sgh-20231201

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 1, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-38102

SMART GLOBAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Cayman Islands			98-1013909
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


c/o Walkers Corporate Limited
190 Elgin Avenue
George Town, Grand Cayman
Cayman Islands			KY1-9008
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code: (510) 623-1231

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, $0.03 par value per share	SGH	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 2, 2024, the registrant had 51,830,117 ordinary shares outstanding.

Table of Contents


		Page
PART I. Financial Information
Item 1	Financial Statements	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	35

PART II. Other Information
Item 1	Legal Proceedings	36
Item 1A	Risk Factors	36
Item 2	Unregistered Sales of Equity Securities , Use of Proceed s and Issuer Purchases of Equity Securities	36
Item 3	Defaults Upon Senior Securities	36
Item 4	Mine Safety Disclosures	37
Item 5	Other Information	37
Item 6	Exhibits	37

Signatures		39


2

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) 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 that are not historical in nature, that are predictive or that depend upon or refer to future events or conditions. These statements include, but are not limited to, statements regarding our future financial or operating performance, the extent and timing of future revenues and expenses and customer demand, statements regarding the deployment of our products and services, statements regarding our reliance on third parties, and statements using words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “potential,” “should” and similar words and the negatives thereof. These forward-looking statements are based on our 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 our control, including but not limited to, global business and economic conditions and growth trends in technology industries, our customer markets and various geographic regions; uncertainties in the geopolitical environment; the ability to manage our cost structure; disruptions in our operations or supply chain; changes in trade regulations or adverse developments in international trade relations and agreements; changes in currency exchange rates; overall information technology spending; appropriations for government spending; the success of our strategic initiatives including additional investments in new products and additional capacity; acquisitions of companies or technologies and the failure to successfully integrate and operate them or customers’ negative reactions to them; incurring unanticipated costs following the completion of the sale of our SMART Brazil business; issues, delays or complications in integrating the operations of Stratus Technologies; limitations on or changes in the availability of supply of materials and components; fluctuations in material costs; the temporary or volatile nature of pricing trends in memory or elsewhere; deterioration in customer relationships; our dependence on a select number of customers and the timing and volume of customer orders; production or manufacturing difficulties; competitive factors; technological changes; difficulties with, or delays in, the introduction of new products; slowing or contraction of growth in the LED market; changes to applicable tax regimes or rates; prices for the end products of our customers; strikes or labor disputes; deterioration in or loss of relations with any of our limited number of key vendors; the inability to maintain or expand government business; and the continuing availability of borrowings under term loans and revolving lines of credit and our ability to raise capital through debt or equity financings. These and other risks, uncertainties and factors are described in greater detail under the sections titled “Risk Factors,” “Critical Accounting Estimates,” “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and “Liquidity and Capital Resources” contained in our Annual Report on Form 10-K for the fiscal year ended August 25, 2023, this Quarterly Report and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings. 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 our Company to be materially different from such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on any forward-looking statements.

The forward-looking statements included in this Quarterly Report are made only as of the date of this Quarterly Report. We do not intend, and have no obligation, to update or revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this Quarterly Report, except as required by law.

About This Quarterly Report

As used herein, “SGH,” “Company,” “Registrant,” “we,” “our,” “us” or similar terms refer to SMART Global Holdings, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2024 and 2023 contain 53 weeks and 52 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated.

SGH, SMART Global Holdings, SMART Modular Technologies, SMART, the SMART logo, Intelligent Platform Solutions, Penguin Computing, Penguin Edge, Penguin Solutions, the Penguin Computing logo, CreeLED, J Series, XLamp, Stratus, Stratus Technologies, the Stratus Logo and our other trademarks or service marks appearing in this Quarterly Report are our trademarks or registered trademarks. Trade names, trademarks and service marks of other companies appearing in this Quarterly Report are the property of their respective holders.


3

PART I. Financial Information

Item 1. Financial Statements

INDEX TO FINANCIAL STATEMENTS


			Page
Consolidated Balance Sheets			5
Consolidated Statements of Operations			6
Consolidated Statements of Comprehensive Income (Loss)			7
Consolidated Statements of Shareholders’ Equity			8
Consolidated Statements of Cash Flows			9
Notes to Consolidated Financial Statements			10


4

SMART Global Holdings, Inc.

Consolidated Balance Sheets

(In thousands, except par value amount)

(Unaudited)


As of	December 1, 2023		August 25, 2023
Assets
Cash and cash equivalents	$	529,059	$	365,563
Short-term investments	24,385		25,251
Accounts receivable, net	170,590		219,247
Inventories	208,441		174,977
Other current assets	54,373		51,790
Current assets of discontinued operations	—		70,574
Total current assets	986,848		907,402
Property and equipment, net	112,328		118,734
Operating lease right-of-use assets	64,637		68,444
Intangible assets, net	150,283		160,185
Goodwill	161,958		161,958
Deferred tax assets	74,365		74,085
Other noncurrent assets	80,446		15,150
Total assets	$	1,630,865	$	1,505,958

Liabilities and Equity
Accounts payable and accrued expenses	$	219,082	$	182,035
Current debt	28,511		35,618
Deferred revenue	39,096		48,096
Acquisition-related contingent consideration	50,000		50,000
Other current liabilities	32,115		32,731
Current liabilities of discontinued operations	—		77,770
Total current liabilities	368,804		426,250
Long-term debt	748,299		754,820
Noncurrent operating lease liabilities	64,407		66,407
Other noncurrent liabilities	33,346		29,248
Total liabilities	1,214,856		1,276,725

Commitments and contingencies

SMART Global Holdings shareholders’ equity:
Ordinary shares, $0.03 par value; authorized 200,000 shares; 58,447 shares issued and 51,906 outstanding as of December 1, 2023; 57,542 shares issued and 51,901 outstanding as of August 25, 2023	1,753		1,726
Additional paid-in capital	491,145		476,703
Retained earnings	62,536		82,457
Treasury shares, 6,541 and 5,641 shares held as of December 1, 2023 and August 25, 2023, respectively	(145,577)		(132,447)
Accumulated other comprehensive income (loss)	303		(205,964)
Total SGH shareholders’ equity	410,160		222,475
Noncontrolling interest in subsidiary	5,849		6,758
Total equity	416,009		229,233
Total liabilities and equity	$	1,630,865	$	1,505,958

The accompanying notes are an integral part of these consolidated financial statements.


5

SMART Global Holdings, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended
	December 1, 2023		November 25, 2022
Net sales:
Products	$	206,430	$	316,508
Services	67,817		75,289
Total net sales	274,247		391,797
Cost of sales:
Products	163,413		251,291
Services	27,984		28,408
Total cost of sales	191,397		279,699
Gross profit	82,850		112,098

Operating expenses:
Research and development	21,389		24,072
Selling, general and administrative	57,217		67,708
Change in fair value of contingent consideration	—		3,700
Other operating (income) expense	2,939		1,771
Total operating expenses	81,545		97,251
Operating income (loss)	1,305		14,847

Non-operating (income) expense:
Interest expense, net	9,559		8,494
Other non-operating (income) expense	(576)		(1,362)
Total non-operating (income) expense	8,983		7,132
Income (loss) before taxes	(7,678)		7,715

Income tax provision (benefit)	3,534		11,322
Net income (loss) from continuing operations	(11,212)		(3,607)
Net income (loss) from discontinued operations	(8,148)		8,931
Net income (loss)	(19,360)		5,324
Net income attributable to noncontrolling interest	561		332
Net income (loss) attributable to SGH	$	(19,921)	$	4,992

Basic earnings (loss) per share:
Continuing operations	$	(0.23)	$	(0.08)
Discontinued operations	(0.15)		0.18
	$	(0.38)	$	0.10
Diluted earnings (loss) per share:
Continuing operations	$	(0.23)	$	(0.08)
Discontinued operations	(0.15)		0.18
	$	(0.38)	$	0.10
Shares used in per share calculations:
Basic	52,068		48,962
Diluted	52,068		48,962

The accompanying notes are an integral part of these consolidated financial statements.


6

SMART Global Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)


	Three Months Ended
	December 1, 2023		November 25, 2022
Net income (loss)	$	(19,360)	$	5,324
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(6,142)		(2,008)
Cumulative translation adjustment reclassified to net income	212,397		—
Gains (losses) on derivative instruments	—		20
Gains (losses) on investments	12		(7)
Comprehensive income (loss)	186,907		3,329
Comprehensive income attributable to noncontrolling interest	561		332
Comprehensive income (loss) attributable to SGH	$	186,346	$	2,997

The accompanying notes are an integral part of these consolidated financial statements.


7

SMART Global Holdings, Inc.

Consolidated Statements of Shareholders’ Equity

(In thousands)

(Unaudited)


	Shares Issued	Amount		Additional Paid-in Capital		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Total SGH Shareholders’ Equity		Non- controlling Interest in Subsidiary		Total Equity
As of August 25, 2023	57,542	$	1,726	$	476,703	$	82,457	$	(132,447)	$	(205,964)	$	222,475	$	6,758	$	229,233
Net income (loss)	—	—		—		(19,921)		—		—		(19,921)		561		(19,360)
Other comprehensive income (loss)	—	—		—		—		—		206,267		206,267		—		206,267
Shares issued under equity plans	905	27		3,428		—		—		—		3,455		—		3,455
Repurchase of ordinary shares	—	—		—		—		(13,130)		—		(13,130)		—		(13,130)
Share-based compensation expense	—	—		11,014		—		—		—		11,014		—		11,014
Distribution to noncontrolling interest	—	—		—		—		—		—		—		(1,470)		(1,470)
As of December 1, 2023	58,447	$	1,753	$	491,145	$	62,536	$	(145,577)	$	303	$	410,160	$	5,849	$	416,009


	Shares Issued	Amount		Additional Paid-in Capital		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Total SGH Shareholders’ Equity		Non- controlling Interest in Subsidiary		Total Equity
As of August 26, 2022	52,880	$	1,586	$	448,112	$	251,344	$	(107,776)	$	(221,655)	$	371,611	$	6,935	$	378,546
Net income	—	—		—		4,992		—		—		4,992		332		5,324
Other comprehensive income (loss)	—	—		—		—		—		(1,995)		(1,995)		—		(1,995)
Shares issued under equity plans	1,060	32		3,910		—		—		—		3,942		—		3,942
Repurchase of ordinary shares	—	—		—		—		(4,659)		—		(4,659)		—		(4,659)
Share-based compensation expense	—	—		10,412		—

SEC Form 10-Q filed by SMART Global Holdings Inc.