Penguin Solutions, Inc.

(Tabular amounts in thousands, except per share amounts)

Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Penguin Solutions, Inc. (“Penguin Solutions,” “we,” “us,” “our,” the “Company” or similar terms) and its consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) consistent in all material respects with those applied in our Annual Report on Form 10-K for the fiscal year ended August 30, 2024 and the applicable rules and regulations of the SEC regarding interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, consisting of a normal recurring nature, to fairly state the financial information set forth herein. These consolidated interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended August 30, 2024.

Presentation of SMART Brazil as Discontinued Operations: On June 13, 2023, we entered into an agreement to divest of an 81% interest in SMART Modular Technologies do Brasil – Indústria e Comercio de Componentes Ltda. (“SMART Brazil”). We concluded that, as of August 25, 2023, (i) the net assets of SMART Brazil met the criteria for classification as held for sale and (ii) the proposed sale represented a strategic shift that was expected to have a major effect on our operations and financial results. On November 29, 2023, we completed the divestiture. The balance sheets, results of operations and cash flows of SMART Brazil have been presented as discontinued operations for all periods presented. SMART Brazil was previously included within our Integrated Memory segment. See “Divestiture of SMART Brazil.”

Unless otherwise noted, amounts and discussion within these notes to the consolidated financial statements relate to our continuing operations.

Fiscal Year: Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2025 and 2024 contain 52 weeks and 53 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated.

Financial information for our subsidiaries in Brazil was included in our consolidated financial statements on a one-month lag because their fiscal years ended on July 31 of each year. In connection with the completion of the divestiture of an 81% interest in SMART Brazil, we ceased consolidating the operations of SMART Brazil in our financial statements as of the November 29, 2023 disposal date. As a result, financial information for the first quarter of 2024 includes the four-month period for our SMART Brazil operations from August 1, 2023 to November 29, 2023.

Preferred Share Investment

On December 13, 2024, we closed the SKT Investment (as defined below) by SK Telecom Co., Ltd. (“SKT”). Pursuant to the terms of the Securities Purchase Agreement by and between Penguin Solutions and SKT (the “SKT Purchase Agreement”), we sold to Astra AI Infra LLC (“Astra AI Infra”), an affiliate of SKT,200,000 convertible preferred shares, par value $0.03 per share, of Penguin Solutions (the “CPS”) at a price of $1,000 per share or an aggregate price of $200.0 million (the “SKT Investment”). The CPS have an initial liquidation preference of 1 x and are only redeemable at our option inone installment upon notice, provided that no such notice shall be sent until at least five years after the date of the closing of the SKT Investment. The CPS vote together with the ordinary shares, par value $0.03 per share, of Penguin Solutions, on an as-converted basis, and entitle the holder to receive dividends ofsix percent per annum, cumulative, payable quarterly in-kind or in cash at our option, subject to certain conditions.

11

The holder of the CPS may convert the CPS into ordinary shares at any time, provided that the CPS may, at our option, automatically be converted into ordinary shares on any date following the second anniversary of the closing of the SKT Investment upon which the volume-weighted average price of the ordinary shares for any 15 consecutive trading day period equals or exceeds 150% of the then-applicable conversion price. The CPS are convertible into ordinary shares at an initial conversion price of $32.81, subject to adjustment upon the occurrence of certain events. Holders of the CPS are also entitled to certain protective provisions.

Additionally, on the closing date of the SKT Investment, we and Astra AI Infra entered into an Investor Agreement, and the Certificate of Designation relating to the CPS (the “CPS Certificate of Designation”) became effective. The Investor Agreement and the CPS Certificate of Designation provide for certain rights and restrictions relating to the SKT Investment, including but not limited to board representation rights, pro rata rights, registration rights and consent rights, and standstill provisions, disposition restrictions and voting obligations.

Overview of Transaction

On November 29, 2023, we completed the divestiture of SMART Brazil pursuant to the terms of that certain Stock Purchase Agreement (the “Brazil Purchase Agreement”), by and among SMART Modular Technologies (LX) S.à r.l., a société à responsabilité limitée governed by the laws of Grand Duchy of Luxembourg and a wholly owned subsidiary of Penguin Solutions (the “Brazil Seller”), Lexar Europe B.V., a company organized under the laws of The Netherlands (the “Brazil Purchaser”), Shenzhen Longsys Electronics Co., Ltd., a company limited by shares governed by the laws of the People’s Republic of China (“Longsys”), solely with respect to certain provisions therein, Shanghai Intelligent Memory Semiconductor Co., Ltd., a limited liability company governed by the laws of the People’s Republic of China and, solely with respect to certain provisions therein, Penguin Solutions.

Pursuant to the Brazil Purchase Agreement, Brazil Seller sold to Brazil Purchaser, and Brazil Purchaser purchased from Brazil Seller,81% of Brazil Seller’s right, title and interest in and to the outstanding quotas of SMART Brazil, with Brazil Seller retaining a 19% interest in SMART Brazil (the “Retained Interest”).

Pursuant to the Brazil Purchase Agreement, Brazil Seller has a right to receive, and Brazil Purchaser is obligated to pay, (i) a deferred payment due 18 months following the closing and (ii) subject to and at the time of exercise of the Put/Call Option (as defined below), an additional deferred cash adjustment equal to 19% of the amount of SMART Brazil’s net cash as of the closing (as calculated pursuant to the Brazil Purchase Agreement).

Pursuant to the Brazil Purchase Agreement, at the closing, SMART Brazil, Brazil Seller, Brazil Purchaser and Longsys entered into a Quotaholders Agreement, which provides Brazil Seller with a put option to sell the Retained Interest in SMART Brazil to Brazil Purchaser (the “Put Option”) during three exercise windows following SMART Brazil’s fiscal years ending December 31, 2026, December 31, 2027 or December 31, 2028 (the “Exercise Windows”), with such Exercise Windows beginning on June 15, 2027 and ending on July 15, 2027, beginning on June 15, 2028 and ending on July 15, 2028 and beginning on June 15, 2029 and ending on July 15, 2029, respectively. A call option has also been granted to Brazil Purchaser to require Brazil Seller to sell the Retained Interest to Brazil Purchaser during the Exercise Windows (together with the Put Option, the “Put/Call Option”). The price for the Put/Call Option is based on a 100% enterprise value of 7.5 x net income for SMART Brazil for the preceding fiscal year at the time of exercise.

Total consideration in exchange for the sale of an 81% interest in SMART Brazil amounted to $194.1 million which included cash at closing of $164.9 million, a deferred payment with fair value of $25.4 million and a deferred cash adjustment with a fair value of $3.7 million. The deferred payment, comprised of a notional amount of $28.4 million, discounted at 7.5% due May 2025. The deferred payment is included in other current assets in the accompanying consolidated balance sheets. The fair value of the deferred cash adjustment, comprised of a notional amount of $4.8 million discounted at 7.5%, equal to 19% of the amount of SMART Brazil’s net cash as of the closing (as calculated pursuant to the Brazil Purchase Agreement). The deferred cash adjustment, which is accounted for as a derivative financial instrument, is due at the time of exercise of the Put/Call Option and was included in other noncurrent assets in the accompanying consolidated balance sheet.

12

Presentation of SMART Brazil Operations

As of August 25, 2023, we concluded that the net assets of SMART Brazil met the criteria for classification as held for sale. In addition, the divestiture of SMART Brazil was expected to have a major effect on our operations and financial results. As a result, we have presented the results of operations, cash flows and financial position of SMART Brazil as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented.

A disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less costs to sell. Accordingly, we evaluated the carrying value of the net assets of SMART Brazil (including $206.3 million recognized within shareholders’ equity related to the cumulative translation adjustment from SMART Brazil), estimated costs to sell and expected proceeds and concluded the net assets were impaired as of August 25, 2023. As a result, we recognized an impairment charge of $153.0 million in the fourth quarter of 2023 to write down the carrying value of the net assets of SMART Brazil. In addition, we concluded that the outside basis of SMART Brazil inclusive of any withholding taxes should be recognized upon the classification as held for sale as of August 25, 2023. Accordingly, we recognized withholding taxes on the expected capital gain and deferred tax liabilities of $28.6 million in 2023.

Assets and liabilities of SMART Brazil as of the November 29, 2023 disposal date were as follows:

13

The following table presents the results of operations for SMART Brazil:

Loss from Divestiture of SMART Brazil

The following table presents the calculation of the loss from the divestiture of an 81% interest in SMART Brazil:

(1)The sale of an 81% interest in SMART Brazil resulted in the de-consolidation of SMART Brazil and, accordingly, the release of the related cumulative translation adjustment. Included in the basis calculation above is the balance of cumulative translation adjustment for SMART Brazil as of the closing. The release of the cumulative translation adjustment is included in net income (loss) from discontinued operations in the accompanying consolidated statement of operations.

(2)In connection with the transaction, we revalued our 19% Retained Interest in SMART Brazil based on the implied value for 100% of SMART Brazil, adjusted for lack of control premium. As of February 28, 2025, the carrying value of our remaining 19% interest in SMART Brazil was $37.8 million and was included in other noncurrent assets in the accompanying consolidated balance sheets as a non-marketable equity investment.

14

Recognition Periods: The loss from the divestiture of an 81% interest in SMART Brazil was recognized as follows:

Recently Issued Accounting Standards

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses, as well as a qualitative description of amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. This ASU also requires disclosure of the total amount of selling expenses and an entity’s definition of selling expenses. The amendments in this ASU are effective for us in 2028 for annual reporting and in 2029 for interim reporting, with early adoption permitted and may be applied prospectively or retrospectively. We do not expect ASU 2024-03 to have an impact on our financial position, results of operations and cash flows. We are currently evaluating the impact on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU are intended to increase transparency through improvements to annual disclosures primarily related to income tax rate reconciliation and income taxes paid. The amendments in this ASU are effective for us in 2026 for annual reporting, with early adoption permitted. The ASU may be applied on a prospective basis, although retrospective application is permitted. We are evaluating the timing and effects of this ASU on our income tax disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Segment Reporting Disclosures, which will require an entity to provide more detailed information about its reportable segment expenses that are included within management’s measurement of profit and loss and will require certain annual disclosures to be provided on an interim basis. The amendments in this ASU are effective for us in 2025 for annual reporting and in 2026 for interim reporting and are required to be applied using the full retrospective method of transition. We are evaluating the effects of adoption of this ASU on our segment disclosures.

Cash and Investments

As of February 28, 2025 and August 30, 2024, all of our debt securities, the fair values of which approximated their carrying values, were classified as held to maturity. As of February 28, 2025, restricted cash, which is included in other noncurrent assets, was $0.3 million. Cash, cash equivalents and short-term investments were as follows:

15

Non-marketable Equity Investments

As of both February 28, 2025 and August 30, 2024, other noncurrent assets included $53.0 million of non-marketable equity investments, which are accounted for under the measurement alternative at cost less impairment, if any. In the event an observable price change occurs in an orderly transaction for an identical or a similar investment, the carrying value of investments would be remeasured to fair value as of the date that the observable transaction occurred, with any resulting gains or losses recorded in results of operations.

Accounts Receivable

In the third quarter of 2023, we entered into a trade accounts receivable sale program with a third-party financial institution to sell certain of our trade accounts receivable on a non-recourse basis pursuant to a factoring arrangement. This program allows us to sell certain of our trade accounts receivables up to $60.0 million. As of February 28, 2025, there have beenno trade accounts receivable sold under this program.

Inventories

As of February 28, 2025 and August 30, 2024,19% and 14%, respectively, of total inventories were owned and held under our logistics services program.

Property and Equipment

Depreciation expense for property and equipment was $5.0 million and $10.0 million in the second quarter and first six months of 2025, respectively, and $7.2 million and $14.7 million in the second quarter and first six months of 2024, respectively.

16

Intangible Assets and Goodwill

In the first six months of 2025 and 2024, we capitalized $0.8 million and $0.9 million, respectively, for intangible assets with weighted-average useful lives of 18.5 years and 19.0 years, respectively. Amortization expense for intangible assets was $9.0 million and $19.0 million in the second quarter and first six months of 2025, respectively, and $9.9 million and $20.1 million in the second quarter and first six months of 2024, respectively. Amortization expense is expected to be $16.6 million for the remainder of 2025, $30.3 million for 2026, $29.7 million for 2027, $9.9 million for 2028, $6.0 million for 2029 and $10.8 million for 2030 and thereafter.

During the second quarter of 2023, we initiated a plan within our Advanced Computing segment pursuant to which we intend to wind down manufacturing and discontinue the sale of legacy products offered through our Penguin Edge business by approximately the end of 2025. As a result, we recorded a charge of $6.1 million in the second quarter of 2025 to impair the carrying value of Advanced Computing goodwill. At each reporting date, we reassess the estimated remaining cash flows of the Penguin Edge business. We currently anticipate that the goodwill of the Penguin Edge reporting unit of $10.0 million as of February 28, 2025 will become further impaired in future periods.

Accounts Payable and Accrued Expenses

(1)Included accounts payable for property and equipment of $0.6 million and $0.4 million as of February 28, 2025 and August 30, 2024, respectively.

Debt

17

Credit Facility

On February 7, 2022, Penguin Solutions and SMART Modular Technologies, Inc. entered into a credit agreement (the “Original Credit Agreement”) with a syndicate of banks and Citizens Bank, N.A., as administrative agent that provided for (i) a term loan credit facility in an aggregate principal amount of $275.0 million (the “2027 TLA”) and (ii) a revolving credit facility in an aggregate principal amount of $250.0 million (the “2027 Revolver”), in each case, maturing on February 7, 2027. On August 29, 2022, the Original Credit Agreement was amended (the “Amended Credit Agreement”) to, among other things, provide for incremental term loans in an aggregate amount of $300.0 million (together with the 2027 TLA, the “Amended 2027 TLA”). As of February 28, 2025, there was $300.0 million of principal amount outstanding under the Amended 2027 TLA, unamortized issuance costs were $2.2 million and the effective interest rate was 7.43%. As of February 28, 2025, there wereno amounts outstanding under the 2027 Revolver and unamortized issuance costs were $1.8 million.

Convertible Senior Notes

Repurchase of Convertible Senior Notes

On August 6, 2024, we repurchased $80.0 million aggregate principal amount of our 2.25% Convertible Senior Notes due 2026 (the “2026 Notes”) for $100.6 million cash (including payment for accrued interest) in privately-negotiated transactions. The repurchase was accounted for as debt extinguishment. Accordingly, we recognized a loss in the fourth quarter of 2024, included in other non-operating expense, of $20.4 million, consisting of $19.7 million premium paid to extinguish the 2026 Notes and $0.7 million for the write-off of unamortized issuance costs.

Convertible Senior Notes Interest

Unamortized debt discount and issuance costs are amortized over the terms of our 2026 Notes, our 2.00% Convertible Senior Notes due 2029 (the “2029 Notes”) and our 2.00% Convertible Senior Notes due 2030 (the “2030 Notes”) using the effective interest method. As of February 28, 2025 and August 30, 2024, the effective interest rate for our 2026 Notes was 2.83%. As of February 28, 2025 and August 30, 2024, the effective interest rate for our 2029 Notes was 2.40%. As of February 28, 2025 and August 30, 2024, the effective interest rate for our 2030 Notes was 2.65%. Aggregate interest expense for our convertible senior notes consisted of contractual stated interest and amortization of issuance costs and included the following:

Maturities of Debt

As of February 28, 2025, maturities of debt were as follows:

18

Leases

We have operating leases through which we utilize facilities, offices, and equipment in our manufacturing operations, research and development activities and selling, general and administrative functions. Sublease income was not significant in any period presented. The components of operating lease expense were as follows:

Cash flows from operating activities included payments for operating leases of $4.3 million and $4.5 million in the first six months of 2025 and 2024, respectively.

As of February 28, 2025 and August 30, 2024, the weighted-average remaining lease term for our operating leases was 10.0 years and 10.1 years, respectively, and the weighted-average discount rate was 6.0% and 6.1%, respectively. Certain of our operating leases include one or more options to extend the lease term for periods fromtwo tofive years. In determining the present value of our operating lease liabilities, we have assumed we will not extend any lease terms.

As of February 28, 2025, minimum payments of lease liabilities were as follows:

Commitments and Contingencies

Product Warranty and Indemnities

We generally provide a limited warranty that our products are in compliance with applicable specifications existing at the time of delivery. Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of amounts paid for such items. Our warranty obligations are not material.

We are party to a number of agreements in which we have agreed to defend, indemnify and hold harmless our customers and suppliers from damages and costs, which may arise from product defects as well as from any alleged infringement by our products of third-party patents, trademarks or other proprietary rights. We believe our internal development processes and other policies and practices limit our exposure related to such indemnities. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. However, to date, we have not had to reimburse any of our customers or suppliers for any significant losses related to these indemnities. We have not recorded any liability for such indemnities.

Contingencies

From time to time, we may be involved in legal matters that arise in the normal course of business. Litigation in general, and intellectual property, employment and shareholder litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to

19

predict. We regularly review contingencies to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made.

Equity

Penguin Solutions Shareholders’ Equity

Preferred Shares

On December 13, 2024, we closed the SKT Investment. Pursuant to the terms of the SKT Purchase Agreement, we sold to Astra AI Infra, a special purpose vehicle formed by SKT to consummate the SKT Investment (the “SPV”),200,000 convertible preferred shares, par value $0.03 per share, of Penguin Solutions at a price of $1,000 per share or an aggregate price of $200.0 million.

Conversion

A holder of the CPS may convert such holder’s CPS into ordinary shares at any time, provided that the CPS may, at our option, automatically be converted into ordinary shares on any date following the second anniversary of the closing of the SKT Investment upon which the volume-weighted average price of the ordinary shares for anyfifteen consecutive trading day period equals or exceeds 150% of the then-applicable conversion price. The CPS are convertible into ordinary shares at an initial conversion price of $32.81, subject to customary adjustment upon the occurrence of certain events (including share subdivision and consolidation, certain dividends and distributions, and any reclassification or share exchange) and a share issuance limitation.

Dividends

The CPS entitle the holder to receive dividends ofsix percent per annum, cumulative, and payable quarterly in-kind or in cash at the Company’s option, subject to certain conditions. We declared and paid preferred cash dividends of $2.2 million in the second quarter and first six months of 2025. As of February 28, 2025, we accrued preferred dividends of $0.4 million.

Liquidation Preference

In case of a Liquidation Trigger Event (as defined in the CPS Certificate of Designation), each holder of the CPS will be entitled to receive, in preference to holders of the ordinary shares, the greater of (i) the original issue price plus accrued but unpaid dividends (whether or not declared) to the date of the applicable Liquidation Trigger Event to the extent such accrued but unpaid dividends are not compounded dividends as of such time and (ii) the amount such holder of the CPS would receive had such holder, immediately prior to such Liquidation Trigger Event, converted the CPS into ordinary shares. The liquidation preference associated with the CPS was $1,000 per share at February 28, 2025.

Voting Rights

Except as specified under applicable law, each holder of the CPS will be entitled to vote or consent as a single class with the holders of ordinary shares on all matters submitted for a vote of or consent by holders of ordinary shares, such number of votes equal to the largest number of whole ordinary shares in which all CPS held of record by such holder could then be converted.

Director Designation Rights

SKT (through the SPV) is entitled to nominateone director if the total number of directors of the Company iseleven or less, andtwo directors if the total number of directors of the Company istwelve or more, to be elected or appointed to the Board of Directors of the Company (any such director, an “Investor Designee”). The right to nominate an Investor Designee continues until such time as SKT and its subsidiaries and affiliates (including the SPV) beneficially own less than five percent of the ordinary shares then issued and outstanding (calculated on a fully-diluted basis) directly or by holding the CPS.

20

Redemption Rights

The CPS will not be redeemable or repurchased upon the election of the holders of the CPS. We may repurchase the CPS in one installment upon notice to the holders of the CPS, provided that no such notice shall be sent until at least five years after the date of the closing of the SKT Investment.

Share Repurchase Authorization

On April 4, 2022, our Board of Directors approved a $75.0 million share repurchase authorization (the “Initial Authorization”), under which we may repurchase our outstanding ordinary shares from time to time through open market purchases, privately-negotiated transactions or otherwise. On January 9, 2024, we announced that the Audit Committee of the Board of Directors approved an additional $75.0 million share repurchase authorization (the “Additional Authorization,” and together with the Initial Authorization, the “Current Authorization”). The Current Authorization has no expiration date but may be suspended or terminated by the Board of Directors at any time. In the first six months of 2025 and 2024, we repurchased 634 thousand and 931 thousand ordinary shares for $11.1 million and $13.9 million, respectively, under the Current Authorization. As of February 28, 2025, an aggregate of $66.6 million remained available for the repurchase of our ordinary shares under the Current Authorization. Certain of our agreements, including the Amended Credit Agreement, the SKT Purchase Agreement and the CPS Certificate of Designation, contain restrictions that limit our ability to repurchase our ordinary shares.

Other Share Repurchases

Ordinary shares withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are treated as ordinary share repurchases. In the first six months of 2025 and 2024, we repurchased 368 thousand and 113 thousand ordinary shares as payment of withholding taxes for $6.5 million and $1.9 million, respectively.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component in the first six months of 2025 were as follows:

Fair Value Measurements

21

The deferred cash adjustment resulting from the divestiture of an 81% interest in SMART Brazil is accounted for as a derivative financial instrument and is revalued at the end of each reporting period. The asset’s fair value, as measured on a recurring basis, was based on Level 2 measurements, including market-based observable inputs of interest rates and credit-risk spreads.

The fair value of the Amended 2027 TLA, as measured on a non-recurring basis, was estimated based on Level 2 measurements, including discounted cash flows and interest rates based on similar debt issued by parties with credit ratings similar to ours. The fair values of our convertible senior notes, as measured on a non-recurring basis, were determined based on Level 2 measurements, including the trading prices of the notes.

Equity Plans

As of February 28, 2025,7.9 million of our ordinary shares were available for future awards under our equity plans.

The disclosures related to our restricted awards and employee share purchase plan include both our continuing and discontinued operations.

Restricted Share Awards and Restricted Share Units Awards (“Restricted Awards”)

Restricted Award activity was as follows:

As of February 28, 2025, total unrecognized compensation costs for unvested Restricted Awards were $66.3 million, which were expected to be recognized over a weighted-average period of 2.4 years.

Employee Share Purchase Plan (“ESPP”)

Under our ESPP, employees purchased 253 thousand ordinary shares for $3.2 million in the first six months of 2025 and 298 thousand ordinary shares for $3.3 million in the first six months of 2024.

Share-Based Compensation Expense

Share-based compensation expense for our continuing operations was as follows:

Income tax benefits for share-based awards were $1.4 million and $2.9 million in the second quarter and first six months of 2025, respectively, and $1.7 million and $3.5 million in the second quarter and first six months of 2024, respectively.

22

Revenue and Customer Contract Balances

Net Sales and Gross Billings

We provide certain services on an agent basis, whereby we procure product, materials and services on behalf of our customers and then resell such product, materials or services to our customers. As a result, we recognize only the amount related to the agent component as revenue in our results of operations. The cost of products, materials and services invoiced to our customers under these arrangements, but not recognized as revenue or cost of sales in our results of operations, were as follows:

Customer Contract Balances

(1)Contract assets are included in other current and noncurrent assets.

(2)Contract liabilities are included in other current and noncurrent liabilities based on the timing of when our customers are expected to take control of the asset or receive the benefit of the service.

Contract assets represent amounts recognized as revenue for which we do not have the unconditional right to consideration.

Deferred revenue represents amounts received from customers in advance of satisfying performance obligations. As of February 28, 2025, we expect to recognize revenue of $121.6 million of the balance of $133.5 million in the next 12 months and the remaining amount thereafter. In the first six months of 2025, we recognized revenue of $52.2 million from satisfying performance obligations related to amounts included in deferred revenue as of August 30, 2024. In addition, as of February 28, 2025, other current liabilities included $18.6 million that is not included in the above remaining performance obligations. While this liability relates to amounts received from customers in connection with arrangements that are cancellable at the customer’s discretion, we have not had to refund any such amounts to our customers in the periods presented.

Customer advances, which is included in other current liabilities in the accompanying consolidated balance sheets, represent amounts received from customers for advance payments to secure product. In the first six months of 2025, we recognized revenue of $0.5 million from satisfying performance obligations related to amounts included in customer advances as of August 30, 2024.

As of February 28, 2025 and August 30, 2024, other current liabilities included $15.1 million and $12.2 million, respectively, for estimates of consideration payable to customers, including estimates for pricing adjustments and returns.

Other Operating (Income) Expense

In recent periods, we initiated plans that included workforce reductions and the elimination of certain projects across our businesses. In connection therewith, we recorded restructuring charges of $1.0 million and $6.3 million in the first six months of 2025 and 2024, respectively, primarily for employee severance costs and other benefits. We anticipate that these activities will continue into future quarters and anticipate recording additional

23

restructuring charges. As of February 28, 2025, $0.9 million remained unpaid, which is expected to be paid by the end of fiscal 2025.

Other Non-operating (Income) Expense

Income Taxes

Income taxes includes a provision (benefit) for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to us and our subsidiaries, adjusted for certain discrete items, which are fully recognized in the period they occur. We have historically determined our interim income tax provision (benefit) by applying the annual estimated effective income tax rate expected to be applicable for the full fiscal year to the income (loss) before taxes for jurisdictions which are subject to income tax. In determining the full year estimate, we do not include the impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax provision (benefit) and income (loss) before taxes. Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate. Additionally, our income tax provision (benefit) is subject to volatility and could be impacted by changes in our geographic earnings, non-deductible share-based compensation and certain tax credits.

Our effective tax rate was 46.3% and 48.6% in the second quarter and first six months of 2025, respectively, and differed from the U.S. statutory rate primarily due to losses generated in a jurisdiction where no tax benefit can be recognized and to withholding taxes, state income taxes, and nondeductible compensation paid to officers, partially offset by research and development tax credits. Our effective tax rate was (20.3)% and (31.0)% in the second quarter and first six months of 2024, respectively, and differed from the U.S. statutory rate primarily due to losses generated in a jurisdiction where no tax benefit can be recognized, withholding taxes and state income taxes.

Determining the consolidated income tax provision (benefit), income tax liabilities and deferred tax assets and liabilities involves judgment. We calculate and provide for income taxes in each of the tax jurisdictions in which we operate, which involves estimating current tax exposures as well as making judgments regarding the recoverability of deferred tax assets in each jurisdiction. The estimates used could differ from actual results, which may have a significant impact on operating results in future periods.

24

Earnings Per Share

We calculate basic earnings per ordinary share (“EPS”) pursuant to the two-class method as a result of the issuance of the CPS on December 13, 2024. The two-class method is an earnings allocation formula that determines EPS for ordinary shares and participating securities according to dividend and participation rights in undistributed earnings. Under this method, all current period earnings, distributed and undistributed, are allocated to ordinary shares and participating securities based on their respective rights to receive dividends. The CPS are considered a participating security. The CPS are not included in the computation of basic EPS in periods in which we have a net loss, as the CPS are not contractually obligated to share in our net losses.

With respect to the CPS, diluted EPS is calculated using the more dilutive of the two-class method or if-converted method. The two-class method uses net income available to ordinary shareholders and assumes conversion of all potential shares other than the participating securities. The if-converted method uses net income and assumes conversion of all potential shares including the participating securities.

Dilutive potential ordinary shares include outstanding share options, unvested restricted share units, convertible notes and convertible preferred shares.

The following table summarizes the computation of basic and diluted EPS under the two-class or if-converted method in applicable periods, as well as the anti-dilutive shares excluded:

Upon any conversion of our convertible senior notes, we will be required to pay cash in an amount at least equal to the principal portion and have the option to settle any amount in excess of the principal portion in cash and/or ordinary shares. As a result, only the amounts expected to be settled in excess of the principal portion are considered in calculating diluted earnings per share under the if-converted method.

25

Segment and Other Information

Segment information presented below is consistent with how our chief operating decision maker evaluates operating results to make decisions about allocating resources and assessing performance. We have the following three business units, which are our reportable segments:

•Advanced Computing: Our Advanced Computing segment, under our Penguin Computing and Stratus brands, offers specialized platform solutions and services for artificial intelligence, high-performance computing, machine learning, advanced modeling and the internet of things that span the continuum of edge, core and cloud. Our solutions are designed specifically for customers across multiple markets, including hyperscale, financial services, energy, government, education, healthcare and others.

•Integrated Memory: Our Integrated Memory segment, under our SMART Modular Technologies brand, provides high-performance and reliable integrated memory solutions through the design, development and advanced packaging of leading-edge to extended lifecycle products. These specialty products are tailored to meet customer-specific requirements across networking and communications, enterprise storage and computing, including server applications and other vertical markets. These products are marketed to original equipment manufacturers and to commercial and government customers. The Integrated Memory segment also offers SMART Supply Chain Services, which provides customized, integrated supply chain services to enable our customers to better manage supply chain planning and execution, reduce costs and increase productivity.

•Optimized LED: Our Optimized LED segment, under our Cree LED brand, offers a broad portfolio of application-optimized LEDs focused on improving lumen density, intensity, efficacy, optical control and/or reliability. Backed by expert design assistance and superior sales support, our LED products enable our customers to develop and market LED-based products for general lighting, video displays and specialty lighting applications.

Segments are determined based on sources of revenue, types of customers and operating performance. There are no differences between the accounting policies for our segment reporting and our consolidated results of operations. Operating expenses directly associated with the activities of a specific segment are charged to that segment. Certain other indirect operating income and expenses are generally allocated to segments based on their respective percentage of net sales. We do not identify (other than goodwill) or report internally our assets nor allocate certain expenses and amortization, interest, other non-operating (income) expense or taxes to segments.

26