher higher with was results reflect our $XX with than for expectations and turned which year across quarter, quarter key

on very XX% the of percentages larger variability up and prior period. mix low margin is represents a On includes movement Computing’s from we which sales earnings potential on a quarter-to-quarter. Computing teens team the new Gross down IPS our That margin quarter. services, of comprising Penguin is the discussed which hardware Wireless the basis, services Edge, good reference, to For prior and businesses. due sequentially was the of and software former in Embedded year-to-date software SMART IPS percentage and due IPS Penguin have SMART gross expanding brand making Penguin said, revenue in to calls, year-to-date progress

and data Our requirements offerings, traditional cloud data in Penguin focused Computing core, has high-performance customer team AI, HPC a solutions on roadmap and edge analytics robust workloads. targeting center,

OriginAI, of new and number We calendar upscale AI an the targeting half introduction platform for for inference. core at datacenter Penguin second training solutions Computing’s the planned of in needs customer including and platforms a year have ’XX,

card server growing accelerate Penguin new Penguin’s and with by solutions is business, engagements high-performance cloud which and in based and facilitate and customers used on to a voice continues PCIe-XXXX, financial, as released edge LTE. the IPS evidenced focus oil gas Additionally, existing to federal expanding sectors. add-in over and the XG

will We drive to opportunities POD our continue scale Demand potential to have future investments based in and reoccurring on-demand On for Penguin POD IPS. cloud which solutions on the to government or revenues capitalize

to performance our growth of future business recent new are to in excited We IPS potential QX continue drive funnel strengthen about beyond. the and and

in in which QX reach the improved operations Brazil. turning and in X% Specialty and quarter, Revenue sequentially points encompasses XX.X% Group, pricing largely over Memory to to the margins Now sequentially expanded same by year-over-year Gross XXX by quarter. Memory mix. grew our due XX% to basis to Solutions million the $XXX and in

supply business Memory Specialty well Our environment. executed a in challenging

data-intensive core low where applications customers business helping and networking are architecture very bandwidth OpenCAPI memory. such traditional traction interface Beyond latency performance supports OpenCAPI which gaining with are improvements. the to standards our new is in open enterprise, telecom, high and drive standard more an as in we

production anticipate We grew performance expect ’XX. quarter in ramp and for product flash fiscal our business and to revenue in compute-intensive OpenCAPI are our we DRAM strong this seeing as nicely Backlog we quarter-over-quarter into portfolio year modules for moving into QX. move applications the

their for focus new our markets needs. customers application-specific end development to meet We product are expanding across

very and We Each transportation of as the DIM opportunities are used production modules surveillance as areas use products in of these in early Specialty custom in segment represents SSD sector. Memory. well applications for cybersecurity mini new low-powered for and

compared primarily demand which XX% Demand for previous from while quarter. the due server, when in unit ASPs. grew QX stable, mobile results memory ASPs increased to remained and slightly increasing to strong in notebook Our were PC Brazil

country and new catalyst Additionally, our revenues SSDs next remain our for are during fiscal plans to in about build optimistic this growth we track in on year.

despite million. Cree well supply-constrained a million is the a testament were technology The environment, Non-GAAP team silicon exceeded and $XX our model guidance partners well of ability which team’s to our progressing to operating focus to and almost continued guide strategic LED transformation driving LED to margins to turning in gross across of million a recording Analyst execute. to drive their $XXX XX%, portfolio. manufacturing operating expectations a that fab-light to Now the revenue ahead from Claude key wafers with of versus outlined migration The performance. with sapphire the leadership our during Day transition recent product $XX carbide

efficacy confident S to flagship LED’s LED’s for is Demand available Line end directional, in engaged critical. improve. the LED optical are continues control deliver wins specialty team’s Cree segments and in optimized growth XLamp brightest lighting, driving onboard, one its targeted We product and part example, where lighting, For across Cree customer and in lumen SGH. lighting We most results strong is team reliable of line XP-GX saw and lighting couldn’t lighting. high to the the of Cree more fully class. ability profitability This outdoor product, market horticulture the LEDs and as be excited in general have new video to remain applications

Let QX me QX over call financials stop detailed at here and Ken? a hand and for look to forecast. the our Ken

Ken Rizvi

in continue to April, Mark. our to we business. and strategy our grow our diversify Thanks, Analyst outlined At Day

how strong our all demonstrates XXXX Memory performance of and Platform Solutions, strategy LED Solutions. Intelligent of out businesses, our across quarter Solutions fiscal third is The playing with

XXXX sales quarter guidance result of As approximately range. all key reported metrics the the million, the third Company. above sequentially, with for strong of our Mark mentioned for Net record XX% quarter fiscal of earlier, increase we $XXX quarter were XXXX and year-over-year third a XX% from fiscal an a

quarter at of in our and $X.XX margin came XX.X% per gross In range. both addition, XXXX, non-GAAP above was share diluted third earnings the guidance fiscal non-GAAP for

Now from into the million fiscal our was total of driven our by primarily by which SGH third statement. incorporation sales added SGH $XXX Cree non-GAAP turning XX%. approximately grew of This in approximately basis, to income On LED year-over-year quarter. highlights a growth revenues

year-over-year revenues by our grew X%. mainly driven approximately on approximately XX% which approximately XX% Solutions, LED, Cree by grew a by by grew which and Memory IPS Excluding basis,

quarter million, record of fiscal revenues on approximately that IPS basis third quarterly had the business. a $XX a for For

of the had third Group fiscal Solutions quarter Memory $XXX approximately million revenues of in XXXX. Our

the Brazil Memory and was LED third period to of fiscal quarter the in Solutions of XX.X% was XX.X% third in mix up the Group. XX.X%, the $XXX from XXXX Solutions margin performance higher sales. Group, for in prior Gross a Specialty fiscal primarily the the XX.X% fiscal same fiscal quarter third million. due and revenues margin year, Memory XXXX helped up revenues $XXX by from of Gross of quarter quarter IPS prior quarter of the from approximately the reported the in the Within third for million while of XXXX, reported the hardware of in down

and solutions in variability IPS, previously, timing expect for discussed of services the we quarter-to-quarter have based we revenue. As gross on margin some

in fiscal of XXXX. expenses LED were We quarter in are primarily solutions, XX.X%, XXXX inclusion IPS, from increased margin million, continued an of were the points with to XXX quarter second margin quarter quarter. in Operating for fiscal the due Operating third was up uptick well XXXX. in fiscal of in up as expecting, from fiscal was third year-over-year LED for flat the basis XX.X% gross fiscal bonus expenses the for quarter Group as up Solutions $XX.X fiscal the to relatively of however, margin our the the of period. the million fourth for in Gross and approximately see approximately quarter third $XX.X investments the Memory Gross Solutions IPS third XXXX.

benefit This approximately spending, required In credits to in financial $X.X Brazil. Brazil from addition, offset helped benefited operating in expenses credit. this which million R&D is our from to

related calendar credits third of earnings the expected for share call, with share the compared $X.XX As XXXX. in earnings was per per Non-GAAP in diluted current share to expire XX% sales the to fiscal discussed law of financial X% second XXXX double for beginning the last quarter during third of approximately Adjusted fiscal $XX.X million these approximately $XX.X XXXX in quarter quarter in our the fiscal specific per year third to $X.XX of compared third the quarter EBITDA per of quarter share the million fiscal fiscal from of almost was sales of XXXX. or or and XXXX. $X.XX is

and of market and XX%; as XXXX end XX%; and Mobile breakdown XX%; industrial lighting, follows. sales advanced was defense server for by Our third and fiscal XX%; storage, XX%. and network was of the other, net telecom, quarter PCs

to working capital. Turning

in fiscal last the at million of the The quarter. addition past times the well totaled compared days during the quarter. last fourth $XXX.X sales quarter increase the fiscal the prior X.X fiscal a build a the in at receivables, of practices, Inventory and XX XX million $XXX.X receivables million end for by third strategic LED $XXX with were third quarter $XXX.X million goods were of quarter versus inventory as quarter. was outstanding sold on third respectively with driven accounts quarter, our in accounts net Our Consistent addition of preparation million fiscal solutions. of the million by in gross in days sales at with solutions quarter. outstanding which and cost for LED ramp prior with $XXX.X quarter. X.X times turnover revenue came driven Days largely turns calculated are higher compared inventory as compared days basis, Inventory end the $XXX.X and totaled the

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

Third the quarter, and prior totaled from second quarter XX-month up primarily in $XXX.X with operations On million sequentially basis, was the flow to from cash a inclusion operations totaled $XX.X compared million flow quarter of solutions. LED cash the million. due $XX.X from trailing

$X.X and you XXXX million now our depreciation, quarter was million. guidance. And depreciation fiscal For capex and those $X.X of was quarter fourth capex turning to the tracking for

the net to approximately from of our $XXX our the expect million, for $XXX We quarter of of year-over-year an increase fourth range at approximately million guidance. sales XX% XXXX will midpoint

the for expected fourth approximately XX%. Our of to XXXX GAAP is XX% to and quarter margin gross non-GAAP be

amortization the expense share-based earnings a quarter as is expected driven growth excluding expenses versus expenses by plus in approximately range with the asset increase $X.XX. non-GAAP earnings the be share intangible GAAP fourth fiscal to sequential our of per Platform fiscal Solutions additional are to line week call $XX On the quarter LED an basis, from support Cree and in having expected operating XXXX. million discount. Intelligent in last $XX and expense, comments the compensation additional as diluted is quarter the Our of to well million third investments be convertible or primarily in our non-GAAP fourth to of Group. in The minus $X.XX debt

diluted fourth of $X.XX. to non-GAAP expect million. are We in expenditures minus share capital earnings fiscal $XX plus will range in Cash $XX expected quarter of the or range the per $X.XX be be million for the to

share price. for diluted fourth XX of the XXXX is GAAP count current stock our expected to shares on million approximately be Our fiscal quarter based

share and the be constraints shares, expected XXXX forecast as to to on environment, in quarter calls diluted for current based of fiscal convertible the XX of supply our the refer fiscal is non-GAAP contemplates count Please capped Our the million fourth results chain. EBITDA the the is concluding it fourth our release the approximately in Mark? includes GAAP benefit section financial the note for questions. for further reconciliation the global Mark to quarter which information call back the call before With we net press open that, earnings measures of let adjusted to me details. some reconciliation non-GAAP of our our non-GAAP turn for GAAP tables financial to income comments to and

Mark Adams

Ken. Thanks,

Before with remarks few prepared a I comments. call to for the would opening end my like Q&A, additional

on to we like are be and I’d coming making governance corporate or our disclosures that updates environmental sustainability and the good ESG quarters. progress providing First, we in acknowledge will

and all a factory sites the workers high I want of recognize our at environment. a have of maintaining to fantastic keeping globe while of a job who Secondly, level done operating our safe performance healthy around

strict electronic measures have Cree facilities and Modular LED, operational pandemic the performed outbreaks and COVID broad shortages. uncertain COVID teams our in Asia, well to extremely these are we have during Penguin SMART maintain and considering had date. at not With employee issues times in and supply operating Brazil new to situation any safety Our continuing major

couple shareholder back by the you Cree outstanding with Penguin strategy Day objectives our Analyst performance of Computing SMART April, growing in growth operating our value both evidence hope Modular, inorganically. you out. I during the key outlined drive organically results our and from are business strategic As playing in this to When strong and LED at see

third future. proud to opportunity the Operator, have ready questions. are we for of are we growth results, feel quarter tremendous take While our we in we now

Operator

Instructions]. have [Operator We from Barclays. do Tom O’Malley question from a

You’re now live.

Tom O’Malley

a on do the that that. the near quarter quarter. nice strong what contribution LED deal of results. and of of higher even afternoon. Thanks My business, bit contribution on talk taking congrats a did see my sustainable rate the ahead get first Good first Hey. question for was you and you guys obviously the question rate you kind and run during rate really of $XXX to kind the you of you Can laid the kind future? of the million When the that million in was quarter out to outside in in about run run little happened $XXX

Mark Adams

the play LED sector business certainly demand markets the pleased and we profile in Yes. in. I we’re the the in and Tom, think Yes, Mark. this is with broader

with this the LED thing growth X% there bit single-digit signals, Analyst and think a the at industry three some little the there on signals at tapping potential we’re Day and and of course or loss and investing are some to just to it, great the side six that about kind business, didn’t I X%. favorable LED And there right in kind market I a And ago buy traditionally in as grow of we it. on at operations But little this trough $XXX bit starting on say, signals in of Day reacting to — nine we turn kind want we should that mid was talked were we business here. new that looking now predicted years a looking bullish we upside about in we’ve is to job — Analyst or so or or is for about grow we we we’re October, at think that at doing did demand accordingly. growth, a harvest downturn a forecasted months Initially on quarter. back the last a demand we the kind I the think opportunity positive two like million house has there — a of a that Cree of is the months team from said, and been were of more the ago,

Tom O’Malley

What’s seeing you into remarks going — and think outside And strong in some increase That’s the already? Great. point sequential you you parts? data really Obviously, prepared big Specialty you a quarter-over-quarter. in particular helpful. I of revenue. your August Memory increase Can will Specialty driving us your then comment about Memory was be through talk the moving this gave of talked have

Mark Adams

you just for or business of terms Are whole the memory? in meaning

Tom O’Malley

whole — whole for into business the For the August.

Mark Adams

to some this HPC many efficiency traditional workload workload broadly Well, by them them I catalysts and actually things many early of stage around different we continuing But are back some computing sector IPS of are at certainly of edge initiatives strong customers When kind business. of very the doing out. are Penguin and sectors Computing primarily and development and — Edge, around rolling optimization, is look in well growth, be that the like offering driven IoT is in demand end on then and think driven is strong. across Penguin where it’s But the our dynamics. front end Computing HPC sectors and by AI of at on very application AI Penguin and the the their are dynamics strong

and its by platform IPS performance primarily are management. AI being we on Penguin the So workload — driven

as number indicators memory just of enterprise in for and memory are that computes high-performance can the broader driving memory you different storage consumption both side, center the the a see hyperscalers. trends in computing, data cloud from storage, On higher

We’re starting see new to way. in that market opportunities

you notwithstanding good pretty to the with GDP COVID implications standard in is economic range good, so And pretty indicators normally unemployment, economic situation, inflation the in but in pretty — is hand, generally that that Brazil operates. largely couple Brazil, favorable. a

strong. the — currency is for So pretty

So Brazil are Brazil are spending good and in and servers positive. IT so economic indicators

with coupled that in the applications got specialty you’ve So memory business. new

got memory to of question, first and Cree So I then, IPS your mentioned business. you’ve course, is the and LED as

and so I is growth and last that’s months demand there’s here. robust strengthen over we’ve seen that across relatively or we phenomenon the think Just our think that’s kind nine the sectors from of more

Tom O’Malley

Great. Congrats again, guys.

Mark Adams

Thanks.

Operator

do on one we Chin Stifel. the queue Next have Brian from

now are You live.

Brian Chin

outsourcing Good afternoon. particularly results Congratulations thanks few gross progress there. on is in conversion to Hi first above and margin. in memory, allowing the improvements questions. current improvement clearly. wafers? sapphire little ask but on on or making sustainable Very good line on sequential for this a trend to and bit here the Maybe the LED, Are you’re the a us based

Mark Adams

front Well, us I is in improvement there of still. think

planned our Cree in-quarter margins operating a was been gross has favorable, our where little in I that painted the we we’re of our picture think exception his were to to successful gaining broadly we But businesses, speaking, demand transformation that here on bit due relative and are were that all mix at gaining efficiency IPS just addition called trying of I and across as plan. Ken were terms mix. from on — some efficiencies operating some we comments suggest down in to momentum out with was the which

that you we just experienced it’s is the think mix incremental and strength. QX. but think in than combine again we And so benefits, more from it there here, pricing with if improvement We shows

that Ken and margin. second. for in let good time been have these side, get our starting that in traction. think new development some to on opportunities opportunity a But talk market memory to I are in are I’ll memory And So, biggest the

side as So comments? But services and slightly LED memory a better think improve we forecasting can basis. kind the and IPS here. will given memory speaking, improve, it go-forward we margins is think to confident that from broadly of up of on can from QX just were well, flattish more think a from mix we especially here could pretty primarily improvement Brazil improve a on improve any Ken, we we’re of

Ken Rizvi

Brian. for Thanks Hey, Yes. the question.

if basis, margin profile the So recall, a non-GAAP from XX%. you guided we if look we XX% to on up QX at

by So we exceed that. couple driven of did was a That factors.

had of of solutions performance on is One the good Cree XX.X%. very which non-GAAP margins LED basis, which or a LED,

So expecting. are drive higher helped That than outperformance. what we that

into seeing look we QX, As some we’re overall. trends nice

IPS Mark to some that So of highlight those trends LED, within Would should one of margins range us XX% drive just Solutions, highlighted those also and to overall. item. three gross Cree XX% Memory that like to segments,

logistics of move migrating couple a basis. however, This we’ve QX Group or historically Solutions a on net As a from that where has migrated to is now into gross QX, we our we a one net from business have have the within taken revenue fold. a basis Memory are we basis. effect we There customer,

at So, basis, one, baked to $XXX But that would look if a guidance, how apples-to-apples gross to we and million. already as that’s customer a we guidance took an closer that look million range into to at have basis. our moved net $XXX of QX, basis in embedded versus customer on you $XXX this be now if on QX, we million revenues of our guidance, — QX our midpoint is versus

fairly flow taking with one XX% basis that customer particular a margins on that the comfortable on net for piece by and a this other that’s does QX. The why basis, the through gross to we P&L non-GAAP fact improve guidance a XX% feel do is the bit that margin

Brian Chin

it. Okay. Got

associated that? So of guess, with if million like — in $XX reduction was Can fiscal the at margin revenue. what XQ midpoint the impact you sort I benefit heard quantify the you I then correctly, a it’s

Ken Rizvi

It as in move points from benefit we basis XXX points basis into QX XX that to Yes. about is QX.

Brian Chin

Okay.

that. Okay. I appreciate

just more up. couple going coming of into Just But IPS, a undoubtedly questions.

guess of your next any coming curious strong year You in meaningful fiscal even are you double-digit with that that’s I building growth But fiscal here sustain ’XX. growth fiscal and the shippable such a Mark out backlog year? strong sort the in IPS already year in are ’XX can tracking a business

Ken Rizvi

Yes.

Analyst So I’ll to outlined the comment we at aligned what Day.

on sustain longer-term head CAGR do we’ll double-digit we type business to like basis have momentum. given as XXXX. providing guidance not that have momentum, continues believe If into of year-over-year Any a in we a So But business. have XXXX. that basis to But commercial for business. good year we’re QX. backlog Obviously, said for we can we we looks good we of on see what the side strong economy a looked on quarter-to-quarter basis, especially the that global or

Brian Chin

Okay. free Really Great. just cash levels? free levels in Thanks. the in revenue cash XQ. And real guess and one the last flow generation cash quick quarter. on higher of flow. Do kind the around think good similar I operating fiscal you expected

Ken Rizvi

would equivalent QX. a Yes, look maybe type free as QX cash we proxy can the look I guidance EBITDA as you capex, higher EBITDA flows at expect or or to based of free cash at expect the would on minus we slightly

Brian Chin

Great. Thank you.

Mark Adams

you. Thank

Operator

Sidney Ho Bank. is Deutsche on queue the from one Next

now You’re live.

Sidney Ho

a guess related to seeing that sounds Memory. — COVID drivers of my questions questions are sales an are notebook the now the it seeing the to is Specialty I higher see little congrats My the Are taking it side. to units on in A of mobile that Brazil you ’XX. Last acceleration you’re for of said upside like not cases Thanks was well. memory results. Great. as seems you on should couple are starting and of bit and fiscal SSD source solid declining? ASP retail benefit like in quarter these And improving, a follow-up you

good to data a which I of and about progress to recovery starting I IT Thanks. Curious that in think quarter. say enterprise industrial would have talked the centers also spending, traditional question You follow-up that. recover. some is much you business how is in would on tied last

Mark Adams

Jack start I’ll let and So jump in.

I see starting your base think traditional customer to first, demand. the increase second question to definitely

earlier as pretty in of — know, seeing that we’re broader one growth customers there are The conditions. in new focused think, SSDs is in in are profile the relative of terms probably I we there, in world of is leverage on is supply But demand about going notebook markets our in take in in that you terms Brazil. advantage manufacturing more have we on the stage the to infrastructure the is our and in-country desktop penetration of place the Where can drive as well to benefits we in the capital in server It’s really to largest we of versus the commentary some categories, the a the core think as and tight of points around vis-à-vis buy we in supply there the category. Jack, commentary in course, highlighted. there of from Brazil. board player Brazil, Of is your question? SSD the category memory we any growth to incentive Brazil as when fact drive strong you’re system where talking a you memory to much the dynamic

Jack Pacheco

I right units the think, PC, flat Brazil real growth now been is has Sidney, Brazil, area for server Brazil. really notebook, fairly Yes. mean in in in the quarter-to-quarter. I Mobile

driving have down little Brazil the So part that in bit, been growth business ASPs we in more the are it’s but in area. of growth seeing Brazil. that unit up And of a

Sidney Ho

impact follow-up us Maybe constraints chain. is to may these gross thinking Memory more manufactured related of more new headwind parts be supply Is impacted? in helpful. That’s of Solutions? COVID Can are things in I about? Intelligent on color there. the or question Platform the that Asia you there. you have supply Ken lockdowns of guidance a will about contemplated you’re related the Okay. is margin which some likely my businesses thinking more that that two your little think you How mentioned give more are those it availability your on Thanks.

Mark Adams

comment nice we’re in a before me is the business. let make Sidney, just part Yes, about businesses contributes The the obviously essential Ken here.

up Malaysia running. Brazil have and operations Our and been

lot and that our a We’re know, are at US. obviously, the we need you careful, based assets, as being in the very of running capacity they’re manufacturing

So of standpoint, question. second we’re Ken supply. from operational with to hit so an not let being it I’ll deal to produce the being relates able much the and part as

Ken Rizvi

inventory up quarter LED. our we reasons inventory we bit really at about And two we three earnings talked did the Cree call, Sure. previous look included go — and on for this the reasons. One, this so a little if or

not the So large QX if we on that in of that were fact take was QX a about secure into and opportunity that which going our for that the talked were secure call increase to parts portion to QX but able we from last then QX, the we the was QX. to to revenue find second inventory And inventory. factor, only to

the we Cree for So incremental increase, quarter-to-quarter as constituted it our terms as that around And that And acquisition Memory excluding in two-thirds to relates of and was the that supply areas at excluding inventory. the growth look businesses. the just and primarily we inventory Brazil was saw in business. that both Cree, to the secure our probably of the Specialty our growth businesses,

Sidney Ho

Great. Thank you.

Operator

Next Needham from Gill Raji one & on the line Company. is

now live. You’re

Raji Gill

Thank some I markets. and growth you on bit of seeing a Mark, was end momentum you’re Yes. the could wondering these congrats in about you impressive. the across little board, very great if talk

you the growth. in on same — and storage seeing defense seem if and can continues market to outliers business be those mobile looks wondering doubled But break I’m mobile, server the time, in If you the on to comment that end And like and an kind year-over-year server, it at because more mobile you strong grow. maybe PC basis. terms industrial of growth server than — industrial networking, you’re and of when down then storage, and storage

Mark Adams

kind forecasting broader staggering, got true stored on storage is only you being you those out and growth from the data growth. something IT if what drive Really growth. a to data of that’s for two that about the continues amount you and of be is hard numbers for an storage, generated as and obviously is of Digital is But center break server if of and likes each, the forecasting. SSDs sector Western are when it, as at what’s Seagate catalyst perspective just of the of the think lines Sure. And well look there integration which even

on So validated the the in the is it storage piece. data explosion we think market continues and just

hyperscale both the enterprise content terms core investments broader are edge as there in pretty is those as the high of relatively systems and in high-growth the On markets, the those networks of as well applications businesses architecture, as strong. number, to to and the computing in terms cloud edge server leading well both and numbers piece, then in

cloud in Beyond just catalysts the hyperscale data of enterprise that just of the machine have with learning, of beyond also kind benefits and as a the lot this enterprise server AI, profile these level at combined model architecture the in you federal driving good to growth as — core demand and to space pretty you the implementation edge, analytics or as storage corporate the well leads acknowledged. that both sector of investments

Raji Gill

And the question on just revenue growth. another

it look grew which a tough grew business XXXX in year-over-year grew the So off that — if XX% IPS XX% business, year-over-year. very you at of May compare

business to progresses the so in business services compares. pretty trends developed on focus And about strong growth seeing you also you’re does that of model Wondering you forward? you’ve shift the it and tough maybe as specifically customer the in characterize if terms change, how help off could that that what talk more and could

Ken Rizvi

also kind really solutions and business kind storage. really Sure. In the is compute is The selling answer — that around as gave selling that platform well of of I capabilities you. we’re as catalyst just we’re

capabilities data as favorable. all traditional And applications, well custom workflow so, provisioning allocation very edge design, AI, as analytics, just the optimization, HPC platform

said thing are what kind looking a the of be Penguin level, in designing in at the I system think and important an investing dollars operating come them. world. partner see their of application that When services hardware to I they larger of think layer to do capabilities. increase for we’re like capabilities, in at to our starting more want as kind enterprises prefer relative to limited what as expert by terms they’re you systems far is in to outsourced for And mean the security what an solution capital is integration their that of They invest provider. on that you

to way. customers kind that things that have house. do the advisory is and see those them quite we’re and dynamic, And COVID maybe They our that a by in would bring slightly deployment software layered OS sale has maintenance things didn’t right changed, to of job Penguin all And to people partner we a consulting design, accelerated prefer that do. I frankly are hardware, post like would service, in and like so what largest think, when for prefer starting that resources all [indiscernible]

Raji Gill

think that quarter-by-quarter? Great does the the you going or in do sort quarter-to-quarter was kind points question How margin but and volatility what on going there upon mix hardware? back it, quarter-over-quarter. IPS of last question, a on go forward? for model of some seasonality to I in and congratulations for QX. to we How does in we on segment gross the hardware? up segment. down the touched my the job hardware know the services try percentage Ken. And is quarter vary of again gross Is margins that services it basis XXX about in How components IPS of services revenue and guide, about the as but the — It’s Thanks. is of XX%,

Ken Rizvi

there longer managed — for term business there services services And to these there — quarter that we software like can But have incremental commercial sales and is do large business lumpiness QX does versus as that we when services. seasonality our think and we be some federal into there Look typically. quarter. also in is software there where systems are you about customers. fiscal business that’s our install into services has related is overall some head federal and But as because

more in I’d So as sales QX. we say looked hardware-oriented at QX,

uptick would why As at IPS we QX related because some would services. QX, incremental to services we will some installation look margins the that expect That’s for going be for systems. highlighted QX we there there those be is to

Raji Gill

Thank you.

Ken Rizvi

on in as minus. basis, But business. XX%, can into and we’re drive or add a highlighted XX% that on Overall long-term we plus business Day software business that at plus XX% long-term that a services be we Analyst that the basis more towards looking to term, longer

Operator

Instructions]. [Operator

do Kevin Cassidy the have Next Securities. Rosenblatt from we queue one on

You are now live.

Kevin Cassidy

Hi. Thanks also. going for the about to taking services my question and congratulations on software the I’m great more ask results.

that’s many for Maybe great, outgrow? And sales how But of in this to just than that’s teens opportunities continue looking is of low coming Just to funnel from you’re revenue? to your in growing faster to It’s be Group expect to XX% going overall do you the — this. up. at moved this understand XX%. the going Group’s

Mark Adams

I think, Kevin — I some think that still is growth. there

had basis of XX%. percentage to stop we a short that As saying

what think But Ken in reasonable mix XX I over of we months. timing XX get think to than more can the to high and is see you’re think to just higher maybe deployments — to mid commented of I that this that on. the it’s XX%s next the these going XX%, mid the

Kevin Cassidy

with renamed the the And the along products, of to Penguin you Okay. edge how Edge, in core? opportunities products the edge, many lumped that the

Mark Adams

Yes, the right But it one-third, breakdown think XX%, I know XX%, like per se Penguin I — computing, that I revenue in have Penguin don’t track roughly somewhere the mix like opportunities probably Computing, that. high-performance by XX%, would just about think the edge. — XX%, to I two-third, say

Kevin Cassidy

right. Thanks. All That again. Good Okay. helps. Congratulations luck.

Mark Adams

Kevin. Thanks, Yes.

Operator

the I the presenters. further will no back question queue. are now it There on turn to

Mark Adams

for Great. thank again, on Well, like we’d today’s call. you joining us all to

QX. our great focus today, continue we to Thank focused While we’re on you. on continue to Have the great we very be a delivering in announced and results results strategy about excited day.

Operator

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

You may disconnect. now

Penguin Solutions (PENG) 7 Jul 212021 Q3 Earnings call transcript