SGH Reports Third Quarter Fiscal 2023 Financial Results

June 29, 2023

Strong Operating Results and Record Cash and Equivalents

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

Third Quarter Fiscal 2023 Highlights

  • Net sales of $383 million, down 17.1% versus the year-ago quarter
  • GAAP gross margin of 25.7%, up 100 basis points versus the year-ago quarter
  • Non-GAAP gross margin of 28.0%, up 230 basis points versus the year-ago quarter
  • GAAP EPS of $(0.50) versus $0.44 in the year-ago quarter
  • Non-GAAP EPS of $0.66 versus $0.87 in the year-ago quarter
  • Record cash and cash equivalents of $401 million
  • Announced agreement to sell an 81% interest in SMART Modular Technologies do Brasil – Indústria e Comércio de Componentes Ltda. (“SMART Brazil”)

“The team achieved strong results for the third quarter in what remains a challenging global economic environment. Non-GAAP gross margin increased to 28.0%, an improvement of 230 basis points from the same period last year, and achieved non-GAAP earnings of $0.66 per share. In addition, we exited the third quarter with a strong balance sheet, including record cash and cash equivalents of $401 million,” commented the Company’s CEO Mark Adams. “With the announced agreement to sell an 81% interest in SMART Brazil on June 13, we are continuing our transformation to a high-performance, high-availability enterprise solutions company, and believe we are positioned to benefit from emerging trends in AI, machine learning and data analytics,” indicated Adams.

Quarterly Financial Results

 

GAAP (1)

 

Non-GAAP (2)

(in millions, except per share amounts)

Q3 FY23

 

Q2 FY23

 

Q3 FY22

 

Q3 FY23

 

Q2 FY23

 

Q3 FY22

Net sales

$

383.3

 

 

$

429.2

 

 

$

462.5

 

$

383.3

 

$

429.2

 

$

462.5

Gross profit

 

98.6

 

 

 

110.4

 

 

 

114.5

 

 

107.2

 

 

123.9

 

 

118.9

Operating income (loss)

 

(8.8

)

 

 

(7.2

)

 

 

35.3

 

 

36.3

 

 

51.4

 

 

54.3

Net income (loss) attributable to SGH

 

(24.5

)

 

 

(27.2

)

 

 

24.1

 

 

33.1

 

 

37.6

 

 

45.9

Diluted earnings (loss) per share

$

(0.50

)

 

$

(0.55

)

 

$

0.44

 

$

0.66

 

$

0.76

 

$

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 June 29, 2023, SGH is providing the following financial outlook for its fourth quarter of fiscal 2023:

 

GAAP

Outlook

Adjustments

Non-GAAP

Outlook

Net sales

$375 million +/- $25 million

$375 million +/- $25 million

Gross margin

26% +/- 1%

2%

(A)

28% +/- 1%

Operating expenses

$87 million +/- $2 million

($16) million

(B)(C)

$71 million +/- $2 million

Diluted earnings (loss) per share

$0.02 +/- $0.15

$0.43

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

$0.45 +/- $0.15

Diluted shares

54.5 million

(2) million

52.5 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

 

3

 

(D) Estimated income tax effects

 

(3

)

 

$

21

 

Third Quarter Fiscal 2023 Earnings Conference Call and Webcast Details

SGH will hold a conference call and webcast to discuss the third quarter of fiscal 2023 results and related matters today, June 29, 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 177936. 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 SGH’s business strategies, investments and growth drivers in SGH’s industries and markets, 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 rapidly evolving nature of the COVID-19 pandemic; disruptions in SGH’s operations or supply chain as a result 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; 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; future cash flows of the Penguin Edge business; 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; 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, our companies are united by a drive to raise the bar, execute with discipline and focus on what’s next for the technologies that support and advance the world. Across computing, memory and LED lighting solutions, we build long-term strategic partnerships with our customers.

Backed by a proven leadership team, we operate with excellence around the globe while unlocking new avenues of growth for our business and industry.

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 26,
2023

 

February 24,
2023

 

May 27,
2022

 

May 26,
2023

 

May 27,
2022

Net sales:

 

 

 

 

 

 

 

 

 

Memory Solutions

$

148,370

 

 

$

151,136

 

 

$

265,850

 

$

491,473

 

 

$

765,332

Intelligent Platform Solutions

 

170,854

 

 

 

222,451

 

 

 

95,345

 

 

604,276

 

 

 

296,256

LED Solutions

 

64,106

 

 

 

55,587

 

 

 

101,345

 

 

182,233

 

 

 

320,067

Total net sales

 

383,330

 

 

 

429,174

 

 

 

462,540

 

 

1,277,982

 

 

 

1,381,655

Cost of sales

 

284,687

 

 

 

318,793

 

 

 

348,077

 

 

950,548

 

 

 

1,032,278

Gross profit

 

98,643

 

 

 

110,381

 

 

 

114,463

 

 

327,434

 

 

 

349,377

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

22,235

 

 

 

26,665

 

 

 

20,298

 

 

72,956

 

 

 

56,749

Selling, general and administrative

 

70,596

 

 

 

62,771

 

 

 

58,483

 

 

204,389

 

 

 

164,147

Impairment of goodwill

 

 

 

 

17,558

 

 

 

 

 

17,558

 

 

 

Change in fair value of contingent consideration

 

14,800

 

 

 

6,400

 

 

 

124

 

 

24,900

 

 

 

41,324

Other operating (income) expense

 

(186

)

 

 

4,154

 

 

 

249

 

 

6,009

 

 

 

249

Total operating expenses

 

107,445

 

 

 

117,548

 

 

 

79,154

 

 

325,812

 

 

 

262,469

Operating income (loss)

 

(8,802

)

 

 

(7,167

)

 

 

35,309

 

 

1,622

 

 

 

86,908

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

8,059

 

 

 

8,006

 

 

 

5,110

 

 

24,102

 

 

 

14,678

Other non-operating (income) expense

 

514

 

 

 

13,329

 

 

 

550

 

 

13,183

 

 

 

3,570

Total non-operating (income) expense

 

8,573

 

 

 

21,335

 

 

 

5,660

 

 

37,285

 

 

 

18,248

Income (loss) before taxes

 

(17,375

)

 

 

(28,502

)

 

 

29,649

 

 

(35,663

)

 

 

68,660

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

6,702

 

 

 

(1,716

)

 

 

5,154

 

 

9,876

 

 

 

20,495

Net income (loss)

 

(24,077

)

 

 

(26,786

)

 

 

24,495

 

 

(45,539

)

 

 

48,165

Net income attributable to noncontrolling interest

 

378

 

 

 

433

 

 

 

382

 

 

1,143

 

 

 

1,567

Net income (loss) attributable to SGH

$

(24,455

)

 

$

(27,219

)

 

$

24,113

 

$

(46,682

)

 

$

46,598

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

$

(0.50

)

 

$

(0.55

)

 

$

0.48

 

$

(0.95

)

 

$

0.94

Diluted

$

(0.50

)

 

$

(0.55

)

 

$

0.44

 

$

(0.95

)

 

$

0.84

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

Basic

 

49,380

 

 

 

49,116

 

 

 

50,095

 

 

49,152

 

 

 

49,543

Diluted

 

49,380

 

 

 

49,116

 

 

 

54,998

 

 

49,152

 

 

 

55,756

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

May 26,
2023

 

February 24,
2023

 

May 27,
2022

 

May 26,
2023

 

May 27,
2022

GAAP gross profit

$

98,643

 

 

$

110,381

 

 

$

114,463

 

 

$

327,434

 

 

$

349,377

 

Share-based compensation expense

 

1,655

 

 

 

1,369

 

 

 

1,724

 

 

 

4,732

 

 

 

5,103

 

Amortization of acquisition-related intangibles

 

6,704

 

 

 

6,615

 

 

 

2,696

 

 

 

19,785

 

 

 

8,374

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales-related restructure

 

211

 

 

 

5,552

 

 

 

 

 

 

5,763

 

 

 

 

Non-GAAP gross profit

$

107,213

 

 

$

123,917

 

 

$

118,883

 

 

$

360,313

 

 

$

362,854

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

25.7

%

 

 

25.7

%

 

 

24.7

%

 

 

25.6

%

 

 

25.3

%

Effect of adjustments

 

2.3

%

 

 

3.2

%

 

 

1.0

%

 

 

2.6

%

 

 

1.0

%

Non-GAAP gross margin

 

28.0

%

 

 

28.9

%

 

 

25.7

%

 

 

28.2

%

 

 

26.3

%

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

$

107,445

 

 

$

117,548

 

 

$

79,154

 

 

$

325,812

 

 

$

262,469

 

Share-based compensation expense

 

(8,376

)

 

 

(9,026

)

 

 

(8,823

)

 

 

(26,106

)

 

 

(25,192

)

Amortization of acquisition-related intangibles

 

(4,905

)

 

 

(4,200

)

 

 

(3,247

)

 

 

(13,497

)

 

 

(9,741

)

Acquisition and integration expenses

 

(8,637

)

 

 

(2,824

)

 

 

(2,181

)

 

 

(18,193

)

 

 

(3,470

)

Impairment of goodwill

 

 

 

 

(17,558

)

 

 

 

 

 

(17,558

)

 

 

 

Change in fair value of contingent consideration

 

(14,800

)

 

 

(6,400

)

 

 

(124

)

 

 

(24,900

)

 

 

(41,324

)

Restructure charge

 

186

 

 

 

(4,154

)

 

 

(249

)

 

 

(6,009

)

 

 

(249

)

Other

 

 

 

 

(900

)

 

 

81

 

 

 

(1,800

)

 

 

(496

)

Non-GAAP operating expenses

$

70,913

 

 

$

72,486

 

 

$

64,611

 

 

$

217,749

 

 

$

181,997

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

$

(8,802

)

 

$

(7,167

)

 

$

35,309

 

 

$

1,622

 

 

$

86,908

 

Share-based compensation expense

 

10,031

 

 

 

10,395

 

 

 

10,547

 

 

 

30,838

 

 

 

30,295

 

Amortization of acquisition-related intangibles

 

11,609

 

 

 

10,815

 

 

 

5,943

 

 

 

33,282

 

 

 

18,115

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales-related restructure

 

211

 

 

 

5,552

 

 

 

 

 

 

5,763

 

 

 

 

Acquisition and integration expenses

 

8,637

 

 

 

2,824

 

 

 

2,181

 

 

 

18,193

 

 

 

3,470

 

Impairment of goodwill

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

14,800

 

 

 

6,400

 

 

 

124

 

 

 

24,900

 

 

 

41,324

 

Restructure charge

 

(186

)

 

 

4,154

 

 

 

249

 

 

 

6,009

 

 

 

249

 

Other

 

 

 

 

900

 

 

 

(81

)

 

 

1,800

 

 

 

496

 

Non-GAAP operating income

$

36,300

 

 

$

51,431

 

 

$

54,272

 

 

$

142,564

 

 

$

180,857

 

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 26,
2023

 

February 24,
2023

 

May 27,
2022

 

May 26,
2023

 

May 27,
2022

GAAP net income (loss) attributable to SGH

$

(24,455

)

 

$

(27,219

)

 

$

24,113

 

 

$

(46,682

)

 

$

46,598

 

Share-based compensation expense

 

10,031

 

 

 

10,395

 

 

 

10,547

 

 

 

30,838

 

 

 

30,295

 

Amortization of acquisition-related intangibles

 

11,609

 

 

 

10,815

 

 

 

5,943

 

 

 

33,282

 

 

 

18,115

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales-related restructure

 

211

 

 

 

5,552

 

 

 

 

 

 

5,763

 

 

 

 

Acquisition and integration expenses

 

8,637

 

 

 

2,824

 

 

 

2,181

 

 

 

18,193

 

 

 

3,470

 

Impairment of goodwill

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

14,800

 

 

 

6,400

 

 

 

124

 

 

 

24,900

 

 

 

41,324

 

Restructure charge

 

(186

)

 

 

4,154

 

 

 

249

 

 

 

6,009

 

 

 

249

 

Amortization of debt discount and other costs

 

937

 

 

 

1,048

 

 

 

2,705

 

 

 

3,054

 

 

 

7,211

 

Loss on extinguishment of debt

 

 

 

 

16,691

 

 

 

 

 

 

15,924

 

 

 

653

 

Foreign currency (gains) losses

 

590

 

 

 

281

 

 

 

641

 

 

 

1,113

 

 

 

3,516

 

Other

 

 

 

 

900

 

 

 

(81

)

 

 

1,800

 

 

 

496

 

Income tax effects

 

10,900

 

 

 

(11,753

)

 

 

(513

)

 

 

(4,153

)

 

 

(2,139

)

Non-GAAP net income attributable to SGH

$

33,074

 

 

$

37,646

 

 

$

45,909

 

 

$

110,198

 

 

$

149,788

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding - Diluted:

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares outstanding

 

49,380

 

 

 

49,116

 

 

 

54,998

 

 

 

49,152

 

 

 

55,756

 

Adjustment for dilutive securities and capped calls

 

754

 

 

 

726

 

 

 

(2,063

)

 

 

770

 

 

 

(2,468

)

Non-GAAP weighted-average shares outstanding

 

50,134

 

 

 

49,842

 

 

 

52,935

 

 

 

49,922

 

 

 

53,288

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

GAAP diluted earnings (loss) per share

$

(0.50

)

 

$

(0.55

)

 

$

0.44

 

 

$

(0.95

)

 

$

0.84

 

Effect of adjustments

 

1.16

 

 

 

1.31

 

 

 

0.43

 

 

 

3.16

 

 

 

1.97

 

Non-GAAP diluted earnings per share

$

0.66

 

 

$

0.76

 

 

$

0.87

 

 

$

2.21

 

 

$

2.81

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to SGH

$

(24,455

)

 

$

(27,219

)

 

$

24,113

 

 

$

(46,682

)

 

$

46,598

 

Interest expense, net

 

8,059

 

 

 

8,006

 

 

 

5,110

 

 

 

24,102

 

 

 

14,678

 

Income tax provision (benefit)

 

6,702

 

 

 

(1,716

)

 

 

5,154

 

 

 

9,876

 

 

 

20,495

 

Depreciation expense and amortization of intangible assets

 

21,300

 

 

 

19,931

 

 

 

16,571

 

 

 

61,020

 

 

 

48,461

 

Share-based compensation expense

 

10,031

 

 

 

10,395

 

 

 

10,547

 

 

 

30,838

 

 

 

30,295

 

Flow-through of inventory step up

 

 

 

 

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales-related restructure

 

211

 

 

 

5,552

 

 

 

 

 

 

5,763

 

 

 

 

Acquisition and integration expenses

 

8,637

 

 

 

2,824

 

 

 

2,181

 

 

 

18,193

 

 

 

3,470

 

Impairment of goodwill

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

14,800

 

 

 

6,400

 

 

 

124

 

 

 

24,900

 

 

 

41,324

 

Restructure charge

 

(186

)

 

 

4,154

 

 

 

249

 

 

 

6,009

 

 

 

249

 

Loss on extinguishment of debt

 

 

 

 

16,691

 

 

 

 

 

 

15,924

 

 

 

653

 

Other

 

 

 

 

900

 

 

 

(81

)

 

 

1,800

 

 

 

496

 

Adjusted EBITDA

$

45,099

 

 

$

63,476

 

 

$

63,968

 

 

$

171,900

 

 

$

206,719

 

The non-GAAP adjustment for income tax effects for the three months ended May 26, 2023 includes a reduction in taxes of $4.0 million, or $0.08 per diluted share, for the retroactive effect of a revision in the amount of U.S. net operating losses expected to be utilized in 2023.

SMART Global Holdings, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

As of

May 26,
2023

 

August 26,
2022

Assets

 

 

 

Cash and cash equivalents

$

401,275

 

 

$

363,065

 

Accounts receivable, net

 

243,571

 

 

 

410,323

 

Inventories

 

226,051

 

 

 

323,084

 

Other current assets

 

68,014

 

 

 

55,393

 

Total current assets

 

938,911

 

 

 

1,151,865

 

Property and equipment, net

 

177,751

 

 

 

153,935

 

Operating lease right-of-use assets

 

77,789

 

 

 

77,399

 

Intangible assets, net

 

171,415

 

 

 

77,812

 

Goodwill

 

183,089

 

 

 

74,009

 

Other noncurrent assets

 

42,233

 

 

 

37,044

 

Total assets

$

1,591,188

 

 

$

1,572,064

 

 

 

 

 

Liabilities and Equity

 

 

 

Accounts payable and accrued expenses

$

210,125

 

 

$

413,354

 

Current debt

 

32,253

 

 

 

12,025

 

Acquisition-related contingent consideration

 

45,700

 

 

 

 

Other current liabilities

 

96,227

 

 

 

90,161

 

Total current liabilities

 

384,305

 

 

 

515,540

 

Long-term debt

 

782,258

 

 

 

591,389

 

Noncurrent operating lease liabilities

 

73,421

 

 

 

71,754

 

Other noncurrent liabilities

 

27,038

 

 

 

14,835

 

Total liabilities

 

1,267,022

 

 

 

1,193,518

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

SMART Global Holdings shareholders’ equity:

 

 

 

Ordinary shares

 

1,655

 

 

 

1,586

 

Additional paid-in capital

 

432,185

 

 

 

448,112

 

Retained earnings

 

223,301

 

 

 

251,344

 

Treasury shares

 

(124,659

)

 

 

(107,776

)

Accumulated other comprehensive income (loss)

 

(214,385

)

 

 

(221,655

)

Total SGH shareholders’ equity

 

318,097

 

 

 

371,611

 

Noncontrolling interest in subsidiary

 

6,069

 

 

 

6,935

 

Total equity

 

324,166

 

 

 

378,546

 

Total liabilities and equity

$

1,591,188

 

 

$

1,572,064

 

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

May 26,
2023

 

February 24,
2023

 

May 27,
2022

 

May 26,
2023

 

May 27,
2022

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(24,077

)

 

$

(26,786

)

 

$

24,495

 

 

$

(45,539

)

 

$

48,165

 

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

 

 

 

 

 

 

 

 

 

Depreciation expense and amortization of intangible assets

 

21,300

 

 

 

19,931

 

 

 

16,571

 

 

 

61,020

 

 

 

48,461

 

Amortization of debt discount and issuance costs

 

937

 

 

 

1,048

 

 

 

2,706

 

 

 

3,054

 

 

 

7,476

 

Share-based compensation expense

 

10,031

 

 

 

10,395

 

 

 

10,547

 

 

 

30,838

 

 

 

30,295

 

Impairment of goodwill

 

 

 

 

17,558

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

14,800

 

 

 

6,400

 

 

 

124

 

 

 

24,900

 

 

 

41,324

 

(Gain) loss on extinguishment of debt

 

 

 

 

16,691

 

 

 

 

 

 

15,924

 

 

 

653

 

Other

 

(811

)

 

 

3,705

 

 

 

(48

)

 

 

3,213

 

 

 

640

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(13,746

)

 

 

78,529

 

 

 

34,089

 

 

 

194,478

 

 

 

(41,490

)

Inventories

 

67,952

 

 

 

119,491

 

 

 

(26,531

)

 

 

104,561

 

 

 

(116

)

Other assets

 

15,391

 

 

 

(1,525

)

 

 

(8,375

)

 

 

8,667

 

 

 

2,070

 

Accounts payable and accrued expenses and other liabilities

 

(49,907

)

 

 

(145,951

)

 

 

(18,032

)

 

 

(278,888

)

 

 

(54,174

)

Payment of acquisition-related contingent consideration

 

 

 

 

 

 

 

 

 

 

(73,724

)

 

 

 

Deferred income taxes, net

 

(832

)

 

 

1,049

 

 

 

1,168

 

 

 

1,526

 

 

 

721

 

Net cash provided by operating activities

 

41,038

 

 

 

100,535

 

 

 

36,714

 

 

 

67,588

 

 

 

84,025

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures and deposits on equipment

 

(13,260

)

 

 

(12,613

)

 

 

(9,156

)

 

 

(37,522

)

 

 

(29,298

)

Acquisition of business, net of cash acquired

 

 

 

 

(2,800

)

 

 

 

 

 

(213,073

)

 

 

 

Other

 

434

 

 

 

2,060

 

 

 

(54

)

 

 

773

 

 

 

(746

)

Net cash used for investing activities

 

(12,826

)

 

 

(13,353

)

 

 

(9,210

)

 

 

(249,822

)

 

 

(30,044

)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

 

 

 

 

 

 

 

 

295,287

 

 

 

270,775

 

Proceeds from issuance of ordinary shares

 

4,180

 

 

 

308

 

 

 

4,389

 

 

 

8,430

 

 

 

11,849

 

Proceeds from borrowing under line of credit

 

 

 

 

 

 

 

 

 

 

 

 

 

84,000

 

Payment of acquisition-related contingent consideration

 

 

 

 

 

 

 

 

 

 

(28,100

)

 

 

 

Payments to acquire ordinary shares

 

(660

)

 

 

(11,564

)

 

 

(13,905

)

 

 

(16,883

)

 

 

(16,800

)

Payment of premium in connection with convertible note exchange

 

 

 

 

(14,141

)

 

 

 

 

 

(14,141

)

 

 

 

Repayments of debt

 

(8,153

)

 

 

(4,507

)

 

 

 

 

 

(17,149

)

 

 

(125,000

)

Net cash paid for settlement and purchase of Capped Calls

 

 

 

 

(4,304

)

 

 

 

 

 

(4,304

)

 

 

 

Distribution to noncontrolling interest

 

 

 

 

(2,009

)

 

 

 

 

 

(2,009

)

 

 

(3,773

)

Repayments of borrowings under line of credit

 

 

 

 

 

 

 

 

 

 

 

 

 

(109,000

)

Other

 

(1

)

 

 

(3,414

)

 

 

 

 

 

(3,417

)

 

 

(3,841

)

Net cash provided by (used for) financing activities

 

(4,634

)

 

 

(39,631

)

 

 

(9,516

)

 

 

217,714

 

 

 

108,210

 

 

 

 

 

 

 

 

 

 

 

Effect of changes in currency exchange rates on cash and cash equivalents

 

813

 

 

 

1,712

 

 

 

3,570

 

 

 

2,730

 

 

 

2,149

 

Net increase in cash and cash equivalents

 

24,391

 

 

 

49,263

 

 

 

21,558

 

 

 

38,210

 

 

 

164,340

 

Cash and cash equivalents at beginning of period

 

376,884

 

 

 

327,621

 

 

 

365,768

 

 

 

363,065

 

 

 

222,986

 

Cash and cash equivalents at end of period

$

401,275

 

 

$

376,884

 

 

$

387,326

 

 

$

401,275

 

 

$

387,326

 

 

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

Source: SMART Global Holdings, Inc.