NEWARK, Calif., Sept. 28, 2017 (GLOBE NEWSWIRE) -- SMART Global Holdings, Inc. (“SMART”) (NASDAQ:SGH), parent company of SMART Modular Technologies, Inc., today reported financial results for the fourth quarter and full year fiscal 2017 ended August 25, 2017.
Fourth Quarter Fiscal 2017 Highlights:
Full Year Fiscal 2017 Highlights:
• Net sales 53% higher than year ago quarter
• Net sales 42% higher than prior fiscal year
• Net sales of $223.0 million
• Net sales of $761.3 million
• GAAP operating income $20.6 million
• GAAP operating income $53.9 million
• GAAP net loss of $(10.2) million
• GAAP net loss of $(7.8) million
• Adjusted EBITDA of $31.3 million
• Adjusted EBITDA of $99.4 million
• GAAP EPS of $(0.48)
• GAAP EPS of $(0.49)
• Non-GAAP diluted EPS of $0.79
• Non-GAAP diluted EPS of $2.26
“We completed fiscal 2017 on a strong note, having accomplished a number of key milestones that set the foundation for continued momentum as we enter fiscal 2018,” commented Iain MacKenzie, President and Chief Executive Officer of SMART Global Holdings. “The strength of the global memory market contributed to all of our businesses across the board. In SMART Brazil we are also benefitting from the improving economy and the introduction of new products. Increasing demand from our networking and storage customers is driving healthy growth in our Specialty Memory business as well. We also recently paid off a portion of our term loan with the proceeds of our IPO, as well as completing an important debt refinancing that clears the path for improved operating leverage in our financial model, enabling us to drive increasing returns for our shareholders.”
Quarterly Financial Results
GAAP (1)
Non-GAAP (2)
(In millions, except per share amounts)
Q4 FY17
Q3 FY17
Q4 FY16
Q4 FY17
Q3 FY17
Q4 FY16
Net Sales
$
223.0
$
207.0
$
146.2
$
223.0
$
207.0
$
146.2
Gross Profit
$
48.0
$
47.4
$
29.9
$
48.2
$
47.6
$
30.0
Operating Income
$
20.6
$
20.4
$
4.0
$
25.4
$
24.8
$
8.3
Net Income (Loss)
$
(10.2
)
$
8.0
$
(1.5
)
$
17.4
$
13.7
$
2.5
Earnings (loss) per share
$
(0.48
)
$
0.50
$
(0.11
)
$
0.79
$
0.62
*
$
0.18
Annual Financial Results
GAAP (1)
Non-GAAP (2)
(In millions, except per share amounts)
FY17
FY16
FY17
FY16
Net Sales
$
761.3
$
534.4
$
761.3
$
534.4
Gross Profit
$
162.3
$
106.9
$
162.9
$
107.4
Operating Income
$
53.9
$
6.2
$
71.2
$
23.4
Net Income (Loss)
$
(7.8
)
$
(20.0
)
$
36.6
$
(4.1
)
Earnings (loss) per share
$
(0.49
)
$
(1.44
)
$
2.26
$
(0.30
)
(1) GAAP represents U.S. Generally Accepted Accounting Principles.
(2) Please refer to the “Non-GAAP Information” section and the "Reconciliation of Non-GAAP Financial
Measures" table below for further detail on the non-GAAP financial reporting referenced above
and a reconciliation of such measures to our nearest GAAP measures.
* Represents pro forma non-GAAP earnings per diluted share. The pro forma weighted average diluted
shares outstanding used in the computation includes the pro forma effect of the 6,095,000 shares issued
in our IPO on May 30, 2017 as if they were outstanding for the entire third quarter.
Other Highlights • Paid down $61.1 million of our term loan with proceeds from the IPO and then completed a refinancing transaction that extended the maturity date of the term loan; both transactions contributed to significantly reduce interest expense.
Business Outlook The following statements are based upon management's current expectations for the first quarter of fiscal 2018 ending November 24, 2017. These statements are forward-looking, and actual results may differ materially. SMART undertakes no obligation to update these statements.
Net Sales - GAAP/Non-GAAP
$225 to $240 million
Gross Margin - GAAP/Non-GAAP
21% to 22%
Earnings per share - GAAP
$0.66 to $0.70
Intangible amortization per share
$0.06
Stock-based compensation per share
$0.07
Earnings per share - Non -GAAP
$0.79 to $0.83
Expected diluted share count
22.3 million
Conference Call Details SMART will host a conference call today for analysts and investors at 1:30 p.m. Pacific time, 4:30 p.m. Eastern time. Dial-in US toll free +1-866-487-6452 using access code 79446792.
A replay of the conference call will be available until October 22, 2017 through the Events section of the SMART website at www.smartgh.com or until October 5, 2017 by calling US toll free +1-855-859-2056; Passcode: 79446792.
Forward-Looking Statements This release contains, and statements made during the above-referenced conference call will contain "forward-looking statements" including among other things, statements regarding future events and the future financial performance of SMART (including the business outlook for the next fiscal quarter) and statements regarding growth drivers in SMART’s industry and markets. These statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including but not limited to: business and economic conditions and growth trends in the technology industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the success of our strategic initiatives including additional investments in new products and additional capacity; the DRAM market and the temporary and volatile nature of pricing trends; deterioration in customer relationships; production or manufacturing difficulties; competitive factors; technological changes; difficulties with or delays in the introduction of new products; slowing or contraction of growth in the memory market in Brazil; reduction in or termination of local content requirements in Brazil; changes to applicable tax regimes or rates; prices for the end products of our customers; fluctuations in material costs and availability; deterioration in or loss of relations with any of our limited number of key vendors; and other factors and risks detailed in SMART’s filings with the Securities and Exchange Commission. Such factors and risks as outlined above and in such filings may not constitute all factors and risks that could cause actual results of SMART to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. SMART operates in a continually changing business environment and new factors emerge from time to time. SMART cannot predict such factors, nor can it assess the impact, if any, from such factors on SMART or its results. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements should not be relied upon as a prediction of actual results. These forward-looking statements are made as of today, and SMART does not intend, and has no obligation, to update or revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release, except as required by law.
Non-GAAP Information The following non-GAAP financial measures are included in this press release, including Adjusted EBITDA, non-GAAP net income, non-GAAP net income per diluted share, non-GAAP diluted EPS and pro forma non-GAAP diluted EPS. We define Adjusted EBITDA as GAAP net income plus net interest expense, income tax expense, depreciation and amortization expense, stock-based compensation expense, restructuring charges, non-cash charges in connection with refinancing and other infrequent or unusual items. Adjusted EBITDA is not a measure of financial performance calculated in accordance with U.S. GAAP, and should be viewed as a supplement to, not a substitute for, our results of operations presented on the basis of U.S. GAAP. Adjusted EBITDA also does not purport to represent cash flow provided by, or used in, operating activities in accordance with U.S. GAAP and should not be used as a measure of liquidity.
The non-GAAP financial results presented herein do not include stock-based compensation expense, intangible amortization expense, amortization of non-cash debt discount related to warrants and non-cash charges in connection with refinancing. These non-GAAP financial measures are provided to enhance the user's overall understanding of our financial performance. By excluding these charges and gains, as well as any related tax effects, our non-GAAP results provide information to management and investors that is useful in assessing SMART's core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results, to plan and forecast future periods, and to assess performance of certain executives for compensation purposes. The presentation of this additional information is not meant to be a substitute for the corresponding financial measures prepared in accordance with U.S. GAAP. In addition, these measures may not be used similarly by other companies and therefore may not be comparable between companies.
Investors are encouraged to review the “Reconciliation of Non-GAAP Financial Measures to GAAP Results” and “Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA” tables below for more detail on Adjusted EBITDA and non-GAAP calculations.
About SMART Global Holdings The SMART family of companies are global leaders in specialty memory, storage and hybrid solutions serving the electronics industry with standard and custom products for over 25 years. SMART delivers components, modules and solutions to a broad customer base, including OEMs in computing, networking, communications, storage, mobile and industrial markets. Customers rely on SMART as a strategic supplier with custom designs, product quality, technical support, a global footprint, and the ability to provide locally manufactured memory products in multiple geographies. See www.smartgh.com, www.smartm.com, www.smarth.com or www.smartsscs.com for more information.
SMART Global Holdings, Inc.
and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended
Fiscal Year Ended
August 25, 2017
May 26, 2017
August 26, 2016
August 25, 2017
August 26, 2016
Net sales:
Brazil DRAM
$
46,830
$
38,028
$
19,473
$
132,881
$
86,936
Brazil Mobile Memory
87,935
71,216
46,992
265,294
158,964
Specialty Memory
88,254
97,730
79,736
363,116
288,523
Total net sales
223,019
206,974
146,201
761,291
534,423
Cost of sales (1)
175,011
159,599
116,325
599,041
427,491
Gross profit
48,008
47,375
29,876
162,250
106,932
Operating expenses:
Research and development (1) (2)
9,718
8,797
10,353
38,160
38,116
Selling, general and administrative (1) (2)
17,722
17,193
14,532
66,759
57,495
Management advisory fees
-
1,000
1,000
3,000
4,001
Restructuring
-
-
(8
)
457
1,135
Total operating expenses
27,440
26,990
25,877
108,376
100,747
Income from operations
20,568
20,385
3,999
53,874
6,185
Other income (expense):
Interest expense, net
(6,132
)
(8,294
)
(6,310
)
(29,204
)
(25,575
)
Other income (expense), net
(20,887
)
(762
)
1,144
(22,551
)
1,874
Total other expense
(27,019
)
(9,056
)
(5,166
)
(51,755
)
(23,701
)
Income (loss) before income taxes
(6,451
)
11,329
(1,167
)
2,119
(17,516
)
Provision for income taxes
3,758
3,371
294
9,914
2,444
Net income (loss)
$
(10,209
)
$
7,958
$
(1,461
)
$
(7,795
)
$
(19,960
)
Earnings per share:
Basic
$
(0.48
)
$
0.57
$
(0.11
)
$
(0.49
)
$
(1.44
)
Diluted
$
(0.48
)
$
0.50
$
(0.11
)
$
(0.49
)
$
(1.44
)
Shares used in computing per-share calculation:
Basic
21,435
13,986
13,865
15,785
13,841
Diluted
21,435
15,955
13,865
15,785
13,841
(1) Includes share-based compensation expense as follows:
Cost of sales
$
192
$
176
$
113
$
636
$
461
Research and development
232
(22
)
162
655
$
725
Selling, general and administrative
1,407
1,235
627
4,073
$
2,686
Total stock-based compensation expense
$
1,831
$
1,389
$
902
$
5,364
$
3,872
(2) Includes amortization of intangible assets expense as follows:
Research and development
$
1,225
$
1,224
$
1,225
$
4,897
$
4,897
Selling, general and administrative
1,746
1,774
2,196
7,042
8,471
Total amortization expense
$
2,971
$
2,998
$
3,421
$
11,939
$
13,368
SMART Global Holdings, Inc.
and Subsidiaries
Reconciliation of Non-GAAP Financial Measures to GAAP Results
(In thousands, except per share data)
Three Months Ended
Fiscal Year Ended
August 25, 2017
May 26, 2017
August 26, 2016
August 25, 2017
August 26, 2016
Reconciliation of gross profit:
GAAP gross profit
$
48,008
$
47,375
$
29,876
$
162,250
$
106,932
GAAP gross margin
21.5%
22.9%
20.4%
21.3%
20.0%
Add: Share-based compensation included in cost of sales
192
176
113
636
461
Non-GAAP gross profit
$
48,200
$
47,551
$
29,989
$
162,886
$
107,393
Non-GAAP gross margin
21.6%
23.0%
20.5%
21.4%
20.1%
Reconciliation of operating expenses:
GAAP operating expenses
$
27,440
$
26,990
$
25,877
$
108,376
$
100,747
Less: Share-based compensation expense included in opex
Research and development
232
(22
)
162
655
725
Selling, general and administrative
1,407
1,235
627
4,073
2,686
Total
1,639
1,213
789
4,728
3,411
Less: Amortization of intangible assets included in opex
Research and development
1,225
1,224
1,225
4,897
4,897
Selling, general and administrative
1,746
1,774
2,196
7,042
8,471
Total
2,971
2,998
3,421
11,939
13,368
Non-GAAP operating expenses
$
22,830
$
22,779
$
21,667
$
91,709
$
83,968
Reconciliation of income from operations:
GAAP income from operations
$
20,568
$
20,385
$
3,999
$
53,874
$
6,185
GAAP operating margin
9.2%
9.8%
2.7%
7.1%
1.2%
Add: Share-based compensation expense
1,831
1,389
902
5,364
3,872
Add: Amortization of intangible assets
2,971
2,998
3,421
11,939
13,368
Non-GAAP income from operations
$
25,370
$
24,772
$
8,322
$
71,177
$
23,425
Non-GAAP operating margin
11.4%
12.0%
5.7%
9.3%
4.4%
Reconciliation of provision for income taxes:
GAAP provision for income taxes
$
3,758
$
3,371
$
294
$
9,914
$
2,444
GAAP effective tax rate
-58.3%
29.8%
-25.2%
467.9%
-14.0%
Tax effect of adjustments to GAAP results
(317
)
(376
)
(357
)
(1,395
)
(1,365
)
Non-GAAP provision for income taxes
$
4,075
$
3,747
$
651
$
11,309
$
3,809
Non-GAAP effective tax rate
19.0%
21.5%
20.6%
23.6%
-1380.1%
Reconciliation of net income (loss) per share (diluted)
and diluted per share amounts:
GAAP net income (loss)
$
(10,209
)
$
7,958
$
(1,461
)
$
(7,795
)
$
(19,960
)
Adjustments to GAAP net income:
Share-based compensation
1,831
1,389
902
5,364
3,872
Amortization of intangible assets
2,971
2,998
3,421
11,939
13,368
Amortization of debt discount related to warrants
1,214
1,733
-
5,127
-
Loss on early debt repayment
6,743
-
-
6,743
-
Loss on extinguishment of LT debt
15,194
-
-
16,579
-
Tax effect of items excluded from non-GAAP results
(317
)
(376
)
(357
)
(1,395
)
(1,365
)
Non-GAAP net income (loss)
$
17,427
$
13,702
$
2,505
$
36,562
$
(4,085
)
Weighted average shares outstanding for calculation
of non-GAAP income per share (diluted)
22,011
15,955
13,865
16,171
13,841
Non-GAAP net income per share (diluted)
$
0.79
$
0.86
$
0.18
$
2.26
$
(0.30
)
Pro forma weighted average shares outstanding for
computing pro forma diluted per-share calculation*
22,050
Pro forma non-GAAP net income per share (diluted)
$
0.62
* Assuming IPO closing shares (6,095) on May 30, 2017 were issued and outstanding as of the beginning of Q3'17.
SMART Global Holdings, Inc.
and Subsidiaries
Reconciliation of GAAP Net Income (loss) to Adjusted EBITDA
(In thousands, except per share data)
Three Months Ended
Fiscal Year Ended
August 25, 2017
May 26, 2017
August 26, 2016
August 25, 2017
August 26, 2016
GAAP net income (loss)
$
(10,209
)
$
7,958
$
(1,461
)
$
(7,795
)
$
(19,960
)
Share-based compensation expense
1,831
1,389
902
5,364
3,872
Amortization of intangible assets
2,971
2,998
3,421
11,939
13,368
Interest expense, net
6,132
8,294
6,310
29,204
25,575
Provision for income tax
3,758
3,371
294
9,914
2,444
Depreciation
4,869
4,848
4,668
21,300
18,111
Management advisory fees
—
1,000
1,000
3,000
4,001
Debt extension costs*
—
—
—
1,745
—
Loss on early debt repayment **
6,743
—
—
6,743
—
Loss on extinguishment of LT debt ***
15,194
—
—
16,579
—
Restructuring
—
—
(8
)
457
1,135
Special retention bonuses
—
—
265
25
1,611
Valuation adjustment related to prepaid
state value-added taxes
—
—
908
—
908
Investment advisory fees
—
—
—
540
—
Obsolete inventory related to restructuring
—
—
—
372
—
Misappropriated product shipment
—
—
—
—
695
Adjusted EBITDA
$
31,289
$
29,858
$
16,299
$
99,387
$
51,760
* Debt extension costs consist of $1.7 million associated with the amendment of our senior secured term loan and revolving
credit facility in November 2016.
** Loss on early payment of term loan for principal amount of $61.1 million in June 2017 related to IPO.
*** Consists of $15.2 million loss on extinguishment of long-term debt for principal payment of $151.0 million in August 2017
and $1.4 million loss on a February 2017 extinguishment.
SMART Global Holdings, Inc.
and Subsidiaries
Consolidated Balance Sheets
(In thousands)
August 25
May 26,
August 26,
2017
2017
2016
Assets
Current assets:
Cash and cash equivalents
$
22,436
$
22,341
$
58,634
Accounts receivable, net
183,303
174,453
141,036
Inventories
127,135
135,489
103,066
Prepaid expenses and other current assets
14,115
15,699
16,522
Total current assets
346,989
347,982
319,258
Property and equipment, net
55,182
52,006
57,600
Other noncurrent assets
26,728
21,936
19,937
Intangible assets, net
5,107
8,001
16,884
Goodwill
46,022
45,360
44,976
Total assets
$
480,028
$
475,285
$
458,655
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$
189,717
$
210,633
$
197,976
Accrued liabilities
27,316
22,130
14,071
Current portion of long-term debt
22,841
13,024
17,116
Total current liabilities
239,874
245,787
229,163
Long-term debt
154,450
197,910
225,587
Deferred tax liabilities
1,439
1,769
2,677
Other long-term liabilities
1,869
2,437
2,465
Total liabilities
$
397,632
$
447,903
$
459,892
Shareholders’ equity (deficit):
Ordinary shares
653
420
416
Additional paid-in capital
232,162
170,502
145,284
Accumulated other comprehensive loss
(143,210
)
(146,540
)
(147,523
)
Retained earnings (accumulated deficit)
(7,209
)
3,000
586
Total shareholders’ equity (deficit)
82,396
27,382
(1,237
)
Total liabilities and shareholders’ equity
$
480,028
$
475,285
$
458,655
SMART Global Holdings, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended
Fiscal Year Ended
August 25, 2017
May 26, 2017
August 26, 2016
August 25, 2017
August 26, 2016
Cash flows from operating activities:
Net income (loss)
$
(10,209
)
$
7,958
$
(1,461
)
$
(7,795
)
$
(19,960
)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization
7,839
7,846
8,090
33,238
31,480
Share-based compensation
1,831
1,389
902
5,364
3,872
Provision for doubtful accounts receivable and sales returns
(82
)
205
34
(51
)
18
Deferred income tax benefit
(1,194
)
(84
)
270
(2,389
)
(1,417
)
(Gain) loss on disposal of property and equipment
223
—
2
352
(55
)
Extinguishment loss on long-term debt
15,194
—
—
16,580
—
Loss on early debt payment
6,744
—
—
6,744
—
Amortization of debt issuance costs
486
628
768
2,337
3,042
Amortization of debt original issuance discount
106
119
419
766
1,654
Amortization of debt discount
1,215
1,733
—
5,128
—
Changes in operating assets and liabilities:
Accounts receivable
(6,910
)
(36,891
)
(9,147
)
(40,426
)
44,922
Inventories
9,333
(4,833
)
5,616
(21,851
)
31,326
Prepaid expenses and other assets
(799
)
(735
)
8,663
(58
)
11,007
Accounts payable
(22,407
)
27,525
(15,595
)
(10,608
)
(86,588
)
Accrued expenses and other liabilities
4,639
3,846
(3,811
)
11,736
(4,251
)
Net cash provided by (used in) operating activities
6,009
8,706
(5,250
)
(933
)
15,050
Cash flows from investing activities:
Capital expenditures and deposits on equipment
(7,499
)
(3,784
)
(3,849
)
(18,678
)
(13,844
)
Restricted cash
—
—
13
—
194
Proceeds from sale of property and equipment
184
425
36
651
281
Net cash used in investing activities
(7,315
)
(3,359
)
(3,800
)
(18,027
)
(13,369
)
Cash flows from financing activities:
Proceeds from long-term debt borrowing
—
—
592
—
5,771
Long-term debt payment
(2,009
)
(5,954
)
(4,246
)
(19,698
)
(16,694
)
Early payment of long-term debt
(61,127
)
—
—
(61,127
)
—
Payment for extinguishment of long-term debt
(151,008
)
—
—
(151,946
)
—
Proceeds from issuance of long-term debt, net of costs paid
156,962
—
—
156,962
—
Fees paid for revolving line of credit refinancing
(3,167
)
—
—
(3,167
)
Issuance of ordinary shares from an initial public offering, net of
underwriting commissions
63,507
—
—
63,507
—
Payment of costs related to initial public offering
(949
)
(200
)
6
(1,149
)
—
Proceeds from borrowings under revolving line of credit
119,500
123,000
106,500
457,750
279,200
Repayments of borrowings under revolving line of credit
(119,500
)
(123,000
)
(106,500
)
(457,750
)
(279,200
)
Proceeds from issuance of ordinary shares from share option exercise
58
348
92
406
133
Tax payments due upon issuance of oridnary shares for release of
restricted stock units
(763
)
—
—
(763
)
—
Repurchase of ordinary shares
—
—
—
—
(124
)
Net cash used in financing activities
1,504
(5,806
)
(3,556
)
(16,975
)
(10,914
)
Effect of exchange rate changes on cash and cash equivalents
(103
)
(541
)
(1,936
)
(263
)
(227
)
Net increase (decrease) in cash and cash equivalents
95
(1,000
)
(14,542
)
(36,198
)
(9,460
)
Cash and cash equivalents at beginning of period
22,341
23,341
73,176
58,634
68,094
Cash and cash equivalents at end of period
$
22,436
$
22,341
$
58,634
$
22,436
$
58,634
Investor Contact: Suzanne Schmidt Investor Relations for SMART Global Holdings, Inc. (510) 360-8596 [email protected]