Smart Global Holdings, Inc.(NASDAQ:SGH) recently reported Q3 FY2023 results, with revenue of $383M, down -17% from the same quarter last year, but within guidance. Revenue from services continues to grow at 15% of revenue in Q3 FY2022, up from 13% of revenue last quarter. Earnings per share (EPS) was above guidance, coming in at $0.66.
CEO Mark Adams opened his prepared comments on last week’s earnings call by calling out the progress made on the transformation of SGH over the past three years: “we’ve grown our top line, increased our gross margins, delivered strong earnings per share and strengthened our balance sheet by generating positive operating cash flow.” Adams, who came in as CEO the year prior to the 2021 acquisition of the Cree LED business, continues to stress that SGH’s diverse lines of business – computing, memory and LED lighting solutions – all share a customer-focused expertise for specialty end markets.
Net Revenue in Q3 FY2023 for the three SGH business units:
| Business Unit | Q3 FY23 Rev (M) | % of Total SGH Rev Q3 FY23 | Q3 FY23 Rev vs Q3 FY22 |
| Intelligent Platform Solutions (IPS) | $148.4 | 39% | -45% |
| Memory Solutions | $170.8 | 44% | +79% |
| LED Solutions (Cree LED) | $64.1 | 17% | -47% |
| Total Q3 FY2023 Net Revenue | $383.3 | 100% | -17% |
The quarterly performance of the LED Solutions business unit (Cree LED) was up sequentially by +15% from Q2 FY2023 with CEO Adams noting that last quarter “could have been the bottom.” He noted that they are seeing an improvement in customer design activity, typically a precursor to improved demand, and expressed optimism for Cree LED to have a stronger fiscal 2024. Three of Cree LED’s most recent product releases received LED Magazine’s BrightStar Award for innovation. SGH recently announced the opening of Cree LED’s new headquarters at the Park Point campus in Research Triangle Park, NC. Cree LED’s new 86,000 sf facility includes 42,000 sf of lab space and will focus on research and development. SGH’s strategy with Cree LEDs has been to transition away from silicon carbide to sapphire wafers, as well as moving to an outsourced, capital-light manufacturing model.
Looking ahead to the final quarter of FY2023, SGH is guiding for revenue in the range of $350 to $400M, with GAAP gross margin of approximately 26% (plus or minus 1%.). The Q4 FY2023 assumption for the Cree LED business revenue is to be up “modestly.” CEO Adams commented during the latest earnings call Q&A that the challenging LED market environment is not specific to Cree: “I would encourage you to benchmark Cree’s performance relative to the competitive landscape…Cree has done a great job navigating some really tough headwinds during the macroeconomic environment they faced and I’m just really impressed.”
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SGH Q3 FY2023 Press Release: https://ir.smartm.com/news/news-details/2023/SGH-Reports-Third-Quarter-Fiscal-2023-Financial-Results/default.aspx
SGH Q3 FY2023 Financial Results Presentation: https://s27.q4cdn.com/987169844/files/doc_financials/2023/q3/SGH-Q3-23-Earnings-Call-Presentation_Final.pdf