Executive Summary

Q1 FY24 revenue was $274.2M, down 30.0% y/y and down 13.4% q/q; non-GAAP EPS was $0.24 and GAAP EPS was $(0.23). Gross margin reached record levels: GAAP 30.2% and non-GAAP 33.3% .
Management guided Q2 FY24 net sales to $285M ± $25M and non-GAAP EPS to $0.25 ± $0.10, with non-GAAP gross margin of 32.5% ± 1% .
Balance sheet strengthened: cash and short-term investments totaled a record $553M; cash from operations from continuing operations was ~$59.7M in Q1 FY24. The Board authorized a new $75M share repurchase, bringing total authorizations over two years to $150M .
Versus publicly reported Wall Street consensus (non-S&P source), Q1 FY24 non-GAAP EPS of $0.24 beat by $0.08, and revenue of ~$274.25M missed by ~$0.75M; S&P Global consensus data was unavailable via our tool .
Key narrative: continued transformation toward enterprise solutions and services mix (services ~25% of revenue), AI-related product focus, and IPS leadership, while near-term revenue headwinds and seasonality temper Q2 outlook .

What Went Well and What Went Wrong

What Went Well

Record gross margins: GAAP gross margin 30.2% (+160 bps y/y), non-GAAP gross margin 33.3% (+200 bps y/y), reflecting shift to higher-value enterprise solutions .
Services mix and cash generation: management highlighted services revenue at ~25% of total, record cash + short-term investments of $553M, and ~$59.7M operating cash flow from continuing operations in Q1 FY24 .
Strategic capital allocation: $75M additional share repurchase authorization (total $150M over two years), signaling confidence and shareholder return support .

Quote: “We are pleased with the progress we are making on our transformation journey… another quarter of record non-GAAP gross margins reflecting the continued shift to higher value enterprise solutions.” — CEO Mark Adams .

What Went Wrong

Revenue decline: total net sales fell to $274.2M, down 30% y/y and down 13.4% q/q (from $316.7M in Q4 FY23), with IPS segment down sequentially .
EPS compression: non-GAAP EPS declined to $0.24 from $0.35 in Q4 FY23 and $0.75 in Q1 FY23; GAAP EPS was $(0.23) vs $1.17 in Q4 FY23 and $(0.08) in Q1 FY23 .
Outlook implies seasonality/near-term softness: management guided Q2 FY24 revenue to $285M ± $25M, noting seasonality; external coverage similarly flagged the anticipated sequential revenue decrease .

Financial Results

Consolidated Results vs prior periods and estimates

Metric	Q1 FY23	Q4 FY23	Q1 FY24	Consensus (Q1 FY24)	Beat/Miss
Revenue ($USD Millions)	$391.8	$316.7	$274.2	~$274.25	Miss (~$0.75M)
GAAP Gross Margin (%)	28.6	28.9	30.2	N/A	—
Non-GAAP Gross Margin (%)	31.3	31.7	33.3	N/A	—
GAAP Diluted EPS ($)	$(0.08)	$1.17	$(0.23)	N/A	—
Non-GAAP Diluted EPS ($)	$0.75	$0.35	$0.24	$0.16	Beat ($0.08)

Note: S&P Global consensus was unavailable via our tool; consensus references above come from public sources.

Segment Net Sales (Continuing Operations)

Segment ($USD Thousands)	Q1 FY23	Q4 FY23	Q1 FY24
Memory Solutions	$118,286	$105,181	$85,668
Intelligent Platform Solutions (IPS)	$210,971	$145,432	$118,824
LED Solutions	$62,540	$66,045	$69,755
Total Net Sales	$391,797	$316,658	$274,247

KPIs and Profitability

KPI	Q1 FY23	Q4 FY23	Q1 FY24
Gross Profit ($USD Thousands) GAAP	$112,098	$91,585	$82,850
Gross Profit ($USD Thousands) Non-GAAP	$122,805	$100,300	$91,277
Operating Income ($USD Thousands) GAAP	$14,847	$(1,639)	$1,305
Operating Income ($USD Thousands) Non-GAAP	$51,388	$30,295	$26,679
Adjusted EBITDA ($USD Thousands)	$57,842	$37,579	$34,340
Cash + Short-term Investments ($USD Millions)	N/A	$391.0	$553.0
Cash from Operations (Continuing Ops) ($USD Thousands)	$(84,751)	$37,556	$59,713

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($M)	Q2 FY24	N/A	$285 ± $25	N/A
Non-GAAP Gross Margin (%)	Q2 FY24	N/A	32.5% ± 1%	N/A
Non-GAAP OpEx ($M)	Q2 FY24	N/A	$66 ± $3	N/A
Non-GAAP Diluted EPS ($)	Q2 FY24	N/A	$0.25 ± $0.10	N/A
Diluted Shares (M)	Q2 FY24	N/A	53	N/A
Net Sales ($M)	Q1 FY24	$275 ± $25	Actual $274.2	Met (within range)
Non-GAAP Gross Margin (%)	Q1 FY24	31.5% ± 1%	Actual 33.3%	Raised vs guide
Non-GAAP Diluted EPS ($)	Q1 FY24	$0.15 ± $0.15	Actual $0.24	Raised vs guide

Repurchase Authorization: Additional $75M approved Jan 8, 2024; cumulative authorizations $150M .

Earnings Call Themes & Trends

Topic	Q3 FY23 (Two Quarters Ago)	Q4 FY23 (Prior Quarter)	Q1 FY24 (Current)	Trend
AI/Technology Initiatives	Announced Brazil divestiture to focus on high-performance, high-availability enterprise solutions; positioning for AI/ML/data analytics	Transformation to enterprise solutions; sustainability goals; product expansion (e.g., DC4800 SSDs)	Continued investment in AI, advanced memory, strengthening CreeLED portfolio	Strengthening focus and investment
Supply Chain/Macro	Challenging macro; operational discipline	Continued macro caution; focusing on margin and customer mix	Seasonality expected to drive lower Q2 revenue; disciplined outlook	Near-term cautious
Product/Segment Performance	IPS growth y/y; LED weaker y/y; mix shift	IPS ~52%, Memory ~31%, LED ~17% of Q4 sales; non-GAAP GM 31.7%	IPS led at $118.8M; LED up q/q; Memory down q/q; services ~25% of revenue	IPS leadership; LED improving
Regional/Portfolio Actions	Announced sale of 81% SMART Brazil stake	Expected closing late 2023/early 2024 ; transformation narrative reinforced	Completed sale Nov 29, 2023; Brazil reported as discontinued ops	Portfolio streamlined
R&D Execution	Investment to support enterprise solutions	Focus on product expansion and margin leverage	Investing strategically in AI and advanced memory technologies	Sustained/increasing

Management Commentary

“We are pleased with the progress we are making on our transformation journey… another quarter of record non-GAAP gross margins…” — Mark Adams, CEO .
“We ended our first quarter with record cash and short term-investments of $553 million, allowing us to continue investing strategically in AI, developing products based on advanced memory technologies and strengthening CreeLED’s portfolio…” — Mark Adams, CEO .
Services revenue represented approximately 25% of overall revenues; cash and short-term investments totaled $553M — Company remarks on call summary .

Q&A Highlights

Seasonality: Management expects a sequential revenue decrease in Q2 FY24 due to seasonal effects, despite long-term optimism in LED and enterprise solutions .
Segment leadership and mix: IPS led with ~$118.8M revenue in Q1; services mix reached ~25% of total, supporting margin outcomes .
Balance sheet/capital return: Discussion of record cash and $75M repurchase authorization as strategic flexibility for investment and shareholder returns .

Estimates Context

S&P Global (Capital IQ) consensus estimates were unavailable via our tool for SGH this quarter.
Public sources indicate Q1 FY24 non-GAAP EPS of $0.24 beat by $0.08 and revenue of ~$274.25M missed by ~$0.75M; use these as indicative until S&P Global data is accessible .

Key Takeaways for Investors

Margin-led transformation: The shift toward enterprise solutions and services mix is structurally lifting margins; Q1 delivered record GAAP/non-GAAP gross margins despite revenue headwinds .
Capital allocation as a support: $75M additional repurchase (total $150M over two years) plus record liquidity provides downside support and investment optionality in AI and advanced memory .
Near-term revenue caution vs medium-term thesis: Q2 guide reflects seasonality and softer near-term demand, while strategic focus on AI/IPS and LED portfolio strengthening underpin medium-term growth/margin expansion goals .
IPS leadership with services contribution: IPS remains the leading segment, and services at ~25% of revenue should continue to aid margin stability; monitor IPS customer concentration and enterprise adoption cadence .
Portfolio simplification reduces volatility: Completion of the 81% sale of SMART Brazil streamlines operations and supports higher-quality revenue trajectory (Brazil now in discontinued ops) .
Catalysts: Continued margin beats vs guidance, execution in IPS and AI-linked products, and buyback activity; watch Q2 delivery vs guide and service mix sustainability .
Actionable: Position around margin durability and capital return; monitor Q2 seasonal downtick for entry points and track updates on AI product traction and IPS pipeline on the next call .

SMART Global Holdings, Inc. (SGH)·Q1 2024 Earnings Summary