Penguin Solutions, Inc. · NASDAQ:PENG
Penguin Solutions — Investor Day (July 2024)
70 slides from Penguin Solutions's investor day presentation, Jul 16, 2024
Slide 1: Solving the Complexity of AI
2024 ANALYST EVENT SOLVING THE COMPLEXITY OF AI July 16, 2024 © 2024 SGH 1
Slide 2: Disclaimer
Disclaimer This presentation and the oral communications made during the course of this presentation contain forward-looking statements Statement Regarding Use of Non-GAAP Financial Measures: within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities E
Slide 3: Agenda
1. Strategic Vision 2. Market Opportunities 3. AI Infrastructure Complexity AGENDA 4. Driving Customer Success 5. Importance of Memory in AI 6. Financial Overview 7. Closing Remarks 8. Q&A © 2024 SGH 3
Slide 4: 2021 Perception Study
2021 Perception Study Too much dependency on cyclical memory business Brazil doesn't fit—consumer memory and emerging market risk Investors prefer to diversify on their own Need for a clear strategy © 2024 SGH 4
Slide 5: 2021 Perception Study
2021 Perception Study Too much dependency on cyclical memory business Brazil doesn't fit—consumer memory and emerging market risk Clear Growth Investors prefer to diversify on their own Strategy Need for a clear strategy © 2024 SGH 5
Slide 6: Execution
Execution Our Performance to Our Long-Term Model from Analyst Day 2021 Long-Term FY 2020* Financial Framework FY 2024E** Revenue $730M High Single % Growth $1.2B (12.8% CAGR) Non-GAAP 20.7% 26.0% + 32.1% Gross Margin*** Non-GAAP 4.6% 10.0% + 10.4% Operating Margin*** *Figures reflect continuing oper
Slide 7: Our Evolution
Our Evolution From a Memory Module Company to an AI Enterprise Solutions Company 1 MEMORY MODULE 2 HOLDING COMPANY 3 AI TECHNOLOGY COMPANY INNOVATOR © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 7
Slide 8: Our Evolution
Our Evolution From a Memory Module Company to an AI Enterprise Solutions Company 1 MEMORY MODULE 2 HOLDING COMPANY 3 AI TECHNOLOGY COMPANY INNOVATOR © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 8
Slide 9: AI's Accelerated Adoption
AI’s Accelerated Adoption Exciting Time to Be in AI More than 80% of enterprises will use GenAI in production environments by 2026, up from less than 5% in 2023 2023 2026 Source: Gartner October 11, 2023 © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 9
Slide 10: The Complexity of AI Infrastructure
The Complexity of AI Infrastructure “ AI comes with great promises, but also with great challenges. The hardware and software we need to develop and support AI are profoundly different from the basic compute technologies that we ” have been familiar for a couple of decades at this point. Santosh Jan
Slide 11: Solving the Complexity of AI
Solving the Complexity of AI HPC AND AI PLATFORM EXPERTS AI CLUSTER MANAGEMENT BEST-IN-CLASS MANAGED SERVICES INNOVATIVE SOLUTIONS HIGH PERFORMANCE / HIGH AVAILABILITY © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 11
Slide 12: Penguin Solutions
Penguin Solutions Trusted partner enabling our customers to harness the power of AI © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 12
Slide 13: SGH and SK Telecom
SGH and SK Telecom $200M Strategic Investment to Advance End-to-End AI Infrastructure Solutions Potential Areas of Collaboration Advancing end-to-end AI solutions Broadening AI software solutions portfolio Increasing Penguin's global reach Developing innovative edge products Accelerating development
Slide 14: Market Opportunities
MARKET OPPORTUNITIES Mark Seamans | VP of Global Marketing © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 14
Slide 15: AI Expands Across a Broad Range of Markets
Healthcare Finance Energy Travel Agriculture Entertainment AI Expands Across a Education Supply Chain Broad Range Retail Manufacturing of Markets Human Resources Automotive Telecommunications © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 15
Slide 16: AI Is Happening in Waves
AI Is Happening in Waves HYPERSCALE AI ENTERPRISE AI MODEL 1 2 FINE TUNING AND PRIVATE 3 INFERENCE CONSUMPTION AT SCALE FOR TRAINING MODEL CREATION 100’s of Solutions 10,000’s 100,000+ Wave 2 builds on the output of Wave 1— Wave 3 builds on the output of Wave 1 and 2— To refine models for vertical u
Slide 17: Enterprises Are Struggling with AI Deployments
Enterprises Are Struggling with AI Deployments DAY 1 WORKLOADS GET TO SMOOTH PRODUCTION OPERATIONS ON TIME. ON BUDGET. DELIVER THE VALUE OF AI. DESIGN BUILD DEPLOY MANAGE EXPAND EVOLVE © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 17
Slide 18: AI Factory Infrastructure
AI Factory Infrastructure Enterprise Platforms Designed to Support Advanced AI Workloads with Optimal Performance and Stability at Scale EFFICIENT RAPID WORKLOAD OPTIMAL CONTINUAL DESIGN DEPLOYMENT EXECUTION PERFORMANCE IMPROVEMENT © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 18
Slide 19: Enterprise IT Gaps Lead to Delays, Costs, and Missed ROI
Enterprise IT Gaps Lead to Delays, Costs, and Missed ROI It’s All About Achieving “Percentage of Potential” 100% AI Node Availability OPTIMUM AI INFRASTRUCTURE VALUE 0% 0% Cluster Performance—Network, Health, Optimization 100% © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 Patent Pendi
Slide 20: Enterprise IT Gaps Lead to Delays, Costs, and Missed ROI
Enterprise IT Gaps Lead to Delays, Costs, and Missed ROI It’s All About Achieving “Percentage of Potential” 100% 70% of 70% = 49% 70% AI Node Availability LESS THAN HALF OF THE VALUE FROM THE INFRASTRUCTURE INVESTMENT 70% 0% 0% Cluster Performance—Network, Health, Optimization 100% © 2024 Penguin So
Slide 21: Enterprise IT Gaps Lead to Delays, Costs, and Missed ROI
Enterprise IT Gaps Lead to Delays, Costs, and Missed ROI It’s All About Achieving “Percentage of Potential” 100% LOST VALUE AI Node Availability LESS THAN HALF OF THE VALUE FROM THE INFRASTRUCTURE INVESTMENT 0% 0% Cluster Performance—Network, Health, Optimization 100% © 2024 Penguin Solutions. All R
Slide 22: AI Factory Infrastructure
AI Factory Infrastructure Enterprise Platforms Designed to Support Advanced AI Workloads with Optimal Performance and Stability at Scale EFFICIENT RAPID WORKLOAD OPTIMAL CONTINUAL DESIGN DEPLOYMENT EXECUTION PERFORMANCE IMPROVEMENT © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 22
Slide 23: AI Factory Infrastructure
AI Factory Infrastructure Enterprise Platforms Designed to Support Advanced AI Workloads with Optimal Performance and Stability at Scale POWER PRODUCTION COMPLEX ISSUE NETWORK CHANGE LIMITATIONS READINESS DIAGNOSIS THROUGHPUT MANAGEMENT © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 23
Slide 24: AI Infrastructure Complexity
AI INFRASTRUCTURE COMPLEXITY PHIL FADI MARK POKORNY GEBARA SEAMANS CHIEF TECHNOLOGY ADVISOR & VP OF GLOBAL OFFICER AI INDUSTRY MARKETING EXECUTIVE PANELISTS MODERATOR © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 24
Slide 25: Power Is the Foundation for AI
POWER IS THE FOUNDATION 120 kW FOR AI 44 kW 22 kW 13 kW 10 kW CPU Rack A100 Rack H100 Rack H100 Rack B100 Rack (40 Nodes) (2 Nodes) (2 Nodes) (4 Nodes) (GTC) © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 25
Slide 26: The Network Is the Platform
Up to 30% of the wall clock time in AI/ML training is spent waiting for the network THE NETWORK IS THE PLATFORM AI Training Workloads Need Every Component to Pull Together © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 26
Slide 27: Avoid False Starts
AVOID FALSE STARTS Nothing Kills AI Enthusiasm Faster Than Slow Performance and Failed User Jobs © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 27
Slide 28: Isolating the Root Cause of Performance Issues
ISOLATING THE ROOT CAUSE OF PERFORMANCE ISSUES © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 28
Slide 29: Getting to Production Is Just the Beginning
GETTING TO PRODUCTION IS JUST THE BEGINNING Think Ahead to the Management & Health Monitoring Framework © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 29
Slide 30: AMD and Shell
AMD and Shell Customer and Innovation Profile INDUSTRY Energy Providing efficient and effective cooling to CHALLENGES support best-in-class performance for Shell IT’s HPC needs as CPU power consumption increases Penguin solution leveraging AMD EPYC SOLUTION processors with single-phase immersion coo
Slide 31: Driving Customer Success
DRIVING CUSTOMER SUCCESS Pete Manca | President of Intelligent Platform Solutions © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 31
Slide 32: AI Factory Infrastructure
AI Factory Infrastructure Enterprise Platforms Designed to Support Advanced AI Workloads with Optimal Performance and Stability at Scale POWER PRODUCTION COMPLEX ISSUE NETWORK CHANGE LIMITATIONS READINESS DIAGNOSIS THROUGHPUT MANAGEMENT © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 32
Slide 33: The Biggest Risk
The Biggest Risk Overinvesting in an Underperforming Resource 100% LOST VALUE AI Node Availability LESS THAN HALF OF THE VALUE FROM THE INFRASTRUCTURE INVESTMENT 0% 0% Cluster Performance—Network, Health, Optimization 100% © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 33
Slide 34: Solving the Complexity of AI
Solving the Complexity of AI "Best Fit" Technology Predictable Deployment Foundation Process Software-Enabled Expert Operations Services © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 34
Slide 35: Driving Customer Success
Driving Customer Success We Deliver Customer Benefits Assured Accelerated AI AI Infrastructure Outcomes © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 35
Slide 36: Solution Delivery Based on Proven Architectures
Solution Delivery Based on Proven Architectures Powered by our best-in-class managed services and software Ready to Run Tailored Unified Process: Design | Build | Deploy | Manage © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 36
Slide 37: Ready-to-Run Solution
Ready-to-Run Solution OriginAI Integrated Platform for AI Infrastructure Configuration Options Complete “Ready to Run” AI Infrastructure Solution Large (4096 GPU) HARDWARE All Servers, Racks, Network, Storage SOFTWARE Penguin and 3rd Party Software Medium BUILD Design and In-Factory Build (1024 GPU)
Slide 38: Tailored Solution
Tailored Solution Broad Partnerships for Customer Choice Accelerated Time Tailored AI Maximum to Production Solutions Customer Choice based on Penguin software and that precisely match and solution value integrating proven services capabilities customer requirements "best fit" technologies CPU & Net
Slide 39: Proven Delivery Process
Proven Delivery Process Delivering Production-Ready AI Foundations for Customers DESIGN BUILD DEPLOY MANAGE De-risking investment In-Factory rack, cable, and Penguin software for deep Driving uptime and through proven burn-in testing enables cluster health monitoring throughput for large sca
Slide 40: AI at the Edge
AI AT THE EDGE © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 40
Slide 41: AI Is Set to Grow at the Edge
AI Is Set to Grow at the Edge ENTERPRISE AI MODEL INFERENCE FINE TUNING AND PRIVATE 3 AT SCALE MODEL CREATION 100,000+ Wave 3 Inferencing Use Cases Will Increasingly Be Pushed to the Edge to Drive Processing Closer to the “Point Of Data” © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 4
Slide 42: Edge's Expanded Role
Edge’s Expanded Role Data Access and Availability Is Key 77% of organizations define their edge workloads as “highly critical” or “critical” to business operations EDGE ENVIRONMENTS Uptime Is Heterogenous Lack of IT Staff ARE CHALLENGING Essential Distributed IT and OT at the Edge Source: IDC Edge V
Slide 43: AI at the Edge
AI at the Edge Fault-Tolerant and High-Availability Edge for Continuous Workloads ztC Endurance Platform 99.99999% availability High-performance processor and scalable memory ztC Edge Platform Rugged hot-swappable nodes Automated data protection and local site recovery Zero Touch Computing (
Slide 44: Dis-Chem Pharmacies
Dis-Chem Pharmacies Customer and Innovation Profile INDUSTRY Pharmaceutical and retail (based in South Africa) Providing “always on” access to critical in-store POS and CHALLENGES inventory tracking systems; simplifying operations; designed to avoid data loss—and revenue loss. Stratus fault tolerant
Slide 45: Penguin Software Portfolio
Penguin Software Portfolio Delivering High-Performance and High-Availability Solutions CLUSTERWARE PLATFORM ASSURED INFRASTRUCTURE MODULE (AIM) Patent Pending FAULT-TOLERANT ACTIVE SERVICE NETWORK PENGUIN CLOUD CENTRAL © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 45
Slide 46: End-to-End Services Portfolio
End-to-End Services Portfolio Spanning the Data Center, Distributed Edge, and Cloud Professional Services Accelerated Deployment Customer Care Continuous Operations Managed Services Assured Performance Certified NVIDIA DGX-Ready Managed Services Partner © 2024 Penguin Solutions. All Rights Reserved.
Slide 47: Voltage Park
Voltage Park Leadership and Experience INDUSTRY AI Cloud Provider Deployment of 24,000 GPU AI cluster CHALLENGES and managing the platform at scale Large-scale NVIDIA H100 solution across 4 data centers. SOLUTION Powered by Penguin ClusterWare software. Managed end-to-end by Penguin services. © 2024
Slide 48: Relentless Commitment to Customer Success
Relentless Commitment to Customer Success "Best Fit" Technology Predictable Deployment Foundation Process Software-Enabled Expert Operations Services © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 48
Slide 49: Importance of Memory in AI
IMPORTANCE OF MEMORY IN AI Andy Mills | VP of Advanced Product Development Memory © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 49
Slide 50: AI Model Parameters: The Memory Gap
The Memory Gap Compute Limited Era Memory and Bandwidth Limited Era Complex AI Models Increase 10 T Memory Requirements DLRM-10T GPT-4 1T Accelerated growth in AI has PaLM significantly outpaced that of AI Model Parameters 100 B GPT-3 Memory memory capacity affecting: Wall Turing-NGL AMD M1300x (192
Slide 51: AI Model Parameters: The Memory Gap
The Memory Gap Complex AI Models Increase 10 T Memory Requirements 1T AI Memory Requirement Accelerated growth in AI has significantly outpaced that of 240X AI Model Parameters 100 B memory capacity affecting: 10 B Reliability 1B 2X Scalability Performance 2015 2016 2017 2018 2019 2020 2021 2022 202
Slide 52: Solving the Memory Challenge
Solving the Memory Challenge Strength in Core Memory Technologies Reliability Scalability Performance Zefr CXL Memory High-Bandwidth Memory Expansion Cards Memory Appliance Eliminating over 90% of Efficiently scale Accelerate performance utilizing memory reliability failures memory by 80%–100% Silic
Slide 53: CXL Expansion
CXL Expansion A New Model for Scaling Memory INDUSTRY AI-Based Business Analytics CHALLENGES Using Conventional Memory Was Too Expensive SOLUTION Penguin Server with CXL Add-In Expansion RESULTS CXL Enables 66% Lower Cost for Same Footprint © 2024 Penguin Solutions. All Rights Reserved. July 16, 202
Slide 54: Financial Overview
FINANCIAL OVERVIEW Jack Pacheco | COO and President of Memory Solutions © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 54
Slide 55: Value Creation Strategy
Profitable Growth Increased focus on recurring, higher margin software and services opportunities within high growth AI, HPC, and Edge Computing Penguin Solutions Transformation and Value Creation Operational Excellence Strategy Pivot business toward investing in software and services capabilities w
Slide 56: Revenue Growth & Optimal Product Mix
Revenue Growth & Optimal Product Mix Consolidated Performance Expanding Services Mix $M Total Revenue $M Services Revenue $1,200 $300 $1,000 $250 1 ~13% CAGR $800 $200 1 $600 $150 ~36% CAGR $400 $100 $200 $50 $0 $0 3 FY'20A FY'24E 2 FY'20A FY'24E IPS Memory LED FY'20A FY'24E Note: All figures reflec
Slide 57: Executing on Profitability
Executing on Profitability Non-GAAP Gross Margin1 Non-GAAP Operating Margin1 35% 12% $123 30% 10% ~11 Points 25% Margin Expansion 8% 20% $152 ~6 Points Margin Expansion 6% 15% $34 4% 10% 5% 2% 0% 0% 2 2 FY'20A FY'24E FY'20A FY'24E Note: All figures reflect continuing operations which excludes SMART
Slide 58: Maintaining a Strong Balance Sheet
Maintaining a Strong Balance Sheet Cash & Cash Equivalents 1 Net Debt / Adjusted EBITDA1 2 $M $480 3.0X $320 2.0X ~1.2X Reduction ~$380M Increase $160 1.0X $0 0.0X FY'20A Q3 FY'24A FY'20A LTM Q3 FY'24A Note: All figures reflect continuing operations which excludes SMART Brazil, divested at the end o
Slide 59: Investing for Growth
Investing for Growth EXPAND SOFTWARE GROW SERVICE INVEST IN EXPAND EDGE AI OFFERINGS CAPABILITIES GO-TO-MARKET SOLUTIONS © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 59
Slide 60: SGH & SK Telecom Transaction Overview
SGH & SK Telecom Transaction Overview • $200 million convertible preferred equity (200,000 preferred shares) • Conversion price of $32.81 per preferred share1 based on a 30% premium to the volume-weighted average closing price of SGH ordinary shares over the 15-day period ending on July 12, 2024 TRA
Slide 61: Delivering Margin Expansion
Delivering Margin Expansion ~38% - 40% Non-GAAP Gross Margin 1 ~32.1% Initiatives ~20.7% • Focus on high margin product mix • Portfolio optimization • Drive down BOM costs FY'20A FY'24E 2 Long Term 3 Model ~16% - 18% Non-GAAP Operating Margin 1 Initiatives ~10.4% • Reallocate OPEX to higher growth a
Slide 62: Long-Term Model
Long-Term Model Long-Term FY'24E¹ Financial Framework2 High Single Digit to Revenue ~$1.2B Low Double Digit CAGR Non-GAAP 32.1% ~38% - 40% Gross Margin Non-GAAP 10.4% ~16% - 18% Operating Margin Note: All figures reflect continuing operations which excludes SMART Brazil, divested at the end of fisca
Slide 63: Capital Allocation Strategy
Capital Allocation Strategy Strategic Initiatives for Maximizing Shareholder Value Organic Growth Maintaining a Strong Strategic Acquisitions Investments Balance Sheet and Divestitures • Invest in GTM and R&D • Maintain conservative leverage • Focus on solutions, software, initiatives that: levels a
Slide 64: Financial Momentum
Financial Momentum Profitable Growth Higher Margin Software and Services Focus Operating Margin Expansion Significant Cash Flow Generation Leveraging Penguin Solutions AI, HPC, Edge Expertise to Drive Growth and Value © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 64
Slide 65: Closing Remarks
CLOSING REMARKS Mark Adams | Chief Executive Officer © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 65
Slide 66: Looking Ahead
Looking Ahead Evolving Our Business to Higher Margins and More Predictable Revenue Leverage our expertise in HPC and AI Develop innovative solutions Expand software and services Scale new customer acquisition Advance our operational excellence capabilities © 2024 Penguin Solutions. All Rights Reserv
Slide 67: Q&A
Q&A MARK MARK PHIL PETE ANDY JACK ADAMS SEAMANS POKORNY MANCA MILLS PACHECO CHIEF EXECUTIVE VP OF GLOBAL CHIEF TECHNOLOGY PRESIDENT OF VP OF ADVANCED COO AND OFFICER MARKETING OFFICER INTELLIGENT PRODUCT PRESIDENT PLATFORM DEVELOPMENT OF MEMORY SOLUTIONS MEMORY © 2024 Penguin Solutions. All Rights R
Slide 68: Appendix: GAAP to Non-GAAP Reconciliations
APPENDIX GAAP to Non-GAAP Reconciliations © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 68
Slide 69: GAAP to Non-GAAP Reconciliation: FY'20A & FY'24E
GAAP to Non-GAAP Reconciliation: FY’20A & FY’24E 1 Note: All figures reflect continuing operations which excludes SMART Brazil, divested at the end of fiscal 2023 The reconciliations of the non-GAAP consensus measures to their most directly comparable GAAP measures included in this slide are estima
Slide 70: GAAP to Non-GAAP Reconciliation: FY'20A & FY'24E
GAAP to Non-GAAP Reconciliation: FY’20A & FY’24E Note: All figures reflect continuing operations which excludes SMART Brazil, divested at the end of fiscal 2023 © 2024 Penguin Solutions. All Rights Reserved. July 16, 2024 70