• Total Revenue for Fiscal 2024: $1.17 billion.
• Q4 Revenue: $311 million, marking the third consecutive quarter of sequential growth.
• Non-GAAP Gross Margin for Fiscal 2024: 31.9%.
• Q4 Non-GAAP Gross Margin: 30.9%, down from 32.3% in the prior quarter.
• Non-GAAP EPS for Q4: $0.37, flat sequentially and up slightly from the prior year quarter.
• Cash and Cash Equivalents: $389 million at the end of Q4.
• Intelligent Platform Solutions (IPS) Q4 Revenue: $149 million, 48% of total revenue.
• Memory Business Q4 Revenue: $96 million, 31% of total revenue.
• LED Business Q4 Revenue: $66 million, 21% of total revenue.
• Non-GAAP Operating Margin for Q4: 10.8%, up 1.2 percentage points versus last year.
• Adjusted EBITDA for Q4: $39 million, 13% of sales.
• Inventory at End of Q4: $151 million, down from $177 million in the prior quarter.
• Fiscal 2025 Revenue Growth Outlook: 15% plus or minus 5 percentage points.
• Fiscal 2025 Non-GAAP Gross Margin Outlook: 32% plus or minus 1 percentage point.
• Fiscal 2025 Non-GAAP EPS Outlook: Approximately $1.70 plus or minus $0.20.

• Warning! GuruFocus has detected 4 Warning Sign with SGH.

Release Date: October 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SMART Global Holdings Inc (NASDAQ:SGH) achieved its third consecutive quarter of sequential revenue growth, with Q4 revenue, gross margin, and EPS all within guidance range.
• The company reported total revenues of $1.17 billion for fiscal 2024, with managed services revenue increasing from 17% in FY23 to 21% in FY24.
• SGH's cash position remains strong with approximately $389 million in cash and cash equivalents and short-term investments.
• The company is optimistic about double-digit year-over-year growth in FY25, driven by expanding customer engagements and strategic partnerships.
• SGH is enhancing its intellectual property portfolio, filing patent applications related to its innovations in AI and high-performance computing.

Negative Points

• Non-GAAP gross margin for Q4 was down from the previous quarter, primarily due to product mix and a lower mix of services revenue.
• The company's cash and cash equivalents decreased by $78 million from the prior quarter, primarily due to a $125 million prepayment on a term loan and repurchasing $80 million in convertible notes.
• SGH's services revenue decreased from $67 million in the prior quarter to $60 million in Q4, representing a decline in its share of total revenue.
• The company faces challenges with extended lead times for certain components, impacting the ramp-up of existing and new customer projects.
• SGH's decision to shift from quarterly to fiscal year financial outlook may reduce visibility into short-term performance, potentially causing uncertainty among investors.

Q & A Highlights

Q: Can you provide an update on the services and software opportunity with Tier 2 customers and the potential customer pipeline? A: Mark Adams, CEO: We don't disclose specific customer information, but currently, 20% of our corporate revenue is from software and services, primarily services. We believe software will become a significant part of our business over time, though we are not disclosing financial metrics at this early stage.

Q: What led to winning the large consumer gaming company contract, and how do you differentiate in the market? A: Mark Adams, CEO: Our success is due to our ability to manage complexity, which many companies struggle with when they attempt to handle it themselves or with traditional hardware providers. Our tools ensure success in implementations, managing environments, and providing reliable networking performance, which differentiates us in the market.

Q: Why did you shift to providing a fiscal year outlook instead of quarterly guidance, and what gives you confidence in this approach? A: Mark Adams, CEO: The shift allows us to show confidence in our business over a longer horizon, reducing noise from deployment and revenue recognition timing. Nate Olmstead, CFO: We have confidence in our backlog, service renewals, and customer demand profiles, which provide visibility over the longer term.

Q: Can you discuss the IPS revenue growth and any revenue shifts that might have occurred? A: Nathan Olmstead, CFO: Some IPS business revenue recognition was delayed due to operational complexities, shifting into Q1 and Q2. The full-year outlook reflects this, and the business trajectory remains consistent with past performance.

Q: How is the market reception for your production-ready AI solutions, and do you expect it to contribute significantly to revenue soon? A: Mark Adams, CEO: While Origin AI is gaining traction, particularly with enterprise customers, it may not be a major revenue contributor by the fiscal second half. The initial implementations are smaller, but we are building the funnel for future growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.