# Penguin Solutions, Inc.: Form 10-Q for the period ended May 30, 2025

- Company: [Penguin Solutions, Inc.](/companies/peng.md) (CIK 1616533)
- Form: 10-Q
- Filed: 2025-07-08
- Accepted by EDGAR: Jul 8, 2025, 17:17 ET
- Period: 2025-05-30
- Accession: 0001628280-25-034541
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1616533/000162828025034541/sgh-20250530.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1616533/000162828025034541/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-05-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-03-01 to 2025-05-30 | $324.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-08-31 to 2025-05-30 | $1.03bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-03-01 to 2025-05-30 | $229.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-08-31 to 2025-05-30 | $733.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-03-01 to 2025-05-30 | $95.1m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-08-31 to 2025-05-30 | $297.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-03-01 to 2025-05-30 | $20.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-08-31 to 2025-05-30 | $59.9m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2025-03-01 to 2025-05-30 | $59.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-08-31 to 2025-05-30 | $179.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2025-03-01 to 2025-05-30 | $9.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-08-31 to 2025-05-30 | $45.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-03-01 to 2025-05-30 | $7.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-08-31 to 2025-05-30 | $21.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-03-01 to 2025-05-30 | $2.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-08-31 to 2025-05-30 | $16.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-03-01 to 2025-05-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-08-31 to 2025-05-30 | $0.18 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-03-01 to 2025-05-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-08-31 to 2025-05-30 | $0.18 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-03-01 to 2025-05-30 | 53,738,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-08-31 to 2025-05-30 | 54,336,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-08-31 to 2025-05-30 | $179.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-08-31 to 2025-05-30 | $6.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-08-31 to 2025-05-30 | $49.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-05-30 | $709.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-05-30 | $1.25bn | us-gaap:AssetsCurrent |
| Total assets | at 2025-05-30 | $1.80bn | us-gaap:Assets |
| Current liabilities | at 2025-05-30 | $476.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-05-30 | $1.21bn | us-gaap:Liabilities |
| Long-term debt | at 2025-05-30 | $639.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-05-30 | $19.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2025-05-30 | $584.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,794 characters.

*The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report and in the 2024 Annual Report. This discussion contains forward-looking statements that involve risks, uncertainties and other factors. Our actual results could differ materially from those contained in these forward-looking statements due to a number of risks, uncertainties and other factors, including those discussed below and elsewhere in this Quarterly Report and in the 2024 Annual Report. See also “Cautionary Note Regarding Forward-Looking Statements.”*

*Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2025 and 2024 contain 52 weeks and 53 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated. All financial information for our subsidiaries in Brazil is included in our consolidated financial statements on a one-month lag because their fiscal years ended on July 31 of each year. In connection with the completion of the divestiture of an 81% interest in SMART Brazil (as defined below), we ceased consolidating the operations of SMART Brazil in our financial statements as of the November 29, 2023 disposal date. As a result, financial information for the first quarter of 2024 includes the four-month period for the SMART Brazil operations from August 1, 2023 to November 29, 2023. All tabular amounts are in thousands, except percentages.*

### Overview

On June 30, 2025, we completed the U.S. Domestication of the parent company of our corporate group, Penguin Solutions Cayman, from the Cayman Islands to the State of Delaware in the United States, resulting in Penguin Solutions Delaware becoming our publicly traded parent company and the successor issuer to Penguin Solutions Cayman. The financial information in this Quarterly Report for periods prior to the completion of the U.S. Domestication relates to Penguin Solutions Cayman. Unless stated otherwise or the context requires otherwise, the terms “Penguin Solutions,” “Company,” “we,” “our,” “us” or similar terms (i) for periods prior to the effectiveness of the U.S. Domestication, refer to Penguin Solutions Cayman and its consolidated subsidiaries and (ii) for periods at or after the completion of the U.S. Domestication, refer to Penguin Solutions Delaware and its consolidated subsidiaries. See “Explanatory Note” and “About this Quarterly Report,” above.

For an overview of our business, see “Item 1. Business” of the 2024 Annual Report.

### Divestiture of SMART Brazil

On November 29, 2023, we completed the divestiture of an 81% interest in SMART Modular Technologies do Brasil – Indústria e Comercio de Componentes Ltda. (“SMART Brazil”) to Lexar Europe B.V., an affiliate of Shenzhen Longsys Electronics Co. Ltd.

***Presentation of SMART Brazil as Discontinued Operations:*** In accordance with authoritative guidance under U.S. GAAP, we have presented the balance sheets, results of operations and cash flows of SMART Brazil operations in this Quarterly Report, including in the accompanying consolidated financial statements and notes, as discontinued operations for all periods presented. The SMART Brazil operations were previously reported as part of our Integrated Memory segment. Unless otherwise noted, discussion within this Quarterly Report relates solely to our continuing operations and excludes the SMART Brazil operations.

See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

### Factors Affecting Our Operating Performance

***Macro-Economic Demand Factors:*** Our business segments each have their own unique set of demand factors. Our Advanced Computing business is driven by demand for high-performance compute solutions across AI and machine learning initiatives, as well as traditional workload optimization and efficiency applications. Demand in our Integrated Memory segment is driven by end-market demand from OEMs for customer-specific solutions in vertical markets such as industrial, government, networking, high-performance compute and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments. Finally, demand for our Optimized LED products is derived from targeted end-market applications, such as general high-power and mid-power lighting and specialty lighting, including video display and horticulture applications. We believe our diversified business segments may sometimes provide a natural hedge against downturns in any particular industry and resulting negative impacts on the financial and operational success of our customers. However, broader macro-economic trends, including global conflicts impacting international relations, recessionary indicators, high inflation rates, uncertainty and costs associated with trade policies and tariffs, and interest rates, can adversely affect all three segments concurrently.

***Shifts in the Mix and Timing of Our Revenue:*** Shifts in the mix of revenue from our operating segments, and in the timing of revenue, which can vary significantly from period to period, can impact our business and operating results, including gross and operating margins. For example, our Advanced Computing segment has shown solid growth, but is subject to variability in its sales and margin profile from period to period for reasons such as the following: recognition of revenue is tied to, among other things, customer decisions as to the completion of delivery and system go-live events, sales can be affected by the timing of customer deployments, contract renewal decisions by customers, or customer budget and volume considerations and margin is driven by the extent to which higher margin software and managed services comprise Advanced Computing sales. Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected revenue mix will have direct implications for our operating income and margins. Additionally, our revenue will be negatively impacted by the winding down of our Penguin Edge business, which we expect to wind down and discontinue by approximately the end of calendar year 2025. The comparability of our operating results against prior periods will also be affected following the wind down of our Penguin Edge business.

***Our Ability to Identify, Complete and Successfully Integrate Acquisitions:*** A substantial portion of our growth over the last several years has been driven by acquisitions, and we intend to continue to use corporate development as an engine for growth. Within our existing segments, we plan to pursue acquisitions to expand features and functionality, expand into adjacent businesses and grow our customer base and geographic footprint. From time to time, we may seek to expand our addressable market by entering new business segments where, as we did with our Cree LED and Stratus Technologies acquisitions, we identify a business opportunity at scale with a path to being accretive to our overall operations in the near term. If we are unable to identify and complete attractive acquisitions, we may not be successful in growing our revenue and/or expanding our margins. Any acquisitions we do complete may require us to incur debt or raise capital through equity financings or may subject us to unforeseen liabilities or costs, or operational challenges, that in turn impede our ability to realize the expected returns on our investment.

***Disruptions in Our Supply Chain May Adversely Affect Our Businesses:*** We depend on third-party suppliers for key components of our products, such as commodity DRAM components from offshore foundries that we use in our specialty memory products, third-party wafers that we use in our memory and LED businesses and AI and HPC components for our Advanced Computing business. In our memory and LED businesses, we have adopted a “Fab-Light” business model to reduce our capital expenditures and operating expenses, while affording greater flexibility in adapting to shifts in demand and other market trends. Our Fab-Light business model contributes to margin expansion in our overall business. However, our reliance on third-party manufacturers exposes us to risk of supply chain disruption and lost business. For example, the recent global semiconductor shortage has adversely affected our operating results. In addition, in our Advanced Computing business, where we source components from third parties, the high demand for and limited supply of AI components globally, as well as any delays in the production of such components, continues to affect our sourcing of these components and the timing of deployments. In particular, we continue to experience extended lead times for certain components that are incorporated into our overall solutions, which impacts how quickly we are able to ramp existing and new customer projects. If such disruptions worsen or are prolonged, or if there is meaningful disruption in our supply arrangement with any of our third-party suppliers, our operating results and financial condition may continue to be adversely affected.

### Results of Operations

| Net sales: | Three Months Ended May 30, 2025 |  | May 31, 2024 |  | Nine Months Ended May 30, 2025 |  | May 31, 2024 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Advanced Computing | $132,498 | 40.9% | $144,968 | 48.2% | $510,081 | 49.5% | $405,197 | 47.1% |
| Integrated Memory | 130,124 | 40.1% | 91,629 | 30.5% | 332,090 | 32.2% | 260,594 | 30.3% |
| Optimized LED | 61,629 | 19.0% | 63,983 | 21.3% | 188,701 | 18.3% | 193,857 | 22.6% |
| Total net sales | 324,251 | 100.0% | 300,580 | 100.0% | 1,030,872 | 100.0% | 859,648 | 100.0% |
| Cost of sales | 229,168 | 70.7% | 211,674 | 70.4% | 733,329 | 71.1% | 605,958 | 70.5% |
| Gross profit | 95,083 | 29.3% | 88,906 | 29.6% | 297,543 | 28.9% | 253,690 | 29.5% |
| Operating expenses: |  |  |  |  |  |  |  |  |
| Research and development | 20,222 | 6.2% | 19,681 | 6.5% | 59,940 | 5.8% | 61,596 | 7.2% |
| Selling, general and administrative | 59,724 | 18.4% | 57,249 | 19.0% | 179,575 | 17.4% | 175,851 | 20.5% |
| Impairment of goodwill | 5,294 | 1.6% | — | —% | 11,373 | 1.1% | — | —% |
| Other operating expense | — | —% | 465 | 0.2% | 968 | 0.1% | 6,739 | 0.8% |
| Total operating expenses | 85,240 | 26.3% | 77,395 | 25.7% | 251,856 | 24.4% | 244,186 | 28.4% |
| Operating income | 9,843 | 3.0% | 11,511 | 3.8% | 45,687 | 4.4% | 9,504 | 1.1% |
| Non-operating (income) expense: |  |  |  |  |  |  |  |  |
| Interest expense, net | 573 | 0.2% | 6,167 | 2.1% | 7,152 | 0.7% | 22,975 | 2.7% |
| Other non-operating (income) expense | (1,439) | (0.4)% | 441 | 0.1% | (1,012) | (0.1)% | 113 | —% |
| Total non-operating (income) expense | (866) | (0.3)% | 6,608 | 2.2% | 6,140 | 0.6% | 23,088 | 2.7% |
| Income (loss) before taxes | 10,709 | 3.3% | 4,903 | 1.6% | 39,547 | 3.8% | (13,584) | (1.6)% |
| Income tax provision | 7,259 | 2.2% | (1,323) | (0.4)% | 21,262 | 2.1% | 4,409 | 0.5% |
| Net income (loss) from continuing operations | 3,450 | 1.1% | 6,226 | 2.1% | 18,285 | 1.8% | (17,993) | (2.1)% |
| Net loss from discontinued operations | — | —% | — | —% | — | —% | (8,148) | (0.9)% |
| Net income (loss) | 3,450 | 1.1% | 6,226 | 2.1% | 18,285 | 1.8% | (26,141) | (3.0)% |
| Net income attributable to noncontrolling interest | 789 | 0.2% | 610 | 0.2% | 2,325 | 0.2% | 1,784 | 0.2% |
| Net income (loss) attributable to Penguin Solutions | 2,661 | 0.9% | 5,616 | 1.9% | 15,960 | 1.6% | (27,925) | (3.2)% |
| Preferred share dividends | 3,033 | 0.9% | — | —% | 5,633 | 0.5% | — | —% |
| Income available for distribution | (372) | (0.1)% | 5,616 | 1.9% | 10,327 | 1.0% | (27,925) | (3.2)% |
| Income allocated to participating securities | — | —% | — | —% | 678 | 0.1% | — | —% |
| Net income (loss) available to ordinary shareholders | $(372) | (0.1)% | $5,616 | 1.9% | $9,649 | 0.9% | $(27,925) | (3.2)% |

Percentages represent percentage of total net sales. Summations of percentages may not compute precisely due to rounding.

### Net Sales, Cost of Sales and Gross Profit

In the third quarter of 2025, net sales increased by $23.7 million, or 7.9%, compared to the same period in the prior year, primarily due to higher sales from our Integrated Memory business segment, partially offset by lower sales from our Advanced Computing and Optimized LED business segments. Integrated Memory net sales increased by $38.5 million, or 42.0%, compared to the same period in the prior year, primarily due to higher sales volumes of DRAM products stemming from improved market demand, along with higher supply chain services. Advanced Computing net sales decreased by $12.5 million, or 8.6%, in the third quarter of 2025, compared to the same period in the prior year, primarily due to lower hardware sales stemming from the timing of customer projects. Optimized LED net sales decreased by $2.4 million, or 3.7%, in the third quarter of 2025, compared to the same period in the prior year, primarily due to lower direct sales across China and Europe.

In the first nine months of 2025, net sales increased by $171.2 million, or 19.9%, compared to the same period in the prior year. The increase in the nine-month period was due to higher sales from our Advanced Computing and Integrated Memory business segments, partially offset by lower sales from our Optimized LED business segment. Advanced Computing net sales increased by $104.9 million, or 25.9%, in the first nine months of 2025, compared to the same period in the prior year, primarily due to higher hardware sales driven by increased demand for AI solutions and high-performance computing within the first half of 2025. Integrated Memory net sales increased by $71.5 million, or 27.4%, in the first nine months of 2025, compared to the same period in the prior year, primarily due to higher sales volumes of DRAM and Flash storage products stemmi ng from improved market demand. Optimized LED net sales decreased by $5.2 million, or 2.7%, in the first nine months of 2025, compared to the same period in the prior year, primarily due to lower direct sales across China and Europe.

Cost of sales increased by $17.5 million, or 8.3%, and $127.4 million, or 21.0%, in the third quarter and first nine months of 2025, respectively, compared to the same periods in the prior year. The increase was primarily driven by increased product sales from our Integrated Memory segment in the third quarter and first nine months of 2025, along with increased product sales from our Advanced Computing segment in the first nine months of 2025.

Gross margin decreased to 29.3% in the third quarter of 2025 compared to 29.6% in the same period in 2024, and to 28.9% in the first nine months of 2025 compared to 29.5% in the same period of 2024, primarily due to unfavorable mix from higher product revenue in our Advanced Computing business.

### Non-GAAP Measure of Segment Operating Income

Below is a table of our operating income, measured on a non-GAAP basis, which Penguin Solutions management uses to supplement Penguin Solutions’ financial results under GAAP to analyze its operations and make decisions as to future operational plans and believes that this supplemental non-GAAP information is useful to investors in analyzing and assessing our past and future operating performance. These non-GAAP measures exclude certain items, such as share-based compensation expense; amortization of acquisition-related intangible assets (consisting of amortization of developed technology, customer relationships, trademarks/trade names and backlog acquired in connection with business combinations); acquisition-related inventory adjustments; diligence, acquisition and integration expense; restructuring charges; impairment of goodwill; changes in the fair value of contingent consideration; redomiciliation costs; and other infrequent or unusual items. While amortization of acquisition-related intangible assets is excluded, the revenues from acquired companies is reflected in our non-GAAP measures and these intangible assets contribute to revenue generation. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Segment and Other Information.”

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, as they exclude important information about our financial results, as noted above. The presentation of these adjusted amounts varies from amounts presented in accordance with GAAP and therefore may not be comparable to amounts reported by other companies.

|  | Three Months Ended May 30, 2025 | May 31, 2024 | Nine Months Ended May 30, 2025 | May 31, 2024 |
| --- | ---: | ---: | ---: | ---: |
| GAAP operating income | $9,843 | $11,511 | $45,687 | $9,504 |
| Share-based compensation expense | 10,251 | 11,192 | 33,362 | 32,801 |
| Amortization of acquisition-related intangibles | 8,439 | 9,766 | 27,033 | 29,525 |
| Cost of sales-related restructuring | 369 | 387 | 404 | 1,271 |
| Diligence, acquisition and integration expense | 296 | 4 | 1,696 | 6,678 |
| Redomiciliation costs (1) | 3,702 | — | 7,304 | — |
| Impairment of goodwill | 5,294 | — | 11,373 | — |
| Restructuring charges | — | 465 | 968 | 6,739 |
| Other (1) | 280 | — | 655 | — |
| Non-GAAP operating income | $38,474 | $33,325 | $128,482 | $86,518 |
| Non-GAAP operating income by segment: |  |  |  |  |
| Advanced Computing | $24,684 | $28,921 | $91,734 | $69,113 |
| Integrated Memory | 12,457 | 4,471 | 30,543 | 17,682 |
| Optimized LED | 1,333 | (67) | 6,205 | (277) |
| Total non-GAAP operating income by segment | $38,474 | $33,325 | $128,482 | $86,518 |
| (1) In the second quarter of 2025 we began breaking out redomiciliation costs from “Other.” All periods presented have been adjusted to reflect this change. |  |  |  |  |

Advanced Computing operating income decreased by $4.2 million, or 14.7%, in the third quarter of 2025, as compared to the same period in the prior year, primarily due to decreased net revenue from lower hardware sales, and increased by $22.6 million, or 32.7%, in the first nine months of 2025, as compared to the same period in the prior year, primarily due to increas ed net revenue, as well as lower operating expenses, mainly driven by lower subcontract services, partially offset by increased operating expenses, mainly driven by increased personnel costs stemming from bonus achievement.

Integrated Memory operating income increased by $8.0 million, or 178.6%, and $12.9 million, or 72.7%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year, primarily due to increased net revenue, partially offset by increased operating expenses, mainly driven by increased personnel costs stemming from bonus achievement.

Optimized LED operating income increased by $1.4 million and $6.5 million, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year, primarily due to higher gross profit, stemming from more favorable product mix.

### Operating and Non-operating (Income) Expense

### Research and Development

Research and development expense increased by $0.5 million, or 2.7%, and decreased $1.7 million, or 2.7%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year. The increase in the three-month period, compared to the same period in the prior year, was primarily due to higher personnel-related expenses stemming from increased bonus achievement as a result of company performance. The decrease in the nine-month period, compared to the same period in the prior year, was primarily due to decreased personnel-related expenses mainly driven by headcount reductions, as well as lower subcontract services mainly driven by Penguin Computing.

### Selling, General and Administrative

Selling, general and administrative expense increased by $2.5 million, or 4.3%, and $3.7 million, or 2.1%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in the prior year, primarily due to higher personnel-related expenses stemming from increased bonus achievement as a result of company performance, partially offset by decreased professional services as compared to increased cost in the prior year due to the SMART Brazil divestiture referenced above.

### Impairment of Goodwill

During the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of certain products offered through our Penguin Edge business by approximately the end of calendar year 2025. In connection therewith and with the preparation of the financial statements included in this Quarterly Report, we assessed goodwill associated with our Penguin Edge business within our Advanced Computing segment and concluded it was partially impaired. As a result, we recorded charges of $5.3 million and $11.4 million in the third quarter and first nine of 2025, respectively, to impair the carrying value of Advanced Computing goodwill. We currently anticipate that the goodwill of the Penguin Edge reporting unit of $4.7 million as of May 30, 2025 will be fully impaired by the end of calendar 2025. For additional information regarding the goodwill impairment, refer to “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill.”

### Other Operating (Income) Expense

There were no other operating expenses in the third quarter of 2025 and $0.5 million operating expenses attributable to restructuring charges in the third quarter of 2024. Other operating expense in the first nine months of 2025 and 2024 included restructuring charges of $1.0 million and $6.7 million, respectively. The restructuring charges for all periods presented were primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the wind down of our Penguin Edge business. We anticipate that these activities will continue into future quarters and anticipate recording additional restructuring charges.

### Interest Expense, Net

Net interest expense decreased by $5.6 million and $15.8 million in the third quarter and first nine months of 2025, respectively, compared to the same periods in the prior year, primarily due to principal payments made on the Amended 2022 TLA (as defined below) during the last half of fiscal 2024.

### Other Non-operating (Income) Expense

Other non-operating (income) expense in the third quarter and first nine months of 2025 and 2024 primarily reflected foreign currency gains (losses). See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Other Non-operating (Income) Expense.”

### Income Tax Provision (Benefit)

Income tax provision in the third quarter and first nine months of 2025 increased by $8.6 million and by $16.9 million, respectively, as compared to the same periods in the prior year, primarily due to an increase in profit before tax in jurisdictions subject to income tax, partially offset by a reduction in withholding tax.

Our effective tax rate was 67.8% and 53.8% in the third quarter and first nine months of 2025, respectively, and differed from the U.S. statutory rate primarily due to losses generated in a jurisdiction where no tax benefit can be recognized and to withholding taxes, state income taxes, and nondeductible compensation paid to officers, partially offset by research and development tax credits. Our effective tax rate was (27.0)% and (32.5)% in the third quarter and first nine months of 2024, respectively, and differed from the U.S. statutory rate primarily due to losses generated in a jurisdiction where no tax benefit can be recognized, withholding taxes and state income taxes.

The global minimum tax under the Pillar Two framework became effective for us in the first quarter of 2025. While the impact on our unaudited consolidated financial statements is currently not material, our analysis is ongoing as the Organisation for Economic Co-operation and Development continues to release additional guidance and countries enact related legislation.

See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Income Taxes.”

### Net Income (Loss) From Discontinued Operations

As discussed above, we have presented the results of SMART Brazil as discontinued operations in our consolidated statements of operations. In the first quarter of 2024, we completed the divestiture, and in connection therewith, recognized a loss of $8.9 million.

See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

### Liquidity and Capital Resources

As of May 30, 2025, we had cash, cash equivalents and short-term investments of $735.5 million, of which $545.5 million was held by subsidiaries outside of the United States. Our principal uses of cash and capital resources have been acquisitions, debt service requirements, capital expenditures, research and development expenditures and working capital requirements. We expect that future capital expenditures will focus on expanding our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades. Cash and cash equivalents generally consist of funds held in demand deposit accounts, money market funds and time deposits. We do not acquire investments for trading or speculative purposes.

We may from time to time seek additional equity or debt financing. Any future equity or debt financing may be dilutive to our existing investors and may include debt service requirements and financial and other restrictive covenants that may constrain our operations and growth strategies. In the event that we seek additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued product innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

We expect that our existing cash and cash equivalents, short-term investments, borrowings available under our credit facilities and cash generated by operating activities will be sufficient to fund our operations for at least the next 12 months.

### Repayment of 2022 TLA and 2025 Credit Facility

On February 7, 2022, Penguin Solutions and SMART Modular Technologies, Inc. entered into a credit agreement (the “2022 Original Credit Agreement”) with a syndicate of banks and Citizens Bank, N.A., as administrative agent that provided for (i) a term loan credit facility in an aggregate principal amount of $275.0 million (the “2022 TLA”) and (ii) a revolving credit facility in an aggregate principal amount of $250.0 million (the “2022 Revolver”), in each case, maturing on February 7, 2027. The 2022 Original Credit Agreement provided that up to $35.0 million of the 2022 Revolver is available for issuances of letters of credit. On August 29, 2022, the 2022 Original Credit Agreement was amended (the “2022 Amended Credit Agreement”) to, among other things, provide for incremental term loans so that the aggregate amount of term loans was $300.0 million (together with the 2022 TLA, the “Amended 2022 TLA”), amend the First Lien Leverage Ratio (as defined in the 2022 Amended Credit Agreement) and increase the aggregate amount of unrestricted cash and permitted investments netted from the definitions of Consolidated First Lien Debt and Consolidated Net Debt. As of May 30, 2025, there was $300.0 million of aggregate principal amount outstanding under the Amended 2022 TLA and there were no amounts outstanding under the 2022 Revolver.

On June 24, 2025 (the “Refinancing Closing Date”), Penguin Solutions (the “Parent Borrower”) and SMART Modular Technologies, Inc. (the “Co-Borrower” and together with the Parent Borrower, the “Borrowers”) entered into a new Credit Agreement (the “2025 Credit Agreement”) by and among the Borrowers, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing bank. The 2025 Credit Agreement provides for a revolving credit facility in an aggregate principal amount of $400 million (the “2025 Credit Facility” and the revolving loans thereunder, the “2025 Loans”), maturing on June 24, 2030.

Under the 2025 Credit Agreement, 2025 Loans bear interest at a rate per annum equal to either, at the Borrowers’ option, Term Secured Overnight Financing Rate (“Term SOFR”) rate or a base rate, in each case plus an applicable margin based on the Total Leverage Ratio (as defined in the 2025 Credit Agreement) and ranges from 1.25% to 3.00% per annum with respect to Term SOFR borrowings and from 0.25% to 2.00% per annum with respect to base rate borrowings. In addition, we are required to pay a quarterly unused commitment fee at an initial rate of 0.25%, which may increase up to a rate of 0.35% based on certain Total Leverage Ratio levels specified in the 2025 Credit Agreement.

On the Refinancing Closing Date, we borrowed $100 million under the 2025 Credit Facility, and simultaneously applied such proceeds, together with $200 million cash on hand, to repay in full all borrowings and terminate all commitments under the 2022 Amended Credit Agreement. Immediately prior to the repayment and termination of the 2022 Amended Credit Agreement, we had $300 million of principal outstanding under the Amended 2022 TLA, with unamortized issuance costs of $1.8 million and an effective interest rate of 7.17%, and no amounts outstanding under the 2022 Revolver, with unamortized issuance costs of $1.5 million. Following the termination of the 2022 Amended Credit Agreement, we will recognize a loss on extinguishment of debt equal to the unamortized issuance costs of $3.3 million.

For a description of the material terms of the 2025 Credit Agreement, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Subsequent Events.”

### Convertible Senior Notes

#### 2026 Notes

In February 2020, we issued $250.0 million in aggregate principal amount of 2.25% Convertible Senior Notes due 2026 (“2026 Notes”) pursuant to an indenture (the “2026 Indenture”) between us and U.S. Bank Trust Company National Association, as trustee. The 2026 Notes will mature on February 15, 2026, unless earlier converted, redeemed or repurchased.

On January 18, 2023, we exchanged $150.0 million principal amount of 2026 Notes for $150.0 million principal amount of new 2029 Notes (as defined below). On August 6, 2024, we repurchased $80.0 million aggregate principal amount of our 2026 Notes for $100.6 million cash (including payment for accrued interest) in privately-negotiated transactions. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes – Repurchase of Convertible Senior Notes” in this Quarterly Report. As of May 30, 2025, $20.0 million in aggregate principal amount of 2026 Notes were outstanding.

#### 2029 Notes

In February 2023, we issued $150.0 million in aggregate principal amount of 2.00% Convertible Senior Notes due 2029 (“2029 Notes”) pursuant to an indenture (the “2029 Indenture”), dated as of January 23, 2023, between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes will mature on February 1, 2029, unless earlier converted, redeemed or repurchased. As of May 30, 2025, $150.0 million in aggregate principal amount of 2029 Notes were outstanding.

#### 2030 Notes

On August 6, 2024 and August 14, 2024, we issued $175.0 million and $25.0 million aggregate principal amount, respectively, of our 2.00% Convertible Senior Notes due 2030 (collectively, the “2030 Notes,” and together with the 2026 Notes and the 2029 Notes, the “Convertible Senior Notes”) pursuant to, and governed by, an indenture (the “2030 Indenture”), dated August 6, 2024, between us and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes will mature on August 15, 2030, unless earlier converted, redeemed or repurchased. As of May 30, 2025, $200.0 million in aggregate principal amount of 2030 Notes were outstanding.

For additional details of the terms of our Convertible Senior Notes, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes” in the 2024 Annual Report and “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes” in this Quarterly Report.

#### Capped Calls

In connection with our Convertible Senior Notes, we have entered into privately-negotiated capped call transactions, which are intended to reduce the effect of potential dilution upon conversion of our Convertible Senior Notes. The capped calls provide for our receipt of cash or shares, at our election, from counterparties if the trading price of our ordinary shares is above the strike price on the expiration date.

For additional information on our Capped Call Transactions, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Capped Calls” in the 2024 Annual Report.

### Divestiture of SMART Brazil

In November 2023, we completed the divestiture of SMART Brazil. In connection with the divestiture, we sold an 81% interest and retained a 19% interest in SMART Brazil. At the closing of the transaction, we received cash of $143.0 million, net of tax, from the sale. In addition, we received a deferred payment of $24.3 million (net of $4.2 million withholding tax) in May 2025. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

### Preferred Share Investment

On December 13, 2024, we closed the SKT Investment (as defined below) by SK Telecom Co., Ltd. (“SKT”). Pursuant to the SKT Purchase Agreement, we sold to Astra AI Infra LLC, an affiliate of SKT (“Astra AI Infra”), 200,000 convertible preferred shares, par value $0.03 per share, of Penguin Solutions (the “Issued Cayman CPS”), at a price of $1,000 per share or an aggregate price of $200.0 million (the “SKT Investment”).

On the closing date of the SKT Investment, we and Astra AI Infra entered into an Investor Agreement, and the CPS Certificate of Designation became effective. The Investor Agreement and the CPS Certificate of Designation provided for certain rights and restrictions relating to the SKT Investment, including but not limited to board representation rights, pro rata rights, registration rights and consent rights, and standstill provisions, disposition restrictions and voting obligations.

On June 27, 2025, in connection with the U.S. Domestication, Penguin Solutions Delaware executed and adopted a Certificate of Designation of Convertible Preferred Stock (the “CPS Delaware Certificate of Designation”) that sets forth the terms, rights and obligations of a series of 200,000 shares of preferred stock of Penguin Solutions Delaware having a par value of $0.03 per share, designated as convertible preferred stock (the “Issued CPS”), which principal attributes remain substantially the same as prior to the U.S. Domestication, subject to changes to give effect to requirements of Delaware Law. The shares of Issued CPS are convertible into shares of common stock at an initial conversion price of $32.81, subject to adjustment upon the occurrence of certain events, will have an initial liquidation preference of 1x and will only be redeemable at our option, subject to certain conditions. The holder of Issued CPS may convert such holder’s Issued CPS into shares of common stock at any time, provided that the Issued CPS may, at our option, automatically be converted into shares of common stock on any date following the second anniversary of the closing upon certain conditions. The Issued CPS entitles the holder to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at our option. Shares of Issued CPS are not redeemable upon or repurchased upon the election of the holders of Issued CPS. Refer to the Certificate of Designation of Penguin Solutions, Inc., effective as of June 27, 2025, filed hereto as Exhibit 3.2, and to the section entitled “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” contained in Penguin Solution Cayman’s definitive proxy statement filed with the SEC on May 2, 2025.

On June 30, 2025, effective upon consummation of the U.S. Domestication, Penguin Solutions Delaware assumed the Investor Agreement from Penguin Solutions Cayman and Penguin Solutions Delaware and SKT amended and restated the Investor Agreement (as amended and restated, the “Amended and Restated Investor Agreement”) such that the rights and restrictions relating to SKT’s beneficial ownership of the Issued Cayman CPS in place prior to the U.S. Domestication apply in respect of SKT’s holdings of the Issued CPS following consummation of the U.S. Domestication.

See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Preferred Share Investment” and “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Subsequent Events.”

### Cash Flows

|  | Nine Months Ended May 30, 2025 | May 31, 2024 |
| --- | ---: | ---: |
| Net cash provided by operating activities from continuing operations | $183,616 | $117,677 |
| Net cash used for investing activities from continuing operations | (25,744) | (3,526) |
| Net cash provided by (used for) financing activities from continuing operations | 144,587 | (159,615) |
| Net increase in cash and cash equivalents from discontinued operations | 24,251 | 90,447 |
| Effect of changes in currency exchange rates | — | (1,256) |
| Net increase in cash, cash equivalents and restricted cash | $326,710 | $43,727 |

***Operating Activities:*** Cash flows from operating activities reflects net income, adjusted for certain non-cash items, including depreciation and amortization expense, share-based compensation, gains and losses from investing or financing activities, and from the effects of changes in operating assets and liabilities.

Net cash provided by operating activities from continuing operations in the first nine months of 2025 resulted primarily from net income of $18.3 million, adjusted for non-cash items of $89.2 million. Operating cash flows were positively affected by a $76.1 million net change in our operating assets and liabilities, primarily from the effects of an increase of $133.9 million in accounts payable and accrued expenses and other liabilities primarily due to increase in deferred revenue from customer services and higher accounts payable related to the timing of trade purchases, and a decrease of $13.7 million in other assets, partially offset by an increase of $30.8 million in inventories, primarily to support future demand across both Advanced Computing and Integrated Memory, and an increase of $40.8 million in accounts receivable primarily due to increased sales.

Net cash provided by operating activities from continuing operations in the first nine months of 2024 resulted primarily from a net loss of $18.0 million, adjusted for non-cash items of $80.7 million. Operating cash flows were favorably affected by a $55.0 million net change in our operating assets and liabilities, primarily from the effects of an increase of $84.6 million in accounts payable and accrued expenses and other liabilities, partially offset by the payment of $29.0 million of contingent consideration related to our 2023 acquisition of Stratus Technologies. The increase in accounts payable and accrued expenses and other liabilities was primarily due to timing of payments, as well as higher deferred revenue resulting from amounts received from customers in advance of satisfying performance obligations.

***Investing Activities:*** Net cash used for investing activities from continuing operations in the first nine months of 2025 consisted primarily of $18.6 million net purchase of marketable investment securities and $6.1 million for capital expenditures and deposits on equipment.

Net cash used for investing activities from continuing operations in the first nine months of 2024 consisted of $13.6 million for capital expenditures and deposits on equipment, offset by net maturities of marketable investment securities of $11.4 million.

***Financing Activities:*** Net cash provided by financing activities from continuing operations in the first nine months of 2025 consisted primarily of $191.2 million of proceeds from the issuance of preferred shares, net of issuance costs of $8.8 million, and $7.7 million in proceeds from the issuance of ordinary shares from our equity plans, partially offset by $49.2 million of payments to acquire our ordinary shares (including $40.9 million under our share repurchase program).

Net cash used for financing activities from continuing operations in the first nine months of 2024 consisted primarily of $126.6 million in principal repayment of debt, $21.0 million for payment of contingent consideration related to our 2023 acquisition of Stratus Technologies and $18.0 million of payments to acquire our ordinary shares (including $13.9 million under our share repurchase program), partially offset by $8.1 million in proceeds from the issuance of ordinary shares from our equity plans.

### Critical Accounting Estimates

The preparation of these financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. Estimates and judgments are based on historical experience, forecasted events and various other assumptions that we believe to be reasonable under the circumstances; however, actual results could differ from those estimates. Our management believes our critical accounting estimates require management’s most difficult, subjective or complex judgments and are critical in the portrayal of our financial condition and results of operations. Our discussion of critical accounting estimates is intended to supplement our summary of significant accounting policies so that readers will have greater insight into the uncertainties involved in applying our critical accounting policies and estimates.

For a summary of our critical accounting estimates, see “PART II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of the 2024 Annual Report. There have been no material changes to our critical accounting estimates from those described in the 2024 Annual Report.

For a summary of our significant accounting policies, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Significant Accounting Policies” of this Quarterly Report and “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Significant Accounting Policies” of the 2024 Annual Report. There have been no material changes to our significant accounting policies from those described in the 2024 Annual Report.

## Market risk

As filed, 4,066 characters.

### Foreign Exchange Risk

We are subject to inherent risks attributed to operating in a global economy. Our international sales and our operations in foreign countries subject us to risks associated with fluctuating currency values and exchange rates. Because a significant portion of our sales are denominated in U.S. dollars, increases in the value of the U.S. dollar could increase the price of our products so that they become relatively more expensive to customers in a particular country, possibly leading to a reduction in sales and profitability in that country. In addition, we have certain costs that are denominated in foreign currencies and decreases in the value of the U.S. dollar could result in increases in such costs, which could have a material adverse effect on our results of operations.

As a result of our international operations, we generate a portion of our net sales and incur a portion of our expenses in currencies other than the U.S. dollar, such as the Japanese Yen, Malaysian Ringgit and Chinese Renminbi. We present our consolidated financial statements in U.S. dollars and remeasure certain assets and liabilities into U.S. dollars at applicable exchange rates. Consequently, increases or decreases in the value of the U.S. dollar may affect the value of these items with respect to our non-U.S. dollar businesses in our consolidated financial statements, even if their value has not changed in their local currency. Our customer pricing and material cost of sales are generally based on U.S. dollars. Accordingly, the impact of currency fluctuations to our consolidated statements of operations is primarily to our other costs of sales (i.e., non-material components) and our operating expenses as those items are typically denominated in local currency. Our consolidated statements of operations are also impacted by foreign currency gains and losses arising from transactions denominated in a currency other than the U.S. dollar. These translations could significantly affect the comparability of our results between financial periods or result in significant changes to the carrying value of our assets and liabilities. As a result, changes in foreign currency exchange rates impact our reported results.

Based on our monetary assets and liabilities denominated in foreign currencies as of May 30, 2025 and August 30, 2024, we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses recorded in non-operating expense of $2.2 million and $2.5 million, respectively, to revalue these assets and liabilities.

### Interest Rate Risk

We are subject to interest rate risk in connection with our variable-rate debt, which included borrowings under the Amended 2022 TLA until our repayment of outstanding amounts thereunder on June 24, 2025, and includes borrowings under our 2025 Credit Facility pursuant to the 2025 Credit Agreement entered into on June 24, 2025. As of July 1, 2025, we had $100.0 million outstanding under the 2025 Credit Facility. In addition, the 2025 Credit Agreement provides for borrowings of up to $400.0 million aggregate principal amount under a revolving credit facility. Assuming that we would satisfy the financial covenants required to borrow and that the amounts available under the 2025 Credit Facility were fully drawn, a 1.0% increase in interest rates would result in an increase in annual interest expense, and a decrease in our cash flows, of $4.0 million per year.

As of May 30, 2025, we had cash, cash equivalents and short-term investments of $735.5 million. We maintain our cash and cash equivalents in deposit accounts, money market funds with various financial institutions and in short-duration fixed income securities. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of these investments as a result of changes in interest rates. Increases or decreases in interest rates would be expected to augment or reduce future interest income by an insignificant amount.

## Controls and procedures

As filed, 1,485 characters.

### Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of May 30, 2025 to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

### Changes in Internal Control Over Financial Reporting

During the third quarter of 2025, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 20,156 characters.

Other than as set forth below, there have been no material changes to the risks described in “PART I – Item 1A. Risk Factors” in the 2024 Annual Report. You should carefully consider the risks and uncertainties and the other information in this Quarterly Report, including “PART I. Financial Information – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, in “PART I – Item 1A. Risk Factors” in the 2024 Annual Report. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs and, as a result, the market price of our common stock could decline and you could lose all or part of your investment.

This Quarterly Report also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for additional information. Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks facing our Company described below, in the 2024 Annual Report.

### The anticipated benefits of the U.S. Domestication may not be realized.

On June 30, 2025, we consummated the redomiciliation of the parent company of our corporate group from the Cayman Islands to the State of Delaware in the United States. We may not realize the benefits we anticipate from the U.S. Domestication, particularly as the achievement of the benefits are in many important respects subject to factors that we do not and cannot control, including the reaction of third parties with whom we enter into contracts and do business and the reaction of investors. Additionally, the anticipated benefits from the U.S. Domestication may not offset the direct and indirect costs and expenses incurred in connection with the U.S. Domestication. Our failure to realize those benefits could have a material and adverse effect on our business, results of operations or financial condition.

### The U.S. Domestication may adversely impact our effective tax rate.

Although we do not expect the U.S. Domestication to increase our effective tax rate, there is a risk that our effective tax rate may increase after the U.S. Domestication. Following the U.S. Domestication, our effective tax rate may change significantly, which could materially impact our financial results, including our earnings and cash flow, for periods after the U.S. Domestication, and may fluctuate significantly from period to period. Our effective tax rate is based upon the application of currently applicable income tax laws, regulations and treaties, as well as current judicial and administrative interpretations of these income tax laws, regulations and treaties in various jurisdictions, including other than the United States.

In light of these factors, there can be no assurance that our effective tax rate will not increase in future periods, including as a result of and following the U.S. Domestication. Moreover, U.S. tax laws significantly limit our ability to redomicile outside of the United States. Accordingly, if our effective tax rate were to increase as a result of the U.S. Domestication, our business and financial performance could be adversely affected.

***The market for our common stock may differ from the market for the Penguin Solutions Cayman ordinary shares and the market price of our common stock may as a result be subject to volatility.***

The market price, trading volume or volatility, or potential investor pool of our common stock may be different from those of the Penguin Solutions Cayman ordinary shares.

As a result, the market price of our common stock could be subject to wide fluctuations, which may be unrelated to the Penguin Solutions group of companies’ operating performance and prospects but nevertheless affect the price of our common stock. This volatility may affect the ability of holders of our common stock to sell their shares at an advantageous price.

***Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could delay, defer, discourage, or prevent a takeover attempt.***

Our amended and restated certificate of incorporation and amended and restated bylaws contain, and the General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”) contains, provisions which could have the effect of delaying, deferring, discouraging or preventing acquisitions of the Company that some stockholders may favor. These provisions provide for the following:

- a classified board of directors with three-year staggered terms, who can only be removed for cause, and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all then-outstanding voting stock entitled to vote at an election of directors, which may delay the ability of stockholders to change the membership of a majority of our board of directors;
- no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
- the exclusive right of our board of directors to set the size of the board of directors and to elect a director to fill a vacancy, however occurring, including by an expansion of the board of directors, which prevents stockholders from being able to fill vacancies on our board of directors;
- the ability of our board of directors to authorize the issuance of shares of undesignated preferred stock and to determine the price and other terms of those shares, including voting or other rights or preferences, without stockholder approval, which could impede the success of any attempt to change control of the Company and be used to significantly dilute the ownership of a hostile acquirer;
- the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;
- in addition to our board of directors’ ability to adopt, amend, or repeal our amended and restated bylaws, our stockholders may adopt, amend, or repeal our amended and restated bylaws only with the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of voting stock of the Company entitled to vote generally in an election of directors;
- the required approval of at least 66 2/3% of the voting power of all then outstanding shares of the Company entitled to vote thereon, voting together as a single class, to adopt, amend, or repeal certain provisions of our amended and restated certificate of incorporation;
- the requirement that any action required or permitted to be taken by its stockholders must be effected at a duly called annual or special meeting of its stockholders and may not be taken by written consent in lieu of a meeting; however, any action required or permitted to be taken by the holders of the CPS, voting separately as a series or class, may be taken by written consent;
- the requirement that a special meeting of stockholders may be called only by or at the direction of our board of directors, the chairperson of our board of directors, or our chief executive officer or president, thus prohibiting a stockholder from calling a special meeting;
- advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to bring other business before a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us;
- certain litigation against us can only be brought in Delaware; and
- the limitation of liability of, and provision of indemnification to, our directors and officers.

These provisions, alone or together, could delay, defer, discourage or prevent hostile takeovers and changes in control or changes in our management. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire.

As a Delaware corporation, we are also subject to provisions of the Delaware General Corporation Law, including Section 203 thereof, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or the Delaware General Corporation Law that has the effect of delaying, deferring, discouraging or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

***Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.***

Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered or intend to enter into with our directors and officers provide that:

- we will indemnify our directors and officers to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;
- we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;
- we are required to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, except that such directors or officers will undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;
- the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and
- we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees, and agents.

Our directors’ and officers’ liability insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability that may be imposed.

***Our amended and restated certificate of incorporation provides for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, and that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act.***

Our amended and restated certificate of incorporation provides that unless we consent in writing to the selection of an alternative forum, (a) the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court for the District of Delaware or other state courts of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action, suit or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder to the Company or our stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws (as either may be amended from time to time), or (iv) any action, suit or proceeding asserting a claim against the Company that is governed by the internal affairs doctrine; and (b) the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint.

Any person or entity purchasing or otherwise acquiring any interest in any security of the Company will be deemed to have notice of and consented to these provisions. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Exchange Act, from bringing such claims in federal court to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.

We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. If a court were to find the choice of forum provision that is contained in our amended and restated certificate of incorporation or amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, results of operations, and financial condition. For example, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

The choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our current or former director, officer or stockholder to the Company, which may discourage such claims against us or any of our current or former director, officer or stockholder to the Company and result in increased costs for investors to bring a claim.

***Tariffs, other trade restrictions, or taxes have had in the past and could have in the future, an adverse impact on our business, operations, and financial results.***

We source materials from, manufacture products in, and sell products in foreign countries, including China, making the price and availability of our merchandise susceptible to international trade risks and other international conditions. For example, any economic and political uncertainty caused by the U.S. tariffs imposed on goods from China and other countries by the current administration, and any corresponding tariffs or currency devaluations from China or such other countries in response, has negatively impacted, and may in the future negatively impact, demand and/or has in the past increased, or may in the future increase, the cost for certain of our products, particularly within our LED business. In addition, many of our customers also rely on international trade and may experience impacts similar to our own, which could in turn affect their relationship with us. Furthermore, the imposition of additional tariffs, duties, border adjustment taxes or other trade restrictions by the United States could result in the adoption of additional or increased tariffs or other trade restrictions by other countries. Tariffs may in the future increase our cost of materials and may cause us to increase prices to our customers, which we believe may reduce demand for our products. Our price increases may not be sufficient to fully offset the impact of tariffs and may result in lowering our margin on products sold. In sum, if the United States Government increases or implements additional tariffs, or if additional tariffs or trade restrictions are implemented by other countries, the resulting trade barriers could have a significant adverse impact on our suppliers, our customers and on our business. The volatility and unpredictability of international trade policies and conditions add further complexity to our operations, making it challenging to forecast and plan effectively. We are not able to predict future trade policy of the United States (including any potential changes in U.S. trade policy if there is a change in administration) or of any foreign countries in which we operate or purchase goods, or the terms of any trade agreements or their impact on our business. The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence or threat of a trade war or other governmental action related to tariffs or trade agreements or policies, has the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the world and U.S. economies, which in turn could have a material adverse effect on our business, operating results and financial condition.

### Our credit agreement may limit our flexibility in operating our business.

We, through Penguin Solutions Cayman and SMART Modular Technologies, as Borrowers, are party to the 2025 Credit Agreement, as described in more detail in “PART I – Item 1. Financial Statements– Notes to Consolidated Financial Statements – Subsequent Events.” This agreement contains, and future credit agreements may contain, restrictive covenants that limit our ability to engage in specified transactions and prohibit us from voluntarily prepaying certain of our other indebtedness. For instance, the covenants in our 2025 Credit Agreement limit the ability of Penguin Solutions Cayman and certain of its subsidiaries to, among other things:

- incur additional indebtedness;
- create liens on assets;
- engage in mergers or consolidations;
- sell assets;
- pay dividends, make distributions or repurchase capital stock;
- make investments, loans or advances;
- repay or repurchase certain subordinated debt (except as scheduled or at maturity);
- create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries;
- make certain acquisitions;
- engage in certain transactions with affiliates; and
- amend material agreements governing our subordinated debt and fundamentally change our business.

Under the 2025 Credit Agreement, we also are required to satisfy and maintain certain specified financial ratios. Our ability to meet those financial ratios could be affected by events beyond our control, and there can be no assurance that we will meet those ratios.

The failure to comply with any of these covenants would cause a default under the 2025 Credit Agreement. A default, if not waived, could result in acceleration of the outstanding indebtedness under the 2025 Credit Agreement as well as under our outstanding Convertible Senior Notes, in which case such indebtedness would become immediately due and payable. If any default occurs, we may not be able to pay our debt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be available on terms that are acceptable to us. Complying with these covenants may cause us to take actions that we otherwise would not take or not take actions that we otherwise would take.

Filed Jul 8, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-034541. Last ingested by Listed: Nov 2, 2026, 18:46 ET. No prices; not investment advice.