SGH - Earnings call 4 2023 | Penguin Solutions, Inc.

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Operator

Welcome to the SMART Global Holdings Fourth Quarter and Full Year Fiscal 2023 Earnings Call. My name is Victoria and I'll be your moderator today.[Operator Instructions] I would now like to pass the conference over to your host, Suzanne Schmidt, with Investor Relations. Thank you.

You may proceed, Suzanne.

Suzanne Schmidt

Thank you, operator. you webcast us Quarter to Year XXXX thank conference today's and and Fiscal and call discuss results. afternoon, for on joining earnings Full Good SGH's Fourth

company. site Jack Mark Chief conference Relations growth Rizvi, Officer.You on section the the the included We information and release everyone can throughout use slide the trajectory website. projections make Chief call, are company's in for note statements, would and of accompanying Financial today the read the this release encourage press earnings the of go and I company call Operating statements and Officer; our the the Executive remind will call On also like on about forward-looking is to for you outlook. Investor Officer; the the most and to presentation.Please presentation to Pacheco, find this Chief forward-looking Ken note financial on the Adams, quarter including that to statements press call during current the that

a results. included into measures. agreement early the and our in or our forward-looking encourage 'XX required will Non-GAAP and operations. financial statements for measures today's reflected close and be presentation calendar as the approvals forward-looking a beliefs today the update limitation, conditions. end Mark are are A made XX% classified June entered they to, in accompanying an noted.And to by when our our as 'XX, The measures law, and consider risks slide presentation.As future GAAP operations as any the sell of regulatory GAAP Adams, on uncertainties We of satisfaction press presented as statements reconciliation The guarantees with of reminder, to all is relates company's including, press of the subject superior subject and an GAAP from, and call representative in are isolation and to or performance. the required CEO. not SMART following based to and both current periods financial should turn to and which are me Forward-looking you also not performance no of without of statements.We the Brazil except to publicly Brazil transaction at reports. to the we discussion in as unless considered and most and analyzing assumptions, we closing the risks to applicable to date expected on release operations is over earnings SMART only release quarterly non-GAAP in Accordingly, are substitute interest our uncertainties, annual or XXXX, for well measures customary exclude filed otherwise revise as discontinued all that, call financial discuss non-GAAP recent Brazil, are assume Mark? SMART continuing statements operations, our results in let XX, responsibility

Mark Adams

Thanks, Suzanne.

and fiscal X high-performance, into company reporting of been years, from our module the of this fiscal to further Solutions developing are the of opportunities beginning what more furthered look-forward our XXXX, calendar Today, detail we positioned the because in the I business important results for large-scale fiscal consumer in base standards-based Brazil XXXX, of past XXXX periods products global transaction fiscal would completion June will including as tolerant from revenue. recurring In IPS, operations SMART memory represented time to for fiscal of Brazil in how total we XX% and high-margin on services today, platforms, At transformation. Ken announcement.Our Memory we align transaction this perspective, today's we resources anticipate significant sharing discontinued computing refer ahead.In accomplished high-availability the May delivered our all XXXX, divestiture Brazil. for earnings year, XXXX, transactions investments customer and our or on in in from sold high-availability for we Over company electronics high-performance, we on the I solutions XXXX, continuing now Brazil, enterprise IPO comparisons which of This transform XX% are announced in a XXX% LED customers. XX% Brazil and operations. to Stratus a Solutions. enterprise we SMART to we as Solutions the to proud manufactures agreement our an will enter an early XXXX, few SGH to from Memory a we've revenue.In memory.Of journey stake XXXX, continuing memory are an SGH focus am of As solutions expanded closing period, our commentary divest high-volume Brazil. provide last the core, towards SGH's have edge excluding focused Technologies, from a $X.XX services. will we offerings we The solutions. reporting XX% our transformation. IPS a high-availability came leading presented for billion and and beyond added significantly SGH our sales fault software came acquired in And, provider expanded valued at

of FY from record Non-GAAP FY aligning each XX% of our year has FY a revenue. SGH.As 'XX, grown or It In gross part Stratus customer solutions, enterprise prioritized our or $XXX are of a much we million X increased sales in serve our our to Services improved addition, to XX.X% differentiated overall strategy high-performance, in is high-availability businesses profit growing to of have 'XX provide margins we larger XX% SGH sales, now engagements for provide million where portion XX.X% we customers. $XXX inclusive in total our of 'XX.Gross as best Services in revenue 'XX to also solutions. from of margins fiscal

high-availability high-performance, and and computing manage build, the solutions For deploy that IPS, Edge, Core span we design, Cloud.

customers' telecom, datacom, applications. through our our storage, Solutions and meet specialty our high-performance, we needs.For Memory data as We such center, high-reliability for capabilities advanced customers Solutions to and continue industrial other business, Memory markets provide computing with build partnerships to internally

balance IPS, high-reliability business Technology high-performance the per of from Penguin totaled on-premise, $XXX for our and including ago for non-GAAP build, gross to made cash of commitment million basis up and Brazil; We tolerant results fault are development XXX operations such or research our or margin provide solutions, diluted share the advanced investments excluding in our at and exited lines. our Express with managed lines. to opportunities short-term are approximately Sales We quarter innovation, earnings which with LED customers, to Memory $XX and leveraging the on product non-GAAP HBM, computing equivalents was the delivering enterprise million, generated a and Link memory making investments and capture services and applications.For focused our XX.X%, let review me Compute design, technologies $X.XX. high-reliability most to $XXX strong We cash we Starting fourth QX in of portfolio.Now each Solutions Cloud. is quarter; million.Now Edge, the in as intellectual turn strong totaled year the Bandwidth me both High solutions in quarter. cash up and in Stratus sheet, deploy flow LEDs high-performance, let from and our and CXL points and property

customer trusted on managed providing environments.Our a as is centers building Our workloads for way and relationships, solutions solution advisor, to total post-installation where goal planning, all customer-specific business we services. sell the infrastructure a serve IT model from through

lead from may discussed depending As scope, fluctuate supply-chain calls, quarter-to-quarter prior on deployment revenues such factors budgets. we our have and engagements, times capital as customer schedules, product on

also in XX% of order have which $XXX had XXXX the the the sales. quarter, from last IPS XXXX week million, SGH time-to-time.For We fiscal sales between as an first received we than revenue in of expected. totaled we total week can rather fiscal quarters of previously represented move In example, fourth IPS

services, revenue, and to these of implementation, renewal in in provide the and longer-term total next-generation verticals, is as is oil such experience positioned with AI of and gas.Across financial given well interest which longer. seeing point-in-time believe generated leading services mix or partnering and HPC, companies majority of at year platforms, XX% SGH services continues to focus care, that are Penguin on these such an customer AI. the extensive each after services health we design of education, of services are our some in and as markets research its Solutions as Penguin the term IPS, in to UltraScale, reach solutions, expanding typically government, managed subject we represented sometimes in include initial quarter.Our revenue as a Our

able be DGX platform innovative automated DGX-Ready benefit Solutions runs performance an platforms, the platform of help new an Solutions Stratus Edge AI ztC product, NVIDIA deliver.Moving combined example continues that was large-scale well approach strives to efficiently. wins partnerships, secure, program.Through computing under deployments. advanced this which Penguin Penguin will and program, supercomputing of a leadership a Solutions month, last and manage our customer-first, named perform customer Technologies, business-critical deploy on for to by to customers reliably partner with with channel will NVIDIA class Penguin rugged As highly service-oriented Customers applications that quickly, Services Managed the strong and the for from to

develop long-standing advanced, a to Stratus at solutions AI this highly Edge fault-tolerant later the in well-positioned targeted Computing calendar is launch year.Looking reliable platforms is for to Additionally, computing Stratus new-generation of its ahead, Edge. leverage expertise

on I've with As HPC regards lumpy concentration. IPS business, with in is our high nature calls, customer prior mentioned specifically to

concentration with are While we on continue reducing customer next the to deeply existing we years. also few customers, our engage focused over

driving anticipate products which by based customer current second of deployments, weighted our half customer prioritizing fiscal be customer-focused such on chain XXXX and year the We challenge higher-quality a revenue capital to through approach.We memory. and supply somewhat towards affected will budgets.Shifting is are factors of visibility, revenue timing services as IPS

SMART which is the Specialty Group, Our Solutions operates under focused Memory enterprise Memory on applications. brand Modular

where are to X the applications remains lower, products.Our customer a to facilitating flat are at XX-gigabyte AI, the price addition came for memory more affecting usage total products, RDIMM DDRX know-how breakthrough our making as my quarter.While early memory essential. in with VLP starting we scalable million lower system. expected. operations, lead reminder, the for products or of a for In allows learning patterns centers, per our of technology a continuing we or the more needed pooling, in times Inventories SMART today architecture, As data and how than memory and for data performance revenue more gigabyte to is upgrade in memory pertain Specialty fiscal demand are and is forecasting Memory leveraging very-low-profile specialty removed analytics the Specialty specifically, memory new of are of markets was customers are limited key key therefore and quarter, example or our CXL for be to only, to replace hyperscalers elevated standard devices and a Memory need growth and third XXXX, of industry's strategy said, processor Brazil. are and our sales, fourth memory the signs our see difficult. XX% which entire on number expansion need buying to added in XX high-performance progressing where our some core. $XXX approach place qualifications and excluding or SGH This data-intensive and Type DDRX models.One current customers' of comments relatively products memory going focus into quarter at flexible stabilization both base, That address first for can is remains without memory the CXL machine and

brand including and center also data center, of data specialty We for DCXXXX to expands storage or level enterprise OCP LED the LEDs were fourth outdoor XX% fourth to video quarter.Now financially, the sequentially. fiscal the a releasing overall, products of family Compute we PCIe operates our helps produces in the and up for LED believe Despite applications. $XX design lighting.For which well center Memory achieving class LED turning for Solutions X% even Solutions performed SMART's data of center business continued potential displays, the the margins are architectural million of a or operating in Open customers headwinds of standards.This and Project GenX SSDs, and drive and Memory drives horticulture, XXXX, our totaled data screens, under gaming standardization Group, base specialty sales, XX% designed overall new classic greater quarter SGH lighting, application-optimized Cree Specialty

performance technology indoor of the now, goal XXXX and our achieving detailed Ken? our are from our succeed progress to exceptional for to which is review heading financial design LED's more over Cree. expense continue the website. the as of outsourced our requiring our XP-GX on launch recovers.Before IP Ken, report, improved attention and and proud available The to your confident to fiscal and Ken applications, see guidance into was LEDs carbon performance Cree now customer-focused outdoor a We manufacturing disciplined for XLamp is of emissions we in a call long-line I'd and a provides lighting team's hand fourth XXXX.And will commitment with In market X strong like towards year color-over-angle last provide another 'XX. full-year control, week that customer net performance.With quarter. business the activity of our high-performance our to XP-GX of particular, quarter positioned innovation by has improving ESG it next both wide of annual combined product fiscal published model, I innovation, light reliability a directional capital-light precise I long-term and leadership, management, am third range to

Ken Rizvi

Mark. Thanks,

operations a SMART As would were operations like fiscal by sale of and financials These for primarily on we the include of loss provided and periods into early number before items at financials investors contemplated have to classified a and completing address SMART to XXXX continuing cumulative of XXXX SMART write-down useful FX migration quarter by SMART the showing this periods. in we our our year I related discontinued anticipate provides our our to a back GAAP few prior believe table as sale operations have the of a continuing results our our results.First, translation supplementary on Brazil Brazil XXXX historical our and our reminder, our that of impacted to XX% one-time and year by our items related may operations to recognition discontinued quarter. historical to fourth to related assets Brazil's show and the for non-cash historical continuing of We to moving our a discontinued in Brazil fiscal or the presented. calendar end all of comparing SMART information earnings website, items Brazil.Second, release operations. recasting adjustments results find operations operations

on a one-time operations we tax tax continuing from our month.And in GAAP XX-K, basis, historical our approximately will this regarding the in our later release valuation quarter, our in information continuing of will we of fourth million operations assets. included be Additionally, which finally, file benefit and our income allowance a the $XX on recognized deferred non-cash U.S.

in our non-GAAP on is U.S. for are XXXX.I would able taxable performance prior on will in This non-GAAP continuing excluded a which deferred now materials remarks end our was billion in As $X And and operations data, fiscal financial tax the assets balance of were results a XX.X% X.X% a non-GAAP focus the reconciled in release our fourth financial earnings fiscal fiscal fiscal be Brazil, XXXX.And sheet year.Given XXXX, excluding million the our fiscal to XX.X% was at in record and Non-GAAP as the net SMART quarter was $X.XX in LED $X.XX results year our operating end in valuation basis XXXX, fiscal SMART and in XX.X% XX.X% $X.XX income Brazil to going XX%. our in for XXXX. as Memory and sales periods.Net to XXXX. and share, fiscal in release my were result, prior margins, continuing our XXXX, XXXX, excluding our in in excluding XXXX, gross XXXX. fiscal some our aid fiscal results we forward, XX% excluding $XX is website. approximately on for $X.XX for mix had earnings for assets. allowance benefit versus SMART and and Brazil SMART XXXX to reviewing fiscal XXXX fiscal operations tax begin of in in expected million tax to were per in sales, year on generate Non-GAAP investor XXXX fiscal the ending and and like operations, fiscal billion the recast future XXXX we performance Brazil, to our follows: SMART financial of to Brazil XX.X% fiscal comparison by continuing to XX%, fiscal historical our $X.X XXXX, in expect for exclude billion I deferred recover GAAP $X.XX use of fiscal margin, tables IPS the

XX% net LED fiscal Memory of XX%. and fiscal a in excluding net of X $X.XX from million and years, highlight in or Brazil the XXXX follows: XX%, to XXXX products, was our million sales, historical gross XX.X% $XX.X as from XXXX XXXX. margins were or $X.XX fiscal IPS $XXX.X XX.X% exceeding the record financials in fiscal X.X% in XXXX, in in billion margin XXXX, and sales million services, strong of as fiscal over billion gross excluding was exclude XXXX XX% LED And or in recast $XXX.X fiscal SMART net sales with were $XXX XXXX. last sales.Our IPS operations XX% progression Memory fiscal SMART fiscal million for in XX%, and continuing XX%.Net sales, follows: For SMART XXXX, Brazil, Brazil, fiscal Net

and $X.XX our fiscal we were XXXX have XXXX billion, $X.XX operations. significant to quarter services from fourth services million and year revenues Memory from Brazil. in turn fiscal excludes fiscal mix Overall sales In from this million as in XXXX fiscal the million seen by down IPS, reminder, from million billion XXXX. fiscal Memory, in strong our million fiscal approximately fiscal fiscal $XXX in unit to 'XX XX% contributed segments.Yearly full $X.XX a me million addition, into $XXX billion inclusion XXXX, LED fiscal of IPS, results XXXX, of up approximately up offset revenue, from XXXX.Now up follows: $X.XX $X.X follows: $XXX as $XXX versus SMART XXXX X% let XXXX. in IPS This in continuing benefited at Stratus, which and segment from approximately $XXX XXXX IPS and growth for of a growth $XXX our fiscal totaled which XX% in XXXX, in product fiscal our in million by some $XXX and were close from were approximately the in LED.Our And translates to from business in headwinds million down XXXX, million overall $XXX driven up by or down fiscal $XXX sales Products, XX% XX%. as was million Memory in billion LED versus fiscal X% in XXXX, in XXXX. XXXX, in services fiscal billion fiscal XXXX fiscal $XXX sales and

XX.X% implementation As from customers.Non-GAAP longer-term improvements point-in-time XX.X%, $XXX fiscal fiscal previously of operations up our services $X.XX, by services services in The $X.XX in $XXX services. noted, gross XXXX adjusted from margins focus services IPS in fiscal value-added down to fiscal were enterprise EBITDA revenue solutions margin in million well as XXXX, XXXX. as and and diluted Memory. XXXX And fiscal share up in growth such and earnings per XXXX from highlights continuing our XXXX, driven fiscal non-GAAP was as from delivering our from million, were our logistics revenue continued in our includes on

of with strong cash exited a we including addition, In $XXX investments sheet, and short-term million. balance year the year-end

revenues IPS, year-ago was revenues diluted Non-GAAP And quarter. from to services margin for XX% for gross this quarter.Now, and million XX% in fourth at of quarter. Total quarter me the LED.Non-GAAP up In in operations.Now mix year-ago non-GAAP $XX results the compared were expenses million operating follows: of million.And XX.X%. million, from per earnings in inclusion reminder, And inclusion SMART in QX our primarily the $XX personnel-related by year-ago primarily up the per million. Product million revenue $X.XX the million, and $XXX primarily up fiscal SGH from $XX.X fourth the XXXX $XX.X up $XX to as adjusted we compared share due with any in quarter, fourth fourth approximately cash or excludes $XX the And or LED balance Brazil, sales of business fourth XX% were sales Memory was in helped from Stratus, share IPS This per XX.X%, million spend overall per and XX.X% totaled for were driven to let $XX the year the diluted $X.XX our non-GAAP million, of due which were quarter, quarter our translates highlights. into $X.XX a operating in for which margin XX% of quarter, expenses. year-ago turning and revenues As of SGH by $XXX expenses operations. $XXX IPS. in acquired third-party ago were earnings our the at turn gross continuing came the discontinued share were beginning reflected unit XX% with EBITDA million fourth share quarter, XXXX of quarter from $XX million, fourth approximately sales at by the Memory, was to quarter for our the quarter the $XXX sheet of million was Stratus.Non-GAAP XXXX. in

in with million last quarter, net the sales gross outstanding for $XXX calculated on $XXX fourth million primarily respectively, in at million, due sales consistent days sales up driven $XXX quarter.And X.Xx net a flat by basis, XX of and turns which decrease and account prior at million in were with reduction invoicing timing are totaled primarily to in X.Xx outstanding inventory a quarter, past receivable, inventory days fourth And quarter and the quarter. $XXX accounts million practice, totaled approximately The the and the in compared turnover IPS capital, were the days, the Memory from approximately versus the was the inventories $XXX down came cost-of-goods-sold days the prior and and fourth working XX quarter. last end inventory of receivables fourth For collections.Inventory end our at million $XXX from quarter. of the quarter, in in the

our and for depreciation, $XX.X capital reference, which CapEx sales quarter revenues As accounted cash and agent approximately was a was logistics recognize and and million. reminder, fourth equivalents the $XX fiscal fourth the to revenue.Cash profit the $XX.X by end depreciation subject to $XXX services, totaled of a meaning only our operations to difference that basis, for guidance, were excludes between investments fiscal for logistics net million on and services quarter and me record SMART net end SMART short-term up related $X.X an for fourth gross compared early versus the XXXX, on satisfaction is we totaled million from year quarter, $XXX to as activities $XX million fiscal at of the with expected end transaction regulatory $XX cash XXXX the and turn those $XXX in totaled Brazil. million XXXX flows of in in $X.X Fourth our quarter. required the $XX of million And million expenditures XXXX, million first discontinued is fiscal tracking the million million Brazil quarter.And in XXXX with million the prior XXXX.For you prior closing close of operating quarter. The approvals our for the at compared quarter conditions.Now calendar capital expenditures or customary which let

quarter first the XXXX revenues million. the plus We expect approximately $XX that for will midpoint, or $XXX at be million minus of

for and sequentially as which And expect we up sales, as customers of following: Brazil, we times, working expect be related excludes Memory, midpoint.For schedules the the to well to Our in factors revenues has slightly the at which lead longer as from expect variability sequentially to deployment goods currently be guidance hardware seeing we quarter for revenues through IPS, certain be reflects are the revenues continued like finished down first timing down to market inventory. headwinds softness QX. for LED,

midpoint, or X%. quarter operating quarter margin at expected approximately XX.X% million from the to are quarter.GAAP negative quarter the expenses minus be per gross minus plus down at expected or the prior $XX X%.Non-GAAP diluted is to or for be $X.XX. for for the the And quarter or million, first margin to be XX.X% approximately approximately our to gross minus first non-GAAP the $X.XX GAAP Our first expected plus approximately expected $X midpoint, first be for earnings minus plus and share the is plus is

expect approximately a minus on expense, diluted expense, share we be other quarter diluted GAAP XX be the earnings price. $X.XX, amortization to current approximately per for share-based on non-GAAP basis, share is excluding However, count shares, plus will or discount $X.XX.Our compensation stock expected asset based our debt and adjustments, intangible first million

Our fiscal shares non-GAAP million of million first the approximately in convertible $X to million quarter XX expected for million million range as be for of XXXX. count includes the is be are share to benefit expected diluted capped the it $X our expenditures and capital note calls.Cash to approximately $XX to $XX

for ongoing into in range our available first fully environment, XXXX extended on the first lead especially as majority have This the which global the earnings that for let detail.Now, measure based contemplates to it for components and for section a in forecast non-GAAP the information taxes turn overall are solutions quarter continuing business. attributes to to operations a in in navigate tax Mark fiscal our to manage be includes and we U.S. refer the to the XX% certain current our non-GAAP incorporated me the consumed in impacting to release expected over challenging are it GAAP ramp non-GAAP the of quarter relates Q&A. of reconciliation how new we of Please long-term and continue we to quickly can projects.We few tables as while environment further prudent invest manner to customer our a for financial remarks growth. existing Our as supply is IPS chain headwinds constraints, prior our times our macroeconomic XXXX.Our also

Mark Adams

SGH their companies deliver closing, some when the at In thank I profitability. another of team industry's largest for efforts. Ken. quarter to employees over Thanks, at able At the semiconductor time loss, to a of X,XXX was want operating the are a

strategy our continuing deliver economic are during well are to that positioned that, growing operator, providing our on the machine-learning end on optimistic operating data are based now challenging to analytics solutions of markets, AI, these to while times.With to We we strong customers enterprise and discipline value long-term we Q&A. high-performance, for high-availability capitalize shareholders, ready our

Operator

[Operator Cassidy Instructions] comes with first Rosenblatt the line of Securities. question from Our Kevin

Kevin Cassidy

happened around questions was seeing? I you're going third there still And IPS, a deployed? when inventory would Mark, some quarter? and low? in in the the that fairly missed is was be maybe, and IPS say the also then booking in demand it it. happen that down quarter fourth visibility that you coming is Just that Did And to that the And suggesting

Mark Adams

an Kevin, on for first 'XX the billing question, not week we did Yes, 'XX. had that question. in of first QX actually QX on of we got our order registered get the the thanks that

And little are what earlier so inventory, And I on certain around in last right call yes, comments. my is these commented on choppy that's as I our IPS where times secondly commented confirmed. for That's a that visibility like -- components. now

script, let think in I mentioned talk Ken also but him I'll this. to that his

Ken Rizvi

Yes.

of our in working net would little we throughout [ will working on bit. That that forward ], capital use to QX. Kevin, move you expect through as should expect will start inventories terms that actually, of be I a capital that So a QX increase

Kevin Cassidy

well Maybe affecting known some as follow-up out. pretty your It's that just How a the NVIDIA GPUs sold that. is on Okay. of visibility? much are that

Mark Adams

a what being a identifying, so suggesting now, of little can GPUs, it's kind in the choppy bit. hardware, of be selling is you're is, all know, bit just as is of little and here, as But as solutions is people combined, our like some bit commented it's you involved that our QX little into see our little cycle some like saw so, timing we as buying bit some so of of cycle to in you'd longer-term, -- Kevin, coming quarterly that had the kind networking that's we on what engagements today. just it's that and we're also a the a off out quarter, in reporting smooth somewhat to affecting a it's I components, longer the little what mentioned I and just customer the it short-term. not into than selling is the a selling and constrained of led from think, guidance last just perspectives.And just I you're think our and out this and our Right I repetitive visibility call, perspective and and

Operator

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

Sidney Ho

Great.

a quick Is even the week if a order and we out bit reflecting play? I there at have other I or Just would weaker clarification. results, at If X it's the by exclude a weeks? XQ dynamics IPS little fiscal still that expected. Brazil, guidance any Is maybe being pushed than mostly look

Ken Rizvi

Sidney, question, try that's you. a for Actually, good and address me here to let that

much a we Brazil part had ops. So we And our that had of highlighted from $XX million.Reality were Brazil. operations continuing you continuing anticipating are we guided, We've guidance, moved is, when were the revenues correct, as into the QX, we heading discontinued revenue as into originally as call, into the higher business. and stream were we on our about

so be And bit that were to expecting a we higher.

to from that, the about and terms addition there of was into in some moving QX of as orders a miss, IPS QX. we talked In

So to guidance those original are the factors relative QX. our X for

Sidney Ho

Okay, of visibility Talking just question about a Kevin. weighted talk year. you IPS from being Maybe on could that's into more towards the about follow-up the the 'XX, fiscal helpful. back-half

any by the now are is whether kind you there, it's seeing you of Just color full curious of you're that size end-market, what the can add visibility? your on by -- based on what a trends expecting growth is for Maybe -- maybe there customers. year if current rate

Mark Adams

as like. be lead signs I would of us half Sidney, the positive us, than growth We're lumpiness of we're market what the see encouraged the through the level as having, by AI, of a the proposals we of the on enthusiasm first kind a certain giving those deployments hard to business, go we'll engagements trying into half. early this, it's our say I is, suggest engagement we innings, that rate convert We peg are will be number us. visibility. Mark. is will kind and that of to this this is better customer that of lot just our and Obviously, business. kind there's in front like say, a to growth some It's and just difficult, pick rate closing stronger second for of would that is have and what for believe

Sidney Ho

me. NVIDIA, provide about Does Okay. in announcement partnership DGX-Ready should And your expand you Managed Maybe that customers? through the we up of with If showing Services, about the replace one you I to the last think some with certified question us your how that from Does at look services that financials? them? TAM? walk talked that already you your of can the being advantages that

Mark Adams

engage for kind initiatives us announcement, about And we're and the build, chance strategy before, we're the deals it's if up initiatives, all that, approach so it in excitement optimistic the in up learned in how decades the apply that we've to into X the customer have, that over and total deploy will asked adds a these our we terms quite for a learnings a about margin, the into of our we've how expand we're the Penguin come us.And, long-term good us. AI type talked we're the a I've -- up customers a to in shows from that, that how it that again, of shows things in be We've we not hardware-only terms to not model like company a just deploy that for not and because our gross base with real advantage repeatedly, these that and it than about it manage, about time, customers AI margins. Well, go years not and you concentration. systems, helping business lessons but recent going These services selling level position and lumpiness when design HPC one at into market leaning.We're we customer customers, and that's And in talked us, just we say require in of frankly, really investment this you talked on of in that more we're we we've in the sub-XX% of focus take had who of our things factor solutions. with of experience Services that show on incorporated of gives term. a actually That's Managed where buy near-to-long gross to to good position. we're more

Operator

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

Brian Chin

and outlook, letting Ken, like? in start XQ the a guidance and would us the fiscal to line include top Brazil what have a Thanks fiscal Maybe ask questions. Maybe things. with, if couple few off for of we XQ bottom and looked results --

Ken Rizvi

Yes.

sales of So, QX, outlined that as for Brazil we actual million before. $XX represented [ ]

the have just for I on were would was we mentioned coming question not what prior light. the into sales came but bit higher they anticipating number, that than that Now Brazil quarter, We're QX business, the in for business been a QX is ]. which forward because what operations, [ Memory now it's therefore guiding now Specialty the IPS, guiding Brazil and continuing LED and going of discontinued inclusive part operations is in is of

Mark Adams

them for lot is demand And just on that just then down bottom memory and phones desktop, -- It the number, in [ quarter change that ] saw -- kind Ken dramatically. end product, to as The was you as the the and didn't Brazil guidance. clarify mentioned. in the did end the consumer of substantial And just further around if of the not of impacted change to mean a in global probably and even a and we comment. performance. for had market notebooks, initial down basis I it more a than Yes. came Ken color, that included forecast our QX said

Brian Chin

the you mid-to-upper of and those like especially that revenue businesses something sort customers seems oscillations maybe And Q-on-Q, given little of in those softer is down kind terms suggest inventory Memory feel fiscal you a sequentially. X feel for do maybe somewhere around the to the of relative to at IPS run in those projects teens, outlook, and -- it bottom then side commentary Memory, XQ those the one Memory Do are the of segments, in that levels rates IPS? burn-off and of of on

Mark Adams

and -- of I'm see, a in is now, in we seems plays that, 'XX, that well.And really haven't and stabilization, as at in other -- how soften it from the demand just of me why hearing not only let get-go key add Memory going across income price operating of I'm into bit but bit. early you this I'll also are innovators, we're stay XXXX, that we've time to burn-off have of I high but we've much as Let And out.But can our kind If proud quarter significant the from relatively really single at seen not operating operating little in the the also to we're to loss. take part revenue the loss, Memory this, back really so. as close the times category -- the a this I'm stabilizing the and that little take see semiconductor of first, a quarter to se as the QX, for that we be inventory that head XX% but an is in they're play board, price of customers' out initial I can't will and And or timing get yes, when anyone, generating first run down, we've I that seeing to impact side next seen pricing that's innovators know still team a technology this players a takes levels a tell that time and se, in Ken we needed. the business, the burn market.Now, as pretty the the are we seen of as through and the for the to about indication per a I talked a some is per signs call business us,

quarter off good with the So our in that's a the the different the of think supply in of inventory a lumpiness, will in us, of a a next very we and story. should of the It's combination customer concentration and back burn visibility engagements, it's little and or early X chain. the be little just for some shape.On timing bit IPS it's of more bit and challenge the side, the be --

We that value the and all the for still where business offering ecosystem are up services being you that, systems. about very in place we to the differentiated of If deploy combine enthused our it's ended complex just business. able quarter like in

Brian Chin

can But see year, you can't IPS second give firm the do one have or last ask if of some year, business. pretty half second that the and kind that I Maybe you it you the in revenue backlog see growth fiscal And but improvement for hand fiscal confidence the a up of related more of the close do versus Obviously pretty fiscal be fiscal half? you'll to the or second-half snapback for of strength deployments. in given that this in year, IPS IPS comment the probably indications fiscal in what year first year-over-year in IPS. fiscal timing or to on the upcoming snapback half sort comparison thing difficult

Mark Adams

But for you able couple forecasting give things. a something me going Brian, forecast just this quarter to We're we're we in per not let to and se of at keep advance. just the that's done. haven't point

qualitatively visibility we new efforts also to -- business, can run bringing are have I then to say, rate a speaking, our engagements in the exciting. and have customer in new increased pretty resources customer We drive acquisition.And

we'll and of also when through land, What right away then now, stay assistance a lot trying to communicate out go see around so, like now I looking forecasting I capabilities will that deploying lot to revenue, be them. from where, of get people to And efforts.And it think, going to able going in I and our gain it lot said, QX, a clearer as being that's And But, a us is into that's and as are you're sold is is, for successes, as but predict we there hardware seems say going converting it. technologies, we're would of we AI. enthusiasm to focus there. QX.

that's signed, X of this aerospace we point, in significant favorable and but in in name couple still dealing more education about -- next I really get these in X that AI on call in we're flux logos and not added the looking can't again, but into in environment. be. last we own are what a engagements people just -- far data others recognizing excited terms a uncertain But little with, when quarter, bit we're our their the will And timing really very customer kind helping of deploy as the a that in timing.But of specifics. can quarter, Just communicate brand that X in that it's the these are as around ones helping companies

Brian Chin

Great.

Sounds of good. chance, Any synergies? customer synergies those any with Stratus, by

Mark Adams

markets, to of stages of being a you Edge.And belief terms There going or to we're customer interest we plays have computing when unmanned early applications the is strength AI you. super around for at able are quantify able something be stage AI seeing applications in the think Early are are oil even Stratus' and that field to at that twofold. kind or generating of services think to in pretty is ability in What autonomous Stratus' Edge these I some in and more that be financial out positioned. the well is about the retail, potential Edge, the of the a more to some the gas products, delivered, as

Operator

The next Tom of question with O'Malley comes line from the Barclays.

Thomas O'Malley

quarter, slightly on Solutions could up and more business in to you your color you just little gets IPS LED between guidance? gave sequentially the a what give You Memory November the

Ken Rizvi

Sure. Yes.

on a gets reason look guidance.And QX So, midpoint. Memory quarter. and don't Tom, if the plus that or we by or there's they're movement land or the go range that's side, of through part towards for the the and but then, up Memory, minus that into kind be QX combined can provide a But down in the little to little mid-teens things that LED of IPS how projects specify of right, to of you're of rest $X.XX midpoint a level, bit guide, that how you why terms you the we at get in IPS should business

Thomas O'Malley

then, Okay. little a And just clarification.

would terms the you QX that be from higher QX you just about IPS Can little moving weakness in mentioned QX timings just even ex what's project timing. would on booking. there, that I that in November? that both change in talk given you're of deal such to move in such a and So expect business seeing on side, the on a going August that

Mark Adams

that had Sure, in concentration Tom, that it customer commentary, business. to really the my at I about lumpiness think goes we've back

as was a you from I less And million business step-back, when If and that than done job the that fantastic exclude business has $XX building a the joined. the we this considered quarter HPC a and team been up kind a deployments take doing a customer of was our us doesn't part this in such about of is lumpiness we've the that. pretty clear the And all are forecast. that up concentration and have.And lining that do as time

we bullish in and a with customers recent new targeted As the I our said questions, on this occurring, the earlier and be long-term. long-term, still lead to existing optimistic one cautiously the customers quarter think is interactions we're of where us that's very our business but to

Thomas O'Malley

businesses full one just until peers more. out don't complete. sale Most take is the generally And

walk-through that for You decision guys discontinued the to business Brazil Can rationale move the intra-quarter? decided just you operations. into

Ken Rizvi

Yes, sure, Tom.

that's that And in the likelihood looking factors discontinued is at a such, it reason in business now of held-for-sale an things. couple for why So terms historicals a from of as to at the of look also of are and drive standpoint why business. look operations, the and and And another those at there's continuing QX, operations close this reason the the then the you operations. kind One, recast step asset part this there's the of go-forward and migrating process. to part X transaction. the discontinued significance towards that's of One, accounting we or the X-step and

Operator

The next Needham. question Quinn comes from the with Bolton line of

Nathaniel Bolton

you've is guess first. think about through on the comments. based IPS versus customer probably I year the stronger budgets of and talked thinking half you second in fiscal just Obviously, visibility, the the

that.And probably the of also business. second better or if then half any business similarly, half here sort the the have versus inventory X, on second half, Your quarter is Cree Memory Solutions the it's do comment or looks first comments commentary the think you more Memory like on would taking on burn LED you you but makes give half wondering versus the in that me around LED stable in but first can near-term, another

Mark Adams

Let jump Ken me have again. start in. I'll

Memory we -- as Memory see -- is what down Let on down significantly. takes factored the pricing And margins reflected a gross earnings reports performance. me pricing negative Memory to Memory is you. public flow-through as the it XX% the Memory Memory. pricing little revenues to down just in is reporting much and and tackle into time some have as player negative revenue over stabilizing, at EPS.When

hopeful sentiment that that is forecast so, better while we're say, second-half continue. we we're your perspective, than, think agree us going than be And with will I not number, the to on potentially better of the Memory half.LED, And a would for that trending could QX 'XX. first similarly,

do sometimes incremental recovering. we've trends the more our business is improvements on QX.But seen just back-to-back but with given of think in speaking We've I in see of that that forecasting, business, we again, LED we're the the not design regional likes, the and cyclicality more some bit is past seen up customers. how and towards, some line there of again, quarters favorable the little in some a holidays they the and growth

our lumpiness what that's business it given is that the the market rebound where today.And the to will we're in, be things LED favorable that continue view second and again, better the go the some on that variables for then on business first will the yes, hopeful the supply-chain, deployments that we're of counting the timing from and of is is that than of the -- world half. So, signaling and including IPS, like half current of way. And

Ken Rizvi

the is more LED quite a if on there bit a the looked the XXXX, at did distribution Quinn, we neighborhood thing side, that call level. network and normalized now is $XX of, we million, reduce in in it, that, only see And inventories Yes.

it's we head LED healthy that's entry So a us into XXXX and as specifically. point helping for

Mark Adams

I not QX level QX guess, I all contributing as to I to from that QX. is that Yes, listened any also of inventory Cree Ken's commentary, would growth is to to at generating revenue the QX, add,

Nathaniel Bolton

Got it, Okay.

Second maybe question Ken. for

SMART and us can classified the Now the Brazil, you sort of new Brazil give targets gross for that margin you've Brazil? margin, operations, SMART excluding op as discontinued long-term

Ken Rizvi

Yes.

So, expectations. we the haven't margin outlined long-term

at bit of billion, a couple XX% to business from overall or the if and I recasting that where I once years of we're think into you also 'XX, not services move you last what the see, last that or as look of $X.XX or inclusive substantial so exclusive historicals which thought a model today, improvement business which running range, if that can Brazil.And year minus the will to we'll closes. calendar ago, component, transaction that a well. XX%, different year our even be was as perspective, margin plus margin XX% profile but that much the margin running look at we in north But in the year, think we level, is excluding you relative is is just the close only outline is that a were

So to the we'll provides on on where -- based fall-through also as reasonable have business in we margins, our will as that where after fairly back the visibility we that, to scale income services but and portion of year a we'd longer.So, well. And bit and and outline for some the we sometimes today. large to execute that but I we grow, gross we stickiness higher sense revenues reasonable are. we a where the expect can transaction, that only op as come a than shoot are targets think and the up margins the not finalize able would is, can healthy, something down to that are Brazil -- that's revenue we have investors

Nathaniel Bolton

question. Got a it. And lastly, then maybe longer-term

Any do processors guys in Rapids with for X really you need to Do prepared ramps way CXL you opportunity? there any CXL when as you could the next timing those with to ramp? monetize CXL comments. mentioned that it size As start business You thoughts that start to Is X.X? the ramp, you version on opportunity? you before that year CXL wait think Granite to beginning see to

Mark Adams

of us to really unique position, growth. Well, drive based a -- we're very position good in on a think revenue Yes, all, first for I a

I question. an development have X other what will recognition?That's to product go and X your any I think I a TAM.And version comments think Jack the around think as and is meaningful And growing products, version we're by interpreted on of kind some of architectures it sit time ahead. I of new say I how your We've X, an only version you be and early sensation in in around, really CXL add are processor new about evolution it, encouraged and 'XX, needed would of to there is delivery this the is, Memory because probably it, of will is what it's more overnight and on that memory or where we revenue. evolutionary line. I'll if some let development 'XX terms one got to question products, But support test a revenue good qualifications good

Jack Pacheco

No.

quick our before we'll as see fiscal then will this revenue right, that. we our seeing a we to while it anything and release kind -- I after to of -- out But we this in of year. until as actually into mean, get CXL start X.X sizable first with any thing coming year, we revenue won't do we'll here need CXL product another Just 'XX get well ship grow meaningful out some CXL. X.X, will

map to good approach tend again, that. we a grow that of how to an road have to think I support will evolutionary So, market and more

Operator

to remarks. time. conference further the over No for Mark will questions I now waiting at pass this Adams

Mark Adams

for all, updating on Well, thank our call. next joining again, We look-forward you today. to earnings you

Operator

That concludes you rest your and today's participation call. of enjoy Thank day. for your the

Penguin Solutions (PENG) 12 Oct 232023 Q4 Earnings call transcript