SGH - Earnings call transcript Q4 2021 | Penguin Solutions, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the SGH Fourth Quarter and Full-Year Fiscal 2021 Results 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. now today, hand Suzanne would to conference I speaker your Schmidt, Instructions] like the to over [Operator Investor Relations. ahead. go Please

Suzanne Schmidt

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

highlights Chief corporate the and visit newly me Chief Ken our our Joining Adams, Financial the video webcast Pacheco, To Jack Officer. about today call Officer; on open today sghcorp.com. Rizvi, a with Chief that Mark We brand. more SGH are Executive Operating launched Officer; learn identity new

In quarter call addition, we find on for information on the slide this including you accompanying this website. earnings new to presentation encourage most on conferences We current and you financial can company the various this to will the for the press information attending. throughout release be go the site

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

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

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

Mark Adams

business: are Solutions for SGH. report milestone under was organized Cree all Thank Cree and Solutions the Platform of joining year Intelligent Penguin company of with to We fourth brand, fiscal today. SMART momentum. In the lines brand, fiscal LED and fiscal you, Solutions to XXXX into and XXXX a that LED I closed and ways, we many quarter brand. strong under completed XXXX LED the am acquisition results outstanding entering with the pleased under you that we with of us Modular the Suzanne, three Memory for

Our the services share supply of three our to to be requirements the and that in common from chain in a deliver solutions year in model, served, pandemic to more capabilities challenges, and our they that a they of couldn’t I microelectronic leveraging businesses markets all quality. businesses constraints, unprecedented outstanding the results. proud were COVID manufacturing, team operating rose managed core deliver niche engineering, custom address able macro of challenge the that

revenue fiscal achieved QX, year margins reached up Total me prior Let the our diversified the fourth was in points highlights few XXXX, we from a share of fiscal a of quarter QX revenue, at margins new at XX%, increase of year-over-year. from XXX of reported year. $X.X expansion revenues prior XX% customer from XXXX. mix billion at significant Each same of year an Cree down in new more And achieved record quarter. and results from XX.X%. to vertical businesses XX% gross wins Modular margin accounting We LED. Non-GAAP gross individual for in Solutions business in XX% Memory outstanding just gross markets to Penguin with the our SMART basis

Sandeep position, we of On of appointed their largest in Nayyar the Lake, the our Silver Independent midst the shareholder, Director governance on Lead as ownership long Board. time divesting side,

noticed, new may great as growth sustainable for and we diversity our you launched and XXXX commitment believe great we released we've on And progress We reinforcing commitment in also diversification reflect execution our long-term strategy ESG are of report go-forward company of to to our what compelling. creating of our a everything made In SGH our do. expanding XXXX brand the to we've some in addition, investment possibilities in progress and mission joining with independence, company's made the accomplished greater ESG to We've board highlighting date recent Herscher Penny future. of growth is our powering have public initiatives Board, and announcement the more and accurately and experience. our the and website inaugural thesis SGH’s

outstanding are serve. each an we well by built across innovation we have specialty lines positioned leadership business We and of markets of our the team driving in

Platform tremendous but to revenue a mix even year ago. quarter Group, of of approximately turned or in date, are in some services. Solutions Intelligent the with profitable primarily pleased higher were more provide Starting another business. strong IPS, higher now than the by ahead. managed from sequentially growth our up each I by to of performance quarter line for QX a will which excited due XX% million, more opportunities We of progress $XX lie that the same record margins Gross detail

QX variability deployments XX% team a revenues QX services we The fiscal year. due margin and software revenue to make managed continues to progress service in quarter-over-quarter. last percentages previously discussed and the IPS growing the gross of XXXX IPS As growth total managed of reminder, with on versus potential initiatives, by its timing of

Performance two for centers. resource received the of awards Modernization Computing and highlights. Force $XX Navy Department We the High supercomputing Defense customer totaling to program Air Turning million from

with memory performance HPC and simulation Computing's awards, are tech high solutions the advanced systems applications research. plus TrueHPC most platform both and deliver making we will services equipped latest for technology, with solutions, ideal the For managed complete storage. them TrueHPC Penguin processing coupled

complex enhancements This and focus scaling updates existing software to QX, most to continue the manage the These an on and we major and in our Computing HPC Workstation financial win is Scyld the powerful oil of and ultra among solutions. engagements progress be Software Cloud will example the Penguin Clusterware, make Manager, federal sectors. performance systems security expanding and DoD's supercomputers In in in customers Solutions. gas Our released deploy to new portfolio. and Cloud scale Scyld Scyld with

towards a solutions. and and well demand and expertise in continue bias offerings. service experience We HPC cloud to grow AI are software hardware is seeing of this complete customer our our and XX meet with years demand with IPS to positioned

the are of We XXXX reach about our revenue million. by fiscal continue our growth solid IPS QX QX potential In $XXX versus Memory forward. X% and to excited fiscal more to XXXX performance funnel grew drive to business Solutions Group, strengthen going new

to year on an ago would and apples-to-apples been our basis. base have customer on Excluding gross from a customer from that to basis approximately progress revenue solutions. team XX% quarter QX to The a make call, new vertical the market impact the discussed revenues due reclassification we continues the developing net expanding up

the and success enabling work compute overall application-specific we design system performance. The the datacenter engineering-driven for accelerator and large highly-focused, from we high-performance processing memory this with In a card companies moving are long expansion where stemming such specific CPU of from large from becoming latency. datacenter a customer doing provides developing data, to delivered hyperscale near instance, memory very parallel low offloads by execution requirements the strength One that solutions. any algorithms our is of Host selected requirements to play critical more history are our

internal is products emerging standard functions SSD successfully Brazil our SSD compute qualification modules a we memory certain CCIX The based leading improves to AI for emerging CCIX business, CCIX standard process. the continue QX, Gen-X on new is offloading memory module performance and delivered to to machine our memory-based concluded of as in technology. the manufacturer. module. and server designed an In began by invest samples new We such applications Gen-X that we and our learning. In qualification first

product utilizing and our UFS storage for the launched we which high-density Brazil lower greater addition, XG our smartphones, in solution capacity. In for power uMCP interface is first

[Technical to our Now outstanding in Solutions turning Difficulty]. quarter. million grew Revenues had which to an $XXX LED QX Group,

Mark Adams

Operator?

Operator

to Yes, give One that out, am please. one moment moment. going one second I just me figure

Mark Adams

you. Thank

Operator

We delay, stand apologize for the please by.

Suzanne Schmidt

on to we're ahead. from ahead point section. go continue the Mark, Operator, LED go in going this and

Mark Adams

quarter. Solutions million grew I what QX had to a to Thank Revenues you, patience. were $XXX LED to for your is our which the in for quarter started an just Group, strong outstanding talk in historically as in increased on markets as our the margins Gross advance manufacturing were meet we both to business. in serve transformation. we well of specialty execution LED as higher the the able demand the quarter

and captive model Moving a light to manufacturing of wafers sapphire technology from competitive portfolio an outsourced advantage. capital from model, is a the silicon carbide to Cree LED's key

and in Our position. the focus mid power LED including on portions reinforces lighting and segment, market leadership high segments the lighting specialty general video the high-performance our market, specialized of

density of in from. We the technology are come where movement [Technical will investing following emerging tomorrow's include growth areas Example trends we Difficulty] are new improving

Ken Rizvi

all grew in sales margin addition across acquisition approximately prior to XX% by record gross basis fiscal by LED on billion approximately to Intelligent in from Difficulty] of accretive solutions businesses. was to up by XXXX points year-over-year $XXX Group million and fiscal X.X to by gross XXX on performance a grew platform Non-GAAP basis year and XX% IPS. LED approximately Solutions million. $XXX record our XXXX. during strong margin Memory $XXX XX.X% our solutions year-over-year solutions our million a in a contributed driven approximately driven our non-GAAP a of X% basis XX.X% [Technical

from EBITDA from $X.XX million, in million $XXX was per $X.XX, fiscal and XXXX diluted XX% up fiscal non-GAAP XXXX our earnings For share approximately was adjusted fiscal $XXX XXXX. up in

turn $XXX fourth let from with of Now company the year-over-year quarter and another guidance the a metrics up quarter results. approximately XXXX reported sales of fourth XX% million, range. X% the in record fourth of our Net all quarter our quarter sequentially. an for were for key the to me the quarter fourth and midpoint We increase strong above

came for margin above earnings share our XX.X%. fourth In addition, record was non-GAAP the non-GAAP a diluted per guidance. a $X.XX gross at record quarter, in A both

Cree in of operating basis, highlights. added a approximately year-over-year Turning SGH fourth helped LED On non-GAAP the the quarter, to the quarter. by XX% of million by SGH, which our grew approximately in revenues sales incorporation $XXX into total

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

fourth for the quarter, IPS $XX record that record million, For approximately a of has business. revenues

any hardware, discussed continue quarter. variability revenues in in margins and the IPS quarter-to-quarter given of and earnings to the managed timing will As business we gross have on based have services our in previous software, calls,

Memory grew specialty Our $XXX business. revenues had Revenues approximately of growth of primarily million the fourth continued in from Group the Solutions memory our quarter.

This In the channel replenish the to more also some business the the versus level Group able well fourth quarter, million quarter. the in strong additional had weeks of approximately to for constrains our for revenues as high LED by $XXX the as Solutions in the third an XX products as our we LED Our supply benefit of a eased. were fourth quarter. growth normal was week power driven of demand overall

As LED we fiscal the first revenues for anticipate sequentially. solutions head to into down of quarter XXXX, we come

migrate to enabling manage light demand better continue operational towards flexible to structure, more a model and We a fluctuations supply. fab of

at from which but and quarter. the of anticipate to the as margin for basis, continue benefited as at record discussed up expect the CAGR XX.X% the up on Day, for the some were in software gross IPS, LED XXXX. performance Gross and SGH quarter seasonality prior quarter quarter-to-quarter. margin a to XX.X%, services mid-single-digit our stronger margins from higher Solutions fourth helped quarter fourth Non-GAAP long-term was Group, the mix margin from As grow Analyst variability from by fourth this a managed in in a well we business and XX.X%

have gross hardware, we revenue. based in margin business on variability profile the the past, its and have in As of quarter-to-quarter, our software services will mix IPS discussed

we million to expenses bonus an $XX.X of in IPS, continued fourth gross the fourth related inclusion solutions, increase LED the solutions LED XXXX. $XX due as approximately XXXX. in the were margin Operating of reserved of quarter from addition, fourth the sale Operating within In previously to well million, did as to accrual in for the investments up have in parts. up one-time benefit of quarter, quarter expenses the quarter a were fourth

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

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

fiscal XXXX other by at and was and breakdown servers XX% and end telecom for learning XX%, lighting net Mobile as quarter fourth markets XX%, the data network follows. analytics was Our XX%, and storage XX%. of advance AI, sales defense and XX%, machine PCs of industrial and

Now turning to working capital.

was $XXX the the supply totaled flat on for by of are we basis. accounts came of inventory purchase receivable our quarter million Group, with $XXX.X additional compared Day chain million Memory business, fourth quarter. at inventory where Solutions end risk last including the of the on compared our not driven days sales net customers. $XXX.X end for Our $XXX.X taker the behalf quarter. days This growth prior our the with with outstanding the XX a at in Inventory at last million totaled the million quarter

In to and And of XXXX. shipments early quarter fiscal quarter. and first million for fourth in and our addition, outstanding, were inventory quarter. our goods turnover respectively up which times fourth times accounts turns in were sold support the X.X built past gross on $XXX.X the of quarter sales consistent IPS business cost fourth $XXX.X we prior in in for with are million quarter inventory receivable, days calculated a the versus X.X the Inventory basis, practice

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

million. XXXX cash flow fiscal totaled $XXX.X For from operations

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

net our first sales range $XXX expect from XXXX million the $XXX We to approximately million. will for quarter of

and IPS maintenance the to for the Our as XX% of of to related be GAAP business is approximately overall XX% of services between a software gross gross first XX%. XX% quarter SGH's expected expected for to be gross to is quarter XXXX expect the XXXX we margin which first Non-GAAP to fiscal is and for quarter. higher mix expected our help margins margin

first $XX to expenses expect other asset to a Our in amortization we $XX basis, share-based non-GAAP million operating are the of to and range $XX expected million convertible or GAAP first the for share Cash to $XX million. per $X share be in expenditures the earnings million in $XX compensation plus plus approximately XXXX $XX $XX million $X.XX. expenditures $X.XX excluding to diluted includes are be solutions. non-GAAP expenditures for for per minus be LED approximately to expense, of range fiscal adjustments, expected non-GAAP is capital million of the be to diluted expected approximately debt $X.XX. related be million XXXX. fiscal and approximately On expected capital quarter earnings $XX to million discounts or of intangible expense, integration minus Cash quarter is capital

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

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

contemplates for in for forecast reconciliation the chain. current financial in based and to the on global to of the results of the our the tables reconciliation measures the net in refer non-GAAP financial section supply non-GAAP first release is GAAP which constraints information EBITDA to GAAP quarter the Please Our fiscal further details. adjusted environment income earnings

me concluding let the before Mark some for questions. call to Now the turn Mark? back to open call comments we

Mark Adams

Intelligent SGH well of over much company have history I CEO until of I as both when was What the the in factor one are operations. Brazilian became are for year of memory, an Prior now different I we computing our specialty the on I had at of long called top in truly were LED When ago, didn't to of the the company. largest a much high-performance literally Ken. Solutions. joined Cree of our Platform opportunities business appreciation acquisition of that, you Thanks the aware a Today business, installing computer in systems we world.

powering lighting core making the networks, segment, the how of enabling expanding of set XXX an safer, achieved are leading QX, in year margins anywhere possibilities. in by at SGH technology world emergency and examples revenues We are access in is points vehicle solutions the compared enabling We in and same EPS for almost high-bandwidth world the to instant. basis memory to record to is $X.XX. especially more a growth QX There up of XX% the LED QX. ultimately solutions and QX data many a Our of in gross quarter ago,

are feels Thank Our about Q&A. and at our again, you all, team lines we SGH couldn't for excited something open call. please the more Operator, be very for future. joining building special our

Operator

Please from Instructions] ahead. go [Operator with Tom question first O'Malley comes Our Barclays.

Thomas O'Malley

guys, the nice my congrats thanks results. and taking Hey, question on for

you Could saw of you IPS, need also then explain missed but contributed with issues but segment of which margin weigh outperformance gross a increase in business those. you to substantial this most just mentioned the you software of see and service is LED, one I quarter? of gross the obviously some more in beat call the if here. me biggest where margins mentioned know this I Forgive margin leverage? here, the highlight that the you Could you

Mark Adams

is Tom, Mark. and this Sure,

it, technical service had our problems you your we for much to and call I patience. want I thank First third-party before throughout apparently to of will some that the apologize all, get to get very hosting

Sometimes our these things out are of control.

to would here, in We prepared as IPS. just the as well you towards LED the specifics, the asked, I but I at expansion, weighted improvement continued let Ken on but the noted vis-à-vis with say, service margin that Cree will combination, I'll appreciate his gross it patience. Relative comments truly a managed margin heavily question Ken continue was mix in Q&A the really your into get

Ken Rizvi

Yes.

look So up. memory at board Solutions, actually we for solutions Tom, across and IPS for margins for if LED the were it

big two in as relative guidance the of As margin LED to Mark in performance as non-GAAP on better XX.X% well for terms margin relative enhancement that both of the QX our good highlighted, Solutions, drivers and the a IPS, to upside having – weight basis.

Thomas O'Malley

right. All Memory within the from and on quarter, just came guys really moving And Solution, you that then the another mentioned Memory Specialty strength piece Logistics.

you the you're headwind Memory strongest about Solutions? or pieces moving last think about revenue I you for within Solutions dollars business headwind the sort on be color on within of quarter Are talked a really was ex Any line that that helpful? talking basis that the you Memory business seeing. would

Mark Adams

Yes.

saw Tom, when And due grow business. So $XXX about million million from growth, growth was the that Specialty Solutions, to at that Memory in QX. in we that specifically QX look $XXX business here to you within of most

of to to customer talked note a basis. in moved one thing QX basis the tail end as one of about QX, Now, QX, or gross a from net that we we

even in QX. to so our did that, with Memory QX good we Specialty And business see growth

Thomas O'Malley

It’s helpful.

that's one more if Let sneak okay. in just me

also And LED are some as You obviously you ramp IPS inventory two mentioning well. mentioning things, inventory. and grew you're

about that You've you're you talk can Or described seasonality confident why in the primarily related that fiscal next just talk year? building the you to the LED growing beginning IPS? that into in about Is some in inventory? QX. kind business so confidence of in your of Can

Ken Rizvi

Sure.

for fiscal be our reasons. clarify, in XXXX. to highlighted our inventory we prepared the to grew just ship remarks, in in able Tom, we to One, - orders you've as inventory IPS segments, grew did So two the essentially early QX

growth about that half had to amounted hand, to we of on QX. the So QX inventory have that to inventory

where chain that to The other was related And about big highlighted, not balance to to business, the are two Group. overall and but related growth of our supply was taker it, of as so risk I carry the not those half the our Memory we the there, - two-thirds portion we for inventory would are on drivers. within that we are sheet, risk that a taker say Solutions

we overall will the balance into that You inventory from come move see QX for as company QX. down

Mark Adams

we're would And of top that, in support is as I make in mode just about what business we talked the other chain the comment supply in aware we certain and of Ken revenue said businesses. are only our all growth take these looking advantage taking in at, line we're growth how vigilant we're three advantage opportunities sourcing in newer mode to but be and of all opportunities, growth. We're opportunities of across we're to in able constraints, also

Thomas O'Malley

guys. Thanks,

Mark Adams

you. Thank

Operator

Chin your Please with Stifel. Okay. And is next question ahead. go from Brian

Brian Chin

questions. thanks. Hi want afternoon. on stay with I there. and margin really positive here ask on which Good the the a Good And to here, big outlook. performance. strong to afternoon. actually just Maybe few is Yes, margins Congratulations clearly a gross results

you clearly talked it or because right? some was not jokes of be of going those around software other pause they’re fully horizon. over is things and the and of ago lines margin low where on to place op businesses, the the target, example. be think may pruning versus you And mix, a now. not could of I sort maybe of the faster the mean, here -- aside, some those that again it that take year-end optimization durable kind some mid-XXs initiatives of say But hardware long sort But the IPS, big product on Day right? lot a target sustainable, on for gross, of a can on the meant there as the we I to materializing of long-term you decompose we're sort long about teens Analyst are

reserved benefit a to kind the calibrate, that to terms you margins should inventory? also previously sense could in what selling that trying positive And of be. just maybe is get gross sort of of baseline So sort of what Ken, of of

Mark Adams

we say Ken have on let well that, where numbers I’ll today. are just taking we to longer-term the did would I the that your humor a treatment to yes, specifically. guide to is get get

we course, driving on drive new Of that go-forward opportunities a are that the in have we're certain continue we to for to taking the of basis. advantage value-add and business trying capabilities look

have as our just manufacturing so, think March when just this with when back transformation, ago, couldn’t bought LED seven And we been we the the envisioned than we the thought side business that, any in this team. Claude went And months about better into certainly by on environment execution probably XXXX addition is the execution demand the closed tremendous business to the we in, in transaction half as and favorable of stable and we year. back more of

Memory of we business the Specialty we'd lumpiness this of the upper we're side, versus well, focus And to is the as On to There and the be of continue managed due this and speak. IPS into margins. as software think the business might doesn’t to our times to hardware always going se, deployment quarter, end on puts going then gross some schedules that talked all, around as to or in induce think per so some in in will range. to we've continue services lineup like the to we the might not variability takes XX-day margins be range. margins it and to that about about All it drive

XX the the I bottom probably at plus the thinking top business I how today. me keep look but is and honest, in to will in think, the somewhere XX and on range that XX Ken I'm the

about Now, points the months mentioned better XXX as were than we my I high in on ago. end XX comments, just opening basis

I so And we're making a of think lot progress.

go-forward funnel XX team margin to the that, be months XX XX next we forecast, maintain a but today and to strengthen will increase to question direction we're is a in in very confident as that our confident, driving in are our and Ken? our to growth strengthen to margins continue on strength the we strengthen the are our our job mix drive Our understand behaviors and to signaling we funnel management value basis. to over to and mix accordingly our a

Ken Rizvi

and Yes, and helps on parts on if or collide some so. that margins the look about previously of LED terms it points by reserved in of overall basis tax piece, XX the sale you

Brian Chin

Okay, quarter? to you got the be that in expect similar it. And November

Ken Rizvi

expect to of reserved around sell QX. look Well, part guidance XX.X% at we in when XX% don’t pre we're midpoint reason versus the so that our at is parts, why you that the

Brian Chin

one margin it Okay, May disclose did sort terms does you maybe sort be terms engagements? and terms profile you, demand your but of about gross that enough. in margin of take stress you've it, just clearly the Ken there pricing just but breakdowns you're fall how of of through reemphasized on to growth memory and I on have And the to of that of again, in missed times your through DRAM, not so choppy fair of of gross is those how se, risk then but margins couple in more sort DRAM, in much, on of per kind but going segment on in may terms margins? by did give concerns about the terms more choppiness

Mark Adams

just I'll me hand it and let that, Ken. forward then to last over say take would I Yes, the

semiconductor on and stressed not on capital the of our we're of yes broader On memory DRAM a especially prior company. sitting we that play environments, calls the memory nature have business pure the fact market risk given and that

our then Our question of from demand exposure lack don’t byproduct certainly see specifically, the as more we lighter to is and of a the business memory customers. your address

parts, parts We the These demand we to I really strengthen the matter think think also technology both or our the provide to a business the value these of DRAM by business. our on on balance early companies. helps in more are parts legacy fact, probable any are that ability semiconductor stable. remained for As And think to kind these that which interest of of strategic technologies way solutions company. ability add of our memory have custom

So the we're memory business today. remains business very not here talking pretty We're demand excited about weaker strong. and actually memory about

Ken Rizvi

see you’ll in business. your first are QX, then to in three part of to We the those the how about and Yes our we’ve at for this Analyst segments. running fiscal Day question, of is XXXX, talked answer we so as our XX-K migrated of terms

of We presidents segments. each three have those for three with

And so, we’ll margins under we our K, forward going only Qs see revenues percent, the margin memory our SGH guiding will in be report operating under you go-forward the reporting and under to basis. in will LED be but gross IPS, solutions, will a on and we Solutions,

Brian Chin

and current. commercial the has growth got on Okay, just been that. closing really just IPS fast, strong fiscal into then this year And throughout

about the win base the confidence year mind there give does risk in DoD maybe can fiscal a XXXX just or processors Mark, you You be forward fiscal as kind basis? double-digit that even you the other but of on good or going is sort effect with this inventory to much of now on growth there, ship that to terms key that demand, in as is not you components of some current to IPS for go-forward against these just talked so where ensure a all need buy year. a

Mark Adams

fantastic strong. of year, on funnel a half in the and not the as early this wasn’t got I just first in earnings this months I to done job. I Thierry’s very and business team has business. XX tell the Yes, back leadership been guidance like ago, remember has call it we process, you under potential And the well the my of understood -- my And super on mentioned

We forward But be tell very more the business will lumpy and this bullish you lumpy, go more the to we’re going for to it it’s be when remain and you going properly. are and guide now potential on. Yes, funnel. about we encouraged

just although stop year, around that in our that’s I happened would short would a QX the you business. that guidance going change tell there’s optimism the nothing We’re for giving to of

Brian Chin

Great. Thank you, guys.

Mark Adams

Okay. Thank you.

Operator

is Cassidy question next our And Rosenblatt with from Securities. Kevin

Kevin Cassidy

thanks it at is all my Yes, and the for question ship for early IPS taking results. once? be that on to Does XXXX. million? maybe with of early contracts, by on DoD the the deployed need think And the theme was great that $XX timing sticking congratulations -- what I

Ken Rizvi

Yes.

QX fiscal or QX our QX the in that expectation Kevin, will QX, our So, timing. for of that, terms in, is flow it and in fiscal

Kevin Cassidy

or percentage Okay, that. services great. I tied also, for And just revenue ongoing to an years? that stream would services that What there think is be were

Ken Rizvi

Yes.

neighborhood on that We won’t terms piece, services will over about you time. in but be how the of and of should long, over So give kind in XX%, of XX% specifics that time. be the

Kevin Cassidy

ending details Okay, you mentioned can Brazil credit credit or also reapply little great. more that can -- the is around us a that? XXXX, And you you year in give for calendar that

Ken Rizvi

actually that so Kevin, the in one Sure. is law Brazil. on that

going it’s of January away it’s to law SGH, but credit a So law. XXXX. specific That in that has nothing current

QX So in away our we QX what OpEx benefit locally is in effect Brazil R&D you will can a spending all from the that the get increasing things and of expect dollars have and will same. go being

Kevin Cassidy

of would Okay. that Any be? much how gauge

Ken Rizvi

QX. at should mean that be as the up would would that based neighborhood, we and in to I $X so say QX say I expected QX, the or to I credits are million be on look where in range

Kevin Cassidy

up. that clearing for Thanks Thank great. you. Okay,

Ken Rizvi

No it. problem. Happy to do

Operator

is Company. Rajvi question from next Needham Gill with & Your

Rajvindra Gill

Yes, congratulations and the on also thank you margins. my

that, Just get sticking and the to once of but in of margin XX excluding the and point sale XX%, to kind to margins I for been, range. it’s the based the similar was like of gross its early but And range. on the impact is seems a the math this, range. the high from end still very getting early of kind LED Ken, kind of giving on it that’s you’re we’re XX% business XX% know low margins again on early know the and quarter IPS previous XX% IPS, was end, the that kind on understanding volatile. there basis of this in this the revenue mix kind of We it gross August LED a on XXs range the margins the wanted quarter, implies or wide XXs is But inventory, baseline better the XXs I before of

for manufacturing baseline is IPS, versus think margins to as Is margins? going there what’s of when managed So, for services basis particularly the any previous a clarity room in shift about there? And all the how quarters? you then LED secondarily, for be light more the on quarter-by-quarter expansion to

Mark Adams

take Yes, two. break it and into that let me

we’re these like hardware future really to and deploying the more the Rajvi managed the orientation it’s mix side, to back tough level IPS On breakdown and to forth growing we’re we’re systems when at be projecting timing unfortunately how going software. it’s into of that growing, we’re from and the quarters shifting and the growth services

try And the I’m and as challenging earlier, color give today just commented something but going far of have se. bullish business. doing I to the sure not just of that’s competitors we spike some you lumpiness too to -- Again very we frankly, issue. than really not per same in the is where we’re out our So around the can to give spike us any we’re is you for margin QX is to some bigger better quite think relative color

because we us quarter, you’re terms quarters getting And it a execution. executing to helps got we on It’s to of pleased talked basis. so, really we’ll point, our quarter do Vis-à-vis it again -- on and this again of LED best I our and we’re the but we’re earlier the be just the issue in intra again timing said at be as very seeing, two, just careful, in everything end just with we properly mix. expansion go the lower some and forward margin range guidance as the might about

XX% to We’re about XX% done.

to will fiscal I be so the next XX% think the last done speak. in year

some this those And over and XX% for optimistic QX. kind upside. the on, about margin, XX% of it’s in But margins. see potential constant, XX% business now we and in think for the again this. gross improved we future of somewhere both points see XX% today. bought company as so things the remember QX we basis there very bought improvement we’re north margin is months again, as resulted that what We is have And in XXX range. holding about commented potential are at you But where And gross a pleased XX

Rajvindra Gill

you then have information. you do is in of week We on seasonality going for that just that Okay, And the Thank be great. extra the August. revenue down business mentioned sequentially. to the that

specialty and it we specialty being that kind the XXXX those business broken respect just the line how likewise Brazil about the more fiscal progress down sequentially. November we commentary to mentioned wondering Thanks. quarter? versus throughout other And are a sticking with as the into LED think year the related and as I'm memory? provided pieces color for in or of Brazil top on in PCs/mobile have to past to you You about memory go kind on with seeing segments? and we of Brazil? individual expectation the What’s within of Brazil. color the Wondering any What down

Mark Adams

Got it.

about. the a try couple of let So me you talked to items address

versus one weeks of actual, was QX So an things we for highlighted We we normal QX. XX XX in weeks had LED in solutions. had the a

the QX. for So Solutions QX did that LED help to that revenue growth saw we

As saw we the minus think look QX midpoint guidance $XX at $XXX I to million you million. at QX, plus or our

expect talked I within terms Chinese this we normal of in seasonality, essentially a quarter-on-quarter unique that also pieces QX see today, you question the in going seasonally but down for would, New to for your I the flat to you the guess, also, have it for down call. some business third asked world for as the QX. businesses. do you have close seasonal and moving part even on we instance, about Brazil do would to our that amongst we So business, memory though our of be seasonally to Year norms, QX, with in three some the the we see We tick that would environment is And you QX, to QX, say in fact head fiscal into LED last earnings the due

remember part and of there. some business. memory the see do color seasonality around correctly of was the of Fourth, I you breakout So your question if

talked these together and businesses flat there see down at would changed the of bit mix I PC about, and solutions in QX with revenues QX We Brazil. within Brazil being a we pull relatively XX% now not we quarter-on-quarter did substantially drove overall versus revenue QX overall. business Brazil component mobile a the we’re that in memory within memory memory the looking as solutions better being of and the solutions than So, less demand has quarter-to-quarter. say for

Rajvindra Gill

you. Thank guys. it, appreciate I

Mark Adams

Thank you.

Operator

is Ho Bank. question from Deutsche next Sidney Your with

Sidney Ho

supply within own Thanks you the my well margin give like? couple update taking supply customer maybe your supply of a in supply in talk chain, on, the supply guidance months three chain to chain you the it what questions later about some seeing contemplating gross you can questions Ken an looked ago for maybe constraints compared us you I’ll but is question. when some on on constraint. as save as your what that

Ken Rizvi

a other where in seeing are are sales, would we revenue. say have if would parts what contemplated chain as our our specific the I are constraints electronic are there that lead QX I’d despite chain solution parts, are in we’re still But components players call we done shortages fiscal supply look we supply which long. seeing source at we still Sure. the able the had that numbers to They’ve within the and our more of fantastic certain to more supply us hit and for constraints. guidance, overall think to enable overall team job at But the able being of chain guidance do to as we of be we out there. we times specific out we we our ensure look put overall. general is in And supply so there around I that terms like

our guidance. as the the through it. there that talked we So earnings are constraints, remarks, incorporated into managing And on prepared overall about we’re is in call, yes, but

Sidney Ho

from how just one think Maybe helpful. OEMs, talk in of your it, their kind in inventory, specialty to non-memory especially customers PC memory memory business, at seeing in do that And That’s question, shortages the inventory about compared are to when any some plans? about supply memory Brazil that, you component build impacting causing of Okay. adjusting both of market, supply previous of related aspect their your that you the memory? level the

Mark Adams

I exposure would have high that, about all, we’ve the we a suggest first in as talked to don’t PC. of just past,

some have a business we’re PC, does has exposure PCs, mobile And environment to supplier Brazil none. virtually SSDs. albeit the to Our well our where confined no as exposure largest specialty as within and business

I muted customers. conditions supply macroeconomic kind to it’s about business, our of when to think So PC the exposure relative at our broader

on side. same the material the business. our to it’s But so exposure thing is our We have memory little that heard not

Sidney Ho

ask I Okay. fair. If just may another question? That’s

Mark Adams

Sure.

Sidney Ho

in memory It’s specialty the didn’t a that the guys also product but that talk your Brazil the this memory business business? that call, about for or using internally about on you in in also, Curious SSD Is developed Clearly talked is products for using you controller. past there track a it’s SSD if kind Brazil? SSD can plans and about you talked margin revenue targets your you And share both any Specialty past. Thanks. on implication for the Memory controller? the is if of own

Mark Adams

not product our Yes. in I implementation. Specialty the retail or the other we SSD Again, would we’re which is, to just there, to that's custom about SSDs and say similar is that every think selling SSD way do is it very design that client not distribution, business. and

in about Brazil an nature custom talked SSD in annual this be by Brazil, NAND very Memory market. second Brazil for we’re Specialty year basis. running and overall our volume of as overall and may of our they kind be SSD the calls, it’s just in and and is, and And of business we production So, will think half XX% NAND the business about anticipate is of prior ramping I’ve up on in

– be Now will the client client at PC-driven side. on the that

million again exposure zero from to and business. the But commented have we’ll rate exit XXXX fiscal PC so, so run And expect in year I’ve we some to somewhere today $XX the speak. we’re that our coming to

encouraged. And so, we’re

and We’re running. up

as test I script. the my doing in We’re mentioned

business. zero Specialty XX% we in Specialty And our $XX what revenue of segment to somewhere think the a business overall about in Brazil. And is to coming that on SSD will today, somewhere so million believe of be our from be

Sidney Ho

you. Great. Thank

Mark Adams

you. Thank

Operator

Mark go Please Jefferies. with Lipacis question our And comes from ahead. final

Mark Lipacis

I my that manifest for a Hi, how great. you’re I tightness. guys your angle, customers. first question from that might had you Thanks that some one, different taking a can and -- is on chain for from Two questions. supply But questions, appreciate contemplating

order tight able customers chain may supply the when be your to is. imagine full end how produce product is I their complete you to have So hear kits not in whatever stories about

just imagine take One they you order one that into And fact, and that they on two inventories. so, guys stuff? module until from I In might kit either hey you to say; memory own you call two, the hold of might complete can up ways. it pushing they their a in the manifest and out get to or guys you put

go of tightness misread your When you hope you executing that antenna know maybe your is seeing supply you any of lot a signal chain, get kind focus Mark management I so and kind very cycles where suggesting of investigations in to be -- in my inventory. this to? And is, do second guess make sure you do you any And burned, any you as and then or where And push or have maybe because part cycles. – the own you outs I are building as your you don’t like of both question might order are seeing much. differences guys, activity get Ken don’t through you’re the you disruptions Thank question, your customers a up? of a lived for of

Mark Adams

imply the we commented can’t cycles was inventory mix of for that. shipment to broader this thing asking actually relative everybody kind QX constraints that bought kind our want early as it. certainly IPS Ken Yes, and inventory to some business. I in of are all memory remind microelectronics the appreciate just question. One I Good of Hey. the questions and is around of

products not it’s are are memory sitting these inventory. like So all

for actually supply the our the that we the we of commitments at Jack firm with has have comfortable customers. conditions. We business most and SGH. are given market the on balance navigated buying We’re commitments pretty these we’re from demand the that have inventory

our feel are on we this inventory position very about there. doing pretty is well on Our we’re side, So sense I implications similarly on and good appreciate LED all the exposed? pretty the

and to as our LED segments to specifically memory more but serve Some was the of space. of in able buying these IPS mentioned be the opportunistic each upside also I customers in

Now the looking what rate. for? part second you’re we question to be the of last think last should saying your your I

reflected implying you can should notice you Ken see And about our QX shared we You’re excited QX what that’s by guidance. in pretty the what right we’re with that we’re now and for bullish on opportunity. guidance

good I It’s for of able to it it’s memory the meet conditions even orders Now, supply the customer standing products in we we’re not none Certainly matter it’s be this looking supply out because what a memory solutions that again at And the of seen would different across for? all industry fact changing that pushing kind you behavior as we’ve in point. today and products. demand of markets, of are see the environment be specialty the market again pretty in important as that there legacy and as we’re our business, can technologies customer some guide. most long our well needs early to which from think a parts our of

we’ll all-in-all, for it. on look So we’re it,

QX. inventory But We’re demand seen appropriately going in and again major to signals. the this we for shifts drive forecasted any sit results customer have we our business position us watching to service as allows to demand ones not that signals our customers our we today here from

Mark Lipacis

you Thank much. color. very Great

Mark Adams

So, operator, before just like close, I’d close with some we to comments.

which In fiscal slightly the year Furthermore, XXXX months that even slightly QX, more more our in it’s we’re the Day Think And roughly about months, was at in income, below excited company. operating of Day, First reported down as of results XX%. the year which memory as about memory, performance, XX% is operating a now of XX%. in income XXXX income below XX%, was just strong the than theme today, fiscal our XX Analyst of overall all, XX roughly QX operating at QX is was ago terms XX% XXXX. that. memory business in to And time XXXX of our XX%. Analyst was today we

We’re developing and attracting outstanding talent.

edge provide future is we at machine technologies. Clearly, growth more for bright. We add data segments more are new advanced learning, in computing, as our be SGH We’re couldn’t LED value lighting targeting capabilities investing our excited. in-memory analytics, to such compute, customers. And AI, market

call you your today. on – the to call So time look for And forward the we future we communications. thank

Ken Rizvi

you. Thank

Operator

Thank you again This conference for today’s joining call. us today. conclude does

now disconnect. You may

Penguin Solutions (PENG) 13 Oct 212021 Q4 Earnings call transcript