Penguin Solutions, Inc. · NASDAQ:PENG
Penguin Solutions — SMART Global Holdings — Investor Day (April 2021)
73 slides from Penguin Solutions's investor day presentation, Apr 20, 2021
Slide 1: A Whole Lot More Than A Memory Company
A Whole Lot More Than A Memory Company Analyst Day 2021 Mark Adams | President and CEO 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements Today’s presentations and oral communications made during the course of these Such factors and risks as outlined above and in such filings may not constitute all factors and presentations contain statements that constitute forward-looking statements regarding our risks tha
Slide 3: Agenda
01 SGH Vision Mark Adams 02 Intelligent Platform Solutions Group Thierry Pellegrino 03 LED Solutions Group AGENDA Claude Demby A new chapter for SGH 04 Memory Solutions Group Jack Pacheco 05 Operating Excellence Jack Pacheco 06 Finance Overview Ken Rizvi 07 Q&A 3
Slide 4: Our Connected World
Our Connected World
Slide 5: Our Connected World
Our Connected World ML Storage AI Safety Cloud Energy- Compute Efficiency Sensors Lighting
Slide 6: The SGH Team
The SGH Team Mark Adams Jack Pacheco Ken Rizvi Compute President & Compute Executive Vice President, COO Senior Vice President Chief Executive Officer President, Chief Financial Officer SMART Modular Technologies Anne Kuykendall Claude Demby Thierry Pellegrino Vice President Senior Vice President Se
Slide 7: SGH
Enabling growth-oriented companies in specialty markets by empowering them SGH to solve our customers’ advanced technology problems Operating Acquisition System Framework 7
Slide 8: SGH Operating System
SGH Operating Quality System Corporate Supply Culture/ Chain Human Excellence Capital SGH Proven operating system Operating to accelerate integration, System capture synergies, and Global Capital-Efficient create long-term value Manufacturing Model while leveraging a Scale/Efficiency capital-efficie
Slide 9: SGH Acquisition Framework
Compete in high-value specialty markets SGH Serve strategic customers and partners Acquisition Embody SGH corporate culture and values Framework Leverage our proven operating system Create shareholder value 9
Slide 10: Executing On Our Strategy
Executing On Our Strategy Memory Intelligent Platform LED Solutions Group Solutions Group Solutions Group Value Design, development Supply Chain Global Customer Capital-Efficient and advanced Excellence Manufacturing Relationship Model Creation packaging of memory Scale/Efficiency Management solutio
Slide 11: Intelligent Platform, LED and Memory Solutions
Intelligent Platform Solutions Accelerating our customers’ digital transformation with emerging technologies, innovative platforms that create value, improve competitiveness, and unify edge, core, and cloud LED Solutions Established global technology leader in the LED lighting market with the indust
Slide 12: The Continuum
Our business lines have a long history of collaborating and serving some of the world’s largest enterprise customers 12
Slide 13: Growth & Diversification
Growth & Diversification Since FY 2016, we have grown revenues while diversifying our business. • FY16 – 100% Memory • FY21* – 55% Memory FY 2016 FY 2021* * % mix based on mid-point of Q3 FY21 guidance, annualized 13
Slide 14: Intelligent Platform Solutions
Intelligent Platform Solutions Analyst Day 2021 Thierry Pellegrino | President of Intelligent Platform Solutions
Slide 15: Intelligent Platform Solutions
GLOBAL- STATEMENT SLIDE (each should have a different image) Intelligent Platform Solutions Accelerate our customers’ digital transformation with emerging technologies, innovative platforms that create value, improve competitiveness, and unify edge, core, and cloud 15
Slide 16: The Continuum: From the Edge to the Core to the Cloud
The Continuum From the Edge to the Core to the Cloud Edge Core Cloud 16
Slide 17: Intelligent Platform Solutions Today
Intelligent Platform Solutions Today Edge Core Cloud Key Capabilities Key Capabilities Key Capabilities • Application-specific embedded platforms for • Complete design services • HPC and AI cloud integration near and far edge services (Private, Public) • Data center optimized solutions • Solutions f
Slide 18: Focused Market Segments and Customers
Focused Market Segments and Customers Edge Core Cloud Embedded, modular and IoT High-growth sectors of HPC Technical computing cloud solutions that extend our and AI service, multi-cloud customers’ core environments orchestration platform, to edge applications cloud-native reference architectures 18
Slide 19: Technology, Products and Services
Technology, Products and Services Custom Innovative Software Services Platforms End-to-End Solutions Platforms Delivering the Accelerate adoption Extending the Filling the impossible of emerging technologies data center skills gap Highly dense data Integrated hardware, Cloud-native workflow, Profess
Slide 20: Market Opportunity and Trends
Market Opportunity and Trends Platform Complexity as-a-Service Edge Core Cloud 2.0 Data explosion HPC & AI growth in Cloud appropriate vs Cloud first, Extension of data center for the Enterprise Repatriation, Hybrid/Multi-Cloud, improved user experience Data driven and faster insight 11.4% CAGR 19.8
Slide 21: Key Growth Initiatives
Key Growth 12.2% CAGR Initiatives Drive growth and profitability through product mix with increased breadth and depth of innovative solutions. Solutions 2020 2024 12.8% Drive growth, profitability, and CAGR customer value solving emerging challenges in multi-cloud workflow orchestration and AI workf
Slide 22: Plans for the Future
Plans for the Future Growing Our Business Today Long-Term Growth Vectors Edge Core-Cloud Edge-Core-Cloud Far and Near Edge Data Center HPC & AI Edge-Core-Cloud Embedded compute platforms Tailored HPC & AI platforms HPC & AI Cloud Service • Federal • Energy Software • Industrial • FSI • Hybrid/Multi-
Slide 23: Case Study: AI / Machine Learning
Case Study: AI / Machine Learning The Solution Background Customer Type Social Media Platform Services Differentiation Usage Model Highly scalable AI/ML Design services, Experience in large-scale Remote hosted and Business Challenge platform designed for Professional services, AI architecture for th
Slide 24: Why We Win
Why We Win Focused, Agile Innovative Engineering Highly End-to-End and Quick Solutions Expertise Collaborative Capabilities to Market 24
Slide 25: Transform-Leverage-Grow
Transform-Leverage-Grow Our path to revenue growth and strong gross margin expansion Transform Leverage and Grow Double Digit • Go to market with platform solutions • Leverage best in class operational Revenue CAGR spanning from the edge to the core excellence across SGH to the cloud • Promote the v
Slide 26: LED Solutions Group
LED Solutions Group Analyst Day 2021 Claude Demby | President LED Solutions Group
Slide 27: LED Solutions Group
LED Solutions Group Established global technology leader in the LED lighting market with the industry’s strongest LED brand 27
Slide 28: Cree LED Overview
Cree LED Established global technology leader with the industry’s strongest LED brand, Overview 1650+ patents, and established global sales and distribution channels Leading Position Strong Track Record Global in Attractive Markets of Product Innovation Footprint Best-in-class, high-power 1,650+ pat
Slide 29: Our Brand Advantage
Our Brand Advantage Cree LED’s industry leadership is underpinned by strong brand equity and a reputation for superior performance Cree LED’s Industry Recognition “Product of the Year Award: “Technology Brand of the Year” “Market Leadership: “Best Packaged LED: XLamp High Intensity LEDs” Architectur
Slide 30: Our Winning Strategy
Our Winning Strategy Cree LED is focused on delivering a differentiated value proposition with best-in-class technology to high-margin end markets Focus on attractive market segments delivering application optimized solutions HP General Lighting MP General Lighting Video Screens Specialty Leverage a
Slide 31: Attractive Market Opportunities
Attractive Market Opportunities Cree LED is well-positioned to grow its position in differentiated, higher-value specialty areas while solidifying its leading position in HP Lighting and expand its position in MP Lighting Cree LED SAM Video Screens Specialty 5YR CAGR: ~11% 5YR CAGR: ~9% 4.0% CAGR •
Slide 32: Diverse Customer Base & Market Segments
Diverse Customer Base For over 30 years, Cree LED has established itself as a leader in the industry offering new and differentiated technologies to a & Market Segments broad base of customers across multiple market segments Leading global players in each target market segment HP General MP General
Slide 33: Leading Technology
Leading Cree LED has a 30-year track record of innovation Technology and industry firsts driven by the R&D team 2019-2020 The commitment to R&D has driven Cree LED’s patent portfolio to be recognized worldwide
Slide 34: Key Growth Initiatives
Key Growth Initiatives Cree LED’s manufacturing transformation is designed to enhance business resiliency and facilitate expansion into higher-value specialty areas FY21 FY22-23 FY24 Transform Leverage Grow Separation and integration Focus on key growth areas Drive a focused global sales and distrib
Slide 35: LA Rams
35 LA Rams
Slide 36: Customer Case Study: SoFi Stadium
SoFi Stadium | Home of the Los Angeles Rams Customer Case Study Customer Problem The SoFi display ring is the biggest in the NFL. Customer wanted a 360-degree 2-sided visible ring End Market with 4K Ultra HD resolution Full color video displays throughout stadium so the fans can have the same “exper
Slide 37: Why We Win
Why We Win Cree LED is a driving force of innovation in the LED industry, delivering the best system value and superior products to customers across attractive end markets Focus on Create a more Leverage our attractive markets resilient LED business global presence, where our best-in-class via our m
Slide 38: Transform-Leverage-Grow
Transform-Leverage-Grow Our path to revenue growth and gross margin expansion Transformation Leverage to Grow Mid single digit • Moving to fab-lite manufacturing • Performance leadership Revenue CAGR model creating greater agility • Drive growth in four key areas • Completing the separation • Realiz
Slide 39: Memory Solutions Group
Memory Solutions Group Analyst Day 2021 Jack Pacheco | President, Memory Solutions Group
Slide 40: Memory Solutions Group
Memory Solutions Group Enabling high performance computing through design, development, and advanced packaging of leading edge to legacy memory solutions 40
Slide 41: Broad Portfolio of Memory and Storage Products
Broad Portfolio of Memory and Storage Products Legacy Standard Solutions Leading Edge DDR 3 DDR 4, eMCP, SSD NV-DIMM Embedded Flash DDIMM Low-Capacity SSD Optane Memory Multi form-factors Gen Z/CXL Customer-Centric Application-Specific Build-to-Order Engineering Focus Solutions Low-Volume High Mix 4
Slide 42: Targeting Large & Growing Markets
Targeting Large & Growing Markets Standard and Specialty NAND Flash and DRAM Products Market Memory Solutions Group 6.9% 5.0% 92-97% CAGR $159.9bn CAGR Standard Modules & Mobile Memory $1.6bn $122.5bn $78.8bn DRAM $1.4bn $65.6bn DRAM $3.3bn $81.1bn $2.6bn 3-8% Flash Specialty $56.9bn Memory Flash 20
Slide 43: Key Customers Across Multiple Growth Markets
Key Customers Across Multiple Growth Markets Industrial, PC & Mobile Networking Servers Aerospace Laptops Memory & Telecom & Storage Medical 43
Slide 44: Memory Solutions for Diverse Applications
Memory Solutions for Diverse Applications DRAM SSD Advanced IC Packaging Fabric Attached eMMC/eMCP/uMCP Gen-Z User Programmable ZMM Memory Module Serial Attached OpenCAPI DDIMM CXL DRAM/ PM EDSFF Die Stacking Direct/Parallel Attached (Derivatives) DDR4 32GB DDR4-3200 ULP ECC UDIMM 16Gb Mini-DIMM Dir
Slide 45: Key Growth Initiatives
Key Growth Initiatives Target Verticals Controller-based DRAM products • Open CAPI – in initial production • Gen-Z – design kits sold • CXL – in design • Datacenter accelerator cards – initial customer qualification • Estimated FY24 TAM: $1.5B1 Data Centers Edge Computing • Goal is 15% market share
Slide 46: Case Studies: Diverse Customers & Applications Driving Growth
Case Studies: Diverse Customers & Applications Driving Growth Industrial Automation Storage SSD Brazil • Long-term supply partner • Persistent Memory reduces • m.2 NVMe PCIe SSD with • Reputation for quality I/O bottleneck Local Flash IC (controller inside) and technical support • Eliminates need to
Slide 47: SMART Wins by Creating Value
SMART Wins by Creating Value Integration of technologies and products enables greater Product and Test R&D efficiency and customer value creation Engineering Customer Solutions Time to Differentiated Best-in-Class Performance Market Products Quality Reliability Quality Design and delivery Dedicated,
Slide 48: Transform-Leverage-Grow
Transform-Leverage-Grow Our path to revenue growth and gross margin expansion Low to mid Transformation Leverage to Grow single digit Revenue • Launching controller based leading • Drive growth in Data CAGR edge DRAM products Center/Cloud/AI markets • DRAM modules/SSD manufacturing • Introduction of
Slide 49: Operating Excellence
Operating Excellence Analyst Day 2021 Jack Pacheco | Chief Operating Officer SGH
Slide 50: Key Themes
Key Themes Industry 4.0 Cost Effective Investing in automation LEAN transformation Best-in-Class Quality Automation Connection IOT Big Data Sub 250 DPPM >95% First Pass Yields Leading Edge Industry 4.0 SMT Lines First one in Western USA Workflow Artificial Cloud System Intelligence Computing Integra
Slide 51: Worldwide Factory Footprint
Worldwide Factory Footprint Newark, CA Durham, NC Advanced Test/Board Reliability Lab and Module Assembly LED Huizhou, China Memory Packaging/Module Intelligent Platform Solutions Assembly Penang, Malaysia LED Fremont, CA Board/System/Module Manaus, Brazil Assembly System Integration and Test Memory
Slide 52: Embracing Futuristic Leading Edge Technology
Embracing Futuristic Leading Edge Technology Holistic approach incorporating Industry 4.0 core pillars to drive forward operational excellence. 14.0 I4.0 SMT lines SMT Lines Automatic Program Creation | Automatic Process Correctional Capabilities I4.0 Automation Power AI Vision System (PAIV) • Robot
Slide 53: Superior Supply Chain/Inventory Management
Superior Supply Chain/Inventory Management Managing commodities proactively by anticipating shortages and positioning materials for optimal lead times Worldwide supply chain capabilities across all regions Vertically integrated freight and customs brokerage Purchasing Locations Warehouses Integrated
Slide 54: SMART Global System – Single Source of Truth
SMART Global System – Single Source of Truth MES MES MES MES SMART SMART SMART Cree LED, Modular, Embedded Modular, Durham Newark Computing, Malaysia & Huizhou Customers Tempe Penguin MES API ERP : SAP on HANA WAS, XI & B2B Computing, Analytics EDI Fremont Enterprise Resource Planning System Busines
Slide 55: LEAN Culture
LEAN Culture Elevating operations value proposition Cost optimization and efficiency improvement Embarking on LEAN transformation initiatives Cost Optimization SMART Goals Operating the Setting the specific, factory with measurable, End-to-end business optimized cost achievable, realistic, transform
Slide 56: Finance Overview
Finance Overview Analyst Day 2021 Ken Rizvi | SVP and Chief Financial Officer
Slide 57: SGH Growth and Diversification
SGH Growth and Diversification Value Creation Enabling growth-oriented companies to solve customers’ advanced technology problems Strategy Operating Excellence Leveraging the SGH operating system and acquisition framework to create long-term value Value Creation Delivering value to our customers, su
Slide 58: Expanding Serviceable Addressable Market (SAM)
Expanding Serviceable Addressable Market (“SAM”) SGH Total SAM1 has increased by $13B in the past 3 years Memory Solutions Intelligent Platform Solutions LED Solutions ~$4B ~$9B ~$4B SAM2 SAM3 SAM4 Pre – 2018 June 2018 - July 2019 March 2021 ~$17B CUMULATIVE SAM 1. SAM Reflects CY20 figures. 2. Sour
Slide 59: Growing Revenue While Diversifying the Business
Growing Revenue While Diversifying the Business Revenue Growth Diversification ($M) $800 $700 $600 22 96 % $500 % 82% 77% 55% $400 FY FY FY Pro 18 19 18 20 23% Forma2 23% $300 % 4% $200 $100 $0 Q4'16 Q4'17 Q1'16 Q2'16 Q3'16 Q1'17 Q2'17 Q3'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'2
Slide 60: Increasing Momentum in Gross Profit and Cash Flow Generation
Increasing Momentum in Gross Profit and Cash Flow Generation Gross Profit1 Adjusted EBITDA1 ($M) ($M) $140 $100 $120 $80 $100 $60 $80 $60 $40 $40 $20 $20 $0 $0 Q2'18 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21E Q
Slide 61: Capital Allocation Priorities
Capital Allocation Priorities Capital Management Framework Investing for Growth Strategic and Accretive Maintaining a Strong and Margin Expansion Acquisitions Balance Sheet • $500M+ of R&D1, S&M1, and CapEx • ~$325M2 cumulative spend • Prudent and flexible debt spend since FY16 since FY17 • Minimum
Slide 62: Investing for Growth and Margin Expansion
Investing for Growth and Margin Expansion Gross Margin LED Initiatives Intelligent Solutions 25%+ Platform Gross • Portfolio Optimization Memory Solutions ~20% Solutions Margin1 • Driving down BOM costs and implementing Industry 4.0 initiatives Gross • IPS expansion into solutions, software, and ser
Slide 63: Strategic and Accretive Acquisitions
Strategic and Accretive Acquisitions Financial Criteria Strong Track Record of Successful Acquisitions Revenue Growth Margin Expansion June 2018 July 2019 July 2019 March 2021 Positive Free Cash Flow Improved Improved Achieved Significant gross margin gross margin 50% revenue opportunity to by 400 b
Slide 64: Maintaining a Strong Balance Sheet
Maintaining a Strong Balance Sheet Reduced leverage and increased Total Debt /EBITDA Cash & Eq. cash balance since FY 2016, while ($M) driving growth and diversification 6.0 x $160 spanning four acquisitions $140 5.0 x $120 4.0 x $100 3.0 x $80 $60 2.0 x $40 1.0 x $20 0.0 x $0 1 FY16A Q3 LTM FY21E 1
Slide 65: SGH Long-Term Model
SGH Long-Term Model FY21E1 Long-Term Inorganic Financial Framework Growth Criteria Revenue $1.4 - $1.5B High Single Digit CAGR Revenue Growth Non-GAAP Margin Expansion ~19-20% >500 bps improvement Gross Margin Positive Free Cash Flow Non-GAAP ~ 8-9% >500 bps improvement Non-GAAP EPS Operating Margin
Slide 66: Strong Financial Momentum
Strong Financial Momentum Gross Operating Significant Revenue Margin Margin Cash Flow Growth Expansion Expansion Generation Leveraging SGH’s Proven Operating System and Acquisition Framework to Drive Growth and Value 66
Slide 67: Q&A
Q&A Mark Jack Ken Claude Thierry Adams Pacheco Rizvi Demby Pellegrino President & EVP & COO Senior Vice Senior Vice Senior Vice Chief Executive President, President President President Officer SMART Modular Chief Financial President, President, Technologies Officer Cree LED Penguin 67
Slide 68: Thank You
Thank You Smart Global Holdings, Smart Modular Technologies, Penguin Computing, Cree LED and our other trademarks appearing herein are the trademarks or registered trademarks of Smart Global Holdings, Inc. Trademarks of other companies appearing herein are the property of their respective holders. 6
Slide 69: Appendix
Appendix 69
Slide 70: GAAP to Non-GAAP Reconciliation: FY'16 – FY'18
GAAP to Non-GAAP Reconciliation: FY’16 – FY’18 ($ in millions) Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 GAAP gross profit $ 23.3 $ 23.1 $ 30.6 $ 29.9 $ 29.7 $ 37.2 $ 47.4 $ 48.0 $ 57.8 $ 73.0 $ 78.1 $ 82.7 GAAP gross margin 19.2% 19.7% 20.5% 20.4% 18.6% 21.6% 22.9% 21.
Slide 71: GAAP to Non-GAAP Reconciliation: FY'19 – Q2'21
GAAP to Non-GAAP Reconciliation: FY’19 – Q2’21 ($ in millions) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 GAAP gross profit $ 85.1 $ 57.1 $ 43.0 $ 52.3 $ 54.3 $ 51.5 $ 54.2 $ 56.3 $ 52.6 $ 53.5 GAAP gross margin 21.6% 18.8% 18.3% 18.8% 20.0% 18.9% 19.3% 19.0% 18.0% 17.6% Share-based
Slide 72: GAAP to Non-GAAP Reconciliation: FY'19 – Q2'21
GAAP to Non-GAAP Reconciliation: FY’19 – Q2’21 ($ in millions) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 GAAP gross profit $ 85.1 $ 57.1 $ 43.0 $ 52.3 $ 54.3 $ 51.5 $ 54.2 $ 56.3 $ 52.6 $ 53.5 GAAP gross margin 21.6% 18.8% 18.3% 18.8% 20.0% 18.9% 19.3% 19.0% 18.0% 17.6% Share-based
Slide 73: GAAP to Non-GAAP Reconciliation: FY'20
GAAP to Non-GAAP Reconciliation: FY’20 ($ in millions) FY'20 ($ in millions) FY'20 GAAP gross profit $ 216.4 GAAP income from operations $ 41.3 GAAP gross margin 19.3% GAAP operating margin 3.7% Share-based compensation included in cost of sales 3.0 Share-based compensation expense 18.7 Intangible a