Penguin Solutions, Inc. Q4 FY2024 earnings call

Rebranding and Transformation

• Officially became Penguin Solutions Inc. with NASDAQ ticker PENG, transforming from a holding company to a global enterprise solutions provider for AI infrastructure.

2024 Milestones

• Completed divestiture of Brazil business in November 2024.
• Appointed Pete Manca as President of IPS in May 2024 and Nate Olmstead as CFO in June 2024.
• Announced partnership with SK Telecom in July 2024 for AI infrastructure and edge computing.

Fiscal 2024 Results

• Revenue, gross margin, and EPS were within guidance range. Achieved 3rd consecutive quarter of sequential revenue growth. Cash position strong with ~$389 million in cash and equivalents.

Segment Details

• IPS: 48% of Q4 revenue, driven by AI deployments and managed services. Focused on software development and IP, scaling ClusterWare and AIM software. Filing patent applications for innovations.
• Memory: 31% of Q4 revenue. Positioned for growth with recovery in networking/telecom and AI workloads. Introduced Cfexpress and DDR5 CXL Add-in Card products.
• LED: 21% of Q4 revenue. Cree LED brand leading in high performance lighting, with design win activity.

2025 Initiatives

• Solve AI challenges for customers.
• Partner with SK Telecom for global expansion and AI infrastructure growth.
• Expand software and services offerings, investing in AI-driven solutions.
• Innovate relentlessly, developing new memory and compute technologies.

For fiscal 2024, total revenues were $1.17 billion. Managed services revenue grew from 17% in FY '23 to 21% in FY '24. In Q4 2024: Intelligent Platform Solutions (IPS) accounted for 48% of revenue, reaching $149 million. Memory contributed 31% of Q4 revenue, with $96 million. LED represented 21% of Q4 revenue, at $66 million. Fiscal 2024 total revenues were $1.17 billion.

Fiscal 2025 Outlook

• Revenue growth: Year-over-year growth of 15% ±5%.
• Segment-wise: IPS revenue growth 10%-25% YOY; Memory revenue growth 10%-20% YOY; LED revenue flat to up 10% YOY.
• Non-GAAP gross margin: 32% ±1%.
• Non-GAAP operating expenses: $275M ±$15M.
• Non-GAAP diluted EPS: ~$1.70 ±$0.20. Shifted from quarterly to full-year guidance to provide broader perspective on business dynamics.

• Global macroeconomic headwinds impacting business operations.
• Supply chain constraints, especially extended lead times for components in IPS business.
• Visibility issues and lumpiness in CSP hardware orders affecting forecasting.

Q: Do you have any updated thoughts on how you're sizing this services and software opportunity with the Tier 2s?

A: Typically don't disclose customer information, but software is material long-term; we're in early stages.

Q: What led you to win the large consumer gaming company?

A: Expertise in managing AI complexity, with tool sets providing best ROI for customers.

Q: Confidence in guiding full-year vs quarterly?

A: Longer horizon better for visibility on deployment timing and accounting complexity.

Q: IPS revenue growth sequential but lower than expected?

A: Some business slips into future quarters due to booking/deployment timing.

Q: Customer reception to production ready Origin AI solution?

A: Validation with gaming company, but funnel building takes time.

Q: SK Telecom investment hold-up?

A: U.S. oversight for foreign investment, expected close end of 2024/early 2025