Smart Global Holdings, Inc.(NASDAQ:SGH) recently reported Q2 FY2023 results, with record non-GAAP gross margin at 28.9% on $429M in revenue, which was within quarterly revenue guidance, but down 4.5% from the same quarter in FY2022. Non-GAAP Earnings per share (EPS) was $0.76 – down from $0.87 in the year-ago quarter.
CEO Mark Adams noted the market headwinds on the earning call, noting SGH continues to navigate near-term challenges “with our deep manufacturing expertise, extensive customer relationships, disciplined operating model and strong balance sheet.” SGH’s key focus areas for growth and attractive returns include: AI, Machine Learning, Data Analytics, 5G, Enterprise Storage and Specialty Lighting – providing “multiple secular tailwinds” according to CEO Adams.
Net Revenue in Q2 FY2023 for the three SGH business units:
| Business Unit | Q2 FY23 Rev (M) | % of Total SGH Q2 FY23 Rev |
| Intelligent Platform Solutions (IPS) | $222.5 | 52% |
| Memory Solutions | $151.1 | 35% |
| LED Solutions (Cree LED) | $55.6 | 13% |
| Total Q2 FY2023 Net Revenue | $429.2 | 100% |
The quarterly performance of the Lighting Solutions business unit (Cree LED) was as guided during last quarter’s earnings call, with the current economic environment creating soft demand that is compounded by customers working down existing inventory. CEO Adams emphasized that while there is a continuing focus on tight cost controls at Cree LED, investment innovation continues to strengthen its position in the LED sector. He noted that signs of demand improvement are being seen and that revenue “is expected to be up modestly in fiscal Q3.”
CFO Ken Rizvi highlighted balance sheet improvements in Q2 FY2023 including an inventory reduction to $294M from $416M at the end of the prior quarter, mainly due to higher levels of IPS shipments in Q2. He also noted that In Q2 FY2023 SGH spent approximately $11M to repurchase 677,000 shares. SGH has spent $58M of a $75M share repurchase authorization since April 2022 for a total of approximately 3.2M shares repurchased.
Looking ahead to the next quarter, the company expects continued global macroeconomic headwinds and ongoing supply chain constraints. Revenue guidance for Q3 FY2023 indicates expected net sales to range from $355M to $395M, incorporating lower revenue for the Intelligent Platform Solutions business, flat revenue from Memory Solutions and “modest” increase in revenue for Cree LED. Cash capital expenditures for Q3 FY2023 are expected to be in the range of $12M to $15M. CEO Adams again closed his formal comments on the Earnings call with a thank you to the global team at SGH for their execution in Q2. If SGH delivers on its guidance, Q3 will be an opportunity for Cree LED to be the bright spot among SGH’s business units.
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SGH Q2 FY2023 Press Release: https://ir.sghcorp.com/news/news-details/2023/SGH-Reports-Second-Quarter-Fiscal-2023-Financial-Results/default.aspx
SGH Q2 FY2023 Financial Results Presentation: https://s27.q4cdn.com/987169844/files/doc_financials/2023/q2/SGH-Q2-23-Earnings-Presentation-Final.pdf