Penguin Solutions, Inc.
For the period ended May 30, 2025. Filed Jul 8, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
May 30, 2025 · Filed Jul 8, 2025
PENG$41.83+12.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-02-28; filed 2025-04-02.
0001628280-25-016182
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-05-30; filed 2025-07-08.
0001628280-25-034541
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 70 previous paragraphs and 92 current paragraphs.
35 unchanged; 32 reworded; 23 added; 1 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
On June 30, 2025, we completed the U.S. Domestication of the parent company of our corporate group, Penguin Solutions Cayman, from the Cayman Islands to the State of Delaware in the United States, resulting in Penguin Solutions Delaware becoming our publicly traded parent company and the successor issuer to Penguin Solutions Cayman. The financial information in this Quarterly Report for periods prior to the completion of the U.S. Domestication relates to Penguin Solutions Cayman. Unless stated otherwise or the context requires otherwise, the terms “Penguin Solutions,” “Company,” “we,” “our,” “us” or similar terms (i) for periods prior to the effectiveness of the U.S. Domestication, refer to Penguin Solutions Cayman and its consolidated subsidiaries and (ii) for periods at or after the completion of the U.S. Domestication, refer to Penguin Solutions Delaware and its consolidated subsidiaries. See “Explanatory Note” and “About this Quarterly Report,” above.
Current report
believe our diversified business segments may sometimes provide a natural hedge against downturns in any particular industry and resulting negative impacts on the financial and operational success of our customers. However, broader macro-economic trends, including global conflicts impacting international relations, recessionary indicators, high inflation rates, uncertainty and costs associated with trade policies and tariffs, and interest rates, can adversely affect all three segments concurrently.
Current report
In the first nine months of 2025, net sales increased by $171.2 million, or 19.9%, compared to the same period in the prior year. The increase in the nine-month period was due to higher sales from our Advanced Computing and Integrated Memory business segments, partially offset by lower sales from our Optimized LED business segment. Advanced Computing net sales increased by $104.9 million, or 25.9%, in the first nine months of 2025, compared to the same period in the prior year, primarily due to higher hardware sales driven by increased demand for AI solutions and high-performance computing within the first half of 2025. Integrated Memory net sales increased by $71.5 million, or 27.4%, in the first nine months of 2025, compared to the same period in the prior year, primarily due to higher sales volumes of DRAM and Flash storage products stemmi
Current report
Advanced Computing operating income decreased by $4.2 million, or 14.7%, in the third quarter of 2025, as compared to the same period in the prior year, primarily due to decreased net revenue from lower hardware sales, and increased by $22.6 million, or 32.7%, in the first nine months of 2025, as compared to the same period in the prior year, primarily due to increas
Current report
Repayment of 2022 TLA and 2025 Credit Facility
Current report
On June 24, 2025 (the “Refinancing Closing Date”), Penguin Solutions (the “Parent Borrower”) and SMART Modular Technologies, Inc. (the “Co-Borrower” and together with the Parent Borrower, the “Borrowers”) entered into a new Credit Agreement (the “2025 Credit Agreement”) by and among the Borrowers, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing bank. The 2025 Credit Agreement provides for a revolving credit facility in an aggregate principal amount of $400 million (the “2025 Credit Facility” and the revolving loans thereunder, the “2025 Loans”), maturing on June 24, 2030.
Current report
Under the 2025 Credit Agreement, 2025 Loans bear interest at a rate per annum equal to either, at the Borrowers’ option, Term Secured Overnight Financing Rate (“Term SOFR”) rate or a base rate, in each case plus an applicable margin based on the Total Leverage Ratio (as defined in the 2025 Credit Agreement) and ranges from 1.25% to 3.00% per annum with respect to Term SOFR borrowings and from 0.25% to 2.00% per annum with respect to base rate borrowings. In addition, we are required to pay a quarterly unused commitment fee at an initial rate of 0.25%, which may increase up to a rate of 0.35% based on certain Total Leverage Ratio levels specified in the 2025 Credit Agreement.
Current report
On the Refinancing Closing Date, we borrowed $100 million under the 2025 Credit Facility, and simultaneously applied such proceeds, together with $200 million cash on hand, to repay in full all borrowings and terminate all commitments under the 2022 Amended Credit Agreement. Immediately prior to the repayment and termination of the 2022 Amended Credit Agreement, we had $300 million of principal outstanding under the Amended 2022 TLA, with unamortized issuance costs of $1.8 million and an effective interest rate of 7.17%, and no amounts outstanding under the 2022 Revolver, with unamortized issuance costs of $1.5 million. Following the termination of the 2022 Amended Credit Agreement, we will recognize a loss on extinguishment of debt equal to the unamortized issuance costs of $3.3 million.
Current report
For a description of the material terms of the 2025 Credit Agreement, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Subsequent Events.”
Current report
2026 Notes
Current report
In February 2020, we issued $250.0 million in aggregate principal amount of 2.25% Convertible Senior Notes due 2026 (“2026 Notes”) pursuant to an indenture (the “2026 Indenture”) between us and U.S. Bank Trust Company National Association, as trustee. The 2026 Notes will mature on February 15, 2026, unless earlier converted, redeemed or repurchased.
Current report
On January 18, 2023, we exchanged $150.0 million principal amount of 2026 Notes for $150.0 million principal amount of new 2029 Notes (as defined below). On August 6, 2024, we repurchased $80.0 million aggregate principal amount of our 2026 Notes for $100.6 million cash (including payment for accrued interest) in privately-negotiated transactions. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes – Repurchase of Convertible Senior Notes” in this Quarterly Report. As of May 30, 2025, $20.0 million in aggregate principal amount of 2026 Notes were outstanding.
Current report
2029 Notes
Current report
In February 2023, we issued $150.0 million in aggregate principal amount of 2.00% Convertible Senior Notes due 2029 (“2029 Notes”) pursuant to an indenture (the “2029 Indenture”), dated as of January 23, 2023, between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes will mature on February 1, 2029, unless earlier converted, redeemed or repurchased. As of May 30, 2025, $150.0 million in aggregate principal amount of 2029 Notes were outstanding.
Current report
2030 Notes
Current report
On August 6, 2024 and August 14, 2024, we issued $175.0 million and $25.0 million aggregate principal amount, respectively, of our 2.00% Convertible Senior Notes due 2030 (collectively, the “2030 Notes,” and together with the 2026 Notes and the 2029 Notes, the “Convertible Senior Notes”) pursuant to, and governed by, an indenture (the “2030 Indenture”), dated August 6, 2024, between us and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes will mature on August 15, 2030, unless earlier converted, redeemed or repurchased. As of May 30, 2025, $200.0 million in aggregate principal amount of 2030 Notes were outstanding.
Current report
For additional details of the terms of our Convertible Senior Notes, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes” in the 2024 Annual Report and “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes” in this Quarterly Report.
Current report
Capped Calls
Current report
In connection with our Convertible Senior Notes, we have entered into privately-negotiated capped call transactions, which are intended to reduce the effect of potential dilution upon conversion of our Convertible Senior Notes. The capped calls provide for our receipt of cash or shares, at our election, from counterparties if the trading price of our ordinary shares is above the strike price on the expiration date.
Current report
For additional information on our Capped Call Transactions, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Capped Calls” in the 2024 Annual Report.
Current report
On the closing date of the SKT Investment, we and Astra AI Infra entered into an Investor Agreement, and the CPS Certificate of Designation became effective. The Investor Agreement and the CPS Certificate of Designation provided 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.
Current report
On June 27, 2025, in connection with the U.S. Domestication, Penguin Solutions Delaware executed and adopted a Certificate of Designation of Convertible Preferred Stock (the “CPS Delaware Certificate of Designation”) that sets forth the terms, rights and obligations of a series of 200,000 shares of preferred stock of Penguin Solutions Delaware having a par value of $0.03 per share, designated as convertible preferred stock (the “Issued CPS”), which principal attributes remain substantially the same as prior to the U.S. Domestication, subject to changes to
Current report
On June 30, 2025, effective upon consummation of the U.S. Domestication, Penguin Solutions Delaware assumed the Investor Agreement from Penguin Solutions Cayman and Penguin Solutions Delaware and SKT amended and restated the Investor Agreement (as amended and restated, the “Amended and Restated Investor Agreement”) such that the rights and restrictions relating to SKT’s beneficial ownership of the Issued Cayman CPS in place prior to the U.S. Domestication apply in respect of SKT’s holdings of the Issued CPS following consummation of the U.S. Domestication.
Removed paragraphs (1)
Previous report
Credit Facility
Reworded paragraphs (32)
Previous wording
The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended August 30, 2024. This discussion contains forward-looking statements that involve risks, uncertainties and other factors. Our actual results could differ materially from those contained in these forward-looking statements due to a number of risks, uncertainties and other factors, including those discussed below and elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended August 30, 2024. See also “Cautionary Note Regarding Forward-Looking Statements.”
Current wording
The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report and in the 2024 Annual Report. This discussion contains forward-looking statements that involve risks, uncertainties and other factors. Our actual results could differ materially from those contained in these forward-looking statements due to a number of risks, uncertainties and other factors, including those discussed below and elsewhere in this Quarterly Report and in the 2024 Annual Report. See also “Cautionary Note Regarding Forward-Looking Statements.”
Previous wording
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. All financial information for our subsidiaries in Brazil is 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 the SMART Brazil operations from August 1, 2023 to November 29, 2023. All tabular amounts are in thousands, except percentages.
Current wording
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. All financial information for our subsidiaries in Brazil is 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 (as defined below), 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 the SMART Brazil operations from August 1, 2023 to November 29, 2023. All tabular amounts are in thousands, except percentages.
Previous wording
For an overview of our business, see “Item 1. Business” of our Annual Report on Form 10-K for the fiscal year ended August 30, 2024.
Current wording
For an overview of our business, see “Item 1. Business” of the 2024 Annual Report.
Previous wording
Macro-Economic Demand Factors: Our business segments each have their own unique set of demand factors. Our Advanced Computing business is driven by demand for high-performance compute solutions across AI and machine learning initiatives, as well as traditional workload optimization and efficiency applications. Demand in our Integrated Memory segment is driven by end-market demand from OEMs for customer-specific solutions in vertical markets such as industrial, government, networking, high-performance compute and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments. Finally, demand for our Optimized LED products is derived from targeted end-market applications, such as general high-power and mid-power lighting and specialty lighting, including video display and horticulture applications. We believe our diversified business segments may sometimes provide a natural hedge against downturns in any particular industry. However, broader macro-economic trends can adversely affect all three segments concurrently.
Current wording
Macro-Economic Demand Factors: Our business segments each have their own unique set of demand factors. Our Advanced Computing business is driven by demand for high-performance compute solutions across AI and machine learning initiatives, as well as traditional workload optimization and efficiency applications. Demand in our Integrated Memory segment is driven by end-market demand from OEMs for customer-specific solutions in vertical markets such as industrial, government, networking, high-performance compute and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments. Finally, demand for our Optimized LED products is derived from targeted end-market applications, such as general high-power and mid-power lighting and specialty lighting, including video display and horticulture applications. We
Previous wording
Shifts in the Mix and Timing of Our Revenue: Shifts in the mix of revenue from our operating segments, and in the timing of revenue, which can vary significantly from period to period, can impact our business and operating results, including gross and operating margins. For example, our Advanced Computing segment has shown solid growth, but is subject to variability in its sales and margin profile from period to period for reasons such as the
Current wording
Shifts in the Mix and Timing of Our Revenue: Shifts in the mix of revenue from our operating segments, and in the timing of revenue, which can vary significantly from period to period, can impact our business and operating results, including gross and operating margins. For example, our Advanced Computing segment has shown solid growth, but is subject to variability in its sales and margin profile from period to period for reasons such as the following: recognition of revenue is tied to, among other things, customer decisions as to the completion of delivery and system go-live events, sales can be affected by the timing of customer deployments, contract renewal decisions by customers, or customer budget and volume considerations and margin is driven by the extent to which higher margin software and managed services comprise Advanced Computing sales. Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected revenue mix will have direct implications for our operating income and margins. Additionally, our revenue will be negatively impacted by the winding down of our Penguin Edge business, which we expect to wind down and discontinue by approximately the end of calendar year 2025. The comparability of our operating results against prior periods will also be affected following the wind down of our Penguin Edge business.
Previous wording
Net sales increased by $80.7 million, or 28.3%, and $147.6 million, or 26.4%, in the second quarter and first six months of 2025, respectively, compared to the same periods in the prior year. These increases are due to higher sales from our Advanced Computing and Integrated Memory business segments. Advanced Computing net sales increased by $58.8 million, or 41.5%, and $117.4 million, or 45.1%, in the second quarter and first six months of 2025, respectively, compared to the same periods in the prior year, primarily due to higher hardware sales driven by increased demand for AI solutions and high-performance computing. Integrated Memory net sales increased by $22.0 million, or 26.4%, and $33.0 million, or 19.5%, in the second quarter and first six months of 2025, respectively, compared to the same periods in the prior year, primarily due to higher sales volumes of DRAM products stemming from improved market demand, partially offset by lower supply chain services. Optimized LED net sales were flat in the second quarter and decreased by $2.8 million, or 2.2%, in the first six months of 2025, compared to the same periods in the prior year, primarily due to lower direct sales across China and Europe.
Current wording
In the third quarter of 2025, net sales increased by $23.7 million, or 7.9%, compared to the same period in the prior year, primarily due to higher sales from our Integrated Memory business segment, partially offset by lower sales from our Advanced Computing and Optimized LED business segments. Integrated Memory net sales increased by $38.5 million, or 42.0%, compared to the same period in the prior year, primarily due to higher sales volumes of DRAM products stemming from improved market demand, along with higher supply chain services. Advanced Computing net sales decreased by $12.5 million, or 8.6%, in the third quarter of 2025, compared to the same period in the prior year, primarily due to lower hardware sales stemming from the timing of customer projects. Optimized LED net sales decreased by $2.4 million, or 3.7%, in the third quarter of 2025, compared to the same period in the prior year, primarily due to lower direct sales across China and Europe.
Previous wording
Cost of sales increased by $58.0 million, or 28.6%, and $109.9 million, or 27.9%, in the second quarter and first six months of 2025, respectively, compared to the same periods in the prior year, primarily driven by increased product sales from our Advanced Computing and Integrated Memory segments as noted above.
Current wording
Cost of sales increased by $17.5 million, or 8.3%, and $127.4 million, or 21.0%, in the third quarter and first nine months of 2025, respectively, compared to the same periods in the prior year. The increase was primarily driven by increased product sales from our Integrated Memory segment in the third quarter and first nine months of 2025, along with increased product sales from our Advanced Computing segment in the first nine months of 2025.
Previous wording
Gross margin decreased to 28.6% in the second quarter of 2025 compared to 28.8% in the same period in 2024, and to 28.7% in the first six months of 2025 compared to 29.5% in the same period of 2024, primarily due to unfavorable mix from higher product revenue in our Advanced Computing business.
Current wording
Gross margin decreased to 29.3% in the third quarter of 2025 compared to 29.6% in the same period in 2024, and to 28.9% in the first nine months of 2025 compared to 29.5% in the same period of 2024, primarily due to unfavorable mix from higher product revenue in our Advanced Computing business.
Previous wording
Advanced Computing operating income increased by $14.6 million, or 65.7%, and $26.9 million, or 66.8%, in the second quarter and first six months of 2025, respectively, as compared to the same periods in the prior year, primarily due to increased net revenue, as well as lower operating expenses, mainly driven by lower subcontract services, partially offset by increased operating expenses, mainly driven by increased personnel costs stemming from bonus achievement.
Current wording
ed net revenue, as well as lower operating expenses, mainly driven by lower subcontract services, partially offset by increased operating expenses, mainly driven by increased personnel costs stemming from bonus achievement.
Previous wording
Integrated Memory operating income increased by $5.0 million, or 82.3%, and $4.9 million, or 36.9%, in the second quarter and first six months of 2025, respectively, as compared to the same periods in the prior year, primarily due to increased net revenue, partially offset by increased operating expenses, mainly driven by increased personnel costs stemming from bonus achievement.
Current wording
Integrated Memory operating income increased by $8.0 million, or 178.6%, and $12.9 million, or 72.7%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year, primarily due to increased net revenue, partially offset by increased operating expenses, mainly driven by increased personnel costs stemming from bonus achievement.
Previous wording
Optimized LED operating income increased by $3.0 million, or 166.2%, and $5.1 million, or 2,420.0%, in the second quarter and first six months of 2025, respectively, as compared to the same periods in the prior year, primarily due to higher gross profit, stemming from more favorable product mix.
Current wording
Optimized LED operating income increased by $1.4 million and $6.5 million, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year, primarily due to higher gross profit, stemming from more favorable product mix.
Previous wording
Research and development expense decreased by $0.6 million, or 3.0%, and $2.2 million, or 5.2%, in the second quarter and first six months of 2025, respectively, as compared to the same periods in the prior year, primarily due to lower personnel-related expenses mainly driven by headcount reductions, as well as lower subcontract services mainly driven by Penguin Computing.
Current wording
Research and development expense increased by $0.5 million, or 2.7%, and decreased $1.7 million, or 2.7%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year. The increase in the three-month period, compared to the same period in the prior year, was primarily due to higher personnel-related expenses stemming from increased bonus achievement as a result of company performance. The decrease in the nine-month period, compared to the same period in the prior year, was primarily due to decreased personnel-related expenses mainly driven by headcount reductions, as well as lower subcontract services mainly driven by Penguin Computing.
Previous wording
Selling, general and administrative expense decreased by $2.1 million, or 3.4%, in the second quarter of 2025, as compared to the same period in the prior year, primarily due to decreased professional services, partially offset by higher personnel-related expenses stemming from increased bonus achievement as a result of company performance. Selling, general and administrative expense increased by $1.2 million, or 1.1%, in the first six months of 2025, as compared to the same period in the prior year, primarily due to higher personnel-related expenses stemming from increased bonus achievement as a result of company performance, partially offset by decreased professional services stemming from increased cost in the prior year due to the SMART Brazil divestiture referenced above.
Current wording
Selling, general and administrative expense increased by $2.5 million, or 4.3%, and $3.7 million, or 2.1%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year, primarily due to higher personnel-related expenses stemming from increased bonus achievement as a result of company performance, partially offset by decreased professional services as compared to increased cost in the prior year due to the SMART Brazil divestiture referenced above.
Previous wording
During the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of certain legacy products offered through our Penguin Edge business by approximately the end of 2025. In connection therewith and with the preparation of the financial statements included in this Quarterly Report, we assessed goodwill associated with our Penguin Edge business within our Advanced Computing segment and concluded it was partially impaired. 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. 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.
Current wording
During the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of certain products offered through our Penguin Edge business by approximately the end of calendar year 2025. In connection therewith and with the preparation of the financial statements included in this Quarterly Report, we assessed goodwill associated with our Penguin Edge business within our Advanced Computing segment and concluded it was partially impaired. As a result, we recorded charges of $5.3 million and $11.4 million in the third quarter and first nine of 2025, respectively, to impair the carrying value of Advanced Computing goodwill. We currently anticipate that the goodwill of the Penguin Edge reporting unit of $4.7 million as of May 30, 2025 will be fully impaired by the end of calendar 2025. For additional information regarding the goodwill impairment, refer to “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill.”
Previous wording
Other operating expense in the first six months of 2025 and 2024 included restructuring charges of $1.0 million and $6.3 million, respectively, primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the wind down of our Penguin Edge business. We anticipate that these activities will continue into future quarters and anticipate recording additional restructuring charges.
Current wording
There were no other operating expenses in the third quarter of 2025 and $0.5 million operating expenses attributable to restructuring charges in the third quarter of 2024. Other operating expense in the first nine months of 2025 and 2024 included restructuring charges of $1.0 million and $6.7 million, respectively. The restructuring charges for all periods presented were primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the wind down of our Penguin Edge business. We anticipate that these activities will continue into future quarters and anticipate recording additional restructuring charges.
Previous wording
Net interest expense decreased by $5.1 million in the first six months of 2025 compared to the same period in the prior year, primarily due to principal payments made on the Amended 2027 TLA (as defined below) during the last half of fiscal 2024.
Current wording
Net interest expense decreased by $5.6 million and $15.8 million in the third quarter and first nine months of 2025, respectively, compared to the same periods in the prior year, primarily due to principal payments made on the Amended 2022 TLA (as defined below) during the last half of fiscal 2024.
Previous wording
Other non-operating (income) expense in the first six months of 2025 and 2024 primarily reflected foreign currency gains (losses). See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Other Non-operating (Income) Expense.”
Current wording
Other non-operating (income) expense in the third quarter and first nine months of 2025 and 2024 primarily reflected foreign currency gains (losses). See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Other Non-operating (Income) Expense.”
Previous wording
Income tax provision in the second quarter and first six months of 2025 increased by $5.4 million and by $8.3 million, respectively, as compared to the same periods in the prior year, primarily due to an increase in profit before tax in jurisdictions subject to income tax, partially offset by a reduction in withholding tax and increase in research and development tax credit.
Current wording
Income tax provision in the third quarter and first nine months of 2025 increased by $8.6 million and by $16.9 million, respectively, as compared to the same periods in the prior year, primarily due to an increase in profit before tax in jurisdictions subject to income tax, partially offset by a reduction in withholding tax.
Previous wording
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.
Current wording
Our effective tax rate was 67.8% and 53.8% in the third quarter and first nine 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 (27.0)% and (32.5)% in the third quarter and first nine 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.
Previous wording
As of February 28, 2025, we had cash, cash equivalents and short-term investments of $647.0 million, of which $489.2 million was held by subsidiaries outside of the United States. Our principal uses of cash and capital resources have been acquisitions, debt service requirements, capital expenditures, research and development expenditures and working capital requirements. We expect that future capital expenditures will focus on expanding our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades. Cash and cash equivalents generally consist of funds held in demand deposit accounts, money market funds and time deposits. We do not acquire investments for trading or speculative purposes.
Current wording
As of May 30, 2025, we had cash, cash equivalents and short-term investments of $735.5 million, of which $545.5 million was held by subsidiaries outside of the United States. Our principal uses of cash and capital resources have been acquisitions, debt service requirements, capital expenditures, research and development expenditures and working capital requirements. We expect that future capital expenditures will focus on expanding our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades. Cash and cash equivalents generally consist of funds held in demand deposit accounts, money market funds and time deposits. We do not acquire investments for trading or speculative purposes.
Previous wording
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. The Original Credit Agreement provided that up to $35.0 million of the 2027 Revolver is available for issuances of letters of credit. 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”), amend the First Lien Leverage Ratio (as defined in the Amended Credit Agreement) and increase the aggregate amount of unrestricted cash and permitted investments netted from the definitions of Consolidated First Lien Debt and Consolidated Net Debt. As of February 28, 2025, there was $300.0 million of aggregate principal amount outstanding under the Amended 2027 TLA and there were no amounts outstanding under the 2027 Revolver.
Current wording
On February 7, 2022, Penguin Solutions and SMART Modular Technologies, Inc. entered into a credit agreement (the “2022 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 “2022 TLA”) and (ii) a revolving credit facility in an aggregate principal amount of $250.0 million (the “2022 Revolver”), in each case, maturing on February 7, 2027. The 2022 Original Credit Agreement provided that up to $35.0 million of the 2022 Revolver is available for issuances of letters of credit. On August 29, 2022, the 2022 Original Credit Agreement was amended (the “2022 Amended Credit Agreement”) to, among other things, provide for incremental term loans so that the aggregate amount of term loans was $300.0 million (together with the 2022 TLA, the “Amended 2022 TLA”), amend the First Lien Leverage Ratio (as defined in the 2022 Amended Credit Agreement) and increase the aggregate amount of unrestricted cash and permitted investments netted from the definitions of Consolidated First Lien Debt and Consolidated Net Debt. As of May 30, 2025, there was $300.0 million of aggregate principal amount outstanding under the Amended 2022 TLA and there were no amounts outstanding under the 2022 Revolver.
Previous wording
In November 2023, we completed the divestiture of SMART Brazil. In connection with the divestiture, we sold an 81% interest and retained a 19% interest in SMART Brazil. At the closing of the transaction, we received cash of $143.0 million, net of tax, from the sale. In addition, we have the right to receive a deferred payment of $28.4 million in May 2025. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”
Current wording
In November 2023, we completed the divestiture of SMART Brazil. In connection with the divestiture, we sold an 81% interest and retained a 19% interest in SMART Brazil. At the closing of the transaction, we received cash of $143.0 million, net of tax, from the sale. In addition, we received a deferred payment of $24.3 million (net of $4.2 million withholding tax) in May 2025. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”
Previous wording
On December 13, 2024, we closed the SKT Investment (as defined below) by SK Telecom Co., Ltd. (“SKT”). Pursuant to the SKT Purchase Agreement, we sold to Astra AI Infra LLC, an affiliate of SKT, 200,000 convertible preferred shares, par value $0.03 per share, of Penguin Solutions (defined above as the “CPS”), at a price of $1,000 per share or an aggregate price of $200.0 million (the “SKT Investment”). The CPS are convertible into ordinary shares at an initial conversion price of $32.81, subject to adjustment upon the occurrence of certain events, will have an initial liquidation preference of 1x and will only be redeemable at our option, subject to certain conditions. The 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 upon certain conditions. The CPS entitles the holder to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at our option.
Current wording
give effect to requirements of Delaware Law. The shares of Issued CPS are convertible into shares of common stock at an initial conversion price of $32.81, subject to adjustment upon the occurrence of certain events, will have an initial liquidation preference of 1x and will only be redeemable at our option, subject to certain conditions. The holder of Issued CPS may convert such holder’s Issued CPS into shares of common stock at any time, provided that the Issued CPS may, at our option, automatically be converted into shares of common stock on any date following the second anniversary of the closing upon certain conditions. The Issued CPS entitles the holder to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at our option. Shares of Issued CPS are not redeemable upon or repurchased upon the election of the holders of Issued CPS. Refer to the Certificate of Designation of Penguin Solutions, Inc., effective as of June 27, 2025, filed hereto as Exhibit 3.2, and to the section entitled “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” contained in Penguin Solution Cayman’s definitive proxy statement filed with the SEC on May 2, 2025.
Previous wording
See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Preferred Share Investment.”
Current wording
See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Preferred Share Investment” and “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Subsequent Events.”
Previous wording
Net cash provided by operating activities from continuing operations in the first six months of 2025 resulted primarily from net income of $14.8 million, adjusted for non-cash items of $58.8 million. Operating cash flows were positively affected by a $13.0 million net change in our operating assets and liabilities, primarily from the effects of an increase of $122.1 million in accounts payable and accrued expenses and other liabilities primarily due to increase in deferred revenue from customer services and higher accounts payable related to the timing of trade purchases, and a decrease of $15.7 million in other assets, partially offset by an increase of $46.2 million in inventories, primarily to support future demand across both Advanced Computing and Integrated Memory, and an increase of $78.6 million in accounts receivable primarily due to increased sales.
Current wording
Net cash provided by operating activities from continuing operations in the first nine months of 2025 resulted primarily from net income of $18.3 million, adjusted for non-cash items of $89.2 million. Operating cash flows were positively affected by a $76.1 million net change in our operating assets and liabilities, primarily from the effects of an increase of $133.9 million in accounts payable and accrued expenses and other liabilities primarily due to increase in deferred revenue from customer services and higher accounts payable related to the timing of trade purchases, and a decrease of $13.7 million in other assets, partially offset by an increase of $30.8 million in inventories, primarily to support future demand across both Advanced Computing and Integrated Memory, and an increase of $40.8 million in accounts receivable primarily due to increased sales.
Previous wording
Net cash provided by operating activities from continuing operations in the first six months of 2024 resulted primarily from a net loss of $24.2 million, adjusted for non-cash items of $59.4 million. Operating cash flows were favorably affected by a $2.6 million net change in our operating assets and liabilities, primarily from the effects of a decrease of $49.5 million in accounts receivable partially offset by the payment of $29.0 million of contingent consideration related to our 2023 acquisition of Stratus Technologies and an increase of $21.1 million in other current assets. The decrease in accounts receivable was primarily due to lower gross sales in our Advanced Computing and Integrated Memory segments.
Current wording
Net cash provided by operating activities from continuing operations in the first nine months of 2024 resulted primarily from a net loss of $18.0 million, adjusted for non-cash items of $80.7 million. Operating cash flows were favorably affected by a $55.0 million net change in our operating assets and liabilities, primarily from the effects of an increase of $84.6 million in accounts payable and accrued expenses and other liabilities, partially offset by the payment of $29.0 million of contingent consideration related to our 2023 acquisition of Stratus Technologies. The increase in accounts payable and accrued expenses and other liabilities was primarily due to timing of payments, as well as higher deferred revenue resulting from amounts received from customers in advance of satisfying performance obligations.
Previous wording
Investing Activities: Net cash used for investing activities from continuing operations in the first six months of 2025 consisted primarily of $18.6 million net purchase of marketable investment securities and $4.2 million for capital expenditures and deposits on equipment.
Current wording
Investing Activities: Net cash used for investing activities from continuing operations in the first nine months of 2025 consisted primarily of $18.6 million net purchase of marketable investment securities and $6.1 million for capital expenditures and deposits on equipment.
Previous wording
Net cash used for investing activities from continuing operations in the first six months of 2024 consisted of $9.9 million for capital expenditures and deposits on equipment, offset by net maturities of marketable investment securities of $2.5 million.
Current wording
Net cash used for investing activities from continuing operations in the first nine months of 2024 consisted of $13.6 million for capital expenditures and deposits on equipment, offset by net maturities of marketable investment securities of $11.4 million.
Previous wording
Financing Activities: Net cash provided by financing activities from continuing operations in the first six months of 2025 consisted primarily of $191.2 million of proceeds from the issuance of preferred shares, net of issuance costs of $8.8 million, and $3.7 million in proceeds from the issuance of ordinary shares from our equity plans, partially offset by $17.6 million of payments to acquire our ordinary shares (including $11.1 million under our share repurchase program).
Current wording
Financing Activities: Net cash provided by financing activities from continuing operations in the first nine months of 2025 consisted primarily of $191.2 million of proceeds from the issuance of preferred shares, net of issuance costs of $8.8 million, and $7.7 million in proceeds from the issuance of ordinary shares from our equity plans, partially offset by $49.2 million of payments to acquire our ordinary shares (including $40.9 million under our share repurchase program).
Previous wording
Net cash used for financing activities from continuing operations in the first six months of 2024 consisted primarily of $51.6 million in principal repayment of debt, $21.0 million for payment of contingent consideration related to our 2023 acquisition of Stratus Technologies and $15.9 million of payments to acquire our ordinary shares (including $13.9 million under our share repurchase program), partially offset by $4.2 million in proceeds from the issuance of ordinary shares from our equity plans.
Current wording
Net cash used for financing activities from continuing operations in the first nine months of 2024 consisted primarily of $126.6 million in principal repayment of debt, $21.0 million for payment of contingent consideration related to our 2023 acquisition of Stratus Technologies and $18.0 million of payments to acquire our ordinary shares (including $13.9 million under our share repurchase program), partially offset by $8.1 million in proceeds from the issuance of ordinary shares from our equity plans.
Previous wording
For a summary of our critical accounting estimates, see “PART II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of our Annual Report on Form 10-K for the fiscal year ended August 30, 2024. There have been no material changes to our critical accounting estimates from those described in our Annual Report on Form 10-K for the fiscal year ended August 30, 2024.
Current wording
For a summary of our critical accounting estimates, see “PART II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of the 2024 Annual Report. There have been no material changes to our critical accounting estimates from those described in the 2024 Annual Report.
Previous wording
For a summary of our significant accounting policies, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Significant Accounting Policies” of this Quarterly Report and “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Significant Accounting Policies” of our Annual Report on Form 10-K for the fiscal year ended August 30, 2024. There have been no material changes to our significant accounting policies from those described in our Annual Report on Form 10-K for the fiscal year ended August 30, 2024.
Current wording
For a summary of our significant accounting policies, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Significant Accounting Policies” of this Quarterly Report and “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Significant Accounting Policies” of the 2024 Annual Report. There have been no material changes to our significant accounting policies from those described in the 2024 Annual Report.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
ng from improved market demand. Optimized LED net sales decreased by $5.2 million, or 2.7%, in the first nine months of 2025, compared to the same period in the prior year, primarily due to lower direct sales across China and Europe.
Current report — wording carried from elsewhere
On December 13, 2024, we closed the SKT Investment (as defined below) by SK Telecom Co., Ltd. (“SKT”). Pursuant to the SKT Purchase Agreement, we sold to Astra AI Infra LLC, an affiliate of SKT (“Astra AI Infra”), 200,000 convertible preferred shares, par value $0.03 per share, of Penguin Solutions (the “Issued Cayman CPS”), at a price of $1,000 per share or an aggregate price of $200.0 million (the “SKT Investment”).
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
following: recognition of revenue is sometimes tied to customer decisions as to the completion of delivery and system go-live events, sales can be affected by the timing of customer deployments or customer budget considerations and margin is driven by the extent to which higher margin software and managed services comprise Advanced Computing sales. Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected revenue mix will have direct implications for our operating income and margins.
Previous report — wording carried elsewhere
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,