Penguin Solutions (PENG) 4 Oct 222022 Q4 Earnings call transcript

Good afternoon, everyone. Welcome to the SGH Fourth Quarter Fiscal 2022 Earnings Call. My name is Don Tan, I'll be your operator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Ms. Schmidt. Suzanne Ms. Schmidt?

XXXX Good conference you discuss call quarter full-year operator. on joining SGH's and and earnings today's and fiscal afternoon, you, for thank us fourth Thank results. webcast to

Mark On the Chief Officer; Ken and Chief Officer; Chief Officer. Jack Operating Financial Adams, Rizvi, call Pacheco, Executive are: today

the the presentation the the go everyone forward-looking the current is results website. earnings for that and We are statements statements like use most you press made present certain included and to Please presentation. this quarter section call press statements company. can note that find also and Relations our that and or You these release statements events of company's on the to that of throughout call actual site forward-looking the may to of for accompanying slide the constitute would in expectations, on releases the Investor materially. may information note read encourage differ I remind the the to today

included the that, all GAAP release. press Adams, our Mark? the also consider Mark reconciliation will GAAP should non-GAAP from, financial isolation CEO. in for me performance. GAAP measures discuss call is measures turn you a when and with A in let to analyzing measures of substitute considered today's be encourage non-GAAP to We superior And as to not over results. or measures. our Non-GAAP both We to

XXXX committed shareholder fiscal to Throughout returns. a company long-term to Suzanne. Thanks, attractive profitable SGH we and continued transform into growth diversified

despite results key a climate. and macroeconomic During accomplished our a milestones, strong FY'XX, of we challenging achieved number

XXX%, by of on a GAAP gross per revenues now $XXX record points, annual adjusted by non-GAAP topline the earnings per margins adjusted XXX basis and EBITDA and EBITDA non-GAAP over share we looking margins record the and included, basis by of $X.X back of past achievements over earnings increased non-GAAP by on annual 'XX billion; record fiscal grown And expanded million; grown over annual over non-GAAP years, $X.XX of basis; XX.X% have record a XX.X% two XX%, XXX%. gross share. Our

Technologies growth addition, our better continued years In completed after ahead. in for positioning of our year-end, the IPS the just group acquisition fiscal we Stratus

our to revenues quarter. midpoint SGH concluded and financial totaled Now metrics million turn fourth XXXX upper-end range. or gross resulted margins and $X.XX our XX.X%. These the combined let quarter operating the guidance came in earnings results per in of share $XXX with me guidance. fiscal our with program the fourth exceeded at at which quarter Fourth the strong non-GAAP non-GAAP of above repurchase discipline of key share,

year-ago to IPS. the turn Revenue our review for from me at sequentially; the a fourth and of $XXX XX% up with of Starting XX% Let businesses. record each million up in came brief quarter, a quarter.

to our continues contributor an XX% DevOps, Services rollouts including needs, we predictable customers' our first practice growth see world IPS. and use researchers continued past technologies new Management, to IPS demonstrate higher Heading a as project demand The These to the to HPC. were revenue designing these are our available be of large After highlighted were from Computing's Penguin What's that year-over-year New This the Penguin more? the we to computing shipments of major recognition. for and HPC and System FY'XX. area year to Operations Development implementing has success to taken multi-year services our our engagements year, HPC-AI that individualized an portion value-added XXXX additional IPS when compared meet our deliver industry A to value offers or customers. offerings Optimization. cloud customer exciting services note solution, part for the and more up in base. margins. grew On garner proposition services strong a into revenue installations, on revenues revenues compared feature year in basis, longer-term fiscal QX, growth quarter. XX% offer and hardware 'XX. of in cloud-technology market differentiated fiscal of quarter, scientific QX when Despite based half a increased we IPS's across service on continue of

QX we signals somewhat will QX. we customer and IPS And as has out mentioned have a monitor we As a business. on look been prior demand to result, traditionally calls, continue lumpy further as into into

of that allow address the and us fault-tolerant comprehensively is availability capabilities IPS our equipped and addition more customers' with needs. advanced to future expand Stratus, offerings With will IPS high our

Revenue in to LED Group. and quarter. turning fourth contributing COVID-related demand. the in constraints, policies impacting Solutions supply totaled our China Cree $XX Now headwinds LED faced to million with chain strong

Our demand continues in in to also China, business Europe. and we be weakness are soft and US the seeing

and in specialty in and As as decrease SSD particular, designs in LED segments. key SSDs. LED as confident PCIe networking for our storage remains storage video increasing products. in sequential we and such, general memory and Cree such SATA long-term operating for group, In strong the to a expect Solutions enterprise LED in a the level we DDRX, a under seeing headwinds leader premium of outdoor are high-value target saw revenue brand, and horticulture, and OEM the street DDRX, our are as million. and technology and macro remains such performance QX. we customers applications such our for the networking the markets, Modular Flash architectural high performance are computing offerings applications, lighting. applications lighting came demand design-ins our memory increased products high-performance business the see subside. brand We $XXX as an as entertainment from core In at LED In operating business activity our telecom, SMART space, lighting business Memory markets NVMe for such fine-pitch in The of specialty

Compute technologies such technologies DDRX, DDRX Express products, commonly newer CXL. We legacy are Link, as for and referred to and activity design as spanning to also seeing DDRX, as strong DRAM Specialty such

rate the in smartphone partially headwinds markets Brazil. front, form interest of the seeing data positive PC anticipated industry in on and flows That generating Brazilian continue call. consumer machine to are learning favorable X and our proliferation meet DDRX supporting Additionally operations. strong market continued new products disciplined develop SSD market order Brazil such strength we quarter, our Brazil with while last managing to in our trends longer-term specialty specialty DDRX, were fourth introducing as to said, manufacturing, all cash from offset our operating our The overall customers. capitalize solutions Longer-term business our free valued The us for SSDs, providing competencies modules, the service memory we to foundation communicated customer factors. increasing in core weaker center and attach memory to for and AI, for differentiated that engineering, remained business an growth, as we the on Gen on demand, of in approach migration expenses and with DDRX growth application and our remains capital uMCPs, and as expenditures

news Now to look I'd fiscal like into share you back level and ahead XXXX. take some with a we as step corporate

August. like the acquisition Stratus would officially when team, at of joined us First, end closed the the I who welcome to

AMD welcome, we Massachusetts Officer August Board the celebrate are headquarters person. Papermaster, who fact, in milestone at to joined with on important of call this like Mark a Maynard, in Chief conducting I'd In Directors from Technology XXnd. this our to team Stratus earnings also

and Data We industry transformation guide to of we instrumental and With the our are technology key growth continue such as thrilled Computing. as join Cloud, have in Machine Analytics, be years High-Performance to Board. Learning, his Mark engineering markets the SGH SGH Mark XX-plus AI, will and experience, helping in

Finally, announce SGH's emissions I'm very to to One achieving Two net-zero proud and XXXX. by commitment Scope

it governance in which this environmental, will our our second a social, performance more quarter. detailed You coming as to and over for review weeks. our Ken available website and And commitment, in can guidance be efforts QX our for Ken? report, annual well read I'll of about now, financial the on next other as ESG hand

remarks our earnings I to which non-GAAP Mark. our tables. are on my will Thanks, release GAAP reconciled in focus results,

for results XXXX and me fiscal our fourth full-year to quarter let results. Now turn our

by XX% As had Intelligent across all $X.XX Platform businesses. strong by XX% strong driven a all Overall LED full-year Mark basis points top results XXXX by margin XX% by business. XXX fiscal year. to million. contributed Memory solutions XXXX, in grew billion, with was three Solutions Non-GAAP to record year-over-year XXXX approximately were And margin This year a gross our approximately for our year, strong up another the the shared XX.X% approximately prior Specialty of Memory our is growth up a performance. a execution this across grew of on fiscal $XXX improvements $XXX to driven million our basis by of $XXX from segments. XX.X% previous in on fiscal Solutions in sales growth X% fiscal earlier, we first on basis our business. the during to million, revenues in record driven year-over-year sequential in

share non-GAAP million XXXX. per $XXX from For XXXX. up in fiscal diluted XXXX, million, in adjusted EBITDA were record was a a up And $X.XX record earnings fiscal from $X.XX, $XXX fiscal

leverage. million, exited the well addition, prudent sheet, balance as including year-end In balance of cash we with as $XXX year a strong

guidance let segments. our our were turn came strength $X.XX range, XX.X% results, high-end were at non-GAAP we quarter headwinds, fourth business macroeconomic our margin of by $XXX million. the me a in Despite range. guidance the our the and gross and IPS the of sales Now diluted earnings reported quarter, Non-GAAP our for diversification share of to strong results. helped the fourth midpoint above the per quarter of at Net

$XX at $XXX was Non-GAAP XX% for the LED, XXXX Memory. for primarily for $X.X was million fourth sales; guidance, credit million helped expected the provide by during our from in down in This expense reduction in continued well Memory a This million fourth XX.X% fourth revenue quarter at per better $X.XX and Our quarter. our the in share midpoint per down XXXX our year-ago to Brazil, fiscal investments quarter, XXXX of LED the unit sales. taxes, than IPS, the XX% And $XXX as of for the quarter $X.X $X diluted quarter of gross for of driven share XX% was Non-GAAP million quarter mix the in repurchases margin working fourth translates XX.X% follows: now share fourth as quarter in year-ago from benefited quarter in from primarily approximately management, XX% into first to benefit, Operating was a quarter in and XXXX. share from of sales for million, third of quarter $XX in of businesses, lower million quarter. the due Brazil. XX% in quarter in Fourth XXXX. quarter. higher which to turning in financial by million financial $X of shares lower in operating sales, sales at business $X.XX the sales; lower $XX.X to credits and in fourth in expenses credits of from capital. up EBITDA our with million XXXX. were and the share, IPS earnings million of per or million part expenses to was sales per were up is or due the quarter in by compared operating the of adjusted $XX earnings the $XX from Operating And million fourth LED. Non-GAAP as expenses for year-ago were in SGH the compared

XX $XXX lower in million, of inventories primarily receivable increase at shipments. last $XXX in This And came Our IPS. to prior-quarter. the XX.X the $XXX Inventory are IPS inventory quarter prior sales the builds to were timing quarter, for from compared We consistent fourth the fourth million, million of first the days and at on would respectively, inventory due decline and $XXX an net a times $XXX with last up at with goods was quarter, in second $XXX down the days inventory due support fourth of receivable, outstanding past of sold gross cost the end the million IPS primarily times accounts were turns end quarter million totaled which quarter quarter. versus for the Days quarter. XX sales by X.X revenues. timing the in driven days, of turnover accounts the totaled sales expect calculated in to outstanding And basis, and practice, quarter. from million

quarter. at on recognize totaled $XXX gross net and only a the million is to that the services reminder, between In accounted the profit $XX.X operations $XX in million the revenue Fourth with quarter, the services during $XX the the for related net quarter which difference logistics repurchase sales. repurchased our logistics we the in million was basis, expenditures the and million quarter. $XX.X compared million. $XX.X net As million capital totaled meaning our business, with fourth for agent sales on end authorization. at is the And million, an under depreciation as fourth Cash quarter, share $XXX of equivalents end shares, prior attracting of approximately million X.X prior were from the spending depreciation, compared quarter $X.X fourth quarter flow expenditures those capital and cash million of and we

For XXXX million we expenditures. approximately spent capital in $XX

diversification Our is invest strong overall organic we capital a our in of as as and growth see segments, business will in such Stratus maintaining balance a allocation opportunities seek via opportunistic each while in to significant repurchases share acquisition and sheet and foremost, and for and we three strategy first for return manner; return follows: prudent our disciplined second, flexibility continue capital we further business manner. capital third, leverage; to an scale review continue provides in price sensitive will opportunities further to as us

financial first non-GAAP XXXX, closed retire area to acquisition solutions XXXX. fits let you capabilities with debt. the recently Stratus, to me our expected from $XXX global of and standpoint, to For fault-tolerant center high Prior The and existing the quarter cash-on-hand data acquisition $XXX be used expands based of the fiscal an the to EPS. and A inclusive a our strategy. rates. beginning on and margins, the add million within $XXX our our the to grid. From of X%, is incorporate Leverage flow and to our to XXXX our larger first our for SOFR will Stratus a and diversification $XXX.X at of net with term acquisition, of is proceeds fiscal We provider Term be With additional Facility current of based we plus for a update approximately notes, interest framework, our use purchase this and the expect net our on paid guidance, loan an we turning excess acquisition focus cash retire aligns in of our bears on the We for million to $X credit interest non-GAAP than expanded Edge. and gross availability improves acquisition SOFR under more well notes, Loan conjunction our Total would facility Stratus. immediately quarter of outstanding total million by convertible annual the the million, The with the revenues, results it growth million overall $XXX earn-out also In the quarter facilities closed accretive will Cree along million.

first turn me to let our Now XXXX quarter guidance.

midpoint. approximately sales the to that $XXX XXXX for net range million or million, $XXX $XXX first expect of from at quarter approximately million the We fiscal will

headwinds offset $XX business Our including to and in guidance incorporates by our Memory Stratus, approximately expected is the from macroeconomic but million business, business our million continued Brazil. strong our impacting IPS $XX of revenue demand LED in

quarter the be XX.X%, to expected margin quarter margin XX.X% to gross sequentially, is of gross the incorporation primarily to is XX.X% XX.X%. first GAAP to expected for for approximately due up Non-GAAP Stratus. the be to first Our approximately

GAAP diluted $X.XX, plus non-GAAP we be share will share-based minus earnings $X.XX. asset expense, to million be adjustments, of debt approximately diluted for non-GAAP expenses up expense, $XX $XX approximately minus expected first the operating share and $X expected $X.XX. and the is $X.XX, incorporation other earnings approximately On or to quarter amortization Stratus. Our or minus plus discount per first intangible due for the approximately plus excluding primarily to compensation basis, are sequentially, a quarter per be million million, or expect

of own to to Cree $XX approximately on count non-GAAP be the $XX are first $XX of in million expenditures due GAAP the $XX quarter Our million in shares, facility. migration fiscal to for quarter million capital and its diluted is to for Cash current for part be range expected XXXX, and XX price. approximately share expected based million our into stock the million, to first the

Our Stratus. the of recent outlook company's incorporates the of acquisition effects

accounting assessment impact. the value does our completed However, we and outlook of not assets reflect therefore not fair liabilities, of the have this GAAP and and purchase

reporting, equipment. In increasing eight assessment, for estimated that our quarter assets. change completed $X result incorporated upcoming technology we this beginning of million our And of we to addition, I our based for and manufacturing equipment wanted our capital in assessment in re-use fiscal from and preliminary five guidance. rates In to to anticipate benefit the We XXXX. share into September which spending expected fiscal lives the XXXX, useful expected per of years, first an such is on an quarter periodically planned evaluate will XXXX, transitions, a

Our non-GAAP of and XXXX macroeconomic contemplates continued non-GAAP reconciliation the refer headwinds further GAAP section quarter first which measures for details. our supply and of financial chain is forecast for in based constraints. earnings fiscal global environment, the Please release table the current on to the information to

for turn to to a Now, it let Mark remarks prior few me over Q&A.

Ken. Thanks,

I we year long-term XXXX, As fiscal enter future excited SGH. at about remain the

positioned key We focus Solutions. Cloud excel and in AI, well Data Center of our Analytics, Machine areas Learning, Advanced to HPC, are Data Lighting

me customers for to flow continue Operator, our now ready creating solutions cash if the with commitment market that that be confidence able headwinds the our committed short-term, and shareholders. for we broader Our model we developing The our not, execution innovative to value are we and generation. appropriately, we solutions most, to companies free strong long-term facing. manage for all In secular capital-light Q&A. navigate grow, will demands combined differentiated will our to maximizing for give are remain spending our

the Brian Stifel. sir. Instructions] comes Our of line Chin from with [Operator you, Thank question first

is line open. Your now

like results the IPS that way this Memory, [indiscernible] digit question, sort Thanks afternoon. I'm in right this apples-to-apples tough ask us of then environment. the of guidance, the obliged question, is I maybe to first LED implicit prior letting flat-to-down of Hi, guide sort November and a in about? congratulations for quarter to maybe ask sort decline by there. down segments, guess, think in your sort mid-single acquisition, quarter Good kind of and to is XX%, of, the on

Yeah.

comments. thanks QX say, actually, the look to in if a and implicit and guide is our So, I result your slower of expecting more we're for And US see thanks also we we're little at in Europe. a for Brian, question bit the China, here in demand our that's bit and headwinds macro in decline LED the would current seeing a and business. in

In LED addition, I inventory, would the part of for be and that at expectation decline. so lower business, season, for our the reason some is will will our say, be sell-in sell-through burning the than the distributors the that's this through

actually are I down more or gauge a sequentially can that would potentially you business businesses So doing. the anticipate being and QX, what XX% other then bit from

Got it, got it.

the you're quarter. dip do a when stabilizing? of trying guess, breakeven to -- I you do guess, shipment of many visibility Cree, So quarters whether follow-up. terms inventory, in maybe the up guess you've I quarterly seen and that in you're can business. the of the I match to place And this end, you the mean, first or the the acquired take sell-through, you this in that's Since expect is LED is it have process channel of place? sell-out accumulated And that in maybe to In basis November terms this sell-out in has revenue the how the there. I been touching Where out had you sort maybe that clean any on of has for as the business? to kind that probably revenue been annualized

Yeah.

maybe Brian. a there, couple in of So questions

addressed -- can So I them all. let I've see if address me

are to and two, and [indiscernible] clear that if inventory given inventories, visibility on should expect It's be we given but and of through environment lean should QX given and the clear number first is into today's from provide much we'll the move lean uncertain, that little you that looked their and inventory, (ph) [disty] a shipments a I occurred. we out the customers early equal would And inventories, the are quarters. is, are question overall up? the that we build-up correct. going of And start the to But so obviously, I capital, in say, we shipments we for they we profitability wouldn't on I'd looked QX, the color working what out, to standpoint, as you So have, tell uncertainty. based the today macro some at say through but it's with foremost, If certain. an as seeing our you when trying more of as to move

there where Op as optimize some sure at look we positive to look to we that much because income close we'll on recovers, specific breakeven As to the is cash us, expenses although are to if we macro-driven the you make still basis, business generate include that near-term an then and product concern. in can any flow. very QX, businesses that they see profitable how that of versus And is this that's

as back the we So fiscal of state into 'XX, it to a returns, LED fiscal hopefully profitable macro year more then the move start business. to this for should the return and half as

Got it.

six the is also, XX positive months, necessary customer of it long low synergies? fair overlap. earlier companies on sort before of in to overlap from and of process, I that there terms Is just high market is we Let's and say cross-selling the the of closing and given see degree a there topic get months, -- deal. integration vertical how before to a impact away foresee do degree the close Stratus start of two this hop-off, given And the that you acquisition of a between

Mark. is this Brian, Hey,

a we future. that customers sized today, potential strength overlapping of existing think think out into which and a is I synergies the correctly. lot you Not revenue

it's growth. for of right markets in growth. Some address. vertical we a driving interesting Edge actually IPS lot Stratus, you now of And And terms about the center what's is business the that data lot with is a overlap that's that think the of the driving

a not away. there of overlap going of in revenues lot terms So,

it's the of potential synergies have, short-term, to model revenue a from good. to call in the in we and Relative think XX-month opportunities for we impact our So standpoint, [indiscernible] last cost see stated business months upsides to will be we the the XX pretty impact on wins of XX small we and somewhere some our majority or in of XX-month but range, out we outweighed fiscal in middle may from think the some time 'XX. the a close year of the

Mark. Okay, Ken great. Thanks, Thanks,

Thanks, Brian.

question, you Thank your sir. for

Our of next comes Tom line the question from O'Malley with Barclays.

Your line is now open.

Hey, question. and in August taking just thanks good had on a up guys, margin afternoon, gross for follow the a quarter. I -- the just the profile

gross I strong each segment's helpful August? gross would think, but on by contribution in saw have quarter, quarter? Any you had there you be be puts Just software called the which color segment muting your margins because but margin gross IPS that takes help contribution IPS, which out the just on on through mix, may the walk a can may and previously been the lower margins in of the should you you saw down. margins,

Happy at to level. that through high a talk

So some the business. say down of the QX down then growth that that the reduction costs QX, bit if the we flat. QX call from on margins look talked if levels fixed on we from about, are QX, margin the percent and our in as were the a from at the for business, given for we reasonably we QX therefore, Memory given more And LED, margins the is and in outlined be sequentially, to overall I we've IPS. to will back-end, IPS, looked hardware-centric, last sales would

in the puts and So which to XX.X% margins those takes, the are QX. drove level that

in to vector I prior And up quarter, an in revisit business wanted is gave November IPS the the for organic LED you business quarter? question, from Okay. a November perspective the just then, the the

Yeah.

flat-to-down from should be can but I QX up IPS so flattish the So what well. flattish, a bit, here excluding in kind business to would business little QX that QX. And Stratus bit business see be you into Memory of flat that's the then, is organically, a expect as our

quick. That's Okay. then sneak And one really more let helpful. just me in

think did You million the but headwind guys margin implications the early there seeing customers it Clearly, of a to a there seeing and from I improve is that supply that in going a behavior the is acquisition, $XXX a change results an those you're you and the region? direction? in from Are competitive year, really talked a $XXX inventory structure structure, gross a to million is effort to you're issue operating weakness, LED what different about you China, outside market COVID business. in perspective the customer just seeing had in in perspective? of on just Or China, chain as given

Hey, Tom, to what talked relative the you It's demand it's Mark really latter Adams. the to to profile.

of by LEDs build seen mobile it's likes and might Certainly, activity decline actually on. as continued there I globally. in in announced here terms construction around a world getting some in And lot a the a As is restructuring think, down. in who be was the And are dance and industry if market. aware, devices, at looked the of Board, or the kind for bottom impacted of we quarter, you you've very phone also positioned just scale going growth consumer the structural well major across the competitor Cree let's that with start

think, in confident exercise rest back go us really of business, more up. of I'm will And with the prepare on what's gross business. This market. to as we I type the this efficient good in the given margin going get profile pretty

we're is so business, macro at When uncertainty, right revenues given end guiding is what highlight seeing some as we're that is out to are lean now, the burning the just we Tom, look Yeah, demand through than inventory higher that, distributors well. the terms one lasts QX. and to in trying this bit we to to usually for LED as or of out so. environment three periods we look inventory history, QX, of uncertain, at burns look these But in in into a QX. quarters if visibility type that Obviously,

So our as we us to hope sell-in QX, our we this look is will behind or into that sell-out. start would match into and QX

you. Thank

your for you question, Thank sir.

Gill Raji Needham of Our next & the line question with comes Company. from

Your line open. now is

I thanks specifically follow-up Thank for you, margin. it. around on just Again, questions. for a November, and the guide the gross my taking appreciate

just the different And do Stratus gross So takes wanted by to and the trending what how sense the a there is quarter-over-quarter? we sub-segments? margin of puts organically, about get the ex inputs the -- think

Yeah.

So Raji, you, in maybe, to I'll give aggregate. it

basis said basis. basis the of is a on points we acquisition annual gross XXX historically what our on north non-GAAP margins, So adds Stratus that, an to

XXX Brian, here so, lower current here will points range basis little back-end the the the of earlier outlined fixed And the And looked closer I points change subtract gross for we at a the basis in get points to the QX, sales volume. expect only the to QX if be we the sales little the would margins are you bit QX, where from QX, and as LED segments look cost expected I would primary or at as because segments, bit the to are XXX of nature given that given down where a change can it's be to just so sales even business probably XXX or basis base in more similar, is. but to that levels levels, be it that to there,

revenue, X% X% the flat-to-up. just of something then to And And overall you Memory so in down ex to of Memory, plus, be the IPS be that. about indicated on or LED then guide XX% respect with will order X%. Appreciate will the so, sequentially. it. is that the Got implies down kind Stratus It November

split out seeing if if expect of and between segments? Memory And those the kind you have within one, could Memory; of some so Brazil of is, drop of under -- we Any pricings? with elaborate, specific overall are we Brazil any kind Specialty on going trends Specialty the economy that that clarity the impact there? each the of kind pressure in be continue Are question I Should we on to Memory segments. Memory respect given to any to those

Mark. it's Raji, Hey

our pretty and Let first had market, call, Memory -- I'll headwinds last in played last desktop/notebook and we on call. the as out of phones piggyback. Relative that strong on suggested guided as Ken me consumer-facing notebook market that itself, and the we take some the mobile Brazil part our to thought let and had

it's -- side especially would fluctuation a bit what in the pricing. now. and see Memory business, market, pretty We I bounce stronger, demand don't to guys the hard But pricing, talked but profile would Obviously, enterprise the what Memory you bottom, think, I revenue, margin kind very lot our from products the flattish can suggest think Specialty And we because starting been is of And -- quarter also side kind you quarter-over-quarter, model, some that good hit as in memory stable QX priced a I'll the of customer a announcements Brazil. a on analyze will. on on the as get of dynamic tend on Memory give the you bottom I also, Memory be stronger quarter. Now but of particulars, the we the the can if slightly a kind specific it's service-level are a we're pretty is a of units purchasing in the offset in of from well. to Ken say there probably maybe about let

you kind more in of and give Ken particulars. Let jump

Yeah.

be into think Raji, would at look at we it range bit if in And the say, as had as we you if start can we those essentially did versus look looked QX. highlighted, move down demand. QX as we hope recovery and at Mark back the in I levels down that's to QX, here. been as that here Specialty a But flat-to-down business, I of QX beyond, is to very I in at similar Mark think mid-point a level, that So level it it's a And business, kind overall, Brazil in we mentioned, mid-point then we business know. on come bouncing the the little level. our guidance at a as And see

question, can and Very last I just the helpful, OpEx. on if Ken,

I OpEx, the which sort of million $XX going So -- mentioned sequentially, think, includes Stratus. up

or expect should kind so OpEx there Thanks basis? OpEx helpful. clarity the we synergies on $XX that much. be the is So, a would million a of quarter go-forward rate Any side? run odd on

Yeah.

as it purpose, -- for the Stratus. incorporating Mark are assume mentioned, rate that so, run modeling business because would that's And I we of that's the

the as on that one of As all we're business, in in that you to think as of modeling I sure cost a year. at that's businesses, the the the purpose, our look in combined we're the is But model through fair we prudent Mark range from areas cost. making at looking mentioned, structure overall move

you. Thank

question. you your for Thank

next Our question of Deutsche with comes from Sidney Ho the line Bank.

Your line is now open.

it us trends which $XXX Thanks looks think close the Can for the the to maybe or last was quarter you question three about you I And much pretty has then good. cancellations? 'XX, run your into side, on times done And update on I backlog Stratus? excluding Are seeing rate. now? first of any how to taking is is give visibility kind my push you how do backlog of first directionally half question. four My guess demand million, out IPS demand-driven talked have you quarterly your an

this Sidney, Sure. Mark. is

half in we year. first changed part and the for The which QX. demand remains implicit talked it's that I to strong, still last strong suggest talk our QX that trend the just that on of the nothing is guide of in us. backlog -- the first since Let has call may very the for in say earnings very would

very on So still January bullish IPS. is

QX into out and something see in can we push Sure. can QX? Now,

larger nature. over would that that strategic belief that, is cost-cutting We very short-term we say that not that belief customers haven't systems about in serve. seen is these I these but with of type enterprises implementing are our yet, the in our systems activities And are also time my we're

systems of these of AI-Machine I'm cycle, speak. Learning are systems the the type tomorrow's to will installing, that we're enterprise, so the through So these belief people for invest and that

that way. play we're out optimistic will So that

I We any of seen And an front or QX in relative the orders this of just to at our year. haven't backlog reduction beyond point. half ounce can't and call

Maybe XX% QX is understand But quite level. with full down year. the up is for if services, XX% IPS, range if somewhere IPS math the quarter. a like it's up is right, services it if year-over-year, XX% my it's of Okay, math look that's the at for I my the right, the the And in staying you helpful. bit from

in right dollar, where can QX -- -- number words, is run in absolute other down, an like why XQ rate, so fiscal actually that more going Just the fiscal forward? it's curious anomaly, go that of is kind right of

Yeah.

So, good question, it's a Sidney.

that talked we services and about is we other of last and when our the our quarter outline had and of specific So terms in customers. some specific it's the to And items overall that services did other quarter, generated so, lumpiness on quarter-to-quarter, were quarter. that there variability implementation call occurred we and that last time, that that to some we in this say there nature business, tried just quarter specific were some implementation with we

meaning is If basis. this number, we at quarterly And of there low-XXs have engagements, about is quarter, out XX are look of you type talked a services important that in kind look those is months of however, we longer-term we portion what as larger services. I on QX, that a visibility that based so think on

and what that's that with where team and very I and I much And Penguin further the visibility, IPS know doing have are visibility. Thierry better think the complements with Stratus their visibility, services have is engagement, is long-term We more to business. driving team

terms into we services for good XXXX, especially on cash that in $XXX should in guess a look business. million, the which basis year, of So well going both of inclusive businesses a terms visibility, terms be as of business. of the is goodness the overall we're of My flow margin, I very goodness combined Stratus north think goodness of to is component and in have services

a I can Okay. in That's one super housekeeping more, one. If squeeze just helpful.

couple of from they Solutions that's Thanks. it now how is Memory business last trends the for Specialty coming Specialty Memory me. versus over And portion of Given the the Brazil Memory? Memory, different have quarters. What

Yeah. but business what in expecting the at I it business, We look at that looked here Brazil at the larger if is didn't than looked I out and much if Specialty specifically, break I both we're today, QX. QX

that million majority was the QX $XXX call that we it's So you doing about looked out in The talked level. QX, Brazil from the did delta that around a of little to about in business. at of flattening now it, overall, and business down at it QX, million, come bit, Specialty vast business kind what QX if did but $XXX

So largest the Brazil Memory side. been in has the headwind

Great, thank you.

comes Our Rosenblatt your from [Operator for line the Thanks Securities. next from of Instructions] question question. Cassidy Kevin

now is line open. Your

a -- of IPS new Yeah. RFQs is their any recession been Has taking any companies already? for Thanks my the as question. the change private up? back Or around all coming seeing the you're or discussion around question for RFQs getting My this since more number even a both here business. there as Are coming on side you maybe around pulling public comments far CapEx? and --

of of commitment building in the opportunities these Mark. point, in some to are a seen say remember, activity, is cases. replying IPS. way, we more cycles would seeing at not by at noticeable have funnel XX minimum Hey Kevin. a terms terms -- This the At this months anything six in in the that QX, I getting we're Actually our

that the selective in and as IPS funnel we something not at not want calls, we're about we're hardware, bid we're we we're haven't our And on, to seen the so the pretty services. of we're on create disciplined sure going to hardware-only actually, we to also, in it's to to. of talked continues because want and I so, type in opportunities business integration getting And the surprising It's the in we value software of for make that grow. just terms services, stay paid that prior overall

up, business, already year kind I side say, are the of lot in anything back, this haven't seen strong. because in side, commercial are sense, business. And on shipments of And pulled seeing locked pretty the at of then, and commitments the the healthy the federal and just relatively federal part building still actually think even piece we you much funnel that when about scheduled has would been of a So we activities. that

be. And -- so, don't are spending next as people or next year, what will usual business know year's will they the not

still very as So is the well. federal active side

quarters few of IPS? give how A for chain? ago was in supply Can And on for the about supply all some there Okay, you're chain you bottlenecks. that seeing explanation. comments great. what types the Thanks

Yeah.

we're not woods think of on the chain. yet supply I out the

prior Now systems seeing with what we the are recovery, exactly talked is other supply call, there what I've -- want, sectors And our are the that manufacture think not this Memory. a parts other which we're integrate ecosystem, we on technologies that is just still i.e., we I tight. doing are is yet, and and that and about chain demand-driven of

are where not. industries the mix And So bit a a day-to-day. bit least loosened the and we're kind and line so, chain. able teams to to sure up, guide we needed the of a of still common the our have working going our we're yet it's woods make And out still and not of in like hybrid that, to course, diligently have or denominator, a some implies it's all some of navigate up supply that but

Okay. Thank you.

queue. the with your we Thank And all questions you that, question. in exhausted for have

Mark closing to I Adams, for to any conference now, pass like would So remarks. the over CEO,

the eye at headwinds. operator, remain future market how in to in We record the excited we thank you, current joining with about we and fiscal a company investment all you prudent spending on Thank balance After near-term. the for long-term our again vigilant in for our while mindful operate success, are SGH, a XXXX, our year today. being

you with SGH Thank today's XXXX Fourth that, conclude for And will your Earnings Call. Fiscal Quarter we participation.

now disconnect line. your You may