Q3 2024 SMART Global Holdings Inc Earnings Call

Shayla: Good afternoon. Thank you for attending today's SGH third quarter and final 2024 earnings call. My name is Shayla, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to turn the conference over to our host, Suzanne Schmidt with Investor Relations. Suzanne, you may proceed.

Unknown Executive: Good afternoon, thank you for attending today's SGH third quarter final, 2024.

Good afternoon. Thank you for it so with today's S. G. H third quarter final 2024 earnings call. My name is Jay Leno OBO moderator for today.

Shayla: My name is Shayla, and I'll be a moderator for today. All lines will be needed during the presentation portion of the call, with an opportunity for questions and answers at the end.

All lines will be needed during the presentation portion of the call with an opportunity for questions and answers at the end I would now like to turn the conference over to our host Suzanne Schmidt with Investor Relations.

Unknown Executive: I want to turn the conference over to our host, Suzanne Schmidt, with Investor Relations.

Suzanne Schmidt: Suzanne, you may proceed.

You May proceed.

Suzanne Schmidt: Thank you, operator. Good afternoon, and thank you for joining us on today's earnings conference call. Thank you for joining us on this call and webcast to discuss SGH's third quarter fiscal 2024 results.

Suzanne Schmidt: Thank you, operator. Good afternoon, and thank you for joining us on today's earnings conference call and webcast to discuss SGH's third quarter fiscal 2024 results. On the call today are Mark Adams, Chief Executive Officer; Jack Pacheco, Chief Operating Officer; and Nate Olmstead, Chief Financial Officer. You can find the accompanying slide presentation and press release for this call in the investor relations section of our website. We encourage you to go to the site throughout the quarter for the most current information on the company.

Suzanne Schmidt: Thank you operator, good afternoon, and thank you for joining us on today's earnings conference call and webcast to discuss <unk> third quarter fiscal 2024 results.

Suzanne Schmidt: On the call today, our Mark Adams, Chief Executive Officer, Jack Pacheco, Chief Operating Officer, and Nate Olmsted, Chief Financial Officer. You can find the accompanying slide presentation and press release for this call on the Investor Relations section of our website. We encourage you to go to the site throughout the quarter for the most current information on the company.

Suzanne Schmidt: I would also like to remind everyone to read the note on the use of forward-looking statements that is included in the press release and the earnings call presentation. Please note that during this conference call, the company will make projections and forward-looking statements, including but not limited to statements about the company's growth trajectory and financial outlook. Forward-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including, without limitation, the risks and uncertainties reflected in the press release and the earnings call presentation filed today, as well as in the company's most recent annual and quarterly reports.

Suzanne Schmidt: On the call today are Mark Adams, Chief Executive Officer.

Suzanne Schmidt: Jack Pacheco, Chief operating officer, and Nate Olmstead, Chief Financial Officer.

Suzanne Schmidt: You can find the accompanying slide presentation and press release for this call on the Investor Relations section of our website.

Encourage you to go to the site throughout the quarter for the most current information on the company.

Suzanne Schmidt: I would also like to remind everyone to read the note on the use of forward-looking statements that is included in the press release and the earnings call presentation. Please note that during this conference call, the company will make projections and forward-looking statements, including but not limited to statements about the company's growth trajectory and financial outlook. Forward-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including, without limitation, the risks and uncertainties reflected in the press release and the earnings call presentation file today, as well as in the company's most recent annual and quarterly reports.

Suzanne Schmidt: The forward-looking statements are representative only as of the date they are made, and, except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements. We will also discuss both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for, or superior to, our GAAP results. We encourage you to consider all measures when analyzing our performance. A reconciliation of the gap to non-gap measures is included in today's press release and accompanying slide presentation. And with that, I will turn the call over to Mark Adams, CEO. Mark?

Suzanne Schmidt: I would also like to remind everyone to read the note on the use of forward looking statements that is included in the press release and the earnings call presentation.

Suzanne Schmidt: Please note that during this conference call the company will make projections and forward looking statements, including but not limited to statements about the company's growth trajectory and financial outlook.

Forward looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including without limitation, the risks and uncertainties reflected in the press release and the earnings call presentation filed today as well as in the company's most recent.

Suzanne Schmidt: Annual and quarterly reports.

Suzanne Schmidt: The forward looking statements are representative only as of the date they are made, and except as required by applicable law, we assume no responsibility to publicly update or revise any forward looking statements.

Suzanne Schmidt: The forward looking statements are representative only as of the date, they are made and except as required by applicable law, we assume no responsibility to publicly update or revise any forward looking statements.

Suzanne Schmidt: We will also discuss both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for, or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. A reconciliation of GAAP to non-GAAP measures is included in today's press release and the company's slide presentation.

Suzanne Schmidt: We will also discuss both GAAP and non-GAAP financial measures non-GAAP measures should not be considered in isolation from as a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance.

Suzanne Schmidt: A reconciliation of the GAAP to non-GAAP measures is included in today's press release and accompanying slide presentation.

Suzanne Schmidt: And with that, let me turn the call over to Mark Adams, CEO. Mark.

Suzanne Schmidt: And with that let me turn the call over to Mark Adams CEO Mark <unk>.

Mark Adams: Thanks, Suzanne.

Thanks Suzanne.

Mark W. Adams: Welcome and thank you all for joining our fiscal 2024 Q3 earnings call. We hope you had a nice July 4th holiday.

Mark Adams: Welcome and thank you all for joining our fiscal 2024 Q3 earnings call. We hope you had a nice July 4th holiday. I am very pleased with the execution by our team in the third quarter. Our financial results are clear evidence of our transformation into a high-performance, high-availability enterprise solutions provider. We continue to make progress in areas such as growing new customer engagements, advancing our software and service offerings, and driving operational efficiency. We believe we are uniquely positioned to enable companies across the technology ecosystem from hyperscalers to corporate enterprises to emerging cloud service providers and their AI design, build, deploy, and manage.

Speaker Change: Welcome and thank you all for joining our fiscal 2024 Q3 earnings call.

Speaker Change: We hope you had a nice July 4th holiday.

Mark W. Adams: I am very pleased with the execution by our team in the third quarter. Our financial results are clear evidence of our transformation into a high-performance, high-availability enterprise solutions provider. We continue to make progress in areas such as growing new customer engagement, advancing our software and service offerings, and driving operational efficiency. We believe we are uniquely positioned to enable companies across the technology ecosystem, from hyperscalers to corporate enterprises to emerging cloud service providers, in their AI design, build, deploy, and management.

Speaker Change: I am very pleased with the execution by our team in the third quarter.

Speaker Change: Our financial results are clear evidence of our transformation into a high performance high availability enterprise solutions provider.

Speaker Change: We continue to make progress in areas, such as growing new customer engagements.

Speaker Change: Advancing our software and service offerings and.

Speaker Change: And driving operational efficiency. We believe we are uniquely positioned to enable companies across the technology ecosystem from hyperscale or corporate enterprises to emerging cloud service providers and their AI design build deploy and management.

Mark Adams: We have 25 years of deep experience in high performance computing for HBC, which is a very foundation upon which AI technologies like advanced multi-prostate cluster computing were built. With our heritage in deployment of complex HBC infrastructure solutions, we have the expertise and know-how to address the complexity that businesses face when implementing AI at scale.

Mark W. Adams: We have 25 years of deep experience in high-performance computing, or HPC, which is the very foundation upon which AI technologies like advanced multiprocessor cluster computing were built. With our heritage in the deployment of complex HVC infrastructure solutions, we have the expertise and know-how to address the challenges that businesses face when implementing AI at scale. Let me turn to our third quarter financial results. All key metrics came in at or above the midpoint of our guidance.

Speaker Change: We had 25 years of deep experience and high performance computing or HCC.

Which is the very foundation upon which AI technologies like advanced Multiprocessor cluster computing were built.

Speaker Change: With our heritage in the deployment of complex H B C infrastructure solutions, we have the expertise and know how to address the complexity that businesses face with implementing AI at scale.

Mark W. Adams: Revenues total $300.6 million, in line with the midpoint of our guidance range, non-GAAP gross margin of 32.3% was slightly above the midpoint of our guide, and we achieved non-GAAP EPS of 37 cents, which was well above the midpoint of our guidance range. We exited Q3 with a strong balance sheet, with cash and short-term investments of $468 million. Looking ahead, we are excited about the opportunities for us to serve new and existing customers in HPC and AI. I have mentioned our deep experience, which differentiates us as a partner that can rapidly and reliably deploy advanced systems. We have a proven record of accelerating time to deployment and maximizing the potential of a given system.

Mark Adams: Let me turn to our third quarter financial results. All key metrics came in at or above the midpoint of our guide. Revenue was totaled 300.6 million, in line with the midpoint of our guidance range. Non-GAAP gross margin of 32.3% was slightly above the midpoint of our guide, and we achieved non-GAAP APS at 37 cents, which was well above the midpoint of our guidance range. We edited Q3 with a strong balance sheet with cash and short-term investment of 468 million. Looking ahead, we are excited about the opportunities for us to serve new and existing customers in HBC and AI.

Speaker Change: Let me turn to our third quarter financial results.

Speaker Change: All key metrics came in at or above the midpoint of our guide.

Speaker Change: Revenues totaled $300 6 million in line with the midpoint of our guidance range.

Speaker Change: non-GAAP gross margin of 32, 3% was slightly above the midpoint of our guide.

Speaker Change: We achieved non-GAAP EPS up 37 cents, which was well above the midpoint of our guidance range.

Speaker Change: We exited Q3 with a strong balance sheet with cash and short term investments of $468 million.

Speaker Change: Looking ahead, we are excited about the opportunities for us to serve new and existing customers and HBC and AI.

Mark Adams: I have mentioned our deep experience, which differentiates us as a partner that can rapidly and reliably deploy advanced systems. We have a proven record of accelerating time to deployment, maximizing the potential of a given system, creating unique software to manage elements of a customer's infrastructure environment, and even expanding systems already in production with almost no downtime. Many of our customers work with us from the design phase of their AI journey. We have also seen an increase in interest from customers who have started a deployment and face challenges that they then turn to us to solve.

I have mentioned our deep experience.

Speaker Change: This differentiates us as a partner that can rapidly and reliably deploy advanced systems.

We have a proven record of accelerating time to deployment Max.

Speaker Change: Maximizing the potential of the gathering system.

Mark W. Adams: Creating unique software to manage elements of a customer's infrastructure environment and even expanding systems already in production with almost no downtime. Many of our customers work with us from the design phase of their AI journey. But we have also seen an increase in interest from customers who have started a deployment and face challenges that they then turn to us to solve, from Initial Data Center Design to Systems-Level Architecture Development to the integration of complex technologies such as compute, memory, storage, networking, and cooling to post-implementation management, leveraging our software and service portfolio.

Speaker Change: Creating unique software to manage the elements of our customers' infrastructure environment.

Speaker Change: And even expanding systems already in production with almost no downtime.

Speaker Change: Many of our customers work with us from the design phase of their AI journey.

Speaker Change: But we have also seen an increase in interest from customers.

Speaker Change: Started a deployment phase.

Today's challenges that they then turn to us to solve.

Mark Adams: From the initial data center design to systems level architecture development to the integration of complex technologies such as compute, memory, storage, networking, and cooling, to post-implementation management leveraging our software and service portfolio, we serve the role of a trusted partner in the development and deployment of these complex AI solutions.

Speaker Change: From initial data center design.

Two systems level architecture development.

Speaker Change: To the integration of complex technologies, such as compute memory storage networking and cooling the post implementation management, leveraging our software and services portfolio.

Mark W. Adams: We serve the role of a trusted partner in the development and deployment of these complex AI solutions. We'll share more detail about our positioning and growth strategy at next week's Analyst Day in New York City. Before I review our individual business line performance, I wanted to take the opportunity to welcome Nate Olmsted as our CFO.

Speaker Change: We serve the role of a trusted partner in the development and deployment of these complex AI solutions.

Mark Adams: We'll share more detail in our positioning and growth strategy and next week's Analyst Day in New York City.

Speaker Change: We will share more detail and our positioning and growth strategy.

Speaker Change: Analyst Day in New York City.

Mark Adams: Before I review our individual business lines' performance, I wanted to take the opportunity to welcome Nate Owens as our CEO. Nate was most recently CEO of Logitech, a multi-billion dollar international technology company. While at Logitech, he managed a business that scaled from 2.8 billion to 4.5 billion in revenue and from approximately 6 billion to 10 billion dollars in market cap.

Speaker Change: Before I review, our individual business lines performance.

Mark W. Adams: Nate was most recently CFO of Logitech, a multi-billion dollar international technology company. While at Logitech, he managed a business that scaled from $2.8 billion to $4.5 billion in revenue and from approximately $6 billion to $10 billion in market cap. Prior to joining Logitech, Nate spent 16 years at HP and HPE in various executive roles, where he had responsibilities spanning from business planning to investor relations to operational finance. Now on to our individual business line performance, starting with our Intelligent Platform Solutions, or IPS Business, featuring our plenary-granted solutions.

Speaker Change: Wanted to take the opportunity to welcome Nate Olmstead our CFO.

Nathaniel Quinn Bolton: Nate was most recently CFO of Logitech, a multibillion dollar international Technology company.

Nathaniel Quinn Bolton: While at Logitech, He managed the business that scale from $2 8 billion to $4 5 billion in revenue.

Nathaniel Quinn Bolton: And from approximately $6 billion to $10 billion in market cap.

Mark Adams: Prior to joining Logitech, Nate spent 16 years at HPE and HPE in various executive roles where he had responsibility spanning from business planning to investor relations to operational. Now on to our individual business lines of oneness, starting with our intelligent platform solutions, or IPS business featuring our payment granted solutions. Our payment team has decades of experience with a wide range of ACC infrastructure solutions, enabling us to address the complex needs of our customers. We are sometimes compared to high revenue, low margin, hardware-oriented businesses, a baseline that doesn't align with our solutions-oriented engagement model. Today we design, build, deploy, and manage a complex portfolio of hardware, software, and managed services for ACC solutions and AI applications on-premise, at the edge, and in the cloud.

Nathaniel Quinn Bolton: Prior to joining Logitech spent 16 years at HP and HPE in various executive roles.

Nathaniel Quinn Bolton: Where he had responsibility spanning from business planning to Investor relations to operational finance.

Nathaniel Quinn Bolton: Now onto our individual business lines performance.

Nathaniel Quinn Bolton: Starting with our intelligent platform solutions.

Nathaniel Quinn Bolton: Our Ips business, featuring our Penguin branded solutions.

Mark W. Adams: Our planning team has decades of experience with a wide range of HTC infrastructure solutions, enabling us to address the complex needs of our customers. We are sometimes compared to high-revenue, low-margin, hardware-oriented businesses, a baseline that doesn't align with our solutions-oriented engagement model. Today, we design, build, deploy, and manage a complex portfolio of hardware, software, and managed services for HVC solutions and AI applications on-premise, at the edge, and in the cloud. In Q3, 48% of our overall revenues came from IPS, which totaled $145 million in the quarter and was the largest component of our overall revenue.

Nathaniel Quinn Bolton: Our planning team has decades of experience with a wide range of ACC infrastructure solutions.

Nathaniel Quinn Bolton: Enabling us to address the complex needs of our customers.

Nathaniel Quinn Bolton: We are sometimes compared to high revenue low margin hardware oriented businesses, a baseline that doesn't align with our solutions oriented engagement model.

Nathaniel Quinn Bolton: Today, we design build deploy.

Nathaniel Quinn Bolton: And manage a complex portfolio of hardware software and managed services for ACC solutions.

Nathaniel Quinn Bolton: Applications on premise at the edge and in the cloud.

Mark Adams: In Q3, 48% of our overall revenues come from IPS, which totaled 145 million in the quarter, and was the largest component of our overall revenue. We are seeing increased activity in our permanent business with some key customer wins, including a multi-million-dollar, non-hardware win, meaning that payment was brought in to provide software and managed services only. We've also secured 12-on orders from customers across the hyper-scaled defense and education verticals. In addition, we've achieved our biggest wins to date with our ZTC Edge and ZTC Endurance, fault-tolerant computing platform, both of which address the critical need for reliable solutions at the edge.

Speaker Change: In Q3, 48% of our overall revenues come from Ibs, which totaled $145 million in the quarter and was the largest component of our overall revenue.

Mark W. Adams: We are seeing increased activity in our Penwin business, with some key customer wins, including a multi-million dollar non-hardware win, meaning that Penwin was brought in to provide software and managed services only. We've also secured follow-on orders from customers across the hyperscaler, defense, and education verticals. In addition, we've achieved our biggest wins to date with our ZTC Edge and ZTC Endurance fault-tolerant computing platforms, both of which address the critical need for reliable solutions at the edge.

Speaker Change: We are seeing increased activity in our tolling business with some key customer wins.

Speaker Change: A multimillion dollar non hardware win meaning that poem was brought in to provide software and managed services only.

Speaker Change: We've also secured follow on orders from customers across the Hyperscale odor defense and education verticals.

Speaker Change: In addition, we achieved our biggest wins to date with our DTC edge and DTC endurance fault tolerant computing platform.

Speaker Change: Both of which address the critical need for reliable solutions at the edge.

Mark Adams: Last month, we announced our Origin AI solution. Penguin's AI factory offering, which productizes our decades of knowledge and learnings, to simplify and accelerate the deployment and management of GPUs at scale. This platform integrates penguins' intelligent cluster management software and expertise with proven AI architectures, enabling enterprises to harness the power of AI without the time and resource investment typically required to build and manage AI infrastructure from scratch.

Mark W. Adams: Last month, we announced our Origin AI solution, Penguin's AI Factory offering, which productizes our decades of knowledge and learnings to simplify and accelerate the deployment and management of GPUs at scale. This platform integrates Penguin's intelligent cluster management software and expertise with proven AI architectures, enabling enterprises to harness the power of AI without the time and resource investment typically required to build and manage AI infrastructure from scratch.

Speaker Change: Last month, we announced our origin AI solution.

Speaker Change: Penguins, AI factory, offering, which prioritizes, our decades of knowledge and learnings.

To simplify and accelerate the deployment and management of Gpus at scale.

Speaker Change: This platform integrates penguins intelligent cluster management software and expertise with proven AI architectures, enabling enterprises to harness the power of AI without the time and resource investments typically required to build and manage AI infrastructure from scratch.

Mark Adams: You will hear more about this at our Analyst Day next week, and hear from some of the new executives we brought on board to bolster our go-to-market and sales development capabilities. This quarter's achievement highlights the pivotal role we can play in advancing AI and HPC. We believe we are in the early stages of this transformative market opportunity. Our unique experience is vital to enable customers who are looking for reliable and scalable AI solutions.

Mark W. Adams: You will hear more about this at our Analyst Day next week and hear from some of the new executives we brought on board to bolster our go-to-market and sales development capabilities. This quarter's achievements highlight the pivotal role we can play in advancing AI and HPC. We believe we are in the early stages of this transformative market opportunity.

Speaker Change: You will hear more about this at our analyst day next week and hear from some of the new executives we brought onboard.

Speaker Change: The bolster our go to market and sales development capabilities.

Speaker Change: This quarter's achievements highlight the pivotal role we can play in advancing <unk> in Asia.

Speaker Change: D C.

Speaker Change: We believe we are in the early stages of this transformative market opportunity.

Mark W. Adams: Our unique experience is vital to enable customers who are looking for reliable and scalable AI solutions to turn to our memory business, which operates under the Smart Modular brand. Working closely with our customers in the areas of HPC and AI, supercomputing, network and telecom, storage, and data centers, we develop and manufacture high-performance, high-reliability memory solutions that leverage our decades of expertise in advanced memory technology. For Q3, revenue came in at $92 million, or 30% of total SGH sales. Sales improved from Q2 levels, as we expected, and we believe they will continue to improve from here. Margins were lower than we expected due to mixed and Higher-priced Memory Purchases.

Speaker Change: Our unique experience is vital.

Speaker Change: To enable customers, who are looking for reliable and scalable AI solutions.

Mark Adams: Turning to our memory business, which operates under the Smart Modular brand. Working closely with our customers in the area of the HPC and AI, super computing, networking telecom, storage, and data centers, we develop and manufacture our performance, our reliability memory solutions that leverage our decades of expertise advanced memory technology. for Q3 revenue came in at 92 million or 30% of total S.J. sales. Sales improved from Q2 levels, as expected, and we believe will continue to improve from here. Margins were lower than we expected due to mix and higher price memory purchases. During the quarter, we achieved a number of imported milestones in product development and customer engagement in our advanced memory solutions.

Speaker Change: Turning to our memory business, which operates under the smart modular brand.

Speaker Change: Working closely with our customers and nearing the HTC and AI supercomputing networking telecom storage and data centers, we developed and manufactured high performance high reliability memory solutions that leverage our decades of expertise and advanced memories.

Speaker Change: Knowledges.

Speaker Change: For Q3 revenues came in at $92 million or 30% of total SBA sales.

Speaker Change: Sales improved from Q2 levels as we expected and we believe we will continue to improve from here.

Speaker Change: Margins were lower than we expected due to mix.

Speaker Change: And higher price memory purchases.

Mark W. Adams: During the quarter, we achieved a number of important milestones in product development and customer engagement for our advanced memory solutions. In the area of new product development, we saw strong design and customer sampling activity for our new 8-pin DDR5 CXL add-in cards, which enable compute performance by increasing memory capacity and speed. And we achieved an important milestone with our 4GEN add-in card, which was the first add-in card to pass the standards test set forth by the CXL Consortium Industry Group. Importantly, this ensures compatibility and reliability for customers using CXL technology. In Q3, we also received our first ATEM CXL add-in card production sale to an AI compute vendor. I hope this helps.

Speaker Change: During the quarter.

Speaker Change: The number of important milestones and product development.

Speaker Change: Customer engagement in our advanced memory solutions.

Mark Adams: In the area of new product development, we saw strong designing and customer sampling activity for our new 8DIN DDR5 CXL add-in card, which enables compute performance by increasing memory capacity and speed, and we achieved an important milestone with our 4DIN add-in card, which was the first add-in card to pass the Spanish test set forth by the CXL consortium industry group. Importantly, this ensures compatibility and reliability for customers using CXL technology. In Q3, we also received our first 8DIN CXL add-in card production cell to an AI compute vendor. In addition, we introduced our e3.x non-volatile CXL design combining DRAM and NAND devices.

Speaker Change: New product development, we saw strong designing and customer sampling activity for our new ATM DDR five CHL Adam sorry.

Speaker Change: Which enables continued performance by increasing memory capacity and speed.

Speaker Change: And we achieved an important milestone with our afford them add in card, which was the first adding time to pass.

Speaker Change: Anish test set forth by the CSL consortium industry group.

Speaker Change: Importantly, this ensures compatibility and reliability for customers using CSL technology.

Speaker Change: In Q3, we also received.

Speaker Change: Atms DSL, adding card production cell tumor to keep another.

Speaker Change: Although this thing.

Mark W. Adams: We introduced our E3.S non-volatile CXL design, combining DRAM and NAND devices. This new design operates like a DRAM module but retains data even when powered off thanks to our custom backup and restore architecture that leverages NAND's nonvolatile capability. This is especially important for AI and high-performance computing applications, as it ensures that critical data is not lost, making these systems more reliable and efficient. Our accomplishments this past quarter not only reinforced our leadership in advanced memory solutions but also underscored the indispensable role of memory in HPC and AI. Efficient high-capacity memory is essential to unlocking the power of GPU-based processors in AI and to manage the vast amounts of data and complex computations required by AI applications.

Speaker Change: We introduced our <unk>.

Speaker Change: <unk> really got us non volatile <unk> design, combining DRAM or NAND devices.

Mark Adams: This new design operates like a DRAM module but retains data even when powered off thanks to our custom backup and restore architecture that manages NAND non-volatile capabilities. This is especially important for AI and high performance computing applications, as it ensures that critical data is not lost, making these systems more reliable and efficient. Our accomplishment this past quarter, not only reinforced our leadership in advanced memory solutions but also on the scores of the indispensable role of memory, NADC and AI. Efficient high-capacity memory is essential to unlocking the power of GPU-based processors in AI and to manage the vast amounts of data and complex computations required by AI applications.

Speaker Change: This new design operates like a DRAM module.

Speaker Change: But he claims data even when power off thanks to our test them back up in the store architecture.

Speaker Change: <unk> NAND non volatile capabilities.

Speaker Change: This is especially important for AI and high performance computing applications evidenced serves a critical data is not lost.

Speaker Change: It means systems more reliable and efficient.

Speaker Change: Our accomplishments this past quarter, not only reinforce our leadership.

Speaker Change: Memory solutions.

Speaker Change: But also underscores the indispensable role of memory.

Speaker Change: <unk> and AI.

Speaker Change: Efficient high capacity memory.

Speaker Change: It's essential to unlocking the power of Gpus based processors and AI.

Speaker Change: And to manage the vast amounts of data.

Complex computations required by AI applications.

Mark Adams: The most heritage in the design, manufacturer and deployment for high performance, high availability, memory solutions positions us well to enhance the overall performance of our customers' AI systems. Finally, our CRE-LED business, which produces application-optimized LEDs for products and markets such as specialty lighting, video screens, gaming displays, outdoor quarter-cultural architectural lighting. In the third fiscal quarter of 2024, LED solutions revenue grew by 6% sequentially to a total of 64 million, or 21% of total SGH sales. Backlog and channel visibility are improving, and the team continuing to innovate for its customers while keeping operating expenses in line with current business scale.

Mark W. Adams: Smart Heritage in the Design, Manufacture, and Deployment of High-Performance, High-Availability Memory Solutions positions us well to enhance the overall performance of our customers' AI systems. Finally, our CLEO&D business, which produces application-optimized LEDs for products and markets such as specialty lighting, video screens, gaming displays, outdoor horticulture, and architectural lighting, in the third fiscal quarter of 2024. LED Solutions revenue grew by 6% sequentially to a total of $64 million, or 21% of total SGH sales.

Speaker Change: Smart circuits in the design manufacture and deployment for high performance high availability memory solutions.

Speaker Change: This is as well to enhance the overall performance of our customers' AI systems.

Speaker Change: Finally, our <unk> business with.

Speaker Change: <unk> produces application optimized Leds.

Speaker Change: Products in markets, such as specialty lighting.

Speaker Change: Video screens gaming displays outdoor horticulture and architectural lighting.

Speaker Change: And the third fiscal quarter of 2024.

Speaker Change: Solutions revenue grew by 6% sequentially to a total of $64 million or 21% of total SBA sales.

Mark W. Adams: Backlog and channel visibility are improving, and the team is continuing to innovate for its customers while keeping operating expenses in line with current business scale. During the quarter, the team also continued to focus on developing advanced lighting solutions. Cree LED announces the new X-LAMP, an XSL LED family designed for peak performance, and Portable Lighting. Each LED in the XFL family is tailored for a specific lumen target.

Speaker Change: Backlog in sound visibility are improving.

Speaker Change: And the team continuing to innovate towards customers, while keeping operating expenses in line with current business scale.

Mark Adams: During the quarter, the team also continued to focus on developing advanced lighting solutions. Cree LED announced its new X-Lamp XFL LED family designed for peak performance in flashlight and portable lighting. Each LED in the XFL family is tailored for specific lumen targets, accelerating the design process for manufacturers and enabling quicker market delivery of high-value products. This innovation underscores our commitment to advanced lighting technology and supporting our customer success. Importantly, Cree LED's advanced RD capabilities and robust IP portfolio generated through decades of technology leadership set the stage for sustained innovation and future growth. I'm doing IP assertion activities across multiple LED applications, support, and facilitate these growth opportunities.

Speaker Change: During the quarter.

Speaker Change: <unk> also continued to focus on developing advanced lighting solutions.

Speaker Change: Cree led announced its new X slant.

Speaker Change: XFL led family designed for peak performance.

Speaker Change: Last night and portable lighting.

Speaker Change: It's already in the XFL family is tailored for specific lumen targets accelerating the design process for manufacturers.

Mark W. Adams: Accelerating the design process for manufacturers and enabling quicker market delivery of high-value products, this innovation underscores our commitment to advanced lighting technology and supporting our customer success. Importantly, Creo ID's advanced R&D capabilities and robust IT portfolio generated through decades of technological leadership set the stage for sustained innovation and future growth. Ongoing IP assertion activities across multiple LED applications support and facilitate these growth opportunities. The broader market environment in LED continues to suggest that consolidation is likely and effective at some point.

Speaker Change: Quicker market delivery of high value products.

This innovation underscores our commitment to advanced lighting technology and supporting our customers' success.

Speaker Change: Importantly, clearly these advanced R&D capabilities.

Speaker Change: And robust IP portfolio generated two decades of technology leadership set the stage for sustained innovation and future growth.

Speaker Change: Ongoing IP assertion activities across multiple applications.

Speaker Change: Support and facilitate these growth opportunities.

Mark Adams: The broader market environment and LED continues to suggest that consolidation is likely in the sector at some point. Cree's outsourced manufacturing, capital-wide model positions are very well competitively as we return to profitability with strong growth margin development; these are via competitors.

Speaker Change: The broader market environment led and continues to suggest that consolidation is likely in the second at some point.

Jack A. Pacheco: Creed's outsourced manufacturing capital light model positions us very well competitively as we return to profitability with strong growth margin performance vis-à-vis our competitors, in light of the fact that Nate just joined us at CFO two weeks ago. I've asked Jack to review our Q3 financial performance and our guidance for next quarter.

Speaker Change: Craig outsourced manufacturing capital light model.

Speaker Change: This leaves us very well competitively as we returned to profitability with strong gross margin performance vis vis our competitors.

Mark Adams: In light of the fact that Nate just joined us as CFO two weeks ago, I have asked Jack to review our Q3 financial performance in our guidance for next quarter.

Speaker Change: In light of the fact that Nate just joined us as CFO two weeks ago.

Speaker Change: I've asked Jack to review, our Q3 financial performance.

Speaker Change: And our guidance for next quarter Jack.

Jack Pacheco: Thanks, Mark. I will focus my remarks on our non-GAAP results, which are reconciled to GAAP at a very major lease table and the investment materials on our website. Let me turn to our third quarter results. Total SGA revenues were 301 million at the midpoint of our guidance, and on the gap growth margin came in at 32.3% also at the midpoint of our guidance. Non-GAAP diluted earnings per share was 37 cents for the third quarter, which was above the midpoint of our guidance, helped where it continued to control its expenses. In the third quarter, our overall service is revenue totaled 67 million, or 22% of revenue, up from 49 million, or 17% of revenue in the prior quarter.

Jack A. Pacheco: Thanks, Mark I will focus my remarks on our non-GAAP results, which are reconciled to GAAP earnings release tables and in the investor materials on our website.

Jack A. Pacheco: I will focus my remarks on our non-GAAP results, which are reconciled to GAAP in an earnings release table and in investing materials on our website. So let me turn to our third-quarter results. Total SGH revenues were $301 million at the midpoint of our guide, and Non-Gap Gross Margin came in at 32.3%. Also, at the midpoint of our guide, non-GAAP diluted earnings per share was $0.37 for the third quarter, which was above the midpoint of our guidance. HealthSquare continued control of expenses.

Jack A. Pacheco: In the third quarter, our overall services revenue totaled $67 million, or 22% of revenue, up from $49 million or 17% of revenue in the prior quarter. Product revenues were $233 million in the third quarter. Third quarter revenue by business unit was as follows: ITS.

Speaker Change: Now, let me turn to our third quarter results.

Speaker Change: Total SGA to revenues.

Jack A. Pacheco: For $301 million at the midpoint of our guidance and non-GAAP gross margin came in at 32, 3%.

Jack A. Pacheco: Also at the midpoint of our guidance.

Jack A. Pacheco: non-GAAP diluted earnings per share was 37 for the third quarter.

Jack A. Pacheco: Which was above the midpoint of our guidance helped where continued control of expenses.

Jack A. Pacheco: In the third quarter.

Jack A. Pacheco: Our overall services revenue.

Jack A. Pacheco: Totaled $67 million or 22% of revenue.

Jack A. Pacheco: Up from $49 million or 17% of revenue in the prior quarter.

Jack Pacheco: Product revenues were 233 million in the third quarter. Third quarter revenues by business unit was as follows: IPF 145 million, memory 92 million, and LED 64 million. This translates into a sales mix of 48% IPF, 30% memory, and 21% LED. Non-GAAP growth margins for SGA 2.3 was 32.3%, up from 31.6% in the year-ago quarter, driven primarily by lower memory volumes that were offset by improved mix with an IPF. Growth margin was up sequentially from 31.5% in the prior quarter, primarily due to a higher mix of service revenue. Non-GAAP operating expenses for the third quarter were 63.6 million.

Jack A. Pacheco: Product revenues were $233 million in the third quarter.

Jack A. Pacheco: Third quarter revenue by business unit was as follows.

Jack A. Pacheco: 145. Memory, $92 million, and L.E.D. $64 million. This translates into a sales mix of 48% IPF. 30% memory and 21% LED, non-GAAP gross margins for SGH and Q3 was 32.3%, up from 31.6% in the year-ago quarter, driven primarily by lower memory volumes that were offset by improved mix with an IPS. Gross margin was up sequentially from 31.5% in the prior quarter, primarily due to a higher mix of service revenue, non-GAAP operating expenses for the third quarter for $63.6 million, relatively flat compared to $63.2 million in the second quarter, operating expenses were also down from $66.7 million in the year-ago quarter, primarily due to lower variable expenses and cost-reduction action, non-GAAP diluted earnings per share for the third quarter of 2024 with 37 cents per share, compared to $0.27 per share last quarter and $0.57 per share in the year-ago quarter, adjusted EBITDA for the third quarter of 2024 with $39 million or 13% of sales, compared to $33 million or 12% of sales in the last quarter and $49 million or 14% of sales in the year-ago quarter.

Jack A. Pacheco: $145 million.

Jack A. Pacheco: Memory $92 million.

Jack A. Pacheco: Led $64 million.

Jack A. Pacheco: This translates into a sales mix of 48% Ips.

Jack A. Pacheco: <unk>, 30% memory and 21% led.

Jack A. Pacheco: non-GAAP gross margins for <unk> in Q3 was 32, 3%.

Up from 31, 6% in the year ago quarter.

Jack A. Pacheco: Driven primarily by lower memory volumes that were offset by improved mix within Ips.

Jack A. Pacheco: Gross margin was up sequentially from 31, 5% in the prior quarter primarily.

Speaker Change: Primarily due to a higher mix of service revenue.

Speaker Change: non-GAAP operating expenses for the third quarter were $63 6 million.

Jack Pacheco: Relatively flat compared to $63.2 million in the second quarter, operating expenses were also down from $66.7 million in the year-ago quarter from early due to lower variable expenses and cost reduction actions. Non-GAAP due to earnings per share for the third quarter of 2024 was $0.37 per share compared to $0.27 per share last quarter and $0.57 per share in the year-ago quarter. Adjusted EBITDA for the third quarter of 2024 was $0.39 million or 13 per cent of sales compared to $0.33 million or 0.12 per cent of sales in the last quarter and $0.49 million or 14 per cent of sales in the year ago quarter.

Speaker Change: Relatively flat compared to $63 2 million in the second quarter.

Speaker Change: Operating expenses were also down from $66 7 million in the year ago quarter, primarily due to lower variable expenses and cost reduction actions.

Speaker Change: non-GAAP diluted earnings per share for the third quarter 2024 with 37 per share.

Speaker Change: Compared to 27 per share last quarter, and <unk> 57 per share in the year ago quarter.

Speaker Change: Adjusted EBITDA for the third quarter of 2024 was $39 million or 13% of sales.

Speaker Change: Third to $33 million or 12% of sales.

Speaker Change: Last quarter, and $49 million or 14% of sales in the year ago quarter.

Jack Pacheco: Turning to balance, you highlights for working capital are net accountable total $212 million compared to $170 million last quarter. The sales outstanding came at $41.8 days, slightly up from $41.1 days in the prior quarter. Inventory total $177.9 at the end of the third quarter, higher than $173.9 at the end of the prior quarter. Inventory turns were 8.4 times in the third quarter, up from $6.8 in the prior quarter from relative to time unit receipts and shipments. Consistent with past practice, net accounts receivable, days outstanding, and inventory turnover are calculated in a gross sale in cost of goods old basis, which were $461.372 million, respectively, for the third quarter.

Jack A. Pacheco: Turning to balance sheet highlights, for working capital, net accounts receivable total $212 million, compared to $170 million last quarter. Day sales outstanding came in at 41.8 days, slightly up from 41.1 days in the prior quarter.

Speaker Change: Turning to the balance sheet highlights for working capital our net accounts receivable totaled $212 million.

Compared to $170 million last quarter.

Speaker Change: Sales outstanding came in at 41, eight days slightly up from 41, one days from the prior quarter.

Jack A. Pacheco: Inventory totaled $177 million at the end of the third quarter, higher than $173 million at the end of the prior quarter. Inventory returns were 8.4 times in the third quarter, up from 6.8 in the prior quarter, primarily due to time unit receipts and shipments, consistent with past practice. Net accounts receivables, days outstanding, and inventory turnover are calculated on a gross sales and cost of goods sold basis, which were $461 million and $372 million, respectively, for the third quarter. As a reminder, the difference between gross and net revenue is related to our logistics services, which is accounted for on our agent base means that we only recognize the net profit on logistic services as revenue.

Speaker Change: Inventory totaled $177 million at the end of the third quarter.

Speaker Change: And then $173 million at the end of the prior quarter.

Speaker Change: Inventory turns were eight four times in the third quarter up from $6 eight in the prior quarter, primarily due to timing of receipts and shipments.

Consistent with past practice net accounts receivables days outstanding and inventory turnover are calculated on a gross sales and cost of goods sold basis.

Speaker Change: Which were $461 million and $372 million, respectively for the third quarter.

Jack Pacheco: As a reminder, the difference between gross and net revenue is related to our logistics services, which is accounted for on an agent basis, meaning that we only recognize the net profit on logistics services as revenue. Cash and cash equivalents in short-term investments total of $468 million at the end of the third quarter, up $2 million from $466 million at the end of the prior quarter. Third quarter cash flows generated from operating activity total $80 million compared to $22 million used from operating activity in the prior quarter. We did have these share repurchases in our third quarter from our share buyback program.

Speaker Change: As a reminder, the difference between gross and net revenue is related to our logistics services, which.

Which is accounted for on an agent basis means.

Speaker Change: It means that we only recognize the net profit on logistics services as revenue.

Jack A. Pacheco: Cash and Cash Equivalents and Short-Term Investments increased to over $468 million at the end of the third quarter by $2,000,000 from $466,000,000 at the end of the prior quarter. Third quarter cash flows generated from operating activities totaled $80 million, compared to 22 million used from operating activities in the prior quarter. We didn't have any share repurchases in our third quarter from our share buyback program since our initial share repurchase authorization in April 2022.

Speaker Change: Cash and cash equivalents and short term investments.

Speaker Change: Total of $468 million at the end of the third quarter.

Speaker Change: A $2 million from $466 million at the end of the prior quarter.

Speaker Change: Third quarter cash flows generated from operating activities totaled $80 million.

Speaker Change: $22 million used for operating activities in the prior quarter.

Speaker Change: We didn't have any share repurchases in our third quarter from our share buyback program.

Jack Pacheco: Since our initial share repurchase authorization in April 2022, we've used a total of $72.3 million to repurchase 4.5 million shares to the end of the third quarter. As of the end of our third quarter, we have $77.79 million available for future repurchases under our authorization.

Speaker Change: Since our initial share repurchase authorization in April 2022.

Jack A. Pacheco: We used a total of $72.3 million to repurchase 4.1 million shares for the end of the third quarter. As of the end of the third quarter, we have $77.7 million available for future repurchases under our authorization. To remind everyone, our capital allocation strategy remains the same. First and foremost, we will continue to invest in our business, as we see significant opportunities for further organic growth. Second, we will continue to evaluate acquisition opportunities in a disciplined manner.

Speaker Change: We used a total of $72 3 million to repurchase $4 1 million shares through the end of the third quarter.

Speaker Change: As of the end of our third quarter, we have $77 7 million available for future repurchases under our authorization.

Jack Pacheco: To remind everyone, our capital allocation strategy remains the same. First and foremost, we will continue to invest in our business as we see significant opportunities for further organic growth. Second, we will continue to evaluate acquisition opportunities in a disciplined manner. Third, the incremental share repurchase authorization provides flexibility to return capital to our shareholders in an opportunistic and price-sensitive manner. And finally, we look to retire debt as appropriate to keep our growth leverage at reasonable levels. We retired $75 million of our term loan in the third quarter. bringing down the principal amount by $112 million since the first quarter to $425 million.

Speaker Change: To remind everyone our capital allocation strategy remains the same.

Speaker Change: First and foremost we will continue to invest in our business as we see significant opportunities for further organic growth.

Speaker Change: We will continue to evaluate acquisition opportunities.

Speaker Change: Manner.

Jack A. Pacheco: Third, the incremental share repurchase authorization provides us with flexibility to return capital to our shareholders in an opportunistic and price-sensitive manner. And finally, we look to retire debt as appropriate to keep our gross leverage at a reasonable level. We retired $75 million of our term loans in the third quarter, bringing down the principal amount by $112 million since the first quarter to $425 million, for those of you tracking capital expenditures and depreciation.

Speaker Change: Third the incremental share repurchase authorization provides us flexibility to return capital to our shareholders in an opportunistic and price sensitive manner.

Speaker Change: Finally, we will look to retire debt as appropriate to keep our gross leverage at reasonable levels.

Speaker Change: We retired $75 million of our term loan in the third quarter bring.

Speaker Change: Bringing down the principal amount by $112 million since the first quarter to $425 million.

Jack Pacheco: For those of you tracking capital expenditures and depreciation, capital expenditures were $3.8 million in the third quarter, and depreciation was $5.6 million.

Speaker Change: For those of you tracking capital expenditures and depreciation.

Jack A. Pacheco: Capital expenditures were $3.8 million in the third quarter, and depreciation was $5.6 million. Turning to our fourth fiscal quarter 2024 guidance, we expect that revenues for the fourth quarter of 2024 will be approximately $325 million at the midpoint, plus or minus 25. Our guidance for the fourth quarter reflects the following. For IPS, we expect revenues to be up in the low double digits sequentially at the midpoint due to timing of deployment. For memory, we expect revenues to be up slightly in the low single digits sequentially. And for LED, we currently expect revenues to be slightly in the low single digit range, sequentially at the midpoint.

Speaker Change: Capital expenditures were $3 8 million in the third quarter and depreciation was $5 6 million.

Jack Pacheco: Turning to our fourth fiscal quarter of 2024 guidance, we expect that revenues for the fourth quarter of 2024 would be approximately $325 million at the midpoint, plus or minus $25 million. Our guidance for the fourth quarter reflects the following. For IPS, we expect revenues to be up in the low double digits sequentially at the midpoint due to the timing of deployments. For memory, we expect revenues to be up slightly in the low single digits sequentially at the midpoint. And for LED, we currently expect revenues to be up slightly in the low single-digit range sequentially at the midpoint.

Turning to our fourth fiscal quarter of 2024 guidance.

Speaker Change: We expect that revenues for the fourth quarter of 2024 will be approximately $325 million at the midpoint.

Speaker Change: Plus or minus $25 million.

Jack A. Pacheco: Our GAAP gross margin for the fourth quarter is expected to be approximately 29.5% at the midpoint, plus or minus one and a half percent. Non-GAAP gross margin for the fourth quarter is expected to be approximately 31.5% at the midpoint, plus or minus one and a half percent. Non-GAAP operating expenses for the fourth quarter are expected to be approximately $66 million, plus or minus $2 million. I'd be up through the prior quarter, primarily due to variable expenses associated with our higher expected revenue.

Speaker Change: Our guidance for the fourth quarter reflects the following for Ips, we expect revenues to be up in the low double digits sequentially at the midpoint due to timing of deployment.

Speaker Change: For memory, we expect revenues to be up slightly in the low single digits sequentially at the midpoint and.

Speaker Change: And for led we currently expect revenues to be up slightly low single digit range sequentially at the midpoint.

Jack Pacheco: Our gap growth margin for the fourth quarter is expected to be approximately 29.5 percent at the midpoint, plus or minus 1.5 percent. Non-GAAP growth margin for the fourth quarter is expected to be approximately 31.5 percent at the midpoint, plus or minus 1.5 percent. Our non-GAAP operating expenses for the fourth quarter are expected to be approximately $66 million plus or minus 2.9, slightly up from the prior quarter, primarily due to variable expenses associated with our higher expected revenue. Gap, the limited earnings per share for the fourth quarter is expected to be approximately $3, plus or minus $15.

Speaker Change: Our GAAP gross margin for the fourth quarter is expected to be approximately 29, 5% at the midpoint plus or minus one 5%.

Speaker Change: non-GAAP gross margin for the fourth quarter.

Speaker Change: As expected to be approximately 31, 5% at the midpoint.

Speaker Change: Plus or minus one 5%.

Speaker Change: Our non-GAAP operating expenses for the fourth quarter.

I expected to be approximately $66 million, plus or minus $2 million.

Speaker Change: Slightly up from the prior quarter.

Speaker Change: Ordinarily due to variable expenses associated with our higher expected revenue.

Jack A. Pacheco: Gap's diluted earnings per share for the fourth quarter is expected to be approximately 3 cents, plus or minus 15 cents. On a non-GAAP basis, excluding share-based compensation expense, intangible asset amortization expense, debt discounts, and other adjustments, we expect the diluted earnings per share will be approximately $0.40, plus or minus $0.15. Our GAAP diluted share account for the fourth quarter is expected to be approximately 55.7 million shares based on our current stock price.

Speaker Change: GAAP diluted earnings per share for the fourth quarter is expected to be approximately three plus or minus <unk> 15.

Jack Pacheco: On a non-gap basis, excluding share of these compensation expense, intangible asset emurization expense that discounts in other adjustments, we expect the limited earnings per share will be approximately $0.40, plus or minus $15. Our gap, the limited share count for the fourth quarter, is expected to be approximately $55.7 million shares based on a firm stock price. For a non-gap, the limited share count is expected to be approximately 54.7 million shares. Cash capital expenditures for the fourth quarter are expected to be in the range of $4.6 million. As a reminder, we are utilizing a long-term projected non-GAAP tax rate of 28 percent, which reflects currently available information, including the sale of Smart Brazil, which was completed in the first quarter, as well as other factors and assumptions.

Speaker Change: On a non-GAAP basis, excluding share based compensation expense intangible asset amortization expense debt discount and other adjustments, we expect diluted earnings per share will be approximately 40.

Speaker Change: Plus or minus 15.

Speaker Change: Our GAAP diluted share count for the fourth quarter.

Speaker Change: <unk> to be approximately $55 7 million shares based on our current stock price.

Jack A. Pacheco: For a non-GAAP diluted share count, it's expected to be approximately 54.7 million shares. Cash capital expenditures for the fourth quarter are expected to be in the range of $4 to $6 million. As a reminder, we are utilizing a long-term projected non-GAAP tax rate of 28%, which reflects currently available information, including the sale of Smart Brazil, which was completed in the first quarter, as well as other factors and assumptions. We'll expect to use a normalized non-GAAP tax rate through 2024.

Speaker Change: non-GAAP diluted share count is expected to be approximately $54 7 million shares.

Speaker Change: Cash capital expenditures for the fourth quarter.

Speaker Change: <unk> to be in the range of $4 million to $6 million.

Speaker Change: As a reminder, we are utilizing our long term projected non-GAAP tax rate of 28%.

Speaker Change: Which reflect currently available information.

Speaker Change: The sale of Smart, Brazil, which was completed in the first quarter.

Speaker Change: As well as other factors and assumptions.

Jack Pacheco: We will expect to use a normalized non-GAAP tax rate from 2024. The long-term non-GAAP tax rate may be subject to changes from a variety of reasons, including the rapidly evolving global tax environment, significant changes in their geographic earnings mix, or changes to a strategy or business operations.

Jack A. Pacheco: The long-term non-gap tax rate may be subject to changes for a variety of reasons, including the rapidly evolving global tax environment, significant changes in their geographic earnings mix, or changes to a strategy or business operation. Our forecast for the fourth quarter of 2024 is based on the current environment, which contemplates the global macroeconomic headwinds and ongoing supply chain constraints, especially as it relates to our IPS booth. This includes extended lead times for certain components that are incorporated into our overall solution, impacting how quickly we can ramp up existing and new customer projects.

Speaker Change: We'll expect to use a normalized non-GAAP tax rate for 2020 for the long term non-GAAP tax rate may be subject to changes for a variety of reasons.

Speaker Change: Included in a rapidly evolving global tax environment significant changes in our geographic earnings mix or changes to our strategy or business operations.

Jack Pacheco: Our forecast for the fourth quarter of 2024 is based on the current environment, which contemplates the global macroeconomic adherence and ongoing supply chain constraints, especially as it relates to our IPS business. This includes extended lead times for certain components that are incorporated into our overall solutions. Impacting that quickly, we can rent existing and new customer projects.

Speaker Change: Our forecast for the fourth quarter of 2024 based on the current environment, which contemplates the global macroeconomic headwinds and ongoing supply chain constraints, especially as it relates to our Ics business.

Speaker Change: This includes extended lead times for certain components that are incorporated into our overall solutions impacting how quickly we can ramp existing and new customer projects.

Jack Pacheco: We continue to manage our operations in a prudent manner. As we navigate a challenging environment, we're also investing in our long-term growth.

Jack A. Pacheco: We continue to manage our operations in a prudent manner as we navigate a challenging environment while also investing in our long-term growth. Please refer to the Non-Gap Financial Information section in the Reconciliation of Gap to Non-Gap Measures table in our earnest release for further detail. Now, I turn it over to Mark for a few remarks prior to Q&A. Thanks, Jack.

Speaker Change: We continued to manage our operations in a prudent manner as we navigate a challenging environment, while also investing in our long term growth.

Jack Pacheco: Please refer to the Non-GAAP Financial Information section in the Reconciliation of GAAP and Non-GAAP Measures table in an early release for further details.

Speaker Change: Please refer to the non-GAAP financial information section and the reconciliation of GAAP to non-GAAP measures tables in our earnings release for further details.

Mark Adams: Let me turn it over to Mark for a few marks prior to Q&A.

Speaker Change: Let me turn it over to Mark for a few remarks prior to Q&A.

Mark Adams: Thanks, Jack.

Mark W. Adams: Thanks Jack.

Mark W. Adams: Before turning to your questions, I'd like to reiterate how proud I am of our team and their accomplishments to date. We continue to advance our offerings and drive operational efficiency in support of our customers and their AI deployments. Our deep expertise in HPC and specialty memory, honed over 25 years, equips us to address the complexity of AI implementation across various environments. We are excited about the future opportunities in HEC and AI.

Mark Adams: Before you answer your questions, I’d like to reiterate how proud I am of our team and their accomplishments to date. We continue to banter our offerings and drive operational infestancy in support of our customers and their AI deployments. Our deep expertise in HBC and special memory honed over 25 years equates us to address the complexity of AI implementation across various environments.

Mark W. Adams: Turning to your questions I'd like to reiterate how proud I am of our team and their accomplishments to date.

We continue to advance our offerings and drive operational efficiency in support of our customers and their AI deployments.

Mark W. Adams: Our deep expertise in HCC and specialty memory.

Mark W. Adams: Honed over 25 years.

Mark W. Adams: <unk> us to address the complexity of AI implementation across various environments.

Mark Adams: We are excited about the future opportunities in HBC and AI, and we look forward to sharing more detail of our growth strategy at the upcoming analyst day. As we continue to innovate and strengthen our position in AI and HBC, we are committed to delivering conceptual value to our customers and stakeholders.

Mark W. Adams: We are excited about the future opportunities and ACC in AI.

Mark W. Adams: And we look forward to sharing more detail of our growth strategy at the upcoming Analyst Day, as we continue to innovate and strengthen our position in AI and HTC. We are committed to delivering exceptional value to our customers and stakeholders. Operator, we are now ready for Q&A.

Speaker Change: And we look forward to sharing more detail of our growth strategy at the upcoming analyst day.

As we continue to innovate and strengthen our position and AI at ACC.

Speaker Change: We are committed to delivering exceptional value to our customers and stakeholders.

Unknown Executive: Operator, we are now ready for Q&A. We will now begin our question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If there are any reasons you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking a question. We'll pause briefly here as questions are registered.

Speaker Change: Operator, we're now ready for Q&A.

Operator: We will now begin our question and answer session. If you would like to ask a question, please press the star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. We'll pause briefly here as questions are registered. Our first question is from Kevin Cassidy with the company Rosenblatt. Kevin, your line is now open.

Speaker Change: We will now begin our question and answer session. If you would like to ask a question. Please press star followed by one what are your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.

Speaker Change: As a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking a question. We'll pause briefly here ask questions are registered.

Speaker Change: Okay.

Kevin Cassidy: Our first question is from Kevin Cassidy with a company, Rosenblad. Kevin, your line is open.

Speaker Change: Our first question is from Kevin Cassidy with a company Rosenblatt, Kevin Your line is now open.

Mark Adams: Thank you and congratulations on the good results. And Mark, you know, with all the, you've made changes in management and also the HBC and AI market is changing rapidly, you know, how is IPS's go-to-market strategy changing? Kevin, thanks for the question. That's a really, really good question for where we sit today. You know, if you look it back, you know, at our evolution, over the last, you know, three plus years, you know, from a memory module company to an infrastructure solutions hybrid liability, high performance company, the nature of what we do is evolving and transforming.

Kevin Edward Cassidy: Thank you and congratulations on the good results. And Mark, you know, with all the changes you've made in management and also the HPC and AI market is changing rapidly. You know, how is IPS's go-to-market strategy changing?

Kevin Edward Cassidy: Thank you and congratulations on the good results.

Kevin Edward Cassidy: And Mark with other you've made changes in management and also the HBC and AI market.

Kevin Edward Cassidy: Changing rapidly.

Speaker Change: Ips is go to market strategy changing.

Mark W. Adams: Kevin, thanks for the question. It's a really, really good question for where we sit today.

Kevin Edward Cassidy: Kevin Thanks for the question.

Kevin Edward Cassidy: That's a really really good question for where we sit today.

Mark W. Adams: If you look back at our evolution over the last three plus years, from a memory module company to an infrastructure solutions, high reliability, high performance company, the nature of what we do is evolving and transforming. And as we do that, you know, the talent and the capabilities that we need are evolving as well. And so, if you think about last quarter when we named Pete Menke as the president of IPS Penguin, and, of course, we just named a new CFO in Nate.

Kevin Edward Cassidy: If you look at back.

Kevin Edward Cassidy: At our evolution over the last three plus years now from memory module company to a <unk>.

Kevin Edward Cassidy: Infrastructure solutions high reliability high performance company.

Kevin Edward Cassidy: The nature of what we do is evolving and transforming and as we do that.

Mark Adams: And as we do that, you know, it's the talent and the capabilities that we need are evolving as well. And so if you think about last quarter, when we named Pete Manka as the president of IPS Penguin, and of course, we just named a new CFO in Nate, you know, these are, these are continued growth opportunities for us as a company to mature and expand our capabilities from a scale and a process standpoint. Specific to go to market, we brought on new sales leadership over the last six to twelve months. Recently, we just tired Dave Osborne, who's a S.B.P.

Kevin Edward Cassidy: The talent and the capabilities that we need are evolving as well and so.

Speaker Change: If you think about last quarter when we are named.

Pete: Pete <unk> as the.

Pete <unk>: The president of Ips Penguin.

Speaker Change: And of course, we just.

Speaker Change: Named our new CFO and Nate.

Speaker Change:

Mark W. Adams: You know, these are, these are.., continued growth opportunities for us as a company to mature and expand our capabilities from a scale and a process standpoint. Specific to go-to-market, we've brought on new sales leadership over the last six to twelve months. Recently, we just hired Dave Osborne, who's a SVP of Partnership and Alliances, after spending, you know, over 16 years at SAP in an executive role there and helping us build out partnerships because historically we've been mostly a B2B direct sales company, and that's still a very key part of our strategy, but working with industry partners to expand our reach and expand our capabilities and development opportunities will be critical for us as we continue to grow.

These are these are.

Speaker Change: Continued growth opportunities for us as a company to mature and expand our capabilities from a scale and a process standpoint.

Speaker Change: Specific to go to market we brought on.

Speaker Change: New sales leadership over the last six to 12 months.

Speaker Change: Recently, we just hired.

I'm, Dave Osborne, Who's SVP of partnership and alliances after spending over 16 years at SAP.

Mark Adams: of partnership and alliances after and over 16 years at SAP, an executive role there and helping us build out partnerships because historically we've been mostly a B2B direct sales company and that's still a very key part of our strategy. But working with industry partners to expand our reach and expand our capabilities and development opportunities will be critical for us as we continue to grow. So, you know, a lot is changing as we're looking for new talent to come in and blend with our existing team to build out, and I actually think it's a really big responsibility for the CEO to review this and make sure we're always improving, whether it's internally through development capabilities or bringing the right talent in and a new leader as a CFO or a new head of the business and Pete Maca and Penguin.

Dave Osborne: In an executive role, there and helping us build out partnerships because historically, we've been mostly a b to b direct sales company and that's still a very key part of our strategy, but working with industry partners.

Dave Osborne: To expand our reach and expand our capabilities and development opportunities will be critical for us as we continue to grow so.

Mark W. Adams: So, you know, a lot is changing as we're looking for new talent to come in and blend with our existing team to build out, and I actually think it's a really big responsibility for the CEO to review this and make sure we're always improving, whether it's internally through development capabilities or bringing in the right talent and a new leader as a CFO, or a new head of the business in PMACA and Penguin. We always We have to be reinventing ourselves all the time.

Speaker Change: A lot changing as we're looking for new talent to come in and blend with our existing team to build out and.

Speaker Change: I actually don't think it's a really big responsibility for the CEO.

Speaker Change: To review this and make sure we're always improving whether it's internally through development capabilities or bringing the right talent in a new leader as a CFO or a new head of the business in <unk> and Penguin.

Mark Adams: You know, we always have to be getting better and make sure we don't assume that we're going to get there in a static way. We have to be reinventing ourselves all the time.

Speaker Change: We always have to be getting better and make sure we don't.

Speaker Change: Assume that we're going to get there.

Speaker Change: In a static way we have to be in reinventing ourselves all the time.

Unknown Executive: Well, thanks for all that.

Mark W. Adams: Well, thanks for all that. I guess another part of my question is the, you know, maybe you haven't found out. I think there are a little over 10 customers for your Penguin products. How can we get this to be more scalable, to be able to handle, say, 50 customers? It seems that AI is going to be going out to, you know, corporate and, you know, other parts of the industry.

Rob: Thanks, Rob.

Mark Adams: The, I guess, another part of my question is the, you know, maybe you have, I think some are a little over 10 customers for your Penguin products. How can we get this to be more scalable, to be able to handle, say, 50 customers? It seems that AI is going to be fuller going out to, you know, corporate and, you know, other parts of the industry. Well, I'll tell you, I'm pretty pleased from where we were just six to nine months ago, relative to that expansion. And, first of all, I think we've done a better job getting the right people in place to go out and build these relationships and target the right engagement.

Rob: I guess another part.

Rob: My question is the.

Speaker Change: Maybe yes.

Speaker Change: I think some are a little over 10.

Speaker Change: Customers for Penguin products.

Speaker Change: How can we get this to be more scalable to be able to handle say 50 customers. It seems that AI is going to be.

Speaker Change: Going going out.

Speaker Change: Corporate and other parts of the industry.

Mark W. Adams: Well, I'll tell you, Kevin, I'm pretty pleased with where we were just six to nine months ago relative to that expansion. And, first of all, I think we did a better job getting the right people in place to go out and build these relationships and target the right engagement. Secondly, when I mentioned partnerships, there are definitely customers who are working with other companies who don't quite have the skillset, and software, and managed services that Penguin has.

Speaker Change: Well I'll tell you I am.

Speaker Change: Kevin I am pretty pleased from where we were just six to nine months ago relative to that expansion and.

Speaker Change: First of all I think we've done a better job getting the right people in place to go out and build these relationships and targeting the right engagement secondly, what I mentioned partnerships there are definitely customers.

Mark Adams: Secondly, when I mentioned partnerships, there are definitely customers who are working with other companies who don't quite have the skill set and software and manage services that Penguin has. And so, you know, when we talked about the customer base just back in the fall, we're already adding new customers. And I would say, you know, at a pace that I'm very comfortable with as it relates to the business expansion.

Speaker Change: Who are working with other companies, who don't quite have the skill set and software and managed services that Penguin has and so.

Mark W. Adams: And so, you know, when we talked about the customer base just back in the fall, we're already adding new customers. And I would say, you know, at a pace that I'm very comfortable with as it relates to business expansion. Part of it for us is gonna be how do we scale the resources in the company to take on new business opportunities over the next, you know, two to three years.

Speaker Change: When we talked about the customer base just back in the fall.

Speaker Change: We're already adding new customers and I would say.

Speaker Change: At a pace that I'm very comfortable with as it relates to the business expansion.

Mark Adams: You know, part of it for us is going to be how, how do we scale the resources in the company to take on new business opportunities over the next two to three years. And we mentioned that as kind of a horizon for expanding our customer base and trying to start to tease out some of the lumpiness in the business. And I'm, you know, really pleased with where we are today. I think you heard in my script. We, in the quarter Q3, had a customer that was a software and services only, meaning we didn't sell the hardware.

Speaker Change: Part of it for us is going to be how do we scale the resources in the company to take on a new business opportunities.

The next two to three years, and we mentioned that as kind of a horizon for <unk>.

Mark W. Adams: And we mentioned that as kind of a horizon for expanding our customer base and trying to start to tease out some of the lumpiness in the business. And I'm, you know, really pleased with where we are today. I think you heard in my script. We, in the quarter Q3, we had a customer that was a software and services only customer, meaning we didn't sell the hardware. We actually got called in to an environment where the customer couldn't stand up the data center infrastructure they bought.

Speaker Change: Expanding our customer base and trying to start to tease out some of the lumpiness in the business.

Speaker Change: Im really pleased with where we are today I think you heard.

Speaker Change: In my script.

Speaker Change: In the quarter Q3.

Speaker Change: We had a customer that was a software and services only meaning we didn't sell the hardware, we actually got called in.

Mark Adams: We actually got called in in an environment where the customer couldn't stand up to the data center infrastructure they bought. And they've asked us to come in with our software and our managed services to help them get their data center up and running. Which is a great testament to our value add, not just on the systems level that people know payment for, but more on the software. Services.

Speaker Change: In an environment, where the customer couldn't stand up to the data center infrastructure.

Speaker Change: <unk> and they've asked us to come in with our software and our managed services to help them get their data center up and running which is a great Testament to our value add not just on the systems level that people no payment for a bit more on the software and services.

Mark W. Adams: And they've asked us to come in with our software and our managed services to help them get their data center up and running, which is a great testament to our value add, not just on the systems level that people know Penguin for, but more on the software and services. Okay, great. Thank you.

Unknown Executive: Okay, great. Thank you.

Speaker Change: Okay, great. Thank you.

Unknown Executive: You're given.

Kevin: Hey, Kevin.

Thomas O'malley: Next question comes from Thomas O'Malley with the company Barclays.

Thomas O'malley: Our next question comes from Thomas O'Malley with the company Barclays. Thomas, your line is now open.

Kevin: Our next question comes from Thomas O'malley with accompanying Barclays. Thomas Your line is now open.

Unknown Executive: Thomas, the line is not open. Hi, yeah, this is Scott on for Tom. I notice that gross margins are guided to a step back next quarter, but the sequential growth will be driven by IPS. And you know, as you guys are talking about more software and service revenue coming on there. So can you just give us an idea of the puts and takes of the margin pressure you're seeing? Yeah, I mean, if we ship a little more hardware in a quarter than software services, it'll drive the gross margins down a little bit in the business.

Scott: Hi, yeah, this is Scott on for Tom. I noticed that gross margins are guided to take a step back next quarter, but the sequential growth will be driven by IPS. And, you know, as you guys are talking about more software and service revenue coming on there. So, can you just give us an idea of the puts and takes of the margin pressure you're seeing?

Kevin: Hi, Yes. This is Scott on for Tom I noticed the gross margins are guided to take a step back next quarter, but the sequential growth.

Scott: It will be driven by Ips and <unk>.

Speaker Change: As we're talking about.

Speaker Change: More software and service revenue coming on there. So can you just give us an idea of the puts and takes of the margin pressure you are seeing.

Jack A. Pacheco: Yeah, I mean, if we ship a little more hardware in a quarter than software services, it'll drive the gross margins down a little bit. It's more of a mixed issue in the quarter than anything else.

Speaker Change: Yes, I mean, if we shipped a little more hardware in a quarter than software services and drive the gross margins down a little bit.

Speaker Change: The business. So it's more of a mix issue in the quarter than anything else.

Unknown Executive: So more of a mix issue in the quarter than anything else.

Jack A. Pacheco: That will be the case as we grow when we're taking on new engagements. The software and services kind of accumulate over time. The hardware tends to be up front in our deployment, and so margins can move around a little bit, but we try to give the street enough advance notice on the guide to get you there.

Unknown Executive: Matt, we'll be the case. Got you in there. Yeah, sorry. Obviously, that will be the case as we grow. When we're taking on new engagements, the software and service is kind of accumulates over time. The hardware tends to be up front in our deployment. And so margins can move around a little bit, but we just try to give the street enough advanced notice on the guide to get you there.

Speaker Change: And that will be the case.

Speaker Change: Yes, sorry, I was going to say that will be the case as we grow.

Speaker Change: When we're taking on new engagements.

Speaker Change: We're in services kind of a.

Speaker Change: Accumulates over time, the hardware it tends to be upfront in our deployment and so on.

Speaker Change: Margins can move around a little bit but we.

Speaker Change: Try to give the street enough advance notice on the Guy to get you there.

Unknown Executive: Great, thank you.

Jack A. Pacheco: Great, thank you. And then on the memory side, you guys guided to slight growth there. Obviously, elsewhere in the memory industry, you're seeing improving fundamentals, as well as the CXL product that you guys are layering on later this year. Can you give us an idea of, I guess, what you're seeing near term and then, you know, further out? Yeah, as we've always said, that our enterprise memory solutions business...

Speaker Change: Great. Thank you.

Unknown Executive: And then on the memory side, you know, you guys guided to slight growth there. Obviously, elsewhere in the memory industry, you're seeing improving fundamentals as well as the CXL product that you guys are layering on later this year.

Speaker Change: And then on the memory side.

Speaker Change: As guided to slight growth there, obviously elsewhere in the memory industry youre seeing improving fundamentals as well as the <unk> product that you guys are layering on later this year can you give us an idea of I guess, what youre seeing near term and then.

Unknown Executive: Can you give us an idea of, I guess, what you're seeing in your term and then further out? Yeah, as we've always said, that our enterprise memory solutions business is kind of less volatile than what I would say. I described as the high volume consumer business and memory. And so, you know, the volatility works both in our favor, but we also don't see a snapback as much because we didn't really, you know, decline as much. And so, if you think about price reductions in revenue, you know, kind of in the 50-55% in the broader semi-perspective, you know, we didn't see that severe downturn.

Speaker Change: Further out.

Mark W. Adams: Yeah, as we've always said, that our enterprise memory solutions business is kind of less volatile than what I would say, I describe as the high volume consumer business in memory. And so, the volatility works both in our favor, but we also don't see a snapback as much because we didn't really decline as much. And so, if you think about price reductions and revenue, kind of in the 50, 55% and the broader semi-perspective, you know, we didn't see that severe downturn.

Speaker Change: Yes, as we've always said that our enterprise memory solutions business is kind of a less volatile than what I would say I would describe as the logging to high volume consumer business in memory and <unk>.

Speaker Change: So they're there.

Speaker Change: The volatility it works both in our favor, but we also don't see a snapback as much because we didn't really.

Speaker Change: Decline as much and so if you think about price reductions in revenue crown in the 50% to 55% and the broader semi perspective.

Speaker Change: We didn't see that severe downturn, we saw some and some of it was units some of it is pricing and so on the on the recovery cycle ours, there'll be a little bit more muted than the large scale memory.

Unknown Executive: We saw some, and some of it was units; some of it was pricing. And so, on the recovery cycle, ours will be a little bit more muted than the large-scale memory folks when they see the pricing switchback. We believe it will switch back or start to see demand. You know, forecasts for, you know, Q4 and beyond look pretty strong going in the back half of the year.

Mark W. Adams: We saw some, and some of it was units, some of it was pricing. And so, on the recovery cycle, ours will be a little bit more muted than the large-scale memory folks when they see the pricing switch back. We believe it will switch back. We're starting to see demand, you know, and forecasts for Q4 and beyond look pretty strong going into the back half of the year. You mentioned CXL; we're excited to get our first production order in the quarter in Q3.

Speaker Change: Folks when they see the pricing switchback, we believable switchback, we're starting to see <unk>.

Speaker Change: <unk>.

Speaker Change: Our forecast for Q4 and beyond.

Speaker Change: Pretty strong going into the back half of the year.

Unknown Executive: You mentioned CXL. We're excited to get our first production order in the quarter and Q3. It's an early validation of our leadership position. So, you know, obviously we'd love the memory business to be, you know, further ahead in the recovery cycle, but we know it's on track. And, you know, the customer design wins or are fairly healthy. So, I think it's just a matter of the nature of our enterprise business is a little bit less volatile on the downturn and the recovery cycle pace.

Speaker Change: You mentioned CSL, we're excited to get our first production order in the quarter in Q3.

Mark W. Adams: It's an early validation of our leadership position. So, you know, obviously, we'd love the memory business to be, you know, further ahead in the recovery cycle, but we know it's on track and, you know, the customer design wins are fairly healthy. So, I think it's just a matter of the nature of our enterprise business being a little bit less volatile in the downturn and the recovery cycle pace.

Speaker Change: It's an early validation of our leadership position.

Speaker Change: So.

Speaker Change: Obviously, we'd love to memory business to be.

Speaker Change: Further ahead in the recovery cycle, but we know it's on track and.

Speaker Change: The customer design wins or are fairly healthy. So I think it's just a matter of the nature of our enterprise business is a little bit less volatile on the <unk>.

Speaker Change: <unk> and the recovery cycle pace.

Unknown Executive: Great. Thank you.

Great. Thank you.

Unknown Executive: You've done this.

Thomas O'malley: Thank you, Thomas. Our next question comes from Brian Chin with the company Steepful. Brian, your line is now open.

Brian Edward Chin: You Thomas our next question comes from Brian Chin with a company Stifel. Brian Your line is now open.

Brian Chin: Our next question comes from Brian Chin with the company Stefold, Brian.

Unknown Executive: The line is not open. Hi, thanks.

Brian Edward Chin: Hi, thanks. This is Denison speaking for Brian.

Hi, Thanks, This is Dennis on for Brian.

Mark Adams: This is Dennis on for Brian. I just want to ask about these largest wins for our ZTC Edge Endurance. Could you speak more about which verticals are adopting these systems and what the timeframe for implementation for these is? Sure. We are seeing success in oil and gas and financial institutions or the primary markets, although we've got a broader set of markets we attract to. These types of environments are really where the availability and lack of need for on-site support are critical. If you think about financial environments, trading deaths, or even point of sale, ATM type environments, as well as in the oil and gas energy sector, you think of things like oil rigs and just remote locations; this type of reliability is a necessity to help people compete.

Brian Edward Chin: I wanted to ask about these largest wins for <unk> and Darren could you speak more about which verticals are adopting new systems and what the timeframe for implementation for these guys.

Denison: I just want to ask about these largest wins for ZTC Edge and Endurance. Could you speak more about which verticals are adopting these systems and what the time frame for implementation is for these?

Mark W. Adams: Sure. We are seeing success in oil and gas, and financial institutions are the primary markets, although we've got a broader set of markets we attract to. These types of environments are really where the availability and lack of need for on-site support are critical. And if you think about, you know, financial environments, trading desks, or even point-of-sale ATM type environments, as well as in the oil and gas energy sector, think of things like oil rigs and just remote locations, this type of reliability is a necessity to help people compete.

Brian Edward Chin: Sure.

Darren: We're seeing success.

Darren: And oil and gas.

Speaker Change: Financial institutions are the primary markets, although we've got a broader set of markets that we attract you.

Speaker Change: These types of environments are really were.

Speaker Change: The availability and lack of need for on site.

Speaker Change: To support our critical and if you think about.

Speaker Change: Financial environment trading desks or even point.

Speaker Change: Point of sale ATM type environments as.

Speaker Change: As well as in.

Speaker Change: In the oil and gas energy sector, I think of things like oil rigs and just.

Speaker Change: Remote locations.

Speaker Change: This type of reliability is a necessity to help people compete.

Mark Adams: Again, it's kind of proven to be our hallmark of offering these 5.9s and 7.9s type of availability, where the system will go down for minutes a year. It's a great platform as we think about the evolution of the edge and the evolution towards AI-imprisoning in the future.

Speaker Change: And.

Again, it really is kind of proven to be.

Speaker Change: Our hallmark of offering these 597 hundred 90, <unk> type of availability, where the system will go down four minutes a year.

Mark W. Adams: And again, it really is, it's kind of proven to be our hallmark of offering these five nines and seven nines type availability where the system will go down for minutes a year. It's really, it's a great platform as we think about the evolution of the edge and, you know, the evolution towards AI inferencing in the future. It's a nascent market today, but the platform we have will be a great benefit for customers who are looking to build those types of platforms in the future.

Speaker Change: It's really a it's a great platform as we think about the evolution of the edge and.

Speaker Change: The evolution towards AI inferencing in the future is a nascent market today, but the platform we have will be a great.

Mark Adams: It's a nation market today, but the platform we have will be a great benefit for customers who are looking to build those type of platforms in the future.

Speaker Change: The benefit for customers, who are looking to build.

Speaker Change: Those type of platforms in the future.

Speaker Change: Okay.

Mark Adams: Great. And then, on a similar note, I think you've previously also spoken about some new household names. I don't think you said who it was, but they were taking an interesting HPC and AI systems. Can you say more about how progress is going with those customers and maybe kind of what industries they're from? Yeah, actually, we're seeing strong interest from, I would say, with the traditional enterprise, and that could be large scale software data center type companies. That could be financial institutions that definitely is oil and gas and education as well.

Mark W. Adams: Great. And then on a similar note, I think you've previously spoken about some new household names. I don't think you said who it was, but they were taking an interest in HPC and AI systems. Can you say more about how progress is going with those customers and maybe kind of what industries they're from?

Speaker Change: Great and then on a similar note I think you've previously also spoken about some new household names I don't think you said, who it was but they were taking an interest in HBC and AI systems can you say more about how progress is going with those customers and maybe kind of what industries they're from.

Mark W. Adams: Yeah, actually, we're seeing strong interest from, I would say, traditional enterprises, and that could be large-scale software data center-type companies, that could be financial institutions, it definitely is oil and gas, and education as well. A number of really good engagements, and I think you'll see us continue to talk about that at our Analyst Day next week. As I mentioned earlier, when Kevin asked the question about our go-to-market strategy, we're very pleased with the progress we're making.

Speaker Change: Yes, actually we are seeing.

Speaker Change: A strong interest from I would say with the traditional enterprise and that could be.

Speaker Change: Large scale software data center type companies that could be financial institutions is definitely as oil and gas.

And education as well.

Mark Adams: You know, a number of really good engagements, and I think you'll see us continue to talk to that at our Analyst Day next week. As I mentioned earlier, when Kevin asked the question about our go-to-market, we're very pleased with the progress we're making. As I said, in terms of the wins we've had, we'll speak to some of those next week, but I would just say across the broader enterprise space, beyond hyper-scalers where the initial investment was going in this industry, enterprises now kind of in the mix. And a subset we talked about on the last call was tier two cloud service providers are almost a vehicle for traditional enterprises.

Speaker Change: In a number of.

Speaker Change: Really good.

Speaker Change: Engagements and I think Youll see us continue to talk to that at our analyst day next week.

Speaker Change: As I've mentioned earlier.

Speaker Change: Kevin asked the question about.

Our go to market.

Speaker Change: We're very pleased with the progress we're making.

Mark W. Adams: As I said, in terms of the wins we've had, we'll speak to some of those next week. But I would just say across the broader enterprise space, beyond hyperscalers where the initial investment was going into this industry, enterprise is now kind of in the mix. And a subset we talked about on the last call is Tier 2 cloud service providers are almost a vehicle for traditional enterprises, so they're working together and needing the deployment expertise and help and the design expertise, and that's where we come in as part of a solution provider.

Speaker Change: As I said in terms of the wins, we've had will speak to some of those next week.

Speaker Change: But.

Speaker Change: I would just say across the broader enterprise space.

Speaker Change: Beyond Hyperscale is where the initial investment was going in this industry.

Speaker Change: Enterprise is now kind of in the mix.

Speaker Change: And a subset we talked about on the last call was tier two cloud service providers are there almost a vehicle for traditional enterprises. So they are working together and meeting the deployment expertise and help them to design expertise and that's where we come in as part of a solution provider. So.

Mark Adams: So they're working together and needing the deployment expertise and help and the design expertise. And that's where we come in as part of a solution provider. So I think the verticals again are financial and oil and gas education, as I mentioned.

Mark W. Adams: So I think the verticals, again, are financial and oil and gas, and education, as I mentioned, and I think that you'll see more of that in the coming quarters as we matriculate some of these opportunities we've been engaged in.

Speaker Change: The verticals again or our.

Speaker Change: Financial and oil and gas education as I mentioned.

Unknown Executive: And I think that you'll see more of that in the coming quarters as we matriculate some of these opportunities we've been engaged in. Great. Thank you for the detailed answer. That's all. That's it for me. Thank you.

And I think that youll see more of that.

Speaker Change: In the coming quarters as we are.

Speaker Change: Matriculate some of these opportunities we've been engaged in.

Speaker Change: Yeah.

Denison: Great. Thank you for the detailed answer. That's all. That's it for me.

Speaker Change: Great. Thank you for the detailed answer.

Speaker Change: That's it for me.

Speaker Change: Thank you.

Unknown Executive: Thank you, Brian.

Brian Edward Chin: Thank you, Brian. Our next question is from Nick Doyle with the company Needem. Nick, your line is now open.

Thank you Brian. Our next question is from Nick Doyle with company Needham Nick Your line is now open.

Nick Doyle: Our next question is from Nick Doyle with a company, Needham.

Unknown Executive: Nick, your line is not open. Hey guys, and welcome, mate. What was Stratuses contribution in the quarter and has it been trending in that 40 to 45 million dollar range? Just wondering if these fault-honored wins that you're talking about is that going to be associated with Stratus? And I guess, is that a hardware or software and services type product?

Nicolas Emilio Doyle: Hey, guys, and welcome, Nate. What was Stratus' contribution in the quarter, and has it been trending in that $40-$45 million range? Just wondering if these fault-tolerant wins that you're talking about are going to be associated with Stratus? Is that a hardware or software and services type product?

Speaker Change: Hey, guys and welcome Nate.

Nicolas Emilio Doyle: What was stratasys contribution in the quarter and has it been trending in that 40% to $45 million range. Just wondering if these fault tolerant wins that youre talking about is is there.

Speaker Change: That can be associated with stratus.

<unk>.

Speaker Change: I guess it.

Speaker Change: Is that a hardware software and services type.

Speaker Change: <unk>.

Mark Adams: Yeah, let me just say we're not going to break out kind of brands like that in terms of the business on a go-forward basis. I can tell you that any product we sell at the edge and back in the data center on from environment, we sell software and services along with our hardware platform, and that's a business that we're going to be disciplined in how we bid out our capabilities. We do not; we want to be in just a hardware-only game. The edge platform that you're referring to that we got from the Stratus acquisition continues to perform very well.

Speaker Change: Yes, let me let me just say, we're not going to breakout.

Mark W. Adams: brands like that in terms of the business on a go-forward basis. I can tell you that any product we sell at the edge and back in the data center on-prem environment, we sell software and services along with our hardware platform, and that's a business that we're going to be disciplined in how we bid out our capabilities. We do not want to be in just a hardware-only game. The Edge platform that you're referring to that we got from the Stratus acquisition continues to perform very well.

Speaker Change: Kind of brands like that in terms of the business on a go forward basis.

Speaker Change: I can tell you that.

Any product we sell.

Speaker Change: At the edge and back in the data center on Prem environment.

We sell software and services, along with our hardware platform and that's a business that.

Speaker Change: We're going to be disciplined in how we bid out our capabilities, we do not want to be in just a hardware only game.

Speaker Change: The edge platform that you're referring to that we got from the <unk> acquisition.

Speaker Change: <unk> continues to perform very well gross margins are accretive to the overall gross margin of the company.

Mark Adams: Gross margins are created to the overall gross margins of the company, and I think we're really excited about the evolution of AI at the edge. Now I don't think that's a market that's here in 2024, but I think the opportunity for developing solutions and platforms that provide high availability, high performance compute capability at the edge. I think we're really in good position as that market evolved over the next two to three years.

Mark W. Adams: Gross margins are accretive to the overall gross margin of the company, and I think we're really excited about the evolution of AI at the Edge. Now I don't think that's a market that's here in 2024, but I think the opportunity for developing solutions and platforms that provide high availability, high performance compute capability at the Edge, I think we're really in a good position as that market evolves over the next two to three years.

Speaker Change: And I think.

Speaker Change: We're really excited about the evolution of AI at the edge now I don't think Thats a market thats here in 2024, but I think the opportunity for a development.

Speaker Change: <unk> solutions and platforms.

Speaker Change: That provide high availability high performance compute capability at the edge I think we're really in good position as that market evolves over the next two to three years.

Nicolas Emilio Doyle: And then, normally, specialty memory is seasonally down in the fiscal fourth quarter. Why are you able to grow, you know, low single digits? Is that just the memory cycle and inventory getting in a better place than some of the other demand drivers you've discussed, the offset? And then, at the same time, mm-hmm?

Unknown Executive: And then normally specialty memory is seasonally down in the Cisco 4th order.

Speaker Change: Thanks, and then normally specialty memory is seasonally down in the fiscal fourth quarter.

Unknown Executive: Why are you able to grow, you know, low single digits? Is that just the memory up to cycle and inventory getting in a better place and some of the other demand drivers you've discussed the offset? And then at the same time, are the memory gross margins able to expand with new product introductions like CXL and Zephyr. Thanks. Yeah, thanks for the question.

Why are you able to grow low single digits is that just the memory up cycle and inventory getting in a better place than some of the other demand drivers you've discussed the offset.

Speaker Change: Then I think the same time.

Mhm.

Speaker Change: Go ahead or are the memory gross.

Nicolas Emilio Doyle: Are the memory gross margins able to expand with new product introductions like CXL and Zephyr? Yeah, thanks for the question. Yeah, I think you kind of nailed it on the front end, which is the severity...

Speaker Change: I heard that memory gross margins able to expand with new product introductions like <unk> and Zephyr.

Mark W. Adams: And if you look at what's going on in the business today, memory pricing has started to recover. And for us, our largest customers' inventory has been a little bit of a headwind over the last couple quarters. But we're starting to see that alleviate, and despite the seasonality that you referenced in terms of Q4, we're coming from such a low base that we expect, you know, the growth that Jack acknowledged in our Q4. So it's really just a market recovery story, and inventory is starting to normalize for some of our largest customers heading into Q4.

Mark W. Adams: Yeah, thanks for the question. Yeah, I think you kind of nailed it on the front end, which is the severity of the memory cycle. In terms of dollars, it was probably the worst memory cycle, you know, on record. And even small price declines were significant. You know, if you use a data point of publicly available information, Micron's revenue fell from over $8 billion down below $4 billion in just two to three quarters. And so, and again, that was just a proxy for everybody else's challenges as well.

Speaker Change: Yes, thanks for the question.

Unknown Executive: Yeah, I think you kind of nailed it on the front end, which is the severity of the memory cycle. In terms of dollars, it was probably the worst memory cycle, you know, on record, and even bright price declines were significant. You know, but if you use a data point of publicly available information, Micron's revenue fell from over 8 billion down below 4 billion in just two to three quarters. And so, and again, that was just a proxy for everybody else's challenges as well. And if you look at what's going on in the business today, memory pricing has started to recover.

Speaker Change: Yes, I think you've kind of nailed it on the front end, which is.

Speaker Change: The severity of the memory cycle.

Speaker Change: In terms of dollars it was probably the worst memory cycle.

Speaker Change: On record and even bright price declines were significant.

Speaker Change: If you use a data point of publicly available information Micra Micron's revenue fell from over $8 billion down below $4 billion and just two to three quarters and so.

Speaker Change: And again that was just a proxy for everybody else's challenges as well.

And if you look at.

Speaker Change: What's going on in the business today memory pricing has started to recover.

Unknown Executive: And for us, our largest customer's inventory has been a little bit of a headwind over the last couple of quarters, but we're starting to see that alleviate. Despite the seasonality that you referenced in terms of Q4, we're coming from such a low base that we expect. and the growth that Jack acknowledged in our Q4. So it's really just a market recovery story, and the inventory is starting to normalize that some of our largest customers heading in the Q4.

Speaker Change: For us.

Speaker Change: Our largest customers inventory has been a little bit of a headwind over the last couple of quarters, but we're starting to see that alleviate.

Speaker Change: And despite the seasonality that you referenced in terms of Q4.

Speaker Change: Coming from such a low base that we expect the growth that Jack acknowledged in our Q4 so.

Speaker Change: It's really just a market recovery story.

Speaker Change: And inventory is starting to normalize at some of our largest customers heading into Q4.

Speaker Change: Okay.

Unknown Executive: Thank you, Nick. At this time, there are no questions registered in Q.

Thank you Nick.

Operator: At this time, there are no other questions registered in queue, so I'd like to pass the conference back over to our managing team for closing remarks.

Speaker Change: At this time there are no other questions from interested in queue. So I'd like to pass the conference back over time management team for closing remarks.

Unknown Executive: So I'd like to pass the conference back over to our managing team for closing remarks. Thanks. Thank you.

Mark W. Adams: Thank you. Before closing, I wanted to remind everyone that we will be holding our Investor Day on July 16th in New York City at the NASDAQ MarketSite. We hope many of you will be able to join us in person. And for those not able to be in person, we look forward to having you join us via our webcast. Please contact Suzanne for more information on how to register. Thank you all again for joining us today.

Speaker Change: Thank you before closing I wanted to remind everyone that we will be holding.

Mark Adams: Before closing, I wanted to remind everyone that we will be holding our Investor Day on July 16th in New York City at the NASDAQ Market Site. We hope many of you will be able to join us in person. And for those not able to be in person, we look forward to joining. Having you join VR, our webcast.

Our Investor Day on July 16th in New York City.

Speaker Change: At the NASDAQ market site.

Speaker Change: We hope many of you will be able to join us in person.

Speaker Change: For those not able to be in person, we look forward to joining.

Speaker Change: Having you joined via our webcast. Please contact Suzanne for more information on how to register.

Suzanne Schmidt: Please contact Suzanne for more information on how to register. Thank you all again for joining today.

Speaker Change: You all again for joining today.

Speaker Change: Yeah.

Unknown Executive: That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.

Operator: That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.

Speaker Change: That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.

Speaker Change: Okay.