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SGH Reports Second Quarter Fiscal 2024 Financial Results

IPS revenue up 19 percent sequentially; total SGH revenue of $285 million

SMART Global Holdings, Inc. (“SGH” or the “Company”) (NASDAQ: SGH) today reported financial results for the second quarter of fiscal 2024.

Second Quarter Fiscal 2024 Highlights

  • Net sales of $284.8 million, up 3.9% versus the prior quarter
  • GAAP gross margin of 28.8% versus 30.2% in the prior quarter
  • Non-GAAP gross margin of 31.5% versus 33.3% in the prior quarter
  • GAAP EPS of $(0.26) versus $(0.23) in the prior quarter
  • Non-GAAP EPS of $0.27 versus $0.24 in the prior quarter

“The second quarter marked a period of continued progress towards our transformation into a high-value enterprise solutions company,” said CEO Mark Adams. “Leveraging our deep-rooted expertise in high-performance computing and specialty memory solutions, we are uniquely positioned to help our valued customers address the rapid adoption of AI,” concluded Adams.

As previously disclosed, on November 29, 2023, we completed our previously announced divestiture of an 81% interest in our SMART Brazil operations. Our SMART Brazil operations are classified as discontinued operations in the accompanying financial information for all periods presented. The discussion in this release relates to our continuing operations, which exclude SMART Brazil.

Pete Manca to Lead IPS Business

SGH today also announced the appointment of Pete Manca as President of Intelligent Platform Solutions (“IPS”). Mr. Manca brings extensive experience building businesses that deliver high-performance solutions to enterprise customers. Prior to joining SGH, Mr. Manca served as a Senior Vice President and General Manager at Dell Technologies from 2018 to 2023, managing several large businesses, including Converged Solutions, OEM Solutions, and APEX, Dell’s end-to-end portfolio of cloud offerings, ranging from storage to high-performance computing to AI services and solutions.

“We are thrilled to welcome Pete aboard as our President, IPS,” said Mark Adams. “Pete’s strategic vision, broad experience, and commitment to customer-driven innovation make him the ideal leader to propel our AI and HPC business forward.”

“The era of AI and HPC is upon us, and I can’t think of a more exciting company to join at this pivotal time,” said Manca. “I am eager to start working with the IPS team to maximize the benefit of these transformative technologies for our customers and partners.”

Quarterly Financial Results

 

GAAP (1)

 

Non-GAAP (2)

(in thousands, except per share amounts)

Q2 FY24

 

Q1 FY24

 

Q2 FY23

 

Q2 FY24

 

Q1 FY24

 

Q2 FY23

Net sales:

 

 

 

 

 

 

 

 

 

 

 

Memory Solutions

$

83,297

 

 

$

85,668

 

 

$

110,339

 

 

$

83,297

 

$

85,668

 

$

110,339

Intelligent Platform Solutions

 

141,405

 

 

 

118,824

 

 

 

222,451

 

 

 

141,405

 

 

118,824

 

 

222,451

LED Solutions

 

60,119

 

 

 

69,755

 

 

 

55,587

 

 

 

60,119

 

 

69,755

 

 

55,587

Total net sales

$

284,821

 

 

$

274,247

 

 

$

388,377

 

 

$

284,821

 

$

274,247

 

$

388,377

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

81,934

 

 

$

82,850

 

 

$

111,008

 

 

$

89,735

 

$

91,277

 

$

124,483

Operating income (loss)

 

(3,312

)

 

 

1,305

 

 

 

(2,077

)

 

 

26,514

 

 

26,679

 

 

55,784

Net income (loss) attributable to SGH

 

(13,620

)

 

 

(11,773

)

 

 

(33,396

)

 

 

14,141

 

 

12,538

 

 

43,180

Diluted earnings (loss) per share

$

(0.26

)

 

$

(0.23

)

 

$

(0.68

)

 

$

0.27

 

$

0.24

 

$

0.87

(1)

GAAP represents U.S. Generally Accepted Accounting Principles.

(2)

Non-GAAP represents GAAP excluding the impact of certain activities. Further information regarding the Company’s use of non-GAAP measures and reconciliations between GAAP and non-GAAP measures is included within this press release.

Business Outlook

As of April 9, 2024, SGH is providing the following financial outlook for the third quarter of fiscal 2024:

 

GAAP

Outlook

Adjustments

Non-GAAP

Outlook

Net sales

$300 million +/- $25 million

 

$300 million +/- $25 million

Gross margin

29% +/- 1.5%

3%

(A)

32% +/- 1.5%

Operating expenses

$80 million +/- $2 million

($14) million

(B)(C)

$66 million +/- $2 million

Diluted earnings (loss) per share

$(0.07) +/- $0.15

$0.37

(A)(B)(C)(D)

$0.30 +/- $0.15

Diluted shares

52.6 million

1.8 million

 

54.4 million

Non-GAAP adjustments (in millions)

 

(A) Share-based compensation and amortization of acquisition-related intangibles included in cost of sales

$

8

 

(B) Share-based compensation and amortization of acquisition-related intangibles included in R&D and SG&A

 

13

 

(C) Other adjustments

 

1

 

(D) Estimated income tax effects

 

(2

)

 

$

20

 

Second Quarter Fiscal 2024 Earnings Conference Call and Webcast Details

SGH will hold a conference call and webcast to discuss the second quarter of fiscal 2024 results and related matters today, April 9, 2024, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Interested parties may access the call by dialing +1-833-470-1428 in the U.S. or +1-929-526-1599 from international locations, using the access code 202143. The earnings presentation and a live webcast of the conference call can be accessed from the Company’s investor relations website (https://ir.smartm.com/investors/default.aspx) where they will remain available for approximately one year.

Use of Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements concerning or regarding future events and the future financial and operating performance of SGH, including each of its lines of business; statements regarding the extent and timing of and expectations regarding SGH’s future revenues and expenses and customer demand; statements regarding SGH’s strategic investments and priorities; statements regarding long-term effective tax rates; and statements regarding the business and financial outlook for the next fiscal quarter described under “Business Outlook” above.

These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” “could,” and other words of similar meaning. Forward-looking statements provide SGH’s current expectations or forecasts of future events, circumstances, results or aspirations and are subject to a number of significant risks, uncertainties and other factors, many of which are outside of SGH’s control, including but not limited to: global business and economic conditions and growth trends in technology industries, our customer markets and various geographic regions; uncertainties in the geopolitical environment; the ability to manage our cost structure; disruptions in our operations or supply chain; changes in trade regulations or adverse developments in international trade relations and agreements; changes in currency exchange rates; overall information technology spending; appropriations for government spending; the success of our strategic initiatives including additional investments in new products and additional capacity; acquisitions of companies or technologies and the failure to successfully integrate and operate them or customers’ negative reactions to them; incurring unanticipated costs following the completion of the sale of our SMART Brazil business; issues, delays or complications in integrating the operations of Stratus Technologies; limitations on or changes in the availability of supply of materials and components; fluctuations in material costs; the temporary or volatile nature of pricing trends in memory or elsewhere; deterioration in customer relationships; our dependence on a select number of customers and the timing and volume of customer orders; production or manufacturing difficulties; competitive factors; technological changes; difficulties with, or delays in, the introduction of new products; slowing or contraction of growth in the LED market; changes to applicable tax regimes or rates; prices for the end products of our customers; strikes or labor disputes; deterioration in or loss of relations with any of our limited number of key vendors; the inability to maintain or expand government business; and the continuing availability of borrowings under term loans and revolving lines of credit and our ability to raise capital through debt or equity financings.

These and other risks, uncertainties and factors are described in greater detail under the sections titled “Risk Factors,” “Critical Accounting Estimates,” “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and “Liquidity and Capital Resources” contained in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and the Company’s other filings with the U.S. Securities and Exchange Commission. In addition, such risks, uncertainties and factors as outlined above and in such filings do not constitute all risks, uncertainties and factors that could cause actual results of SGH to be materially different from such forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Any forward-looking statements that the Company makes in this press release speak only as of the date of this press release. Except as required by law, SGH does not undertake to update the forward-looking statements contained in this press release to reflect the impact of circumstances or events that may arise after the date that the forward-looking statements were made.

Statement Regarding Use of Non-GAAP Financial Measures

SGH management uses non-GAAP measures to supplement SGH’s financial results under GAAP. Management uses these measures to analyze its operations and make decisions as to future operational plans and believes that this supplemental non-GAAP information is useful to investors in analyzing and assessing the Company’s past and future operating performance. These non-GAAP measures exclude certain items, such as share-based compensation expense; amortization of acquisition-related intangible assets (consisting of amortization of developed technology, customer relationships, trademarks/trade names and backlog acquired in connection with business combinations); acquisition-related inventory adjustments; diligence, acquisition and integration expense; restructure charges; impairment of goodwill; changes in the fair value of contingent consideration; gains (losses) from changes in currency exchange rates; amortization of debt discount and other costs; gain (loss) on extinguishment of debt; other infrequent or unusual items and related tax effects and other tax adjustments. While amortization of acquisition-related intangible assets is excluded, the revenues from acquired companies is reflected in the Company’s non-GAAP measures and these intangible assets contribute to revenue generation. Management believes the presentation of operating results that exclude certain items provides useful supplemental information to investors and facilitates the analysis of the Company’s core operating results and comparison of operating results across reporting periods. Management also uses adjusted EBITDA, which represents GAAP net income (loss), adjusted for net interest expense; income tax expense; depreciation and amortization expense; share-based compensation expense; acquisition-related inventory adjustments; diligence, acquisition and integration expense; restructure charges; impairment of goodwill; changes in the fair value of contingent consideration; gain (loss) on extinguishment of debt and other infrequent or unusual items.

Beginning in 2024, for our non-GAAP reporting, we are utilizing a long-term projected non-GAAP effective tax rate of 28%, which includes the tax impact of pre-tax non-GAAP adjustments and reflects currently available information as well as other factors and assumptions. While we expect to use this normalized non-GAAP effective tax rate through 2024, this long-term non-GAAP effective tax rate may be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix or changes to our strategy or business operations. Our GAAP effective tax can vary significantly from quarter to quarter based on a variety of factors, including, but not limited to, discrete items which are recorded in the period they occur, the tax effects of certain items of income or expense, significant changes in our geographic earnings mix or changes to our strategy or business operations. We are unable to predict the timing and amounts of these items, which could significantly impact our GAAP effective tax rate, and therefore we are unable to reconcile our forward-looking non-GAAP effective tax rate measure to our GAAP effective tax rate.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, as they exclude important information about SGH’s financial results, as noted above. The presentation of these adjusted amounts varies from amounts presented in accordance with GAAP and therefore may not be comparable to amounts reported by other companies. In addition, adjusted EBITDA does not purport to represent cash flow provided by, or used for, operating activities in accordance with GAAP and should not be used as a measure of liquidity. Investors are encouraged to review the “Reconciliation of GAAP to Non-GAAP Measures” tables below.

About SMART Global Holdings – SGH

At SGH, we design, build, deploy and manage high-performance, high-availability enterprise solutions that help our customers solve for the future. Across our computing, memory, and LED lines of business, we focus on serving our customers by providing deep technical knowledge and expertise, custom design engineering, build-to-order flexibility and a commitment to best-in-class quality.

Learn more about us at SGHcorp.com.

SMART Global Holdings, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

March 1,

2024

 

December 1,

2023

 

February 24,

2023

 

March 1,

2024

 

February 24,

2023

Net sales:

 

 

 

 

 

 

 

 

 

Memory Solutions

$

83,297

 

 

$

85,668

 

 

$

110,339

 

 

$

168,965

 

 

$

228,625

 

Intelligent Platform Solutions

 

141,405

 

 

 

118,824

 

 

 

222,451

 

 

 

260,229

 

 

 

433,422

 

LED Solutions

 

60,119

 

 

 

69,755

 

 

 

55,587

 

 

 

129,874

 

 

 

118,127

 

Total net sales

 

284,821

 

 

 

274,247

 

 

 

388,377

 

 

 

559,068

 

 

 

780,174

 

Cost of sales

 

202,887

 

 

 

191,397

 

 

 

277,369

 

 

 

394,284

 

 

 

557,068

 

Gross profit

 

81,934

 

 

 

82,850

 

 

 

111,008

 

 

 

164,784

 

 

 

223,106

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

20,526

 

 

 

21,389

 

 

 

25,272

 

 

 

41,915

 

 

 

49,344

 

Selling, general and administrative

 

61,385

 

 

 

57,217

 

 

 

60,074

 

 

 

118,602

 

 

 

127,782

 

Impairment of goodwill

 

 

 

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

6,400

 

 

 

 

 

 

10,100

 

Other operating (income) expense

 

3,335

 

 

 

2,939

 

 

 

3,781

 

 

 

6,274

 

 

 

5,552

 

Total operating expenses

 

85,246

 

 

 

81,545

 

 

 

113,085

 

 

 

166,791

 

 

 

210,336

 

Operating income (loss)

 

(3,312

)

 

 

1,305

 

 

 

(2,077

)

 

 

(2,007

)

 

 

12,770

 

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

7,249

 

 

 

9,559

 

 

 

9,430

 

 

 

16,808

 

 

 

17,924

 

Other non-operating (income) expense

 

248

 

 

 

(576

)

 

 

13,307

 

 

 

(328

)

 

 

11,945

 

Total non-operating (income) expense

 

7,497

 

 

 

8,983

 

 

 

22,737

 

 

 

16,480

 

 

 

29,869

 

Income (loss) before taxes

 

(10,809

)

 

 

(7,678

)

 

 

(24,814

)

 

 

(18,487

)

 

 

(17,099

)

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

2,198

 

 

 

3,534

 

 

 

8,149

 

 

 

5,732

 

 

 

19,471

 

Net income (loss) from continuing operations

 

(13,007

)

 

 

(11,212

)

 

 

(32,963

)

 

 

(24,219

)

 

 

(36,570

)

Net income (loss) from discontinued operations

 

 

 

 

(8,148

)

 

 

6,177

 

 

 

(8,148

)

 

 

15,108

 

Net income (loss)

 

(13,007

)

 

 

(19,360

)

 

 

(26,786

)

 

 

(32,367

)

 

 

(21,462

)

Net income attributable to noncontrolling interest

 

613

 

 

 

561

 

 

 

433

 

 

 

1,174

 

 

 

765

 

Net income (loss) attributable to SGH

$

(13,620

)

 

$

(19,921

)

 

$

(27,219

)

 

$

(33,541

)

 

$

(22,227

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

$

(0.26

)

 

$

(0.23

)

 

$

(0.68

)

 

$

(0.49

)

 

$

(0.76

)

Discontinued operations

 

 

 

 

(0.15

)

 

 

0.13

 

 

 

(0.15

)

 

 

0.31

 

 

$

(0.26

)

 

$

(0.38

)

 

$

(0.55

)

 

$

(0.64

)

 

$

(0.45

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

$

(0.26

)

 

$

(0.23

)

 

$

(0.68

)

 

$

(0.49

)

 

$

(0.76

)

Discontinued operations

 

 

 

 

(0.15

)

 

 

0.13

 

 

 

(0.15

)

 

 

0.31

 

 

$

(0.26

)

 

$

(0.38

)

 

$

(0.55

)

 

$

(0.64

)

 

$

(0.45

)

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

Basic

 

52,031

 

 

 

52,068

 

 

 

49,116

 

 

 

52,050

 

 

 

49,039

 

Diluted

 

52,031

 

 

 

52,068

 

 

 

49,116

 

 

 

52,050

 

 

 

49,039

 

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

March 1,

2024

 

December 1,

2023

 

February 24,

2023

 

March 1,

2024

 

February 24,

2023

GAAP gross profit

$

81,934

 

 

$

82,850

 

 

$

111,008

 

 

$

164,784

 

 

$

223,106

 

Share-based compensation expense

 

1,691

 

 

 

1,815

 

 

 

1,308

 

 

 

3,506

 

 

 

2,950

 

Amortization of acquisition-related intangibles

 

5,894

 

 

 

5,944

 

 

 

6,615

 

 

 

11,838

 

 

 

13,081

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

 

 

 

2,599

 

Cost of sales-related restructure

 

216

 

 

 

668

 

 

 

5,552

 

 

 

884

 

 

 

5,552

 

Non-GAAP gross profit

$

89,735

 

 

$

91,277

 

 

$

124,483

 

 

$

181,012

 

 

$

247,288

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

28.8

%

 

 

30.2

%

 

 

28.6

%

 

 

29.5

%

 

 

28.6

%

Effect of adjustments

 

2.7

%

 

 

3.1

%

 

 

3.5

%

 

 

2.9

%

 

 

3.1

%

Non-GAAP gross margin

 

31.5

%

 

 

33.3

%

 

 

32.1

%

 

 

32.4

%

 

 

31.7

%

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

$

85,246

 

 

$

81,545

 

 

$

113,085

 

 

$

166,791

 

 

$

210,336

 

Share-based compensation expense

 

(8,948

)

 

 

(9,155

)

 

 

(8,723

)

 

 

(18,103

)

 

 

(17,062

)

Amortization of acquisition-related intangibles

 

(3,857

)

 

 

(4,064

)

 

 

(4,200

)

 

 

(7,921

)

 

 

(8,592

)

Diligence, acquisition and integration expense

 

(5,885

)

 

 

(789

)

 

 

(2,824

)

 

 

(6,674

)

 

 

(9,556

)

Impairment of goodwill

 

 

 

 

 

 

 

(17,558

)

 

 

 

 

 

(17,558

)

Change in fair value of contingent consideration

 

 

 

 

 

 

 

(6,400

)

 

 

 

 

 

(10,100

)

Restructure charge

 

(3,335

)

 

 

(2,939

)

 

 

(3,781

)

 

 

(6,274

)

 

 

(5,552

)

Other

 

 

 

 

 

 

 

(900

)

 

 

 

 

 

(1,800

)

Non-GAAP operating expenses

$

63,221

 

 

$

64,598

 

 

$

68,699

 

 

$

127,819

 

 

$

140,116

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

$

(3,312

)

 

$

1,305

 

 

$

(2,077

)

 

$

(2,007

)

 

$

12,770

 

Share-based compensation expense

 

10,639

 

 

 

10,970

 

 

 

10,031

 

 

 

21,609

 

 

 

20,012

 

Amortization of acquisition-related intangibles

 

9,751

 

 

 

10,008

 

 

 

10,815

 

 

 

19,759

 

 

 

21,673

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

 

 

 

2,599

 

Cost of sales-related restructure

 

216

 

 

 

668

 

 

 

5,552

 

 

 

884

 

 

 

5,552

 

Diligence, acquisition and integration expense

 

5,885

 

 

 

789

 

 

 

2,824

 

 

 

6,674

 

 

 

9,556

 

Impairment of goodwill

 

 

 

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

6,400

 

 

 

 

 

 

10,100

 

Restructure charge

 

3,335

 

 

 

2,939

 

 

 

3,781

 

 

 

6,274

 

 

 

5,552

 

Other

 

 

 

 

 

 

 

900

 

 

 

 

 

 

1,800

 

Non-GAAP operating income

$

26,514

 

 

$

26,679

 

 

$

55,784

 

 

$

53,193

 

 

$

107,172

 

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

March 1,

2024

 

December 1,

2023

 

February 24,

2023

 

March 1,

2024

 

February 24,

2023

GAAP net income (loss) attributable to SGH

$

(13,620

)

 

$

(11,773

)

 

$

(33,396

)

 

$

(25,393

)

 

$

(37,335

)

Share-based compensation expense

 

10,639

 

 

 

10,970

 

 

 

10,031

 

 

 

21,609

 

 

 

20,012

 

Amortization of acquisition-related intangibles

 

9,751

 

 

 

10,008

 

 

 

10,815

 

 

 

19,759

 

 

 

21,673

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

 

 

 

2,599

 

Cost of sales-related restructure

 

216

 

 

 

668

 

 

 

5,552

 

 

 

884

 

 

 

5,552

 

Diligence, acquisition and integration expense

 

5,885

 

 

 

789

 

 

 

2,824

 

 

 

6,674

 

 

 

9,556

 

Impairment of goodwill

 

 

 

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

6,400

 

 

 

 

 

 

10,100

 

Restructure charge

 

3,335

 

 

 

2,939

 

 

 

3,781

 

 

 

6,274

 

 

 

5,552

 

Amortization of debt discount and other costs

 

968

 

 

 

1,042

 

 

 

1,048

 

 

 

2,010

 

 

 

2,117

 

Loss (gain) on extinguishment or prepayment of debt

 

325

 

 

 

 

 

 

16,691

 

 

 

325

 

 

 

15,924

 

Foreign currency (gains) losses

 

182

 

 

 

(546

)

 

 

165

 

 

 

(364

)

 

 

(355

)

Other

 

 

 

 

 

 

 

900

 

 

 

 

 

 

1,800

 

Income tax effects

 

(3,540

)

 

 

(1,559

)

 

 

811

 

 

 

(5,099

)

 

 

5,791

 

Non-GAAP net income attributable to SGH

$

14,141

 

 

$

12,538

 

 

$

43,180

 

 

$

26,679

 

 

$

80,544

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding - Diluted:

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares outstanding

 

52,031

 

 

 

52,068

 

 

 

49,116

 

 

 

52,050

 

 

 

49,039

 

Adjustment for dilutive securities and capped calls

 

1,043

 

 

 

1,213

 

 

 

726

 

 

 

1,128

 

 

 

777

 

Non-GAAP weighted-average shares outstanding

 

53,074

 

 

 

53,281

 

 

 

49,842

 

 

 

53,178

 

 

 

49,816

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations:

 

 

 

 

 

 

 

 

 

GAAP diluted earnings (loss) per share

$

(0.26

)

 

$

(0.23

)

 

$

(0.68

)

 

$

(0.49

)

 

$

(0.76

)

Effect of adjustments

 

0.53

 

 

 

0.47

 

 

 

1.55

 

 

 

0.99

 

 

 

2.38

 

Non-GAAP diluted earnings per share

$

0.27

 

 

$

0.24

 

 

$

0.87

 

 

$

0.50

 

 

$

1.62

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to SGH

$

(13,620

)

 

$

(11,773

)

 

$

(33,396

)

 

$

(25,393

)

 

$

(37,335

)

Interest expense, net

 

7,249

 

 

 

9,559

 

 

 

9,430

 

 

 

16,808

 

 

 

17,924

 

Income tax provision (benefit)

 

2,198

 

 

 

3,534

 

 

 

8,149

 

 

 

5,732

 

 

 

19,471

 

Depreciation expense and amortization of intangible assets

 

17,156

 

 

 

17,654

 

 

 

17,199

 

 

 

34,810

 

 

 

34,248

 

Share-based compensation expense

 

10,639

 

 

 

10,970

 

 

 

10,031

 

 

 

21,609

 

 

 

20,012

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

 

 

 

2,599

 

Cost of sales-related restructure

 

216

 

 

 

668

 

 

 

5,552

 

 

 

884

 

 

 

5,552

 

Diligence, acquisition and integration expense

 

5,885

 

 

 

789

 

 

 

2,824

 

 

 

6,674

 

 

 

9,556

 

Impairment of goodwill

 

 

 

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

6,400

 

 

 

 

 

 

10,100

 

Restructure charge

 

3,335

 

 

 

2,939

 

 

 

3,781

 

 

 

6,274

 

 

 

5,552

 

Loss on extinguishment of debt

 

325

 

 

 

 

 

 

16,691

 

 

 

325

 

 

 

15,924

 

Other

 

 

 

 

 

 

 

900

 

 

 

 

 

 

1,800

 

Adjusted EBITDA

$

33,383

 

 

$

34,340

 

 

$

65,119

 

 

$

67,723

 

 

$

122,961

 

SMART Global Holdings, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

As of

March 1,

2024

 

August 25,

2023

Assets

 

 

 

Cash and cash equivalents

$

442,329

 

 

$

365,563

 

Short-term investments

 

23,439

 

 

 

25,251

 

Accounts receivable, net

 

169,718

 

 

 

219,247

 

Inventories

 

172,763

 

 

 

174,977

 

Other current assets

 

76,481

 

 

 

51,790

 

Current assets of discontinued operations

 

 

 

 

70,574

 

Total current assets

 

884,730

 

 

 

907,402

 

Property and equipment, net

 

109,516

 

 

 

118,734

 

Operating lease right-of-use assets

 

62,529

 

 

 

68,444

 

Intangible assets, net

 

140,923

 

 

 

160,185

 

Goodwill

 

161,958

 

 

 

161,958

 

Deferred tax assets

 

73,914

 

 

 

74,085

 

Other noncurrent assets

 

83,884

 

 

 

15,150

 

Total assets

$

1,517,454

 

 

$

1,505,958

 

 

 

 

 

Liabilities and Equity

 

 

 

Accounts payable and accrued expenses

$

182,021

 

 

$

182,035

 

Current debt

 

 

 

 

35,618

 

Deferred revenue

 

37,228

 

 

 

48,096

 

Other current liabilities

 

48,710

 

 

 

32,731

 

Acquisition-related contingent consideration

 

 

 

 

50,000

 

Current liabilities of discontinued operations

 

 

 

 

77,770

 

Total current liabilities

 

267,959

 

 

 

426,250

 

Long-term debt

 

740,663

 

 

 

754,820

 

Noncurrent operating lease liabilities

 

62,585

 

 

 

66,407

 

Other noncurrent liabilities

 

34,743

 

 

 

29,248

 

Total liabilities

 

1,105,950

 

 

 

1,276,725

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

SMART Global Holdings shareholders’ equity:

 

 

 

Ordinary shares

 

1,769

 

 

 

1,726

 

Additional paid-in capital

 

502,560

 

 

 

476,703

 

Retained earnings

 

48,916

 

 

 

82,457

 

Treasury shares

 

(148,309

)

 

 

(132,447

)

Accumulated other comprehensive income (loss)

 

106

 

 

 

(205,964

)

Total SGH shareholders’ equity

 

405,042

 

 

 

222,475

 

Noncontrolling interest in subsidiary

 

6,462

 

 

 

6,758

 

Total equity

 

411,504

 

 

 

229,233

 

Total liabilities and equity

$

1,517,454

 

 

$

1,505,958

 

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

March 1,

2024

 

December 1,

2023

 

February 24,

2023

 

March 1,

2024

 

February 24,

2023

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(13,007

)

 

$

(19,360

)

 

$

(26,786

)

 

$

(32,367

)

 

$

(21,462

)

Net income (loss) from discontinued operations

 

 

 

 

(8,148

)

 

 

6,177

 

 

 

(8,148

)

 

 

15,108

 

Net income (loss) from continuing operations

 

(13,007

)

 

 

(11,212

)

 

 

(32,963

)

 

 

(24,219

)

 

 

(36,570

)

Adjustments to reconcile net income (loss) from continuing operations to cash provided by (used for) operating activities

 

 

 

 

 

 

 

 

 

Depreciation expense and amortization of intangible assets

 

17,156

 

 

 

17,654

 

 

 

17,199

 

 

 

34,810

 

 

 

34,248

 

Amortization of debt discount and issuance costs

 

968

 

 

 

1,042

 

 

 

1,048

 

 

 

2,010

 

 

 

2,117

 

Share-based compensation expense

 

10,639

 

 

 

10,970

 

 

 

10,031

 

 

 

21,609

 

 

 

20,012

 

Impairment of goodwill

 

 

 

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

6,400

 

 

 

 

 

 

10,100

 

(Gain) loss on extinguishment or prepayment of debt

 

325

 

 

 

 

 

 

16,691

 

 

 

325

 

 

 

15,924

 

Deferred income taxes, net

 

476

 

 

 

(282

)

 

 

(88

)

 

 

194

 

 

 

1,630

 

Other

 

(208

)

 

 

664

 

 

 

3,759

 

 

 

456

 

 

 

4,116

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

872

 

 

 

48,658

 

 

 

48,936

 

 

 

49,530

 

 

 

172,033

 

Inventories

 

35,678

 

 

 

(33,464

)

 

 

112,287

 

 

 

2,214

 

 

 

10,240

 

Other assets

 

(23,229

)

 

 

2,102

 

 

 

(3,065

)

 

 

(21,127

)

 

 

(9,893

)

Accounts payable and accrued expenses and other liabilities

 

(22,587

)

 

 

23,581

 

 

 

(119,996

)

 

 

994

 

 

 

(174,745

)

Payment of acquisition-related contingent consideration

 

(29,000

)

 

 

 

 

 

 

 

 

(29,000

)

 

 

(73,724

)

Net cash provided by (used for) operating activities from continuing operations

 

(21,917

)

 

 

59,713

 

 

 

77,797

 

 

 

37,796

 

 

 

(6,954

)

Net cash provided by (used for) operating activities from discontinued operations

 

 

 

 

(28,235

)

 

 

22,738

 

 

 

(28,235

)

 

 

33,504

 

Net cash provided by (used for) operating activities

 

(21,917

)

 

 

31,478

 

 

 

100,535

 

 

 

9,561

 

 

 

26,550

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Capital expenditures and deposits on equipment

 

(5,204

)

 

 

(4,648

)

 

 

(11,699

)

 

 

(9,852

)

 

 

(19,690

)

Acquisition of business, net of cash acquired

 

 

 

 

 

 

 

(2,800

)

 

 

 

 

 

(213,073

)

Proceeds from maturities of investment securities

 

12,290

 

 

 

9,665

 

 

 

 

 

 

21,955

 

 

 

 

Purchases of held-to-maturity investment securities

 

(11,034

)

 

 

(8,469

)

 

 

 

 

 

(19,503

)

 

 

 

Other

 

(558

)

 

 

(188

)

 

 

1,998

 

 

 

(746

)

 

 

239

 

Net cash used for investing activities from continuing operations

 

(4,506

)

 

 

(3,640

)

 

 

(12,501

)

 

 

(8,146

)

 

 

(232,524

)

Net cash provided by (used for) investing activities from discontinued operations

 

 

 

 

118,938

 

 

 

(852

)

 

 

118,938

 

 

 

(4,472

)

Net cash provided by (used for) investing activities

$

(4,506

)

 

$

115,298

 

 

$

(13,353

)

 

$

110,792

 

 

$

(236,996

)

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows, Continued

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

March 1,

2024

 

December 1,

2023

 

February 24,

2023

 

March 1,

2024

 

February 24,

2023

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Proceeds from debt

$

 

 

$

 

 

$

 

 

$

 

 

$

295,287

 

Proceeds from issuance of ordinary shares

 

792

 

 

 

3,455

 

 

 

308

 

 

 

4,247

 

 

 

4,250

 

Payment of acquisition-related contingent consideration

 

(21,000

)

 

 

 

 

 

 

 

 

(21,000

)

 

 

(28,100

)

Payments to acquire ordinary shares

 

(2,732

)

 

 

(13,130

)

 

 

(11,564

)

 

 

(15,862

)

 

 

(16,223

)

Repayments of debt

 

(37,211

)

 

 

(14,423

)

 

 

(3,605

)

 

 

(51,634

)

 

 

(7,211

)

Payment of premium in connection with convertible note exchange

 

 

 

 

 

 

 

(14,141

)

 

 

 

 

 

(14,141

)

Net cash paid for settlement and purchase of Capped Calls

 

 

 

 

 

 

 

(4,304

)

 

 

 

 

 

(4,304

)

Distribution to noncontrolling interest

 

 

 

 

(1,470

)

 

 

(2,009

)

 

 

(1,470

)

 

 

(2,009

)

Other

 

(1

)

 

 

(582

)

 

 

(4,289

)

 

 

(583

)

 

 

(5,077

)

Net cash provided by (used for) financing activities from continuing operations

 

(60,152

)

 

 

(26,150

)

 

 

(39,604

)

 

 

(86,302

)

 

 

222,472

 

Net cash used for financing activities from discontinued operations

 

 

 

 

(606

)

 

 

(27

)

 

 

(606

)

 

 

(124

)

Net cash provided by (used for) financing activities

 

(60,152

)

 

 

(26,756

)

 

 

(39,631

)

 

 

(86,908

)

 

 

222,348

 

 

 

 

 

 

 

 

 

 

 

Effect of changes in currency exchange rates

 

(155

)

 

 

(1,025

)

 

 

1,712

 

 

 

(1,180

)

 

 

1,917

 

Net increase (decrease) in cash and cash equivalents

 

(86,730

)

 

 

118,995

 

 

 

49,263

 

 

 

32,265

 

 

 

13,819

 

Cash and cash equivalents at beginning of period

 

529,059

 

 

 

410,064

 

 

 

327,621

 

 

 

410,064

 

 

 

363,065

 

Cash and cash equivalents at end of period

$

442,329

 

 

$

529,059

 

 

$

376,884

 

 

$

442,329

 

 

$

376,884

 

 

Contacts

Investor Contact:

Suzanne Schmidt

Investor Relations

+1-510-360-8596

ir@sghcorp.com

PR Contact:

Valerie Sassani

VP of Marketing and Communications

+1-510-941-8921

pr@sghcorp.com

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