Penguin Solutions, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Mark Adams welcomed everyone to the call, highlighting Q2 financial results with revenue at $366 million, up 28% YOY; non-GAAP gross margins 30.8%; non-GAAP EPS $0.52, up 97% YOY.
• Market for AI in enterprise segment is growing, and Penguin Solutions leverages its HPC expertise for AI infrastructure.
• Key segments: Advanced Computing up 42% YOY, Integrated Memory up 26% YOY, Optimized LED flat YOY but with improved margins.
• Key initiatives: Expansion of ICE ClusterWare software platform, development of SMART Modular Optical Memory Appliance, partnerships with Dell, SK Telecom.
• Organizational news: Jack Pacheco, Executive Vice President, COO, and President of Integrated Memory, to retire at end of calendar year.

Segment Performance:

• Advanced Computing: Revenue of $200 million in Q2 Fiscal 2025, up 42% year-over-year, representing 55% of total Penguin Solutions revenue.
• Integrated Memory: Revenue of $105 million in Q2 Fiscal 2025, up 26% year-over-year, representing 29% of total revenue.
• Optimized LED: Revenue of $60 million in Q2 Fiscal 2025, flat year-over-year, representing 16% of total revenue.

Guidance:

• Raised full-year revenue midpoint to 17% year-over-year growth.
• Advanced Computing expected to grow 15%-25% YOY; Memory expected to grow 20%-30% YOY; LED expected to be flat YOY.
• Non-GAAP gross margin expected to be 31% ±1%; non-GAAP operating expenses expected to be $265M ±$5M; non-GAAP diluted EPS expected to be approximately $1.60 ±$0.10.

Risks:

• Global macroeconomic environment and ongoing supply chain constraints, including extended lead times for components and higher tariffs in LED business.

Question and Answer: Q: About which verticals Advanced Computing will drive revenue in fiscal second half?

A: Mark Adams mentioned looking to verticals like federal, financial, energy.

Q: Tariffs on LED segment and manufacturing footprint?

A: LED manufacturing in Taiwan and Huizhou; dealing with tariffs as part of ongoing operations.

Q: Progress with SK Telecom partnership and SK Telecom's goals?

A: Mark Adams said good dialogue on AI strategy deployment, working on infrastructure; can't speak for SK Telecom's customer goals but optimistic about collaboration.

Q: Domicile move from Cayman Islands to Delaware benefits?

A: Nate Olmstead said aligns operations with US presence, simplifies operations as majority assets are in US.

Q: Impact of co-packaged optics trend on memory solutions?

A: Mark Adams said on roadmap, developing SMART Modular Optical Memory Appliance, prototypes in late 2026/early 2027.

Q: Deferred income and its recognition?

A: Nate Olmstead said related to services contracts, varies from 1-3 years typically.