Q4 2024 SMART Global Holdings Inc Earnings Call
Welcome to the Penguin Solutions fourth quarter in four years fiscal 2024, Arnie's conference call. I'll now like to test the conference over to our hosts, the N. Schmidt of the semester relations. Then you may proceed.
Unknown Executive: Good afternoon and thank you for joining us on today's earnings conference call in webcast to discuss Penguin Solutions' fourth quarter in full year fiscal 2024 results.
N. Schmidt: Thank you, operator. Good afternoon and thank you for joining us on today's earnings conference call in webcast to discuss Penguin Solutions, fourth quarter and four years of scope 2024 results.
Suzanne Schmidt: On the call today, our Mark Adams, Chief Executive Officer, Jack Pacheco, Chief Operating Officer, and Nate Olmstedt, 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.
Speaker Change: 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.
Unknown Executive: I would also like to remind everyone to reason 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Forward-looking statements are based on current beliefs and assumptions.
Speaker Change: and are not guarantees of future performance.
Speaker Change: and our 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.
Unknown Executive: The forward-looking statements are represented as 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.
Speaker Change: The forward-looking statements are represented as 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.
Unknown Executive: We will also discuss both gap 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-GAAP measures is included in today's press release and accompanying fly presentation.
Speaker Change: We will also discuss both gap and non-gap financial measures.
Speaker Change: Non-Gat measures should not be considered in isolation from as a substitute for or superior to our gap results. We encourage you to consider all measures when analyzing our performance.
Speaker Change: A reconciliation of the gap to nine gap measures is included in today's press release and accompanying fly presentation.
Mark Adams: And with that, let me now turn the call over to Mark Adams, CEO. Mark.
Speaker Change: And with that, let me now turn the call over to Mark Adams CEO Mark.
Mark Adams: Thank you, Suzanne. Welcome and thank you all for joining our earnings call. This is a significant day for us.
Mark Adams: Thank you Suzanne.
Mark Adams: Welcome and thank you all for joining our earnings call.
Mark Adams: As of today, we are officially Penguin Solutions Inc. And our ticker symbol on NASDAQ is now P-E-N-G. Our rebranding is more than just the name change. It reinforces our ongoing transformation from a holding company structure into a global enterprise solution provider tackling one of today's biggest business challenges: solving the complexity of AI infrastructure.
Mark Adams: This is a significant day for us as today. We are officially Angling Solutions Inc.
Mark Adams: and our tiffer symbol on Nazic is now P.E. and P.G.
Mark Adams: Our rebranding is more than just the name change.
Mark Adams: It reinforces our ongoing transformation from a holding company structure into a global enterprise solution provider.
Speaker Change: Park William, one of today's biggest business challenges.
Speaker Change: Solving the complexity of AI and prescription.
Mark Adams: Fiscal 2024 was a pivotal year for us. We achieved a number of key milestones and continued to strengthen our leadership team. In November, we concluded the majority stake deficit year of our Brazil business. dedicating our strategic focus to the enterprise market. In May, we announced that Pete Manca, formerly an executive at Dell, joined us as president of IPS, bringing a wealth of experience to our AI enterprise focus business. In June, we further strengthened our leadership team with the appointment of Nate Olmstead, former Chief Financial Officer at Logitech, as our CFO, expanding the depth and breadth of our financial capabilities.
Speaker Change: Fiscal 2024 was a pivotal year for us.
Speaker Change: We achieve a number of key milestones and continue to strengthen our leadership team.
Speaker Change: In November, we concluded the majority stake the message here of our Brazil business.
Speaker Change: Dedicating our strategic focus to the Enterprise Market.
Speaker Change: In May, we announced that Pete Manker, formerly an executive at Dell, joined us as president of IPS, brings a wealth of experience to our AI enterprise focus business.
Speaker Change: and June, we further strengthened our leadership team with the appointment of Nate Olmstead, former Chief Financial Officer at Logitech at RCFO.
Speaker Change: Expanding the depth and breadth of our financial capabilities.
Mark Adams: And in July, we announced what we expect to be a transformative partnership with SK Telecom, helping position us for future global growth and innovation in AI and edge computing. In Q4, revenue, growth margin, and EPS were all within our guidance range, and we achieved our third consecutive quarter of sequential revenue growth. As we enter fiscal 2025, we remain optimistic about our ability to expand our customer engagements, and thus, based on our outlook, we believe we're positioned for double-digit year-over-year growth in FY25.
Speaker Change: and then July, we announced what we expect to be a transformative partnership with SK Telecom, helping position us for future global growth and innovation in AI and edge computing.
Speaker Change: and Q4, revenue, growth margin and EPS, we're all within our guidance range and we achieved our third consecutive quarter of sequential revenue growth.
Speaker Change: As we enter fiscal 2025, we remain optimistic about our ability to expand our customer engagements. And thus, based on our outlook, we believe we are positioned for double digit year over year growth in FY25.
Mark Adams: Now, let's take a look at the broader market landscape. 2024 has been a landmark year for AI infrastructure across all industries, marked by major technological advancements and significant hardware investments. We believe the next phase of this market evolution is shifting towards more production-ready AI deployments, integrating these advanced systems into business operations, enabling AI to drive high-impact commercial outcomes. This is where financial solutions excels. With over 25 years of experience and high-performance computing, and more recently, AI, we are a trusted partner that enterprises can depend on to navigate that new era of digital transformation.
Speaker Change: Now, let's take a look at the broader market landscape.
Speaker Change: 2014 has been a landmark year for AI infrastructure across all industries marked by major technological advancements and significant hardware investments.
Speaker Change: We believe the next phase of this market evolution, shifting towards more production ready AI deployments.
Speaker Change: Integrating these advanced systems into business operations and enabling AI to drive high-impact commercial outcomes.
Speaker Change: This is where Penguin Solutions excels.
Speaker Change: With over 25 years of experience and high performance computing, and more recently, AI, we are a trusted partner that enterprises can depend on to navigate the new era of digital transformation.
Nate Olmstead: Next, let's turn to our financial performance. For fiscal 2024, we reported total revenues of $1.17 billion. Our managed services revenue now represent a larger share of our sales, growing from 17% in FY23 to 21% in FY24. Our growth profit has improved on a full year basis with non-GAAP growth margin at 31.9%. In Q4, revenue across all three business segments grew sequentially from Q3. Non-GAAP growth margin for the quarter was down versus Q3, primarily due to product mix, but still within our guidance range. We delivered a non-GAAP EPS of 37 cents in line with last quarter.
Speaker Change: Next, let's turn to our financial performance.
Speaker Change: For Fiscal 2024, we reported total revenues of $1.17 billion dollars.
Speaker Change: Our managed services revenues now represent a larger share of ourselves growing from 17% and FY23 to 21% and FY24.
Speaker Change: Our growth profit has improved a full year basis.
Speaker Change: with non-gap growth margin at 31.9%
Speaker Change: Thank you for having you across all three-minute segments, glue sequentially from Q3.
Speaker Change: Now I'm Gapchro's margin for the quarter was down versus Q3, primarily due to product mixed, but still within our guidance range.
Speaker Change: We delivered a non-gap EPS of 37 cents in line with last quarter.
Nate Olmstead: In our task position, we made strong with approximately 389 million in cash and cash equivalents to our turn in debt. We recognize that technology like AI modeling and in memory database are increasingly constrained by memory capacity, a problem sometimes we're sure to as a memory wall. To address this market need, we have launched DDR5 CXL at-in card products, and we're seeing strong sampling activity and positive OEM customer feedback for both afford them and aid them models, positioning us to meet the growing demand of AI infrastructure. We are also actively investing in pioneering research and technological areas like silicon photonics and external memory appliances.
Speaker Change: and our task position remains strong, with approximately 389 million in cash and cash equivalent and short-term investments.
Speaker Change: Let me now provide more detail on our business segments.
Speaker Change: and television platform solutions, or IPF, accounted for 48% of our Q4 revenue.
Speaker Change: Reaching 149 million, driven by AI deployment and managed services across hyperscalers, cloud service providers, or CSPs, and enterprise customers.
Speaker Change: We continue to focus heavily on securing new customer wins.
Speaker Change: Examples of recent customer orders include a hardware software and service engagement at one of the world's largest gaming companies and a pilot program at a leading financial institution.
Speaker Change: Our strategy is clear.
Speaker Change: Payment Solutions helps our customers manage the complexity of AI.
Speaker Change: For Early Stage Design Works, all the way through deployment and ongoing managed services.
Speaker Change: In line with this, we are increasing our investment in software development and AI driven solutions.
Speaker Change: One area, a particular focus, is intelligent software, which can enhance how organizations build, deploy, and scale AI models.
Speaker Change: while also improving the efficiency of managing compute resources, including seamless workplace support across hybrid and multi-clad environments.
Speaker Change: For example, we're scaling Pemmonic Solutions clusterware and assured infrastructure module or aim software which focuses on high-level system monitoring and management of large scale AI infrastructures.
Speaker Change: as we advance our software and services capabilities.
Speaker Change: We are also enhancing our intellectual property portfolio by filing related patent applications.
Speaker Change: Many of which are results of our robust IP capture program to secure the enduring value of our innovations.
Speaker Change: Our memory business contributed 31% of Q4 revenue.
Speaker Change: and we believe in a position for growth heading into FY25, driven by the recovery among networking and telecom customers, as well as increased demand from enterprise customers, driven by AI workloads.
Speaker Change: and our traditional networking telecom and industrial markets. We saw significant D.E.R.F.I. design and activity, especially for very low profile, dims, and ECCS-O dims.
Speaker Change: We introduced our CF Express product line leveraging PCIe Gen4 technology to offer a compact form factor with exceptional endurance.
Speaker Change: Performance and Reliability. Important for customers seeking high performance, low density store solutions.
Speaker Change: especially memory also has a critical role to plan emerging areas like AI, Big Data, and Enterprise IT.
Speaker Change: As we develop future memory solution to meet the performance demand for more complex workloads.
Speaker Change: We recognize that technologies like AI modeling and in memory database are increasingly constrained by memory capacity. A problem sometimes we sure too as a memory wall.
Speaker Change: To address this market need, we have launched DDR5 CXL at-in card products, and we're seeing strong sampling activity and positive OEM customer feedback.
Speaker Change: for both of four of them and eight-dim models, presenting us to meet the growing demand of AI infrastructure.
Speaker Change: We are also actively investing in pioneering research in technological areas like Silicon Botanics and External Memory Appliances.
Nate Olmstead: As AI workloads continue to scale and become increasingly memory-centric, our efforts will enable us to better meet future demands, positioning us to capitalize on emerging opportunities and deliver greater value to our customers. Additionally, our zero failure rate, the effort technology, is designed to provide high reliability for mission critical environments. By minimizing memory failures, the effort not only helps prevent delays in processing, but also can significantly improve our customers' ROI by producing more consistent, reliable outcomes. Our LED business showed 3% sequential growth in Q4, and 5% growth for the full year, and represented 21% of total Q4 revenue.
Speaker Change: As an eye work loads continue to scale and become increasingly memory-centric. Our efforts will enable us to better meet future demands, position us to capitalize on emerging opportunities, and deliver greater value to our customers.
Speaker Change: Additionally, our zero failure rate, zephyr technology, is designed to provide high reliability for mission critical environments.
Speaker Change: By minimizing memory failures, Zepher not only helps prevent delays in processing, but also can significantly improve our customers ROI by producing more consistent reliable outcomes.
Speaker Change: Our LED business showed 3% to a crunch growth in Q4 and 5% growth to the full year and that percentage 21% of total Q4 revenue.
Nate Olmstead: The Creality grand continues to lead in high performance lighting applications with significant product launches and IP protection efforts safeguarding is more than 1,500 patents. We are seeing increasing design when activity and believe we can capture additional market share in FY 2025.
Speaker Change: The Creole D brand continues to lead in high performance lighting applications with significant product launches and IP protection efforts safeguarding is more than 1,500 patents.
Speaker Change: We are seeing increasing design when activity and believe we can capture additional Marta share in FY 2025.
Mark Adams: As we look to fiscal year 25, 4K emissions drive our overall company strategy. First, solve our customers' most complex AI challenges. Our rebranding to Penguins' Solutions highlights our focus on AI and HPC, aligning us with the broader AI deployment trends, with 80% of enterprises expected to implement AI by 2026. Second, partner for growth in global expansion. We anticipate our plan partnership with SK Telecom will accelerate our growth in global reach, particularly in the AI data centers and edge computing solutions. Third, expand our software and services offering. We will continue to focus on moving up the IT stack, investing in AI software solutions and services that help businesses better manage and orchestrate their AI infrastructure.
Speaker Change: As we look to fiscal year 25, 14 initiatives drive our overall company strategy.
Speaker Change: First.
Speaker Change: Solve our customers' most complex AI challenges.
Speaker Change: our rebranding to pengensolutions.
Speaker Change: Highlights are focused on AI and HPC, aligning us with the broader AI deployment trends.
Speaker Change: with 80% of enterprises expected to implement AI by 2020-6.
Speaker Change: Second, partner for growth and global expansion.
Speaker Change: We anticipate our plan partnership with SK Telecom. We accelerate our growth in global reach.
Speaker Change: and AI data centers and edge computing solutions.
Speaker Change: Third, expand our software and services offering.
Speaker Change: We will continue to focus on moving up the IT stack, investing in AI software solutions and services that help businesses better manage and orchestrate their AI infrastructure, enabling seamless workflows across hybrid and multi cloud environments. With this purpose, anyone's solutions offers customers a more integrated and higher value AI infrastructure.
Nate Olmstead: An avalanche team has worked close across hybrid and multi-cloud environments. With its focus, penguins' solutions offer customers a more integrated and higher value AI infrastructure. Our net debt at the end of Q4 was $281 million. For those of you tracking capital expenditures and depreciation, capital expenditures were $6 million in the fourth quarter, and depreciation was $5 million.
Speaker Change: and finally, number four, innovate relentlessly.
Speaker Change: Our ongoing commitment to innovation continues to drive our differentiation in the market.
Speaker Change: by solving for intense computer requirements and expanding our expertise in high-capacity, high-performance memory. We are continuing to enhance our value proposition.
Speaker Change: We're investing in new technologies such as low power compute architectures, high-performing memory solutions, and advanced cooling products, helping us to stay at the forefront of industry trends.
Speaker Change: As Processing and Networking Technology Leigh Ball.
Speaker Change: We believe we are well positioned to integrate these innovations and help our customers harness the full potential of their IT investments.
Speaker Change: and with that I will now turn the call over to Nate for the financial review.
Nate: Thanks, Mark. I will focus my remarks on our non-GAAP results, which are reconciled to gap in our earnings release tables and in the investor materials on our website.
Nate: Now let me turn to our fourth quarter results.
Nate: Revenue, gross margin and EPS were all within the ranges we provided on our last earnings call.
Nate: Total Penguin Solutions revenues were $311 million, up sequentially for the third consecutive quarter.
Nate: and non-gap growth margin came in at 30.9%.
Nate: Non-gap operating margin with 10.8% of 1.2% of points versus last year. And non-gap diluted earnings per share was 37 cents for the fourth quarter, which was flat sequentially and up slightly versus the prior year quarter.
Nate: In the fourth quarter of 2024, our overall service is revenue totaled $60 million or 19% of revenue, down from $67 million or 22% of revenue in the prior quarter.
Nate: Products revenues were $251 million in the fourth quarter of 8% sequentially.
Nate: 4th quarter revenue by business segment was as follows, IPS $149 million or 48% of our total revenue, memory $96 million which was 31% of our total revenue and LED $66 million or 21% of our total revenue.
Nate: Non-gap growth margin for penguins solutions in the fourth quarter was 30.9%. Down from 31.7% in the year ago quarter driven primarily by lower memory volumes that were partially offset by improved mix within IPS.
Nate: Gross margin was down sequentially from 32.3% in the prior quarter, primarily due to a lower mix of services revenue.
Nate: Non-Gap operating expenses for the fourth quarter were 62 million dollars, found from 64 million in the third quarter, primarily due to lower variable expenses.
Nate: Operating expenses were down 11% versus the prior year quarter, primarily due to lower variable expenses and actions we took to reduce our fixed costs.
Nate: Non-Gap operating income was $34 million up 1% versus last quarter and up 11% versus the prior year quarter, which translated into a 1.2 percentage point increase in operating margin versus Q4 last year.
Nate: Non-gap diluted earnings per share for the fourth quarter of 2024, where 37 cents, flat with last quarter, and up slightly versus 35 cents in the year ago quarter.
Nate: and Justin EBITDAF for the fourth quarter of 2024 was $39 million for 13% of sales, flat with the last quarter's percentage and up slightly versus $38 million or 12% of sales in the year ago quarter.
Nate: Turning to balance sheet highlights for working capital are net accounts receivable total $252 million compared to $212 million last quarter.
Nate: Day sales outstanding came in at 49 days. Up from 42 days in the prior quarter, due to different sales linearity within the quarters.
Nate: Inventory total $151 million at the end of the fourth quarter, down from $177 million at the end of the prior quarter.
Nate: Days of inventory was 36 days, down from 44 days in the prior quarter primarily due to the timing of receipts and shipments.
Nate: Counts payable were $182 million at the end of the quarter, down from $192 million in Q3.
Nate: Day's payable outstanding was 43 days compared to 47 days last quarter due to the timing of purchases and payments.
Nate: Our cash conversion cycle was 42 days compared to 38 days last quarter due to the timing of sales and shipments within 2-4 compared to the prior quarter.
Nate: Consistent with past practice, net accounts receivables, day sales outstanding and inventory days are calculated on a growth sales and growth cost of good sold basis.
Nate: which for $470 million and $383 million respectively for the fourth quarter.
Nate: As a reminder, the difference between growth and net revenue is related to our memory businesses, logistics services, which is accounted for on an agent basis, meaning that we only recognize the net profit on logistics services as revenue.
Nate: Cash and Cash Equivalence and Short Term Investments total $389 million at the end of the fourth quarter. Down 78 million from the prior quarter.
Nate: This fluctuation would do primarily to $125 million pre-payment on our turn-low. Repurchasing $80 million in principle amount of our convertible notes and lower cash from operations.
Nate: Partially offset by the issuance of $200 million of new convertible notes.
Nate: Fourth quarter cash flows used for operating activities totaled $12 million, compared to $80 million generated from operating activities in the prior quarter.
Nate: The decrease was due primarily to increased networking capital in Q4, stemming from different benefits and sales linearity, Q4, or Q4.
Nate: We did not have any shared purchases in our fourth quarter under our shared buyback program.
Nate: Since our initial share repurchase authorization in April 2022, we have used the total of $72 million to repurchase $4.1 million shares through the end of fiscal 2024.
Nate: In the fourth quarter, we made a $125 million pre-payment on our turn loan, bringing the remaining principles to $300 million as is the end of the quarter.
Nate: are net debt at the end of Q4 with 281 million dollars.
Nate: For those of you tracking capital expenditures and depreciation, capital expenditures were $6 million in the fourth quarter and depreciation was $5 million.
Nate Olmstead: Before turning to our outlook, I want to reiterate the recent transaction we announced in July: the signing of a strategic $200 million investment from SK Telecom, which underscores our commitment to expanding our capabilities in AI infrastructure and high performance computing. We aim to collaborate with SK Telecom in areas such as advanced end-to-end AI solutions, broadening our AI software solutions portfolio and developing innovative edge products and high-performance, high-availability compute solutions. We believe the planned collaboration will increase our global reach, enhance our offering, and position us to capture growth opportunities in the rapidly evolving AI landscape. We remain on track to close the investment around the end of calendar 2024 or early in calendar 2025, subject to regulatory approvals, and are excited to share more details with you after that time.
Speaker Change: For turning to our outlook, I want to reiterate the recent transaction we announced in July. The signing of a strategic $200 million investment from SK Telecom, which underscores our commitment to expanding our capabilities in AI infrastructure and high performance computing.
Speaker Change: We aim to collaborate with S.K. Telecom in areas such as Advanced N- to N-A-I solution, broadening our AI software solutions portfolio, and developing innovative edge products and high-performance high availability compute solutions.
Speaker Change: We believe the planned collaboration will increase our global reach, enhance our offerings and position us to capture growth opportunities in the rapidly evolving AI landscape.
Speaker Change: We remain on track to close the investment around the end of calendar 2024 or early in calendar 2025. Subject to regulatory approvals and are excited to share more details with you after that time.
Nate Olmstead: As the transaction has not closed, we are not including any impact from it in our financial projections.
Speaker Change: As the transaction has not closed, we are not including any impact from it in our financial projections.
Nate Olmstead: And now, turning to our outlook, we have decided to shift from providing a quarterly financial outlook to providing a fiscal year outlook. We believe this change provides a broader perspective on our business dynamics, especially in relation to AI infrastructure and better aligns with our emphasis on executing on our long-term vision and strategic objectives. We will continue to focus on sustainable value creation and driving crisp execution in both the short and long-term. With that in mind, our outlook for fiscal 2025 revenue is for year-over-year growth of 15 percent plus or minus 5 percentage points. Our revenue outlook for the full year reflects the following.
Speaker Change: and now it turns to our outlook. We have decided to shift from providing a quarterly financial outlook to providing a fiscal year outlook.
Speaker Change: We believe this change provides a broader perspective on our business dynamics, especially in relation to AI infrastructure and better aligns with our emphasis on executing on our long-term vision and strategic objectives.
Speaker Change: We will continue to focus on sustainable value creation and driving crisp execution in both the short and long term.
Speaker Change: With that in mind, our outlook for fiscal 2025 revenue is for year over year growth of 15% plus or minus 5% points.
Nate Olmstead: For IPS, we expect revenues to grow between 10 and 25 percent year over year. For memory, we expect revenues to grow between 10 and 20 percent year over year, and for LED, we expect revenues to be flat to up 10 percent year over year. Our non-GAAP growth margin for the full year is expected to be 32 percent plus or minus 1 percentage point. Our non-GAAP operating expenses for the full year are expected to be 275 million dollars plus or minus 15 million dollars. Our non-GAAP full year diluted earnings per share is expected to be approximately 1 dollar and 70 cents plus or minus 20 cents.
Speaker Change: Our revenue outlook for the full year reflects the following. For IPS, the expect revenues to grow between 10 and 25% year over year.
Speaker Change: For memory, we expect revenues to grow between 10 and 20% year-old for year, and for L.E.D., we expect revenues to be flat to up 10% year-old for year.
Speaker Change: Our non-gap growth margin for the full year is expected to be 32%, plus your minus 1 percentage point.
Speaker Change: Our non-gap operating expenses for the full year are expected to be $275 million, plus or minus $15 million.
Speaker Change: Our non-gap full year diluted earnings per share is expected to be approximately $1.70 plus or minus $0.20.
Nate Olmstead: And finally, our non-GAAP diluted share count is expected to be approximately 56.3 million shares of the year. As a reminder, we are utilizing a long-term projected non-GAAP tax rate of 28 percent, which reflects currently available information. We expect to use this normalized non-GAAP tax rate through 2025. The long-term non-GAAP tax rate may be subject to changes for a variety of reasons, including the rapidly evolving global tax environment. Signifying changes in our geographic earnings mix or changes to our strategy or business operations.
Speaker Change: and finally, our non-gap diluted share account is expected to be approximately 56.3 million shares of the year.
Speaker Change: As a reminder, we are utilizing a long-term projected non-gap tax rate of 28% which reflects currently available information.
Speaker Change: While we expect to use this normalized non-gap tax rate through 2025, 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 our geographic earnings mix, or changes to our strategy or business operations.
Nate Olmstead: Our outlook for fiscal year 2025 is based on the current environment, which contemplates, among other things, the global macroeconomic headwinds 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 how quickly we can ramp existing and new customer projects. We continue to manage our operations in a prudent manner as we navigate a challenging environment while also investing in our long-term growth.
Speaker Change: Our outlook for fiscal year 2025 is based on the current environment, which contemplates among other things, the global macroeconomic headwinds, and ongoing supply chain constraints, especially as it relates to our IPS business.
Speaker Change: This includes extended lead times for certain components that are incorporated into our overall solutions. In acting, how quickly we can ramp existing and new customer projects.
Speaker Change: We continue to manage our operations in a prudent manner, as we navigate a challenging environment while also investing in our long-term growth.
Nate Olmstead: Please refer to the non-GAAP financial information section and the reconciliation of GAAP to non-GAAP measure table in our earnings release for further details.
Speaker Change: Please refer to the non-gap financial information section and the reconciliation of GAP to non-gap measure tables in our earnings release for further details.
Nate Olmstead: And now let me turn it over to Mark for a few remarks prior to Q&A.
Speaker Change: and now let me turn it over to Mark for a few remarks prior to Q&A.
Nate Olmstead: Thanks, Nate.
Mark Adams: In conclusion, we remain laser-focused on achieving our strategic goals. Marked tailwinds from growth in AI deployment and higher-performing memory requirements remain favorable.
Mark Adams: Thanks, mate.
Mark Adams: In conclusion, we remain laser focused on achieving our strategic goals.
Mark Adams: Mark the Kail Lynch from Growth in AI deployment in higher-performing memory requirements remain favorable.
Mark Adams: We believe that talent solutions is ideally positioned to lead in the AI and the HPC markets. And we are focused on continued growth while helping our customers navigate their AI journeys.
Mark Adams: We believe that time and solution is ideally positioned to lead in the AI and the HPC Markers.
Mark Adams: and we are focused on continued growth while helping our customers navigate their AI journeys.
Unknown Executive: Operator, we are now ready to take questions. We will now begin our question in this session. As it sounds, you would like to ask a question. Please first start followed by one for you to the phone keypad.
Speaker Change: Who will now begin our question in this session? As it sounds you would like to ask a question, please first I'll follow by one, for you to the phone keypad. If any of you want to remove that question,
Unknown Executive: If any review of actual move that question, please first start followed by two. I think to ask a question, first start one.
Speaker Change: Please first off, followed by Tim.
Unknown Executive: As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking a question.
Speaker Change: I'd be into ask a question plus star one.
Speaker Change: As a reminder, if you're using a speaker phone, please remember to pick up your hands that before asking a question. Our first question comes from Nick Doyle with a company, Lidle. Nick, can I miss that open?
Nicolas Doyle: First question comes from Nick Doyle with a company legal. Nick, can I ask that open? Yes, thanks for letting me ask a couple of questions. First one, do you have any updated thoughts on how you're sizing this services and software opportunity with the Tier 2s? Maybe how many potential customers do you see in this pipeline? Yeah, I would just say that we typically don't disclose customer information on a call from a market opportunity today. We have talked about 20% of the corporate revenue is in the software and services, primarily services, today. But, as we announced another transaction this quarter and Q4 with a large consumer gaming company.
Speaker Change: Yeah, I would just say that we typically don't discuss.
Speaker Change: The Sclos customer information on a call, but from the market opportunity today, we have talked about 20% of the corporate revenue is in the software and services primarily services today, but as we announced another transaction this quarter and Q4 with a large consumer gaming company.
Nicolas Emilio Doyle: We continue to believe that software is going to be a material part of business over the long run.
Speaker Change: We continue to believe that software is going to be a material part of business over the long run. We're just not disclosing any...
Nicolas Doyle: We're just not disclosing any financial metrics around that today, as we are in the early stages.
Speaker Change: Financial Manager on that today as we are in the early stages.
Nicolas Doyle: Okay, maybe actually just follow up on that one. I mean, what led you, what in your opinion led you to win this large teething or gaming company? I mean, across-the-board service software. Yeah, I think it's similar. Yeah, good question.
Speaker Change: Okay, maybe I should just follow up on that one. I mean, what led you, what in your opinion led you to win this large season regaming company? I mean, across the board, a service software. Yeah, I think it's a little bit.
Nate Olmstead: So at our analyst day, when we talk about when we introduce the concept of managing complexity and something you've heard on our, on our. What is the timing of service renewals, look like, what is the cell through and sell out characteristics in LED, specific customers and memory and what their demand profile looks like. We have a number of things that we look at, and many of those actually do give us some confidence and visibility over the longer term, but as Mark said, sometimes the timing of, especially on the AI, AI infrastructure side, the timing of the booking and the revenue recognition can be challenging because of the complexity of those orders and the complexity of the problems that we're solving for customers.
Speaker Change: Good question. So, at our analyst day, when we talk about when we introduce the concept of managing complexity and something you've heard on our pre-
Speaker Change: Pre-script today.
Speaker Change: I think Mark really doesn't appreciate what that complexity really is and so
Speaker Change: The decision criteria around how and why we win these deals is because companies, for whatever reason, sometimes go off and try to do these either by themselves.
Speaker Change: or with companies who are more traditionally hardware systems providers.
Speaker Change: and typically the tools that we deploy, you know, kind of ensure a more success in these implementations and part of that software, part of its ability to manage the environment, whether it's the GPU, reliability, whether it's networking performance, the uptime.
Speaker Change: and so these things that we have been doing for many years both in HPC and more recently in AI.
Speaker Change: There are capabilities that we have that we believe differentiate us and we've had last quarter we announced one which is a Tier II CSP.
Speaker Change: This quarter is a very large gaming company and it really has to do with the level of expertise companies have available and how much they want to take on themselves and just being more of a hardware OEM, the choir and do themselves.
Speaker Change: The fact of the matter is that we continually seek customers who are, you know, they go out and try on their own, but they don't know how to monitor GPU reliability, or they don't know how to isolate and define a network issue ahead of time through diagnostics, and so these are the type of things that this complexity we raise.
Speaker Change: You know, whether it's in cooling, whether it's in power management, or what have you, any of these areas, for most of them were, you know, we have tool sets that allow us to deploy our software and our capabilities as a service organization to provide the best ROI for our customers.
Speaker Change: and then just kind of zooming out, you know, visibility has always been an issue.
Speaker Change: with the company and I get that, I mean it's hard to pinpoint lump B, CSP hardware orders.
Speaker Change: I know Nate gave a couple points on why you're shifting to guide a full year, but I guess I just asked what gives you the confidence to guide to that number, which is I'd say less visible, you know, instead of three months ahead.
Speaker Change: I'll take that and I'll let Nate jump in.
Speaker Change: Look, we continually are looking at our business on a go-forward basis.
Speaker Change: The visibility is one aspect that you're raising.
Speaker Change: is true. We've talked about it on nearly every earnings call, lumpiness, what that does to our ability to forecast. But remember, it's not just our ability to see what's in front of us from a commit standpoint, from a booking standpoint. The other issue we face is in the area of deployment predictability about timing.
Speaker Change: and so in any given quarter depending on what's in the backlog and what's being shipped and then at the customer deployed and recognizable from an accounting standpoint, there's additional forecast.
Speaker Change: Complexity for us and so we thought it was better for our business.
Speaker Change: To be able to, as we can bird the penguins' solutions, we thought it was better for our business to show you the confidence we have in the business.
Speaker Change: Over a longer horizon, because we think that that teases out some of the noise when things will be installed, deployed and booked from a revenue standpoint, anything else you had?
Speaker Change: Sure, yeah, I think some of the things that I look at Mark and I look at are, you know, what is our backlog?
Speaker Change: What is the timing of service renewals, look like, what is the cell through and sell out characteristics in LED.
Speaker Change: Specific customers in memory and what their demand profile looks like. We have a number of things that we look at.
Speaker Change: Um...
Speaker Change: and many of those actually do give us
Speaker Change: and some confidence in visibility over the longer term. But as Mark said, sometimes the timing of, especially on the AI, AI infrastructure side, the timing of.
Speaker Change: The booking and the revenue recognition can...
Speaker Change: Be challenging because of the complexity of those orders and the complexity of the problems that we're solving for customers.
Nicolas Doyle: Thank you.
Brian Chin: Thank you. Edick's question comes from Brian Chin with a company, Steve Full. Brian, your line is open. Hi there, good afternoon. Thanks for letting us ask a few questions.
Speaker Change: Thank you, Edick's question comes from Brian Chin with a company Steve Full Brian, your line is not open.
Brian Chin: Hi there, good afternoon. Thanks for wearing us. Ask us any questions.
Brian Chin: Maybe the first one here, IPS revenue grew sequentially yet a little lower than expected, and I apologize for this, an explanation if it was provided, but can you discuss or if and why. Any revenue, my shift is out of that quarter, whether it catches in the following quarter, and then kind of connected to that.
Brian Chin: The first one here, IPS revenue grew sequential yet a little lower than expected, and I apologize by this and explanation if it was provided but can you discuss or if and why, and you revenue might have shifted out of that quarter and whether it catches in the following quarter. And then kind of connected to that.
Nate Olmstead: And that's my appreciative of the longer horizon, fiscal year guide, but can you give us some idea of fiscal one queue, sort of how that trends, top and bottom line, or at least some sense of house, maybe second half loaded, you anticipate revenue being in the upcoming fiscal year. Hey Brian, this is Nate. So I think on the first one, yes, there was some business. In IPS that, as Mark was alluding to, sometimes it's difficult to know when all the operational boxes will get checked and when things will be recognized as revenues. So we did have some of that occurring queue for which we'll slip into Q1 and Q2, and that's reflected in the guidance.
Brian Chin: and definitely appreciative of the longer horizon, fiscal year, guys, but can you get a some idea of fiscal one, Q, sort of how that trends, top and bottom line, or at least some sense of house, maybe second half loaded, you anticipate revenue being in the upcoming fiscal year?
Nate Olmstead: I think, as far as how the year looks, you know, really we're focused on the full year outlook. I think, you know, the business doesn't change dramatically unless we have large winds overnight. So I think the trajectory in the past or the of the of the business in Q4 is a pretty good place to start as we look out into fiscal year 25.
Speaker Change: Thank you so much for having me.
Speaker Change: You know, really we're focused on the full year outlook, I think, you know, the...
Speaker Change: Business doesn't change dramatically unless we have large wins overnight so I think the trajectory in the past and of the business in Q4 is a pretty good place to start as we look out into fiscal year 25 Thank you.
Nate Olmstead: Okay, all right, fair enough. Maybe, growing in a little bit over time, I think the market, you know, can appreciate maybe the increased diversity of the engagement and your go to market strategy. I'm curious, what has been the customer reception thus far with what the production ready less customized Origin AI solution. How much faster time to revenue is this than kind of the customized engagement. And do you expect Origin AI to become a bigger contributor to revenue by fiscal second house? I think just can't really run as Mark. I think fiscal second half might be aggressive from the materialities standpoint to think that origin AI would be a major contributor.
Speaker Change: Okay, all right, fair enough.
Speaker Change: Maybe drilling in a little bit. Over time, I think the market can appreciate maybe the increased diversity of the engagement in your go-to-market strategy. I'm just curious, what has been the customer reception thus far with what the production ready, less customized origin AI solution? How much faster time to revenue is this than kind of the customized engagement? And do you expect origin AI to become a bigger, contributed revenue by
Speaker Change: Um, I think.
Speaker Change: just candidly brought us more. I think um...
Speaker Change: Chris Kulsek and have might be aggressive from the materialities standpoint to think that origin A.I. would be a major contributor. The reason why is one of, as you think about the three different types of customers we have.
Nate Olmstead: The reason why is one of, as you think about the three different types of customers we have. We've got hyperscalers who have had a large procurement dollars. We also have Tier II service providers, again, larger deployments, and then you've got the enterprise customers that, you know, typically aren't starting with massive deployments. Again, meaningful multi-million dollar deployments, but they tend to do things in smaller sizes, so to speak, up front proof of concept or single application type AI implementations. Why I bring that up is because Origin AI is particularly strong in the last category, which should help us grow, but the implementations out of the gate might be a little smaller.
Speaker Change: Tier II service providers, again larger deployments, and then you've got the enterprise customers.
Speaker Change: that, um...
Speaker Change: You know, typically aren't starting with massive deployments.
Speaker Change: Again, meaningful multi-million dollar deployments, but
Speaker Change: They tend to do things smaller sizes to speak up front proof of concept or single application type AI implementations. Why I bring that up is because...
Speaker Change: Origin AI is particularly strong in the last category, which should help us grow.
Speaker Change: But the implementations out of the gate might be a little smaller, but I will call out one thing that the reference customer winning Q4 with the global gaming company was an origin AI win for us, and so I think, you know, it's the validations great, but I would also say that it'll take us a little time to build that funnel up. I would hesitate to say it's going to be second half of 25.
Nate Olmstead: But I will call out one thing that the reference customer went in for with the global gaming company was an Origin AI win for us, and so I think, you know, it's the validation's great, but I would also say that it'll take us a little time to build that funnel up. I would hesitate to say it's going to be the second half of 25.
Brian Chin: Okay, yeah, fair enough.
Nate Olmstead: That may be one question that's also ties into the fiscal year outlook. Think, I think you, your guidance reflects topics growing somewhat roughly at the rate of your revenue growth there, thereabouts. Do you envision increasing that target any after the SKT transaction closes, or is your outlook already reflected those kind of any boost and spending you might do after you receive the proceeds? Hey, Brian, Nate here. Actually, we're planning on growing topics at about half the rate of revenue growth at the midpoint of the guidance, so taking to the look on that. But, you know, I think we are, this is a year of some investment, especially on software, as we think that's critical to the long-term success. But I'm also veribilizing a lot of that spend too.
Speaker Change: Okay, that's fair enough.
Speaker Change: That may be one question that's also ties into the fiscal year outlook. I think you, your guidance reflects, topics growing somewhat roughly the rate of your revenue growth there, thereabouts. Do you envision increasing that target any after the SKT transaction closes or is your outlook already reflected in those?
Speaker Change: kind of any boost and spending you might do after you receive the proceeds.
Speaker Change: Hey, Brian Nate here. Actually, we're planning on growing topics at about half the rate of revenue growth at the midpoint of the guidance. So, maybe I'll take another look on that. But, you know, I think we are, this is the year of some investment, especially on software. And as we think that's, you know, critical to the long-term success, but I'm also variableizing a lot of that spend too. So, you know, as the year unfolds, it gives us an opportunity to throttle up or down, speed things up, slow things down a little bit on up that is necessary. But I would characterize this as a year of greater investments in last year. Thank you.
Mark Adams: So, you know, as the year unfolds, because it's an opportunity to throttle up or down, speed things up, slow things down a little bit on the effect that is necessary, but I would characterize this as a year of greater investments in last year.
Brian Chin: Okay, yeah, thank you.
Mark Adams: Yeah, the only other thing I would add to that is if you look back four years, they're expected of operating the company with, you know, an approved mindset. I'm pretty confident and proud of our efforts there, that when the markets have turned, it would be memory or LED at a likes or when we face customer concentration issues in the past four years, I think we've demonstrated that we'll be prudent and dial in operating expenses accordingly, and to Nate's point on variability, we watch it very carefully. You know, that's what got us to 16 quarters in a row of profitability and positive EPS in a stronger balance sheet, just watching the investments carefully so we can obviously position ourselves for growth, but not at the risk of the company's balance sheet.
Speaker Change: Okay, thank you.
Speaker Change: The only other thing I would add to that is...
Speaker Change: If you look back four years, they're attracted to of operating the company with, you know, an approved mindset. I'm pretty confident and proud of our efforts there that when the markets have turned, it would be memory or LED at a likes or when we faced customer consultation issues in the past four years.
Kevin Cassidy: And next question, close from Kevin Cassie with the company Rosemblets, for these Kevin, the line of that open. Yes, thanks for taking my question. Along the line from you describing its free types of customers, the enterprise customer. So couple weeks ago, Accenture, I'm also an agreement with Nvidia, and of course, there would be targeting enterprise types of customers with that. Does that validate your business strategy, and do you see that Accenture is more of a competitor, or do you think there's an opportunity there, so what's with them? Yeah, I don't think of it more in a competitive landscape, because I think at the level that we're talking about, it's more; we are more in the infrastructure category, so to speak.
Speaker Change: i
Speaker Change: And next question comes from Kevin Cassie with a company Rosembroke, the 3rd East Kevin, the line of that open.
Kevin Cassie: Yes, thanks for taking my question. Just along the lines when you're describing these three types of customers, the enterprise customers, a couple of weeks ago, Accenture amounts an agreement with Nvidia, and of course there would be targeting enterprise type customers with that. Does that validate your business strategy, and you see that Accenture, is that more of a competitor, or do you think there's an opportunity there to work with them?
Speaker Change: Yeah, I don't think of it more in a competitive landscape because I think at the level that we're talking about, it's more we are more in the infrastructure category so to speak.
Mark Adams: And I think from what I have found with Accenture is there a little bit higher level in terms of application, layer and security layer, and commercial investment thesis. I think it's a big ad. You know, as we think about our future, I think there's probably more opportunity for us to cooperate with those types of firms, who are out advising boards and CEOs on the commercial rationale, and maybe the application layer, than I think they are spending a lot of time on infrastructure. By the way, Kevin, I'm not seeing that. If that was specific to infrastructure, I missed it, and I missed it in your question.
Speaker Change: and I think...
Speaker Change: From what I have found with Accenture, is there a little bit higher level in terms of application layer and security layer and commercial investment thesis? I think it's a big ad as we think about our future, I think there's probably more opportunity for us to cooperate with those types of firms who are out advising boards and CEOs on the commercial rationale and maybe the application layer, then I think they are spending a lot of time on infrastructure.
Speaker Change: by the way Kevin, I'm not seeing that so I'm not seeing that if that was specific to infrastructure I missed it and I missed it in your question.
Mark Adams: No, it's just the in general, that as, you know, AI starts moving to the enterprise customers, you know, that seems that's your largest opportunity, you have the peer to, but as the Fortune 500 company started opting at, that's where you move into your real life. And then also on the guidance, you know, gross margin and splat, and I know you're focused on adding more services and software. Is this, I guess I are just being more conservative or. You know, I guess how does that. I think, I think, I think you do contemplate the guide, especially around.
Kevin Cassie: Now, it's just an in-generalment as, you know, AI starts moving to the enterprise customers, you know, that it seems that's your largest opportunity, you know, you have the fear too. But like, as the Fortune 500 company started opting at this, that's where you're moving to your real house.
Kevin Cassie: And then also on the guidance, you know, Chris margin is flat and I know you're focused on adding more.
Kevin Cassie: Services and Software, is this, I guess I are just being more conservative or
Speaker Change: I guess how does that mean?
Speaker Change: I think if you contemplate the guide, especially around
Nate Olmstead: The Penguin Computing piece of it. I think Nate said somewhere between 10 and 25 percent growth this year. And Kevin, we've always said to the investor community that, you know, especially when we get into some high growth times. The gross margin kind of balances out because some of the infrastructure or hardware related is at lower, lower margin. Now, certainly not where our competitors are or the people who we get lumped in with. We're not talking about 11 percent, like some other competitors or midteens. But you can imagine that higher, you know, lower margin hardware offsets.
Speaker Change: the Penguin Computing piece of it.
Speaker Change: I think Nate said somewhere between 10 and 25 percent growth this year.
Speaker Change: and Kevin we've always said to the investor community that.
Speaker Change: You know, especially when we get into some high-growth times.
Speaker Change: The gross margin kind of balances out because some of the infrastructure of hardware related.
Speaker Change: is at lower margins. Now certainly not where our competitors are or the people we get lumped in with.
Speaker Change: We're not talking about 11% like some other competitors or the teens.
Speaker Change: but you can imagine that higher, you know, lower margin hardware offsets and so in some sense it's actually a good sign that are we're growing.
Nate Olmstead: And so, in some sense, it's actually a good sign that we are growing. And the systems will lead. And then hopefully over time software and services will catch up and take a and be more in the creative. But as we win new customers, especially during the infrastructure, hardware deployment phase, which is normally phase zero and phase one, you're going to see some of that. I think we've got enough resilience in the business to guide as we guided. But that can have an impact on gross margin from quarter to quarter. And we've just a couple more points on that one.
Speaker Change: and the systems will lead, and then hopefully, over time, software and services will catch up and be margin-to-creative. But as we win new customers, especially during the infrastructure, hardware deployment phase, which is normally phase zero and phase one, you're going to see some of that. I think we've got enough resilience in the business. The guide is we guided, but that can have an impact on gross margin from quarter to quarter.
Nate Olmstead: I think certainly there's a range that we gave on gross margin. So it does leave some room for some margin gross margin expansion, really depending on business mix. And along those lines, you know, we did call out that memory is expected to accelerate its gross year over year from 10 to 20%, and that's a lower margin category. So a little bit of pressure to offset some of the expansion potential in IPS. Last point I'd probably make just on the P&L overall. We are expecting to see some expansion of operating margin again. And so while there's perhaps not as much in the guide or in the outlook at the gross margin level, because we're growing out back slower than revenue, there is some nice expansion and operating margin reflected in that.
Speaker Change: may be just a couple more points on that one. I think certainly there's a range that we gave on gross margin, so it does leave some room for some gross margin expansion, really depending on business mix.
Speaker Change: and along those lines, you know, we did call out that memory is expected to.
Speaker Change: Accelerated's growth here over year from 10 to 20% and that's a lower margin category, so a little bit of pressure to offset some of the expansion potential in IPS.
Speaker Change: Last point I'd probably make just on the P&L overall.
Speaker Change: We are expecting to see some...
Speaker Change: Expansion of Operating Martian, again.
Speaker Change: and so while there's perhaps not as much.
Speaker Change: in the guide, or in the outlook at the gross margin level.
Speaker Change: because we're growing up, actually, slower than revenue, there is some nice expansion, an operating margin reflected in it.
Nate Olmstead: Okay, that's positive.
Speaker Change: Nass. Okay, let's pause it. Thank you.
Unknown Executive: Thank you. Thanks, Kevin.
Thomas O'malley: And the next question comes from Thomas O'Malley with a copy of our please. I must see a line of that open. All right, this is a cop listing on for Tom O'Malley. Thanks for taking the time or taking my question. Could you guys talk a little bit about when you expect the software and services to kind of layer on the other revenue parts from selling all the hardware? I know you guys talked about like a little laginated and then it's being gross margin creative afterwards, but any updates of when you'd expect it or what. It's typically time is, but you have a hardware way.
Kevin Cassie: Thank you, Kevin.
Speaker Change: and next question comes from Thomas O'Malley with a cup key by a please. If I'm going to see your line, it's out open.
Speaker Change: All right, this is Kyle Bluestein on for Tom O'Malley. Thanks for taking the time or taking my question. Could you guys talk a little bit about when you expect the software and services to kind of layer on the other revenue parts from selling all the hardware? I know you guys talked about like a little lagging in, and then it's the most important creative afterwards, but any updates on when you expect it or what the typical lead time is when you have a hardware win.
Nate Olmstead: You know, the way to think about we do get sometimes we get services upfront, but again, it's a fraction there of in terms of the hardware upfront. And then what we have is, as we've mentioned on prior calls, we basically have what you should think of as annual service agreements with our customers. And those get renewed every 12 months and typically at the end of a calendar year where most of our customers operate. And so every year we go through the process of adding new customers, and sometimes services wind down, would have you. And when you think about our business, if you look at how services play out, normally year one, if you look at gross margin transaction for a new customer.
Speaker Change: You know, the way to think about we do get some times we get services up front but again it's a fraction there of in terms of the hardware up front and then what we have is
Speaker Change: As we've mentioned on prior calls, we basically have what you should think of as annual service agreements with our customers and those get renewed.
Speaker Change: 12 months, and typically at the end of a calendar year where most of our customers operate. And so every year we go through the process of adding new customers and sometimes services wind down would have you and when you think about our business, if you look at how services play out, normally year one, if you look at gross margin transaction for a new customer, is probably lower in gross margin than year two and year three because services becomes such a higher piece of the revenue of that customer.
Nate Olmstead: It's probably lower and gross margin than year two and year three, because services becomes such a higher piece of the revenue of that customer. All right, thanks. Thank you guys.
Speaker Change: All right, thanks. Thank you guys.
Unknown Executive: If it's time for another question as a register, then we can, if you like to ask a question, please press star followed by one.
Speaker Change: At the song that I know the question is registered in the queue, again, if you'll like to ask a question, please press star and follow by one.
Speaker Change: Anna's question comes from Amanda Oro with a company loop capital.
Ananda Prosad Baruah: Another question comes from a Nanda or what's a company Loop Capital. And then you may pay. Thank you guys for taking the question.
Speaker Change: Amanda, you may proceed. Thank you guys for taking the questions. Yeah, I guess, just a couple for me.
Ananda Baruah: Yeah, I guess just a couple for me, you know, you guys thought to be in with, well, I guess on the software and service and really services and maybe software and blogs. Expansion opportunity. Is there opportunity to also partner with some of the infrastructure vendors. Server vendors, any of the other infrastructure vendors, as the sink from them, just customers. after that opportunity, and they have a quick follow-up, also. Thanks.
Speaker Change: You guys talked at the end as well. I guess on the software and service was really services and may be talked to us in the long expansion opportunity.
Speaker Change: is their opportunity to also partner with some of the infrastructure vendors, serve vendors, any of the other infrastructure vendors, as the sink from just customers.
Speaker Change: and I have a quick follow-up, all of that. Thanks. Absolutely, part of our go-to-marker strategy as we have evolved. Historically, we've been primarily a direct to customer engagement model and over the last six months.
Mark Adams: Absolutely, part of our go-to-market strategy, as we've evolved. Historically, we've been primarily a direct to customer engagement model, and over the last six months, we've invested in resources and are in active engagement discussions with both OEMs, who some might even consider competitors. We don't think of it that way, to be able to provide software and services on top of hardware, and then others are more in the integrated infrastructure type model. And so, it's a long-winded way of saying, absolutely part of our go-to-market strategy, and we're making pretty good progress there.
Speaker Change: We've invested in resources and are in active engagement discussions.
Speaker Change: with both OEMs.
Speaker Change: who some might even consider competitors. We don't think of it that way. To be able to provide software and services on top of hardware and then others are more in the...
Speaker Change: Integrated Infrastructure type model, and so it's a long-winded way of saying, absolutely part of our go-to-market strategy and we're making pretty good progress there.
Nate Olmstead: Mark, let's speak for help, Paul. And I guess the follow-up is maybe just to make, just on the guide for your service software, and so it's to keep software. Any contact you can provide about what portion of the guide ever wrote is impacted by services and software expansion and all sorts of hardware. Anything there to be helpful there. That's just a move. Yeah, thanks, and I think Mark, what Mark alluded to is that early in the deal tends to be more hardware-heavy in terms of the revenue recognition. And I think this is a year of some growth, as you can see in the outlook.
Speaker Change: Mark, that's a secret helpful. And I guess the follow-up is maybe with the Nate, just on the guide for your stuff where you can see it. Any contact you can provide about.
Speaker Change: What's the question of the guy of the road is impacted by services and software expansion, where I'm going to answer the answer. Anything there to be, please help me again.
Speaker Change: That's it for now.
Speaker Change: Yeah, thanks Ananda. You know, I think Mark, what Mark alluded to is that early in a deal tends to be more hardware, hardware heavy in terms of the revenue recognition. And I think this is the year of some growth as you can see in the outlook. So probably not see a really large swing in the software hardware mix in 25. Of course, that could change depending on the types of deals we get. We certainly are pursuing some things that are more services centric, but just based on sort of court base assumptions. I would sort of assume you know.
Nate Olmstead: So probably not really large swing in the software hardware mix in 25. Of course, that could change depending on the types of deals we get. We certainly are pursuing some things that are more services-centric. But just based on sort of core basis assumptions, I would sort of assume, you know, not a lot of change in that mix; perhaps a little bit of increase. But again, you've got memory growing quickly as well, which will offset some of that. And make down the road would would that dynamic have the potential to all through to something we agree.
Speaker Change: and not a lot of change in that mix perhaps a little bit of...
Speaker Change: Increase, but again, you've got memory growing.
Speaker Change: Quickly as well, which will offset some of that.
Speaker Change: and make down the road, would that dynamic have the potential to alter to something we agree, meaning as you sort of automate some of these software and services, you know, sort of partnership deals, as you think from the hardware.
Mark W. Adams: Meeting as you sort of. To automate some of these software and services, you know, sort of the partnership deals. As you think from the hardware. I would just imagine that that's I don't really have a lot to do with this. I agree with that. I think that is true, and you know, it's also operationally when we look at things in our pipeline. We look at new opportunities. We always talk about the services opportunity that are part of those as well. It's a real key focus for us and core metrics.
Speaker Change: I would be so mad, you know, that's how you're going to come up with a feeling, that's how you're going to work.
Speaker Change: I agree with that. I think that is true and it's also operationally when we look at it.
Speaker Change: Things in our pipeline, we look at new opportunities.
Speaker Change: We always talk about the services opportunity that are part of those as well. It's real key focus for us in a core metric.
Ananda Baruah: Cool thanks. Thanks a lot, guys. Thank you.
Speaker Change: Thanks for watching.
Kevin Cassidy: Next question comes from Kevin Cassie with company was in blood security's Kevin. The line is not open. Yes, thanks for letting us to follow up question. Okay, telecom.
Speaker Change: Next question comes from Kevin Cassie with Coffee, Rosenblatt, Securities Kevin, the line is not open.
Kevin Cassie: Yes, thanks for letting us to follow up questions. SK Telecom, what is it that would be holding this effort? You know, why does it have to wait till the end of the year, maybe the beginning of next year? What other issues need to be resolved?
Nate Olmstead: What I guess what what is what that would be holding this effort, you know, why does it have to wait till the end of the year, maybe beginning of next year. What other issues need to be resolved. Kevin is answering because that type of agreement is treated very similar to an eminent agreement relative to two parties, one being US-based, and one not being US-based, and SK Telecom being Korean, and so it just has to do with more of US oversight, so to speak, and just normal protocol. We have not seen any hiccups, but it does add a little more time to the process.
Speaker Change: Kevin, it's an interesting big, that type of agreement.
Speaker Change: is treated.
Kevin Cassie: very similar to an M&M agreement relative to two parties, one being U.S. based and one not being U.S. based.
Kevin Cassie: and SK Telecom being Korean.
Kevin Cassie: and so it just has to do with more of U.S.
Kevin Cassie: Oversight, so to speak.
Kevin Cassie: and just normal protocol. We...
Kevin Cassie: have not seen any hiccups.
Nate Olmstead: And so, even at the time of the announcement, we knew that, and we suggested, I think it was the end of the calendar year as a possible timing of close. I don't think we're changing that today. It's just the part of the process that you would not normally have, if it was a US investor, nearly as much as US oversight for any type of investment by a foreign entity into a US entity. Okay, thank you.
Kevin Cassie: but it does add a little more time to the process and so.
Kevin Cassie: Even at the time of the announcement, we knew that we suggested, I think it was the end of the calendar year as a possible time they have closed. I don't think we're changing that today, it's just...
Kevin Cassie: and the part of the process that you would not normally have if it was a US investor nearly as much is US oversight for any type of investment by a foreign entity into a US entity.
Mark Adams: At this time, there are no more questions registered in Q, so I'd like to pass the conference back over to our hosting team, Mark Adams, for closing remarks. Thank you, operator, and thank you all for your questions today and for joining us on the call.
Speaker Change: At this time there are no more questions we're just doing in queue so like to pass the conference, back over to our hosting team, Mark Adams, we'll close our remarks.
Mark Adams: Thank you, operator, and thank you all for your questions today and for joining us on the call.
Mark Adams: As we close, I want to reiterate, the fiscal 24 was a transformative year for our company, Now Paying One Solutions. We've made significant strides in positioning ourselves to lead in AI and high performance computing, investing not just in the hardware and infrastructure, but also in the software and services that will help drive the next phase of our business. We enter fiscal 2025, guided by a clear strategy focused on capturing opportunities in AI infrastructure, advanced memory solutions. With a solid financial foundation, innovative product offerings, and strategic partnerships, I believe we were well positioned to capitalize on the demand for AI on premise in the cloud and at the edge.
Mark Adams: As we close, I want to reiterate the fiscal 94, sorry, fiscal 24 was a transformative year for our company.
Mark Adams: Now playing with solutions.
Mark Adams: We've made significant strides in positioning ourselves to lead in AI and high performance computing.
Mark Adams: Investing not just in the hardware and infrastructure.
Mark Adams: but also in the software and services that will help drive the next phase of our business.
Mark Adams: We enter a fiscal 2025 guided by a clear strategy focused on capturing opportunities in AI infrastructure, advanced memory solutions.
Mark Adams: with a sour financial foundation.
Mark Adams: Innovative product offerings.
Mark Adams: and Strategic Partnerships.
Mark Adams: I believe we were well positioned to capitalize on the demand for AI on premise in the cloud and at the edge.
Mark Adams: We are excited about the path ahead and remain committed to delivering value to both our customers and shareholders to execution, innovation, and operational excellence.
Mark Adams: We are excited about the path ahead and we may be committed to delivering value to both our customers and shareholders to execution, innovation and operational excellence.
Mark W. Adams: Thank you again for your continued support. We look forward to updating you on our progress in the quarters to come.
Unknown Executive: That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.