SGH SMART Global Holdings Inc

Sequential Revenue Growth Drives GAAP EPS of $0.10, Non-GAAP EPS of $0.37

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

Third Quarter Fiscal 2024 Highlights

• Net sales of $300.6 million, up 5.5% versus the prior quarter
• GAAP gross margin of 29.6% versus 28.8% in the prior quarter
• Non-GAAP gross margin of 32.3% versus 31.5% in the prior quarter
• GAAP EPS of $0.10 versus $(0.26) in the prior quarter
• Non-GAAP EPS of $0.37 versus $0.27 in the prior quarter, up 37% quarter over quarter

"We are pleased with our Q3 operating results and continued progress in our transformation into a high-performance, high-availability enterprise solutions company," said Mark Adams, CEO of SGH. "Our customers are looking for a trusted deployment partner to help them solve the complexity of AI, and we feel we are well positioned with our portfolio of systems, software and managed services to enable their success," concluded Adams.

Quarterly Financial Results

 

GAAP (1)

 

Non-GAAP (2)

(in thousands, except per share amounts)

Q3 FY24

 

Q2 FY24

 

Q3 FY23

 

Q3 FY24

 

Q2 FY24

 

Q3 FY23

Net sales:

 

 

 

 

 

 

 

 

 

 

 

Memory Solutions

$

91,629

 

$

83,297

 

 

$

109,458

 

 

$

91,629

 

$

83,297

 

$

109,458

Intelligent Platform Solutions

 

144,968

 

 

 

141,405

 

 

 

170,854

 

 

 

144,968

 

 

 

141,405

 

 

 

170,854

 

LED Solutions

 

63,983

 

 

 

60,119

 

 

 

64,106

 

 

 

63,983

 

 

 

60,119

 

 

 

64,106

 

Total net sales

$

300,580

 

 

$

284,821

 

 

$

344,418

 

 

$

300,580

 

 

$

284,821

 

 

$

344,418

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

88,906

 

 

$

81,934

 

 

$

100,480

 

 

$

96,962

 

 

$

89,735

 

 

$

108,990

 

Operating income (loss)

 

11,511

 

 

 

(3,312

)

 

 

(2,386

)

 

 

33,325

 

 

 

26,514

 

 

 

42,327

 

Net income (loss) attributable to SGH

 

5,616

 

 

 

(13,620

)

 

 

(19,648

)

 

 

20,221

 

 

 

14,141

 

 

 

28,731

 

Diluted earnings (loss) per share

$

0.10

 

 

$

(0.26

)

 

$

(0.40

)

 

$

0.37

 

 

$

0.27

 

 

$

0.57

 

(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 July 9, 2024, SGH is providing the following financial outlook for the fourth quarter of fiscal 2024:

 

GAAP

Outlook

Adjustments

Non-GAAP

Outlook

Net sales

$325 million +/- $25 million

—

$325 million +/- $25 million

Gross margin

29.5% +/- 1.5%

2%

(A)

31.5% +/- 1.5%

Operating expenses

$81 million +/- $2 million

($15) million

(B)(C)

$66 million +/- $2 million

Diluted earnings (loss) per share

$0.03 +/- $0.15

$0.37

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

$0.40 +/- $0.15

Diluted shares

55.7 million

(1) million

54.7 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

 

12

 

(C) Other adjustments

 

3

 

(D) Estimated income tax effects

 

(2

)

 

$

21

 

Third Quarter Fiscal 2024 Earnings Conference Call and Webcast Details

SGH will hold a conference call and webcast to discuss the third quarter of fiscal 2024 results and related matters today, July 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 United States or +1-929-526-1599 from international locations, using the access code 829754. 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 related to 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

 

Nine Months Ended

 

May 31,

2024

 

March 1,

2024

 

May 26,

2023

 

May 31,

2024

 

May 26,

2023

Net sales:

 

 

 

 

 

 

 

 

 

Memory Solutions

$

91,629

 

 

$

83,297

 

 

$

109,458

 

 

$

260,594

 

 

$

338,083

 

Intelligent Platform Solutions

 

144,968

 

 

 

141,405

 

 

 

170,854

 

 

 

405,197

 

 

 

604,276

 

LED Solutions

 

63,983

 

 

 

60,119

 

 

 

64,106

 

 

 

193,857

 

 

 

182,233

 

Total net sales

 

300,580

 

 

 

284,821

 

 

 

344,418

 

 

 

859,648

 

 

 

1,124,592

 

Cost of sales

 

211,674

 

 

 

202,887

 

 

 

243,938

 

 

 

605,958

 

 

 

801,006

 

Gross profit

 

88,906

 

 

 

81,934

 

 

 

100,480

 

 

 

253,690

 

 

 

323,586

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

19,681

 

 

 

20,526

 

 

 

20,338

 

 

 

61,596

 

 

 

69,682

 

Selling, general and administrative

 

57,249

 

 

 

61,385

 

 

 

67,914

 

 

 

175,851

 

 

 

195,696

 

Impairment of goodwill

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,558

 

Change in fair value of contingent consideration

 

—

 

 

 

—

 

 

 

14,800

 

 

 

—

 

 

 

24,900

 

Other operating (income) expense

 

465

 

 

 

3,335

 

 

 

(186

)

 

 

6,739

 

 

 

5,366

 

Total operating expenses

 

77,395

 

 

 

85,246

 

 

 

102,866

 

 

 

244,186

 

 

 

313,202

 

Operating income (loss)

 

11,511

 

 

 

(3,312

)

 

 

(2,386

)

 

 

9,504

 

 

 

10,384

 

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

6,167

 

 

 

7,249

 

 

 

9,314

 

 

 

22,975

 

 

 

27,238

 

Other non-operating (income) expense

 

441

 

 

 

248

 

 

 

354

 

 

 

113

 

 

 

12,299

 

Total non-operating (income) expense

 

6,608

 

 

 

7,497

 

 

 

9,668

 

 

 

23,088

 

 

 

39,537

 

Income (loss) before taxes

 

4,903

 

 

 

(10,809

)

 

 

(12,054

)

 

 

(13,584

)

 

 

(29,153

)

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

(1,323

)

 

 

2,198

 

 

 

7,216

 

 

 

4,409

 

 

 

26,687

 

Net income (loss) from continuing operations

 

6,226

 

 

 

(13,007

)

 

 

(19,270

)

 

 

(17,993

)

 

 

(55,840

)

Net income (loss) from discontinued operations

 

—

 

 

 

—

 

 

 

(4,807

)

 

 

(8,148

)

 

 

10,301

 

Net income (loss)

 

6,226

 

 

 

(13,007

)

 

 

(24,077

)

 

 

(26,141

)

 

 

(45,539

)

Net income attributable to noncontrolling interest

 

610

 

 

 

613

 

 

 

378

 

 

 

1,784

 

 

 

1,143

 

Net income (loss) attributable to SGH

$

5,616

 

 

$

(13,620

)

 

$

(24,455

)

 

$

(27,925

)

 

$

(46,682

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

$

0.11

 

 

$

(0.26

)

 

$

(0.40

)

 

$

(0.38

)

 

$

(1.16

)

Discontinued operations

 

—

 

 

 

—

 

 

 

(0.10

)

 

 

(0.15

)

 

 

0.21

 

 

$

0.11

 

 

$

(0.26

)

 

$

(0.50

)

 

$

(0.53

)

 

$

(0.95

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

$

0.10

 

 

$

(0.26

)

 

$

(0.40

)

 

$

(0.38

)

 

$

(1.16

)

Discontinued operations

 

—

 

 

 

—

 

 

 

(0.10

)

 

 

(0.15

)

 

 

0.21

 

 

$

0.10

 

 

$

(0.26

)

 

$

(0.50

)

 

$

(0.53

)

 

$

(0.95

)

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

Basic

 

52,570

 

 

 

52,031

 

 

 

49,380

 

 

 

52,219

 

 

 

49,152

 

Diluted

 

54,283

 

 

 

52,031

 

 

 

49,380

 

 

 

52,219

 

 

 

49,152

 

 

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands, except percentages)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

May 31,

2024

 

March 1,

2024

 

May 26,

2023

 

May 31,

2024

 

May 26,

2023

GAAP gross profit

$

88,906

 

 

$

81,934

 

 

$

100,480

 

 

$

253,690

 

 

$

323,586

 

Share-based compensation expense

 

1,760

 

 

 

1,691

 

 

 

1,595

 

 

 

5,266

 

 

 

4,545

 

Amortization of acquisition-related intangibles

 

5,909

 

 

 

5,894

 

 

 

6,704

 

 

 

17,747

 

 

 

19,785

 

Flow-through of inventory step up

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,599

 

Cost of sales-related restructure

 

387

 

 

 

216

 

 

 

211

 

 

 

1,271

 

 

 

5,763

 

Non-GAAP gross profit

$

96,962

 

 

$

89,735

 

 

$

108,990

 

 

$

277,974

 

 

$

356,278

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

29.6

%

 

 

28.8

%

 

 

29.2

%

 

 

29.5

%

 

 

28.8

%

Effect of adjustments

 

2.7

%

 

 

2.7

%

 

 

2.4

%

 

 

2.8

%

 

 

2.9

%

Non-GAAP gross margin

 

32.3

%

 

 

31.5

%

 

 

31.6

%

 

 

32.3

%

 

 

31.7

%

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

$

77,395

 

 

$

85,246

 

 

$

102,866

 

 

$

244,186

 

 

$

313,202

 

Share-based compensation expense

 

(9,432

)

 

 

(8,948

)

 

 

(8,047

)

 

 

(27,535

)

 

 

(25,109

)

Amortization of acquisition-related intangibles

 

(3,857

)

 

 

(3,857

)

 

 

(4,905

)

 

 

(11,778

)

 

 

(13,497

)

Diligence, acquisition and integration expense

 

(4

)

 

 

(5,885

)

 

 

(8,637

)

 

 

(6,678

)

 

 

(18,193

)

Impairment of goodwill

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(17,558

)

Change in fair value of contingent consideration

 

—

 

 

 

—

 

 

 

(14,800

)

 

 

—

 

 

 

(24,900

)

Restructure charge

 

(465

)

 

 

(3,335

)

 

 

186

 

 

 

(6,739

)

 

 

(5,366

)

Other

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,800

)

Non-GAAP operating expenses

$

63,637

 

 

$

63,221

 

 

$

66,663

 

 

$

191,456

 

 

$

206,779

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

$

11,511

 

 

$

(3,312

)

 

$

(2,386

)

 

$

9,504

 

 

$

10,384

 

Share-based compensation expense

 

11,192

 

 

 

10,639

 

 

 

9,642

 

 

 

32,801

 

 

 

29,654

 

Amortization of acquisition-related intangibles

 

9,766

 

 

 

9,751

 

 

 

11,609

 

 

 

29,525

 

 

 

33,282

 

Flow-through of inventory step up

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,599

 

Cost of sales-related restructure

 

387

 

 

 

216

 

 

 

211

 

 

 

1,271

 

 

 

5,763

 

Diligence, acquisition and integration expense

 

4

 

 

 

5,885

 

 

 

8,637

 

 

 

6,678

 

 

 

18,193

 

Impairment of goodwill

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,558

 

Change in fair value of contingent consideration

 

—

 

 

 

—

 

 

 

14,800

 

 

 

—

 

 

 

24,900

 

Restructure charge

 

465

 

 

 

3,335

 

 

 

(186

)

 

 

6,739

 

 

 

5,366

 

Other

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,800

 

Non-GAAP operating income

$

33,325

 

 

$

26,514

 

 

$

42,327

 

 

$

86,518

 

 

$

149,499

 

 

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

May 31,

2024

 

March 1,

2024

 

May 26,

2023

 

May 31,

2024

 

May 26,

2023

GAAP net income (loss) attributable to SGH

$

5,616

 

 

$

(13,620

)

 

$

(19,648

)

 

$

(19,777

)

 

$

(56,983

)

Share-based compensation expense

 

11,192

 

 

 

10,639

 

 

 

9,642

 

 

 

32,801

 

 

 

29,654

 

Amortization of acquisition-related intangibles

 

9,766

 

 

 

9,751

 

 

 

11,609

 

 

 

29,525

 

 

 

33,282

 

Flow-through of inventory step up

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,599

 

Cost of sales-related restructure

 

387

 

 

 

216

 

 

 

211

 

 

 

1,271

 

 

 

5,763

 

Diligence, acquisition and integration expense

 

4

 

 

 

5,885

 

 

 

8,637

 

 

 

6,678

 

 

 

18,193

 

Impairment of goodwill

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,558

 

Change in fair value of contingent consideration

 

—

 

 

 

—

 

 

 

14,800

 

 

 

—

 

 

 

24,900

 

Restructure charge

 

465

 

 

 

3,335

 

 

 

(186

)

 

 

6,739

 

 

 

5,366

 

Amortization of debt discount and other costs

 

817

 

 

 

968

 

 

 

937

 

 

 

2,827

 

 

 

3,054

 

Loss (gain) on extinguishment or prepayment of debt

 

792

 

 

 

325

 

 

 

—

 

 

 

1,117

 

 

 

15,924

 

Foreign currency (gains) losses

 

606

 

 

 

182

 

 

 

410

 

 

 

242

 

 

 

55

 

Other

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,800

 

Income tax effects

 

(9,424

)

 

 

(3,540

)

 

 

2,319

 

 

 

(14,523

)

 

 

8,110

 

Non-GAAP net income attributable to SGH

$

20,221

 

 

$

14,141

 

 

$

28,731

 

 

$

46,900

 

 

$

109,275

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding - Diluted:

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares outstanding

 

54,283

 

 

 

52,031

 

 

 

49,380

 

 

 

52,219

 

 

 

49,152

 

Adjustment for dilutive securities and capped calls

 

(333

)

 

 

1,043

 

 

 

754

 

 

 

1,216

 

 

 

770

 

Non-GAAP weighted-average shares outstanding

 

53,950

 

 

 

53,074

 

 

 

50,134

 

 

 

53,435

 

 

 

49,922

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations:

 

 

 

 

 

 

 

 

 

GAAP diluted earnings (loss) per share

$

0.10

 

 

$

(0.26

)

 

$

(0.40

)

 

$

(0.38

)

 

$

(1.16

)

Effect of adjustments

 

0.27

 

 

 

0.53

 

 

 

0.97

 

 

 

1.26

 

 

 

3.35

 

Non-GAAP diluted earnings per share

$

0.37

 

 

$

0.27

 

 

$

0.57

 

 

$

0.88

 

 

$

2.19

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to SGH

$

5,616

 

 

$

(13,620

)

 

$

(19,648

)

 

$

(19,777

)

 

$

(56,983

)

Interest expense, net

 

6,167

 

 

 

7,249

 

 

 

9,314

 

 

 

22,975

 

 

 

27,238

 

Income tax provision (benefit)

 

(1,323

)

 

 

2,198

 

 

 

7,216

 

 

 

4,409

 

 

 

26,687

 

Depreciation expense and amortization of intangible assets

 

15,525

 

 

 

17,156

 

 

 

18,554

 

 

 

50,335

 

 

 

52,802

 

Share-based compensation expense

 

11,192

 

 

 

10,639

 

 

 

9,642

 

 

 

32,801

 

 

 

29,654

 

Flow-through of inventory step up

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,599

 

Cost of sales-related restructure

 

387

 

 

 

216

 

 

 

211

 

 

 

1,271

 

 

 

5,763

 

Diligence, acquisition and integration expense

 

4

 

 

 

5,885

 

 

 

8,637

 

 

 

6,678

 

 

 

18,193

 

Impairment of goodwill

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,558

 

Change in fair value of contingent consideration

 

—

 

 

 

—

 

 

 

14,800

 

 

 

—

 

 

 

24,900

 

Restructure charge

 

465

 

 

 

3,335

 

 

 

(186

)

 

 

6,739

 

 

 

5,366

 

Loss on extinguishment of debt

 

792

 

 

 

325

 

 

 

—

 

 

 

1,117

 

 

 

15,924

 

Other

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,800

 

Adjusted EBITDA

$

38,825

 

 

$

33,383

 

 

$

48,540

 

 

$

106,548

 

 

$

171,501

 

 

SMART Global Holdings, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

As of

May 31,

2024

 

August 25,

2023

Assets

 

 

 

Cash and cash equivalents

$

453,791

 

 

$

365,563

 

Short-term investments

 

13,746

 

 

 

25,251

 

Accounts receivable, net

 

211,842

 

 

 

219,247

 

Inventories

 

177,299

 

 

 

174,977

 

Other current assets

 

85,649

 

 

 

51,790

 

Current assets of discontinued operations

 

—

 

 

 

70,574

 

Total current assets

 

942,327

 

 

 

907,402

 

Property and equipment, net

 

107,646

 

 

 

118,734

 

Operating lease right-of-use assets

 

61,729

 

 

 

68,444

 

Intangible assets, net

 

131,380

 

 

 

160,185

 

Goodwill

 

161,958

 

 

 

161,958

 

Deferred tax assets

 

77,903

 

 

 

74,085

 

Other noncurrent assets

 

63,190

 

 

 

15,150

 

Total assets

$

1,546,133

 

 

$

1,505,958

 

 

 

 

 

Liabilities and Equity

 

 

 

Accounts payable and accrued expenses

$

230,646

 

 

$

182,035

 

Current debt

 

—

 

 

 

35,618

 

Deferred revenue

 

88,719

 

 

 

48,096

 

Other current liabilities

 

31,777

 

 

 

32,731

 

Acquisition-related contingent consideration

 

—

 

 

 

50,000

 

Current liabilities of discontinued operations

 

—

 

 

 

77,770

 

Total current liabilities

 

351,142

 

 

 

426,250

 

Long-term debt

 

667,042

 

 

 

754,820

 

Noncurrent operating lease liabilities

 

62,054

 

 

 

66,407

 

Other noncurrent liabilities

 

35,374

 

 

 

29,248

 

Total liabilities

 

1,115,612

 

 

 

1,276,725

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

SMART Global Holdings shareholders’ equity:

 

 

 

Ordinary shares

 

1,790

 

 

 

1,726

 

Additional paid-in capital

 

517,548

 

 

 

476,703

 

Retained earnings

 

54,532

 

 

 

82,457

 

Treasury shares

 

(150,438

)

 

 

(132,447

)

Accumulated other comprehensive income (loss)

 

17

 

 

 

(205,964

)

Total SGH shareholders’ equity

 

423,449

 

 

 

222,475

 

Noncontrolling interest in subsidiary

 

7,072

 

 

 

6,758

 

Total equity

 

430,521

 

 

 

229,233

 

Total liabilities and equity

$

1,546,133

 

 

$

1,505,958

 

 

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

May 31,

2024

 

March 1,

2024

 

May 26,

2023

 

May 31,

2024

 

May 26,

2023

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net income (loss)

$

6,226

 

 

$

(13,007

)

 

$

(24,077

)

 

$

(26,141

)

 

$

(45,539

)

Net income (loss) from discontinued operations

 

—

 

 

 

—

 

 

 

(4,807

)

 

 

(8,148

)

 

 

10,301

 

Net income (loss) from continuing operations

 

6,226

 

 

 

(13,007

)

 

 

(19,270

)

 

 

(17,993

)

 

 

(55,840

)

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

 

 

 

 

 

 

 

 

 

Depreciation expense and amortization of intangible assets

 

15,525

 

 

 

17,156

 

 

 

18,554

 

 

 

50,335

 

 

 

52,802

 

Amortization of debt discount and issuance costs

 

817

 

 

 

968

 

 

 

937

 

 

 

2,827

 

 

 

3,054

 

Share-based compensation expense

 

11,192

 

 

 

10,639

 

 

 

9,642

 

 

 

32,801

 

 

 

29,654

 

Impairment of goodwill

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,558

 

Change in fair value of contingent consideration

 

—

 

 

 

—

 

 

 

14,800

 

 

 

—

 

 

 

24,900

 

(Gain) loss on extinguishment or prepayment of debt

 

792

 

 

 

325

 

 

 

—

 

 

 

1,117

 

 

 

15,924

 

Deferred income taxes, net

 

(3,840

)

 

 

476

 

 

 

(5

)

 

 

(3,646

)

 

 

1,625

 

Other

 

(3,228

)

 

 

(208

)

 

 

(809

)

 

 

(2,772

)

 

 

3,307

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(42,124

)

 

 

872

 

 

 

(12,525

)

 

 

7,406

 

 

 

159,508

 

Inventories

 

(4,535

)

 

 

35,678

 

 

 

56,413

 

 

 

(2,321

)

 

 

66,653

 

Other assets

 

15,424

 

 

 

(23,229

)

 

 

16,950

 

 

 

(5,703

)

 

 

7,057

 

Accounts payable and accrued expenses and other liabilities

 

83,632

 

 

 

(22,587

)

 

 

(51,612

)

 

 

84,626

 

 

 

(226,357

)

Payment of acquisition-related contingent consideration

 

—

 

 

 

(29,000

)

 

 

—

 

 

 

(29,000

)

 

 

(73,724

)

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

 

79,881

 

 

 

(21,917

)

 

 

33,075

 

 

 

117,677

 

 

 

26,121

 

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

 

(101

)

 

 

—

 

 

 

7,963

 

 

 

(28,336

)

 

 

41,467

 

Net cash provided by (used for) operating activities

 

79,780

 

 

 

(21,917

)

 

 

41,038

 

 

 

89,341

 

 

 

67,588

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Capital expenditures and deposits on equipment

 

(3,777

)

 

 

(5,204

)

 

 

(11,984

)

 

 

(13,629

)

 

 

(31,674

)

Acquisition of business, net of cash acquired

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(213,073

)

Proceeds from maturities of investment securities

 

9,915

 

 

 

12,290

 

 

 

—

 

 

 

31,870

 

 

 

—

 

Purchases of held-to-maturity investment securities

 

(1,000

)

 

 

(11,034

)

 

 

—

 

 

 

(20,503

)

 

 

—

 

Other

 

(518

)

 

 

(558

)

 

 

431

 

 

 

(1,264

)

 

 

670

 

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

 

4,620

 

 

 

(4,506

)

 

 

(11,553

)

 

 

(3,526

)

 

 

(244,077

)

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

 

451

 

 

 

—

 

 

 

(1,273

)

 

 

119,389

 

 

 

(5,745

)

Net cash provided by (used for) investing activities

$

5,071

 

 

$

(4,506

)

 

$

(12,826

)

 

$

115,863

 

 

$

(249,822

)

 

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows, Continued

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

May 31,

2024

 

March 1,

2024

 

May 26,

2023

 

May 31,

2024

 

May 26,

2023

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Repayments of debt

$

(75,000

)

 

$

(37,211

)

 

$

(7,211

)

 

$

(126,634

)

 

$

(14,422

)

Payment of acquisition-related contingent consideration

 

—

 

 

 

(21,000

)

 

 

—

 

 

 

(21,000

)

 

 

(28,100

)

Payments to acquire ordinary shares

 

(2,129

)

 

 

(2,732

)

 

 

(660

)

 

 

(17,991

)

 

 

(16,883

)

Distribution to noncontrolling interest

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,470

)

 

 

(2,009

)

Proceeds from issuance of ordinary shares

 

3,817

 

 

 

792

 

 

 

4,180

 

 

 

8,064

 

 

 

8,430

 

Proceeds from debt

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

295,287

 

Payment of premium in connection with convertible note exchange

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(14,141

)

Net cash paid for settlement and purchase of Capped Calls

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,304

)

Other

 

(1

)

 

 

(1

)

 

 

(688

)

 

 

(584

)

 

 

(5,765

)

Net cash used for financing activities from continuing operations

 

(73,313

)

 

 

(60,152

)

 

 

(4,379

)

 

 

(159,615

)

 

 

218,093

 

Net cash used for financing activities from discontinued operations

 

—

 

 

 

—

 

 

 

(255

)

 

 

(606

)

 

 

(379

)

Net cash provided by (used for) financing activities

 

(73,313

)

 

 

(60,152

)

 

 

(4,634

)

 

 

(160,221

)

 

 

217,714

 

 

 

 

 

 

 

 

 

 

 

Effect of changes in currency exchange rates

 

(76

)

 

 

(155

)

 

 

813

 

 

 

(1,256

)

 

 

2,730

 

Net increase (decrease) in cash and cash equivalents

 

11,462

 

 

 

(86,730

)

 

 

24,391

 

 

 

43,727

 

 

 

38,210

 

Cash and cash equivalents at beginning of period

 

442,329

 

 

 

529,059

 

 

 

376,884

 

 

 

410,064

 

 

 

363,065

 

Cash and cash equivalents at end of period

$

453,791

 

 

$

442,329

 

 

$

401,275

 

 

$

453,791

 

 

$

401,275

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240709861465/en/

Investor Contact Suzanne Schmidt Investor Relations +1-510-360-8596 ir@sghcorp.com

PR Contact Maureen O’Leary Director Communications +1-602-330-6846 pr@sghcorp.com