Penguin Solutions, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Smart Global Holdings first quarter fiscal 2021 earnings conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Suzanne Schmidt with Investor Relations. Thank you.

Please go ahead, ma'am. Thank you, Operator. Good afternoon, and thank you for joining us on today's earnings conference call to discuss Smart Global Holdings first quarter fiscal 2021 results. On the call with me today are Mark Adams, Chief Executive Officer, and Jack Pacheco, Chief Operating and Financial Officer. This call is being webcast from our website at smartgh.com. In addition, our website contains an accompanying slide presentation and the earnings press release. We encourage you to go to our website throughout the quarter for the most current information on the company, including information on the various conferences that we will be attending. Before we begin the call, I would like to note that today's remarks and the answers to questions may include forward-looking statements. Any statement that refers to expectations, projections, or other characterizations of future events, including financial projections and future market conditions, is a forward-looking statement. Actual results may differ materially from those expressed in these forward-looking statements. For more information, please refer to the forward-looking statements disclosures in our earnings releases, as well as the risk factors discussed in the documents we file from time to time with the SEC, including our most recent Form 10-K and Form 10-Q. We assume no obligation to update these forward-looking statements which speak as of today. Additionally, during this call, our non-GAAP financial measures will be discussed. Reconciliations to the comparable GAAP financial measures are included in today's earnings press release. We will begin the call with CEO Mark Adams, who will provide a business update, and then Jack Pacheco, COO and CFO will review the financials and forward guidance, after which we will take questions. Mark?

Thank you, Suzanne. Happy 21 to all of you. I want to take this opportunity to thank our global team members for their commitment and resilience as we operate in these uncertain times. During my first full quarter at SBH, I've been impressed with the team's work ethic, and I am optimistic about the potential to execute on our growth and diversification strategies. For me, success is largely driven by people, purpose, planning, and process. In my first few months with the company, this is exactly what I had been focused on. Is the organization structure set up for success? Are we aligned as a team on purpose, what we need to do, and equally important, what we need not to do? After alignment of purpose, do we have the right plan to address the company's priorities Or are there some cases where we have aspirations that need more clarity, investment, and commitment? Once we have the right structure in place, aligned on purpose with the right plans, do we have the right process in place to execute and measure our performance to hold ourselves accountable? While we are certainly at work in process in some of these areas, I'm more excited today than I was 120 days ago. Our future at SDH is very bright. Strategically, we continue to focus on providing differentiated solutions across all of our lines of business. We are targeting future expansion into growth markets such as high-performance computing, artificial intelligence, and cloud with Penguin Computing, edge computing with our embedded business, formerly Artisan Embedded Computing, IoT solutions with our smart wireless, formerly Enforce Computing, and advanced package memory, low-density storage, and in-memory computing as part of our memory solutions business, which includes our specialty memory and Brazil memory business. Financially, each of the lines of business has a mandate to improve their profitability. On this and future calls, we will be sharing proof points to demonstrate our progress along the way. Turning to our first quarter performance, Our revenue came in at $292 million, 7% higher than the same quarter in fiscal year 2020. Gross margin came in just above the midpoint of our guidance range, and our non-GAAP earnings per share of 78 cents exceeded the upper end of our guidance. In addition, we continue to strengthen our balance sheet as cash and equivalents increased 9% over the prior quarter and is now at $164 million. Overall, I was pleased with our results as we continue to execute on our transformation into a diversified growth company. Let me now provide some more detail around each of our businesses' performance. Starting with specialty compute and storage, revenue and growth margins were approximately flat with the prior quarter at $66 million and 27% respectively. As I mentioned on our last call, We are conducting a careful review of all of our lines of business, and if warranted, we'll either find ways to improve gross margins or exit those lines of business that don't meet our margin targets. One example of the latter was our recent decision to shut down our battery business in Brazil. We will be aggressive in looking at new opportunities, but prudent in how we invest and monitor success. In specialty compute and storage, we are focused on developing higher margin opportunities as we leverage software and services as part of our solution portfolio. This value-add focus was reinforced by the official launch of Penguin Computing's solution strategy, which encompasses four dedicated solution practices targeted at enabling customers' adoption of artificial intelligence, high-performance computing, cloud, and data analytics. we will be bundling software and services optimized for each of these four practice areas. While growth in the high-performance computing and artificial intelligence market is primarily being driven by new entrants in these disciplines, existing enterprise customers are benefiting from access to these emerging technologies as we help them to bring these capabilities in-house. Validating this new direction, Penguin received the HPC Wire Reader's Choice Award for best HPC solutions and financial services. We were also recognized by our key partners. Intel awarded Penguin Computing with their Executive Summit Award for outstanding platform innovation. And Weka.io selected Penguin as their 2020 Partner of the Year awarded for software-defined storage. Smart's embedded business secured a $30 million order from the US government for ruggedized ATCA system that operates under extreme shock and vibration conditions. On the technology front, our embedded team released a new advanced telecom computing architecture, or ATCA memory blade, targeted at both industrial and military edge computing applications. One example of a customer usage model for this technology was a leading semiconductor company looking to use our memory blade product as part of an edge computing solution to enable on-site maintenance predictability in AI applications. While some of our strategic initiatives in specialty compute are longer term in nature, I am confident in our short-term pipeline demonstrating customer validation of our vision. We are forecasting sales in specialty compute to grow by over 20% as compared with our first quarter. I am excited with our team's focus on solutions and value-add services and see this as a growth engine for the company in the future. Now turning to specialty memory, which achieved revenue of $120.7 million in the quarter, a 16% increase when compared to fiscal Q1 2020. Our DDR3 product portfolio performed well in our first quarter due to increased demand as well as stabilization of demand pricing. We also saw increased demand for our persistent memory or NVDIMM products aimed at storage applications. As we look to broaden our customer base and markets, we are targeting especially solid-state storage, or SSD, as an important growth area. We have customers sampling our newest SSD product, which leverages SmartModular's internally developed controller. The team is focused on expanding into new vertical markets such as surveillance, and transportation and market. Strategically, our specialty memory team is continuing to evaluate ways we can provide higher value memory solutions for customers focused on enterprise, cloud, AI, and industrial applications. Our Brazil business totaled revenue of $105.2 million, an increase of almost 12% compared to fiscal Q1 of 2020. Increasing memory densities led to strong mobile sales in the quarter, which grew by almost 30% compared with a year ago. We also achieved stronger memory sales for notebooks, which grew 27% as compared with the prior year's first quarter, driven by a growing trend of more people working from home. We continue to accelerate new product introductions in support of our Brazilian customers. We qualified a number of high-density products for mobile applications, including a 64 gigabyte and 128 gigabyte EMCP. The team is currently qualifying in-country SSD manufacturing, which leverages our advanced packaging capabilities, strategic customer relationships, and in-country manufacturing capabilities. Now I'd like to provide a brief update on our pending acquisition of Cree LED. We remain very excited about Cree LED joining the smart family. Cree LED's leadership position in the specialty LED segment aligns well with our overall specialty solution strategy, emphasizing growth, margin enhancement, and diversification. I continue to be impressed with their leadership team, culture, and overall operating discipline as we collectively work on a successful integration plan for Cree LED as part of SGH. We have received positive signs on the regulatory front, and the teams are working hard on integration milestones, which we feel will result in a potential close in the late February, early March timeframe. I will now turn the call over to Jack for a closer look at the financials and guidance for Q2. Jack?