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SMART Global Holdings Reports First Quarter Fiscal 2019 Financial Results

January 8, 2019

NEWARK, Calif., Jan. 08, 2019 (GLOBE NEWSWIRE) -- SMART Global Holdings, Inc. (“SMART”) (NASDAQ: SGH), parent company of SMART Modular Technologies, Inc., today reported financial results for the first quarter of fiscal 2019 ended November 30, 2018.

First Quarter Fiscal 2019 Highlights: • Net sales of $393.9 million, 48% higher than year ago quarter • GAAP operating income of $47.8 million • GAAP net income of $31.0 million • Adjusted EBITDA of $56.5 million • GAAP diluted earnings per share (EPS) of $1.33 • Non-GAAP diluted EPS of $1.75

“We had a strong start to fiscal 2019 with revenue in our first quarter exceeding the high end of our guidance and coming in at $393.9 million,” commented Ajay Shah, Chairman and Chief Executive Officer. “Driving the quarter was continued success in our Specialty Memory business, as well as solid sequential growth from our new Specialty Compute & Storage Solutions business. Our business in Brazil also met expectations”

“Looking ahead we remain optimistic about our overall business. We are seeing increased seasonality during our second fiscal quarter in our Brazil business. However, our other lines of business are expected to perform at or above our previous expectations for fiscal Q2,” concluded Mr. Shah.

Quarterly Financial Results GAAP(1) Non-GAAP(2) ----------------------- (In millions, except per share amounts) Q1 FY19 Q4 FY18 Q1 FY18 Q1 FY19 Q4 FY18 Q1 FY18 --------------------------------------- ------- ------- ------- ------- ------- ------- Net sales $ 393.9 $ 374.0 $ 265.4 $ 393.9 $ 374.0 $ 265.4 - ----- - ----- - ----- - ----- - ----- - ----- Gross profit $ 85.1 $ 82.7 $ 57.8 $ 85.6 $ 83.8 $ 58.1 --------------------------------------- - ----- - ----- - ----- - ----- - ----- - ----- Operating income $ 47.8 $ 45.0 $ 31.5 $ 54.4 $ 51.8 $ 34.6 - ----- - ----- - ----- - ----- - ----- - ----- Net income $ 31.0 $ 29.7 $ 21.0 $ 40.6 $ 40.0 $ 26.3 --------------------------------------- - ----- - ----- - ----- - ----- - ----- - ----- Diluted earnings per share (EPS) $ 1.33 $ 1.28 $ 0.92 $ 1.75 $ 1.72 $ 1.16 --------------------------------------- - ----- - ----- - ----- - ----- - ----- - ----- (1) GAAP represents U.S. Generally Accepted Accounting Principles. (2) Please refer to the “Non-GAAP Information” section and the “Reconciliation of Non-GAAP Financial Measures” table below for further detail on the non-GAAP financial reporting referenced above and a reconciliation of such measures to our nearest GAAP measures.

Business OutlookThe following statements are based upon management’s current expectations for the second quarter of fiscal 2019 ending March 1, 2019. These statements are forward-looking and actual results may differ materially. SMART undertakes no obligation to update these statements.

Net Sales - GAAP / Non-GAAP $310 to $325 million ---------------------------------- -------------------- Gross Margin - GAAP / Non-GAAP 18% to 20% ---------------------------------- -------------------- Diluted EPS - GAAP $0.53 to $0.57 ---------------------------------- -------------------- Share-based compensation per share $0.16 ---------------------------------- -------------------- Intangible amortization per share $0.04 ---------------------------------- -------------------- Diluted EPS - Non-GAAP $0.73 to $0.77 ---------------------------------- -------------------- Expected diluted share count 23.4 million ---------------------------------- --------------------

Conference Call DetailsSMART will host a conference call today for analysts and investors at 1:30 p.m. Pacific time, 4:30 p.m. Eastern time. Dial-in US toll free +1-866-487-6452 using access code 4068047.

A replay of the conference call will be available for one week following today’s call through the Events section of the SMART website at www.smartgh.com or by calling US toll free +1-855-859-2056; Passcode: 4068047.

Forward-Looking StatementsThis release contains, and statements made during the above-referenced conference call will contain “forward-looking statements” including among other things, statements regarding future events and the future financial performance of SMART (including the business outlook for the next fiscal quarter) and statements regarding growth drivers in SMART’s industries and markets. These statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including but not limited to: business and economic conditions and growth trends in the technology industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; changes in seasonal impacts on our results; changes in currency exchange rates; overall information technology spending; appropriations for government spending; the success of our strategic initiatives including additional investments in new products, additional capacity and acquisitions; the DRAM market and the temporary and volatile nature of pricing trends; deterioration in customer relationships; production or manufacturing difficulties; competitive factors; technological changes; difficulties with or delays in the introduction of new products; slowing or contraction of growth in the memory market in Brazil; reduction in or termination of local content requirements in Brazil; changes to applicable tax regimes or rates; prices for the end products of our customers; fluctuations in material costs and availability; strikes or labor disputes; deterioration in or loss of relations with any of our limited number of key vendors; changes in the availability of supply of materials, components or memory products; the inability of Penguin Computing to obtain and retain security clearances to expand its government business; and other factors and risks detailed in SMART’s filings with the Securities and Exchange Commission. Such factors and risks as outlined above and in such filings may not constitute all factors and risks that could cause actual results of SMART to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. SMART and its subsidiaries operate in a continually changing business environment and new factors emerge from time to time. SMART cannot predict such factors, nor can it assess the impact, if any, from such factors on SMART or its subsidiaries’ results. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements should not be relied upon as a prediction of actual results. These forward-looking statements are made as of today, and SMART does not intend, and has no obligation, to update or revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release, except as required by law.

Non-GAAP InformationCertain non-GAAP financial measures are contained in this press release or will be discussed on our conference call, including non-GAAP gross profit, non-GAAP operating income, Adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS. We define Adjusted EBITDA as GAAP net income plus net interest expense, income tax expense, depreciation and amortization expense, share-based compensation expense, acquisition-related expenses, restructuring charges, and other infrequent or unusual items. Adjusted EBITDA is not a measure of financial performance calculated in accordance with U.S. GAAP and should be viewed as a supplement to, not a substitute for, our results of operations presented on the basis of U.S. GAAP. Adjusted EBITDA also does not purport to represent cash flow provided by, or used in, operating activities in accordance with U.S. GAAP and should not be used as a measure of liquidity.

The non-GAAP financial results presented herein exclude share-based compensation expense, intangible amortization expense, acquisition-related expenses, and other infrequent or unusual items, and with respect to non-GAAP diluted EPS, foreign currency gains (losses). These non-GAAP financial measures are provided to enhance the user’s overall understanding of our financial performance. By excluding these charges, as well as any related tax effects, our non-GAAP results provide information to management and investors that is useful in assessing SMART’s core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results, to plan and forecast future periods, and to assess performance of certain executives for compensation purposes. The presentation of this additional information is not meant to be a substitute for the corresponding financial measures prepared in accordance with U.S. GAAP. In addition, these measures may not be used similarly by other companies and therefore may not be comparable between companies.

Investors are encouraged to review the “Reconciliation of Non-GAAP Financial Measures to GAAP Results” and “Reconciliation of GAAP Net Income to Adjusted EBITDA” tables below for more detail on non-GAAP calculations.

About SMART Global Holdings The SMART family of companies are global leaders in specialty memory, storage and hybrid solutions serving the electronics industry with standard and custom products for over 25 years. SMART delivers components, modules and solutions to a broad customer base, including OEMs in computing, networking, communications, storage, mobile and industrial markets. With the addition of Penguin Computing and the creation of a new business unit, SMART Specialty Compute & Storage Solutions (SCSS), SMART has expanded its serviceable markets into areas requiring specialized computing platforms in artificial intelligence and machine learning, advanced modeling and high performance computing. Customers rely on SMART as a strategic supplier with custom designs, product quality, technical support, a global footprint, and the ability to provide locally manufactured products in multiple geographies. See www.smartgh.com, www.smartm.com, www.smarth.com, www.smartsscs.com and www.penguincomputing.com for more information.

SMART Global Holdings, Inc. and Subsidiaries Consolidated Income Statements (In thousands, except per share data) Three Months Ended ------------------------------------- November August 31, November 30, 2018 24, 2018 2017 ----------- ----------- ----------- Net sales: Brazil $ 199,279 $ 198,624 $ 157,850 Specialty Memory 139,949 122,820 107,559 Specialty Compute and Storage Solutions 54,651 52,526 — - ------- - - ------- - - ------- - Total net sales 393,879 373,970 265,409 Cost of sales (1)(2) 308,810 291,291 207,573 Gross profit 85,069 82,679 57,836 - ------- - - ------- - - ------- - Operating expenses: Research and development (1) (2) 11,816 11,659 8,550 Selling, general and administrative(1) 25,454 29,039 17,818 (2) Change in estimated fair value of acquisition-related contingent consideration — (3,000 ) — Total operating expenses 37,270 37,698 26,368 - ------- - - ------- - - ------- - Income from operations 47,799 44,981 31,468 Other income (expense): Interest expense, net (5,875 ) (6,217 ) (4,599 ) Other expense, net (3,329 ) (5,987 ) (2,715 ) Total other expense (9,204 ) (12,204 ) (7,314 ) - ------- - - ------- - - ------- - Income before income taxes 38,595 32,777 24,154 Provision for income taxes 7,619 3,059 3,149 Net income $ 30,976 $ 29,718 $ 21,005 - ------- - - ------- - - ------- - Earnings per share: Basic $ 1.37 $ 1.33 $ 0.97 - ------- - - ------- - - ------- - Diluted $ 1.33 $ 1.28 $ 0.92 - ------- - - ------- - - ------- - Shares used in computing earnings per share: Basic 22,595 22,383 21,673 - ------- - - ------- - - ------- - Diluted 23,257 23,270 22,715 - ------- - - ------- - - ------- - (1) Includes share-based compensation expense as follows: Cost of sales $ 545 $ 475 $ 218 Research and development 634 572 274 Selling, general and administrative 2,876 2,911 1,113 Total stock-based compensation expense $ 4,055 $ 3,958 $ 1,605 - ------- - - ------- - - ------- - (2) Includes amortization of intangible assets expense as follows: Cost of sales $ 16 $ 7 $ — Research and development — 252 245 Selling, general and administrative 961 2,144 1,023 Total amortization expense $ 977 $ 2,403 $ 1,268 - ------- - - ------- - - ------- -

SMART Global Holdings, Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Measures to GAAP Results (In thousands, except per share data) Three Months Ended ---------------------------------- November August 31, November 30, 24, 2018 2018 2017 ---------- ---------- ---------- Reconcil iation of gross profit: GAAP gross $ 85,069 $ 82,679 $ 57,836 profit GAAP gross 21.6 % 22.1 % 21.8 % margin Add: Share-ba sed compensa tion 545 475 218 included in cost of sales Add: Intangib le amortiza tion 16 7 — included in cost of sales Add: Purchase accounti — 631 — ng adjustme nt - ------ - - ------ - - ------ - Non-GAAP gross $ 85,630 $ 83,792 $ 58,054 profit - ------ - - ------ - - ------ - Non-GAA P 21.7 % 22.4 % 21.9 % gross margin Reconcil iation of operatin g expenses : GAAP operatin $ 37,270 $ 37,698 $ 26,368 g expenses Less: Share-ba sed compensa tion expense included in opex Researc h and 634 572 274 develop ment Selling , general 2,876 2,911 1,113 and adminis trative - ------ - - ------ - - ------ - Total 3,510 3,483 1,387 - ------ - - ------ - - ------ - Less: Amortiza tion of intangib le assets included in opex Researc h and — 252 245 develop ment Selling , general 961 2,144 1,023 and adminis trative Total 961 2,396 1,268 - ------ - - ------ - - ------ - Less: S-1 — — 300 related costs Less: Legal fees - term 126 — — loan (payment holiday) Less: Acquisit ion-rela 1,423 2,844 — ted expenses Less: Continge nt consider ation — (3,000 ) — fair value adjustme nt - ------ - - ------ - - ------ - Non-GAAP operatin $ 31,250 $ 31,975 $ 23,413 g expenses - ------ - - ------ - - ------ - Reconcil iation of income from operatio ns: GAAP income from $ 47,799 $ 44,981 $ 31,468 operatio ns GAAP operati 12.1 % 12.0 % 11.9 % ng margin Add: Share-ba sed 4,055 3,958 1,605 compensa tion expense Add: Amortiza tion of 977 2,403 1,268 intangib le assets Add: Purchase accounti — 631 — ng adjustme nt Add: S-1 — — 300 related costs Add: Legal fees - term 126 — — loan (payment holiday) Add: Acquisit ion-rela 1,423 2,844 — ted expenses Add: Continge nt consider ation — (3,000 ) — fair value adjustme nt - ------ - - ------ - - ------ - Non-GAAP income from $ 54,380 $ 51,817 $ 34,641 operatio ns - ------ - - ------ - - ------ - Non-GAA P operati 13.8 % 13.9 % 13.1 % ng margin

SMART Global Holdings, Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Measures to GAAP Results (In thousands, except per share data) Three Months Ended ---------------------------------- November August 31, November 30, 24, 2018 2018 2017 ---------- ---------- ---------- Reconciliation of income before income taxes: GAAP income before income taxes $ 38,595 $ 32,777 $ 24,154 Add: Share-based compensation expense 4,055 3,958 1,605 Add: Amortization of intangible assets 977 2,403 1,268 Add: Purchase accounting adjustment — 631 — Add: S-1 related costs — — 300 Add: Legal fees - term loan (payment holiday) 126 — — Add: Acquisition-related expenses 1,423 2,844 — Add: Contingent consideration fair value adjustment — (3,000 ) — Add: Foreign currency losses 3,384 5,968 2,742 - ------ - - ------ - - ------ - Non-GAAP income before income taxes $ 48,560 $ 45,581 $ 30,069 - ------ - - ------ - - ------ - Reconciliation of provision for income taxes: GAAP provision for income taxes $ 7,619 $ 3,059 $ 3,149 GAAP effective tax rate 19.7 % 9.3 % 13.0 % Tax effect of adjustments to GAAP results (338 ) (2,529 ) (622 ) - ------ - - ------ - - ------ - Non-GAAP provision for income taxes $ 7,957 $ 5,588 $ 3,771 - ------ - - ------ - - ------ - Non-GAAP effective tax rate 16.4 % 12.3 % 12.5 % Reconciliation of net income and earnings per share (diluted): GAAP net income $ 30,976 $ 29,718 $ 21,005 Adjustments to GAAP net income: Share-based compensation 4,055 3,958 1,605 Amortization of intangible assets 977 2,403 1,268 Purchase accounting adjustment — 631 — S-1 related costs — — 300 Legal fees - term loan (payment holiday) 126 — — Acquisition related expenses 1,423 2,844 — Contingent consideration fair value adjustment — (3,000 ) — Foreign currency losses 3,384 5,968 2,742 Tax effect of items excluded from non-GAAP results (338 ) (2,529 ) (622 ) - ------ - - ------ - - ------ - Non-GAAP net income $ 40,603 $ 39,993 $ 26,298 - ------ - - ------ - - ------ - Shares used in computing earnings per share (diluted) 23,257 23,270 22,715 - ------ - - ------ - - ------ - Non-GAAP earnings per share (diluted) $ 1.75 $ 1.72 $ 1.16 - ------ - - ------ - - ------ - GAAP income per share (diluted) $ 1.33 $ 1.28 $ 0.92 - ------ - - ------ - - ------ -

SMART Global Holdings, Inc. and Subsidiaries Reconciliation of GAAP Net Income to Adjusted EBITDA (In thousands) Three Months Ended ------------------------------ November August 31, November 30, 24, 2018 2018 2017 -------- ---------- -------- GAAP net income $ 30,976 $ 29,718 $ 21,005 Share-based compensation expense 4,055 3,958 1,605 Amortization of intangible assets 977 2,403 1,268 Interest expense, net 5,875 6,217 4,599 Provision for income tax 7,619 3,059 3,149 Depreciation 5,431 5,124 5,002 S-1 related costs — — 300 Legal fees - term loan (payment holiday) 126 — — Purchase accounting adjustment(1) — 631 — Acquisition-related expenses(1) 1,423 2,844 — Contingent consideration fair value adjustment(1) — (3,000 ) — - ------ - ------ - - ------ Adjusted EBITDA $ 56,482 $ 50,954 $ 36,928 --------------------------------------------------------------- - ------ - ------ - - ------ (1) Amounts in Q1′19 and Q4′18 related to acquisition of Penguin Computing in June 2018.

SMART Global Holdings, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands) November 30, August 31, 2018 2018 - -------- - - -------- - Assets Current assets: Cash and cash equivalents $ 62,954 $ 31,375 Accounts receivable, net 330,473 237,212 Inventories 188,390 221,419 Prepaid expenses and other current assets 40,351 32,043 - -------- - - -------- - Total current assets 622,168 522,049 Property and equipment, net 60,412 56,615 Other noncurrent assets 17,561 22,449 Intangible assets, net 25,279 26,255 Goodwill 45,655 45,394 Total assets $ 771,075 $ 672,762 - -------- - - -------- - Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 273,655 $ 223,186 Accrued liabilities 49,317 45,190 Current portion of long-term debt 9,868 27,409 - -------- - - -------- - Total current liabilities 332,840 295,785 Long-term debt 200,532 184,190 Other long-term liabilities 8,038 5,659 Total liabilities $ 541,410 $ 485,634 - -------- - - -------- - Shareholders’ equity: Ordinary shares 687 678 Additional paid-in capital 257,607 250,191 Accumulated other comprehensive loss (172,893 ) (175,995 ) Retained earnings 144,264 112,254 - -------- - - -------- - Total shareholders’ equity 229,665 187,128 Total liabilities and shareholders’ equity $ 771,075 $ 672,762 - -------- - - -------- -

SMART Global Holdings, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Three Months Ended ------------------------------------------ November 30, August 31, November 24, 2018 2018 2017 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 30,976 $ 29,718 $ 21,005 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and 6,408 7,526 6,270 amortization Share-based compensation 4,055 3,958 1,605 Provision for doubtful accounts receivable and (104 ) (73 ) 28 sales returns Deferred income tax 403 (1,444 ) (220 ) benefit Loss on disposal of 3 461 — property and equipment Amortization of debt discounts and issuance 685 807 729 costs Change in fair value of — (3,000 ) — contingent consideration Changes in operating assets and liabilities: Accounts receivable (89,441 ) 31,409 (55,801 ) Inventories 30,576 (14,495 ) (3,746 ) Prepaid expenses and (3,182 ) (5,241 ) 1,758 other assets Accounts payable 48,574 (66,331 ) 47,492 Accrued expenses and 6,399 7,321 (4,863 ) other liabilities Net cash provided by (used in) operating 35,352 (9,384 ) 14,257 activities - -------- - - -------- - - -------- - Cash flows from investing activities: Capital expenditures and (13,384 ) (7,487 ) (6,039 ) deposits on equipment Proceeds from sale of 21 204 — property and equipment Acquisition of business, — (42,316 ) — net of cash acquired - -------- - - -------- - Net cash used in (13,363 ) (49,599 ) (6,039 ) investing activities - -------- - - -------- - - -------- - Cash flows from financing activities: Long-term debt payment (1,657 ) (5,865 ) (6,184 ) Proceeds from issuance of long-term debt, net of — 59,365 — costs paid Fees paid for revolving — — (299 ) line of credit refinancing Payment of costs related — — (1,289 ) to initial public offering Proceeds from borrowings under revolving line of 104,000 151,895 105,500 credit Repayments of borrowings under revolving line of (104,000 ) (184,184 ) (105,500 ) credit Proceeds from issuance of ordinary shares from share 2,402 1,324 539 option exercises Proceeds from issuance of 968 — — ordinary shares from ESPP - -------- - - -------- - - -------- - Net cash provided by (used in) financing 1,713 22,535 (7,233 ) activities Effect of exchange rate changes on the cash, cash equivalents and restricted cash * 2,018 2,867 (231 ) - -------- - - -------- - - -------- - Net increase (decrease) in cash and cash equivalents and restricted cash * 25,720 (33,581 ) 754 Cash, cash equivalents, and restricted cash at 37,234 70,815 29,463 beginning of period * - -------- - - -------- - Cash, cash equivalents, and restricted cash at end of $ 62,954 $ 37,234 $ 30,217 period * - -------- - - -------- - - -------- - * Cash balance was adjusted to include restricted cash upon adoption of ASU 2016-18 in fiscal 2019.

Investor Contacts: Karl MoteyVice PresidentStrategic Marketing and Communications(510) 624-8213 karl.motey@smartm.com

Suzanne Schmidt Investor Relations for SMART Global Holdings, Inc. (510) 360-8596 ir@smartm.com

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