SGH - Earnings call transcript Q4 2024 | Penguin Solutions, Inc.

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Operator

Welcome to the Penguin Solutions' Fourth Quarter and Full Year Fiscal 2024 Earnings Conference Call. I'd now like to pass the conference over to our host, Suzanne Schmidt of Investor Relations. Suzanne, you may proceed.

Suzanne Schmidt

Thank you, operator. Good afternoon, and thank you for joining us on today's earnings conference call and webcast to discuss Penguin Solutions' Fourth Quarter and Full Year Fiscal 2024 results.

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

for that statements the quarter note We is in on would remind conference outlook. encourage the but forward-looking You and note to, about to the earnings go Investor projections Please of release accompanying not company. I press the presentation. site call, make you most section statements this throughout everyone financial the including, current the the release that on the included Relations website. and can forward-looking will to the the use the this statements, call company's and limited to and also our slide the growth call of like to read company on for find during press presentation trajectory information

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

over press with the A encourage reconciliation all GAAP to, turn our in be will is for, non-GAAP superior a in the results. as financial to me now slide that, presentation. And Non Mark We isolation when substitute Adams, call Mark? We accompanying measures. -GAAP measures GAAP both included and considered you should measures not CEO. also to analyzing discuss non-GAAP consider our release measures and or let to of GAAP performance. today's from,

Mark Adams

call. symbol our thank This day you today, now our officially And all is us, is NASDAQ as are Welcome, for earnings we ticker significant for on joining Inc. Suzanne. you, and Thank PENG. a Solutions, Penguin

computing. In of team appointment a further Nate Financial depth expanding to former the we and the breadth experience what Chief at Officer June, wealth Olmstead, IPS, our QX, with growth. revenue us and our future Edge quarter gross and all third our in to SK revenue, a expect within transformative consecutive our helping with of we for AI and our enterprise-focused bringing business. In And in we partnership were is global Pete we leadership to announced tackling executive It transformation number than challenges, the rebranding today's dedicating XXXX provider, strengthen May, business, company from global solutions majority one the more In a President In infrastructure. Fiscal milestones Our at complexity a our an our of we achieved name team. to that market. business us. focus continued our structure joined November, of for a reinforces of into a enterprise and formerly completed solving divestiture was us biggest pivotal financial guidance Telecom, as capabilities. margin sequential Dell, AI strengthened leadership EPS July, AI ongoing Logitech, just key a growth holding We change. enterprise of Manca, innovation our strategic range stake position as the of CFO, announced achieved we of and be Brazil year of our

in year-over-year our optimistic thus, to positioned believe about we our engagements. XXXX, As FY outlook, expand on double-digit customer based growth ability we for we 'XX. we enter remain fiscal are And our

AI, these towards investments. and across phase more all significant evolution major industries, is this integrating business this systems look landmark new years to advancements navigate computing of digital next Now, is a depend on the AI of let's era more enabling of high-impact in take experience has believe enterprises where over a to transformation. market by technological deployments, recently, can partner excels. With advanced are the high-performance AI XX broader and market year outcomes. We for hardware drive shifting landscape. a Penguin commercial into we at Solutions XXXX been This production-ready marked trusted operations, AI infrastructure that

turn let's to Next, performance. our financial

XXXX, total fiscal For we revenues of billion. $X.XX reported

managed Our XX% sales, XX% services of 'XX share represents 'XX. from FY to a revenue FY now our larger in growing in

QX, a a QX, revenue Non-GAAP gross segments primarily has sequentially full non-GAAP X the was profit business down at margins for gross year within our but versus in mix, due last with cash million with improved basis, delivered $XXX margin our cash grew on from and investments. approximately and across of Our with to $X.XX, and QX. equivalents guidance gross We all XX.X%. In quarter strong EPS position range. still non-GAAP short-term cash product quarter, in line remains

driven segments. provide or reaching now our hyperscalers, by services across and me deployments detail for Let providers CSPs customers. IPS, of Solutions, or Platform Intelligent cloud more million, and QX revenue, our on AI service business XX% enterprise managed $XXX accounted

include the customer focus institution. gaming and We heavily of a pilot and leading companies a world's wins. new at customer largest continue to service at a on engagement program software orders hardware, Examples financial securing recent one of

through complexity of are AI-driven managing deploy improving way this, Our In solutions. services. Intelligent of models workflow One Software, also all early-stage from environments. and support work AI enhance is across while our in area is Penguin and resources, we software and managed including of manage clear. and how build, investment efficiency scale which seamless Solutions particular AI hybrid strategy the compute customers organizations can focus our multi-cloud helps deployment ongoing development with design increasing line the the

AIM ] Assured management focuses and ClusterWare For software, which system we high-level infrastructures. Solutions' monitoring and Penguin on Infrastructure [ large-scale scaling Module, of AI are example, or

property our are applications, software of innovations. we also which related portfolio of value our of advance we robust intellectual program As result by and capture capabilities, secure filing to the are enduring patent IP enhancing many a our our services

growth AI, and driven networking, form by low-profile a workloads. In AI DDRX networking Memory enterprise positioned role SODIMMs. DIMMs as technology to well with for 'XX, enterprise activity, from We FY markets, as high-performance, among heading offer and recovery data telecom we exceptional design-in Specialty emerging IT. endurance, critical significant XX% play especially customers industrial product factor like low-density we in compact X revenue, telecom leveraging customers the our and introduced Our the important Gen Memory our line, CFexpress seeking QX and business contributed and traditional and customers it by demand to storage areas ECC PCIe solutions. saw into driven of very for believe also big has performance reliability; increased is for

feedback develop a performance and for like memory demand workloads, in-memory the seeing complex To and to and sometimes we to as customer address the need, have growing DDRX by and sampling positioning solutions increasingly recognize positive that As of infrastructure. both this the market the X-DIMM meet are we OEM AI we're more memory demands future wall. strong card technologies meet referred us capacity, problem models, add-in database activity X-DIMM memory launched constrained products, and we for AI CXL modeling to

photonics areas We appliances. pioneering silicon in and technological research memory are actively in also external investing like

on better increasingly As us efforts deliver AI meet capitalize greater emerging become enable to our us opportunities workloads and to customers. memory-centric, to future and value to our continue demand, positioning scale will

prevent memory reliable to reliability technology Additionally, improve in ROI more customers' failures, provide also for producing high only minimizing helps processing, not our environments. by can designed consistent, By our zero Zephyr delays failure rate mission-critical Zephyr is significantly but outcomes.

QX applications of full high-performance LED total to product than for and lighting launches growth business efforts showed X% the its QX significant growth year represented with X,XXX in Our LED Cree and sequential revenue. in protection XX% safeguarding brand IP continues and X% The more patents. lead

market in can believe FY XXXX. win activity We additional increasing are share capture seeing design and we

X As drive 'XX; to our strategy. overall we key company look fiscal year initiatives

First, complex challenges. solve our customers' most AI

us rebranding and focus to expected AI the with AI highlights AI by trends, enterprises Penguin deployment aligning XX% our on of implement broader with to Our Solutions XXXX. HPC,

partner expansion. in reach, growth with and global our Telecom and accelerate centers Edge partnership Second, computing our growth for planned will We SK global solutions. anticipate data AI particularly and

and offering. software services Third, expand our

on enabling to this workflows AI hybrid a customers infrastructure. And higher-value solutions more and offers and continue and the Penguin integrated manage relentlessly. focus, moving With investing environments. up multi-cloud will stack, services and IT AI seamless businesses focus better Solutions innovate across orchestrate infrastructure, We AI that help finally, software four, in their number

We're continues industry drive differentiation at our investing solutions expertise enhance value to technologies to to market. to architectures, for in intense memory, our products, our us helping memory of innovation continuing ongoing solving and and proposition. commitment trends. high-performing requirements new such the low-power compute in forefront the we high-performance are stay By in cooling advanced Our expanding compute as high-capacity,

our customers the IT review. that, the now call evolve, well-positioned of technologies As turn to these are potential integrate to innovations will financial help believe we investments. And processing we and for Nate networking over their full with I the and harness

Nate Olmstead

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

the year prior flat margin prior that diluted expenses. margin income quarter. In XX.X% gross a me for Non-GAAP the we which of in totaled last up lower $XX were follows: on quarter, down margin EPS earnings was versus XX% primarily $X.XX in Solutions sequentially in from were revenue; and and third fourth was of XXXX quarter. the took were quarter XX% Revenue, to percentage sequentially. were versus prior and our quarter up point $XX primarily flat XX% was variable revenue versus variable consecutive the the fourth down fourth fourth to year expenses Non-GAAP XX.X%, as to quarter, versus or XX.X% ago the year revenue was volumes increase or the by of year XX% last which XX% memory to fourth million up partially was revenues and XX% the up the $X.XX QX Products with Now by actions we the primarily IPS, translated expenses slightly the million, $XX margin quarter. percentage of and and of quarter percentage segment our fourth total per came quarter, or of mix expenses operating our $XXX business sales revenue were services operating $XXX the XX.X%, ago versus quarter, million by sequentially due margin for fixed due in was costs. into the IPS. the Penguin diluted million down reduce quarter million call. prior $XX third with provided results. up quarter down our versus share $XX prior EBITDA a memory, earnings points due quarter X% within the operating total Gross gross and Penguin quarter, primarily down $X.XX, was up quarter, revenue. Non-GAAP and quarter. million, let from million revenue, our in share XXXX versus last per quarter's quarter, up sequentially of lower at XX% in revenue. Non-GAAP slightly mix flat revenue; ranges million $XX XX% to or was all slightly in $XXX ago for of LED, year $XX were fourth of turn were non-GAAP the driven operating gross from lower overall fourth offset from year, within $XX in for of lower and last our for XX.X%. last total versus quarter, Adjusted million, in in last million, services X.X X% or Operating million up the X.X our XX% Fourth Total XXXX, for quarter million of sales, quarter or improved quarter year. Non-GAAP non-GAAP earnings year margin the Solutions was $XX revenues which

sheet Turning to highlights. balance

million quarter, quarter from For working in timing prior days XX sales and million the totaled quarter. the of the down Days quarter. receivables linearity net the the compared days, prior of payable outstanding of different last the million from capital, at $XXX the in XX due days of $XXX of to prior within down Accounts timing purchases $XXX XX due to receipts was compared end XX days, million were due the from to fourth quarter, outstanding $XXX payments. $XXX XX Days our quarter to from Days at $XXX the totaled end quarter, the inventory down days QX. was of and XX in up days shipments. accounts payable quarters. Inventory end sales last came million million at the in primarily to at

with within Our accounts XX of sales cycle net shipments to timing quarter. the Consistent QX XX was the practice, cash quarter days compared prior and to last to and compared are conversion days days due past receivables, of quarter. respectively, $XXX sales $XXX and fourth days cost goods inventory basis, million, the gross sales gross outstanding which on calculated and million were a sold for

between difference that profit the on the million differences activities compared sales revenue. Cash $XX related to our services logistics activities initial million is share stemming working in in of XXXX. In meaning increased in reminder, totaled through equivalents XXXX, net not our fourth of on offset a of the to million of the quarter, did accounted prepayment logistics generated million convertible we our quarter the our quarter. totaled prepayment term and net million gross from used as to bringing a services, total amount the the by revenue notes $XX from repurchasing As due buyback share lower $XX the quarter-over-quarter.-We loan, $XXX QX, linearity on fourth primarily new recognize as net in operating investments under prior Since $XXX memory of of we $XXX made which capital partially basis, This to end cash loan, to quarter, an of million X.X repurchases agent and short-term only remaining operating million quarter convertible in the for we the to program. prior any and have repurchase share down million our shares cash due April million The for authorization business' of was at from term the principal used on end fourth million notes. Fourth $XX $XXX million principal quarter. decrease our was issuance flows from a primarily and fluctuation operations, $XX cash in our $XXX is quarter. have end the fiscal repurchase

was at $XXX debt end QX of net the Our million.

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

want close to from commitment aim we products our $XXX which a and AI computing. We end-to-end expanding to our signing of Before SK to capabilities in infrastructure in advanced our in growth solutions around million our track transaction the turning and landscape. We high-performance, to AI you collaboration SK outlook, share planned I enhance XXXX, details and July, portfolio evolving after approvals, solutions, developing with collaborate AI innovative software calendar and believe strategic Telecom, as in such high-availability the solutions. reiterate and global high-performance broadening subject the regulatory end of position calendar Edge underscores areas the Telecom in announced excited increase compute to recent reach, investment investment with to more will AI time. remain to early the offerings the XXXX our We are our opportunities us to or on rapidly capture that

impact financial projections. And turning it not has from not we in As including our outlook. now, to any are transaction the closed, our

year in AI a broader from our providing We perspective to We quarterly on a outlook executing our infrastructure aligns on provides to emphasis to fiscal with change financial relation objectives. this on our believe a outlook. strategic have long-term shift and and dynamics, vision business decided especially better providing

our growth continue in revenue We or percentage outlook and X term. With of focus mind, for that XXXX short execution is in creation the and points. driving to crisp plus on long both value will minus fiscal sustainable year-over-year for XX%,

be to for year-over-year; Memory, between grow XX% flat to revenues LED, and to reflects expect following: IPS, year-over-year. between XX% expect for grow we XX% year and expect XX% and for Our the up we to XX% year-over-year; revenue outlook the for we full revenues revenues

full for expected XX%, percentage Our margin non-GAAP year plus or gross minus is X be to the point.

minus operating full non-GAAP are be or Our $XX year expenses $XXX to million. for expected the million plus

to million count year. Our for be per non-GAAP is expected $X.XX, earnings full plus share minus non-GAAP shares expected finally, share be XX.X or the And diluted diluted our approximately $X.XX. approximately year to is

utilizing non-GAAP currently long-term reminder, we are XX%, available rate a of projected As which information. tax reflects a

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

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

manage as measure the turn a for while to me Q&A. also to our non-GAAP to manner details. And Please long-term non-GAAP prudent navigate earnings prior reconciliation GAAP refer it remarks a in environment growth. Mark our We of and for investing to operations release continue Financial now, in section Information tables few challenging in the a our we over to further let

Mark Adams

In goals. and on we conclusion, are is positioned Penguin from journeys. Operator, favorable. strategic on ready that ideally HPC Market are growth believe deployments helping memory the questions. and laser-focused We while our and AI markets, Nate. in focused their remain we our tailwinds Thanks, now AI AI achieving take lead to Solutions customers to navigate remain growth we requirements continued in higher-performing

Operator

Nick [Operator company Doyle with Instructions] Our first from question comes the Needham.

Nicolas Doyle

software how you Tier one, pipeline? customers you the do in have updated Xs? with services this this potential you're Maybe First and sizing do any many thoughts opportunity on how see

Mark Adams

going services, as transaction and typically another just announced the about from a this consumer to a the don't as material in a long talked, today, any stages. business over to primarily is we large But that the run. services in of be corporate opportunity a today market we the revenue would on We're part in disclosing But that metrics believe gaming company, with just disclose we not of say quarter we software call. XX% have financial we around I is software continue that today. QX Yes. information early are customer

Nicolas Doyle

on -- large across software? in follow the what, one. could to your Okay. mean, mean, service you Maybe I gaming I board the with I led that just this what led company? consumer up opinion, you win

Mark Adams

Yes, good question.

market what Analyst concept today, talk introduced when really So, something it's is. when we you doesn't we our our think appreciate the Day, and on prescripts about heard really of complexity the managing -- at that complexity I

decision because companies, win why try so, reason, whatever and tools around is companies for we manage that we these go these whether kind more the and these part And do performance the criteria or how by are deals to with to the systems it's in whether and who it's it's providers. And the reliability, more that implementations. traditionally hardware networking sometimes off success themselves the deploy either of of GPU part ability is And uptime. software, ensure typically, of environment,

these in a in announced us. And, had And one, things that have so, we believe Tier which we yes, and we X that last capabilities more was both -- differentiate many for AI, have been years, we've doing quarter HPC we they're recently that CSP.

and to we through on go a reliability to own, try time -- out This and to much companies that of and hardware don't and or ahead acquirer define know don't of want they is issue the they how are expertise with it fact monitor of see take quarter do themselves and just is have they company, to a and customers how network available has their isolate GPU the diagnostics. how really level very they continually do large And themselves. gaming a being know who OEM the matter more on it of but

whether organization most for customers. them sets or have these service our deploy complexity software And and in we things in capabilities to -- to best of us that the tool this we're of that or ROI our our are so, have as type the raise, power provide it's it's for management allow we areas, what any cooling these of you, whether -- a

Nicolas Doyle

on I has hard couple which out. Great. points that. ask, I'd CSP that Visibility with been I to issue mean, why Nate I of of gave lumpy year, to say, number, I'd of and it's ahead? what a full shifting to get the just confidence zooming know And guide then pinpoint company, is, guide just X months a to instead but gives the I you're less visible kind always guess you orders. hardware an

Mark Adams

raising. nearly let Look, one it's commit we Yes, jump I'll booking we've standpoint, business that true, basis. looking on to what's to lumpiness call, The you're that earnings our ability in continually is our ability about Nate of from to the see talked us not on at and is visibility But a just our forecast. and every take It maybe a are remember, from it standpoint. in. a go-forward does aspect what that front

The area we timing. is, about issue deployment, other face predictability of the in

then And forecast any in an backlog depending given being what's and so, on from what's deployed customer complexity there's quarter, for in the at and us. accounting the standpoint, shipped and additional recognizable

so anything some deployed convert the in And think horizon longer that better as the our a thought we to to was be confidence when over better we have from our that be out -- booked else we because installed, revenue thought standpoint. Nate, you we and you'd to Solutions, business show of will things teases it add? for it business on noise we a the Penguin was able to business for

Nate Olmstead

of we the look LED, Sure. those Yes, we're for side, give we in the longer AI at the are solving I what said, timing especially do like? I challenging what problems and of infrastructure be timing customers. What the can So, look and -- Memory, complexity I complexity number booking service of look the our as confidence sell-out of and us the What Mark looks renewals the the specific and actually recognition and many visibility characteristics and Mark orders sometimes because timing of is that profile that some have like? term. But the at, a the things in of think over of the things their is of sell-through And is look at. revenue of the some that demand those backlog? on customers

Operator

question with Chin Our Brian from Stifel. comes next the company

Brian Chin

grew Maybe appreciative have a But whether provided. shifted sequentially, quarter the you out why little if that apologize can any kind it and explanation, catches I quarter? And if sort of if yet missed here, was that, I in some being revenue upcoming definitely the one expected. idea how and But half than give discuss of lower might horizon year of an IPS us it XQ, And following can then, the year? anticipate that loaded revenue at first of revenue of trends to or connected second the fiscal longer maybe how fiscal least and of some in guide. you top and line bottom you fiscal sense

Nate Olmstead

is Hey Brian, this Nate.

So all I alluding business one, the to recognized to, on difficult as operational checked Mark the was be it's IPS some boxes first will yes, sometimes in revenue. was as when get that, when things know there think will and

which QX, into and reflected that's occur have that did QX slip will of QX, in the we and guidance. So in some

as the far as really, looks, on outlook. and -- think full how year year the I we're focused

think the wins have change doesn't we large I unless overnight. dramatically business

the of I look fiscal QX good place year path and start business 'XX. the So a we is trajectory out in into as pretty to think the

Brian Chin

reception a diversity little strategy. I and the Fair your production-ready, customized Maybe just you maybe fiscal kind faster I'm the All right. this customer can do Over the the the go-to-market think increased to much a appreciate market in bigger curious, How revenue customized half? the time And engagements? less of engagements contributor solution? what than has expect to OriginAI second bit. Okay. OriginAI by enough. revenue is drilling with been of time, to far thus become

Mark Adams

is Mark. -- candidly Brian, just think I this

from I of OriginAI we is, reason that different second who've aggressive would -- dollars. a The we've about think got X fiscal might large to think you have, be hyperscalers customers procurement half of the a contributor. had standpoint why types think major materiality be one as

is multimillion-dollar Again, call an with which providers, be these that in last We But smaller OriginAI deployments. And massive help starting also proof-of-concept was might the meaningful AI single or category, us bring the then reference they win but smaller. X for tend out will things in customers larger the up win speak; in with I do typically should aren't little so have you've sizes, application deployments. enterprise because deployments, the implementations that Tier a out to but service implementations. Why strong to us. global again, type customer a one got the gate gaming is QX OriginAI thing of that I particularly company grow, upfront

would to so -- the also funnel validation take think it's that I half up. build And to But I great. time that 'XX. to second little us say would it's it'll a is I of hesitate say going be

Brian Chin

enough. ties maybe then, one Okay. Yes, the fair year And fiscal that also outlook. question into

transaction increasing closes? OpEx kind you spending in any reflects outlook might already I your is at you guidance SKT somewhat any of your the the there think after receive of growing rate roughly reflective Do boost after envision Or you that growth of target the your revenue proceeds? do or thereabouts.

Nate Olmstead

rate planning OpEx at Nate on growing at Brian. Actually, the Hey, the here. midpoint of the of we're Yes. revenue half growth guidance. about

But just we think this take think that we -- I So, on especially software, I'm the that's critical a is to investment, year lot spend of long-term success. variablizing look But that. too. of on some another are ] as a also maybe [

year last down, up the necessary. or greater down I So, investment would an than things it this as unfolds, But of slow throttle OpEx a as little bit up, opportunity year year. a on gives characterize to speed us things as

Mark Adams

and of company only of a be operating and we'll turned, confident X in I add that XX the thing you point that the what positive to sheet. profitability got carefully. with have kind prudent demonstrated or we is concentration expenses watch I Memory operating past be when a if quarters our it'd LED Yes, balance back to stronger EPS would likes, the of That's row proud or we think mindset, when accordingly. And look markets and the to X a track it prudent or of record faced very other dial that in I'm in issues us efforts whether there pretty years, customer years we've the Nate's on variability, our and at

the can but ourselves obviously at growth, carefully position watching company's balance just So, for the sheet. so investments not of we the risk

Operator

question company, with Rosenblatt Cassidy Securities. Kevin next comes Our from the

Kevin Cassidy

lines describing of customers. when customers, enterprise Just along the you're types the X the

be of think So, an see with agreement ago, course, your -- would type of is of there them? that there's NVIDIA announced a Does to that an work opportunity business do strategy? enterprise more that couple with competitor And weeks Accenture Accenture validate you you that do customers. they or targeting

Mark Adams

found I more at to we're because Yes. the are that I the about, investment what think add. big it's is a in of I speak. level landscape don't it of security more we infrastructure it's think layer terms in with I And a layer bit category, a competitive application higher and and in thesis. I Accenture -- so commercial they're talking from little more have level And think think

out about layer seen think so than your it, infrastructure. By and not on of specific that with CEOs they more missed I seen are not to maybe in think rationale firms on I missed of spending to -- we Kevin, As was Boards way, lot that. have time the cooperate I commercial types that, for If probably I are have who infrastructure, the a and think our advising it and question. us future, opportunity I those the application there's I

Kevin Cassidy

AI moving starts opportunity. enterprise largest just that seems to the -- that's general your that it's as customers in it No,

on I so wheelhouse, margin Is mix I XXX think X, guess, or I companies as how focused gross is that's start yes. and the this that move You your as are where software. have Tier Fortune services know it dynamic then it, adopting But services? also flat, work into would guidance, far and as more -- being does you adding more on conservative I just guess, you're of your but

Mark Adams

Fair Yes. enough.

and I at is XX% Computing we've high-growth of lower Kevin, I the especially if always some And growth you think of -- I it, Penguin hardware gross margins. of infrastructure, between year. the especially community think when get times, contemplate somewhere because guide, some said that into XX% balances piece investor said margin think, the Nate the look to this the related, out kind around we

people where XX% hardware offsets. or our like mid-teens. not or -- that some We're competitors who certainly other not competitors lumped But we can higher about with. in you get talking are lower-margin Now the imagine

margin be some to during good Phase some deployment over that. phase, we -- And hardware the as X, a normally accretive. But Phase services systems of lead. going and it's And and and hopefully, will actually infrastructure customers, sense, which we're and a then and sign take growing so, is see that new the software and catch up win you're X especially in will time,

I that to got we think in as have gross guide enough business resilience impact on the we've from can quarter-to-quarter. an guided, margin but

Nate Olmstead

that points one. more Maybe couple a just on

and from category. for that expansion, there's it think out margin we I call a XX% And Memory room we on really leave does that's is those year-over-year lower certainly, XX%, margin, so on some did expected that to accelerate some range gross its gave business lines, growth a mix. margin gross depending to along

overall, a to some make again. bit I'd expecting margin the pressure P&L probably are some operating offset to So little in potential we expansion of on see the just expansion point of IPS. Last of

so, expansion that. at reflected gross in And while the outlook there OpEx perhaps in operating we're much the than as in growing or guide slower is revenue, some margin the in there's because level, not margin nice

Kevin Cassidy

that's positive. Okay,

Operator

O'Malley from company question the Our with next Thomas Barclays. comes

Kyle Bleustein

on you revenue gross on from layer but you margin time what the or the Kyle the any know is other a the and services little for Tom you typical is O'Malley. when hardware expect parts Could This you hardware? in about like bit selling to win? have of guys I being Bleustein all when it software talk updates you'd a accretive a guys and lag when afterwards, on then it lead little it about expect talked kind

Mark Adams

the should think as annual those months agreements of The And where the typically way we -- do thereof a you get as prior it's what operate. renewed in is, every think have terms of of what upfront. get service calendar most year a to our and upfront. again, on But we basically fraction get it, end and then about customers, services with have we've we sometimes calls, at customers we mentioned hardware of our XX

it's if services margin gross look And revenue year adding customers you. process a go customer. if so, new X what that new one, become at transaction when year, and a customer, you services margin than year the gross the of have And looked services in out, for lower because through probably think X wind play of higher year such piece a how we down, at about you sometimes every and normally of you our business,

Operator

no comes next the registered Instructions] [Operator question the Capital. time this Ananda in questions company Our there At are queue. Baruah with Loop from other

Ananda Baruah

for just couple me. guess Yes, I a

I and the well of opportunity. as You some server for customers other the distinct software Is guys I also. services, maybe to vendors, the as of vendors any then infrastructure Analysts talked opportunity? partner opportunity have it a vendors, there follow-up And on just quick belongs services software expansion really the also with and that from guess infrastructure -- at

Mark Adams

the we've as the in we've invested primarily model. X And might some discussions engagement we OEMs model. services are months, to that Absolutely consider and able we've both active more resources been and integrated engagement don't part hardware. think in then, evolved. who, of infrastructure our Historically, of top And strategy go-to-market with over a others on are competitors, provide even software last way, direct-to-customer type be in to of it

making it's a there. go-to-market And so, of absolutely good strategy, part progress long-winded we're of saying, our pretty way and

Ananda Baruah

the I Nate. maybe And guess for follow-up helpful. super that's is this -- is Mark,

services is there software services. and hardware? service your Anything Just context you Any the provide to on of for -- impacted and the by software what would service software expansion relative and guide helpful. can growth be complete portion about

Nate Olmstead

Ananda. Thanks, Yes.

a deal, this see I in more of recognition. as alluded is outlook. And early I the be is hardware think in to it think in the what heavy tends Mark year terms growth, can you revenue to some that of a

'XX. probably really the a in mix swing see So, in software/hardware large not

offset bit sort growing change that as depending of Memory some just got of more of But are of course, some we've services-centric. pursuing mix, change things the lot that would get. We assumptions, again, on will core that. of base we a that are in types certainly assume, a deals which increase. perhaps But Of well, I quickly could based on not little of sort

Ananda Baruah

degree, And, consummate meaning would potential of as these Nate, the of hardware? you dynamic sort down software services just down shift has the alter some that some opportunity I imagine dynamic partnership the that and from to an the sort road, have that, deals of would road. to to as distinct

Nate Olmstead

that. with agree I

in that real at we our key opportunities, part focus new when we when we think opportunity as metric. operationally, at also, about a us, that is pipeline, look of it's look those core a for And and It's talk I services are things true. the always that well.

Operator

Our next company Rosenblatt Cassidy comes with from question Kevin Securities.

Kevin Cassidy

that I have holding the The the other SK year? why of up guess, what it maybe to beginning year, wait is what resolved? need of -- end or does What it this Telecom, be be next till would issues to

Mark Adams

being Kevin, Telecom it's type being to similar agreement Korean. is parties, X to U.S.-based one Yes. and M&A because of not SK interesting one U.S.-based agreement very that relative being treated an and

oversight, protocol. has so just to more and normal do just it to so, of And with U.S. speak,

time have but process. to more the hiccups, any it We little seen a does not add

as investment the that foreign it it as at to close. not timing And process just the of was suggested, U.S. the calendar changing of U.S. we we're today. into think I that year and would by we for the end you possible normally knew announcement, a the have entity. that U.S. I so, of think a don't of was oversight as time a U.S. entity if part of the even any investor much a nearly type It's

Operator

no in queue. At there registered are more this time, questions

closing to for our So, conference I'd Adams, pass back team, remarks. like the to Mark over hosting

Mark Adams

joining today and call. Thank the on you, operator, and thank you all us for for your questions

partnerships, year Fiscal AI phase reiterate offerings a enter the and opportunities significant Penguin in in but I lead I strategic in As want was guided just high-performance We've we AI of With clear a strategy memory close, focused advanced and Edge. hardware a for in to drive company, cloud investing services transformative now for on the the the and help to also fiscal positioning demand product will Solutions. by business. We ourselves infrastructure, financial that at we well on-premise, our computing, are infrastructure our on next and software made XXXX in in capitalize AI the solid positioned not the 'XX believe and to strides innovative and that capturing foundation, solutions.

quarters to both progress for again you forward continued shareholders remain Thank and updating the you are our excited excellence. operational We to customers look ahead execution, path to innovation our the about delivering through and value committed on We come. support. to in and your

Operator

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

Penguin Solutions (PENG) 15 Oct 242024 Q4 Earnings call transcript