SGH - Earnings call transcript Q2 2024 | Penguin Solutions, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and thank you for joining the SMART Global Holdings Second Quarter Fiscal 2024 Earnings Call. My name is Kate, and I will be the moderator for today's call. [Operator Instructions] I would now like to turn the call over to Suzanne Schmidt, Investor Relations for SMART Global. Suzanne, you may proceed.

Suzanne Schmidt

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

the Financial Officer. Executive Adams, Operating On and are Pacheco, Officer; Chief Jack Chief Chief Rizvi, Ken today call Officer; Mark

the the encourage on the you the to site Relations can to this find press quarter for our throughout most on slide go company. accompanying You section current for and of presentation release call Investor We information the website. the

would of is to and limited growth to outlook. the the statements, I the Please to the read the call, will trajectory about everyone and statements release financial conference presentation. company also remind forward-looking forward-looking including, like make note but note on this and company's that the press included not use earnings call that during statements in projections

date law, well are as to as most recent the forward-looking statements on Forward-looking revise and risks filed press guarantees and the presentation annual future today made company's performance publicly not we applicable any are statements and assume including, representative or in no required as earnings update release are of as limitation, quarterly are to uncertainties, by based assumptions in reports. and call the of uncertainties and reflected except without subject current are only and statements. and beliefs the risks The they responsibility and the forward-looking

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

call Mark the to And Mark? turn over Adams. let me with that,

Mark Adams

for and to XXXX of earnings today our Thank you for us you, Suzanne, call. all fiscal quarter joining thanks second

strides deploy on-premise, great cloud. second into provider quarter in and that to the in edge of a make the and solutions delivered high-performance, continue AI to financial the at results need high-availability our solid We in transformation customers enterprise

As experience in specialty at compute companies of uniquely AI one with is positioned memory, of the the industry manage and help scale. to few implementation in the decades-long complexity players high-performance SGH

As we our technology-agnostic hardware performance software and and enables a output partners availability systems customers and total achieve manages to solution suite our a for services provider, offer AI professional innovative and configurations, that customers maximum that reliability. best-in-class

of Let for $XXX Revenues range. guidance operational me in our results quarter. the totaled the with million, our midpoint summarize line

was to through guidance the balance which strong of the margin non-GAAP $X.XX, $XXX and of earnings guidance better controls. per totaled non-GAAP a of exited million. expense was operating end QX gross lower our portion with share We due midpoint Cash short-term of hardware above at we Although investments a sheet. mix, higher achieved our

let Now Solutions Intelligent the with me review Platform start IPS. Group line our business or

edge thus revenue, and total at component making overall of XX% revenue IPS QX, largest prior AI management design, a Our team applications IPS and enables manage and on-premise, for framework build, solution QX. cloud. $XXX in our our IPS cluster This in offers up of representing solutions in services. deploy portfolio from the of solution industry-leading and advanced In software best-in-class XX% hardware, SGH our HPC quarter, came at the set the business million, professional robust

hyperscalers solutions them AI. the investment of of service in clear: and collaborate with future The is see cloud CSPs. build infrastructure our large-scale with by to market AI providers the strong continues to vision or and Our deployment partner customers

for early adopters The is first confirmed few AI months of XXXX, that have just however, anymore. not

proof X enterprises as of CSPs, education concepts and well defense, in ranging large-scale adoption as digital signs of financial, oil AI by Tier seeing from media gas, We larger to and as such markets with deployments. are projects

Our dynamic. over market volume reflecting the potential with few this last and have engagements months, in customers up AI picked noticeably existing

with to as memory, manage integrate new in cooling complexity center have targeted facing both networking, the that In they trying our compute, current they clients, rollouts. conversations and storage advanced large-scale they shared arises AI, challenges and and deploying data the are

scale Our have compute and running workloads high-performance efficiency. customers ultimately must provides an uptime overall for at environment that in maximum

infrastructure best-in-class are total As complete innovative a performance that that we all to combines solution services, our manage challenge. output We design, meet availability reliability. of customers professional and and and solution designed help a them provider, AI ready a achieve software for to maximum hardware suite offer to

We approach, the solution each support customer-first tailored decisions everything we Edge to requirements closer we believe brings ready to their where success. and is at do, With customers' put valuable, specific also opportunity heart the a critical we deliver it that of at AI priorities being to where our are inferencing because our ensuring to their will be is market information that closer the made. intelligence most

with at the Server. edge computing new expanded our our Endurance have the platform, fault-tolerant ztC We capabilities Stratus next-generation

We are downtime seeing an to this estimated applications target our enables with run minutes which in customers for demand strong unplanned platform, per year.

approach an the enable AI our to to customers edge implement with platform. a high-availability at developing are high-performance, We

customers, continue our needs is cloud. or edge The Stratus ztC investments on-premise, to the example of the make we Endurance the have of to whether and the at another in made support

X opportunities of businesses, provide and Dell, customers. end-to-end Manager Technologies Pete leading joining to and Senior converged leader that to several including also Dell's is as Manca propel the that of member experience computing solutions high-performance Pete right Pete provider the for high-performance wholesale experience IPS. and cloud of confident the team, and pleased storage announcing his broad the Dell to computing businesses make large am services management a General ahead. to that brings and a our solutions, us underscoring expertise. AI portfolio a as President Prior solutions, enterprise of team are joined offerings of to am President managing ranging I are Apex, served OEM has Today, I of high-availability, our in years, building team. cloud forward that solutions. wealth most of solutions we announce as Egenera, and President CEO served to new Pete Prior from at Pete to Vice

Pete an with guidance, has become has transitioning effective advisory we from role. integrity Dave IPS We who President, partner will work efficient IPS his Dave the a into go-to-market transforming Dave high Lorello, With engineering is is all miss. mindset He valuable been wish former a in the will of best. IPS. board and an across to manufacturing. to with that execution leader more

provide specialty markets such under Modular memory supercomputing, high-reliability for and customers data memory, to now Smart networking applications. the industrial solutions high-performance, which specialty Turning operates with telecom, as other storage, name. and brand We centers,

of total sales. For at QX, million or $XX came revenue SGH XX% in

expected, declined continued levels, QX due customers. from at a As large to inventory elevated sales our primarily number slightly levels of

is signs We the memory cycle that turning upwards. see continue to

earnings rebound on mentioned expect fiscal that near-term into still as remains in challenging sequentially we as the customers. our last quarter. the our we of remain However, grow second call, business demand confident some and revenues 'XX third at half enterprise our move to will unit Nevertheless, traditional of

increasingly the for critical higher most workloads. AI memory need market becomes and the as bandwidth advanced the greater density is handle required landscape compute to to reshaping system performance also

system-level portfolio memory technology, different Link leveraging the and expansion or memory are to our solutions allows the Compute system by computer expanding parts which CXL convergence more product capitalize of and switching on memory communicate We to efficiently. Express and faster of compute and

progress make to continue development. We product on CXL

to memory, innovative high-performance card gigabytes have product system workloads. anticipate tasks CXL of DDRX faster the our of customers high-density design the This the XXX and year. computing making required add-in of successfully sampling and and solution We capable completed AI handling this our more later this large-scale [indiscernible] complex by offers

[indiscernible] technology also second to patent add-in This with and its of a This footprint is XDIM-DDRX-CXL we quarter, [indiscernible] interface unique including for shipped exceptionally cards. has our card of network accelerators enterprise for engineering space a During samples optimizes beneficial slot. PCIe keeps that product initial because design new within a number customers. servers in devices, other it the DIE our single

from product early ramping this XXXX. begin will in revenues that fiscal expect We

DDRX our testing reliability. our exclusive which we offerings, ultra-high Zefr momentum, Finally, bolstered for market Zefr applications, Models gain compute introduced with products enhance to and an and ITEMP by SODIMM ZDIMM reliability significantly our Memory demanding continue

innovation, these our commitment to together, exemplify advancements ongoing industry-leading us address empowering our to Taken customers' needs.

or products the turning for Cree which LEDs screens, million in XX% as Now total fiscal revenue such $XX sales. of specialty quarter Solutions SGH LED second outdoor, produces In lighting, video markets our lighting. XXXX, application-optimized to LED, and totaled architectural of horticulture

As anticipated, second sales sequentially, seasonality. to primarily were lower due quarter

environment current aligning LED in demand relatively continue LED our operations remaining we manage Cree with With term, to the conditions. near business muted prudently and are our expenses the

revenues expect demand to third sequentially that will trends optimistic improve are to in begin currently and the quarter. increase We

needed driving in has focused development team diligently remained high-value leading R&D for continue Cree on Our technology specialty to applications. the

XLANPXPGX quarter, the directional indoor which we portable aftermarket are applications. and During launched high-intensity optimized this past LEDs, auto for

introduced also an targeting greenhouses environments precision where lighting product growth products XLamp sector, and horticultural the transform to S can like extension We yield. line, our tailored for with crop

technology with innovation. to property intellectual in leader brand the portfolio, a and lighting continues charge the As strong lead Cree a team LED

our R&D combined success. and competitiveness portfolio, our LED I outsourced for IP with confident Given prospects capital-light increased and model, future strong am

quarter. more guidance to of here review stop our our and it over QX I'll hand Ken detailed a performance for next and financial for Ken?

Ken Rizvi

to focus the GAAP will in I our our non-GAAP my on materials reconciled in Mark. earnings release our which investor and are results, on Thanks, website. tables remarks

guidance were to revenues. Now overall by of came share $XX primarily second year hardware the our mix Total diluted our the controls. guidance. quarter, million, in the quarter midpoint gross per of revenue low XX.X% quarter. In let helped million. which of was And midpoint revenues revenues me ago the $XXX down were better end services our was Product results. the above non-GAAP from expense second at second for our SGH earnings margin of at a operating in quarter, higher by $XXX at million $X.XX totaled our turn the million, $XX Non-GAAP guidance, and driven the

business mix for XX% sales at XX.X%, and lower gross margin $XX memory LED. that SGH partially improved IPS. quarter, driven IPS year of IPS, by offset Non-GAAP mix $XXX ago as Memory quarter by primarily into in $XX Second the QX unit was from down in million. by were at follows: in was Memory volumes XX% at XX.X% XX% and a revenue translates million This million, LED

XX.X% Gross due revenue. the margin was down prior mix of higher from to hardware primarily quarter, in sequentially a

$XX.X operating actions. primarily second million, were from expenses million variable lower $XX.X reduction million in the ago from first quarter, expenses down cost and Operating quarter the also were expenses quarter. year in $XX.X Non-GAAP to the down for due

quarter And quarter. earnings per $X.XX the compared ago share quarter per per per for adjusted second of the was or $X.XX in for of $X.XX diluted of year and XXXX quarter was quarter or ago EBITDA and quarter. to in $XX $XX XXXX of the last compared last share of or XX% to the sales in million Non-GAAP million share the XX% XX% second share year $XX sales million sales

Turning to highlights. balance sheet

difference $XXX For quarter, the of net X.Xx X.Xx outstanding a inventory million. past turnover a timing net days second the of goods on Days than $XXX up inventory recognize an is and second the the And on down sales million, only for working our in outstanding Consistent XX and the basis, million as which logistics revenue were which totaled gross And the quarter. in cost meaning agent due XX we net were of profit accounts turns basis, end with in prior at on than is $XXX prior logistics $XXX last to from services, end accounts last our slightly the at primarily days, practice, the million invoicing between are of and services gross quarter. and quarter. capital, collections the revenue. quarter, as quarter accounted reminder, calculated from days receivable, sold lower the receivable net related came to sales from that sales lower

In the the earn-out quarter, million paid million million our Cash down in Stratus the and prior second short-term at totaled and $XXX million second of the of retired $XX for quarter, investments from the we $XX end facility. and $XX loan million term quarter. down the equivalents approximately cash $XXX

$XX Second $XX million activities operating quarter million cash to activities provided by the quarter. totaled flows used in compared prior operating in

a activities payment Stratus $XX million flows cash used part operating of payment quarter the cash of contingent $XX for included as Second million consideration total of the earn-out. for

our million repurchased we end our of Since repurchase used shares stock quarter, approximately common X.X the $X.X second of the quarter. During through XXXX, shares million in of million. authorization initial second $XX.X our we repurchase XXX,XXX April a of using to have total

As of our of for second authorizations. quarter, future we under have million $XX available repurchases a total our

our the everyone, strategy allocation remind same. capital remains to And

significant our as we foremost, further we to opportunities and will First invest see for business organic continue growth. in

evaluate of leverage Second, to And such to as shareholders gross provide repurchase in we share levels. in will Stratus. us retire opportunistic our look most our at manner, authorizations opportunities an manner. return third, continue to And a flexibility our disciplined reasonable keep acquisition we the capital to finally, recent acquisition debt and price-sensitive to

the our outstanding. subsequent $XX to second $XXX in We These retired $XX million of since and $XXX by quarter term retired loan end, an million first principal payments of the the quarter term additional quarter million bring down we million the loan. to

in capital second depreciation, of quarter those the was and expenditures you tracking For million. $X.X were expenditures million depreciation $X.X and capital

guidance. Turning to quarter our XXXX third fiscal

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

guidance reflects third quarter the the Our following. for

expect at in quarter, the For with opportunities slightly deployments. fall IPS, the to fourth of flat additional we timing up the be may third depending or on revenues midpoint, that to

For sequentially the Memory, for be the midpoint. range midpoint we up single-digit well. the to And revenues at expect sequentially as the in we expect revenues in high currently to LED, at single-digit grow high range

be Our or gross midpoint, Non-GAAP or third third approximately XX% approximately plus is margin for GAAP X.X%. the plus margin quarter quarter at be the at midpoint, to X.X%. the for gross the expected is minus to expected minus XX%

prior expenses quarter, million, minus are to up quarter Our variable the revenue. slightly non-GAAP expected the with million higher be approximately for due or from operating and associated third primarily expected $XX to plus expenses $X the

share for expense, adjustments, excluding diluted intangible to be plus basis, debt other share loss, third expect amortization plus per $X.XX. earnings a approximately discount minus share-based minus $X.XX, we approximately $X.XX. asset diluted is per be the GAAP a quarter expected and $X.XX expense, earnings or non-GAAP compensation or will On

million GAAP stock expenditures third be in count to is based is $X our shares shares. Cash share to third our the million share diluted diluted quarter the expected capital XX.X Our on approximately be $X for expected are million range to current to the while count quarter non-GAAP expected million. be approximately price, of XX.X for

reminder, well rate the and a information, are And of long-term we tax currently other a Brazil, which factors completed in as first XX%, utilizing available quarter was non-GAAP of the including sale reflects as as SMART projected assumptions. which

this long-term geographic be the tax subject through use the operations. may strategy non-GAAP environment, for significant to business changes tax normalized mix expect our rate we variety our rate in While non-GAAP reasons, a to tax or changes XXXX, of earnings to global including rapidly changes or evolving

customer Our and which includes new current XXXX overall ramp macroeconomic is headwinds relates IPS chain how components our constraints, we into global projects. This the of forecast business. to quickly on that certain our quarter based third solutions times supply existing environment, as current especially ongoing the contemplates can extended for incorporated impacting the lead are for it and

in We in long-term while financial and as measure Please prudent navigate non-GAAP refer our our we environment further a earnings to also section continue table to of for GAAP non-GAAP to manner the release investing manage a our details. challenging in reconciliation growth. information operations

let over to for Now few to it me a remarks turn Mark Q&A. prior

Mark Adams

Ken. Thanks,

need accelerating innings seeing customers, scale we are the of with infrastructure deploying enterprise being help for a new we are infrastructure. early of to market challenges most by an As in at adviser AI for this trusted fully deployed AI still the operational the

leader to needs. AI years market by to position HPC most expertise working us and customers' deployment our this XX Our memory become and a infrastructure of challenging in solve plus know-how

this ahead. now want continues, members positioned team for for quarter. to global feel well their We are for market efforts are we our As exciting the transformation Operator, we opportunities thank our I Q&A. ready

Operator

& first the Instructions] line Needham comes Quinn question [Operator from of The with Bolton Company.

Quinn Bolton

may got across between kind And X on of 'XX. CSPs, as the outlook. calendar and of I on seeing enterprises, the where you for of you the results half the thoughts business I've get large greatest and of demand maybe I then demand to base into out IPS follow-ups. Tier Mark, your Congratulations second some just CSPs start and new look couple customer nice want a guess the deployments be

Mark Adams

Quinn, obviously, problem. the think about when how we so on, of segments our you No engagements it's executive our the by with kind Yes, Thanks, for view X market way. based question, about. talked the is, of the

AI one then of Obviously, have is were a ours. kind large in of the market for large place hyperscalers enable have a you Tier what verticals, early infrastructure customer companies that of which, investors X obviously, themselves we And requirement in you their that to future have X at are the mentioned, CSPs, enterprises other to types lead are segments AI -- an the services big Tier offer different for to that call implementations infrastructure of which then speak. of X the number you success. would And these have the so

So market. early those that were segments the I investors, would are And hyperscalers. say I we as at look the X how mentioned,

someone from do future all the of have demand of signals for seeing like type is someone on enterprise And customers help But and different JV them some they we're we've do seen of AI for in data environment? level prem structure the Large come actually structure center twofold. in evaluating the they what type then Penguin that in it a deploy? in they a very do those they with those where is, uptick in However, co-investment of space partner And outsourced their in Or or high. build? enterprises models. an side Do is provider co-location a on are use do their strategy model and they strategy. it power do and really major

own addition to Tier around hyperscalers infrastructure access The investing largely X infrastructure, data And in for that, mostly enterprises largely CSPs are their have their to the are don't who in building requirements. own to then centers.

want one anyone data massive around to talk And the run AI. for and the I to a in you massive centers today is shortage the if And markets, really requirements there's power available just reinforce, in shortage dynamic data center to AI. and power

systems today, who big type cluster drive you these And seeing data install are And in of need a is demand engagements shortfall That there's lot we're customers large-scale megawatt-type this and help is we for platforms. AI time by as that running people most we where where possible as far performance we activity lot our capabilities gigawatt-, as the and quick rapid pent-up as possible. center that's to these frame or AI so that saying, have of with space, x." need allows of be to can new a a up causing to enable "Hey,

And don't in they they uptime really that the that of performance liability, terms all critical. in in are the have are and uptime, have one customers enterprise These know even what they hyperscalers optimization. don't know things They the of -- big don't world, deployment. the terms typically X infrastructure design of

So even clarity and more of the and deliveries, future around right leading the direction. bookings the proposals heading we've to designs had, number engagements the it's in all

Quinn Bolton

Excellent.

up LLMs mentioned Second Edge in run AI opportunities the are of or other for at AI question may to to the of be highlight sort seem Stratus AI Edge kind larger I'm you the where offering. had, infrastructure. also traditional of business at setting clusters your wondering, Penguin I you sort and there

deployments large on. think just than, you And training, So your could a as say, "Hey, been some focused I the of got to to deployments equipment have you for user also we've end the may high see some inferencing it's rather possible." deployment, may say, get but inferencing not as pretty more which reliability close traditional just necessarily just

Mark Adams

that's I think right.

question So our into is road are in the really really for embedded map now future development we developing -- that. for answer, investing just you your solutions and which integration solution providing

versus at to own large never going there's models, And then language spend go to large to more look you going when a what the training language is impressing. that use prior be large extract AI, was if think models they of it away mentioned, you their you As in model. because need version that training people of of from language kind bunch about

So the training piece will go away.

a more decision-making obviously that, in someone's I could a that think, to there of on the the availability you take competitiveness. noted, the share speed and percentage make inferencing whole, future. break as will greater information or is And the with as closer

reliable maybe highest strategy. develop and solutions we're But but reliability these -- and might just, be be a rig, cost a at of you IT platforms highest have there cluster are store, we way just our customer our single-cluster and oil the maybe on environment, these a the markets, retail part platforms performing, that not not It's about a to at how a gas, small platform, platforms health a thinking them key be where that an AI. where or in with so thinking said, you. at as these what office, do something we about regional the we're And could that's end a from day performance leverage allows see you in and resources are how base and care offer perspective might like maybe maybe designing we ATM, systems do the

just early. is in general so Edge has a mean, future. It's at bright early. AI AI I got Clearly, the

So we're solution platform we're investing developing. for about tomorrow as that we think

Quinn Bolton

memory last on then And Excellent. one outlook. one quick just the

in come and quarters? You in ASP high that the for is single about here, pretty DRAM that you with is you thinking look go be that Are in And ASPs? a how I'll mostly see of growth after earthquake future still if a units for memory units quickly versus starting lot are moving muted? pricing benefits you growth recovery in Wondering up called digit, folks NAND pricing to to heard both digits. from We've pretty unit industry but the Taiwan. queue. Just single high at may especially back the

Mark Adams

Yes.

we Unlike back slower memory cycles, specific, companies, made the through of cycles. we've that is are the want and pure-play slower we back okay? kind if money also plot to on highlight, of a if look see may downturn. on I do customers that that sitting back get I And our they front the holding you And or the you back differentiated before -- inventory of acquiring because go corrections the me of just have and semiconductor Let And a business. we at to go on pain end, look inventory these from we're out, end of little be feeling of bit at memory. this the select terms how in recovery because

it's the And think to continue starting see a QX So we are has in business I starting that's And demand And somewhat here over requests. see earnings QX we more because be to is you year and a cases last little little starting QX, early I was just demand say bit that benefits It's the I our but we're flat at probably and we're fiscal to slower. we'll see overall. not going to of And to it projected time thought late, 'XX. in would our I see to pricing view that that declining corner been our better some numbers. seeing we're demand demand, see the could look back couple world of more of a my quarters. suspected, the a start I than that just in I of frame if call, last QX, through QX turnaround. think of in

Ken Rizvi

a you for well. QX quarter margins even starting X%. Mark's what our just business, operating we're the margins at op soft business growth. just guided margins expectations terms look Quinn, in memory this for were as can sequentially here, for of there And That's some here And to we for in see above to to QX, the highlight point which Yes. and is

Operator

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

Kevin Cassidy

] And quarter. on a what the services? the more order. on other? to You Congratulations give guidance or said does Can Can little a be least on at depending the way is you this X.XX% [ you flat And margin the up more of this gross being X IPS? part for it'd talk just detail one little about include question?

Mark Adams

start let to in. and going jump I'm Ken

you earnings that's, move a is we engagements, to mix hardware, be the and kind in originally, fact, issues. we muted. As if It we go back around a move around, And that that, margins business kind little in look place. quantify move a we're And good said what margins convert in a of all configurations be call, as And then we at that bit, said, these part second our of will bit. will of early saw you out. you I'll services our if the see around half, margin playing little QX It of could Ken stronger to. could let but

might be confident quarter we're around let's are maybe of And forget, nature was it's with good there. the where Very our ago stronger. a X in and see margins if from X.XX, the execution team's gross of But just the years are to be XX.X% primarily we'll future we a business progress And that margin up not stronger, then to that's continue in. services where today. might because software very mix pleased quarters of and hardware deployments

Ken Rizvi

the more at room here of little the timing is look you And part a bit QX. just provided in not if of margin, around Kevin, And Yes. we only the that That's we've which And about those we the deployments, why talked the hardware quarters. in the get that. making between move acceptance outlined and and can sure customer appropriate past we like.

a bit just for will we a that look us and have is flexibility. and wanted ongoing you assumption little managed most services QX near probably services. at but of to the both flex midpoint, margin little Street if guidance, the gives that. the more My point-in-time the And have around we up But end

Kevin Cassidy

your increasing, about the saying visibility And potential expanding customer for you're base as IPS maybe Okay. can Great. you more your are in particular? talk for your or engagements

Mark Adams

absolutely. Yes,

revenue And we've we've be on here in about to Kevin, to as major over and large that business this terms proposals there on capabilities to to time. generated go to is getting making forward the on X to in last be the the and pleased the resources. get bookings can into again, talked executive increase think, these said with super new amount the XX know, it's continues have got repeatedly and with X of, those invested fiscal honest, CSPs. we're I'm we're managing a and customer progress our concentration I months where that of Tier heavily year convert enterprises The you go-to-market path business that very accounts bringing opportunities last and looking engagement is We've a we're a lumpy. seeing, very market we over

But them we again, do in about against think talk and then booked. confirmation chain deployment like. get and then can we go of and we our configurations have You off about we that schedules supply then what map to the

And I don't I in out I've think calls. job prior to want done good enough call so something a because do

for about talk of relationships, of about it We we terms in because transactional. where hard to used It clients that in not memory transformation don't the buy-sell HPC. to is very market be relationship. our But we like about engagements and infrastructure be we're how very AI our really business. a not going memory was our it repeatedly think of it's module a our and because I in customer That's them while. company stops. one with more just -- to much a think customers And in only, and know terms is the we from industry That's much not

it. sure install it We manage and something and it, we We then selling time. over just performs disappearing. make it we not design We're

don't relationship, we transactional think, have that engagements. And We customers. again, clients so I have and

in where as We obviously, larger gross of to we when are that's compete have line but customers, client and the some engagement. myself compare it so up a competitors margin to against, I those managed the shows speak. And

that the is I'm designed? aisle to the is, becoming Where How to there's I is deploy to main What And people sales to the and do GPUs every more validated just yes, very in by do Kevin, GPU on hard become doing How in the customers. okay, how and over the to detecting it, then maximize is and are out. coiled some do is saves the I design a how racks a how do if transformer, complexity on it's as the the from part so failures I I more I've each center. the uptime downtime? we're scale? of a really take what availability? so of hey, of future, But How mean I months. How systems? playing design day. I need data pleased me is get manage? that not lost Can process complexity? Well, building, of aisle, a center XX that power apparent my be evolving last offer the on just we that the what's data proactive opportunity, also, And like as that, the lot the future

And so a sale. advisory consultant we're in much different

about are these HPC, infrastructure AI as engagements to multiprocessor And positioned this it architectures a for way centers, very that talking reaffirming is about relationship. precursor I'm we of better think large after than well to not executive that that it trustee-advisor think inside HPC. there was closer XXXX, so but be in albeit we're AI the you at 'XX. there build a really data got time, 'XX, type of And helping evolved need for couldn't When people I

with at so a that hardware, I many future in think the companies And and add-on of doing services. to just these not deployment knowledge, And that XX-plus years out job customers value there's software articulating the there we're better both the

Operator

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

Unknown Analyst

to I the Tom on for O'Malley. Scott on This services is touch wanted line.

about it the rate new pretty services of ticks back level? up? like meaningfully this in Should So think you a it sort Or do down-ticked run expect as that we quarter. looks the

Ken Rizvi

Yes.

at are before, think I we expect point-in-time up. the tick would look we like, to and that we are QX, services that the services of services services, have, highlighted And we've of managed there and as So implementation within kind I design, as have. basket that there

here had would embedded -- guide. QX, QX. to that in And to up number back in I up in services was expect and back here fewer that would tick so we QX. point-in-time our sorry, in that expect tick I number

Unknown Analyst

then types idea you meaningfully AI and that's That's again or more the of more, interested, the just see Could then that see there whether helpful. us on market CXL. you X of give an And general inflecting more if customers touch could you when you purpose?

Mark Adams

Jack more of Why productization that, about I'll the take and the don't talk the of first let and I revenue. part

if engineering So amount larger caused help kind and of the issues and as there's issue. bandwidth in of the curve executives latency investing going at And is of the performance GPU companies some AI far, are lack an by and into and by technology bandwidth early-stage solutions leading you capital the of this to the as from immense who CPU. companies talk on memory in executives AI infrastructure, that well top and performance solve to the of investing list availability

like do the if would network, to you think you a is, analogy can I about storage that if in use sharing Like at -- you look today.

memory. do can't that You in

have eventually, you'll the So capabilities.

within be spool X.X not able in I think the you'll to that's but CXL it's memory, enough. out future,

as integrated another The are to for it hardware on top trying having solution, and solutions layer is with overall the relates the will memory there only transport layer of and be the compute optical just High-bandwidth of such CXL and throughput is performance maximizing people optical like issue the innovative of solution. that enhance and more memory to not transport can with latency like other we by into the tackle the fit a transport system solutions it how speed.

meaningful dynamics of talk that the to market starting contributor. I'll Jack we about a kind when be But let around see

Jack Pacheco

Yes.

CXL. meaningful about As the this Mark of kind end calendar we talked right, expect shipments see in we to he mentioned, talked year, some -- of

standard companies. it kind your be we both, of so And will server into shipping

to this put more you do to slots and of need server. decrease as room the memory you faster We their well AI you I need a of more in start grows, also and running folks with in more mean to DIM were that the AI sampling in memory. to in out HPM want run conversations lot if different And normal have memory servers. we're your that,

way to use memory only CXL the try So get that that to into pop additional memory server. to really more is and

of in So we're seeing phases opportunities the market. both

Operator

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

Unknown Analyst

for on Brian. questions. Dennis is This Two

in And interest it or the product on-prem the then of frame regarding for and co-investment. the rollout mentioned customer has you kind the X acquisition or process? choice business rollout like general? generative customer's or have of lengthier so these event these last IPS, delivery How the over a colocation your options you does X become in either changed AI Has year how complex? or more So of time impacts,

Mark Adams

back just a kind little great step That's let And me a question. of bit. Yes.

a what's that in early sales the are all AI. a remain enterprises that or crafting on are I their strategy But I innings you tell convinced the still ahead. we AI. and around the large-scale I super that's would of catalyst And metric for GPUs of noise think like, really

I in GPU to think think went to are don't I sales fully really give business the -- people lot strategic And enterprises think a the defined advantage. I them infrastructure. and large-scale building their AI middle don't is have the those of who how change going a

of out is, that all us. front playing say I is real-time this in why So

struggling versus to or to names even would how in are in who with why there any addition, In are they the compete do I you develop solution brand this for a mean, right big But enterprise companies in have center a that B. and how this years. are architecture the few a who really -- the data outside household industries brand-new hyperscalers been design there for is of A

that when it's with mentioned validated your is they of AI understand doing, so I capabilities as process. technology what is, a perspective is starting opportunity get for information an what But longer-term I adoption from a of to it. call, question this and what that what large I organization I more think the think, are gap made, successfully. to executive also enterprises done my the actually think, will this And getting sales is is They're have gap through need between there have is they on And deploy starting earlier Penguin. I our at really engagements to

our identify education And And yes, be a able to the I value also bit so us partners, to but There that that optimism provide half think we the might year. clients from second curve, the our more that's an longer. need be really of might more sense and our that's the perspective, little it of be can in get and confidence fiscal our sticky our leading deploying you for AI. where help

Unknown Analyst

Great. for my And follow-up. then

all of you would gross this suppliers. both increase, memory how memory we to continue So margins? big future about prices recently were the heard price NAND, If increases, from DRAM your impacting and to foresee

Mark Adams

forecast in quarter. to we normally given going not We're more do than a

give me I a of kind forecast. will can say things. it So the of couple

gross on goes. to up line such our in alluded normally top up But you've we've any margins down or benefits think will as trickle I calls, clear revenue. been pricing on depending that show which will way prior our

Because pricing is customers change, and when Why that? moves, realize that. doesn't value-add our our

over down a we down, point our pretty up to fixed declining when as little or see stable, whatever X go math value of margins might X a maybe so bit, true, just reverse happens. or an of trickle revenue stayed ironically, And is And impact our recovery the even because the revenues stream.

change business sense don't don't gross something that this more out sense I dynamics revenue type because of any in the margin not gross that's than happening and going overnight. mutes pricing margin that gain market, the the the recovery percentage of I dollar often to contribution impact.

Ken Rizvi

grow of that over at what is revenues see time, And to of percent. that to at the income past can for We're XX%. ASPs business years, units that running line below an the bottom we just I'd from as improvement Yes. in of couple in will add where op a see now. and we And period see this is start both you that business, north the memory-specific operating income was

ASPs, as should flow So well see unit line. as that improve as we demand to the bottom to start

Operator

not do the remarks. back the have for further we any any questions time, over this registered final at I call turn team, in will And so queue,

Mark Adams

Thank joining. Great. for you all

details you NDRs Before shows just out we will and and you few you again wanted I call, next in to upcoming seeing likes, forward today. meantime, look a plans or for and day at let just know closing Have and an for be the soon. so, great I that the the joining the week. coming thanks the to IR to have months In

Operator

lines. call. you and participation, That concludes now your today's disconnect all for Thank you your may

Penguin Solutions (PENG) 9 Apr 242024 Q2 Earnings call transcript