Smart Global’s Penguin Solutions Shines in Q3 Earnings

Smart Global Holdings ((PENG)) has held its Q3 earnings call. Read on for the main highlights of the call.

Penguin Solutions, a subsidiary of Smart Global Holdings, delivered a solid performance in the third quarter of Fiscal Year 2025. The earnings call revealed notable revenue and earnings per share growth, alongside successful new customer acquisitions and strategic partnerships. Despite some challenges, such as revenue declines in the Advanced Computing segment and issues in the LED segment due to tariffs, the overall sentiment during the call was positive, reflecting the company’s strong financial health and strategic direction.

Revenue Growth

Penguin Solutions reported a revenue of $324 million for Q3 Fiscal Year 2025, marking a 7.9% increase compared to the same period in Fiscal Year 2024. This growth highlights the company’s ability to expand its market presence and capitalize on its strategic initiatives.

Earnings Per Share Increase

The company achieved a 25% year-over-year increase in non-GAAP diluted earnings per share, reaching 47¢. This significant rise underscores the company’s effective cost management and operational efficiency.

Operating Income Growth

Non-GAAP operating income rose by 15% from the prior year, reaching $38 million, with an operating income margin of 11.9%. This growth reflects the company’s successful efforts in enhancing its profitability.

Integrated Memory Segment Growth

The Integrated Memory segment achieved $130 million in revenue, a 24% increase from the prior quarter. This segment’s robust performance indicates strong demand and effective execution of the company’s growth strategies.

New Customer Bookings

Penguin Solutions secured five new customer bookings, indicating strong market interest in its products and services. This achievement demonstrates the company’s ability to attract and retain new clients, contributing to its revenue growth.

Partnership with SK Telecom

The partnership with SK Telecom is progressing well, with early wins related to AI data center infrastructure initiatives. This collaboration is expected to drive future growth and innovation in the company’s offerings.

Refinancing and Balance Sheet Strengthening

The company completed the refinancing of a $400 million credit facility, reducing gross leverage and extending debt maturity. This move strengthens the company’s balance sheet and enhances its financial flexibility.

Advanced Computing Revenue Decline

Advanced Computing revenue was $132 million, down compared to the prior quarter due to the timing of major deployments. Despite this decline, the company remains optimistic about future opportunities in this segment.

LED Segment Constraints

Cree LED revenue faced constraints due to increased costs and uncertainty related to tariffs on products from the China facility. The company is actively addressing these challenges to mitigate their impact.

Gross Margin Slight Decline

Non-GAAP gross margin was 31.7%, down 0.6 percentage points year over year, primarily due to a higher mix of integrated memory net sales. The company is focusing on strategies to improve margins in the coming quarters.

Forward-Looking Guidance

Penguin Solutions reaffirmed its full-year revenue growth outlook of 17% at the midpoint and raised its non-GAAP diluted EPS outlook from $1.60 to $1.80 per share at the midpoint. The company also reported a strong cash position, with cash and cash equivalents and short-term investments totaling $736 million at the end of the quarter.

In conclusion, Penguin Solutions’ Q3 Fiscal Year 2025 earnings call highlighted a positive sentiment with strong financial performance and strategic advancements. Despite some challenges, the company’s growth in revenue, earnings per share, and strategic partnerships positions it well for future success.