Penguin Solutions, Inc.

Ladies and gentlemen, thank you for joining us, and welcome to the Penguin Solutions first quarter fiscal year 2026 financial results call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand. To withdraw your question, please press star 1 again. I will now hand the conference over to Suzanne Schmidt with Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and thank you for joining us on today's earnings conference call and webcast to discuss Penguin Solutions first quarter fiscal 2026 results. On the call today are Mark Adams, Chief Executive Officer, and Nate Olmstead, Chief Financial Officer. You can find the accompanying slide presentation and press release for this call on the investor relations section of our website. We encourage you to go to the site throughout the quarter for the most current information on the company. I would also like to remind everyone to read the note on the use of forward-looking statements that is included in the press release and the earnings call presentation. Please note that during this conference call, the company will make projections and forward-looking statements including but not limited to statements about the company's growth trajectory and financial outlook, business plans and strategy, market demand and shifts, strategic agreements, and existing and potential collaborations. Forward-looking statements are based on current beliefs and assumptions, are not guarantees of future performance, and are subject to risks and uncertainties, including, without limitation, the risks and uncertainties reflected in the press release and the earnings call presentation filed today as well as in the company's most recent annual and quarterly reports. The forward-looking statements are representative only as of the date they are made and except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements. We will also discuss both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. A reconciliation of the GAAP to non-GAAP measures is included in today's press release and accompanying slide presentation. And with that, let me now turn the call over to Mark Adams, CEO. Mark?

Thank you, Suzanne. We hope you all have a nice holiday season and appreciate your attending our first quarter fiscal 2026 earnings call. We are happy with our Q1 results. On our last call, we mentioned some headwinds we anticipated in the first half of our fiscal year. Despite these challenges, revenue came in at 343 million in Q1, up 2% sequentially and 1% year over year. We view this as significant, as we were able to perform well in the first quarter, despite not recognizing any hyperscale hardware revenue, which had been a meaningful contributor in the prior year period. Non-GAAP gross margins were 30%, which compares favorably to the midpoint of our full year outlook, reflecting favorable mix and execution in the quarter. As a reminder, our full-year outlook incorporates expected variability across the year. Non-GAAP operating income was 42 million, up 1% year-over-year, which led to non-GAAP diluting earnings per share of 49 cents. We continue to see indications of a broader market shift from hyperscaler deployments and early corporate pilot programs. toward wider enterprise adoption and more production scale implementations. Within this broader transition, there are early signs that some workloads are evolving from training-centric environments toward inference-oriented use cases as organizations operationalize AI across the enterprise. As AI systems move into full production, Enterprises are increasingly focused on performance, reliability, bandwidth, and overall system efficiency, areas where Penguin's ability to design tailored systems can help customers address their specific workload requirements. We believe enterprises are looking for partners who can deliver complete production-ready platforms spanning infrastructure, software orchestration, and advanced AI tooling. supported with deep technical expertise. Penguin Solutions brings over 25 years of experience in this arena, starting in high-performance computing, or HPC, and expanding in the last five years to include large-scale AI factory build-outs. This expertise enables us to design, build, deploy, and manage complex infrastructure solutions that align with the needs of our enterprise customers. During the transformation of our company into a leading provider of infrastructure solutions, we have communicated the challenges we faced from having a lumpy revenue model with customer concentration. Our fiscal year 2026 guidance was developed with our ongoing focus on new business development and customer diversification in mind, while recognizing that the timing of new customer deployments can vary. We are encouraged by the customer diversification progress we are making and will share additional detail later in the call. Let me now speak to the performance of each of our lines of business. Our advanced computing business achieved revenue of 151 million, up 9% compared to last quarter. We had several customer bookings in Q1, including two new paying customers, one in the defense sector and another in the education and research sector. In addition, we continue to see our pipeline expand into new customer opportunities in the financial services, oil and gas, telecommunications, manufacturing, and education sectors. We're also currently engaged in a number of discussions with sovereign cloud customers outside the US regarding potential large-scale AI deployments. This increase in sovereign AI opportunities internationally reinforces the need for Pangolin's rapid deployment solutions and services, which enable faster time to production and thus enable a quicker return on AI capital investments. As customers evaluate the transition from proof of concept initiatives to larger production deployments, we believe the complexity of these environments underscores the need for a trusted partner with deep technical expertise across multiple technology domains, combined with proven experiences integrating an array of technology building blocks to deliver high-performing and highly reliable AI infrastructure. In support of this need, we have recently launched the Penguin Solutions Rabbit Development Workshop Program, which brings together our architecture leaders, software developers, managed service team members, and supply chain experts to help potential customers better understand and plan for the complexity of implementing AI at scale. Tangwin's design, build, deploy, and manage framework is a proven methodology for high-performing, high-reliability AI factory deployments. Tangwin's decades of experience in complex, large data center installations is at the heart of what differentiates us from many of our hardware-centric competitors. The combination of our architectural design know-how, our ice clusterware software platform, and our managed services offerings reinforces Penguin Solutions' role as a value partner in helping our customers manage the complexity of AI. Our integrated memory business recorded 137 million of revenue in Q1, up 3% compared to the prior quarter, and up 41% compared to Q1 2025. As we head into our second quarter, demand signals for our memory portfolio are strong across our networking, telecommunications, and computing customers. One of the key performance challenges in implementing AI across both training and inference workloads is the limitation of GPU and CPU memory bandwidth. We have been an early developer of Compute Express Link or CXL solutions. We provide an open standard interconnect for high-speed, high-capacity GPU and CPU to device and GPU and CPU to memory connections designed for high-performance data center systems, including those built for AI computing. We are currently shipping early production units through our OEM partners while continuing to expand end-user qualification efforts. Looking ahead, future versions of CXL are expected to emphasize memory pooling, enabling blocks of memory to be dynamically allocated to specific system resources. In parallel, we continue to invest in the design of our optical memory appliance, or OMA, in collaboration with key technology partners, leveraging a photonic transport layer to further increase the performance of GPU, CPU, and memory interconnects. We are seeing increasing memory demand as customers are looking for unique custom solutions to address their needs in supporting AI workloads. Beyond the core customer migration to DDR5 technology, our customers are evaluating how to best utilize memory to optimize the performance of their AI compute needs. In addition to our legacy OEM customers, we are seeing sales growth in direct to enterprise customer engagements and in large hyperscale customers. We believe that our over 30 years of developing specialty memory products, originally under the Smart Modular brand for large Fortune 500 customers, has positioned us well to capitalize on a new wave of higher performing and higher reliability memory for the AI era. We believe we are well positioned for future growth, leveraging our early investments in new technology to expand our addressable market. The optimized LED business operating under the Cree LED brand generated revenue of $55 million in the first quarter, down 18% sequentially. We are seeing weak demand in our China business, along with pockets of softness among certain large US OEM customers. We remain focused on driving profitability in our LED business by leveraging our specialty product portfolio, industry-leading intellectual property, and Capital Light outsource front end operating model. Despite the top line revenue headwind, operating income was 3.5 million, representing an increase of 24% sequentially. As part of our transition from a holding company to an AI solutions provider, we continue to streamline our corporate structure. To that end, in late December, we signed an agreement to sell our remaining 19% stake in Zillia Technologies, formerly Smart Modular Brazil, for $46 million. We expect this transaction to close in our third quarter of fiscal 2026. As we look forward, we remain focused on strengthening our partnerships with ecosystem partners such as NVIDIA, AMD, and CDW. As the volume of corporate deployments accelerates, Tenra solutions can provide our white glove design and implementation services to support our customer success. We are also customizing our ICE clusterware platform to be compatible with other open source energy software products, enabling a more robust infrastructure solution for managing large AI deployments at scale. We believe that the combination of our investments in technologies such as Inference systems level products, memory advancements, and our ICE software, together with our trusted design and managed services capabilities, positions Pangolin Solutions as an ideal partner to help customers manage the complexity associated with implementing AI infrastructure. With a strong balance sheet, a growing customer base, continued investments in differentiated solutions, and an experienced team that helps customers design, build, deploy, and manage AI environments at scale, we remain confident in our position for long-term future success. Let me stop now and hand the call to Nate for a more detailed review of our financial performance. Nate?