8^th Consecutive Quarter of Year-over-Year Revenue Growth;

Board of Directors Approves $75 Million Share Repurchase Authorization

SMART Global Holdings, Inc. ("SGH" or the "Company") (NASDAQ:SGH) today reported financial results for the second quarter of fiscal 2022. Per share measures for all periods reflect the effect of the February 2022 two-for-one share split.

Second Quarter Fiscal 2022 Highlights

Net sales of $449 million, up 48% versus the year ago quarter

GAAP gross margin of 25.1%, up 750 basis points versus the year ago quarter

Non-GAAP gross margin of 26.0%, up 660 basis points versus the year ago quarter

GAAP EPS of $0.04, down 67% versus the year ago quarter

Non-GAAP EPS of $0.87, up 98% versus the year ago quarter

YTD Fiscal 2022 Highlights

Net sales of $919 million, up 54% versus the year ago period

GAAP gross margin of 25.6%, up 780 basis points versus the year ago period

Non-GAAP gross margin of 26.5%, up 750 basis points versus the year ago period

GAAP EPS of $0.40, up 150% versus the year ago period

Non-GAAP EPS of $1.95, up 135% versus the year ago period

"We delivered solid financial results for the second quarter of fiscal 2022, culminating a strong first half of the fiscal year, and demonstrating the strength of our growth and diversification strategy," commented CEO Mark Adams. "The results reflect our commitment to operational excellence by focusing on specialty solutions targeting growth markets such as AI, machine learning, data analytics, enterprise storage and edge/IoT. Across all of our businesses, we are investing to capitalize on the growth opportunities in these market segments. In addition, our Board approved a $75 million share repurchase authorization, reflecting their confidence in the strength of our financial position while providing us the flexibility to return capital to our shareholders in a disciplined manner."

Under the share repurchase authorization, the Company may repurchase its outstanding ordinary shares from time to time through open market purchases, privately-negotiated transactions or otherwise. The share repurchase authorization has no expiration date but may be suspended or terminated by the Board of Directors at any time.

During the second quarter, the Company issued a share dividend of one ordinary share for every one outstanding ordinary share owned. Ordinary shares and per share data in this press release have been adjusted for the impact of the share dividend.

Quarterly Financial Results

	GAAP ⁽¹⁾						Non-GAAP ⁽²⁾
(in millions, except per share amounts)	Q2 FY22		Q1 FY22		Q2 FY21		Q2 FY22		Q1 FY22		Q2 FY21
Net sales	$	449.2	$	469.9	$	304.0	$	449.2	$	469.9	$	304.0
Gross profit		112.7		122.2		53.5		116.9		127.0		59.3
Operating income		16.8		34.8		12.9		57.4		69.2		27.2
Net income attributable to SGH		2.5		20.0		5.8		47.6		56.3		21.9
Diluted earnings per share ⁽³⁾	$	0.04	$	0.37	$	0.12	$	0.87	$	1.08	$	0.44

(1)		GAAP represents U.S. Generally Accepted Accounting Principles.
(2)		Non-GAAP represents GAAP excluding the impact of certain activities. Further information regarding our use of non-GAAP measures and reconciliations between GAAP and non-GAAP measures is included within this press release.
(3)		Diluted earnings per share reflect the impact of the share dividend.

Business Outlook

As of April 5, 2022, SGH is providing the following financial outlook for its third quarter of fiscal 2022:

	GAAP Outlook	Adjustments		Non-GAAP Outlook
Net sales	$435 to $475 million	—		$435 to $475 million
Gross margin	23% to 25%	1%	(A)	24% to 26%
Diluted earnings per share	$0.35 +/- $0.08	$0.40	(A)(B)(C)	$0.75 +/- $0.08
Diluted shares	57 million	(3) million		54 million

Non-GAAP adjustments: (in millions)
(A) Share-based compensation and amortization of acquisition-related intangibles included in cost of sales	$	4
(B) Share-based compensation and amortization of acquisition-related intangibles included in R&D and SG&A		11
(C) Amortization of debt discount and other costs		5
	$	20

Second Quarter Fiscal 2022 Earnings Conference Call and Webcast Details

SGH will hold a conference call and webcast to discuss the Q2 fiscal 2022 results and related matters at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Tuesday, April 5, 2022. Interested parties may access the call by dialing +1-888-550-5584 in the U.S. or +1-646-960-0157 from international locations using access code 2316162. The webcast link is located on the SGH Investor Relations section of our website at https://sghcorp.com. We will also post the presentation to our website prior to the call.

Shortly after the conclusion of the conference call, a replay of the audio webcast will be available on the SGH Investor Relations website for approximately seven days.

Use of Forward-Looking Statements

This press 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 SGH (including the business outlook for the next fiscal quarter) and statements regarding growth drivers in SGH's industries and markets. These forward-looking statements are based on current expectations and preliminary assumptions that are subject to factors and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside SGH's control, including, among others: global business and economic conditions and growth trends in technology and lighting industries, our customer markets and various geographic regions; uncertainties in the geopolitical environment; disruptions in our operations or our supply chain as a result of COVID-19 pandemic or otherwise; changes in trade regulations or adverse developments in international trade relations and agreements; changes in currency exchange rates; overall information technology spending; appropriations for government spending; the success of our strategic initiatives including additional investments in new products and additional capacity; acquisitions of companies or technologies, the failure to successfully integrate and operate them, or customers' negative reactions to them; limitations on or changes in the availability of supply of materials and components; fluctuations in material costs; the temporary or volatile nature of pricing trends in memory or elsewhere; 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 incentives for local manufacturing in Brazil; changes to applicable tax regimes or rates; prices for the end products of our customers; strikes or labor disputes; deterioration in or loss of relations with any of our limited number of key vendors; the inability to maintain or expand government business; and other factors and risks detailed in SGH's filings with the U.S. Securities and Exchange Commission, which include SGH's most recent reports on Form 10-K and Form 10-Q, including SGH's future filings.

Such factors and risks as outlined above and in such filings do not constitute all factors and risks that could cause actual results of SGH to be materially different from our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements are made as of today, and SGH 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.

Statement Regarding Use of Non-GAAP Financial Measures

SGH management uses non-GAAP measures to supplement SGH's financial results under GAAP. Management uses these measures 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. 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, acquisition-related expenses, restructure charges and integration expenses, changes in the fair value of contingent consideration, (gains) losses from changes in currency exchange rates, COVID-19 expenses, amortization of debt discount and other costs and other infrequent or unusual items. While amortization of acquisition-related intangible assets is excluded, the revenues from acquired companies is reflected in our non-GAAP measures and these intangible assets contribute to revenue generation. Management believes the presentation of operating results that exclude certain items provides useful supplemental information to investors and facilitates the analysis of the Company's core operating results and comparison of operating results across reporting periods. Management also uses adjusted EBITDA, which represents GAAP net income (loss), adjusted for net interest expense, income tax expense, depreciation and amortization expense, share-based compensation expense, acquisition-related inventory adjustments, acquisition-related expenses, restructure charges and integration expenses, changes in the fair value of contingent consideration, COVID-19 expenses and other infrequent or unusual items.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, as they exclude important information about our financial results, as noted above. The presentation of these adjusted amounts varies from amounts presented in accordance with GAAP and therefore may not be comparable to amounts reported by other companies. In addition, adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities in accordance with GAAP and should not be used as a measure of liquidity. Investors are encouraged to review the "Reconciliation of GAAP to Non-GAAP Measures" tables below.

About SMART Global Holdings – SGH

At SGH, our companies are united by a drive to raise the bar, execute with discipline and focus on what's next for the technologies that support and advance the world. Across computing, memory and LED lighting solutions, we build long-term strategic partnerships with our customers.

Backed by a proven leadership team, we operate with excellence around the globe while unlocking new avenues of growth for our business and industry.

Learn more about us at SGHcorp.com.


SMART Global Holdings, Inc. Consolidated Statements of Operations (In thousands, except per share amounts)

	Three Months Ended						Six Month Ended
	Feb 25, 2022		Nov 26, 2021		Feb 26, 2021		Feb 25, 2022		Feb 26, 2021
Net sales:
Memory Solutions	$	260,081	$	239,401	$	218,597	$	499,482	$	444,421
Intelligent Platform Solutions		82,257		118,654		85,412		200,911		151,284
LED Solutions		106,833		111,889		—		218,722		—
Total net sales		449,171		469,944		304,009		919,115		595,705
Cost of sales		336,458		347,743		250,553		684,201		489,606
Gross profit		112,713		122,201		53,456		234,914		106,099

Operating expenses:
Research and development		18,794		17,657		8,852		36,451		15,816
Selling, general and administrative		53,114		52,550		31,664		105,664		69,720
Change in fair value of contingent consideration		24,000		17,200		—		41,200		—
Total operating expenses		95,908		87,407		40,516		183,315		85,536
Operating income		16,805		34,794		12,940		51,599		20,563

Non-operating (income) expense:
Interest expense, net		4,462		5,106		4,365		9,568		7,518
Other non-operating (income) expense		1,785		1,235		1,531		3,020		699
Total non-operating (income) expense		6,247		6,341		5,896		12,588		8,217
Income before taxes		10,558		28,453		7,044		39,011		12,346

Income tax provision		7,586		7,755		1,200		15,341		4,475
Net income		2,972		20,698		5,844		23,670		7,871
Net income attributable to noncontrolling interest		514		671		—		1,185		—
Net income attributable to SGH	$	2,458	$	20,027	$	5,844	$	22,485	$	7,871

Earnings per share:
Basic	$	0.05	$	0.41	$	0.12	$	0.46	$	0.16
Diluted	$	0.04	$	0.37	$	0.12	$	0.40	$	0.16

Shares used in per share calculations:
Basic		49,522		49,011		48,435		49,267		48,778
Diluted		57,636		54,635		50,407		56,135		50,307

Earnings per share and shares used in per share calculations reflect the impact of the share dividend.

SMART Global Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures (In thousands)

	Three Months Ended									Six Months Ended
	Feb 25, 2022			Nov 26, 2021			Feb 26, 2021			Feb 25, 2022			Feb 26, 2021
GAAP gross profit	$	112,713		$	122,201		$	53,456		$	234,914		$	106,099
Share-based compensation expense		1,648			1,731			804			3,379			1,641
Amortization of acquisition-related intangibles		2,582			3,096			647			5,678			1,294
Out of period import tax expense		—			—			4,345			—			4,345
Non-GAAP gross profit	$	116,943		$	127,028		$	59,252		$	243,971		$	113,379

GAAP operating expenses	$	95,908		$	87,407		$	40,516		$	183,315		$	85,536
Share-based compensation expense		(8,325	)		(8,044	)		(4,594	)		(16,369	)		(14,845	)
Amortization of acquisition-related intangibles		(3,247	)		(3,247	)		(2,766	)		(6,494	)		(5,533	)
Change in fair value of contingent consideration		(24,000	)		(17,200	)		—			(41,200	)		—
Other		(828	)		(1,038	)		(1,064	)		(1,866	)		(2,681	)
Non-GAAP operating expenses	$	59,508		$	57,878		$	32,092		$	117,386		$	62,477

GAAP operating income	$	16,805		$	34,794		$	12,940		$	51,599		$	20,563
Share-based compensation expense		9,973			9,775			5,398			19,748			16,486
Amortization of acquisition-related intangibles		5,829			6,343			3,413			12,172			6,827
Change in fair value of contingent consideration		24,000			17,200			—			41,200			—
Out of period import tax expense		—			—			4,345			—			4,345
Other		828			1,038			1,064			1,866			2,681
Non-GAAP operating income	$	57,435		$	69,150		$	27,160		$	126,585		$	50,902

GAAP net income attributable to SGH	$	2,458		$	20,027		$	5,844		$	22,485		$	7,871
Share-based compensation expense		9,973			9,775			5,398			19,748			16,486
Amortization of acquisition-related intangibles		5,829			6,343			3,413			12,172			6,827
Change in fair value of contingent consideration		24,000			17,200			—			41,200			—
Out of period import tax expense		—			—			3,358			—			3,358
Amortization of debt discount and other costs		2,296			2,210			2,098			4,506			4,160
Foreign currency (gains) losses		1,408			1,467			843			2,875			201
Other		1,481			1,038			1,064			2,519			2,681
Estimated tax effects of non-GAAP adjustments		126			(1,752	)		(84	)		(1,626	)		(20	)
Non-GAAP net income attributable to SGH	$	47,571		$	56,308		$	21,934		$	103,879		$	41,564

SMART Global Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures (In thousands, except per share amounts)

	Three Months Ended								Six Months Ended
	Feb 25, 2022			Nov 26, 2021			Feb 26, 2021		Feb 25, 2022			Feb 26, 2021
Weighted-average shares outstanding - Diluted:
GAAP weighted-average shares outstanding		57,636			54,635			50,407		56,135			50,307
Adjustment for capped calls		(2,759	)		(2,583	)		—		(2,670	)		—
Non-GAAP weighted-average shares outstanding		54,877			52,052			50,407		53,465			50,307

Diluted earnings per share:
GAAP diluted earnings per share	$	0.04		$	0.37		$	0.12	$	0.40		$	0.16
Effect of above adjustments		0.83			0.71			0.32		1.55			0.67
Non-GAAP diluted earnings per share	$	0.87		$	1.08		$	0.44	$	1.95		$	0.83

Net income attributable to SGH	$	2,458		$	20,027		$	5,844	$	22,485		$	7,871
Interest expense, net		4,462			5,106			4,365		9,568			7,518
Income tax provision		7,586			7,755			1,200		15,341			4,475
Depreciation expense and amortization of intangible assets		16,077			15,813			8,793		31,890			17,160
Share-based compensation expense		9,973			9,775			5,398		19,748			16,486
Change in fair value of contingent consideration		24,000			17,200			—		41,200			—
Out of period import tax expense		—			—			4,345		—			4,345
Other		1,481			1,038			1,064		2,518			2,681
Adjusted EBITDA	$	66,037		$	76,714		$	31,009	$	142,750		$	60,536

Weighted average shares outstanding and diluted earnings per share reflect the impact of the share dividend.

SMART Global Holdings, Inc. Consolidated Balance Sheets (In thousands)

As of	February 25, 2022			August 27, 2021
Assets
Cash and cash equivalents	$	365,768		$	222,986
Accounts receivable, net		385,925			313,393
Inventories		334,148			363,601
Other current assets		45,876			50,838
Total current assets		1,131,717			950,818
Property and equipment, net		149,059			156,266
Operating lease right-of-use assets		35,816			40,869
Intangible assets, net		88,887			101,073
Goodwill		73,413			74,255
Other noncurrent assets		29,621			21,517
Total assets	$	1,508,513		$	1,344,798

Liabilities and Equity
Accounts payable and accrued expenses	$	440,983		$	484,107
Current debt		6,425			25,354
Other current liabilities		86,396			74,337
Total current liabilities		533,804			583,798
Long-term debt		483,911			340,484
Acquisition-related contingent consideration		101,700			60,500
Noncurrent operating lease liabilities		27,047			32,419
Other noncurrent liabilities		7,139			8,673
Total liabilities		1,153,601			1,025,874

Commitments and contingencies

SMART Global Holdings shareholders' equity:
Ordinary shares		1,535			1,504
Additional paid-in-capital		423,136			396,120
Retained earnings		207,272			184,787
Treasury shares		(53,440	)		(50,545	)
Accumulated other comprehensive income (loss)		(229,676	)		(221,615	)
Total SGH shareholders' equity		348,827			310,251
Noncontrolling interest in subsidiary		6,085			8,673
Total equity		354,912			318,924
Total liabilities and equity	$	1,508,513		$	1,344,798

SMART Global Holdings, Inc. Consolidated Statements of Cash Flows (In thousands)

	Three Months Ended									Six Months Ended
	Feb 25, 2022			Nov 26, 2021			Feb 26, 2021			Feb 25, 2022			Feb 26, 2021
Cash flows from operating activities:
Net income	$	2,972		$	20,698		$	5,844		$	23,670		$	7,871
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense and amortization of intangible assets		16,077			15,813			8,793			31,890			17,160
Amortization of debt discount and issuance costs		2,438			2,332			2,191			4,770			4,307
Share-based compensation expense		9,973			9,775			5,398			19,748			16,486
Change in fair value of contingent consideration		24,000			17,200			—			41,200			—
Amortization of operating lease right-of-use assets		2,417			2,548			1,500			5,245			2,913
Other		1,533			(192	)		994			1,341			981
Changes in operating assets and liabilities:
Accounts receivable		(39,526	)		(36,053	)		12,012			(75,579	)		10,082
Inventories		(13,225	)		39,640			(41,053	)		26,415			(28,134	)
Other current assets		6,132			(932	)		(9,849	)		5,200			(19,126	)
Accounts payable and accrued expenses		22,105			(53,751	)		35,780			(31,646	)		45,921
Operating lease liabilities		(2,075	)		(2,141	)		(1,238	)		(4,496	)		(2,742	)
Deferred income taxes, net		(656	)		209			49			(447	)		271
Net cash provided by operating activities		32,165			15,146			20,421			47,311			55,990

Cash flows from investing activities:
Capital expenditures and deposits on equipment		(7,376	)		(12,766	)		(20,151	)		(20,142	)		(34,795	)
Other		(81	)		(611	)		151			(692	)		167
Net cash used for investing activities		(7,457	)		(13,377	)		(20,000	)		(20,834	)		(34,628	)

Cash flows from financing activities:
Proceeds from debt		270,775			—			11,439			270,775			11,439
Proceeds from borrowing under line of credit		24,000			60,000			23,000			84,000			42,500
Proceeds from issuance of shares		2,431			5,029			2,546			7,460			5,651
Repayments of debt		(125,000	)		—			(23,000	)		(125,000	)		—
Repayments of borrowings under line of credit		(59,000	)		(50,000	)		—			(109,000	)		(42,500	)
Distribution to noncontrolling interest		(3,773	)		—			—			(3,773	)		—
Payments to acquire ordinary shares		(230	)		(2,666	)		(44,481	)		(2,895	)		(47,964	)
Other		(3,840	)		—			—			(3,841	)		—
Net cash provided by (used for) financing activities		105,363			12,363			(30,496	)		117,726			(30,874	)

Effect of changes in currency exchange rates on cash and cash equivalents		2,647			(4,068	)		5,781			(1,421	)		(1,496	)
Net increase (decrease) in cash and cash equivalents		132,718			10,064			(24,294	)		142,782			(11,008	)
Cash and cash equivalents at beginning of period		233,050			222,986			164,097			222,986			150,811
Cash and cash equivalents at end of period	$	365,768		$	233,050		$	139,803		$	365,768		$	139,803

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SGH Reports Second Quarter Fiscal 2022 Financial Results