Financial News

SGH Reports Fourth Quarter and Full Year Fiscal 2023 Financial Results

Record GAAP and Non-GAAP Gross Margins for FY2023

SMART Global Holdings, Inc. (“SGH” or the “Company”) (NASDAQ: SGH) today reported financial results for the fourth quarter and full year fiscal 2023.

On June 13, 2023, we entered into an agreement to sell an 81% interest in our SMART Brazil operations. The transaction is expected to close at the end of calendar 2023 or early 2024, subject to required regulatory approvals and satisfaction of customary closing conditions. Accordingly, our SMART Brazil operations are classified as discontinued operations in the accompanying financial statements for all periods presented.

The following discussion relates to our continuing operations, which exclude SMART Brazil.

Fiscal 2023 Highlights for Continuing Operations

  • Net sales of $1.44 billion, up 3.3% versus fiscal year 2022
  • Record GAAP gross margin of 28.8%, up 80 basis points versus fiscal year 2022
  • Record Non-GAAP gross margin of 31.7%, up 250 basis points versus fiscal year 2022
  • GAAP EPS of $0.15 versus $0.41 in fiscal year 2022
  • Non-GAAP EPS of $2.52 versus $2.65 in fiscal year 2022

Fourth Quarter Fiscal 2023 Highlights for Continuing Operations

  • Net sales of $316.7 million, down 12.6% versus the year-ago quarter
  • GAAP gross margin of 28.9%, up 290 basis points versus the year-ago quarter
  • Non-GAAP gross margin of 31.7%, up 460 basis points versus the year-ago quarter
  • GAAP EPS of $1.17 versus $0.18 in the year-ago quarter
  • Non-GAAP EPS of $0.35 versus $0.63 in the year-ago quarter

“Throughout fiscal 2023 the team has made significant progress in our transformational journey towards becoming an enterprise solutions company focused on higher quality revenue and improving gross margins. In the fourth quarter, in what remains a challenging global economic environment, non-GAAP gross margin increased to 31.7%, an improvement of 460 basis points from the same period last year, and non-GAAP earnings were $0.35 per share. In addition, we exited the fourth quarter with a strong balance sheet, including cash, cash equivalents and short term investments of $391 million,” commented the Company’s CEO Mark Adams.

Annual Financial Results of Continuing Operations

 

 

GAAP (1)

 

Non-GAAP (2)

(in thousands, except per share amounts)

FY23

 

FY22

 

FY21

 

FY23

 

FY22

 

FY21

Net sales:

 

 

 

 

 

 

 

 

 

 

 

Memory Solutions

$

443,264

 

$

551,705

 

$

486,205

 

 

$

443,264

 

$

551,705

 

$

486,205

Intelligent Platform Solutions

 

749,708

 

 

440,986

 

 

344,757

 

 

 

749,708

 

 

440,986

 

 

344,757

LED Solutions

 

248,278

 

 

403,185

 

 

224,567

 

 

 

248,278

 

 

403,185

 

 

224,567

Total net sales

$

1,441,250

 

$

1,395,876

 

$

1,055,529

 

 

$

1,441,250

 

$

1,395,876

 

$

1,055,529

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

415,171

 

$

391,045

 

$

237,973

 

 

$

456,578

 

$

408,082

 

$

257,162

Operating income (loss)

 

8,745

 

 

67,176

 

 

(15,706

)

 

 

179,794

 

 

177,461

 

 

83,484

Net income (loss) attributable to SGH

 

7,858

 

 

22,372

 

 

(43,150

)

 

 

127,681

 

 

139,287

 

 

62,122

Diluted earnings (loss) per share

$

0.15

 

$

0.41

 

$

(0.89

)

 

$

2.52

 

$

2.65

 

$

1.23

Quarterly Financial Results of Continuing Operations

 

 

GAAP (1)

 

Non-GAAP (2)

(in thousands, except per share amounts)

Q4 FY23

 

Q3 FY23

 

Q4 FY22

 

Q4 FY23

 

Q3 FY23

 

Q4 FY22

Net sales:

 

 

 

 

 

 

 

 

 

 

 

Memory Solutions

$

105,181

 

 

$

109,458

 

 

$

134,611

 

$

105,181

 

$

109,458

 

$

134,611

Intelligent Platform Solutions

 

145,432

 

 

 

170,854

 

 

 

144,730

 

 

145,432

 

 

170,854

 

 

144,730

LED Solutions

 

66,045

 

 

 

64,106

 

 

 

83,118

 

 

66,045

 

 

64,106

 

 

83,118

Total net sales

$

316,658

 

 

$

344,418

 

 

$

362,459

 

$

316,658

 

$

344,418

 

$

362,459

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

91,585

 

 

$

100,480

 

 

$

94,420

 

$

100,300

 

$

108,990

 

$

98,356

Operating income (loss)

 

(1,639

)

 

 

(2,386

)

 

 

23,060

 

 

30,295

 

 

42,327

 

 

41,866

Net income (loss) attributable to SGH

 

64,841

 

 

 

(19,648

)

 

 

8,862

 

 

18,406

 

 

28,731

 

 

31,610

Diluted earnings (loss) per share

$

1.17

 

 

$

(0.40

)

 

$

0.18

 

$

0.35

 

$

0.57

 

$

0.63

(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 October 12, 2023, SGH is providing the following financial outlook for its continuing operations for the first quarter of fiscal 2024:

 

GAAP

Outlook

Adjustments

Non-GAAP

Outlook

Net sales

$275 million +/- $25 million

$275 million +/- $25 million

Gross margin

28.5% +/- 1%

3%

(A)

31.5% +/- 1%

Operating expenses

$82 million +/- $1 million

($15) million

(B)(C)

$67 million +/- $1 million

Diluted earnings (loss) per share

$(0.16) +/- $0.15

$0.31

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

$0.15 +/- $0.15

Diluted shares

55.6 million

(1.6) million

54 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 included in operating expenses

 

2

 

(D) Estimated income tax effects

 

(6

)

 

$

17

 

Fourth Quarter Fiscal 2023 Earnings Conference Call and Webcast Details

SGH will hold a conference call and webcast to discuss the fourth quarter and full year fiscal 2023 results and related matters today, October 12, 2023, 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 759938. 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; statements regarding the extent and timing or and expectations regarding SGH’s future revenues and expenses and customer demand; statements regarding sale of the Company’s SMART Brazil operations and expected closing timeline; 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, issues, delays or complications in integrating the operations of Stratus Technologies; global business and economic conditions and growth trends in technology industries, SGH’s customer markets and various geographic regions; uncertainties in the geopolitical environment; the unpredictable nature of the COVID-19 pandemic; disruptions in SGH’s operations or supply chain as a result of the downstream effects of the COVID-19 pandemic or otherwise; the ability to manage SGH’s cost structure, including SGH’s success in implementing restructuring or other plans intended to improve SGH’s operating efficiency; workforce reductions; uncertainties in the global macro-economic environment; changes in demand for SGH’s segments; changes in trade regulations or adverse developments in international trade relations and agreements; changes in currency exchange rates; availability of our cash and cash equivalents; overall information technology spending; appropriations for government spending; the success of SGH’s strategic initiatives including additional investments in new products and additional capacity; acquisitions of companies or technologies, the failure to successfully integrate and operate them or customers’ negative reactions to them, including any resulting impairment of goodwill or gain (loss) on extinguishment of debt; the proposed divestiture of SMART Brazil, the failure to execute on the separation and transition of SMART Brazil and its business, the failure to satisfy all conditions to complete the proposed divestiture within the expected timeframe, and the failure to achieve the intended benefits of the sale of SMART Brazil and its business; 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; 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 memory market in Brazil or in the LED market; reduction in, or termination of, incentives for local manufacturing in Brazil; changes to applicable tax regimes or rates; reversal of the valuation allowance for a significant portion of our deferred tax assets, including any potential inability to realize these assets in the future; prices for the end products of SGH’s customers; strikes or labor disputes; deterioration in or loss of relations with any of SGH’s 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, acquisition-related expenses, restructure charges and integration expenses, 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, acquisition-related expenses, restructure charges and integration expenses, impairment of goodwill, changes in the fair value of contingent consideration, gain (loss) on extinguishment of debt and other infrequent or unusual items.

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 and develop 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

 

Year Ended

 

August 25,

2023

 

May 26,

2023

 

August 26,

2022

 

August 25,

2023

 

August 26,

2022

 

August 27,

2021

Net sales:

 

 

 

 

 

 

 

 

 

 

 

Memory Solutions

$

105,181

 

 

$

109,458

 

 

$

134,611

 

 

$

443,264

 

 

$

551,705

 

$

486,205

 

Intelligent Platform Solutions

 

145,432

 

 

 

170,854

 

 

 

144,730

 

 

 

749,708

 

 

 

440,986

 

 

344,757

 

LED Solutions

 

66,045

 

 

 

64,106

 

 

 

83,118

 

 

 

248,278

 

 

 

403,185

 

 

224,567

 

Total net sales

 

316,658

 

 

 

344,418

 

 

 

362,459

 

 

 

1,441,250

 

 

 

1,395,876

 

 

1,055,529

 

Cost of sales

 

225,073

 

 

 

243,938

 

 

 

268,039

 

 

 

1,026,079

 

 

 

1,004,831

 

 

817,556

 

Gross profit

 

91,585

 

 

 

100,480

 

 

 

94,420

 

 

 

415,171

 

 

 

391,045

 

 

237,973

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

20,883

 

 

 

20,338

 

 

 

19,160

 

 

 

90,565

 

 

 

77,472

 

 

59,933

 

Selling, general and administrative

 

65,026

 

 

 

67,914

 

 

 

52,215

 

 

 

260,722

 

 

 

204,839

 

 

158,174

 

Impairment of goodwill

 

1,534

 

 

 

 

 

 

 

 

 

19,092

 

 

 

 

 

 

Change in fair value of contingent consideration

 

4,100

 

 

 

14,800

 

 

 

 

 

 

29,000

 

 

 

41,324

 

 

32,400

 

Other operating (income) expense

 

1,681

 

 

 

(186

)

 

 

(15

)

 

 

7,047

 

 

 

234

 

 

3,172

 

Total operating expenses

 

93,224

 

 

 

102,866

 

 

 

71,360

 

 

 

406,426

 

 

 

323,869

 

 

253,679

 

Operating income (loss)

 

(1,639

)

 

 

(2,386

)

 

 

23,060

 

 

 

8,745

 

 

 

67,176

 

 

(15,706

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

9,183

 

 

 

9,314

 

 

 

7,485

 

 

 

36,421

 

 

 

24,345

 

 

17,141

 

Other non-operating (income) expense

 

(462

)

 

 

354

 

 

 

170

 

 

 

11,837

 

 

 

350

 

 

(582

)

Total non-operating (income) expense

 

8,721

 

 

 

9,668

 

 

 

7,655

 

 

 

48,258

 

 

 

24,695

 

 

16,559

 

Income (loss) before taxes

 

(10,360

)

 

 

(12,054

)

 

 

15,405

 

 

 

(39,513

)

 

 

42,481

 

 

(32,265

)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

(75,890

)

 

 

7,216

 

 

 

6,075

 

 

 

(49,203

)

 

 

18,074

 

 

9,689

 

Net income (loss) from continuing operations

 

65,530

 

 

 

(19,270

)

 

 

9,330

 

 

 

9,690

 

 

 

24,407

 

 

(41,954

)

Net income (loss) from discontinued operations, net of tax

 

(205,685

)

 

 

(4,807

)

 

 

11,097

 

 

 

(195,384

)

 

 

44,185

 

 

64,460

 

Net income (loss)

 

(140,155

)

 

 

(24,077

)

 

 

20,427

 

 

 

(185,694

)

 

 

68,592

 

 

22,506

 

Net income attributable to noncontrolling interest

 

689

 

 

 

378

 

 

 

468

 

 

 

1,832

 

 

 

2,035

 

 

1,196

 

Net income (loss) attributable to SGH

$

(140,844

)

 

$

(24,455

)

 

$

19,959

 

 

$

(187,526

)

 

$

66,557

 

$

21,310

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

$

1.28

 

 

$

(0.40

)

 

$

0.18

 

 

$

0.16

 

 

$

0.45

 

$

(0.89

)

Discontinued operations

 

(4.05

)

 

 

(0.10

)

 

 

0.23

 

 

 

(3.94

)

 

 

0.90

 

 

1.33

 

 

$

(2.77

)

 

$

(0.50

)

 

$

0.41

 

 

$

(3.78

)

 

$

1.35

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

$

1.17

 

 

$

(0.40

)

 

$

0.18

 

 

$

0.15

 

 

$

0.41

 

$

(0.89

)

Discontinued operations

 

(3.71

)

 

 

(0.10

)

 

 

0.22

 

 

 

(3.80

)

 

 

0.81

 

 

1.33

 

 

$

(2.54

)

 

$

(0.50

)

 

$

0.40

 

 

$

(3.65

)

 

$

1.22

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

50,807

 

 

 

49,380

 

 

 

49,238

 

 

 

49,566

 

 

 

49,467

 

 

48,558

 

Diluted

 

55,523

 

 

 

49,380

 

 

 

50,504

 

 

 

51,322

 

 

 

54,443

 

 

48,558

 

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Year Ended

 

August 25,

2023

 

May 26,

2023

 

August 26,

2022

 

August 25,

2023

 

August 26,

2022

 

August 27,

2021

GAAP gross profit

$

91,585

 

 

$

100,480

 

 

$

94,420

 

 

$

415,171

 

 

$

391,045

 

 

$

237,973

 

Share-based compensation expense

 

1,789

 

 

 

1,595

 

 

 

1,569

 

 

 

6,334

 

 

 

6,296

 

 

 

3,871

 

Amortization of acquisition-related intangibles

 

5,876

 

 

 

6,704

 

 

 

2,367

 

 

 

25,661

 

 

 

10,741

 

 

 

8,228

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

 

 

7,090

 

Cost of sales-related restructure

 

1,050

 

 

 

211

 

 

 

 

 

 

6,813

 

 

 

 

 

 

 

Non-GAAP gross profit

$

100,300

 

 

$

108,990

 

 

$

98,356

 

 

$

456,578

 

 

$

408,082

 

 

$

257,162

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

28.9

%

 

 

29.2

%

 

 

26.0

%

 

 

28.8

%

 

 

28.0

%

 

 

22.5

%

Effect of adjustments

 

2.8

%

 

 

2.4

%

 

 

1.1

%

 

 

2.9

%

 

 

1.2

%

 

 

1.9

%

Non-GAAP gross margin

 

31.7

%

 

 

31.6

%

 

 

27.1

%

 

 

31.7

%

 

 

29.2

%

 

 

24.4

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

$

93,224

 

 

$

102,866

 

 

$

71,360

 

 

$

406,426

 

 

$

323,869

 

 

$

253,679

 

Share-based compensation expense

 

(7,785

)

 

 

(8,047

)

 

 

(7,890

)

 

 

(32,894

)

 

 

(30,988

)

 

 

(27,090

)

Amortization of acquisition-related intangibles

 

(5,443

)

 

 

(4,905

)

 

 

(3,247

)

 

 

(18,940

)

 

 

(12,988

)

 

 

(12,027

)

Acquisition and integration expenses

 

(2,676

)

 

 

(8,637

)

 

 

(3,620

)

 

 

(20,869

)

 

 

(7,090

)

 

 

(5,314

)

Impairment of goodwill

 

(1,534

)

 

 

 

 

 

 

 

 

(19,092

)

 

 

 

 

 

 

Change in fair value of contingent consideration

 

(4,100

)

 

 

(14,800

)

 

 

 

 

 

(29,000

)

 

 

(41,324

)

 

 

(32,400

)

Restructure charge

 

(1,681

)

 

 

186

 

 

 

15

 

 

 

(7,047

)

 

 

(234

)

 

 

(3,172

)

Other

 

 

 

 

 

 

 

(128

)

 

 

(1,800

)

 

 

(624

)

 

 

2

 

Non-GAAP operating expenses

$

70,005

 

 

$

66,663

 

 

$

56,490

 

 

$

276,784

 

 

$

230,621

 

 

$

173,678

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

$

(1,639

)

 

$

(2,386

)

 

$

23,060

 

 

$

8,745

 

 

$

67,176

 

 

$

(15,706

)

Share-based compensation expense

 

9,574

 

 

 

9,642

 

 

 

9,459

 

 

 

39,228

 

 

 

37,284

 

 

 

30,961

 

Amortization of acquisition-related intangibles

 

11,319

 

 

 

11,609

 

 

 

5,614

 

 

 

44,601

 

 

 

23,729

 

 

 

20,255

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

 

 

7,090

 

Cost of sales-related restructure

 

1,050

 

 

 

211

 

 

 

 

 

 

6,813

 

 

 

 

 

 

 

Acquisition and integration expenses

 

2,676

 

 

 

8,637

 

 

 

3,620

 

 

 

20,869

 

 

 

7,090

 

 

 

5,314

 

Impairment of goodwill

 

1,534

 

 

 

 

 

 

 

 

 

19,092

 

 

 

 

 

 

 

Change in fair value of contingent consideration

 

4,100

 

 

 

14,800

 

 

 

 

 

 

29,000

 

 

 

41,324

 

 

 

32,400

 

Restructure charge

 

1,681

 

 

 

(186

)

 

 

(15

)

 

 

7,047

 

 

 

234

 

 

 

3,172

 

Other

 

 

 

 

 

 

 

128

 

 

 

1,800

 

 

 

624

 

 

 

(2

)

Non-GAAP operating income

$

30,295

 

 

$

42,327

 

 

$

41,866

 

 

$

179,794

 

 

$

177,461

 

 

$

83,484

 

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Year Ended

 

August 25,

2023

 

May 26,

2023

 

August 26,

2022

 

August 25,

2023

 

August 26,

2022

 

August 27,

2021

GAAP net income (loss) attributable to SGH

$

64,841

 

 

$

(19,648

)

 

$

8,862

 

 

$

7,858

 

 

$

22,372

 

 

$

(43,150

)

Share-based compensation expense

 

9,574

 

 

 

9,642

 

 

 

9,459

 

 

 

39,228

 

 

 

37,284

 

 

 

30,961

 

Amortization of acquisition-related intangibles

 

11,319

 

 

 

11,609

 

 

 

5,614

 

 

 

44,601

 

 

 

23,729

 

 

 

20,255

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

 

 

7,090

 

Cost of sales-related restructure

 

1,050

 

 

 

211

 

 

 

 

 

 

6,813

 

 

 

 

 

 

 

Acquisition and integration expenses

 

2,676

 

 

 

8,637

 

 

 

3,620

 

 

 

20,869

 

 

 

7,090

 

 

 

5,314

 

Impairment of goodwill

 

1,534

 

 

 

 

 

 

 

 

 

19,092

 

 

 

 

 

 

 

Change in fair value of contingent consideration

 

4,100

 

 

 

14,800

 

 

 

 

 

 

29,000

 

 

 

41,324

 

 

 

32,400

 

Restructure charge

 

1,681

 

 

 

(186

)

 

 

(15

)

 

 

7,047

 

 

 

234

 

 

 

3,172

 

Amortization of debt discount and other costs

 

1,010

 

 

 

937

 

 

 

2,788

 

 

 

4,064

 

 

 

9,999

 

 

 

8,419

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

15,924

 

 

 

653

 

 

 

 

Foreign currency (gains) losses

 

(276

)

 

 

410

 

 

 

97

 

 

 

(221

)

 

 

9

 

 

 

389

 

Other

 

 

 

 

 

 

 

128

 

 

 

1,800

 

 

 

624

 

 

 

(1,004

)

Income tax effects

 

(79,103

)

 

 

2,319

 

 

 

1,057

 

 

 

(70,993

)

 

 

(4,031

)

 

 

(1,724

)

Non-GAAP net income attributable to SGH

$

18,406

 

 

$

28,731

 

 

$

31,610

 

 

$

127,681

 

 

$

139,287

 

 

$

62,122

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding - Diluted:

 

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares outstanding

 

55,523

 

 

 

49,380

 

 

 

50,504

 

 

 

51,322

 

 

 

54,443

 

 

 

48,558

 

Adjustment for dilutive securities and capped calls

 

(2,233

)

 

 

754

 

 

 

 

 

 

(558

)

 

 

(1,851

)

 

 

2,129

 

Non-GAAP weighted-average shares outstanding

 

53,290

 

 

 

50,134

 

 

 

50,504

 

 

 

50,764

 

 

 

52,592

 

 

 

50,687

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted earnings (loss) per share

$

1.17

 

 

$

(0.40

)

 

$

0.18

 

 

$

0.15

 

 

$

0.41

 

 

$

(0.89

)

Effect of adjustments

 

(0.82

)

 

 

0.97

 

 

 

0.45

 

 

 

2.37

 

 

 

2.24

 

 

 

2.12

 

Non-GAAP diluted earnings per share

$

0.35

 

 

$

0.57

 

 

$

0.63

 

 

$

2.52

 

 

$

2.65

 

 

$

1.23

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to SGH

$

64,841

 

 

$

(19,648

)

 

$

8,862

 

 

$

7,858

 

 

$

22,372

 

 

$

(43,150

)

Interest expense, net

 

9,183

 

 

 

9,314

 

 

 

7,485

 

 

 

36,421

 

 

 

24,345

 

 

 

17,141

 

Income tax provision (benefit)

 

(75,890

)

 

 

7,216

 

 

 

6,075

 

 

 

(49,203

)

 

 

18,074

 

 

 

9,689

 

Depreciation expense and amortization of intangible assets

 

18,830

 

 

 

18,554

 

 

 

11,646

 

 

 

71,632

 

 

 

46,665

 

 

 

34,937

 

Share-based compensation expense

 

9,574

 

 

 

9,642

 

 

 

9,459

 

 

 

39,228

 

 

 

37,284

 

 

 

30,961

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

 

 

7,090

 

Cost of sales-related restructure

 

1,050

 

 

 

211

 

 

 

 

 

 

6,813

 

 

 

 

 

 

 

Acquisition and integration expenses

 

2,676

 

 

 

8,637

 

 

 

3,620

 

 

 

20,869

 

 

 

7,090

 

 

 

5,314

 

Impairment of goodwill

 

1,534

 

 

 

 

 

 

 

 

 

19,092

 

 

 

 

 

 

 

Change in fair value of contingent consideration

 

4,100

 

 

 

14,800

 

 

 

 

 

 

29,000

 

 

 

41,324

 

 

 

32,400

 

Restructure charge

 

1,681

 

 

 

(186

)

 

 

(15

)

 

 

7,047

 

 

 

234

 

 

 

3,172

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

15,924

 

 

 

653

 

 

 

 

Other

 

 

 

 

 

 

 

128

 

 

 

1,800

 

 

 

624

 

 

 

(1,004

)

Adjusted EBITDA

$

37,579

 

 

$

48,540

 

 

$

47,260

 

 

$

209,080

 

 

$

198,665

 

 

$

96,550

 

SMART Global Holdings, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

As of

August 25,

2023

 

August 26,

2022

Assets

 

 

 

Cash and cash equivalents

$

365,563

 

 

$

313,328

 

Short-term investments

 

25,251

 

 

 

 

Accounts receivable, net

 

219,247

 

 

 

355,002

 

Inventories

 

174,977

 

 

 

263,768

 

Other current assets

 

51,790

 

 

 

33,486

 

Current assets from discontinued operations

 

70,574

 

 

 

186,281

 

Total current assets

 

907,402

 

 

 

1,151,865

 

Property and equipment, net

 

118,734

 

 

 

96,708

 

Operating lease right-of-use assets

 

68,444

 

 

 

71,823

 

Intangible assets, net

 

160,185

 

 

 

77,812

 

Goodwill

 

161,958

 

 

 

55,121

 

Deferred tax assets

 

74,085

 

 

 

4,576

 

Other noncurrent assets

 

15,150

 

 

 

15,014

 

Noncurrent assets from discontinued operations

 

 

 

 

99,145

 

Total assets

$

1,505,958

 

 

$

1,572,064

 

 

 

 

 

Liabilities and Equity

 

 

 

Accounts payable and accrued expenses

$

182,035

 

 

$

354,098

 

Current debt

 

35,618

 

 

 

8,469

 

Deferred revenue

 

48,096

 

 

 

30,780

 

Other current liabilities

 

32,731

 

 

 

57,880

 

Acquisition-related contingent consideration

 

50,000

 

 

 

 

Current liabilities from discontinued operations

 

77,770

 

 

 

64,313

 

Total current liabilities

 

426,250

 

 

 

515,540

 

Long-term debt

 

754,820

 

 

 

575,682

 

Noncurrent operating lease liabilities

 

66,407

 

 

 

66,990

 

Other noncurrent liabilities

 

29,248

 

 

 

14,835

 

Noncurrent liabilities from discontinued operations

 

 

 

 

20,471

 

Total liabilities

 

1,276,725

 

 

 

1,193,518

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

SMART Global Holdings shareholders’ equity:

 

 

 

Ordinary shares

 

1,726

 

 

 

1,586

 

Additional paid-in capital

 

476,703

 

 

 

448,112

 

Retained earnings

 

82,457

 

 

 

251,344

 

Treasury shares

 

(132,447

)

 

 

(107,776

)

Accumulated other comprehensive income (loss)

 

(205,964

)

 

 

(221,655

)

Total SGH shareholders’ equity

 

222,475

 

 

 

371,611

 

Noncontrolling interest in subsidiary

 

6,758

 

 

 

6,935

 

Total equity

 

229,233

 

 

 

378,546

 

Total liabilities and equity

$

1,505,958

 

 

$

1,572,064

 

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Year Ended

 

August 25,

2023

 

May 26,

2023

 

August 26,

2022

 

August 25,

2023

 

August 26,

2022

 

August 27,

2021

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(140,155

)

 

$

(24,077

)

 

$

20,427

 

 

$

(185,694

)

 

$

68,592

 

 

$

22,506

 

Net income (loss) from discontinued operations

 

(205,685

)

 

 

(4,807

)

 

 

11,097

 

 

 

(195,384

)

 

 

44,185

 

 

 

64,460

 

Net income (loss) from continuing operations

 

65,530

 

 

 

(19,270

)

 

 

9,330

 

 

 

9,690

 

 

 

24,407

 

 

 

(41,954

)

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense and amortization of intangible assets

 

18,830

 

 

 

18,554

 

 

 

11,646

 

 

 

71,632

 

 

 

46,665

 

 

 

34,937

 

Amortization of debt discount and issuance costs

 

1,010

 

 

 

937

 

 

 

2,787

 

 

 

4,064

 

 

 

10,263

 

 

 

8,798

 

Share-based compensation expense

 

9,574

 

 

 

9,642

 

 

 

9,459

 

 

 

39,228

 

 

 

37,284

 

 

 

30,961

 

Impairment of goodwill

 

1,534

 

 

 

 

 

 

 

 

 

19,092

 

 

 

 

 

 

 

Change in fair value of contingent consideration

 

4,100

 

 

 

14,800

 

 

 

 

 

 

29,000

 

 

 

41,324

 

 

 

32,400

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

15,924

 

 

 

653

 

 

 

 

Deferred income taxes, net

 

(65,228

)

 

 

(5

)

 

 

(9

)

 

 

(63,603

)

 

 

(20

)

 

 

(1,982

)

Other

 

701

 

 

 

(809

)

 

 

51

 

 

 

4,008

 

 

 

582

 

 

 

(598

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

3,007

 

 

 

(12,525

)

 

 

(59,249

)

 

 

162,515

 

 

 

(97,801

)

 

 

(47,773

)

Inventories

 

28,564

 

 

 

56,413

 

 

 

55,411

 

 

 

95,217

 

 

 

30,733

 

 

 

(99,906

)

Other assets

 

(290

)

 

 

16,950

 

 

 

(5,926

)

 

 

6,767

 

 

 

(10,321

)

 

 

15,415

 

Accounts payable and accrued expenses and other liabilities

 

(29,776

)

 

 

(51,612

)

 

 

(15,368

)

 

 

(256,133

)

 

 

(44,907

)

 

 

192,542

 

Payment of acquisition-related contingent consideration

 

 

 

 

 

 

 

 

 

 

(73,724

)

 

 

 

 

 

 

Net cash provided by operating activities from continuing operations

 

37,556

 

 

 

33,075

 

 

 

8,132

 

 

 

63,677

 

 

 

38,862

 

 

 

122,840

 

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

 

(757

)

 

 

7,963

 

 

 

12,774

 

 

 

40,710

 

 

 

66,069

 

 

 

30,510

 

Net cash provided by operating activities

 

36,799

 

 

 

41,038

 

 

 

20,906

 

 

 

104,387

 

 

 

104,931

 

 

 

153,350

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures and deposits on equipment

 

(7,747

)

 

 

(11,984

)

 

 

(5,858

)

 

 

(39,421

)

 

 

(20,359

)

 

 

(16,669

)

Acquisition of business, net of cash acquired

 

 

 

 

 

 

 

 

 

 

(213,073

)

 

 

 

 

 

(35,677

)

Purchases of held-to-maturity investment securities

 

(25,015

)

 

 

 

 

 

 

 

 

(25,015

)

 

 

 

 

 

 

Other

 

(4,345

)

 

 

431

 

 

 

(71

)

 

 

(3,675

)

 

 

(875

)

 

 

(1,121

)

Net cash used for investing activities from continuing operations

 

(37,107

)

 

 

(11,553

)

 

 

(5,929

)

 

 

(281,184

)

 

 

(21,234

)

 

 

(53,467

)

Net cash used for investing activities from discontinued operations

 

(11,640

)

 

 

(1,273

)

 

 

(2,997

)

 

 

(17,385

)

 

 

(17,736

)

 

 

(30,711

)

Net cash used for investing activities

$

(48,747

)

 

$

(12,826

)

 

$

(8,926

)

 

$

(298,569

)

 

$

(38,970

)

 

$

(84,178

)

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows, Continued

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Year Ended

 

August 25,

2023

 

May 26,

2023

 

August 26,

2022

 

August 25,

2023

 

August 26,

2022

 

August 27,

2021

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

Proceeds from debt

$

 

 

$

 

 

$

 

 

$

295,287

 

 

$

270,775

 

 

$

 

Proceeds from issuance of ordinary shares

 

34,615

 

 

 

4,180

 

 

 

291

 

 

 

43,045

 

 

 

12,140

 

 

 

14,923

 

Proceeds from borrowing under line of credit

 

 

 

 

 

 

 

 

 

 

 

 

 

84,000

 

 

 

172,500

 

Payment of acquisition-related contingent consideration

 

 

 

 

 

 

 

 

 

 

(28,100

)

 

 

 

 

 

 

Payments to acquire ordinary shares

 

(7,788

)

 

 

(660

)

 

 

(40,431

)

 

 

(24,671

)

 

 

(57,231

)

 

 

(48,513

)

Repayments of debt

 

(7,212

)

 

 

(7,211

)

 

 

(1,719

)

 

 

(21,634

)

 

 

(126,719

)

 

 

 

Payment of premium in connection with convertible note exchange

 

 

 

 

 

 

 

 

 

 

(14,141

)

 

 

 

 

 

 

Net cash paid for settlement and purchase of Capped Calls

 

 

 

 

 

 

 

 

 

 

(4,304

)

 

 

 

 

 

 

Distribution to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

(2,009

)

 

 

(3,773

)

 

 

 

Repayments of borrowings under line of credit

 

 

 

 

 

 

 

 

 

 

 

 

 

(109,000

)

 

 

(147,500

)

Other

 

(487

)

 

 

(688

)

 

 

(1,242

)

 

 

(6,252

)

 

 

(9,547

)

 

 

(6,138

)

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

 

19,128

 

 

 

(4,379

)

 

 

(43,101

)

 

 

237,221

 

 

 

60,645

 

 

 

(14,728

)

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

 

(426

)

 

 

(255

)

 

 

8,770

 

 

 

(805

)

 

 

13,234

 

 

 

17,577

 

Net cash provided by (used for) financing activities

 

18,702

 

 

 

(4,634

)

 

 

(34,331

)

 

 

236,416

 

 

 

73,879

 

 

 

2,849

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of changes in currency exchange rates

 

2,035

 

 

 

813

 

 

 

(1,910

)

 

 

4,765

 

 

 

239

 

 

 

154

 

Net increase (decrease) in cash and cash equivalents

 

8,789

 

 

 

24,391

 

 

 

(24,261

)

 

 

46,999

 

 

 

140,079

 

 

 

72,175

 

Cash and cash equivalents at beginning of period

 

401,275

 

 

 

376,884

 

 

 

387,326

 

 

 

363,065

 

 

 

222,986

 

 

 

150,811

 

Cash and cash equivalents at end of period

$

410,064

 

 

$

401,275

 

 

$

363,065

 

 

$

410,064

 

 

$

363,065

 

 

$

222,986

 

 

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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