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What changed in Penguin Solutions, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Penguin Solutions, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+528 added−459 removedSource: 10-K (2025-10-21) vs 10-K (2024-10-24)

Top changes in Penguin Solutions, Inc.'s 2025 10-K

528 paragraphs added · 459 removed · 381 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+17 added−17 removed56 unchanged
Biggest changeFinancial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill – Impairment of Penguin Edge Goodwill.” Stratus Through our Stratus brand, we provide for the continuous availability of business-critical applications by delivering zero-touch computing platforms that are designed to be autonomous, simple to deploy and maintain and protected from interruptions and threats.
Biggest changeFault Tolerant Computing Our Stratus brand products are designed to ensure the continuous availability of customers’ critical data and applications in data centers and edge locations. Our Stratus zero-touch computing (ztC) platforms deliver fault tolerance that is simple to install, interoperable with existing systems, manageable by time-constrained IT or OT (operational technology) teams, and protected from interruptions and threats.
Our FAEs collaborate with our customers, providing us insight into their business models and product roadmaps and enabling us to identify early-stage opportunities that can help grow our business.
Our FAEs collaborate with our customers, providing us with insight into their business models and product roadmaps and enabling us to identify early-stage opportunities that can help grow our business.
For certain customers in our Integrated Memory segment, we employ extensive software-based electrical and thermal simulations and test our designs on high-end functional testers utilizing a broad array of test suites. These tests are designed to meet the quality requirements of enterprise-class systems with stringent specifications required for various high-speed and high-compute applications.
For certain customers in our Integrated Memory segment, we employ extensive software-based electrical and thermal simulations and test our designs on high-end functional testers utilizing a broad array of test suites. These tests are designed to meet the quality requirements of enterprise-class systems with stringent specifications 9 required for various high-speed and high-compute applications.
Environmental Regulations Our operations and properties are subject to various federal, state, local, foreign and international environmental laws and regulations that govern, among other things, environmental licensing and registries, protection of flora and fauna, air and noise emissions, use of water resources, wastewater discharges, management and disposal of 14 hazardous and non-hazardous materials and wastes, reverse logistics (take-back policy) and remediation of releases of hazardous materials.
Environmental Regulations Our operations and properties are subject to various federal, state, local, foreign and international environmental laws and regulations that govern, among other things, environmental licensing and registries, protection of flora and fauna, air and noise emissions, use of water resources, wastewater discharges, management and disposal of hazardous and non-hazardous materials and wastes, reverse logistics (take-back policy) and remediation of releases of hazardous materials.
Our offerings include an extensive lineup of DRAM modules across a variety of DRAM technologies, including legacy synchronous DRAM, double data rate (“DDR”), DDR2, DDR3 and leading-edge, high-performance DDR4 and DDR5 DRAM devices. These technologies are incorporated into standard memory, enterprise memory and 7 hybrid integrated memory solutions in both standard and rugged formats.
Our offerings include an extensive lineup of DRAM modules across a variety of DRAM technologies, including legacy synchronous DRAM, double data rate (“DDR”), DDR2, DDR3 and leading-edge, high-performance DDR4 and DDR5 DRAM devices. These technologies are incorporated into standard memory, enterprise memory, and hybrid integrated memory solutions in both standard and rugged formats.
We also conduct design verification testing of hardware, firmware, system integration and reliability. We continually work to improve our test routines and associated software. For our specialty memory products, we have developed a high-volume, fully automated 9 reliability testing and screening capability that substantially exceeds standard industry practices.
We also conduct design verification testing of hardware, firmware, system integration and reliability. We continually work to improve our test routines and associated software. For our specialty memory products, we have developed a high-volume, fully automated reliability testing and screening capability that substantially exceeds standard industry practices.
SMART Supply Chain Services We offer a wide array of supply chain services including procurement, logistics, inventory management, temporary warehousing, programming, kitting and packaging services. We tailor our supply chain service offerings to meet the specific needs of our customers and enable our customers to manage supply chain planning and execution, which reduces costs and increases productivity.
Supply Chain Services We offer a wide array of supply chain services including procurement, logistics, inventory management, temporary warehousing, programming, kitting and packaging services. We tailor our supply chain service offerings to meet the specific needs of our customers and enable our customers to manage supply chain planning and execution, which reduces costs and increases productivity.
GAAP, we have presented the balance sheets, results of operations and cash flows of SMART Brazil operations in this Annual 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.
GAAP, we have presented the balance sheets, results of operations and cash flows of SMART Brazil operations in this Annual 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 5 of our Integrated Memory segment.
Our flexible and responsive global manufacturing capabilities, inventory management systems and global IT system allow us to move materials from one site to another in a cost-efficient manner and often deploy what might otherwise be excess inventory among other products and customers.
Our flexible and responsive global manufacturing capabilities, inventory management systems and global IT systems allow us to move materials from one site to another in a cost-efficient manner and often deploy what might otherwise be excess inventory among other products and customers.
Our Cree LED chip products include blue and green LED chips based on gallium nitride (“GaN”) and related materials. These chips are used in a number of applications and are available in a range of brightness levels, wavelengths (colors) and sizes.
Our Cree LED chip products include blue and green LED chips based on gallium nitride and related materials. These chips are used in a number of applications and are available in a range of brightness levels, wavelengths (colors) and sizes.
Our DRAM modules encompass a broad range of form factors and functions, including dual in-line memory modules (“DIMMs”), nonvolatile DIMMs, differential DIMMs (“DDIMM”), load reduced DIMMs, registered DIMMs, unbuffered DIMMs, small-outline DIMMs and mini-DIMMs for industrial, government, networking and communications, enterprise storage and computing and other vertical markets.
Our DRAM modules encompass a broad range of form factors and functions, including dual in-line memory modules (“DIMMs”), differential DIMMs 7 (“DDIMM”), load reduced DIMMs, registered DIMMs, unbuffered DIMMs, small-outline DIMMs, and mini-DIMMs for industrial, government, networking and communications, enterprise storage and computing and other vertical markets.
Through our website, we make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC.
Through our website, we make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Exchange Act, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC.
We have never experienced a work stoppage at any of our locations and take pride in our good employee relations. Employee Engagement and Development Continuous growth requires ongoing investment in people, innovation and new opportunities. We are always improving our communications between employees and management teams in order to advance our company goals and enhance the employee experience.
We have never experienced a work stoppage at any of our locations and take pride in our good employee relations. Employee Engagement and Development Continuous growth requires ongoing investment in people, innovation and new opportunities. We are always working to improve our communications between employees and management teams in order to advance our company goals and enhance the employee experience.
In our Advanced Computing and Integrated Memory segments, we purchase a significant portion of our materials from suppliers on a purchase order basis and generally do not have long-term commitments from our suppliers. Our Optimized LED segment has a number of supply agreements with third-party providers for LED chips in wafer or discrete form.
In our Advanced Computing and Integrated Memory segments, we purchase a significant portion of our materials from suppliers on a purchase order basis and generally do not have long-term commitments from our suppliers. Our Optimized LED segment has a number of supply agreements with third-party providers for LED chips in wafer or discrete form. See “Item 1A.
Across our Penguin Solutions business segments, our principal competitors include: • Specialty memory products providers; • Memory semiconductor manufacturers that also manufacture DRAM modules and Flash products; • Supply chain service providers, including distributors and third-party logistics providers; • Compute and storage systems providers; • Semiconductor and subsystem manufacturers; • Embedded computing platforms and systems providers; • Providers of SoMs and SBCs; • LED product manufacturers; • Enterprise IT server vendors; and • Manufacturers of industrial computers.
Across our Penguin Solutions business segments, our principal competitors include: • Specialty memory products providers; • Memory semiconductor manufacturers that also manufacture DRAM modules and Flash products; • Supply chain service providers, including distributors and third-party logistics providers; • Compute and storage systems providers; • Semiconductor and subsystem manufacturers; • Embedded computing platforms and systems providers; • Providers of System-on-Modules (SoMs) and Single-Board Computers (SBCs); • LED product manufacturers; • Enterprise IT server vendors; and • Manufacturers of industrial computers.
We participate in many industry trade shows worldwide and have active memberships in a number of industry organizations, including the Joint Electron Device Engineering Council (“JEDEC”), SD Card Association, Storage Networking Industry Association, Gen-Z Consortium, CXL Consortium, Trusted Computing Group, Open Compute Project, Sensor Open Systems Architecture Consortium, Peripheral Component Interconnect Special Interest Group and Illuminating Engineering Society (“IES”).
We participate in many industry trade shows worldwide and have active memberships in a number of industry organizations, including the Joint Electron Device Engineering Council, SD Card Association, Storage Networking Industry Association, CXL Consortium, Trusted Computing Group, Open Compute Project, Sensor Open Systems Architecture Consortium, Peripheral Component Interconnect Special Interest Group and Illuminating Engineering Society.
Our established global network of materials sourcing helps ensure that our pricing remains competitive and allows us to provide a stable source of supply for our customers. We believe that our longstanding relationships with leading suppliers put us in a favorable position to procure sufficient quantities of materials, including during periods of industry shortages.
Our established global network of materials sourcing is designed to help ensure that our pricing remains competitive and to allow us to provide a stable source of supply for our customers. We believe that our longstanding relationships with leading suppliers put us in a favorable position to procure sufficient quantities of materials, including during periods of industry shortages.
Our Flash memory products include solid-state drives (“SSDs”), Serial Advanced Technology Attachment (“SATA”) and PCIe NVMe products in 2.5" enclosures, M.2 and other module form factors. We also offer Flash component products such as embedded MultiMediaCard (“eMMC”) and embedded and removable products in USB, CompactFlash and SD and microSD Card configurations. Our Flash capabilities include application-specific and customized firmware development.
Our flash memory products include solid-state drives (“SSDs”), Serial Advanced Technology Attachment (SATA) and PCIe NVMe products in 2.5" enclosures, M.2, EDSFF, and other module form factors. We also offer flash component products such as embedded MultiMediaCard and embedded and removable USB products, and SD and microSD Card configurations. Our flash memory capabilities include customized firmware development.
As of the end of fiscal 2024, Penguin Solutions employed approximately 2,700 employees worldwide, with most located in the United States, China and Malaysia. We believe that our employees are the cornerstone of our success. To support their efforts, we aim to provide diverse, inclusive and equitable workplaces that we maintain through ongoing intentional actions.
As of the end of fiscal 2025, Penguin Solutions employed approximately 2,900 employees worldwide, with most located in the United States, China, and Malaysia. We believe that our employees are the cornerstone of our success. To support their efforts, we aim to provide inclusive and equitable workplaces maintained through ongoing intentional actions.
Penguin Solutions designs, builds, deploys and manages high-performance, high-availability enterprise solutions, allowing customers to achieve their breakthrough innovations. We do this in partnership with our customers—customizing solutions while facilitating rapid time to production, optimized long-term performance, high availability and enhanced value.
Penguin Solutions designs, builds, deploys and manages high-performance, high-availability enterprise solutions, allowing customers to achieve their breakthrough innovations. We do this in partnership with our customers—customizing solutions while facilitating rapid time to value, optimized long-term performance, high availability, and greater return on investment.
Our semiconductor suppliers include many of the world’s largest memory manufacturers, including Samsung Semiconductor, Inc., Micron Technology, Inc., SK hynix, Inc. and Kioxia Holdings Corporation.
Our semiconductor suppliers include many 10 of the world’s largest memory manufacturers, including Samsung Semiconductor, Inc., Micron Technology, Inc., SK hynix, Inc., International Business Machines Corporation, and Kioxia Holdings Corporation.
We are committed to paying market competitive wages to attract key talent and work to help to ensure pay equality across our diverse workforce. Our bonus program links employee compensation to Penguin Solutions’ business performance. We also offer an Employee Stock Purchase Plan, equity compensation, retirement benefits and, in the United States, a 401(k) match program.
We are committed to paying market competitive wages to attract key talent and work to help promote pay equality across equal quality and levels of work. Our bonus program links employee compensation to Penguin Solutions’ business performance. We also offer an Employee Stock Purchase Plan, equity compensation, retirement benefits and, in the United States, a 401(k) match program.
This segment was formed after our acquisition of Cree LED in March 2021 and offers products under the Cree LED ® brand. Our Optimized LED segment had net sales of $259.8 million, $248.3 million and $403.2 million in 2024, 2023 and 2022, respectively.
This segment was formed after our acquisition of Cree LED in March 2021 and offers products under the Cree LED ® brand. Our Optimized LED segment had net sales of $256.1 million, $259.8 million, and $248.3 million in 2025, 2024, and 2023, respectively.
In Advanced Computing, we sell Penguin Computing products to enterprise and government customers in AI cloud services, energy, hyperscale and education markets; Penguin Edge products to OEM customers, system integrators and through distribution to government, telecom infrastructure, industrial, network edge computing and transportation markets; and Stratus products and services to financial services, telecom, oil and gas, transportation, healthcare, retail and industrial automation customers.
In Advanced Computing, we sell our HPC and AI products to enterprise and government customers in AI cloud services, energy, financial services, hyperscale, and education; fault-tolerant computing products and services to enterprise customers in financial services, telecom, energy, transportation, healthcare, retail and industrial automation; and Penguin Edge products to OEM customers, system integrators and through distribution to government, telecom infrastructure, industrial, network edge computing and transportation.
We aim to deliver the highest quality products and services through our customer-centered approach. Drawing on our extensive knowledge in specialized domains, we bring customers new ideas and tailored solutions that can meet their most pressing needs. By combining leading-edge technologies with our unique software and services, we demonstrate our commitment to customer success.
Drawing on our extensive knowledge in specialized domains, we bring customers new ideas and tailored solutions that can meet their most pressing needs. By combining leading-edge technologies with our unique software and services, we demonstrate our commitment to customer success.
We collaborate closely with our global original equipment manufacturer (“OEM”) customers throughout their design process and across multiple projects to create solutions for demanding applications with differentiated requirements, such as specific form factors, higher density, lower power, specific firmware and greater durability and reliability compared to standard solutions.
We collaborate closely with global original equipment manufacturers (“OEM”) throughout their design process across multiple projects to create solutions for demanding applications with differentiated requirements. This includes unique form factors, with specific firmware, higher density, lower power, specific and greater durability and reliability compared to standard solutions.
With respect to our Advanced Computing segment, within our Stratus business we primarily compete with manufacturers of enterprise servers and industrial computers. Our Penguin Computing business competes primarily with global manufacturers of HPC and AI products and services.
With respect to our Advanced Computing segment, with our fault tolerant solutions we primarily compete with manufacturers of enterprise servers and industrial computers. Our HPC and AI business competes primarily with global manufacturers of HPC and AI products and services.
R&D expenses were $81.5 million, $90.6 million and $77.5 million in 2024, 2023 and 2022, respectively. As of August 30, 2024, we had approximately 340 R&D personnel worldwide. Competition Our businesses compete with numerous global and local companies.
R&D expenses were $79.8 million, $81.5 million and $90.6 million in 2025, 2024 and 2023, respectively. As of August 29, 2025, we had approximately 430 R&D personnel worldwide. Competition Our businesses compete with numerous global and local companies.
They also include some of the world’s largest providers of computing, communications and graphics processers, including Intel Corporation, Advanced Micro Devices, Inc., 10 NVIDIA Corporation and TD Synnex Corporation; as well as providers of subsystems including Intel and Giga-Byte Technology Co., Ltd.; networking products including Juniper Networks, Inc.; and suppliers of software products.
They also include some of the world’s largest providers of computing, communications and graphics processers, including Intel Corporation (“Intel”), Advanced Micro Devices, Inc. and TD SYNNEX Corporation; as well as providers of subsystems including Intel; networking products including Super Micro Computer, Inc. and Juniper Networks, Inc.; and suppliers of software products.
We actively seek to protect and leverage our intellectual property to promote our business interests. As of August 30, 2024, we owned or exclusively licensed approximately 1,732 patents, which are set to expire between 2024 to 2044, and had 310 pending patent applications.
We actively seek to protect and leverage our intellectual property to promote our business interests. As of August 29, 2025, we owned or exclusively licensed approximately 1,650 patents, which are set to expire between 2025 to 2050, and had 442 pending patent applications.
In 2024, 2023 and 2022, sales to our ten largest end customers (including sales to contract manufacturers and original design manufacturers (“ODMs”) at the direction of such end customers) accounted for 58%, 60% and 62% of total net sales, respectively. See “PART II – Item 8.
In 2025, 2024, and 2023, sales to our ten largest end customers (including sales to contract manufacturers and original design manufacturers (“ODMs”) at the direction of such end customers) accounted for 66% , 58%, and 60% of total net sales respectively. See “Item 1A.
We also provide employees with access to technical and leadership training and training on workplace culture and enrichment, covering topics such as harassment, healthy work environments, inclusion and global ethics and compliance.
We also provide employees with access to technical and leadership training and training on workplace culture and enrichment, covering topics such as harassment, healthy work environments, inclusion, and global ethics and compliance. Inclusion and Belonging We strive to promote a workforce where individuals feel welcome and included.
We are committed to providing employees with an inclusive and nondiscriminatory work environment, which is outlined in our non-discrimination policy. Through this policy, we articulate people-oriented, fair treatment principles for the recruitment, promotion, performance evaluation, compensation, training and retirement of all employees.
Our commitment to providing employees with an inclusive and nondiscriminatory work environment is outlined in our non-discrimination policy, though for the avoidance of doubt such policy is not incorporated herein by reference. Through this policy, we aim to articulate people-oriented, fair treatment principles for the recruitment, promotion, performance evaluation, compensation, training and retirement of all employees.
Our high-brightness LED components consist of surface mount device (“SMD”) and through-hole packaged LED products. Our SMD LED component products are available in a full range of colors and are suitable for a variety of applications, including video, signage, general illumination, transportation, gaming and specialty lighting.
Our SMD LED component products are available in a full range of colors and are suitable for a variety of applications, including video, signage, general illumination, transportation, gaming and specialty lighting. Our through-hole packaged LED component products are available in a full range of colors and are primarily designed for the signage market.
We target opportunities where we believe we can be a primary supplier of longer-lifecycle solutions to OEM customers for diverse and growing end markets within industrial, government, networking and communications, enterprise storage and computing as well as in other vertical markets. We offer an extensive portfolio of approximately 1,400 products available in standard and rugged formats.
We are a primary supplier of longer-lifecycle solutions to OEM customers for diverse end markets within industrial, government, networking and communications, enterprise storage and computing as well as other vertical markets. We offer an extensive portfolio of memory products available in standard and rugged form factors.
We cannot be certain that future identification of environmental concerns or conditions, more vigorous regulatory enforcement, enactment of more stringent laws and regulations or other unanticipated events will not arise in the future.
We cannot be certain that future identification of environmental concerns or conditions, more vigorous regulatory enforcement, enactment of more stringent laws and regulations or other 14 unanticipated events will not arise in the future. Additionally, certain environmental laws may impose liability without regard to fault or the legality of the original conduct.
Our Cree LED XLamp ® , J Series ® and high-brightness product lines feature packaged LED components. The XLamp and J Series components meet a broad range of market needs for lighting applications, including general 8 illumination (both indoor and outdoor applications), portable, architectural, signal and transportation lighting.
The XLamp and J Series components meet a broad range of market needs for lighting applications, including general illumination (both indoor and outdoor applications), portable, architectural, signal and transportation lighting. Our high-brightness LED components consist of surface mount device (“SMD”) and through-hole packaged LED products.
Within our Optimized LED segment, we compete with companies that manufacture and/or sell nitride-based LED chips as well as manufacturers of LED components concentrated primarily in indoor and outdoor lighting; specialty lighting including torch lamps (flashlights), horticulture and color-changing architectural lighting; signs and signals; and transportation.
Within our Integrated Memory segment, we compete against memory module providers and, to a lesser extent, large semiconductor manufacturers that utilize a portion of their capacity to manufacture memory modules. 12 Within our Optimized LED segment, we compete with companies that manufacture and/or sell nitride-based LED chips as well as manufacturers of LED components concentrated primarily in indoor and outdoor lighting; specialty lighting including torch lamps (flashlights), horticulture and color-changing architectural lighting; signs and signals; and transportation.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions – Stratus Technologies.” Our Products and Services Advanced Computing Our Advanced Computing segment offers high-performance, high-availability, fault-tolerant integrated computing platforms and services for AI, accelerated computing, machine learning (“ML”) and the internet of things (“IoT”) that span the continuum of edge, core and cloud.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions – Stratus Technologies.” Our Products and Services Advanced Computing Our Advanced Computing segment offers high-performance and high-availability computing platforms and services that span the continuum from core to edge to cloud.
Our research and product development for Advanced Computing includes high-availability server architecture and design, high-availability software development (including virtualization, operating systems and systems 11 management); server selection and occasional design; designs to enable integration of racks and clusters; storage system design and evaluation; high-performance network design; component testing for switches; cables and interface devices; development of software-defined storage systems; and embedded computer boards and systems.
Our R&D activities focus on driving innovation in our products and services as well as continuous process improvement for procurement, test and manufacturing. 11 Our research and product development for Advanced Computing includes high-availability server architecture and design, high-availability software development (including virtualization, operating systems and systems management); server selection and occasional design; designs to enable integration of racks and clusters, including power and cooling design, evaluation, and deployment; storage system design and evaluation; high-performance network design; component testing for switches; cables and interface devices; development of software-defined storage systems; and embedded computer boards and systems.
For Penguin Computing products, we have developed capabilities for design and development of large-scale systems and dense HPC and AI clusters that have significant power and cooling requirements, with manufacturing and testing for HPC products conducted at our Fremont, California facility.
For our fault tolerant products, we primarily use third-party manufacturers with assembly in our Ireland facility for certain product lines. For our HPC and AI products, we have developed capabilities for design and development of large-scale systems and dense HPC and AI clusters that have significant power and cooling requirements, with manufacturing and testing conducted at our Fremont, California facility.
We know that our diverse teams bring valuable perspectives and insights that help us consistently raise the bar and drive innovation forward. This philosophy applies to all levels of our organization, including our executive leadership team and our Board of Directors.
We know that a sense of belonging can help us to achieve our highest potential, helping to consistently raise the bar and drive innovation forward. This philosophy applies to all levels of our organization, including our executive leadership team and our Board of Directors.
We also offer IoT endpoint applications such as smart city, digital health, digital signage and smart buildings. In our Integrated Memory segment, we sell to OEM customers in industrial, government, networking and communications, enterprise storage and other vertical markets. Our Optimized LED segment sells LED chips and components to manufacturers and electronic component distributors.
In our Integrated Memory segment, we sell memory solutions to OEM customers in industrial, government, networking and communications, enterprise storage and compute, and other vertical markets. Our Optimized LED segment sells LED chips and components to manufacturers and electronic component distributors.
While many of our products contain proprietary aspects and are protected by patents, some of our products are built around mature industry standards and have less patent protection. For these products, we rely on trade secrets and know-how to protect our proprietary interests.
While many of our products contain proprietary aspects and are protected by patents, some of our products are built around mature industry standards and have less patent protection. For these products, we rely on trade secret rights to protect our proprietary interests. The absence of patent protection means that we cannot prevent our competitors from reverse-engineering and duplicating those products.
Our engineering team is focused on firmware development, systems engineering and integration, system and platform validation, applications, and product and reliability engineering for new products. Our advanced engineering and design capabilities enable us to address our customers’ increasingly complex needs.
Our engineering team is focused on firmware development, systems engineering and integration, system and platform validation, applications, and product and reliability engineering for new products.
Our through-hole packaged LED component products are available in a full range of colors and are primarily designed for the signage market. Manufacturing and Test Overview We have manufacturing and testing facilities that support one or more of our business segments, which are primarily located in the United States, Malaysia and China.
Manufacturing and Test Overview We have manufacturing and testing facilities that support one or more of our business segments, which are primarily located in the United States, Malaysia and China.
Within our Advanced Computing segment, we have two operating brands - Penguin Solutions, the umbrella brand for Penguin Computing ® and Penguin Edge™ products, and the Stratus ® brand. Our Penguin Computing business focuses on technical computing for core and cloud environments via advanced high-performance computing (“HPC”) and AI solutions.
Within our Advanced Computing segment, we offer products under the Penguin Solutions ® , Penguin Computing ® , Stratus ® , and our Penguin Edge TM product brands. Our Penguin Solutions and Penguin Computing hardware, software, and services focus on technical computing for core and cloud environments via advanced high-performance computing (“HPC”) and AI solutions.
Our robust portfolio ranges from today’s leading-edge technologies to standard and legacy DRAM and Flash storage products. We provide standard, ruggedized and custom memory and storage solutions that meet the needs of diverse applications in high-growth markets.
Our robust portfolio ranges from today’s leading-edge memory technologies to standard and DRAM and flash storage products, as well as ruggedized and custom memory and storage solutions for diverse applications in a wide range of markets.
We value our employees and understand the importance of their contributions as well as personal development. We believe that at the best workplaces, employees feel inspired, engaged, valued and included.
Human Capital At Penguin Solutions, we aim to put people first by nurturing a culture that supports creativity and growth. We value our employees and understand the importance of their contributions as well as personal development. We believe that at the best workplaces, employees feel inspired, engaged, valued and included.
At the core of our people 13 strategy is a commitment to maintaining a safe and inclusive culture and ensuring that our workforce represents the diversity of the communities where we work. Employees As of August 30, 2024, we had approximately 2,700 full-time employees (excluding contractors) in locations across the globe, including in the United States, China and Malaysia.
At the core of our people strategy is a commitment to maintaining a safe and inclusive culture where individuals can achieve their highest potential, regardless of background. 13 Employees As of August 29, 2025, we had approx imately 2,900 full-time employees (excluding contractors) in locations across the globe, including in the United States, China and Malaysia.
Business Segments The most exciting technological advancements are also the most challenging for companies to adopt. We support our customers in achieving their ambitions across our computing, memory and LED solutions. With our expert skills, experience and partnerships, we help turn our customers’ most complex challenges into compelling opportunities.
We support our customers in achieving their ambitions across our computing, memory, and LED solutions. With our expert skills, experience and partnerships, we help turn our customers’ most complex challenges into compelling opportunities. We aim to deliver the highest quality products and services through our customer-centered approach.
Divestiture of SMART Brazil On November 29, 2023, we completed the divestiture of an 81% interest in SMART Modular Technologies do Brasil – Indústria e Comércio de Componentes Ltda. (“SMART Brazil”) to Lexar Europe B.V. (“Lexar Europe”), an affiliate of Shenzhen Longsys Electronics Co. Ltd. Presentation of SMART Brazil as Discontinued Operations: In accordance with authoritative guidance under U.S.
(“SMART Brazil”) to Lexar Europe B.V. (“Lexar Europe”), an affiliate of Shenzhen Longsys Electronics Co. Ltd. Presentation of SMART Brazil as Discontinued Operations: In accordance with authoritative guidance under U.S.
We plan to continue R&D focused on the innovation and design of these and other new products that address the needs of our customers, with a focus on faster-growing markets. We continue to develop a broad offering of Flash-based products for industrial, government, communications and enterprise storage and compute markets.
We plan to continue R&D focused on the innovation and design of these and other new products that address the needs of our customers, with a focus on faster-growing markets. Our advanced engineering and design capabilities enable us to address our customers’ increasingly complex needs.
Our product development in Integrated Memory includes innovations for next-generation DRAM products, including DDR5, mobile DRAM, hybrid memories such as hybrid volatile and non-volatile DRAM, emerging interconnect standards such as CXL, enterprise memory and Flash-based products, and associated firmware development.
Our product development in Integrated Memory includes innovations for next-generation DRAM products, including DDR5, DRAM, and emerging interconnect standards such as CXL, enterprise memory and flash-based products, as well as associated firmware development. We continue to develop a broad offering of flash-based products for industrial, government, communications and enterprise storage and compute markets.
Unless otherwise noted, discussion within this Annual Report relates solely to our continuing operations and excludes the SMART Brazil operations. 5 See “PART II – Item 8.
Unless otherwise noted, discussion within this Annual Report relates solely to our continuing operations and excludes the SMART Brazil operations. See “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.” Acquisition of Stratus Technologies On August 29, 2022, we completed the acquisition of Stratus Technologies.
We maintain policies and procedures to evaluate open source software used in our products and strive to minimize the risk of our proprietary intellectual property being inadvertently pulled under such licenses. Human Capital At Penguin Solutions, we put people first by nurturing a culture that supports creativity and growth.
Moreover, some of our product solutions incorporate open source software that is available under public licenses such as the GNU General Public License. We maintain policies and procedures to evaluate open source software used in our products and strive to minimize the risk of our proprietary intellectual property being inadvertently pulled under such licenses.
Products using our blue and green LED chips can be found in automotive, video displays, gaming displays, heart rate monitors and function indicator lights. Customers also combine our blue LED chips with phosphors to create white LEDs, which are used for indoor and outdoor illumination, medical and industrial applications and automotive interior lighting, indicators, headlamps and daytime running lights.
Customers also combine our blue LED chips with phosphors to create white LEDs, which are used for indoor and outdoor illumination, medical and industrial applications and automotive interior lighting, indicators, headlamps and daytime running lights. 8 Our Cree LED XLamp ® , J Series ® and high-brightness product lines feature packaged LED components.
Our principal U.S. executive offices are located at 1390 McCarthy Boulevard, Milpitas, California 95035 and our telephone number at this address is (510) 623-1231. Our principal website is www.penguinsolutions.com. Information contained on or accessible through our website is not a part of this Annual Report.
Our principal website is www.penguinsolutions.com. Information contained on or accessible through our website is not a part of this Annual Report.
These memory modules come in configurations of up to 288 pins and densities of up to 128 gigabytes. We support leading-edge and emerging interconnect standards such as Compute Express Link (“CXL”). We utilize advanced printed circuit board and device packaging and stacking technologies to achieve cost-effective, high-density solutions.
These memory modules come in configurations of up to 288 pins and densities of up to 256 gigabytes. \We utilize advanced printed circuit board and device packaging and stacking technologies to achieve cost-effective, high-density solutions. Our products are designed to meet the quality requirements of enterprise class systems pursuant to the stringent specifications required for various high-speed applications.
We have established a Global Diversity Council (“GDC”) focused on creating a working environment that offers equal opportunity employment so that all workers are treated with fairness and respect. The GDC enables us to expand on our strategy to nurture a diverse and inclusive work environment through initiatives such as employee resource groups and the recruitment of more diverse leadership.
We have established a council comprised of employees from across the organization focused on creating a working environment that offers equal opportunity employment so that all workers are treated with fairness and respect.
Through our Penguin Edge business, we offer edge computing solutions for embedded and wireless applications, specializing in high-performance products for customers in government, health care, manufacturing and telecommunications. With our Stratus brand, we offer simplified, protected and autonomous fault-tolerant computing solutions in the data center and at the edge through its hardware, software and services offerings.
With our Stratus product brand, we offer simplified, protected, and autonomous fault-tolerant computing solutions in data centers and at the edge also through hardware, software, and services. We provide these leading-edge advanced computing solutions to customers in the education, energy, financial services, healthcare life sciences, government, hyperscale, and manufacturing markets.
For 40 years, Stratus Technologies has provided reliable and redundant computing that has enabled global Fortune 500 companies and small-to-medium sized businesses to securely and remotely turn data into actionable intelligence at the edge, data center and cloud – focused on both uptime and efficiency.
For over 40 years, our fault tolerant computing solutions have provided reliable and redundant computing that supports Fortune 500 companies as 6 well as small-to-medium sized businesses in securely and remotely turning critical data into actionable intelligence.
Along with the update of our company brand, we revised how we describe our business segments. Today we have Advanced Computing, formerly known as Intelligent Platform Solutions, Integrated Memory, formerly known as Memory Solutions, and Optimized LED, formerly known as LED Solutions.
Along with the update of our company brand, we revised how we describe our business segments. Today we have Advanced Computing, Integrated Memory and Optimized LED. Divestiture of SMART Brazil On November 29, 2023, we completed the divestiture of an 81% interest in SMART Modular Technologies do Brasil – Indústria e Comércio de Componentes Ltda.
These developments could give rise to material environmental liabilities and related costs that could have a material adverse effect on our business, financial condition and results of operations. Available Information Our address in the Cayman Islands is c/o Walkers Corporate Limited, 190 Elgin Avenue, George Town, Grand Cayman, Cayman Islands, KY1-9008.
These developments could give rise to material environmental liabilities and related costs that could have a material adverse effect on our business, financial condition and results of operations. Available Information Our address and principal U.S. executive offices are located at 45800 Northport Loop West, Fremont, California 94538 and our telephone number at this address is (510) 623-1231.
Our products are designed to meet the quality requirements of enterprise class systems pursuant to the stringent specifications required for various high-speed applications. We also design and manufacture embedded and removable Flash memory products in a variety of form factors and capacities, incorporated into storage and hybrid-integrated memory solutions in standard and rugged formats.
SMART CXL Memory is available as a memory expansion add-in-card (AIC) in our Penguin Solutions Altus ® AMD EPYC™ based servers, providing expansive memory for AI workloads. We also design and manufacture embedded and removable flash memory products in a variety of form factors and capacities, incorporated into storage and hybrid-integrated memory solutions in standard and rugged formats.
Our Integrated Memory segment had net sales of $356.4 million, $443.3 million and $551.7 million in 2024, 2023 and 2022, respectively. SMART Modular Technologies Through its brand SMART Modular Technologies ® , Integrated Memory has been helping customers enable high-performance computing through the design, development and advanced packaging of specialty integrated memory solutions for over 30 years.
Our Integrated Memory segment had net sales of $464.2 million, $356.4 million and $443.3 million in 2025, 2024 and 2023, respectively. Memory Products Our SMART Modular Technologies memory solutions have been helping customers across diverse industries and demanding applications—including data centers, networking, industrial automation, rugged environments, and emerging AI and cloud infrastructure.
These platforms are backed by expert customer, professional and managed services dedicated to customer success. Integrated Memory Our Integrated Memory segment enables high-performance, high-availability computing solutions through the design, development and advanced packaging of specialty memory and storage solutions.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill.” Integrated Memory Our Integrated Memory segment solves memory limitations experienced within high-performance, high-availability computing solutions through the design, development, and advanced packaging of specialty memory and storage solutions. Within our Integrated Memory segment, we offer products under the SMART Modular Technologies ® product brand.
As a result, IT and operational technology professionals across financial services, telecom, oil and gas, transportation, healthcare, retail and industrial automation rely on Stratus platforms and services to achieve greater productivity, efficiency, sustainability, safety, security and peace of mind.
As a result, IT and OT professionals across financial services, oil and gas, transportation, healthcare, retail and discrete manufacturing rely on our platforms and services to mitigate operational, financial, and reputational risk and support “always on” availability. Our solutions include the Stratus ztC Endurance™ compute platforms which are designed to deliver 99.99999% availability.
Penguin Edge Our Penguin Edge product portfolio brings together our SMART Embedded Computing™ (“SMART EC”) and SMART Wireless Computing™ (“SMART Wireless”) brands, both of which operate under the unified Penguin Edge product brand. Penguin Edge products encompass system-on-modules (“SoMs”), single board computers (“SBCs”), peripheral component interconnect express (“PCIe”) accelerators and application-ready platforms including bladed edge servers.
Discontinued Computing Solutions By approximately the end of calendar 2025, we expect to fully discontinue our Penguin Edge product portfolio, which had brought together our SMART Embedded Computing™ (“SMART EC”) and SMART Wireless Computing™ (“SMART Wireless”) brands under the unified Penguin Edge brand.
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Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.” Acquisition of Stratus Technologies On August 29, 2022, we completed the acquisition of Storm Private Holdings I Ltd., a Cayman Islands exempted company (together with its subsidiaries, “Stratus Technologies”).
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On June 30, 2025, we consummated the U.S. Domestication of the parent company of our corporate group from the Cayman Islands to the State of Delaware in the United States. For more information about the U.S. Domestication, see “About This Annual Report” above. Business Segments The most exciting technological advancements are also the most challenging for companies to adopt.
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We provide these leading-edge solutions to customers in the education, energy, financial services, government, hyperscale and manufacturing markets. Our Advanced Computing segment had net sales of $554.6 million, $749.7 million and $441.0 million in 2024, 2023 and 2022, respectively.
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Our Advanced Computing segment had net sales of $648.4 million, $554.6 million and $749.7 million in 2025, 2024 and 2023, respectively. AI and HPC Data Centers Penguin Solutions designs, builds, deploys, and manages HPC and AI infrastructure solutions that reliably enable the world’s most advanced, data intensive workloads f or more than 25 years.
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Penguin Computing Through our Penguin Computing business, we provide a robust portfolio of hardware (including solutions based on the Open Compute Project (“OCP”)), software and services offerings. Our solutions are composed of servers, software, integrated turn-key clusters, enterprise-grade storage, networking hardware and software, as well as cloud-based solutions via our Penguin-On-Demand™ (“POD”) solution.
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Our expert insights and strong relationships with best-in-class compute, networking, storage and software technology partners result in highly efficient and scalable AI systems for our customers. We aim to quickly deliver production-ready AI factories, seamlessly scale them to meet customers’ expanding AI needs, and continually optimize infrastructure performance to maximize customers’ return on investment throughout the lifecycle.
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Our product offerings include our OCP-inspired Tundra ® Extreme Scale products to solve technical compute and density challenges. Our rack-mount servers and graphics processing unit (“GPU”) accelerated computing platforms give our customers powerful tools for the development and implementation of AI, ML advanced modeling and HPC applications.
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We can meet the needs of customers’ specific AI workloads across a broad range of industries from hyperscalers and government agencies to financial services firms and manufacturing companies. Our solutions include Penguin Solutions OriginAI ® — an AI infrastructure solution for customers deploying GPUs at scale (hundreds to thousands of GPUs). OriginAI can accelerate AI deployment and deliver predictable performance.
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Complementing our compute, storage and networking hardware solutions is Penguin Solutions’ ClusterWare line of cloud and cluster management software. These products provide advanced capabilities for management of AI and HPC clusters ranging in size from department-level systems to supercomputers.
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This is achieved through proven, pre-defined architectures integrated with validated technologies and backed by the Penguin Solutions ICE ClusterWare™ software platform and our expert services for designing, building, deploying, and managing AI infrastructure. ICE ClusterWare is a hardware-agnostic, intelligent software platform for managing, scaling, and optimizing AI infrastructure.
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Our products and services also enable customers to provide their own AI and HPC cloud with remote access via our proprietary browser-based Virtual Desktop Infrastructure (“VDI”) solution. Our solution approach includes design, build, deploy, manage, software automation and end-to-end services.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business • Changing worldwide economic conditions could adversely affect our operating results and financial condition. • Our operating results fluctuate from quarter to quarter, which make them difficult to predict. • We have experienced losses in the past and may experience losses in the future. • We compete in historically cyclical markets. • Fluctuations in average selling prices may have a material adverse effect on our business, results of operations and financial condition. • Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our operations. • We depend on a select number of customers for a significant portion of our revenue. • Issues in the development of, our investment in, and use of AI or AI solutions, combined with an uncertain regulatory environment, may result in a material adverse impact on our business, results of operations and financial condition, reputational harm, liability or other adverse consequences to our business operations. • The markets that we serve are highly competitive. • We may be unable to optimally match purchasing and production to customer demand, which may have a material adverse effect on our business, results of operations and financial condition. • Our future success depends on our ability to develop new products and services. • Our customers often require that our products undergo a lengthy and expensive process of evaluation and qualification without any assurance of net sales. • If our OEM customers decide to utilize standardized solutions instead of our specialty products, our net sales and market share may decline. • We depend on a small number of sole or limited source suppliers. • We may be unable to adapt to technological change or maintain or improve our manufacturing efficiency. • Disruption of our operations at any one of our manufacturing facilities would substantially harm our business. • We are subject to a number of procurement laws and regulations. • Contracts with the United States Government may be terminated, cancelled or modified. • Products that fail to meet specifications, are defective or that are otherwise incompatible with end uses could impose significant costs on us. • Actual or perceived failures or breaches of our information and security systems, or those of our customers, suppliers or business partners, could expose us to losses. 16 • Actual or perceived non-compliance with applicable data privacy and security laws, or that of our customers, suppliers or business partners, could expose us to losses. • Some of our offerings utilize open source software, which may pose particular risks to our proprietary software, products and services in a manner that could harm our business or make it easier for competitors to enter our markets and compete with us. • We could be prevented from selling or developing our software if our licenses are not enforceable or are modified so as to become incompatible with other open source licenses. • Our indemnification obligations to our customers and suppliers could require us to pay substantial damages. • We may need to raise additional funds, which may not be available on acceptable terms or at all. • We have in the past made, and may in the future make, acquisitions, investments and/or alliances, which involve numerous risks. • We may fail to realize the anticipated benefits of recent acquisitions or the sale of our SMART Brazil business. • We have incurred, and may in the future incur, impairment charges related to our goodwill, which could have a material adverse effect on our business, results of operations and financial condition. • We may incur liabilities relating to additional Brazilian withholding tax in connection with the sale of our Brazil business. • The sale of our Brazil business could impair our ability to protect our trademarks and brand. • If we are not able to maintain, develop and enhance our brand and our reputation, our business and results of operations may be adversely affected. • We rely on third parties to sell a portion of our products and services. • We may be unable to protect our intellectual property. • Legal proceedings and claims could have a material adverse effect on our business, results of operations or financial condition. • We may be required to pay royalties or obtain licenses to sell certain products. • Changes in tax laws or potential adjustments by tax authorities could materially increase our tax expense, and our ability to use our tax attributes is limited. • We reversed the valuation allowance for a significant portion of our deferred tax assets in the fourth quarter of 2023, and we may not be able to realize these assets in the future.
Biggest changeRisks Related to Our Business • Changing worldwide economic conditions could adversely affect our results of operations and financial condition. • Our results of operations fluctuate from quarter to quarter, which make them difficult to predict. • We have experienced losses in the past and may experience losses in the future. • We compete in historically cyclical markets. • Fluctuations in average selling prices may have a material adverse effect on our business, results of operations and financial condition. • Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our business, results of operations and financial condition. • We depend on a select number of customers for a significant portion of our revenue. • Issues in the development of, our investment in, and use of AI or AI technologies, combined with an uncertain regulatory environment, may result in a material adverse impact on our business • The markets that we serve are highly competitive. • We may be unable to optimally match purchasing and production to customer demand, which may have a material adverse effect on our business, results of operations and financial condition. • Our future success depends on our ability to develop new products and services. • Our customers often require that our products undergo a lengthy and expensive process of evaluation and qualification without any assurance of net sales. • If our OEM customers decide to utilize standardized solutions instead of our specialty products, our net sales and market share may decline. • We depend on a small number of sole or limited source suppliers. • We may be unable to adapt to technological change or maintain or improve our manufacturing efficiency. • Disruption of our operations at any one of our manufacturing facilities would substantially harm our business. • We are subject to a number of procurement laws and regulations. • Products that fail to meet specifications, are defective or that are otherwise incompatible with end uses could impose significant costs on us. • Actual or perceived failures or breaches of our information and security systems, or those of our customers, suppliers or business partners, could expose us to losses. • Actual or perceived non-compliance with applicable data privacy and security laws, or that of our customers, suppliers or business partners, could expose us to losses. 16 • Some of our offerings utilize open source software, which may pose particular risks to our proprietary software, products and services in a manner that could harm our business or make it easier for competitors to enter our markets and compete with us. • We could be prevented from selling or developing our software if our licenses are not enforceable or are modified so as to become incompatible with other open source licenses. • Contracts with the U.S.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes.” In addition, all conversions of the Convertible Notes will be settled partially or entirely in cash.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes.” In addition, all conversions of the Convertible Senior Notes will be settled partially or entirely in cash.
As we continue to integrate this business into our operations and portfolio, our ability to realize some or all of the anticipated benefits of the acquisition may be impacted by the following: • difficulties in the assimilation and successful integration of the operations, sales functions, technologies, products, systems, processes, personnel and development capabilities; • failure to maintain and expand the customer bases of our acquired business; • difficulties in leveraging the Stratus Technologies research and development and product development capabilities to expand our products portfolio; • our failure to protect and expand their intellectual property and patent portfolios; • unanticipated costs, including write-offs of tangible assets as well as goodwill or other intangible assets, litigation or other contingent liabilities associated with the acquisition; • the diversion of management’s attention from other business concerns; • adverse effects on existing business relationships with suppliers and customers; • risks associated with entering markets in which we have little or no prior experience and markets with complex government regulations; and • loss of key employees of the acquired business.
As we continue to integrate this business into our operations and portfolio, our ability to realize some or all of the anticipated benefits of the acquisition may be impacted by the following: • difficulties in the assimilation and successful integration of the operations, sales functions, technologies, products, systems, processes, personnel and development capabilities; • failure to maintain and expand the customer bases of our acquired business; • difficulties in leveraging the Stratus Technologies research and development and product development capabilities to expand our products portfolio; • our failure to protect and expand their intellectual property and patent portfolios; • unanticipated costs, including write-offs of tangible assets as well as goodwill or other intangible assets, litigation or other contingent liabilities associated with the acquisition; 32 • the diversion of management’s attention from other business concerns; • adverse effects on existing business relationships with suppliers and customers; • risks associated with entering markets in which we have little or no prior experience and markets with complex government regulations; and • loss of key employees of the acquired business.
As a result, our business is and will continue to be subject to the risks generally associated with international business operations in Malaysia, China, Taiwan, India and other foreign countries, including: • compliance with numerous changing, and sometimes conflicting legal regimes on matters as diverse as tax, anticorruption, import/export controls and quotas, local manufacturing requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data privacy, employment regulations and labor relations, and labor and human rights laws and expectations; • changes in social, political and economic conditions, including as a result of changes of administration, political regimes or sentiment in countries in which we operate or with which we do business; 38 • transportation delays; • power and other utility shutdowns or shortages; • limitations on foreign investment; • disruptions in or lack of adequate infrastructure; • challenges protecting intellectual property and trade secrets; • exchange or currency controls and fluctuations, restrictions on currency convertibility and volatility of foreign exchange markets; • increased trade wars; • corruption or adverse political situations; • governmental intervention in local economies, industries, or the operations of specific companies, including us or our competitors; • changes or instability in local labor conditions, including strikes, work stoppages, protests and changes in employment regulations, increases in wages and the conditions of collective bargaining agreements; • compliance with travel restrictions, stay-at-home or work location conditions or other government or voluntary restrictions relating to epidemics or pandemics; • difficulties recruiting, employing and retaining qualified personnel to manage and oversee our local operations, sales and other activities; • difficulties in managing and overseeing employees and operations in locations far from senior management, which could result in compliance, control or other issues; • difficulties in obtaining governmental approvals and extension of existing incentives; • difficulties in collecting accounts receivable; • expropriation and nationalization of our assets in a particular jurisdiction; and • restrictions, or increases in existing tax rates, on repatriation of cash, dividends or profits.
As a result, our business is and will continue to be subject to the risks generally associated with international business operations in Malaysia, China, Taiwan, India and other foreign countries, including: • compliance with numerous changing, and sometimes conflicting legal regimes on matters as diverse as tax, anticorruption, import/export controls and quotas, local manufacturing requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data privacy, employment regulations and labor relations, and labor and human rights laws and expectations; • changes in social, political and economic conditions, including as a result of changes of administration, political regimes or sentiment in countries in which we operate or with which we do business; • transportation delays; • power and other utility shutdowns or shortages; • limitations on foreign investment; • disruptions in or lack of adequate infrastructure; • challenges protecting intellectual property and trade secrets; • exchange or currency controls and fluctuations, restrictions on currency convertibility and volatility of foreign exchange markets; • increased trade wars; • corruption or adverse political situations; • governmental intervention in local economies, industries, or the operations of specific companies, including us or our competitors; • changes or instability in local labor conditions, including strikes, work stoppages, protests and changes in employment regulations, increases in wages and the conditions of collective bargaining agreements; • compliance with travel restrictions, stay-at-home or work location conditions or other government or voluntary restrictions relating to epidemics or pandemics; • difficulties recruiting, employing and retaining qualified personnel to manage and oversee our local operations, sales and other activities; • difficulties in managing and overseeing employees and operations in locations far from senior management, which could result in compliance, control or other issues; • difficulties in obtaining governmental approvals and extension of existing incentives; 40 • difficulties in collecting accounts receivable; • expropriation and nationalization of our assets in a particular jurisdiction; and • restrictions, or increases in existing tax rates, on repatriation of cash, dividends or profits.
A disruption in or termination of our supply relationship with any of our significant suppliers or our inability to develop relationships with new suppliers, if required, would cause delays, disruptions or reductions in product 23 manufacturing and shipments or require product redesigns which could damage relationships with our customers, increase our costs, reduce our margins or increase the prices we need to charge for our products and could materially and adversely affect our business, results of operations and financial condition.
A disruption in or termination of our supply relationship with any of our significant suppliers or our inability to develop relationships with new suppliers, if required, would cause delays, disruptions or reductions in product manufacturing and shipments or require product redesigns which could damage relationships with our customers, increase our costs, reduce our margins or increase the prices we need to charge for our products and could materially and adversely affect our business, results of operations and financial condition.
Other factors that could cause demand for our products to fluctuate include: • a downturn in the computing, networking, communications, storage, aerospace, government, mobile or industrial markets; • changes in consumer confidence caused by changes in market conditions, including changes in the credit markets, expectations for employment and inflation and energy prices; • changes in the level of customers’ components inventory; • competitive pressures, including pricing pressures, from companies that have competing products, architectures, manufacturing technologies and marketing programs; • changes in technology or customer product needs; • strategic actions taken by our competitors; • market acceptance of our products; • changes in prevailing or available interest rates or liquidity of the domestic capital and lending markets; 45 • exchange rates and currency controls and restrictions on the movement of capital out of country; • recent and potential bank failures; • inflation; and • changes to tax, trade and regulatory policies, including as a result of changes in administration.
Other factors that could cause demand for our products to fluctuate include: • a downturn in the computing, networking, communications, storage, aerospace, government, mobile or industrial markets; • changes in consumer confidence caused by changes in market conditions, including changes in the credit markets, expectations for employment and inflation and energy prices; • changes in the level of customers’ components inventory; • competitive pressures, including pricing pressures, from companies that have competing products, architectures, manufacturing technologies and marketing programs; • changes in technology or customer product needs; • strategic actions taken by our competitors; 48 • market acceptance of our products; • changes in prevailing or available interest rates or liquidity of the domestic capital and lending markets; • exchange rates and currency controls and restrictions on the movement of capital out of country; • recent and potential bank failures; • inflation; and • changes to tax, trade and regulatory policies, including as a result of changes in administration.
Although we have implemented policies and controls to mitigate risks of non-compliance, our business activities create the risk of unauthorized conduct by one or more of our employees, consultants, customs brokers, freight forwarders, third party representatives or distributors that could be in violation of various laws including the FCPA or similar local regulations.
Although we have implemented policies and controls to mitigate risks of non-compliance, our business activities create the risk of unauthorized conduct by one or more of our employees, consultants, customs brokers, freight forwarders, third party representatives or distributors that could 49 be in violation of various laws including the FCPA or similar local regulations.
In addition, breaches of our IT Systems or security measures and the unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers or other third parties could expose us, our customers or other third parties affected to a risk of loss or misuse of this information, result in regulatory enforcement, litigation and potential liability, damage our brand and reputation or otherwise harm our business.
In addition, breaches of our IT Systems or security measures and the unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers or other third parties could expose us, our customers or other third parties affected to a risk of loss or misuse of this 27 information, result in regulatory enforcement, litigation and potential liability, damage our brand and reputation or otherwise harm our business.
If we were to lose one of our key customers or have a key customer cancel a key program or otherwise significantly 20 reduce its volume of business with us or fail to pay us in full for the goods or services purchased from us, our sales and profitability would be materially reduced and our business and financial condition would be seriously harmed.
If we were to lose one of our key customers or have a key customer cancel a key program or otherwise significantly reduce its volume of business with us or fail to pay us in full for the goods or services purchased from us, our sales and profitability would be materially reduced and our business and financial condition would be seriously harmed.
It may also cause us to delay, scale back or eliminate some or all of our research and development programs, or to reduce or cease operations, which could adversely impact our business, results of operations and financial condition. We have in the past made, and may in the future make, acquisitions, investments and/or alliances, which involve numerous risks.
It may also cause us to delay, scale back or eliminate some or all of our research and development programs, or to reduce or cease operations, which could adversely impact our business, results of operations and financial condition. 31 We have in the past made, and may in the future make, acquisitions, investments and/or alliances, which involve numerous risks.
Those risks include data security incidents, cybersecurity events, data breaches, ransomware attacks or other compromises of the IT Systems we or that our vendors use to provide services or process data on our behalf, which may lead to compromised network security and misappropriation or compromise of our information or that of third parties, system disruptions or lead to shutdowns.
Those risks include data security incidents, cybersecurity events, data breaches, ransomware 26 attacks or other compromises of the IT Systems we or that our vendors use to provide services or process data on our behalf, which may lead to compromised network security and misappropriation or compromise of our information or that of third parties, system disruptions or lead to shutdowns.
Many of these laws would also require us to notify regulators and customers, employees or other individuals of any data security breach as described above. The various data privacy enactments impose significant obligations and compliance with these requirements depends in part on 27 how particular regulators apply and interpret them.
Many of these laws would also require us to notify regulators and customers, employees or other individuals of any data security breach as described above. The various data privacy enactments impose significant obligations and compliance with these requirements depends in part on how particular regulators apply and interpret them.
These investments are inherently risky because the markets for the technologies or products they may have under development are typically in the early stages and may never materialize. We could lose our entire investment in these companies. We may fail to realize the anticipated benefits of recent acquisitions. We closed the acquisition of Stratus Technologies in August 2022.
These investments are inherently risky because the markets for the technologies or products they may have under development are typically in the early stages and may never materialize. We could lose our entire investment in these companies. We may fail to realize the anticipated benefits of our acquisitions. We closed the acquisition of Stratus Technologies in August 2022.
Utilizing these non-binding estimates or forecasts, we make significant decisions based on our estimates of customer requirements including determining the levels of business that we will seek and accept, production scheduling, component purchasing and procurement commitments, inventory levels, product development or customization, personnel and production facility needs and other resource requirements.
Utilizing these non-binding estimates or forecasts, we make significant decisions based on our estimates of customer requirements including determining the levels of business that we will seek and accept, production scheduling, component purchasing and procurement commitments, inventory levels, product development or customization, personnel 22 and production facility needs and other resource requirements.
Although we also manufacture standard components, modules and subsystems, an increase in such efforts by our customers could reduce the demand for our higher priced specialized or customized solutions, which in turn would have a negative impact on our business, results of operations and financial condition.
Although we also manufacture standard components, modules and subsystems, an increase in such efforts by our customers could reduce the demand for our higher priced specialized or customized solutions, which in turn would have a significant negative impact on our business, results of operations and financial condition.
Our deferred tax assets may also be subject to additional valuation allowances, which could have a material adverse effect on our business, results of operations and financial condition. Determining whether a valuation allowance for deferred tax assets is appropriate requires judgment and an evaluation of all positive and negative evidence.
Our deferred tax assets may also be subject to additional valuation allowances, which could have a material adverse effect on our business, results of operations, and financial condition. Determining whether a valuation allowance for deferred tax assets is appropriate requires significant judgment and an evaluation of all positive and negative evidence.
For example, our U.S. headquarters in Milpitas, California, manufacturing and research and development facility in Newark, California and our Penguin Computing operations in Fremont, California are located near major earthquake fault lines. Our manufacturing facility in Penang, Malaysia is located in an area that is also prone to natural disasters, such as cyclones, monsoons and floods.
For example, our U.S. headquarters in Fremont, California, manufacturing and research and development facility in Newark, California and our Penguin Computing operations in Fremont, California are located near major earthquake fault lines. Our manufacturing facility in Penang, Malaysia is located in an area that is also prone to natural disasters, such as cyclones, monsoons and floods.
If any of these events were to occur, our business, results of operations and financial condition could be materially adversely affected. Some of our offerings utilize open source software, which may pose particular risks to our proprietary software, products and services in a manner that could harm our business.
If any of these events were to occur, our business, results of operations and financial condition could be materially adversely affected. 28 Some of our offerings utilize open source software, which may pose particular risks to our proprietary software, products and services in a manner that could harm our business.
While we may take various actions to mitigate our business risks associated with climate change and other natural and catastrophic events, this may require us to incur substantial costs and may not be 37 successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risk.
While we may take various actions to mitigate our business risks associated with climate change and other natural and catastrophic events, this may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risk.
Furthermore, even if 22 a customer designs one of our products into its system, we cannot be assured that they will qualify or use our product in production, that the customer’s product will be commercially successful or that we will receive significant orders as a result of that design win or qualification.
Furthermore, even if a customer designs one of our products into its system, we cannot be assured that they will qualify or use our product in production, that the customer’s product will be commercially successful or that we will receive significant orders as a result of that design win or qualification.
Since a large percentage of our production is done in a small number of facilities, a disruption to operations, or a loss that is in excess of, or excluded from, our insurance coverage could adversely impact our business, results of operations and financial condition. We are subject to a number of procurement laws and regulations.
Since a large percentage of our production is done in a small number of facilities, a disruption to operations, or a loss that is in excess of, or 25 excluded from, our insurance coverage could adversely impact our business, results of operations and financial condition. We are subject to a number of procurement laws and regulations.
Changes in these 31 factors, or changes in actual performance compared with estimates of our future performance, may affect the fair value of goodwill and could result in an impairment charge. We may incur liabilities relating to additional Brazilian withholding tax in connection with the sale of our Brazil business.
Changes in these factors, or changes in actual performance compared with estimates of our future performance, may affect the fair value of goodwill and could result in an impairment charge. We may incur liabilities relating to additional Brazilian withholding tax in connection with the sale of our Brazil business.
However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
However, we cannot be certain that such agreements have been entered into with all relevant parties. Furthermore, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
It is possible for competitors with greater 28 resources than ours to develop their own open source solutions or acquire a smaller business that has developed open source offerings that compete with our offerings, potentially reducing the demand for, and putting price pressure on, our offerings.
It is possible for competitors with greater resources than ours to develop their own open source solutions or acquire a smaller business that has developed open source offerings that compete with our offerings, potentially reducing the demand for, and putting price pressure on, our offerings.
In addition, an increase in the existing tax rates applicable to the remittance of dividends or any other intercompany transfer of funds, as well as the enactment of any new tax related to such transfers, may either affect our ability to transfer funds from our subsidiaries or significantly reduce the amounts subject to transfer.
In addition, an increase in the existing tax rates applicable to the remittance of dividends or any other 41 intercompany transfer of funds, as well as the enactment of any new tax related to such transfers, may either affect our ability to transfer funds from our subsidiaries or significantly reduce the amounts subject to transfer.
During periods of oversupply, our net sales may decline if we fail to increase sales volume of existing products or to introduce and sell new products in quantities sufficient to offset declines in selling prices. Our efforts to increase sales or to introduce new products to offset the impact of declines in average selling prices may not be successful.
During periods of oversupply, our net sales may decline 19 if we fail to increase sales volume of existing products or to introduce and sell new products in quantities sufficient to offset declines in selling prices. Our efforts to increase sales or to introduce new products to offset the impact of declines in average selling prices may not be successful.
Our efforts to 21 maintain and improve our competitive position, or our failure to do so, could have a material adverse effect on our business, results of operations and financial condition. We may be unable to optimally match purchasing and production to customer demand, which may have a material adverse effect on our business, results of operations and financial condition.
Our efforts to maintain and improve our competitive position, or our failure to do so, could have a material adverse effect on our business, results of operations and financial condition. We may be unable to optimally match purchasing and production to customer demand, which may have a material adverse effect on our business, results of operations and financial condition.
Further, under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income may be limited.
Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income may be limited.
In addition, our trade secrets, know-how, and other proprietary information may be stolen, used in an unauthorized manner, or compromised through a direct intrusion by private parties or foreign actors, including those affiliated with or controlled by state actors.
In addition, our trade secrets, know-how, and other proprietary information may be stolen, used in an unauthorized manner, or compromised through a direct intrusion 34 by private parties or foreign actors, including those affiliated with or controlled by state actors.
We maintain insurance to protect against certain claims associated with the use of our products; however, our insurance may not cover all or any part of a claim asserted against us. Our 29 insurance does not cover intellectual property infringement in most instances.
We maintain insurance to protect against certain claims associated with the use of our products; however, our insurance may not cover all or any part of a claim asserted against us. Our insurance does not cover intellectual property infringement in most instances.
We cannot assure that our applications will be approved or that these registrations will prevent imitation, counterfeiting or other infringement of our name or the infringement of our other intellectual property rights. Third parties may also oppose our trademark applications and registrations or otherwise challenge our use 33 of the trademarks.
We cannot assure that our applications will be approved or that these registrations will prevent imitation, counterfeiting or other infringement of our name or the infringement of our other intellectual property rights. Third parties may also oppose our trademark applications and registrations or otherwise challenge our use of the trademarks.
Our success is dependent, in part, upon protecting our intellectual property rights. We rely on a combination of trade secrets, trademarks, copyrights, patents and other forms of intellectual property, contractual restrictions and confidentiality procedures to establish and protect our proprietary rights.
Our success is dependent, in part, upon protecting our intellectual property rights. We rely on a combination of trade secrets, trademarks, copyrights, patents and other forms of intellectual property rights, contractual restrictions and confidentiality procedures to establish and protect our proprietary technology.
Changing market dynamics, global and domestic policy developments, and the increasing frequency and impact of meteorological phenomena have the potential to disrupt our business, the business of our suppliers and/or customers, or otherwise adversely impact our business, financial condition, or results of operations.
Changing 39 market dynamics, global and domestic policy developments, and the increasing frequency and impact of meteorological phenomena have the potential to disrupt our business, the business of our suppliers and/or customers, or otherwise adversely impact our business, financial condition, or results of operations.
Although we have master agreements with some of our customers, these agreements govern the terms and conditions of the relationship and do not typically contain requirements for them to purchase minimum volumes.
Although we have master agreements with some of our 20 customers, these agreements govern the terms and conditions of the relationship and do not typically contain requirements for them to purchase minimum volumes.
Investigations, warranty and product liability claims and product recalls, regardless of their ultimate outcome, could have an adverse effect on our business, financial condition and 25 reputation and on our ability to attract and retain customers.
Investigations, warranty and product liability claims and product recalls, regardless of their ultimate outcome, could have an adverse effect on our business, financial condition and reputation and on our ability to attract and retain customers.
Federal and state tax attributes can be subject to an annual limitation under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and state tax laws.
Federal and state tax attributes can be subject to an annual limitation under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable state tax laws.
If attackers are able to exploit critical vulnerabilities before patches are installed or mitigating measures are implemented, significant compromises could impact our and our customers’ systems and data.
If attackers are able to exploit critical vulnerabilities before patches are installed or mitigating measures are implemented, significant compromises could materially impact our and our customers’ systems and data.
In addition, particularly in the high-technology industry, the value of stock options, restricted share unit awards or other share-based compensation is an important element in the retention of employees.
In addition, particularly in the high-technology industry, the value of stock options, restricted stock unit awards or other stock-based compensation is an important element in the retention of employees.
Our future operating results also depend in significant part upon our ability to attract, train and retain qualified management, including for manufacturing and quality assurance, engineering, design, finance, marketing, sales and support. We are continually recruiting such personnel in various parts of the world. However, competition for such personnel across all of our markets can be strong.
Our future results of operations also depend in significant part upon our ability to attract, train and retain qualified management, including for manufacturing and quality assurance, engineering, design, finance, marketing, sales and support. We are continually recruiting such personnel in various parts of the world. However, competition for such personnel across all of our markets can be strong.
Existing laws and regulations may apply to us or our customers in new ways, and new laws and regulations may be instituted, the effects of which are difficult to predict.
Existing laws and regulations may apply to us or our customers or partners in new ways, and new laws and regulations may be instituted, the effects of which are difficult to predict.
Further changes in tax laws could arise as a result of the base erosion and profit shifting project that was undertaken by the Organisation for Economic Co-operation and Development (“OECD”). For example, the OECD introduced an international tax framework under Pillar Two which includes a global minimum tax rate of 15%.
Further changes in tax laws could arise as a result of the base erosion and profit shifting project that was undertaken by the Organisation for Economic Co-operation and Development (“OECD”). For example, the OECD introduced an international tax framework under Pillar Two, which establishes a global minimum tax rate of 15%.
Our ability to attract, retain and motivate such personnel depends in part on our ability to offer competitive compensation packages, including salary, cash incentive compensation and share-based compensation along with other benefits and workplace policies, and we can provide no assurance that we will be successful in attracting or retaining such personnel now or in the future.
Our ability to attract, retain and motivate such personnel depends in part on our ability to offer competitive compensation packages, including salary, cash incentive compensation and stock-based compensation along with other benefits and workplace policies, and we can provide no assurance that we will be successful in attracting or retaining such personnel now or in the future.
If we fail to comply with these laws and regulations, we may be subject to detention, seizure and exclusion of imports, as well as penalties, costs and restrictions on export and import privileges that could have an adverse effect on our business, financial condition and operating results.
If we fail to comply with these laws and regulations, we may be subject to detention, seizure and exclusion of imports, as well as penalties, costs and restrictions on export and import privileges that could have an adverse effect on our business, financial condition and results of operations.
These alternative measures may not be available to us, may not be successful and may not permit us to meet our scheduled debt service obligations, which could result in substantial liquidity problems. Our Amended Credit Agreement restricts our ability to dispose of our assets and use the proceeds from the disposition.
These alternative measures may not be available to us, may not be successful and may not permit us to meet our scheduled debt service obligations, which could result in substantial liquidity problems. The 2025 Credit Agreement restricts our ability to dispose of our assets and use the proceeds from the disposition.
Legal proceedings and claims could have a material adverse effect on our business, results of operations or financial condition. We are currently involved in, and may in the future be involved in, legal proceedings, claims or government and administrative investigations, including any identified under “Item 3.
Legal proceedings and claims could have a material adverse effect on our business, results of operations or financial condition. We are currently involved, and may in the future become involved, in legal proceedings, claims or government and administrative investigations, including any identified under “Item 3.
Issues in the development of, our investment in, and use of AI or AI solutions, combined with an uncertain regulatory environment, may result in a material adverse impact on our business, results of operations and financial condition, reputational harm, liability or other adverse consequences to our business operations.
Issues in the development of, our investment in, and use of AI or AI technologies, combined with an uncertain regulatory environment, may result in a material adverse impact on our business, results of operations and financial condition, reputational harm, liability or other adverse consequences to our business operations.
The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence 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.
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, results of operations and financial condition.
We may not be successful in achieving the revenue and revenue growth necessary to maintain profitability.
We may not be successful in achieving the revenue and revenue growth necessary to achieve and maintain profitability.
If we are unable to differentiate our open source offerings from those of our competitors or compete effectively with other open source offerings, our business, financial condition, operation results and cash flows could be adversely affected.
If we are unable to differentiate our open source offerings from those of our competitors or compete effectively with other open source offerings, our business, financial condition, results of operations and cash flows could be adversely affected.
Our future operating results depend in significant part upon the continued contributions of our key senior management and technical personnel, many of whom hold critical institutional knowledge and expertise and would be difficult to replace.
Our future results of operations depend in significant part upon the continued contributions of our key senior management and technical personnel, many of whom hold critical institutional knowledge and expertise and would be difficult to replace.
Volatility of currencies in countries where we conduct business, most notably the U.S. dollar, Chinese renminbi, Malaysian ringgit, Japanese yen, euro, British pound, South Korean won, New Taiwan dollar, Hong 39 Kong dollar and South African rand have had and may in the future have an effect on our liquidity and operating results.
Volatility of currencies in countries where we conduct business, most notably the U.S. dollar, Chinese renminbi, Malaysian ringgit, Japanese yen, euro, British pound, South Korean won, New Taiwan dollar, Hong Kong dollar and South African rand have had and may in the future have an effect on our liquidity and results of operations.
Additionally, if any of the open source components of our offerings may not be liberally copied, modified or distributed, then our ability to distribute or develop all or a portion of our offerings could be adversely impacted.
Additionally, if any of the third-party open source components of our offerings may not be liberally copied, modified or distributed, then our ability to distribute or develop all or a portion of our offerings could be adversely impacted.
We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Convertible Notes or pay the cash amounts due upon conversion. Applicable law, regulatory authorities and the agreements governing our other indebtedness, including our Amended Credit Agreement, may restrict our ability to repurchase the Convertible Notes.
We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Convertible Senior Notes or pay the cash amounts due upon conversion. Applicable law, regulatory authorities and the agreements governing our other indebtedness, including the 2025 Credit Agreement, may restrict our ability to repurchase the Convertible Senior Notes.
We depend on a select number of customers for a significant portion of our revenue. Our principal customers include global distributors, enterprise users, government agencies and OEMs that compete in the computing, networking, communications, storage, aerospace, government, mobile, industrial automation, IoT, industrial IoT, government, military and lighting markets.
We depend on a select number of customers for a significant portion of our revenue. Our principal customers include global distributors, enterprise users, government agencies and OEMs that compete in the computing, networking, communications, storage, aerospace, mobile, industrial automation, Internet of Things (“IoT”), industrial IoT, government, military and lighting markets.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.” Our indebtedness may have important consequences, including, but not limited to, the following: • increasing our vulnerability to general economic downturns and adverse industry conditions; • limiting our ability to obtain additional financing; 40 • requiring us to dedicate a significant portion of our cash flows from operations to the payment of interest and principal on our debt, which would reduce the funds available to us for our working capital, capital expenditures or other general corporate requirements; • increasing our exposure to rising interest rates from variable rate indebtedness; • diluting the interests of our existing shareholders to the extent ordinary shares are issued upon conversion of our Convertible Notes (as defined below); • limiting our flexibility in planning for, or reacting to, changes in our business and industry; • placing us at a competitive disadvantage compared to our competitors with less indebtedness or more liquidity; and • limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.” Our indebtedness may have important consequences, including, but not limited to, the following: • increasing our vulnerability to general economic downturns and adverse industry conditions; • limiting our ability to obtain additional financing; • requiring us to dedicate a significant portion of our cash flows from operations to the payment of interest and principal on our debt, which would reduce the funds available to us for our working capital, capital expenditures or other general corporate requirements; • increasing our exposure to rising interest rates from variable rate indebtedness; • diluting the interests of our existing stockholders to the extent common stock are issued upon conversion of our Convertible Senior Notes (as defined below); • limiting our flexibility in planning for, or reacting to, changes in our business and industry; • placing us at a competitive disadvantage compared to our competitors with less indebtedness or more liquidity; and • limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.
In addition, litigation or other actions may be necessary to protect our intellectual property rights, to determine the validity and scope of the proprietary rights of others or to defend against third party claims of infringement and/or invalidity. The steps we take to prevent misappropriation, infringement or other violation of the intellectual property of others may not be successful.
In addition, litigation or other actions may be necessary to protect our intellectual property rights, to determine the validity and scope of the proprietary rights of others or to defend 35 against third party claims of infringement and/or invalidity. The steps we take to prevent misappropriation, infringement or other violations of the intellectual property of others may not be successful.
Our business may not generate sufficient cash flows from operations, and future borrowings may not be available to us under our debt arrangements, including our Amended Credit Agreement (as defined below), in an amount sufficient to enable us to service our debt or to fund our other liquidity needs.
Our business may not generate sufficient cash flows from operations, and future borrowings may not be available to us under our debt arrangements, including the 2025 Credit Agreement (as defined below), in an amount sufficient to enable us to service our debt or to fund our other liquidity needs.
In our on-demand and hosted solutions, such as POD, we process, store and transmit data provided by our customers, which may include sensitive and personal data. We also manage, store, transmit and otherwise process various sensitive personal or confidential data related to our company and our employees in the regular course of business.
In our on-demand and hosted solutions, we process, store and transmit data provided by our customers, which may include sensitive and personal data. We also manage, store, transmit and otherwise process various sensitive personal or confidential data related to our company and our employees in the regular course of business.
Sales outside of the United States accounted for 43%, 39% and 49% of our net sales in 2024, 2023 and 2022, respectively. In addition, a significant portion of our product design and manufacturing is performed at our facilities in Malaysia and China, and a significant amount of our product design activities are performed in Taiwan and India.
Sales outside of the United States accounted for 43%, 43% and 39% of our net sales in 2025, 2024 and 2023, respectively. In addition, a significant portion of our product design and manufacturing is performed at our facilities in Malaysia and China, and a significant amount of our product design activities are performed in Taiwan and India.
In addition, our existing indebtedness may limit our ability to obtain additional financing in the future, as discussed in greater detail below under “Risks Relating to Our Debt – Our indebtedness could impair our financial condition and harm our ability to operate our business.” In 2024, 2023 and 2022, we spent $19.4 million, $39.4 million and $20.4 million, respectively, on capital expenditures, which we used, among other things, to expand manufacturing and test capacity as well as research and development.
In addition, our existing indebtedness may limit our ability to obtain additional financing in the future, as discussed in greater detail below under “Risks Relating to Our Debt – Our indebtedness could impair our financial condition and harm our ability to operate our business.” In 2025, 2024 and 2023, we spent $9.0 million, $19.4 million and $39.4 million, respectively, on capital expenditures, which we used, among other things, to expand manufacturing and test capacity as well as research and development.
If our estimates or judgments relating to our critical accounting estimates are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our ordinary shares. The preparation of financial statements in conformity with U.S.
If our estimates or judgments relating to our critical accounting estimates are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our common stock. The preparation of financial statements in conformity with U.S.
The markets in which we operate have in the past experienced, are currently experiencing, and may in the future experience, shortages and long lead times in certain materials, including certain critical components, we use in manufacturing our products. These shortages cause some suppliers to place their customers, including us, on supply allocation.
The markets in which we operate have in the past experienced, are currently experiencing, and may in the future experience, shortages, long lead times and price fluctuations in certain materials, including certain critical components and raw materials that we use in manufacturing our products. These shortages cause some suppliers to place their customers, including us, on supply allocation.
In addition, fluctuating values between the U.S. dollar and other currencies can result in currency gains which are used in the computation of foreign taxes and can increase foreign taxable income. We are a holding company. If enacted, exchange controls may limit our ability to receive dividends and other distributions from our foreign subsidiaries.
In addition, fluctuating values between the U.S. dollar and other currencies can result in currency gains which are used in the computation of foreign taxes and can increase foreign taxable income. If enacted, exchange controls may limit our ability to receive dividends and other distributions from our foreign subsidiaries.
We are dependent upon a small number of sole or limited source suppliers for certain materials, including certain critical components or subsystems, we use in manufacturing our products. Purchases from our two largest suppliers were $0.4 billion, $0.5 billion and $0.9 billion in each of 2024, 2023 and 2022, respectively.
We are dependent upon a small number of sole or limited source suppliers for certain materials, including certain critical components or subsystems, we use in manufacturing our products. Purchases from our two largest suppliers were $0.6 billion, $0.4 billion and $0.5 billion in each of 2025, 2024 and 2023, respectively.
Successful breaches, employee malfeasance or human or technological error could result in, for example, unauthorized access to, disclosure, modification, misuse, loss or destruction of company, customer, government or other third party data or systems; theft of sensitive, regulated, classified or confidential data including personal information and intellectual property; the loss of access to critical data or systems through distributed denial-of-service attacks, denial-of-service attacks, ransomware attacks, supply chain attacks, destructive attacks or other means; and business delays, service or system disruptions or denials of service.
Successful breaches, employee malfeasance or human or technological error could materially impact our business due to, for example, unauthorized access to, disclosure, modification, misuse, loss or destruction of company, customer, government or other third party data or systems; theft of sensitive, regulated, classified or confidential data including personal information and intellectual property; the loss of access to critical data or systems through distributed denial-of-service attacks, denial-of-service attacks, ransomware attacks, supply chain attacks, destructive attacks or other means; and business delays, service or system disruptions or denials of service.
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 ordinary shares could decline and you could lose all or part of your investment. As noted above in “Item 1.
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. As noted above in “Item 1.
We are making significant investments in AI initiatives, including designing, building, deploying and managing AI and high-performance computing infrastructure. AI technologies, markets and related demand trends are complex and rapidly evolving, and we face significant competition from other companies, including companies with greater resources than ours, and an evolving regulatory landscape.
We are making significant investments in AI initiatives, including designing, building, deploying and managing AI and HPC infrastructure. AI and accelerated computing technologies, markets and related demand trends are complex and rapidly evolving, and we face significant competition from other companies, including companies with greater resources than ours, and an evolving regulatory landscape.
Any decision by a government agency not to exercise contract options or to terminate, cancel, modify or curtail any major programs or contracts would adversely affect our revenues, revenue growth and profitability. We may experience periodic performance issues under certain of our contracts.
Any decision by a government agency not to 30 exercise contract options or to terminate, cancel, modify or curtail any major programs or contracts would adversely affect our revenues, revenue growth and our ability to achieve or maintain profitability. We may experience periodic performance issues under certain of our contracts.
We source materials from and sell and manufacture products in foreign countries, including China, making the price and availability of our merchandise susceptible to international trade risks and other international conditions.
We source a significant portion of our 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.
The carrying value of goodwill may be reduced if we determine that goodwill is impaired. We test goodwill for impairment in the fourth quarter of each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
We test goodwill for impairment in the fourth quarter of each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
Financial Statements and 41 Supplementary Data – Notes to Consolidated Financial Statements – Debt.” This, or 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.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.” 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.
Because of the uncertainty of the timing and volume of orders from our customers, sales to our customers have varied from period to period and may vary significantly in the future, and our ability to forecast our sales have been, and may in the future be, difficult.
Because of the uncertainty of the timing, volume and renewals or non-renewals of orders from our customers, sales to our customers have varied from period to period and may vary significantly in the future, and our ability to forecast our sales have been, and may in the future be, difficult.
In addition, the Capped Call counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our ordinary shares and/or purchasing or selling our ordinary shares or other securities of ours in secondary market transactions and prior to the maturity of the Convertible Notes (and are likely to do so during any Observation Period (as defined in the Indenture) related to a conversion of Convertible Notes).
In addition, the Capped Call counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions and prior to the maturity of the Convertible Senior Notes (and are likely to do so during any Observation Period (as defined in the relevant indenture) related to a conversion of Convertible Senior Notes).
These estimates can be affected by numerous factors, including potential changes in economic, industry or market conditions; changes in business operations; changes in competition or changes in the price of our ordinary shares and market capitalization and other relevant events and factors affecting the fair value of the reporting unit.
These estimates can be affected by numerous factors, including potential changes in economic, industry or market conditions; changes in business operations; changes in competition or changes in the price of our common stock and market capitalization and other relevant events and factors affecting the fair value of the reporting unit.
In general, an “ownership change” will occur if there is a cumulative change in our ownership by certain “5-percent shareholders” (including groups of shareholders) that exceeds 50 percentage points (by value) over a rolling three-year period. Similar rules may apply under state tax laws.
In general, an “ownership change” occurs if there is a cumulative change in our ownership by certain “5-percent shareholders” (including groups of stockholders) that exceeds 50 percentage points (by value) over a rolling three-year period. Similar rules may apply under state tax laws.
The Capped Calls are expected generally to reduce the potential dilution to our ordinary shares upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
The Capped Calls are expected generally to reduce the potential dilution to our common stock upon any conversion of the Convertible Senior Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap.
If our assumptions change or if actual circumstances differ from those in our assumptions, our results of operations may be adversely affected and may fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our ordinary shares.
If our assumptions change or if actual circumstances differ from those in our assumptions, our results of operations may be adversely affected and may fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.
We may be unable to adapt to technological change. The industries in which we conduct business are characterized by constant and rapid technological changes and product obsolescence. For example, new manufacturing process technologies using smaller feature sizes and offering better performance characteristics are generally introduced every one to two years.
The industries in which we conduct business are characterized by constant and rapid technological changes and product obsolescence. For example, new manufacturing process technologies using smaller feature sizes and offering better performance characteristics are generally introduced every one to two years.
In addition, we have acquired and continue to acquire companies that may have cybersecurity vulnerabilities and/or unsophisticated security measures, which could expose us to significant cybersecurity, operational, and financial risks. The costs to address product defects or any of the foregoing security problems and security vulnerabilities before or after a cyber incident could be significant.
In addition, we have acquired and continue to acquire companies with cybersecurity vulnerabilities and/or unsophisticated security measures, which exposes us to significant cybersecurity, operational, and financial risks. The costs to address product defects or any of the foregoing security problems and security vulnerabilities before or after a cyber incident could be significant.
In that event, the market price of our ordinary shares would likely decline. In addition, the market price of our ordinary shares may fluctuate or decline regardless of our operating performance. We have experienced losses in the past and may experience losses in the future. Our business has experienced quarterly and annual operating losses.
In that event, the market price of our common stock would likely decline. In addition, the market price of our common stock may fluctuate or decline regardless of our operating performance. We have experienced losses in the past and may experience losses in the future. Our business has experienced quarterly and annual operating losses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity and availability of our critical systems, internal networks and information.
Biggest changeItem 1C. Cybersecurity Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity and availability of our critical systems, internal networks and information. We have aligned our cybersecurity risk management program with recognized security frameworks such as the National Institute of Standards and Technology Cybersecurity Framework and ISO standards.
Key elements of our cybersecurity risk management program include, but are not limited to, the following: • risk assessments designed to help identify material cybersecurity risks to our critical systems and information; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees; • an information security incident response plan that includes procedures for responding to cybersecurity incidents; • an incident response team (the “Response Team”) principally responsible for managing our response to cybersecurity incidents; and • a third-party risk management process for key IT vendors based on our assessment of their criticality to our operations and respective risk profile.
Key elements of our cybersecurity risk management program include, but are not limited to, the following: • risk assessments designed to help identify material cybersecurity risks to our critical systems and information; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees; • an information security event response plan that includes procedures for responding to cybersecurity events; • an information security event response team (the “Response Team”) principally responsible for managing our response to cybersecurity events; and • a third-party risk management process for key IT vendors based on our assessment of their criticality to our operations and respective risk profile.
Our CIO has over two decades of IT experience, including in applications, infrastructure, development, security and governance, and has presented as a featured speaker at numerous IT and security 48 conferences. Our management team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Our CIO has over two decades of IT experience, including in applications, infrastructure, development, security and governance, and has presented as a featured speaker at numerous IT and security conferences. Our management team, including our CIO, has overall responsibility for our corporate cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate and remediate cybersecurity risks and events through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; tabletop training exercises; and alerts and reports produced by security tools deployed in the IT environment.
Board members periodically receive presentations on cybersecurity topics from our CIO or external experts as part of the Board of Directors’ continuing education on topics that impact public companies. Our management team, including our CIO, is responsible for assessing and managing our material risks from cybersecurity threats.
Board members periodically receive presentations on cybersecurity topics from our CIO or external experts as part of the Board of Directors’ continuing education on topics that impact public companies. Our CIO, who is a member of our management team, is primarily responsible for assessing and managing our material risks from cybersecurity threats.
During 2024, we did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that materially affected us, including our business strategy, results of operations or financial condition.
During 2025, we did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity events, that materially affected us, including our business strategy, results of operations or financial condition.
Risk Factors.” Cybersecurity Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated to the Cybersecurity and Technology Risk Management Committee of the Board of Directors (the “Cybersecurity Committee”) oversight of cybersecurity and other information technology risks. The Cybersecurity Committee oversees management’s implementation of our cybersecurity risk management program.
Risk Factors.” Cybersecurity Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated to the Cybersecurity and Technology Risk Management Committee of the Board of Directors (the “Cybersecurity Committee”) oversight of cybersecurity and other information technology risks.
The Cybersecurity Committee receives regular reports from our Chief Information Officer (“CIO”) regarding any significant cybersecurity incidents, as well as any incidents with lesser impact potential. The CIO periodically reports to the Board of Directors regarding cybersecurity risks and our cybersecurity risk management program.
The Cybersecurity Committee oversees management’s implementation of our cybersecurity risk management program. 51 The Cybersecurity Committee receives regular reports from our Chief Information Officer (“CIO”) regarding any significant cybersecurity events, as well as any events with lesser impact potential. The CIO periodically reports to the Board of Directors regarding cybersecurity risks and our cybersecurity risk management program.
The Response Team, including our CIO and other members of our management team, has primary responsibility for assessing and managing our response to cybersecurity incidents.
The Response Team, which includes our CIO and other members of our management team, has primary responsibility for assessing and managing our response to cybersecurity events.
Removed
We have aligned our cybersecurity risk management program with recognized security frameworks such as the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”) and ISO standards.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is a summary of our principal facilities as of August 30, 2024: Location Square Feet (in 000s) Manufacturing Procurement R&D Sales Supply Chain Services Durham, NC 102 X X X Fremont, CA 86 X X X X Huizhou, China 824 X X X Maynard, MA 102 X X X Milpitas, CA 21 Newark, CA 79 X X X X X Penang, Malaysia 139 X X X X X Tempe, AZ 50 X X X X In addition to the principal facilities in the table above, we lease additional facilities in the United States, China, Hong Kong, Ireland, Japan, Scotland, Singapore and Taiwan. 49
Biggest changeThe following is a summary of our principal facilities as of August 29, 2025: Location Square Feet (in 000s) Manufacturing Procurement R&D Sales Supply Chain Services Durham, NC 102 X X X Fremont, CA 86 X X X X Huizhou, China 824 X X X Maynard, MA 69 X X X Newark, CA 79 X X X X X Penang, Malaysia 139 X X X X X Tempe, AZ 50 X X X X In addition to the principal facilities in the table above, we lease additional facilities in the United States, China, Hong Kong, Ireland, Japan, Scotland, Singapore and Taiwan.
Item 2. Properties Our U.S. headquarters are located in Milpitas, California. We lease or own various facilities described below for our design, manufacture, research and development and sales and marketing activities. We believe that our existing facilities are suitable and adequate for our present purposes.
Item 2. Properties Our U.S. headquarters are located in Fremont, California. We lease or own various facilities described below for our design, manufacture, research and development and sales and marketing activities. We believe that our 52 existing facilities are suitable and adequate for our present purposes.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShare Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act, except as shall be expressly set forth by specific reference in such filing.
Biggest changeThe following table sets forth information relating to repurchases of our equity securities during the three months ended August 29, 2025: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs May 31, 2025 - June 27, 2025 16,207 $ 18.26 16,207 $ 36,510,000 June 28, 2025 - July 25, 2025 — $ — — $ 36,510,000 July 26, 2025 - August 29, 2025 — $ — — $ 36,510,000 16,207 $ 18.26 16,207 Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act, except as shall be expressly set forth by specific reference in such filing.
Any future determination to pay dividends will be made at the discretion of our Board of Directors subject to applicable laws and will depend on, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements.
Any future determination to pay dividends on our common stock will be made at the discretion of our Board of Directors subject to applicable laws and will depend on, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements.
As a result, the last day of our fiscal year 51 varies. For consistent presentation and comparison to the industry indices shown herein, we have calculated our share performance graph as of August 31 for each year.
As a result, the last day of our fiscal year 55 varies. For consistent presentation and comparison to the industry indices shown herein, we have calculated our stock performance graph as of August 31 for each year.
Note: Management cautions that the share price performance information shown in the graph above may not be indicative of current share price levels or future share price performance. The share performance graph assumes $100 was invested in our ordinary shares and in the other indices on August 31, 2019.
Note: Management cautions that the stock price performance information shown in the graph above may not be indicative of current stock price levels or future stock price performance. The stock performance graph assumes $100 was invested in our common stock and in the other indices on August 31, 2020.
Issuer Purchases of Equity Securities Ordinary Share Repurchase Authorization On April 4, 2022, our Board of Directors approved a $75.0 million share repurchase authorization (the “Initial Authorization”), under which we may repurchase our outstanding ordinary shares from time to time through open market purchases, privately-negotiated transactions or otherwise.
Domestication. 54 Issuer Purchases of Equity Securities Common Stock Repurchase Authorization On April 4, 2022, our Board of Directors approved a $75.0 million stock repurchase authorization (the “2022 Authorization”), under which we may repurchase our outstanding common stock from time to time through open market purchases, privately-negotiated transactions or otherwise.
The following graph illustrates a comparison of cumulative total returns for our ordinary shares, the Russell 2000 Index and the Nasdaq Electronic Components Index from August 31, 2019 through August 30, 2024. We operate on a 52- or 53-week fiscal year, which ends on the last Friday in August.
The following graph illustrates a comparison of cumulative total returns for our common stock, the Russell 2000 Index and the Nasdaq Electronic Components Index from August 31, 2020 through August 31, 2025. We operate on a 52- or 53-week fiscal year, which ends on the last Friday in August.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information for Ordinary Shares Our ordinary shares are listed on the Nasdaq Global Select Market under the trading symbol “PENG.” Holders of Record As of October 14, 2024, there were 41 registered holders of record of our ordinary shares (not including beneficial holders of our ordinary shares held in street name by brokers and other institutions on behalf of shareholders).
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the Nasdaq Global Select Market under the trading symbol “PENG.” Holders of Record As of October 15, 2025, there wer e 37 registered holders of record of our common stock (not including beneficial holders of our common stock held in street name by brokers and other institutions on behalf of stockholders).
Dividends On January 3, 2022, our Board of Directors declared a share dividend of one ordinary share, $0.03 par value per share, for each outstanding ordinary share owned, to shareholders of record as of January 25, 2022. The dividend was paid on February 1, 2022.
As of October 15, 2025, there was one registered holder of record of our preferred stock, the Issued CPS. Common Stock Dividends On January 3, 2022, our Board of Directors declared a share dividend of one ordinary share, $0.03 par value per share, for each outstanding ordinary share owned, to shareholders of record as of January 25, 2022.
The performance was plotted using the following data: August 31, 2019 August 31, 2020 August 31, 2021 August 31, 2022 August 31, 2023 August 31, 2024 Penguin Solutions, Inc. $ 100 $ 89 $ 171 $ 129 $ 182 $ 146 Russell 2000 Index $ 100 $ 106 $ 156 $ 128 $ 134 $ 159 Nasdaq Electronic Components Index $ 100 $ 113 $ 162 $ 144 $ 163 $ 209
The performance was plotted using the following data: August 31, 2020 August 31, 2021 August 31, 2022 August 31, 2023 August 31, 2024 August 31, 2025 Penguin Solutions, Inc. $ 100 $ 192 $ 146 $ 205 $ 164 $ 192 Russell 2000 Index $ 100 $ 147 $ 121 $ 126 $ 150 $ 163 Nasdaq Electronic Components Index $ 100 $ 144 $ 128 $ 145 $ 183 $ 283
We have not paid any cash dividends on our ordinary shares, and we do not currently intend to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain all available funds and future earnings to support operations and to finance the growth and development of our business.
The dividend was paid on February 1, 2022. We have not paid any cash dividends on our common stock, and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future.
Certain of our agreements, including the Amended Credit Agreement, the SKT Purchase Agreement and the Certificate of Designation relating to the Investment (the “Certificate of Designation”), contain restrictions that limit our ability to repurchase our ordinary shares.
As of August 29, 2025, an aggregate of $36.5 million remained available for the repurchase of our common stock under the 2024 Authorization. Certain of our agreements, including the 2025 Credit Agreement, the SKT Purchase Agreement and the CPS Delaware Certificate of Designation, contain restrictions that limit our ability to repurchase our common stock.
On January 8, 2024, the Audit Committee of the Board of Directors approved an additional $75.0 million share repurchase authorization (the “Additional Authorization,” and together with the Initial Authorization, the “Current Authorization”). The Current Authorization has no expiration date but may be suspended or terminated by the Board of Directors at any time.
On each of January 8, 2024 and October 6, 2025, the Audit Committee of the Board of Directors approved additional $75.0 million stock repurchase authorizations (the “2024 Authorization” and “2025 Authorization,” respectively, and together, the “Current Authorizations”).
Removed
No shares were repurchased during the fourth quarter of 2024 under the Current Authorization. As of August 30, 2024, an aggregate of $77.7 million remained available for the repurchase of our ordinary shares under the Current Authorization.
Added
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. Other than dividend payments to the holder of Issued CPS, we currently intend to retain all available funds and future earnings to support operations and to finance the growth and development of our business.
Added
During fiscal 2025, we did not record any paid in-kind dividends. See “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Preferred Stock Investment” and “– Temporary Equity” of this report for further discussion of the Issued CPS.
Added
Securities Authorized for Issuance under Equity Compensation Plans Information regarding securities authorized for issuance under our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of Part III of this Annual Report.
Added
Recent Sales of Unregistered Securities As previously disclosed in our Current Report on Form 8-K12B filed with the SEC on June 30, 2025, the U.S.
Added
Domestication was effected via a court-sanctioned scheme of arrangement under Cayman Islands law, pursuant to which each ordinary share of Penguin Solutions Cayman was exchanged for one share of common stock of Penguin Solutions Delaware, and each convertible preferred share of Penguin Solutions Cayman was exchanged for one share of convertible preferred stock of Penguin Solutions Delaware.
Added
The issuance of 52,401,114 shares of Penguin Solutions Delaware capital stock pursuant to the scheme of arrangement was exempt from registration under Section 3(a)(10) of the Securities Act, which exempts from the registration requirements any security that is issued in exchange for one or more bona fide outstanding securities where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court expressly authorized by law to grant such approval.
Added
Please refer to Penguin Solutions Cayman’s definitive proxy statement on Schedule 14A filed with the SEC on May 2, 2025 for additional information about the U.S.
Added
The Current Authorizations, which consist solely of amounts approved pursuant to the 2024 Authorization and 2025 Authorization as all amounts under the 2022 Authorization have been utilized, have no expiration date but may be suspended or terminated by the Board of Directors at any time.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIf 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. 54 Results of Operations Year ended August 30, 2024 % of net sales (1) August 25, 2023 % of net sales (1) August 26, 2022 % of net sales (1) Net sales: Advanced Computing $ 554,552 47.4 % $ 749,708 52.0 % $ 440,986 31.6 % Integrated Memory 356,426 30.4 % 443,264 30.8 % 551,705 39.5 % Optimized LED 259,818 22.2 % 248,278 17.2 % 403,185 28.9 % Total net sales 1,170,796 100.0 % 1,441,250 100.0 % 1,395,876 100.0 % Cost of sales 830,020 70.9 % 1,026,079 71.2 % 1,004,831 72.0 % Gross profit 340,776 29.1 % 415,171 28.8 % 391,045 28.0 % Operating expenses: Research and development 81,537 7.0 % 90,565 6.3 % 77,472 5.6 % Selling, general and administrative 233,880 20.0 % 260,722 18.1 % 204,839 14.7 % Impairment of goodwill — — % 19,092 1.3 % — — % Change in fair value of contingent consideration — — % 29,000 2.0 % 41,324 3.0 % Other operating (income) expense 7,064 0.6 % 7,047 0.5 % 234 — % Total operating expenses 322,481 27.5 % 406,426 28.2 % 323,869 23.2 % Operating income (loss) 18,295 1.6 % 8,745 0.6 % 67,176 4.8 % Non-operating (income) expense: Interest expense, net 28,378 2.4 % 36,421 2.5 % 24,345 1.7 % Other non-operating (income) expense 21,084 1.8 % 11,837 0.8 % 350 — % Total non-operating (income) expense 49,462 4.2 % 48,258 3.3 % 24,695 1.8 % Income (loss) before taxes (31,167) (2.7) % (39,513) (2.7) % 42,481 3.0 % Income tax provision (benefit) 10,618 0.9 % (49,203) (3.4) % 18,074 1.3 % Net income (loss) from continuing operations (41,785) (3.6) % 9,690 0.7 % 24,407 1.7 % Net income (loss) from discontinued operations (8,148) (0.7) % (195,384) (13.6) % 44,185 3.2 % Net income (loss) (49,933) (4.3) % (185,694) (12.9) % 68,592 4.9 % Net income attributable to noncontrolling interest 2,539 0.2 % 1,832 0.1 % 2,035 0.1 % Net income (loss) attributable to Penguin Solutions $ (52,472) (4.5) % $ (187,526) (13.0) % $ 66,557 4.8 % (1) Summations of percentages may not compute precisely due to rounding.
Biggest changeResults of Operations Year ended August 29, 2025 % of net sales (1) August 30, 2024 % of net sales (1) August 25, 2023 % of net sales (1) Net sales: Advanced Computing $ 648,417 47.4 % $ 554,552 47.4 % $ 749,708 52.0 % Integrated Memory 464,249 33.9 % 356,426 30.4 % 443,264 30.8 % Optimized LED 256,128 18.7 % 259,818 22.2 % 248,278 17.2 % Total net sales 1,368,794 100.0 % 1,170,796 100.0 % 1,441,250 100.0 % Cost of sales 974,520 71.2 % 830,020 70.9 % 1,026,079 71.2 % Gross profit 394,274 28.8 % 340,776 29.1 % 415,171 28.8 % Operating expenses: Research and development 79,801 5.8 % 81,537 7.0 % 90,565 6.3 % Selling, general and administrative 238,177 17.4 % 233,880 20.0 % 260,722 18.1 % Impairment of goodwill 16,063 1.2 % — — % 19,092 1.3 % Change in fair value of contingent consideration — — % — — % 29,000 2.0 % Other operating expense 2,098 0.2 % 7,064 0.6 % 7,047 0.5 % Total operating expenses 336,139 24.6 % 322,481 27.5 % 406,426 28.2 % Operating income 58,135 4.2 % 18,295 1.6 % 8,745 0.6 % Non-operating (income) expense: Interest expense, net 7,305 0.5 % 28,378 2.4 % 36,421 2.5 % Other non-operating expense 1,929 0.1 % 21,084 1.8 % 11,837 0.8 % Total non-operating expense 9,234 0.7 % 49,462 4.2 % 48,258 3.3 % Income (loss) before taxes 48,901 3.6 % (31,167) (2.7) % (39,513) (2.7) % Income tax provision (benefit) 20,066 1.5 % 10,618 0.9 % (49,203) (3.4) % Net income (loss) from continuing operations 28,835 2.1 % (41,785) (3.6) % 9,690 0.7 % Net loss from discontinued operations — — % (8,148) (0.7) % (195,384) (13.6) % Net income (loss) 28,835 2.1 % (49,933) (4.3) % (185,694) (12.9) % Net income attributable to noncontrolling interest 3,444 0.3 % 2,539 0.2 % 1,832 0.1 % Net income (loss) attributable to Penguin Solutions $ 25,391 1.9 % $ (52,472) (4.5) % $ (187,526) (13.0) % (1) Summations of percentages may not compute precisely due to rounding.
Selling, General and Administrative Selling, general and administrative expense decreased by $26.8 million, or 10.3%, in 2024 compared to the prior year, primarily due to lower diligence, acquisition and integration expense, lower personnel-related expenses, mainly driven by headcount reductions, and lower amortization expense of intangible assets.
Selling, general and administrative expense decreased by $26.8 million, or 10.3%, in 2024 compared to the prior year, primarily due to lower diligence, acquisition and integration expense, lower personnel-related expenses, mainly driven by headcount reductions, and lower amortization expense of intangible assets.
Investing Activities : Net cash used for investing activities from continuing operations in 2024 consisted primarily of $19.4 million used for capital expenditures and deposits on equipment and $11.0 million of purchases of non-marketable investment securities, partially offset by net maturities of marketable investment securities of $19.9 million.
Net cash used for investing activities from continuing operations in 2024 consisted primarily of $19.4 million used for capital expenditures and deposits on equipment and $11.0 million of purchases of non-marketable investment securities, partially offset by net maturities of marketable investment securities of $19.9 million.
Financing Activities : Net cash used for financing activities from continuing operations in 2024 was $209.5 million, consisting primarily of $351.3 million in principal repayment of debt, $21.3 million of payments to acquire ordinary shares, $21.0 million payment of contingent consideration related to our 2023 acquisition of Stratus Technologies and $16.3 million of payments to acquire capped calls in connection with the issuance of our 2030 Notes, partially offset by $192.7 million in net proceeds from the issuance of our 2030 Notes and $9.8 million in proceeds from the issuance of ordinary shares from our equity plans.
Net cash used for financing activities from continuing operations in 2024 was $209.5 million, consisting primarily of $351.3 million in principal repayment of debt, $21.3 million of payments to acquire ordinary shares, $21.0 million payment of contingent consideration related to our 2023 acquisition of Stratus Technologies and $16.3 million of payments to acquire capped calls in connection with the issuance of our 2030 Notes, partially offset by $192.7 million in net proceeds from the issuance of our 2030 Notes and $9.8 million in proceeds from the issuance of ordinary shares from our equity plans.
Items involving significant assumptions, estimates and judgments include the following: • Fair value of consideration paid or transferred (including contingent consideration); 61 • Inventory, including estimated future selling prices, timing of product sales and completion costs for work in process; • Property, plant and equipment, including determination of values in a continued-use model; • Intangible assets, including valuation methodology, estimates of future revenues and costs, profit allocation rates attributable to the acquired technology and discount rates; • Debt and other liabilities, including discount rate and timing of payments; and • Deferred taxes, including projections of future taxable income and tax rates.
Items involving significant assumptions, estimates and judgments include the following: • Fair value of consideration paid or transferred (including contingent consideration); • Inventory, including estimated future selling prices, timing of product sales and completion costs for work in process; • Property, plant and equipment, including determination of values in a continued-use model; • Intangible assets, including valuation methodology, estimates of future revenues and costs, profit allocation rates attributable to the acquired technology and discount rates; • Debt and other liabilities, including discount rate and timing of payments; and • Deferred taxes, including projections of future taxable income and tax rates.
Net cash provided by financing activities from continuing operations in 2023 was $237.2 million, consisting primarily of $295.3 million in net proceeds from our term loan and $43.0 million in proceeds from the issuance of ordinary shares from our equity plans, partially offset by a $28.1 million payment of contingent consideration related to our 2021 acquisition of our Optimized LED business, $24.7 million of payments to acquire ordinary shares, $21.6 million in principal repayment of debt and $14.1 million payment of premium in connection with our convertible note exchange.
Net cash provided by financing activities from continuing operations in 2023 was $237.2 million, consisting primarily of $295.3 million in net proceeds from our term loan and $43.0 million in proceeds from the issuance of ordinary shares from our equity plans, partially offset by $28.1 million payment of contingent consideration related to our 2021 acquisition of our Optimized LED business, $24.7 million of payments to acquire ordinary shares, $21.6 million in principal repayment of debt, and $14.1 million payment of premium in connection with our convertible note exchange.
Each contract may contain multiple performance obligations, which requires the transaction price to be allocated to each performance obligation. We allocate the consideration to each performance obligation based on the relative selling price, determined as the best estimate of the price at which we would transact if it sold the deliverable regularly on a stand-alone basis.
Each contract may contain multiple performance obligations, which requires the transaction price to be allocated to each performance obligation. We allocate the consideration to each performance obligation based on the relative selling price, determined as the best estimate of the price at which we would transact if we sold the deliverable regularly on a stand-alone basis.
Under the terms of these arrangements, we cannot repurpose products without the customer’s consent and accordingly, we recognize revenue at the point in time when products are completed and made available to the customer. Service Revenue : Our service revenue is derived from professional services and supply chain services.
Under the terms of 69 these arrangements, we cannot repurpose products without the customer’s consent and accordingly, we recognize revenue at the point in time when products are completed and made available to the customer. Service Revenue : Our service revenue is derived from professional services and supply chain services.
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 contributed to margin expansion in our overall 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 58 business model contributed to margin expansion in our overall business.
Accordingly, we recognized withholding taxes on the expected capital gain and deferred tax liabilities of $28.6 58 million in 2023. In the first quarter of 2024, we completed the divestiture, and in connection therewith, recognized an additional loss of $8.9 million. See “Item 8.
Accordingly, we recognized withholding taxes on the expected capital gain and deferred tax liabilities of $28.6 million in 2023. In the first quarter of 2024, we completed the divestiture, and in connection therewith, recognized an additional loss of $8.9 million. See “Item 8.
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.
If we are unable to raise additional 63 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.
This determination affects the amount of revenue we recognize; a principal recognizes revenues at the gross amount received for the goods and services, while an agent recognizes revenue at the net amount. The impact of this determination significantly impact the amount of revenue and cost of sales we recognize.
This determination affects the amount of revenue we recognize; a principal recognizes revenues at the gross amount received for the goods and services, while an agent recognizes revenue at the net amount. The impact of this determination significantly impacts the amount of revenue and cost of sales we recognize.
Professional services include solution design, system installation, software automation and managed support services related to HPC and storage systems. Supply chain services includes procurement, logistics, inventory management, temporary warehousing, kitting and packaging.
Professional services include solution design, system installation, software automation and managed support services related to HPC and storage systems. Supply chain services include procurement, logistics, inventory management, temporary warehousing, kitting and packaging.
Net cash provided by operating activities from continuing operations in 2023 was $63.7 million, comprised primarily of a net income of $9.7 million, adjusted for non-cash items of $119.3 million.
Net cash provided by operating activities from continuing operations in 2023 was $63.7 million, comprised primarily of net income of $9.7 million, adjusted for non-cash items of $119.3 million.
Applying the five-step approach in determining whether to recognize revenue at a point in time or over time requires significant judgement. A portion of our revenue is from sales of customized product which, in some cases, are non-cancellable and/or non-refundable.
Applying the five-step approach in determining whether to recognize revenue at a point in time or over time requires significant judgment. A portion of our revenue is from sales of customized product which, in some cases, are non-cancellable and/or non-refundable.
Risk Factors.” Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2024, 2023 and 2022 contained 53, 52 and 52 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated.
Risk Factors.” Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2025, 2024 and 2023 contained 52, 53 and 52 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated.
Significant judgement is required to determine when control passes to the customer and whether and when our performance obligations have been satisfied. This determination can significantly affect the timing of recognizing revenue. Product Revenue : Product revenue is generally recognized when control of the promised goods is transferred to customers.
Significant judgment is required to determine when control passes to the customer and whether and when our performance obligations have been satisfied. This determination can significantly affect the timing of recognizing revenue. Product Revenue : Product revenue is generally recognized when control of the promised goods is transferred to customers.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions.” Other Operating (Income) Expense Other operating expense in 2024 and 2023 included restructure charges of $7.1 million and $7.0 million, respectively, 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.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions.” Other Operating (Income) Expense Other operating expense in 2025, 2024, and 2023 included restructuring charges of $2.1 million, $7.1 million, and $7.0 million , respectively, 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.
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 the company’s past and future operating performance.
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 which management believes provides supplemental information that is useful to investors in analyzing and assessing our past and future operating performance.
Net cash used for investing activities from continuing operations in 2023 was $281.2 million, consisted primarily of $213.1 million net cash used for the acquisition of Stratus Technologies, $39.4 million used for capital expenditures and deposits on equipment and $25.0 million used for the purchases of marketable investment securities.
Net cash used for investing activities from continuing operations in 2023 consisted primarily of $213.1 million net cash used for the acquisition of Stratus Technologies, $39.4 million used for capital expenditures and deposits on equipment and $25.0 million used for the purchases of marketable investment securities.
Other Non-operating (Income) Expense Other non-operating (income) expense in 2024 and 2023 included losses of $22.8 million and $15.9 million, respectively, from the extinguishment or prepayment of debt. Other non-operating (income) expense in 2023 also included net gains of $3.0 million from the disposition of assets. See “Item 8.
Other Non-operating (Income) Expense Other non-operating (income) expense in 2025, 2024 and 2023 included losses of $2.9 million, $22.8 million, and $15.9 million, respectively, from the extinguishment or prepayment of debt. Other non-operating (income) expense in 2024 also included net gains of $0.2 million from the disposition of assets. See “Item 8.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and notes for the year ended August 30, 2024. This discussion contains forward looking statements that involve risks, uncertainties and other factors.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and notes for the year ended August 29, 2025. This discussion contains forward looking statements that involve risks, uncertainties and other factors.
(collectively, the “Borrowers”) entered into a credit agreement (the “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 “2027 TLA”) and (ii) a revolving credit facility in an aggregate principal amount of $250.0 million (the “2027 Revolver”), in each case, maturing on February 7, 2027.
(the “Borrowers”) 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.
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; restructure charges; impairment of goodwill; changes in the fair value of contingent consideration; and other infrequent or unusual items.
These non-GAAP measures exclude certain items, such as stock-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.
We estimate the fair value of the contingent consideration as of the date of acquisition and subsequently recognize changes in the fair value in results of operations. During 2023 and 2022, we recorded charges of $29.0 million and $41.3 million, respectively, to adjust the fair value of the contingent consideration. See “Item 8.
We estimate the fair value of the contingent consideration as of the date of acquisition and subsequently recognize changes in the fair value in results of operations. During 2023, we recorded charges of $29.0 million to adjust the fair value of the contingent consideration. See “Item 8.
The holder of the CPS may convert such holder’s CPS into ordinary shares at any time, provided that the CPS may, at our option, automatically be converted into ordinary shares on any date following the second anniversary of the closing upon 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.
In 2023, our tax benefit of $49.2 million and effective tax rate of 124.5%, which was different from the U.S. statutory tax rate primarily due to a release of the U.S. federal and state valuation allowance.
In 2023, our tax benefit of $49.2 million and effective tax rate of 124.5% differed from the U.S. statutory tax rate primarily due to a release of the U.S. federal and state valuation allowance.
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.
Shifts in the mix of revenue from our operating segments, and in the timing of revenue, which can vary significantly from period to period, have impacted and can continue to impact our business and results of operations, including gross and operating margins.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Leases.” For our purchase obligations, see “Item 8.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.” For our operating lease obligations, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Leases.” For our purchase obligations, see “Item 8.
In 2024, our tax expense of $10.6 million and effective tax rate of (34.1)%, which was different from the U.S. statutory tax rate primarily due to losses, generated in a jurisdiction where no tax benefit can be recognized, and foreign withholding taxes, partially offset by benefits associated with decreases in reserves for uncertain tax provisions and U.S. federal and state tax credits.
In 2024, our tax expense of $10.6 million and effective tax rate of (34.1)% differed from the U.S. statutory tax rate primarily due to losses generated in a jurisdiction where no tax benefit can be recognized, non-deductible expenses and foreign withholding taxes, offset in part by benefits associated with decreases in reserves for uncertain tax provisions and U.S. federal and state tax credits.
If we are unable to identify and complete attractive acquisitions, we may not be successful in growing our revenue and/or expanding our margins.
If we are unable to identify and complete attractive acquisitions and successfully integrate such businesses, we may not be successful in growing our revenue and/or expanding our margins.
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. Credit Facility On February 7, 2022, Penguin Solutions and SMART Modular Technologies, Inc.
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. Entry Into 2025 Credit Agreement and Repayment of 2022 TLA On February 7, 2022, Penguin Solutions Cayman and SMART Modular Technologies, Inc.
As of August 30, 2024, there was $300.0 million of aggregate principal amount outstanding under the Amended 2027 TLA and there were no amounts outstanding under the 2027 Revolver. See “Item 8.
As of August 30, 2024, 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.
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.
Our principal uses of cash and capital resources have been acquisitions, debt service requirements, capital expenditures, investments in working capital, research and development expenditures, and other operating expenses. We expect that future capital expenditures will focus on expansion of our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades.
Our effective income tax rate in the future may be higher depending on a combination of our overall and jurisdictional profitability, the expectation that future tax holidays will have tax rates greater than our prior approved tax holidays and the impact of the OECD’s Pillar Two model rules, which aims to implement a global minimum tax rate of 15%.
Our effective income tax rate in the future may be higher depending on a combination of our overall and jurisdictional profitability, the general expectation that future tax holidays may have tax rates greater than our prior approved tax holidays, and the impact of the Organisation for Economic Co-operation and Development's Pillar Two Model rules which aims to implement a global minimum tax of 15%.
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. Overview For an overview of our business, see “PART I – Item 1.
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. Overview For an overview of our business, see “PART I – Item 1. Business.” On June 30, 2025, we completed the U.S.
Throughout 2023, we adjusted the fair value of the Stratus Earnout by an aggregate of $29.0 million and, as of August 25, 2023, current liabilities included $50.0 million for the amount payable in connection with the Stratus Earnout. In the second quarter of 2024, we paid in full $50.0 million related to the Stratus Earnout.
Throughout 2023, we adjusted the fair value of the Stratus Earnout by an aggregate of $29.0 million and, as of August 25, 2023, current liabilities included $50.0 million for the amount payable in connection with the Stratus Earnout.
Operating and Non-operating (Income) Expense Research and Development Research and development expense decreased by $9.0 million, or 10.0%, in 2024 compared to the prior year, primarily due to lower personnel-related expenses mainly driven by headcount reductions, as well as lower subcontract services mainly driven by Advanced Computing.
Operating and Non-operating (Income) Expense Research and Development Research and development expense decreased by $1.7 million, or 2.1%, in 2025 compared to the prior year, primarily due to lower personnel-related expenses mainly driven by headcount reductions, as well as lower subcontract services mainly driven by Advanced Computing.
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.
However, our reliance on third-party manufacturers exposes us to risk of supply chain disruption and lost business. For example, the global semiconductor shortage, particularly during its peak, has adversely affected our results of operations.
See “Item 8. Financial Statements and Supplementary Data – 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 for all periods presented. As of August 25, 2023, SMART Brazil was classified as held for sale.
For additional information, see “Item 8. Financial Statements and Supplementary Data – 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 for all periods presented.
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.
From time to time, we may seek to expand our addressable market by entering new business segments where we identify a business opportunity at scale with a path to being accretive to our overall operations in the near term.
The CPS will be convertible into ordinary shares at a conversion price of $32.81 per preferred share, 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 shares of Issued CPS are convertible into shares of common stock of Penguin Solutions at an initial conversion price of $32.81 per ordinary share, subject to adjustment upon the occurrence of certain events, have an initial liquidation preference of 1x and are only be redeemable at our option, subject to certain conditions.
The Original Credit Agreement has subsequently been amended to, among other things, provide for incremental term loans in an aggregate amount of $300.0 million (together with the 2027 TLA, the “Amended 2027 TLA”), amend the First Lien Leverage Ratio (as defined in the 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.
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 of $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.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Commitments and Contingencies.” Cash Flows Year ended August 30, 2024 August 25, 2023 August 26, 2022 Net cash provided by operating activities from continuing operations $ 105,521 $ 63,677 $ 38,862 Net cash used for investing activities from continuing operations (11,804) (281,184) (21,234) Net cash provided by (used for) financing activities from continuing operations (209,495) 237,221 60,645 Net increase in cash and cash equivalents from discontinued operations 90,447 22,520 61,567 Effect of changes in currency exchange rates (1,256) 4,765 239 Net increase (decrease) in cash, cash equivalents and restricted cash $ (26,587) $ 46,999 $ 140,079 Operating Activities : Cash flows from operating activities reflects net income, adjusted for certain non-cash items, including depreciation and amortization expense, share-based compensation, changes in the fair value of contingent consideration, gains and losses from investing or financing activities and from the effects of changes in operating assets and liabilities.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Commitments and Contingencies.” Cash Flows Year ended August 29, 2025 August 30, 2024 August 25, 2023 Net cash provided by operating activities from continuing operations $ 113,183 $ 105,521 $ 63,677 Net cash used for investing activities from continuing operations (3,377) (11,804) (281,184) Net cash provided by (used for) financing activities from continuing operations (63,464) (209,495) 237,221 Net increase in cash and cash equivalents from discontinued operations 24,251 90,447 22,520 Effect of changes in currency exchange rates — (1,256) 4,765 Net increase (decrease) in cash, cash equivalents and restricted cash $ 70,593 $ (26,587) $ 46,999 Operating Activities : Cash flows from operating activities reflects net income, adjusted for certain non-cash items, including depreciation and amortization expense, stock-based compensation, changes in the fair value of contingent consideration, gains and losses from investing or financing activities and from the effects of changes in operating assets and liabilities.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.” Liquidity and Capital Resources As of August 30, 2024, we had cash, cash equivalents and short-term investments of $389.5 million, of which $299.1 million was held by subsidiaries outside of the United States.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.” Liquidity and Capital Resources As of August 29, 2025, we had cash, cash equivalents and short-term investments of $453.8 million , of which $315.5 million was held by subsidiaries outside of the United States.
Accordingly, in 2023 we evaluated the carrying value of the net assets of SMART Brazil (including $206.3 million recognized within shareholder’s equity related to the cumulative translation adjustment from SMART Brazil), estimated costs to sell and expected proceeds and concluded the net assets were impaired.
As of August 25, 2023, SMART Brazil was classified as held for sale. Accordingly, in 2023 we evaluated the carrying value of the net assets of SMART Brazil (including $206.3 million recognized within stockholder’s equity related to the cumulative translation adjustment from SMART Brazil), estimated costs to sell and expected proceeds and concluded the net assets were impaired.
Impairment of Goodwill In the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of certain legacy products offered through our Penguin Edge business by approximately the end of 2025. We recorded impairment charges of $19.1 million in 2023 to impair the carrying value of Penguin Edge goodwill.
Impairment of Goodwill In 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 2025.
The Original Credit Agreement provides that up to $35.0 million of the 2027 Revolver is available for issuances of letters of credit.
The 2025 Credit Agreement provides that up to $35.0 million of the 2025 Credit Facility is available for issuances of letters of credit.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill – Impairment of Penguin Edge Goodwill.” Change in Fair Value of Contingent Consideration Our acquisitions of Stratus Technologies in the first quarter of 2023 and our Optimized LED business in the third quarter of 2021 each included contingent consideration.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill.” Change in Fair Value of Contingent Consideration Our acquisitions of Stratus Technologies in the first quarter of 2023 included contingent consideration.
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. Our Ability to Identify, Complete and Successfully Integrate Acquisitions.
Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected revenue mix may have direct implications for our operating income and margins.
Amounts 63 we invoice to customers for the cost of product, materials and services performed, which remain unpaid as of the end of a reporting period, are included in accounts receivable.
Amounts we invoice to customers for the cost of product, materials and services performed, which remain unpaid as of the end of a reporting period, are included in accounts receivable. Additionally, the cost of product and materials procured for customers under these agent services, which remain on hand as of the end of a reporting period, are included in inventories.
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.
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 and may negatively affect gross margins due to changes in shipment timing and product mix.
Optimized LED operating loss improved by $7.4 million, or 153.0%, in 2024 primarily due to higher revenue from increased demand, better factory leverage and product mix and lower personnel-related expenses due to headcount reductions.
Optimized LED operating income increase d by $6.5 million, or 252.7%, in 2025 primarily due to higher gross profit, stemming from a more favorable product mix. Optimized LED operating loss improved by $7.4 million, or 153.0%, in 2024 primarily due to higher revenue from increased demand, better factory leverage and product mix and lower personnel-related expenses due to headcount reductions.
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 HPC and AI components for our Advanced Computing business.
We depend on third-party suppliers for key components of our products as well as certain raw materials, 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 HPC and AI components for our Advanced Computing business; the costs of such components and raw materials may fluctuate from time to time due to market conditions.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Credit Facility.” 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.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Capped Calls” in this 2025 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.
Gross margin increased to 29.1% in 2024 compared to 28.8% in 2023 primarily due to favorable mix from higher service revenue in our Advanced Computing segment.
Gross margin decreased to 28.8% in 2025 compared to 29.1% in 2024 primarily due to unfavorable mix from higher product revenue in our Advanced Computing segment and a higher mix of Integrated Memory sales. Gross margin increased to 29.1% in 2024 compared to 28.8% in 2023 primarily due to favorable mix from higher service revenue in our Advanced Computing segment.
Goodwill and Intangible Assets : We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value.
Our provision for excess and obsolete inventory is also impacted by our arrangements with our customers and/or suppliers, including our ability or inability to resell such inventory to them. 68 Goodwill and Intangible Assets : We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value.
Net Sales, Cost of Sales and Gross Profit Net sales decreased by $270.5 million, or 18.8%, in 2024 compared to the prior year, primarily due to lower sales and weakness in our Advanced Computing and Integrated Memory segments, partially offset by moderate growth in our Optimized LED segment.
Optimized LED net sales decreased by $3.7 million, or 1.4%, compared to the same period in the prior year, primarily due to lower direct sales across China and Europe. 59 Net sales decreased by $270.5 million, or 18.8%, in 2024 compared to the prior year, primarily due to lower sales and weakness in our Advanced Computing and Integrated Memory segments, partially offset by moderate growth in our Optimized LED segment.
Net interest expense increased by $12.1 million, or 49.6%, in 2023 compared to the prior year, primarily due to higher interest expense from the Amended 2027 TLA, partially offset by higher interest income resulting from higher cash and investment balances.
Net interest expense decreased by $8.0 million, or 22.1%, in 2024 compared to the prior year, primarily due to higher interest income resulting from higher cash and investment balances, partially offset by higher interest expense from the Amended 2022 TLA.
At the closing, we paid a cash purchase price of $225.0 million, subject to certain adjustments. In addition, the seller had the right to receive the Stratus Earnout based on the gross profit performance of the Stratus Technologies business during the first full 12 fiscal months following the closing.
In addition, the seller had the right to receive the Stratus Earnout based on the gross profit performance of the Stratus Technologies business during the first full 12 fiscal months following the closing.
GAAP, we have presented the balance sheets, results of operations and cash flows of SMART Brazil operations in this Annual 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.
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 Annual Report, including in the accompanying consolidated financial statements and notes, as discontinued operations for all periods presented.
At the closing of the transaction, we received cash of $143.0 million, net of tax, from the sale. In addition, we have the right to receive a deferred payment of $28.4 million in May 2025. See “Item 8.
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. Refer to “PART II – Item 8.
Net cash provided by operating activities from continuing operations in 2024 was $105.5 million, comprised primarily of a net loss of $41.8 million, adjusted for non-cash items of $121.6 million.
Net cash provided by operating activities from continuing operations in 2025 was $113.2 million, comprised primarily of net income of $28.8 million, adjusted for non-cash items of $103.5 million .
These estimates and assumptions are used to calculate projected future cash flows for the reporting unit, which are discounted using a risk-adjusted rate to estimate a fair value. We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
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 the accounting policies below are critical in the portrayal of our financial condition and results of operations and require management’s most difficult, subjective or complex judgments.
Estimates and judgments are based on historical experience, forecasted events and various other assumptions that we believe 67 to be reasonable under the circumstances; however, actual results could differ from those estimates.
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.
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.
Net cash used for investing activities from continuing operations in 2022 consisted primarily of $20.4 million used for capital expenditures and deposits on equipment.
Investing Activities : Net cash used for investing activities from continuing operations in 2025 consisted primarily of $9.0 million used for capital expenditures and deposits on equipment, partially offset by net sales of marketable investment securities of $7.3 million.
We have operations in Malaysia, where we have tax incentive arrangements for our pioneer status activities and our global supply chain operations. The statutory tax rate for Malaysia is 24%. These arrangements are scheduled to expire in August 2028 and are subject to certain conditions, with which we have partially complied in 2024 and fully complied in 2023 and 2022.
This Malaysia arrangement for the pioneer status activities is scheduled to expire in August 2028 and is subject to certain conditions, with which we have fully complied in 2025, 2024, and 2023.
See “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions – Stratus Technologies.” Factors Affecting Our Operating Performance Macro-Economic Demand Factors. Our business segments each have their own unique set of demand factors.
In the second quarter of 2024, we paid in full $50.0 million related to the Stratus Earnout. 57 See “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions – Stratus Technologies.” Factors Affecting Our Operating Performance Macro-Economic Demand Factors.
Additionally, the cost of product and materials procured for customers under these agent services, which remain on hand as of the end of a reporting period, are included in inventories. Amounts in accounts receivable and inventories impact the determination of cash flows from operating activities. Determining whether we are the principal or agent in these transactions requires significant judgement.
Amounts in accounts receivable and inventories impact the determination of cash flows from operating activities. Determining whether we are the principal or agent in these transactions requires significant judgment.
We test the reasonableness 62 of the output of our long-range planning process by calculating an implied value per share and comparing that to current share prices, analysts’ consensus pricing and management’s expectations.
We test the reasonableness of the output of our long-range planning process by calculating an implied value per share and comparing that to current stock prices, analysts’ consensus pricing and management’s expectations. These estimates and assumptions are used to calculate projected future cash flows for the reporting unit, which are discounted using a risk-adjusted rate to estimate a fair value.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Preferred Share Investment.” Contractual Obligations For information regarding our debt obligations, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.” For our operating lease obligations, see “Item 8.
Domestication apply in respect of SKT’s holdings of the Issued CPS following consummation of the U.S. Domestication. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Preferred Stock Investment.” Contractual Obligations For information regarding our debt obligations, see “Item 8.
Year ended August 30, 2024 August 25, 2023 August 26, 2022 GAAP operating income (loss) $ 18,295 $ 8,745 $ 67,176 Share-based compensation expense 43,160 39,228 37,284 Amortization of acquisition-related intangibles 39,272 44,601 23,729 Flow-through of inventory step up — 2,599 — Cost of sales-related restructure 2,136 6,813 — Diligence, acquisition and integration expense 8,772 20,869 7,090 Impairment of goodwill — 19,092 — Change in fair value of contingent consideration — 29,000 41,324 Restructure charge 7,064 7,047 234 Other 1,558 1,800 624 Non-GAAP operating income $ 120,257 $ 179,794 $ 177,461 Non-GAAP operating income by segment: Advanced Computing $ 95,291 $ 110,975 $ 49,450 Integrated Memory 22,413 73,639 78,869 Optimized LED 2,553 (4,820) 49,142 Total non-GAAP operating income by segment $ 120,257 $ 179,794 $ 177,461 Advanced Computing operating income decreased by $15.7 million, or 14.1%, in 2024 compared to the prior year primarily due to lower sales from our Penguin Computing business, partially offset by lower operating expenses, mainly driven by personnel-related expenses due to lower headcount and lower subcontract services.
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. 60 Year ended August 29, 2025 August 30, 2024 August 25, 2023 GAAP operating income $ 58,135 $ 18,295 $ 8,745 Stock-based compensation expense 41,176 43,160 39,228 Amortization of acquisition-related intangibles 34,838 39,272 44,601 Flow-through of inventory step up — — 2,599 Cost of sales-related restructuring 746 2,136 6,813 Diligence, acquisition and integration expense 1,829 8,772 20,869 Redomiciliation costs (1) 10,038 470 — Impairment of goodwill 16,063 — 19,092 Change in fair value of contingent consideration — — 29,000 Restructuring charges 2,098 7,064 7,047 Other (1) 2,729 1,088 1,800 Non-GAAP operating income $ 167,652 $ 120,257 $ 179,794 Non-GAAP operating income by segment: Advanced Computing $ 115,009 $ 95,291 $ 110,975 Integrated Memory 43,639 22,413 73,639 Optimized LED 9,004 2,553 (4,820) Total non-GAAP operating income by segment $ 167,652 $ 120,257 $ 179,794 (1) In 2025 we began breaking out costs related to the U.S.
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, 53 as well as emerging demand for higher density and greater bandwidth solutions for AI deployments.
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, HPC and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments, and we anticipate growing demand for higher performance and reliability memory solutions, such as our CXL family of products, to support both traditional use cases and increasingly complex AI applications, although there can be no assurance that such demand will materialize as expected or at all.
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: recognition of revenue is sometimes tied to customer decisions as to the completion of delivery and system go-live events, sales can be affected by the timing of customer deployments or customer budget considerations and margin is driven by the extent to which higher margin software and managed services comprise Advanced Computing sales.
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 due to factors such as the following: recognition of revenue sometimes being tied to customer decisions as to the completion of delivery and system go-live events; certain sales being affected by the timing of customer deployments and shipments or customer budget considerations; changes in customer spending on our products and services (including as a result of the macro-economic demand factors discussed above); the impact of customer churn rates (including discounting and churn of significant customers from whom we derive a significant percentage of our revenue); discontinuation of certain of our products from time to time; shifts in our customer mix, including expected trends with respect to growth in demand from non-hyperscaler customers for HPC and AI solutions; and margin being driven by the proportion of higher margin software and managed services within our Advanced Computing sales.
Business.” Divestiture of SMART Brazil On November 29, 2023, we completed the divestiture of an 81% interest in 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.
Domestication, refer to Penguin Solutions Delaware and its consolidated subsidiaries. See “About this Annual Report,” above. Divestiture of SMART Brazil On November 29, 2023, we completed the divestiture of an 81% interest in SMART Brazil to Lexar Europe B.V., an affiliate of Shenzhen Longsys Electronics Co. Ltd.
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. However, broader macro-economic trends can adversely affect all three segments concurrently.
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.
Cost of sales increased by $21.2 million, or 2.1%, in 2023 compared to the prior year, primarily due to the Stratus Technologies 55 acquisition and from higher costs of materials and production costs due to higher sales for our Advanced Computing segment.
Net Sales, Cost of Sales and Gross Profit Net sales increased by $198.0 million, or 16.9%, in 2025 compared to the prior year, primarily due to higher sales from our Advanced Computing and Integrated Memory business segment.
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.
Our business segments each have their own unique set of demand factors. Our Advanced Computing business is driven by demand for our HPC and AI products, as well as traditional workload optimization and efficiency applications.
Net sales increased by $45.4 million, or 3.3%, in 2023 compared to the prior year, due to strong performance in our Advanced Computing business, partially offset by weakness in both our Integrated Memory and Optimized LED segments.
Cost of sales increased by $144.5 million, or 17.4%, in 2025 compared to the prior year, primarily due to our Advanced Computing and Integrated Memory segments having increased products sales for the year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn 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.
Biggest changeIn 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. 70 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.
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. 65
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. 71
Assuming that we would satisfy the financial covenants required to borrow and that the amounts available under the 2027 Revolver 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 $5.5 million per year.
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 August 30, 2024, we had cash, cash equivalents and short-term investments of $389.5 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.
As of August 29, 2025, we had cash, cash equivalents and short-term investments of $453.8 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.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 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.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk Foreign Exchange Risk Our international sales and our operations in foreign countries subject us to risks associated with fluctuating currency values and exchange rates.
Based on our monetary assets and liabilities denominated in foreign currencies as of August 30, 2024 and August 25, 2023, 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 $2.5 million and $1.6 million, respectively, to revalue these assets and liabilities. 64 Interest Rate Risk We are subject to interest rate risk in connection with our variable-rate debt.
Based on our monetary assets and liabilities denominated in foreign currencies as of August 29, 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 $2.7 million and $2.5 million, respectively, to revalue these assets and liabilities.
As of August 30, 2024, we had $300.0 million outstanding under the 2027 TLA. In addition, our Amended Credit Agreement provides for borrowings of up to $250.0 million under the 2027 Revolver.
Interest Rate Risk We are subject to interest rate risk in connection with our variable-rate debt. As of August 29, 2025, we had $100.0 million outstanding under the 2025 Credit Agreement. In addition, the 2025 Credit Facility under the 2025 Credit Agreement provides for additional borrowings of up to $300.0 million for a total commitment of $400.0 million.
Removed
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.

Other PENG 10-K year-over-year comparisons