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SGH Reports Second Quarter Fiscal 2023 Financial Results

Record IPS revenue of $222 million

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

Second Quarter Fiscal 2023 Highlights

  • Net sales of $429 million, down 4.5% versus the year-ago quarter
  • GAAP gross margin of 25.7%, up 60 basis points versus the year-ago quarter
  • Non-GAAP gross margin of 28.9%, up 290 basis points versus the year-ago quarter
  • GAAP EPS of $(0.55) versus $0.04 in the year-ago quarter
  • Non-GAAP EPS of $0.76 versus $0.87 in the year-ago quarter
  • Cash and cash equivalents of $376 million

“Our second quarter fiscal 2023 results demonstrate the resilience of our business, highlighted by strong non-GAAP gross margin of 28.9% and non-GAAP EPS of $0.76, which was above the high end of our guidance range. We exited Q2 with a strong balance sheet, including $376 million in cash and cash equivalents,” commented CEO Mark Adams. “We remain disciplined in managing our expenses given the continued challenging economic environment, while maintaining strategic investments to capitalize on the tailwinds of AI, machine learning, data analytics, networking and specialty lighting, which we believe will drive long-term growth for SGH and create value for our shareholders,” concluded Adams.

Quarterly Financial Results

 

GAAP (1)

 

Non-GAAP (2)

(in millions, except per share amounts)

Q2 FY23

 

Q1 FY23

 

Q2 FY22

 

Q2 FY23

 

Q1 FY23

 

Q2 FY22

Net sales

$

429.2

 

 

$

465.5

 

$

449.2

 

$

429.2

 

$

465.5

 

$

449.2

Gross profit

 

110.4

 

 

 

118.4

 

 

112.7

 

 

123.9

 

 

129.2

 

 

116.9

Operating income (loss)

 

(7.2

)

 

 

17.6

 

 

16.8

 

 

51.4

 

 

54.8

 

 

57.4

Net income (loss) attributable to SGH

 

(27.2

)

 

 

5.0

 

 

2.5

 

 

37.6

 

 

39.5

 

 

47.6

Diluted earnings (loss) per share

$

(0.55

)

 

$

0.10

 

$

0.04

 

$

0.76

 

$

0.79

 

$

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 April 4, 2023, SGH is providing the following financial outlook for its third quarter of fiscal 2023:

 

GAAP

Outlook

Adjustments

Non-GAAP

Outlook

Net sales

$375 million +/- $20 million

$375 million +/- $20 million

Gross margin

26% +/- 1%

2%

(A)

28% +/- 1%

Operating expenses

$90 million +/- $3 million

$18 million

(B)(C)

$72 million +/- $3 million

Diluted earnings (loss) per share

$(0.03) +/- $0.10

$0.43

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

$0.40 +/- $0.10

Diluted shares

50 million

50 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

 

5

 

(D) Estimated tax effects

 

(5

)

 

$

21

 

Second Quarter Fiscal 2023 Earnings Conference Call and Webcast Details

SGH will hold a conference call and webcast to discuss the second quarter of fiscal 2023 results and related matters today, April 4, 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 849109. 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, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to, statements concerning or regarding future events and the future financial performance of SGH (including the business and financial outlook for the next fiscal quarter), SGH’s investment in its business and growth drivers in SGH’s industries and markets.

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, SGH’s customer markets and various geographic regions; uncertainties in the geopolitical environment; uncertainties in the global macroeconomic environment; disruptions in SGH’s operations or its supply chain as a result of the COVID-19 pandemic or otherwise; 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; 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; and the inability to maintain or expand government business. These risks, uncertainties and factors could cause SGH’s actual results to differ materially from those set forth in such forward-looking statements. These and other risks, uncertainties and factors are described in greater detail under the section titled “Risk Factors” 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 are made pursuant to the Private Securities Litigation Reform Act of 1995, as amended, and 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

 

Six Months Ended

 

February 24,

2023

 

November 25,

2022

 

February 25,

2022

 

February 24,

2023

 

February 25,

2022

Net sales:

 

 

 

 

 

 

 

 

 

Memory Solutions

$

151,136

 

 

$

191,967

 

 

$

260,081

 

$

343,103

 

 

$

499,482

Intelligent Platform Solutions

 

222,451

 

 

 

210,971

 

 

 

82,257

 

 

433,422

 

 

 

200,911

LED Solutions

 

55,587

 

 

 

62,540

 

 

 

106,833

 

 

118,127

 

 

 

218,722

Total net sales

 

429,174

 

 

 

465,478

 

 

 

449,171

 

 

894,652

 

 

 

919,115

Cost of sales

 

318,793

 

 

 

347,068

 

 

 

336,458

 

 

665,861

 

 

 

684,201

Gross profit

 

110,381

 

 

 

118,410

 

 

 

112,713

 

 

228,791

 

 

 

234,914

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

26,665

 

 

 

24,056

 

 

 

18,794

 

 

50,721

 

 

 

36,451

Selling, general and administrative

 

62,771

 

 

 

71,022

 

 

 

53,114

 

 

133,793

 

 

 

105,664

Impairment of goodwill

 

17,558

 

 

 

 

 

 

 

 

17,558

 

 

 

Change in fair value of contingent consideration

 

6,400

 

 

 

3,700

 

 

 

24,000

 

 

10,100

 

 

 

41,200

Other operating (income) expense

 

4,154

 

 

 

2,041

 

 

 

 

 

6,195

 

 

 

Total operating expenses

 

117,548

 

 

 

100,819

 

 

 

95,908

 

 

218,367

 

 

 

183,315

Operating income (loss)

 

(7,167

)

 

 

17,591

 

 

 

16,805

 

 

10,424

 

 

 

51,599

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

8,006

 

 

 

8,037

 

 

 

4,462

 

 

16,043

 

 

 

9,568

Other non-operating (income) expense

 

13,329

 

 

 

(660

)

 

 

1,785

 

 

12,669

 

 

 

3,020

Total non-operating (income) expense

 

21,335

 

 

 

7,377

 

 

 

6,247

 

 

28,712

 

 

 

12,588

Income (loss) before taxes

 

(28,502

)

 

 

10,214

 

 

 

10,558

 

 

(18,288

)

 

 

39,011

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

(1,716

)

 

 

4,890

 

 

 

7,586

 

 

3,174

 

 

 

15,341

Net income (loss)

 

(26,786

)

 

 

5,324

 

 

 

2,972

 

 

(21,462

)

 

 

23,670

Net income attributable to noncontrolling interest

 

433

 

 

 

332

 

 

 

514

 

 

765

 

 

 

1,185

Net income (loss) attributable to SGH

$

(27,219

)

 

$

4,992

 

 

$

2,458

 

$

(22,227

)

 

$

22,485

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

$

(0.55

)

 

$

0.10

 

 

$

0.05

 

$

(0.45

)

 

$

0.46

Diluted

$

(0.55

)

 

$

0.10

 

 

$

0.04

 

$

(0.45

)

 

$

0.40

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

Basic

 

49,116

 

 

 

48,962

 

 

 

49,522

 

 

49,039

 

 

 

49,267

Diluted

 

49,116

 

 

 

49,791

 

 

 

57,636

 

 

49,039

 

 

 

56,135

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

February 24,

2023

 

November 25,

2022

 

February 25,

2022

 

February 24,

2023

 

February 25,

2022

GAAP gross profit

$

110,381

 

 

$

118,410

 

 

$

112,713

 

 

$

228,791

 

 

$

234,914

 

Share-based compensation expense

 

1,369

 

 

 

1,708

 

 

 

1,648

 

 

 

3,077

 

 

 

3,379

 

Amortization of acquisition-related intangibles

 

6,615

 

 

 

6,466

 

 

 

2,582

 

 

 

13,081

 

 

 

5,678

 

Flow-through of inventory step up

 

 

 

 

2,599

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales related restructure

 

5,552

 

 

 

 

 

 

 

 

 

5,552

 

 

 

 

Non-GAAP gross profit

$

123,917

 

 

$

129,183

 

 

$

116,943

 

 

$

253,100

 

 

$

243,971

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

25.7

%

 

 

25.4

%

 

 

25.1

%

 

 

25.6

%

 

 

25.6

%

Effect of adjustments

 

3.2

%

 

 

2.4

%

 

 

0.9

%

 

 

2.7

%

 

 

1.0

%

Non-GAAP gross margin

 

28.9

%

 

 

27.8

%

 

 

26.0

%

 

 

28.3

%

 

 

26.5

%

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

$

117,548

 

 

$

100,819

 

 

$

95,908

 

 

$

218,367

 

 

$

183,315

 

Share-based compensation expense

 

(9,026

)

 

 

(8,704

)

 

 

(8,325

)

 

 

(17,730

)

 

 

(16,369

)

Amortization of acquisition-related intangibles

 

(4,200

)

 

 

(4,392

)

 

 

(3,247

)

 

 

(8,592

)

 

 

(6,494

)

Acquisition and integration expenses

 

(2,824

)

 

 

(6,732

)

 

 

(252

)

 

 

(9,556

)

 

 

(1,289

)

Impairment of goodwill

 

(17,558

)

 

 

 

 

 

 

 

 

(17,558

)

 

 

 

Change in fair value of contingent consideration

 

(6,400

)

 

 

(3,700

)

 

 

(24,000

)

 

 

(10,100

)

 

 

(41,200

)

Restructure charge

 

(4,154

)

 

 

(2,041

)

 

 

 

 

 

(6,195

)

 

 

 

Other

 

(900

)

 

 

(900

)

 

 

(576

)

 

 

(1,800

)

 

 

(577

)

Non-GAAP operating expenses

$

72,486

 

 

$

74,350

 

 

$

59,508

 

 

$

146,836

 

 

$

117,386

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

$

(7,167

)

 

$

17,591

 

 

$

16,805

 

 

$

10,424

 

 

$

51,599

 

Share-based compensation expense

 

10,395

 

 

 

10,412

 

 

 

9,973

 

 

 

20,807

 

 

 

19,748

 

Amortization of acquisition-related intangibles

 

10,815

 

 

 

10,858

 

 

 

5,829

 

 

 

21,673

 

 

 

12,172

 

Flow-through of inventory step up

 

 

 

 

2,599

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales related restructure

 

5,552

 

 

 

 

 

 

 

 

 

5,552

 

 

 

 

Acquisition and integration expenses

 

2,824

 

 

 

6,732

 

 

 

252

 

 

 

9,556

 

 

 

1,289

 

Impairment of goodwill

 

17,558

 

 

 

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

6,400

 

 

 

3,700

 

 

 

24,000

 

 

 

10,100

 

 

 

41,200

 

Restructure charge

 

4,154

 

 

 

2,041

 

 

 

 

 

 

6,195

 

 

 

 

Other

 

900

 

 

 

900

 

 

 

576

 

 

 

1,800

 

 

 

577

 

Non-GAAP operating income

$

51,431

 

 

$

54,833

 

 

$

57,435

 

 

$

106,264

 

 

$

126,585

 

SMART Global Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

February 24,

2023

 

November 25,

2022

 

February 25,

2022

 

February 24,

2023

 

February 25,

2022

GAAP net income (loss) attributable to SGH

$

(27,219

)

 

$

4,992

 

 

$

2,458

 

 

$

(22,227

)

 

$

22,485

 

Share-based compensation expense

 

10,395

 

 

 

10,412

 

 

 

9,973

 

 

 

20,807

 

 

 

19,748

 

Amortization of acquisition-related intangibles

 

10,815

 

 

 

10,858

 

 

 

5,829

 

 

 

21,673

 

 

 

12,172

 

Flow-through of inventory step up

 

 

 

 

2,599

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales related restructure

 

5,552

 

 

 

 

 

 

 

 

 

5,552

 

 

 

 

Acquisition and integration expenses

 

2,824

 

 

 

6,732

 

 

 

252

 

 

 

9,556

 

 

 

1,289

 

Impairment of goodwill

 

17,558

 

 

 

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

6,400

 

 

 

3,700

 

 

 

24,000

 

 

 

10,100

 

 

 

41,200

 

Restructure charge

 

4,154

 

 

 

2,041

 

 

 

 

 

 

6,195

 

 

 

 

Amortization of debt discount and other costs

 

1,048

 

 

 

1,069

 

 

 

2,296

 

 

 

2,117

 

 

 

4,506

 

(Gain) loss on extinguishment of debt

 

16,691

 

 

 

(767

)

 

 

653

 

 

 

15,924

 

 

 

653

 

Foreign currency (gains) losses

 

281

 

 

 

242

 

 

 

1,408

 

 

 

523

 

 

 

2,875

 

Other

 

900

 

 

 

900

 

 

 

576

 

 

 

1,800

 

 

 

577

 

Tax effects of above, other tax adjustments and the tax effect of capitalization of R&D expense

 

(11,753

)

 

 

(3,300

)

 

 

126

 

 

 

(15,053

)

 

 

(1,626

)

Non-GAAP net income attributable to SGH

$

37,646

 

 

$

39,478

 

 

$

47,571

 

 

$

77,124

 

 

$

103,879

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding - Diluted:

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares outstanding

 

49,116

 

 

 

49,791

 

 

 

57,636

 

 

 

49,039

 

 

 

56,135

 

Adjustment for dilutive securities and capped calls

 

726

 

 

 

 

 

 

(2,759

)

 

 

777

 

 

 

(2,670

)

Non-GAAP weighted-average shares outstanding

 

49,842

 

 

 

49,791

 

 

 

54,877

 

 

 

49,816

 

 

 

53,465

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

GAAP diluted earnings (loss) per share

$

(0.55

)

 

$

0.10

 

 

$

0.04

 

 

$

(0.45

)

 

$

0.40

 

Effect of adjustments

 

1.31

 

 

 

0.69

 

 

 

0.83

 

 

 

2.00

 

 

 

1.55

 

Non-GAAP diluted earnings per share

$

0.76

 

 

$

0.79

 

 

$

0.87

 

 

$

1.55

 

 

$

1.95

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to SGH

$

(27,219

)

 

$

4,992

 

 

$

2,458

 

 

$

(22,227

)

 

$

22,485

 

Interest expense, net

 

8,006

 

 

 

8,037

 

 

 

4,462

 

 

 

16,043

 

 

 

9,568

 

Income tax provision (benefit)

 

(1,716

)

 

 

4,890

 

 

 

7,586

 

 

 

3,174

 

 

 

15,341

 

Depreciation expense and amortization of intangible assets

 

19,931

 

 

 

19,789

 

 

 

16,077

 

 

 

39,720

 

 

 

31,890

 

Share-based compensation expense

 

10,395

 

 

 

10,412

 

 

 

9,973

 

 

 

20,807

 

 

 

19,748

 

Flow-through of inventory step up

 

 

 

 

2,599

 

 

 

 

 

 

2,599

 

 

 

 

Cost of sales related restructure

 

5,552

 

 

 

 

 

 

 

 

 

5,552

 

 

 

 

Acquisition and integration expenses

 

2,824

 

 

 

6,732

 

 

 

252

 

 

 

9,556

 

 

 

1,289

 

Impairment of goodwill

 

17,558

 

 

 

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

6,400

 

 

 

3,700

 

 

 

24,000

 

 

 

10,100

 

 

 

41,200

 

Restructure charge

 

4,154

 

 

 

2,041

 

 

 

 

 

 

6,195

 

 

 

 

(Gain) loss on extinguishment of debt

 

16,691

 

 

 

(767

)

 

 

653

 

 

 

15,924

 

 

 

653

 

Other

 

900

 

 

 

900

 

 

 

576

 

 

 

1,800

 

 

 

577

 

Adjusted EBITDA

$

63,476

 

 

$

63,325

 

 

$

66,037

 

 

$

126,801

 

 

$

142,751

 

SMART Global Holdings, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

As of

February 24,

2023

 

August 26,

2022

Assets

 

 

 

Cash and cash equivalents

$

375,854

 

 

$

363,065

 

Accounts receivable, net

 

229,474

 

 

 

410,323

 

Inventories

 

294,367

 

 

 

323,084

 

Other current assets

 

78,475

 

 

 

55,393

 

Total current assets

 

978,170

 

 

 

1,151,865

 

Property and equipment, net

 

171,798

 

 

 

153,935

 

Operating lease right-of-use assets

 

80,468

 

 

 

77,399

 

Intangible assets, net

 

182,894

 

 

 

77,812

 

Goodwill

 

182,710

 

 

 

74,009

 

Other noncurrent assets

 

44,043

 

 

 

37,044

 

Total assets

$

1,640,083

 

 

$

1,572,064

 

 

 

 

 

Liabilities and Equity

 

 

 

Accounts payable and accrued expenses

$

226,289

 

 

$

413,354

 

Current debt

 

32,141

 

 

 

12,025

 

Acquisition-related contingent consideration

 

30,900

 

 

 

 

Other current liabilities

 

131,117

 

 

 

90,161

 

Total current liabilities

 

420,447

 

 

 

515,540

 

Long-term debt

 

789,364

 

 

 

591,389

 

Noncurrent operating lease liabilities

 

76,092

 

 

 

71,754

 

Other noncurrent liabilities

 

22,660

 

 

 

14,835

 

Total liabilities

 

1,308,563

 

 

 

1,193,518

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

SMART Global Holdings shareholders’ equity:

 

 

 

Ordinary shares

 

1,631

 

 

 

1,586

 

Additional paid-in capital

 

417,998

 

 

 

448,112

 

Retained earnings

 

247,756

 

 

 

251,344

 

Treasury shares

 

(123,999

)

 

 

(107,776

)

Accumulated other comprehensive income (loss)

 

(217,557

)

 

 

(221,655

)

Total SGH shareholders’ equity

 

325,829

 

 

 

371,611

 

Noncontrolling interest in subsidiary

 

5,691

 

 

 

6,935

 

Total equity

 

331,520

 

 

 

378,546

 

Total liabilities and equity

$

1,640,083

 

 

$

1,572,064

 

SMART Global Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

February 24,

2023

 

November 25,

2022

 

February 25,

2022

 

February 24,

2023

 

February 25,

2022

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(26,786

)

 

$

5,324

 

 

$

2,972

 

 

$

(21,462

)

 

$

23,670

 

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

 

 

 

 

 

 

 

 

 

Depreciation expense and amortization of intangible assets

 

19,931

 

 

 

19,789

 

 

 

16,077

 

 

 

39,720

 

 

 

31,890

 

Amortization of debt discount and issuance costs

 

1,048

 

 

 

1,069

 

 

 

2,438

 

 

 

2,117

 

 

 

4,770

 

Share-based compensation expense

 

10,395

 

 

 

10,412

 

 

 

9,973

 

 

 

20,807

 

 

 

19,748

 

Impairment of goodwill

 

17,558

 

 

 

 

 

 

 

 

 

17,558

 

 

 

 

Change in fair value of contingent consideration

 

6,400

 

 

 

3,700

 

 

 

24,000

 

 

 

10,100

 

 

 

41,200

 

(Gain) loss on extinguishment of debt

 

16,691

 

 

 

(767

)

 

 

653

 

 

 

15,924

 

 

 

653

 

Other

 

3,705

 

 

 

319

 

 

 

880

 

 

 

4,024

 

 

 

688

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

78,529

 

 

 

129,695

 

 

 

(39,526

)

 

 

208,224

 

 

 

(75,579

)

Inventories

 

119,491

 

 

 

(82,882

)

 

 

(13,225

)

 

 

36,609

 

 

 

26,415

 

Other assets

 

(1,525

)

 

 

(5,199

)

 

 

8,829

 

 

 

(6,724

)

 

 

10,445

 

Accounts payable and accrued expenses and other liabilities

 

(145,951

)

 

 

(83,030

)

 

 

19,750

 

 

 

(228,981

)

 

 

(36,142

)

Payment of acquisition-related contingent consideration

 

 

 

 

(73,724

)

 

 

 

 

 

(73,724

)

 

 

 

Deferred income taxes, net

 

1,049

 

 

 

1,309

 

 

 

(656

)

 

 

2,358

 

 

 

(447

)

Net cash provided by (used for) operating activities

 

100,535

 

 

 

(73,985

)

 

 

32,165

 

 

 

26,550

 

 

 

47,311

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures and deposits on equipment

 

(12,613

)

 

 

(11,649

)

 

 

(7,376

)

 

 

(24,262

)

 

 

(20,142

)

Acquisition of business, net of cash acquired

 

(2,800

)

 

 

(210,273

)

 

 

 

 

 

(213,073

)

 

 

 

Other

 

2,060

 

 

 

(1,721

)

 

 

(81

)

 

 

339

 

 

 

(692

)

Net cash used for investing activities

 

(13,353

)

 

 

(223,643

)

 

 

(7,457

)

 

 

(236,996

)

 

 

(20,834

)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

 

 

295,287

 

 

 

270,775

 

 

 

295,287

 

 

 

270,775

 

Proceeds from issuance of ordinary shares

 

308

 

 

 

3,942

 

 

 

2,431

 

 

 

4,250

 

 

 

7,460

 

Proceeds from borrowing under line of credit

 

 

 

 

 

 

 

24,000

 

 

 

 

 

 

84,000

 

Payment of acquisition-related contingent consideration

 

 

 

 

(28,100

)

 

 

 

 

 

(28,100

)

 

 

 

Payments to acquire ordinary shares

 

(11,564

)

 

 

(4,659

)

 

 

(229

)

 

 

(16,223

)

 

 

(2,895

)

Payment of premium in connection with convertible note exchange

 

(14,141

)

 

 

 

 

 

 

 

 

(14,141

)

 

 

 

Repayments of debt

 

(4,507

)

 

 

(4,489

)

 

 

(125,000

)

 

 

(8,996

)

 

 

(125,000

)

Net cash paid for settlement and purchase of Capped Calls

 

(4,304

)

 

 

 

 

 

 

 

 

(4,304

)

 

 

 

Distribution to noncontrolling interest

 

(2,009

)

 

 

 

 

 

(3,773

)

 

 

(2,009

)

 

 

(3,773

)

Repayments of borrowings under line of credit

 

 

 

 

 

 

 

(59,000

)

 

 

 

 

 

(109,000

)

Other

 

(3,414

)

 

 

(2

)

 

 

(3,841

)

 

 

(3,416

)

 

 

(3,841

)

Net cash provided by (used for) financing activities

 

(39,631

)

 

 

261,979

 

 

 

105,363

 

 

 

222,348

 

 

 

117,726

 

 

 

 

 

 

 

 

 

 

 

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

 

1,712

 

 

 

205

 

 

 

2,647

 

 

 

1,917

 

 

 

(1,421

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

49,263

 

 

 

(35,444

)

 

 

132,718

 

 

 

13,819

 

 

 

142,782

 

Cash, cash equivalents and restricted cash at beginning of period

 

327,621

 

 

 

363,065

 

 

 

233,050

 

 

 

363,065

 

 

 

222,986

 

Cash, cash equivalents and restricted cash at end of period

$

376,884

 

 

$

327,621

 

 

$

365,768

 

 

$

376,884

 

 

$

365,768

 

 

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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