Exhibit 99.1

Press Release

FOR IMMEDIATE RELEASE

 

SMART Global Holdings Reports

Second Quarter Fiscal 2018 Financial Results

 

 

NEWARK, CA – March 22, 2018 SMART Global Holdings, Inc. (“SMART”) (NASDAQ: SGH), parent company of SMART Modular Technologies, Inc., today reported financial results for the second quarter of fiscal 2018 ended February 23, 2018.

 

Second Quarter Fiscal 2018 Highlights:

 

     Net sales of $314.0 million, 83% higher than prior year quarter

     GAAP operating income of $45.1 million

     GAAP net income of $36.8 million

     Adjusted EBITDA of $56.2 million

     GAAP diluted EPS of $1.60(1)

     Non-GAAP diluted EPS of $1.73(1)

(1)  GAAP and Non-GAAP diluted EPS include $0.10 of EPS due to FX gains

 

“The second quarter of fiscal 2018 came in above expectations as we benefited from multiple growth drivers.  The overall memory industry supply and demand dynamics remained favorable with respect to increasing memory densities and pricing.  Additionally, in Brazil, the economy continued to improve and we benefited from local content requirements.  Lastly, we once again demonstrated exceptional operating expense control and operating leverage in our financial model,” commented Iain MacKenzie, President and Co-Chief Executive Officer of SMART Global Holdings.

 

“We remain confident in our ability to drive additional growth and improvement in both SMART Brazil and our Specialty Memory businesses as the global memory market and economic trends in Brazil remain positive, and we see increasing demand from our OEM customers, particularly in the storage and networking end markets,” added Mr. MacKenzie.

 

“As we announced on March 14, 2018, I am very pleased that Ajay Shah has agreed to accept the role of President and CEO.  Ajay’s extensive industry knowledge and long history with SMART make him the ideal executive to lead SMART through this next phase of growth.  I look forward to working closely with Ajay through this transition,” concluded Mr. MacKenzie.

 

Quarterly Financial Results

GAAP (1)

 

 

Non-GAAP (2)

 

(In millions, except per share amounts)

Q2 FY18

 

Q1 FY18

 

Q2 FY17

 

 

Q2 FY18

 

Q1 FY18

 

Q2 FY17

 

Net sales

$

314.0

 

$

265.4

 

$

172.0

 

 

$

314.0

 

$

265.4

 

$

172.0

 

Gross profit

$

73.0

 

$

57.8

 

$

37.2

 

 

$

73.2

 

$

58.1

 

$

37.3

 

Operating income

$

45.1

 

$

31.5

 

$

9.3

 

 

$

48.5

 

$

34.6

 

$

13.3

 

Net income (loss)

$

36.8

 

$

21.0

 

$

(2.3

)

 

$

39.9

 

$

23.8

 

$

4.9

 

Earnings (loss) per share - diluted

$

1.60

 

$

0.92

 

$

(0.17

)

 

$

1.73

 

$

1.05

 

$

0.35

 

 

(1)

GAAP represents U.S. Generally Accepted Accounting Principles.

(2)

Please refer to the “Non-GAAP Information” section and the "Reconciliation of Non-GAAP Financial Measures" table below for further detail on the non-GAAP financial reporting referenced above and a reconciliation of such measures to our nearest GAAP measures.

 


Business Outlook

The following statements are based upon management's current expectations for the third quarter of fiscal 2018 ending May 25, 2018. These statements are forward-looking and actual results may differ materially. SMART undertakes no obligation to update these statements.

 

Net Sales - GAAP / Non-GAAP

$320 to $340 million

Gross Margin - GAAP / Non-GAAP

21% to 23%

Diluted EPS - GAAP

$1.61 to $1.69

 

 

Intangible amortization per share

$0.05

Stock-based compensation per share

$0.08

 

 

Diluted EPS - Non-GAAP

$1.74 to $1.82

 

 

Expected diluted share count

23.2 million

 

 

Conference Call Details

SMART will host a conference call today for analysts and investors at 2:30pm Pacific Time, 5:30 pm Eastern Time. Dial-in US toll free +1-866-487-6452 using access code 9983539.

 

A replay of the conference call will be available for one week following today’s call through the Events section of the SMART website at www.smartgh.com or by calling US toll free +1-855-859-2056; Passcode: 9983539.

Forward-Looking Statements

This release contains, and statements made during the above-referenced conference call will contain "forward-looking statements" including among other things, statements regarding future events and the future financial performance of SMART (including the business outlook for the next fiscal quarter) and statements regarding growth drivers in SMART’s industry and markets. These statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including but not limited to: business and economic conditions and growth trends in the technology industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the success of our strategic initiatives including additional investments in new products and additional capacity; the DRAM market and the temporary and volatile nature of pricing trends; deterioration in customer relationships; production or manufacturing difficulties; competitive factors; technological changes; difficulties with or delays in the introduction of new products;  slowing or contraction of growth in the memory market in Brazil; reduction in or termination of local content requirements in Brazil;  changes to applicable tax regimes or rates; prices for the end products of our customers; fluctuations in material costs and availability; deterioration in or loss of relations with any of our limited number of key vendors;  and other factors and risks detailed in SMART’s filings with the Securities and Exchange Commission. Such factors and risks as outlined above and in such filings may not constitute all factors and risks that could cause actual results of SMART to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. SMART operates in a continually changing business environment and new factors emerge from time to time. SMART cannot predict such factors, nor can it assess the impact, if any, from such factors on SMART or its results. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements should not be relied upon as a prediction of actual results. These forward-looking statements are made as of today, and SMART does not intend, and has no obligation, to update or revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release, except as required by law.

 

Non-GAAP Information

Certain non-GAAP financial measures are contained in this press release or will be discussed on our conference call, including Adjusted EBITDA, non-GAAP net income, non-GAAP net income per diluted share and non-GAAP diluted EPS. We define Adjusted EBITDA as GAAP net income plus net interest expense, income tax expense, depreciation and amortization expense, stock-based compensation expense, restructuring charges,  amortization of non-cash debt discount related to warrants, non-cash charges in connection with refinancing, and other infrequent or unusual items. Adjusted EBITDA is not a measure of financial performance calculated in accordance with U.S. GAAP and should be viewed as a supplement to, not a substitute for, our results of operations presented on the basis of U.S. GAAP. Adjusted EBITDA also does not purport to represent cash flow provided by, or used in, operating activities in accordance with U.S. GAAP and should not be used as a measure of liquidity.

 


The non-GAAP financial results presented herein do not include stock-based compensation expense, intangible amortization expense, amortization of non-cash debt discount related to warrants and non-cash charges in connection with refinancing. These non-GAAP financial measures are provided to enhance the user's overall understanding of our financial performance. By excluding these charges and gains, as well as any related tax effects, our non-GAAP results provide information to management and investors that is useful in assessing SMART's core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results, to plan and forecast future periods, and to assess performance of certain executives for compensation purposes. The presentation of this additional information is not meant to be a substitute for the corresponding financial measures prepared in accordance with U.S. GAAP. In addition, these measures may not be used similarly by other companies and therefore may not be comparable between companies.

 

Investors are encouraged to review the “Reconciliation of Non-GAAP Financial Measures to GAAP Results” and “Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA” tables below for more detail on Adjusted EBITDA and non-GAAP calculations.

 

About SMART Global Holdings

The SMART family of companies are global leaders in specialty memory, storage and hybrid solutions serving the electronics industry with standard and custom products for over 25 years. SMART delivers components, modules and solutions to a broad customer base, including OEMs in computing, networking, communications, storage, mobile and industrial markets. Customers rely on SMART as a strategic supplier with custom designs, product quality, technical support, a global footprint, and the ability to provide locally manufactured memory products in multiple geographies. See www.smartgh.com, www.smartm.com, www.smarth.com or www.smartsscs.com for more information.


SMART Global Holdings, Inc.

and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

February 23, 2018

 

 

November 24, 2017

 

 

February 24, 2017

 

 

February 23, 2018

 

 

February 24, 2017

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazil DRAM

 

$

67,322

 

 

$

51,959

 

 

$

28,695

 

 

$

119,281

 

 

$

48,023

 

Brazil Mobile Memory

 

 

141,311

 

 

 

105,891

 

 

 

49,932

 

 

 

247,202

 

 

 

106,143

 

Specialty Memory

 

 

105,332

 

 

 

107,559

 

 

 

93,327

 

 

 

212,891

 

 

 

177,132

 

Total net sales

 

 

313,965

 

 

 

265,409

 

 

 

171,954

 

 

 

579,374

 

 

 

331,298

 

Cost of sales (1)

 

 

240,948

 

 

 

207,573

 

 

 

134,797

 

 

 

448,521

 

 

 

264,431

 

Gross profit

 

 

73,017

 

 

 

57,836

 

 

 

37,157

 

 

 

130,853

 

 

 

66,867

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1) (2)

 

 

9,852

 

 

 

8,550

 

 

 

9,948

 

 

 

18,402

 

 

 

19,645

 

Selling, general and administrative (1) (2)

 

 

18,087

 

 

 

17,818

 

 

 

16,434

 

 

 

35,905

 

 

 

31,844

 

Management advisory fees

 

 

 

 

 

 

 

 

1,000

 

 

 

 

 

 

2,000

 

Restructuring

 

 

 

 

 

 

 

 

471

 

 

 

 

 

 

457

 

Total operating expenses

 

 

27,939

 

 

 

26,368

 

 

 

27,853

 

 

 

54,307

 

 

 

53,946

 

Income from operations

 

 

45,078

 

 

 

31,468

 

 

 

9,304

 

 

 

76,546

 

 

 

12,921

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(4,230

)

 

 

(4,599

)

 

 

(8,512

)

 

 

(8,829

)

 

 

(14,778

)

Other income (expense), net

 

 

2,548

 

 

 

(2,715

)

 

 

(1,005

)

 

 

(167

)

 

 

(902

)

Total other expense

 

 

(1,682

)

 

 

(7,314

)

 

 

(9,517

)

 

 

(8,996

)

 

 

(15,680

)

Income (loss) before income taxes

 

 

43,396

 

 

 

24,154

 

 

 

(213

)

 

 

67,550

 

 

 

(2,759

)

Provision for income taxes

 

 

6,602

 

 

 

3,149

 

 

 

2,124

 

 

 

9,751

 

 

 

2,785

 

Net income (loss)

 

$

36,794

 

 

$

21,005

 

 

$

(2,337

)

 

$

57,799

 

 

$

(5,544

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.68

 

 

$

0.97

 

 

$

(0.17

)

 

$

2.65

 

 

$

(0.40

)

Diluted

 

$

1.60

 

 

$

0.92

 

 

$

(0.17

)

 

$

2.53

 

 

$

(0.40

)

Shares used in computing per-share calculation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

21,915

 

 

 

21,673

 

 

 

13,870

 

 

 

21,794

 

 

 

13,870

 

Diluted

 

 

23,038

 

 

 

22,715

 

 

 

13,870

 

 

 

22,877

 

 

 

13,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes share-based compensation expense as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

$

227

 

 

$

218

 

 

$

142

 

 

$

445

 

 

$

268

 

Research and development

 

 

288

 

 

 

274

 

 

 

230

 

 

 

562

 

 

$

445

 

Selling, general and administrative

 

 

1,182

 

 

 

1,113

 

 

 

722

 

 

 

2,295

 

 

$

1,431

 

Total stock-based compensation expense

 

$

1,697

 

 

$

1,605

 

 

$

1,094

 

 

$

3,302

 

 

$

2,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Includes amortization of intangible assets expense as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

245

 

 

$

245

 

 

$

1,224

 

 

$

490

 

 

$

2,448

 

Selling, general and administrative

 

 

993

 

 

 

1,023

 

 

 

1,723

 

 

 

2,016

 

 

 

3,522

 

Total amortization expense

 

$

1,238

 

 

$

1,268

 

 

$

2,947

 

 

$

2,506

 

 

$

5,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


SMART Global Holdings, Inc.

and Subsidiaries

Reconciliation of Non-GAAP Financial Measures to GAAP Results

(In thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

February 23, 2018

 

 

November 24, 2017

 

 

February 24, 2017

 

 

February 23, 2018

 

 

February 24, 2017

 

Reconciliation of gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

73,017

 

 

$

57,836

 

 

$

37,157

 

 

$

130,853

 

 

$

66,867

 

GAAP gross margin

 

 

23.3

%

 

 

21.8

%

 

 

21.6

%

 

 

22.6

%

 

 

20.2

%

Add: Share-based compensation included in cost of sales

 

 

227

 

 

 

218

 

 

 

142

 

 

 

445

 

 

 

268

 

Non-GAAP gross profit

 

$

73,244

 

 

$

58,054

 

 

$

37,299

 

 

$

131,298

 

 

$

67,135

 

Non-GAAP gross margin

 

 

23.3

%

 

 

21.9

%

 

 

21.7

%

 

 

22.7

%

 

 

20.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

 

$

27,939

 

 

$

26,368

 

 

$

27,853

 

 

$

54,307

 

 

$

53,946

 

Less: Share-based compensation expense included in opex

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

288

 

 

 

274

 

 

 

230

 

 

 

562

 

 

 

445

 

Selling, general and administrative

 

 

1,182

 

 

 

1,113

 

 

 

722

 

 

 

2,295

 

 

 

1,431

 

Total

 

 

1,470

 

 

 

1,387

 

 

 

952

 

 

 

2,857

 

 

 

1,876

 

Less: Amortization of intangible assets included in opex

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

245

 

 

 

245

 

 

 

1,224

 

 

 

490

 

 

 

2,448

 

Selling, general and administrative

 

 

993

 

 

 

1,023

 

 

 

1,723

 

 

 

2,016

 

 

 

3,522

 

Total

 

 

1,238

 

 

 

1,268

 

 

 

2,947

 

 

 

2,506

 

 

 

5,970

 

Less: S-1 related costs

 

 

513

 

 

 

300

 

 

 

 

 

 

813

 

 

 

 

Non-GAAP operating expenses

 

$

24,718

 

 

$

23,413

 

 

$

23,954

 

 

$

48,131

 

 

$

46,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income from operations

 

$

45,078

 

 

$

31,468

 

 

$

9,304

 

 

$

76,546

 

 

$

12,921

 

GAAP operating margin

 

 

14.4

%

 

 

11.9

%

 

 

5.4

%

 

 

13.2

%

 

 

3.9

%

Add: Share-based compensation expense

 

 

1,697

 

 

 

1,605

 

 

 

1,094

 

 

 

3,302

 

 

 

2,144

 

Add: Amortization of intangible assets

 

 

1,238

 

 

 

1,268

 

 

 

2,947

 

 

 

2,506

 

 

 

5,970

 

Add: S-1 related costs

 

 

513

 

 

 

300

 

 

 

 

 

 

813

 

 

 

 

Non-GAAP income from operations

 

$

48,526

 

 

$

34,641

 

 

$

13,345

 

 

$

83,167

 

 

$

21,035

 

Non-GAAP operating margin

 

 

15.5

%

 

 

13.1

%

 

 

7.8

%

 

 

14.4

%

 

 

6.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of provision for income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP provision for income taxes

 

$

6,602

 

 

$

3,149

 

 

$

2,124

 

 

$

9,751

 

 

$

2,785

 

GAAP effective tax rate

 

 

15.2

%

 

 

13.0

%

 

 

-997.2

%

 

 

14.4

%

 

 

-100.9

%

Tax effect of adjustments to GAAP results

 

 

(338

)

 

 

(348

)

 

 

(365

)

 

 

(686

)

 

 

(702

)

Non-GAAP provision for income taxes

 

$

6,940

 

 

$

3,497

 

 

$

2,489

 

 

$

10,437

 

 

$

3,487

 

Non-GAAP effective tax rate

 

 

14.8

%

 

 

12.8

%

 

 

33.7

%

 

 

14.1

%

 

 

39.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) and earnings per share (diluted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

36,794

 

 

$

21,005

 

 

$

(2,337

)

 

$

57,799

 

 

$

(5,544

)

Adjustments to GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

1,697

 

 

 

1,605

 

 

 

1,094

 

 

 

3,302

 

 

 

2,144

 

Amortization of intangible assets

 

 

1,238

 

 

 

1,268

 

 

 

2,947

 

 

 

2,506

 

 

 

5,970

 

Amortization of debt discount related to warrants

 

 

 

 

 

 

 

 

2,180

 

 

 

 

 

 

2,180

 

S-1 related costs

 

 

513

 

 

 

300

 

 

 

 

 

 

813

 

 

 

 

Loss on extinguishment of LT debt

 

 

 

 

 

 

 

 

1,385

 

 

 

 

 

 

1,385

 

Tax effect of items excluded from non-GAAP results

 

 

(338

)

 

 

(348

)

 

 

(365

)

 

 

(686

)

 

 

(702

)

Non-GAAP net income

 

$

39,904

 

 

$

23,830

 

 

$

4,904

 

 

$

63,734

 

 

$

5,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing earnings per share (diluted)

 

 

23,038

 

 

 

22,715

 

 

 

14,142

 

 

 

22,877

 

 

 

14,137

 

Non-GAAP earnings per share (diluted)

 

$

1.73

 

 

$

1.05

 

 

$

0.35

 

 

$

2.79

 

 

$

0.38

 


SMART Global Holdings, Inc.

and Subsidiaries

Reconciliation of GAAP Net Income (loss) to Adjusted EBITDA

(In thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

February 23, 2018

 

 

November 24, 2017

 

 

February 24, 2017

 

 

February 23, 2018

 

 

February 24, 2017

 

GAAP net income (loss)

 

$

36,794

 

 

$

21,005

 

 

$

(2,337

)

 

$

57,799

 

 

$

(5,544

)

Share-based compensation expense

 

 

1,697

 

 

 

1,605

 

 

 

1,094

 

 

 

3,302

 

 

 

2,144

 

Amortization of intangible assets

 

 

1,238

 

 

 

1,268

 

 

 

2,947

 

 

 

2,506

 

 

 

5,970

 

Interest expense, net

 

 

4,230

 

 

 

4,599

 

 

 

8,512

 

 

 

8,829

 

 

 

14,778

 

Provision for income tax

 

 

6,602

 

 

 

3,149

 

 

 

2,124

 

 

 

9,751

 

 

 

2,785

 

Depreciation

 

 

5,120

 

 

 

5,002

 

 

 

6,044

 

 

 

10,122

 

 

 

11,583

 

S-1 related costs

 

 

513

 

 

 

300

 

 

 

 

 

 

813

 

 

 

 

Management advisory fees

 

 

 

 

 

 

 

 

1,000

 

 

 

 

 

 

2,000

 

Debt extension costs*

 

 

 

 

 

 

 

 

1,745

 

 

 

 

 

 

1,745

 

Loss on extinguishment of LT debt**

 

 

 

 

 

 

 

 

1,385

 

 

 

 

 

 

1,385

 

Restructuring

 

 

 

 

 

 

 

 

471

 

 

 

 

 

 

457

 

Special retention bonuses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

Investment advisory fees

 

 

 

 

 

 

 

 

134

 

 

 

 

 

 

540

 

Obsolete inventory related to restructuring

 

 

 

 

 

 

 

 

372

 

 

 

 

 

 

372

 

Adjusted EBITDA

 

$

56,194

 

 

$

36,928

 

 

$

23,491

 

 

$

93,122

 

 

$

38,240

 

* Debt extension costs consist of $1.7 million associated with the amendment of our senior secured term loan and revolving credit facility in November 2016.

** Loss on extinguishment of long-term debt consists of $1.4 million loss on a February 2017 extinguishment.


SMART Global Holdings, Inc.

and Subsidiaries

Consolidated Balance Sheets

(In thousands)

 

 

February 23,

 

 

August 25,

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

51,816

 

 

$

22,436

 

Accounts receivable, net

 

 

223,500

 

 

 

183,303

 

Inventories

 

 

148,577