What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-10-21 compared with 2024-10-24 · 516 added, 301 removed, 1026 unchanged (44% of the section changed)

4 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Stock holders’ Equity

Consolidated Statements of Cash Flows

11 unchanged sentences

Other current assets 47,387 75,264

Current assets of discontinued operations — 70,574

Total current assets 1,064,227 867,704

6 unchanged sentences

Total assets $ 1,617,200 $ 1,474,506

Liabilities and Equity

Liabilities, Temporary Equity and Stockholders' Equity

Accounts payable and accrued expenses $ 318,761 $ 219,090

1 unchanged sentence

Deferred revenue 73,893 63,954

Acquisition-related contingent consideration — 50,000

Other current liabilities 61,300 44,552

Current liabilities of discontinued operations — 77,770

Total current liabilities 473,899 327,596

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Commitments and contingencies

Penguin Solutions shareholders’ equity:

Preferred shares, $ 0.03 par value;

Temporary equity

Preferred stock, $ 0.03 par value;

authorized 30,000 shares;

none issued or outstanding

Ordinary shares, $ 0.03 par value;

200 shares of convertible preferred stock issued and outstanding as of August 29, 2025, redemption amount of $ 200,500 ;

no shares issued or outstanding as of August 30, 2024

Penguin Solutions stockholders’ equity:

Common stock, $ 0.03 par value;

authorized 200,000 shares;

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Retained earnings 46,709 29,985

Treasury shares, 6,949 shares and 5,641 shares held as of August 30, 2024 and August 25, 2023, respectively

Treasury stock, 10,018 shares and 6,949 shares held as of August 29, 2025 and August 30, 2024, respectively

( 206,076 ) ( 153,756 )

Accumulated other comprehensive income (loss) 10 ( 205,964 )

Total Penguin Solutions shareholders’ equity 391,381 222,475

Accumulated other comprehensive income 18 10

Total Penguin Solutions stockholders’ equity 394,246 391,381

Noncontrolling interest in subsidiary 11,271 7,827

Total equity 399,208 229,233

Total liabilities and equity $ 1,474,506 $ 1,505,958

Total stockholders' equity 405,517 399,208

Total liabilities, temporary equity and stockholders' equity $ 1,617,200 $ 1,474,506

The accompanying notes are an integral part of these consolidated financial statements.

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Services 263,706 244,969 248,360

Related party 32,350 — —

Total net sales 1,368,794 1,170,796 1,441,250

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Change in fair value of contingent consideration — — 29,000

Other operating (income) expense 7,064 7,047 234

Other operating expense 2,098 7,064 7,047

Total operating expenses 336,139 322,481 406,426

Operating income (loss) 18,295 8,745 67,176

Operating income 58,135 18,295 8,745

Non-operating (income) expense:

Interest expense, net 7,305 28,378 36,421

Other non-operating (income) expense 21,084 11,837 350

Total non-operating (income) expense 49,462 48,258 24,695

Other non-operating expense 1,929 21,084 11,837

Total non-operating expense 9,234 49,462 48,258

Income (loss) before taxes 48,901 ( 31,167 ) ( 39,513 )

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Net income (loss) from continuing operations 28,835 ( 41,785 ) 9,690

Net income (loss) from discontinued operations ( 8,148 ) ( 195,384 ) 44,185

Net loss from discontinued operations — ( 8,148 ) ( 195,384 )

Net income (loss) 28,835 ( 49,933 ) ( 185,694 )

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Net income (loss) attributable to Penguin Solutions $ 25,391 $ ( 52,472 ) $ ( 187,526 )

Basic earnings (loss) per share:

Preferred stock dividends 8,667 — —

Income available for distribution 16,724 ( 52,472 ) ( 187,526 )

Income allocated to participating securities 1,263 — —

Net income (loss) available to common stockholders $ 15,461 $ ( 52,472 ) $ ( 187,526 )

Basic earnings (loss) per share of common stock:

Continuing operations $ 0.29 $ ( 0.85 ) $ 0.16

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$ 0.29 $ ( 1.00 ) $ ( 3.78 )

Diluted earnings (loss) per share:

Diluted earnings (loss) per share of common stock:

Continuing operations $ 0.28 $ ( 0.85 ) $ 0.15

1 unchanged sentence

$ 0.28 $ ( 1.00 ) $ ( 3.65 )

Shares used in per share calculations:

Common stock used in per share calculations:

Basic 53,154 52,428 49,566

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Penguin Solutions, Inc.

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Stockholders’ Equity

(In thousands)

Amount Shares

Amount Additional

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Total Penguin

Shareholders’

As of August 27, 2021 50,138 $ 1,504 $ 396,120 $ 184,787 $ ( 50,545 ) $ ( 221,615 ) $ 310,251 $ 8,673 $ 318,924

Net income — — — 66,557 — — 66,557 2,035 68,592

Other comprehensive income (loss) — — — — — ( 40 ) ( 40 ) — ( 40 )

Shares issued under equity plans 2,797 84 12,056 — — — 12,140 — 12,140

Repurchase of shares ( 55 ) ( 2 ) 2 — ( 57,231 ) — ( 57,231 ) — ( 57,231 )

Share-based compensation expense — — 39,934 — — — 39,934 — 39,934

Distribution to noncontrolling interest — — — — — — — ( 3,773 ) ( 3,773 )

Stockholders’

As of August 26, 2022 52,880 $ 1,586 — $ — $ 448,112 $ 251,344 $ ( 107,776 ) $ ( 221,655 ) $ 371,611 $ 6,935 $ 378,546

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Settlement of 2026 Capped Calls — — — — 10,786 — — — 10,786 — 10,786

Share-based compensation expense — — 40,813 — — — 40,813 — 40,813

Stock-based compensation expense — — — — 40,813 — — — 40,813 — 40,813

Distribution to noncontrolling interest — — — — — — — — — ( 2,009 ) ( 2,009 )

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Other comprehensive income (loss) — — — — — — — 205,974 205,974 — 205,974

Shares issued under equity plans 2,684 81 9,728 — — — 9,809 — 9,809

Stock issued under equity plans 2,684 81 — — 9,728 — — — 9,809 — 9,809

Repurchase of shares — — — — — — ( 21,309 ) — ( 21,309 ) — ( 21,309 )

Purchase of 2030 Capped Calls — — — — ( 16,300 ) — — — ( 16,300 ) — ( 16,300 )

Share-based compensation expense — — 43,204 — — — 43,204 — 43,204

Stock-based compensation expense — — — — 43,204 — — — 43,204 — 43,204

Distribution to noncontrolling interest — — — — — — — — — ( 1,470 ) ( 1,470 )

As of August 30, 2024 60,226 1,807 — — 513,335 29,985 ( 153,756 ) 10 391,381 7,827 399,208

Net income — — — — — 25,391 — — 25,391 3,444 28,835

Other comprehensive income (loss) — — — — — — — 8 8 — 8

Stock issued under equity plans 2,530 76 — — 8,728 — — — 8,804 — 8,804

Repurchase of shares

— — — — — — ( 52,320 ) — ( 52,320 ) — ( 52,320 )

Stock-based compensation expense — — — — 41,176 — — — 41,176 — 41,176

Issuance of preferred stock — — 200 6 191,177 — — — 191,183 — 191,183

Preferred stock dividends — — — — — ( 8,667 ) — — ( 8,667 ) — ( 8,667 )

Preferred stock reclassified to Temporary equity

— — ( 200 ) ( 6 ) ( 202,704 ) — — — ( 202,710 ) — ( 202,710 )

As of August 29, 2025 62,756 $ 1,883 — $ — $ 551,712 $ 46,709 $ ( 206,076 ) $ 18 $ 394,246 $ 11,271 $ 405,517

The accompanying notes are an integral part of these consolidated financial statements.

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Net income (loss) $ 28,835 $ ( 49,933 ) $ ( 185,694 )

Net income (loss) from discontinued operations ( 8,148 ) ( 195,384 ) 44,185

Net loss from discontinued operations — ( 8,148 ) ( 195,384 )

Net income (loss) from continuing operations 28,835 ( 41,785 ) 9,690

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Amortization of debt issuance costs 3,493 3,724 4,064

Share-based compensation expense 43,160 39,228 37,284

Stock-based compensation expense 41,176 43,160 39,228

Impairment of goodwill 16,063 — 19,092

Change in fair value of contingent consideration — — 29,000

Loss on extinguishment or prepayment of debt 22,763 15,924 653

Loss on extinguishment debt 2,908 22,763 15,924

Deferred income taxes, net ( 14,112 ) ( 11,042 ) ( 63,603 )

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Net cash provided by operating activities from continuing operations 113,183 105,521 63,677

Net cash provided by (used for) operating activities from discontinued operations ( 28,336 ) 40,710 66,069

Net cash used for operating activities from discontinued operations ( 4,099 ) ( 28,336 ) 40,710

Net cash provided by operating activities 109,084 77,185 104,387

1 unchanged sentence

Capital expenditures and deposits on equipment ( 9,012 ) ( 19,424 ) ( 39,421 )

Proceeds from maturities of investment securities 39,395 — —

Proceeds from sales and maturities of investment securities 66,361 39,395 —

Purchases of held-to-maturity investment securities ( 59,066 ) ( 19,503 ) ( 25,015 )

3 unchanged sentences

Net cash used for investing activities from continuing operations ( 3,377 ) ( 11,804 ) ( 281,184 )

Net cash provided by (used for) investing activities from discontinued operations 119,389 ( 17,385 ) ( 17,736 )

Net cash provided by (used for) investing activities 107,585 ( 298,569 ) ( 38,970 )

Net cash provided by investing activities from discontinued operations 28,350 119,389 ( 17,385 )

Net cash provided by investing activities 24,973 107,585 ( 298,569 )

Cash flows from financing activities

Repayments of debt ( 300,015 ) ( 351,337 ) ( 21,634 )

Payments to acquire ordinary shares ( 21,309 ) ( 24,671 ) ( 57,231 )

Payments to acquire common stock ( 52,320 ) ( 21,309 ) ( 24,671 )

Payment of acquisition-related contingent consideration — ( 21,000 ) ( 28,100 )

2 unchanged sentences

Proceeds from debt — 192,694 295,287

Proceeds from issuance of ordinary shares 9,809 43,045 12,140

Proceeds from issuance of common stock 8,804 9,809 43,045

Payment of premium in connection with convertible note exchange — — ( 14,141 )

Repayments of borrowings under line of credit — — ( 109,000 )

Payment of preferred stock cash dividends

( 7,860 ) — —

Proceeds from issuance of convertible preferred stock, net of issuance costs 191,182 — —

Proceeds from borrowing under line of credit 100,000 — —

Fees paid for revolving line of credit financing

( 3,255 ) — —

Other — ( 582 ) ( 6,252 )

Net cash provided by (used for) financing activities from continuing operations ( 63,464 ) ( 209,495 ) 237,221

Net cash provided by (used for) financing activities from discontinued operations ( 606 ) ( 805 ) 13,234

Net cash used for financing activities from discontinued operations — ( 606 ) ( 805 )

Net cash provided by (used for) financing activities ( 63,464 ) ( 210,101 ) 236,416

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Basis of Presentation

The accompanying consolidated financial statements include the accounts of Penguin Solutions, Inc.

(“Penguin Solutions,” “we,” “us,” “our,” the “Company” or similar terms) and its consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America.

Domestication :

On June 30, 2025, we consummated the redomiciliation of the parent company of our corporate group, Penguin Solutions (Cayman), Inc., formerly known as Penguin Solutions, Inc., a Cayman Islands exempted company (“Penguin Solutions Cayman”), from the Cayman Islands to the State of Delaware in the United States, resulting in Penguin Solutions, Inc., a Delaware corporation (“Penguin Solutions Delaware”), becoming our publicly traded parent company (the “U.S.

Domestication”).

Domestication was approved by the shareholders of Penguin Solutions Cayman and effected via a court-sanctioned scheme of arrangement under Cayman Islands law, pursuant to which each ordinary share of Penguin Solutions Cayman was exchanged for one share of common stock of Penguin Solutions Delaware, and each convertible preferred share of Penguin Solutions Cayman was exchanged for one share of convertible preferred stock of Penguin Solutions Delaware.

The accompanying consolidated financial statements include the accounts of Penguin Solutions Cayman and its consolidated subsidiaries prior to the consummation of the U.S.

Domestication and the accounts of Penguin Solutions Delaware and its consolidated subsidiaries after the consummation of the U.S.

Domestication, and have been prepared in accordance with accounting principles generally accepted in the United States of America.

Unless stated otherwise or the context otherwise requires, references to “Penguin Solutions,” “we,” “us,” “our,” and the “Company” in the accompanying consolidated financial statements (i) for periods prior to the consummation of the U.S.

Domestication refer to Penguin Solutions Cayman and its consolid ated subsidiaries and (ii) for periods at or after the consummation of the U.S.

Domestication refer to Penguin Solutions Delaware and its consolidated subsidiaries.

Intercompany balances and transactions have been eliminated in consolidation.

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to Penguin Solutions, Inc.

The change reflects our focus on key areas such as artificial intelligence infrastructure deployment, advanced memory enterprise solutions and high-performance computing.

The change reflects our focus on key areas such as artificial intelligence (“AI”) infrastructure deployment, advanced memory enterprise solutions and high-performance computing (“HPC”).

Presentation of SMART Brazil as Discontinued Operations :

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In connection with the completion of the divestiture of an 81 % interest in SMART Brazil, we ceased consolidating the operations of SMART Brazil in our financial statements as of the November 29, 2023 disposal date.

As a result, financial information for the first quarter of 2024 included the four-month period for our SMART Brazil operations from August 1, 2023 to November 29, 2023.

As a result, financial information for the first

quarter of 2024 included the four-month period for our SMART Brazil operations from August 1, 2023 to November 29, 2023.

Cash, Cash Equivalents and Short-term Investments

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Qualitative factors considered in this assessment include industry and market considerations, overall financial performance and other relevant events and factors affecting the fair value of a reporting unit.

In 2023, we recorded aggregate goodwill impairment charges of $ 19.1 million.

Other than this impairment charge in 2023, there has been no impairment of goodwill for any of our current reporting units.

In 2025 and 2023, we recorded aggregate goodwill impairment charges of $ 16.1 million and $ 19.1 million, respectively under the Penguin Edge reporting unit.

No impairment was recognized in 2024.

Other than these impairment charges, there has been no impairment of goodwill for any of our other reporting units.

See “Intangible Assets and Goodwill.”

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Intangible Assets

Intangible assets are stated at cost and amortized on a straight-line basis over their estimated useful lives of generally 5 to 19 years for technology, 6 to 8 years for customer relationships and 5 to 10 years for trademarks/trade names.

Intangible assets are retired in the period they become fully amortized.

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Land leases are amortized using the straight-line method over their lease terms, which expire from 2057 to 2082.

We review the carrying value of property and equipment for impairment when events and circumstances indicate that the carrying value of an asset or group of assets may not be recoverable from the estimated future cash flows expected to result from its use and/or disposition.

expected to result from its use and/or disposition.

In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the estimated fair value of the assets.

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We recognize revenue based on the transfer of control of goods and services and apply the following five-step approach:

(1) identification of a contract with a customer, (2) identification of the performance obligations in the

contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract and (5) recognition of revenue as performance obligations are satisfied.

(1) identification of a contract with a customer, (2) identification of the performance obligations in the contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract and (5) recognition of revenue as performance obligations are satisfied.

Product Revenue :

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Our service revenue is derived from professional services and supply chain services.

Professional services include solution design, system installation, software automation and managed support services related to high-performance computing (“HPC”) and storage systems.

Professional services include solution design, system installation, software automation and managed support services related to HPC and storage systems.

Revenue from professional services and managed services is recognized based on the nature of the service and terms of the agreements based on the transfer of control.

Design and system installations revenue is recognized upon completion of the services, whereas, managed support services and extended warranties revenue is recognized over-time as the services are provided.

Supply chain services includes procurement, logistics, inventory management, temporary warehousing, kitting and packaging.

While we take title to inventory under such arrangements, control of such inventory does not transfer to us as we do not, at any point, have the ability to direct the use, and thereby obtain the benefits, of the inventory.

Service revenue also includes extended warranty, on-site services and subscriptions to our HPC environment.

Revenue from supply chain services is recognized on a net basis as the service is provided to the customer.

Revenue for these services is typically recognized at the point in time when the underlying goods are shipped to the customer.

Agent Services :

We provide certain services on an agent basis, whereby we procure product, materials and services on behalf of our customers and then resell such product, materials or services to our customers.

We provide certain services on an agent basis, where we procure product, materials and services on behalf of our customers and then resell such product, materials or services to our customers.

Gross amounts invoiced to customers in connection with these agent services include amounts related to the services performed by us in addition to the cost of the product, materials and services procured.

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Amounts we invoice to customers for the cost of product, materials and services performed, which remain unpaid as of the end of a reporting period, are included in accounts receivable.

Additionally, the cost of product and materials procured for customers under these agent services, which remain on hand as of the end of a reporting period, are included in inventories.

Additionally, the cost of product and materials procured for customers under these agent services, which remain on hand as of the end of a reporting period, are included in

Amounts in accounts receivable and inventories impact the determination of cash flows from operating activities.

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As a practical expedient, we recognize the incremental costs of obtaining a contract, specifically commission expenses, that have an amortization period of less than 12 months as an expense when incurred.

Additionally, we account for shipping and handling costs, if any, that occur after control transfers to the customer

as a fulfillment activity.

Additionally, we account for shipping and handling costs, if any, that occur after control transfers to the customer as a fulfillment activity.

We record shipping and handling costs related to revenue transactions within cost of sales as a period cost.

Share-Based Compensation

Share-based compensation is measured at the grant date, based on the fair value of the award, and recognized as expense under the straight-line attribution method over the requisite service period.

Stock-Based Compensation

Stock-based compensation is measured at the grant date, based on the fair value of the award, and recognized as expense under the straight-line attribution method over the requisite service period.

We account for forfeitures as they occur.

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Estimates and judgments are based on historical experience, forecasted events and various other assumptions.

Significant items subject to such estimates and assumptions include business acquisitions and divestitures, income taxes, inventories, goodwill and intangible assets, property and equipment, revenue recognition and share-based compensation.

Actual results could differ from the estimates made by management.

Preferred Share Investment

On July 14, 2024, we entered into a Securities Purchase Agreement (the “SKT Purchase Agreement”) with SK Telecom Co., Ltd.

Pursuant to the SKT Purchase Agreement, we agreed to sell to SK 200,000 convertible preferred shares, par value $ 0.03 per share, of Penguin Solutions (the “CPS”), at a price of $ 1,000 per share or an aggregate price of $ 200 million (the “Investment”).

The CPS will have an initial liquidation preference of 1 x and will only be redeemable at our option.

The CPS will vote together with the ordinary shares, par value $ 0.03 per share, of Penguin Solutions, on an as-converted basis, and entitle the holder to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at Penguin Solutions’ option, subject to certain conditions.

The holder of the CPS may convert such holder’s CPS into ordinary shares at any time, provided that the CPS may, at our option, automatically be converted into ordinary shares on any date following the second anniversary of the closing of the Investment upon which the volume-weighted average price of the ordinary shares for any 15 consecutive trading day period equals or exceeds 150 % of the then-applicable conversion price.

The CPS will be convertible into ordinary shares at a conversion price of $ 32.81 per preferred share, subject to adjustment upon the occurrence of certain events.

Holders of the CPS are also entitled to certain protective provisions.

The SKT Purchase Agreement contains customary representations, warranties, covenants and conditions to the closing, including receipt of all approvals or the termination or expiration of all waiting periods required under applicable antitrust laws.

The SKT Purchase Agreement may be terminated by either Penguin Solutions or SK if the closing has not occurred by April 14, 2025, subject to extension to July 14, 2025 in the event certain approvals have not been obtained.

The Investment is expected to close by the end of calendar 2024 or early in calendar 2025.

On the date of closing of the Investment, we and an affiliate of SK will enter into an Investor Agreement and the Certificate of Designation relating to the CPS (the “Certificate of Designation”) will become effective.

The Investor Agreement and the Certificate of Designation provide for certain rights and restrictions relating to the Investment.

Related Party Transactions

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate family members, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company or (iv) anyone who can significantly influence the financial and operating decisions of the Company.

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Preferred Stock Investment

On December 13, 2024, we closed the SKT Investment (as defined below).

Pursuant to the terms of the Securities Purchase Agreement (the “SKT Purchase Agreement”) by and between Penguin Solutions and SK Telecom Co., Ltd.

(“SKT”), we sold to Astra AI Infra LLC (“Astra AI Infra”), an affiliate of SKT, 200,000 convertible preferred shares, par value $ 0.03 per share, of Penguin Solutions (the “Issued Cayman CPS”) at a price of $ 1,000 per share or an aggregate price of $ 200.0 million (the “SKT Investment”).

Additionally, on the closing date of the SKT Investment, we and Astra AI Infra entered into an Investor Agreement (the “Investor Agreement”), and the Certificate of Designation relating to the Issued Cayman CPS (the “CPS Cayman Certificate of Designation”) became effective.

The Investor Agreement and the CPS Cayman Certificate of Designation provided for certain rights and restrictions relating to the SKT Investment, including but not limited to board representation rights, pro rata rights, registration rights and consent rights, and standstill provisions, disposition restrictions and voting obligations.

Amended and Restated Investor Agreement

On June 30, 2025, effective upon consummation of the U.S.

Domestication, Penguin Solutions Delaware assumed the Investor Agreement from Penguin Solutions Cayman and Penguin Solutions Delaware and SKT amended and restated the Investor Agreement (as amended and restated, the “Amended and Restated Investor Agreement”) such that the rights and restrictions relating to SKT’s beneficial ownership of the Issued Cayman CPS in place prior to the U.S.

Domestication apply in respect of SKT’s holdings of Issued CPS (as defined below) following consummation of the U.S.

Domestication.

Delaware Certificate of Designation for Convertible Preferred Stock

On June 27, 2025, in connection with the U.S.

Domestication, Penguin Solutions Delaware executed and adopted a Certificate of Designation of Convertible Preferred Stock (the “CPS Delaware Certificate of Designation”) that sets forth the terms, rights and obligations of a series of 200,000 shares of preferred stock of Penguin Solutions Delaware, par value $ 0.03 per share, designated as convertible preferred stock (the “Issued CPS”).

The principal attributes of the Issued Cayman CPS and the Issued CPS are substantially the same, with changes to give effect to requirements of Delaware law.

The Issued CPS have an initial liquidation preference of 1 x.

Shares of Issued CPS are not redeemable upon or repurchased upon the election of the holders of shares of Issued CPS and are only redeemable, at our option, in one installment upon notice, provided that no such notice shall be sent until at least five years after the date of the closing of the SKT Investment.

The shares of Issued CPS vote together with the common stock, par value $ 0.03 per share, of Penguin Solutions, on an as-converted basis, and entitle the holder to receive dividends of six percent per annum, cumulative, payable quarterly in-kind or in cash at our option, subject to certain conditions.

The holder of shares of Issued CPS may convert the shares of Issued CPS into common stock at any time, provided that the Issued CPS may, at our option, automatically be converted into common stock on any date following the second anniversary of the closing of the SKT Investment upon which the volume-weighted average price of the common stock for any 15 consecutive trading day period equals or exceeds 150 % of the then-applicable conversion price.

The shares of Issued CPS are convertible into common stock at an initial conversion price of $ 32.81 , subject to adjustment upon the occurrence of certain events.

Holders of Issued CPS are also entitled to certain protective provisions.

For more details, refer to the CPS Delaware Certificate of Designation, filed as Exhibit 3.3 hereto, to the description of the Issued CPS contained in the description of the Registrant’s capital stock, filed as Exhibit 4.1 hereto, and to the information under the heading “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” in Penguin Solutions Cayman’s definitive proxy statement on Schedule 14A filed with the SEC on May 2, 2025.

Assumption and Amendment and Restatement of Equity Plans

Effective upon the completion of the U.S.

Domestication, Penguin Solutions Delaware assumed Penguin Solutions Cayman’s equity incentive plans and all outstanding awards and rights thereunder and amended and restated each plan in the form of the Amended and Restated 2017 Stock Incentive Plan, the Amended and Restated 2021 Inducement Plan and the Amended and Restated 2018 Employee Stock Purchase Plan (together with any applicable predecessor plans, the “Incentive Plans”), to provide, among other things, that Penguin Solutions Delaware common stock will be issued, held, available for issuance or used to measure or satisfy benefits as appropriate under the Incentive Plans, in substitution for Penguin Solutions Cayman ordinary shares.

The assumed awards and rights have substantially the same terms and conditions that applied prior to the consummation of the U.S.

Domestication (including any applicable vesting and change in control provisions and the U.S.

Domestication did not constitute a change in control for the purposes of such provisions).

Divestiture of SMART Brazil

Overview of Transaction

r.l., a société à responsabilité limitée governed by the laws of Grand Duchy of Luxembourg and a wholly owned subsidiary of Penguin Solutions (the “Brazil Seller”), Lexar Europe B.V., a company organized under the laws of The Netherlands (the “Brazil Purchaser”), Shenzhen Longsys Electronics Co., Ltd., a company limited by shares governed by the laws of the People’s Republic of China (“Longsys”), solely with respect to certain provisions therein, Shanghai Intelligent Memory Semiconductor Co., Ltd., a limited liability company governed by the laws of the People’s Republic of China and, solely with respect to certain provisions therein, Penguin Solutions.

On November 29, 2023, we completed the divestiture of SMART Brazil pursuant to the terms of that certain Stock Purchase Agreement (the “Brazil Purchase Agreement”), by and among SMART Modular Technologies (LX) S.à r.l., a société à responsabilité limitée governed by the laws of the Grand Duchy of Luxembourg and a wholly owned subsidiary of Penguin Solutions (the “Brazil Seller”), Lexar Europe B.V., a company organized under the laws of The Netherlands (the “Brazil Purchaser”), Shenzhen Longsys Electronics Co., Ltd., a company limited by shares governed by the laws of the People’s Republic of China (“Longsys”), solely with respect to certain provisions therein, Shanghai Intelligent Memory Semiconductor Co., Ltd., a limited liability company governed by the laws of the People’s Republic of China and, solely with respect to certain provisions therein, Penguin Solutions.

Pursuant to the Brazil Purchase Agreement, Brazil Seller sold to Brazil Purchaser, and Brazil Purchaser purchased from Brazil Seller, 81 % of Brazil Seller’s right, title and interest in and to the outstanding quotas of SMART Brazil, with Brazil Seller retaining a 19 % interest in SMART Brazil (the “Retained Interest”) (the “Brazil Divestiture”).

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The price for the Put/Call Option is based on a 100 % enterprise value of 7.5 x net income for SMART Brazil for the preceding fiscal year at the time of exercise.

Consideration :

The following is a summary of total consideration in exchange for the sale of an 81 % interest in SMART Brazil:

Cash received at closing (1)

Post-closing adjustment for net cash and net working capital (2)

Deferred payment (3)

Deferred cash adjustment (4)

Total consideration $ 194,092

(1) Included $ 26.8 million of cash received at closing for an estimated amount of net cash and an estimated net working capital amount (in excess of a minimum target amount) as of the closing.

(2) Represented the post-closing adjustment for net cash and net working capital, which was received in the third quarter of 2024 upon completion of the review of the final net cash and final working capital amounts.

(3) Represented the fair value of the deferred payment, comprised of a notional amount of $ 28.4 million, discounted at 7.5 % and due May 2025.

The deferred payment was included in other current assets in the accompanying consolidated balance sheet as of August 30, 2024 and in other noncurrent assets as of August 25, 2023.

(4) Represented the fair value of the deferred cash adjustment, comprised of a notional amount of $ 4.8 million, discounted at 7.5 %, equal to 19 % of the amount of SMART Brazil’s net cash as of the closing (as calculated pursuant to the Brazil Purchase Agreement).

The deferred cash adjustment, which is accounted for as a derivative financial instrument, is due at the time of exercise of the Put/Call Option and was included in other noncurrent assets in the accompanying consolidated balance sheet as of August 30, 2024.

Total consideration in exchange for the sale of an 81 % interest in SMART Brazil amounted to $ 194.1 million which included cash at closing of $ 164.9 million, a deferred payment with fair value of $ 25.4 million and a deferred cash adjustment with a fair value of $ 3.7 million.

The deferred payment, comprised of a notional amount of $ 28.4 million discounted at 7.5 %, was received in May 2025.

The deferred payment is included in other current assets in the accompanying consolidated balance sheets for prior periods presented.

The fair value of the deferred cash adjustment, comprised of a notional amount of $ 4.8 million discounted at 7.5 %, equal to 19 % of the amount of SMART Brazil’s net cash as of the closing (as calculated pursuant to the Brazil Purchase Agreement).

Presentation of SMART Brazil Operations

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A disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less costs to sell.

Accordingly, we evaluated the carrying value of the net assets of SMART Brazil (including $ 206.3 million recognized within shareholders’ equity related to the cumulative translation adjustment from SMART Brazil), estimated costs to sell and expected proceeds and concluded the net assets were impaired as of August 25, 2023.

Accordingly, we evaluated the carrying value of the net assets of SMART Brazil (including $ 206.3 million

recognized within stockholders’ equity related to the cumulative translation adjustment from SMART Brazil), estimated costs to sell and expected proceeds and concluded the net assets were impaired as of August 25, 2023.

As a result, we recognized an impairment charge of $ 153.0 million in the fourth quarter of 2023 to write down the carrying value of the net assets of SMART Brazil.

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2024 August 25,

2023 August 26,

Net sales $ 55,159 $ 185,377

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Loss from divestiture of 81 % interest in SMART Brazil

10,888 153,036

Interest (income) expense, net ( 1,262 ) ( 4,174 )

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Pre-tax loss on divestiture of 81 % interest in SMART Brazil

$ 10,888 $ 153,036 $ 163,924

Income tax provision (benefit) ( 1,984 ) 28,564 26,580

1 unchanged sentence

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 – Debt – Debt with Conversion and Other Options and Derivatives and Hedging – Contracts in Entity’s Own Equity:

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract.

This ASU requires a convertible debt instrument to be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives, and requires an entity to use the if-converted method in the diluted earnings per share calculation for convertible instruments.

This ASU was effective for us in the first quarter of 2023 and permitted the use of either the modified retrospective or fully retrospective method of transition.

We adopted ASU 2020-06 in the first quarter of 2023 under the modified retrospective method.

Upon adoption, the previously separated equity component and associated issuance costs for our 2.25 % convertible senior notes due 2026 were reclassified from additional capital to long-term debt, thereby eliminating future amortization of the debt issuance costs as interest expense.

Amortization of the debt issuance costs as interest expense was $ 8.1 million in 2022.

The following table summarizes the effects of adopting ASU 2020-06:

Balance as of August 26,

Adoption of ASU 2020-06 Beginning Balance as of August 27,

Long-term debt $ 575,682 $ 32,183 $ 607,865

Additional paid-in-capital 448,112 ( 50,822 ) 397,290

Retained earnings 251,344 18,639 269,983

On August 26, 2022, we made an irrevocable election, effective August 27, 2022, under the indenture to require the principal portion of our 2026 Notes to be settled in cash and any conversion consideration in excess of the principal portion in cash and/or ordinary shares at our option upon conversion.

As a result, only the amounts expected to be settled in excess of the principal portion are considered in calculating diluted earnings per share under the if-converted method.

See “Debt – Convertible Senior Notes – 2026 Notes.”

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Segment Reporting Disclosures , which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

The guidance is effective for the Company's annual periods beginning in 2025 and interim periods beginning in the first quarter of fiscal year 2026.

The Company adopted the standard on August 29, 2025.

See “Segment and Other Information.”

Recently Issued Accounting Standards

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Improvements to the Accounting for and Disclosure of Internal-Use Software , which replaces the previous stage-based model for capitalizing internal-use software development costs with a principles-based approach.

Under the new guidance, capitalization begins when management authorizes and commits to funding a project and it is probable the project will be completed and used as intended.

The ASU also incorporates website development guidance into ASC 350-40 and introduces the concept of “significant development uncertainty,” which, if present, would delay capitalization.

ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, including interim periods within those years, with early adoption permitted at the beginning of an annual period.

The new guidance may be applied prospectively, retrospectively, or using a modified prospective approach.

We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures, though we do not expect there to be a material impact.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”).

ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers.

Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets.

ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years.

Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively.

We are currently evaluating the potential impact of adopting ASU 2025-05 on our consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosure (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

The amendments in this ASU require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses, as well as a qualitative description of amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.

This ASU also requires disclosure of the total amount of selling expenses and an entity’s definition of selling expenses.

The amendments in this ASU are effective for us in 2028 for annual reporting and in 2029 for interim reporting, with early adoption permitted and may be applied prospectively or retrospectively.

We do not expect ASU 2024-03 to have an impact on our financial position, results of operations and cash flows.

We are currently evaluating the impact on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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The amendments in this ASU are intended to increase transparency through improvements to annual disclosures primarily related to income tax rate reconciliation and income taxes paid.

The amendments in this ASU are effective for us in 2026 for annual reporting, with early adoption permitted.

The amendments in this

ASU are effective for us in 2026 for annual reporting, with early adoption permitted.

The ASU may be applied on a prospective basis, although retrospective application is permitted.

We are evaluating the timing and effects of this ASU on our income tax disclosures.

In November 2023, the FASB issued ASU 2023-07 – Segment Reporting (Topic 280):

Improvements to Segment Reporting Disclosures , which will require an entity to provide more detailed information about its reportable segment expenses that are included within management’s measurement of profit and loss and will require certain annual disclosures to be provided on an interim basis.

The amendments in this ASU are effective for us in 2025 for annual reporting and in 2026 for interim reporting and are required to be applied using the full retrospective method of transition.

We are evaluating the effects of adoption of this ASU on our segment disclosures.

Business Acquisitions

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Amortization of this technology over an estimated useful life of 10 years commenced in the second quarter of 2024 upon completion of research and development efforts.

On March 1, 2021, we completed the acquisition of the Optimized LED business of Cree, Inc., a corporation now known as Wolfspeed, Inc.

The purchase price for the Optimized LED business consisted of cash payments of $ 72.4 million, the issuance of an unsecured promissory note issued in the amount of $ 125.0 million (the “LED Purchase Price Note”) and the potential for Cree to receive an earn-out payment of up to $ 125.0 million based on the revenue and gross profit performance of the Optimized LED business in the 12-month period ended in March 2022, with a minimum payout of $ 2.5 million, payable in the form of an unsecured promissory note to be issued by us (the “LED Earnout Note”).

The LED Earnout Note was accounted for as contingent consideration and was revalued each quarter with changes in valuation reflected in results of operations.

In 2022, we recorded aggregate charges of $ 41.3 million to adjust the value of the LED Earnout Note to its fair value.

The changes in fair value reflected new information about the probability and timing of meeting the conditions of the revenue and gross profit targets of the LED business.

Based on the revenue and gross profit performance of the LED business in Cree’s first four full fiscal quarters following the closing, the final calculated value of the contingent consideration was $ 101.8 million and, in the fourth quarter of 2022, we issued the LED Earnout Note to Cree for this amount.

In the first quarter of 2023, we repaid in full the amount outstanding under the LED Earnout Note.

Cash and Investments

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Non-marketable Equity Investments

As of August 30, 2024 and August 25, 2023, other noncurrent assets included $ 53.0 million and $ 4.2 million, respectively, of non-marketable equity investments, which are accounted for under the measurement alternative at cost less impairment, if any.

As of August 29, 2025 and August 30, 2024, other noncurrent assets included $ 53.0 million of non-marketable equity investments, which are accounted for under the measurement alternative at cost less impairment, if any.

In the event an observable price change occurs in an orderly transaction for an identical or a similar investment, the carrying value of investments would be remeasured to fair value as of the date the observable transaction occurred, with any resulting gains or losses recorded in results of operations.

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This program allows us to sell certain of our trade accounts receivables up to $ 60.0 million.

As of August 30, 2024, there have been no trade accounts receivable sold under this program.

As of August 29, 2025, there have been no trade accounts receivables sold under this program.

As of August 29,

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$ 92,603 $ 106,548

Depreciation expense for property and equipment was $ 25.7 million, $ 26.5 million and $ 22.9 million in 2024, 2023 and 2022, respectively.

As of August 29, 2025 and August 30, 2024, depreciation expense for property and equipment was $ 20.6 million and $ 25.7 million, respectively.

Intangible Assets and Goodwill

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$ 193,231 $ ( 105,477 ) $ 243,003 $ ( 121,549 )

Goodwill by segment:

Advanced Computing $ 147,238 $ 147,238

Integrated Memory 14,720 14,720

$ 161,958 $ 161,958

In 2025 and 2024, we capitalized $ 1.9 million and $ 1.4 million, respectively, for intangible assets, with weighted-average useful lives of 18.6 years and 18.2 years, respectively.

Amortization expense for intangible assets was $ 35.6 million, $ 40.0 million and $ 45.1 million in 2025, 2024 and 2023, respectively.

Amortization expense is expected to be $ 35.6 million for 2025, $ 30.2 million for 2026, $ 29.6 million for 2027, $ 9.9 million for 2028, $ 6.0 million for 2029 and $ 10.2 million for 2030 and thereafter.

Amortization expense is expected to be $ 30.3 million for 2026, $ 29.7 million for 2027, $ 10.0 million for 2028, $ 6.1 million for 2029 and $ 5.4 million for 2030 and $ 6.2 million for 2031 and thereafter.

In connection with our acquisition of Stratus Technologies, we capitalized $ 3.9 million of in-process research and development related to next generation fault tolerant architecture.

Amortization of this technology commenced in the second quarter of 2024.

In the second quarter of 2023, we initiated a plan within our Advanced Computing segment pursuant to which we intend to wind down manufacturing and discontinue the sale of legacy products offered through our Penguin Edge

business by approximately the end of 2025.

As a result, we recorded aggregate charges of $ 19.1 million in 2023 to impair the carrying value of Penguin Edge goodwill.

At each reporting date, we reassess the estimated remaining cash flows of the Penguin Edge business.

We currently anticipate that the remaining goodwill of the Penguin Edge reporting unit of $ 16.1 million as of August 30, 2024 may become further impaired in future periods.

Goodwill by segment

Advanced Computing

Integrated Memory

Balance as of August 25, 2023

$ 166,330 $ 14,720 $ 181,050

Accumulated impairment losses

( 19,092 ) — ( 19,092 )

Carrying value

147,238 14,720 161,958

Balance as of August 30, 2024

166,330 14,720 181,050

Accumulated impairment losses

( 19,092 ) — ( 19,092 )

Carrying value

147,238 14,720 161,958

Impairment losses during the year-ended August 29, 2025

$ ( 16,063 ) $ — $ ( 16,063 )

Balance as of August 29, 2025

166,330 14,720 181,050

Accumulated impairment losses

( 35,155 ) — ( 35,155 )

Carrying value

$ 131,175 $ 14,720 $ 145,895

During the second quarter of 2023, we initiated a plan within our Advanced Computing segment pursuant to which we are winding down manufacturing and discontinuing the sale of products offered through our Penguin Edge business by approximately the end of calendar 2025.

The Penguin Edge technology is becoming obsolete and is only sold to a small number of customers who we expect to phase out the technology.

In each quarter of 2025, to assess the fair value of the Penguin Edge business and reporting unit for the purpose of goodwill impairment, we utilized a discounted cash flow model using assumptions for how a market participant would value the business based on expected future cash flows through the expected completion of the wind down.

We used this valuation approach because there were no comparable transactions in the marketplace of a similar business being sold while in the process of winding down.

Further, since the Penguin Edge business has no expansion or product initiatives, those expected future cash flows incorporated expected revenues, the costs associated with fulfilling customer contracts, and the costs associated with winding down the Penguin Edge business.

In determining the fair value of the Penguin Edge business, it was our expectation that the business would continue to be profitable and generate positive free cash flow through the wind down of the business.

We calculated the expected remaining cash flows based on existing contracts, future expected orders based on historical order volumes, and future expected orders identified through customer engagements for last-time buy planning, which were expected to fully consume all inventory on hand.

Net estimated discounted cash flows were calculated by taking the total

proceeds expected from sales, minus cash outflows for costs associated with fulfilling customer contracts, operating expenses, collection of receivables recognized as of August 29, 2025, and costs associated with the wind down of the Penguin Edge business.

We assumed no capital expenditures because we are no longer investing in the business.

We applied a discount rate of 16.25 %, which we believe reflects the return a market participant would require when purchasing the Penguin Edge business given the risk profile of the remaining operations and the limited future cash flows from winding down.

However, given the short period of time associated with the remaining cash flows for the business, changes to the discount rate would not have produced a materially different fair value estimate.

Since the Penguin Edge business is no longer investing in growth initiatives and operating costs are significantly lower than for an ongoing business, we observed a positive present value of future expected cash flows, which we then compared to the carrying value of the business.

Based on our analysis, the fair value of the Penguin Edge business was determined to be lower than its carrying value, resulting in an impairment charge for the remaining goodwill balance of $ 16.1 million for the year-ended August 29, 2025.

The goodwill impairments were recorded to align the carrying value of the Penguin Edge reporting unit with the fair value of the Penguin Edge reporting unit as of the end of the respective reporting periods.

The goodwill impairment loss recognized reduced the Penguin Edge reporting unit’s carrying value to zero.

Accounts Payable and Accrued Expenses

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2026 Notes 19,945 19,833

2025 Loans 100,000 —

461,838 657,347

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Long-term debt $ 441,893 $ 657,347

Credit Facility

On February 7, 2022, Penguin Solutions and SMART Modular Technologies, Inc.

(collectively, the “Borrowers”) entered into a credit agreement (the “Original Credit Agreement”) with a syndicate of banks and Citizens Bank, N.A., as administrative agent (the “Administrative Agent”) that provided for (i) a term loan credit facility in an aggregate principal amount of $ 275.0 million (the “2027 TLA”) and (ii) a revolving credit facility in an aggregate principal amount of $ 250.0 million (the “2027 Revolver”), in each case, maturing on February 7, 2027.

The Original Credit Agreement provides that up to $ 35.0 million of the 2027 Revolver is available for issuances of letters of credit.

On August 29, 2022, the Borrowers entered into an amendment (the Original Credit Agreement, as amended by this amendment and subsequent amendments, the “Amended Credit Agreement”) with and among the lenders party thereto and the Administrative Agent, which (i) provided for incremental term loans under the Amended Credit Agreement in an aggregate amount of $ 300.0 million (the “Incremental Term Loans” and together with the 2027 TLA, the “Amended 2027 TLA”), which Incremental Term Loans are on the same terms as the term loans incurred under the Original Credit Agreement, (ii) increased the maximum First Lien Leverage Ratio (as defined in the Amended Credit Agreement) financial covenant from 3.00 :1.00 to 3.25 :1.00 and (iii) increased the aggregate amount of unrestricted cash and permitted investments netted from the definitions of Consolidated First Lien Debt and Consolidated Net Debt under the Amended Credit Agreement from $ 100.0 million to $ 125.0 million.

Substantially simultaneously with amending the Original Credit Agreement, the Borrowers applied a portion of the proceeds of the Incremental Term Loans to (i) finance a portion of the purchase price for the acquisition of Stratus Technologies and (ii) prepay in full the $ 101.8 million outstanding under the LED Earnout Note.

Credit Agreement

On February 7, 2022, Penguin Solutions Cayman and Penguin Solutions Corporation (formerly known as SMART Modular Technologies, Inc.) (collectively, the “Borrowers”) entered into a credit agreement (the “2022 Original Credit Agreement”) with a syndicate of banks and Citizens Bank, N.A., as administrative agent (the “Administrative Agent”) that provided for (i) a term loan credit facility in an aggregate principal amount of $ 275.0 million (the “2022 TLA”) and (ii) a revolving credit facility in an aggregate principal amount of $ 300.0 million (the “2022 Revolver”), in each case, maturing on February 7, 2027.

The 2022 Original Credit Agreement provided that up to $ 35.0 million of the 2022 Revolver was available for issuances of letters of credit.

On August 29, 2022, the Borrowers entered into an amendment (the 2022 Original Credit Agreement, as amended by this amendment and subsequent amendments, the “2022 Amended Credit Agreement”) with and

among the lenders party thereto and the Administrative Agent, which (i) provided for incremental term loans under the 2022 Amended Credit Agreement in an aggregate amount of $ 300.0 million (the “Incremental Term Loans” and together with the 2022 TLA, the “Amended 2022 TLA”), which Incremental Term Loans were on the same terms as the term loans incurred under the 2022 Original Credit Agreement, (ii) increased the maximum First Lien Leverage Ratio (as defined in the 2022 Amended Credit Agreement) financial covenant from 3.00 :1.00 to 3.25 :1.00 and (iii) increased the aggregate amount of unrestricted cash and permitted investments netted from the definitions of Consolidated First Lien Debt and Consolidated Net Debt under the 2022 Amended Credit Agreement from $ 100.0 million to $ 125.0 million.

Simultaneously with amending the 2022 Original Credit Agreement, the Borrowers applied a portion of the proceeds of the Incremental Term Loans to (i) finance a portion of the purchase price for the acquisition of Stratus Technologies and (ii) prepay in full the $ 101.8 million outstanding under the LED Earnout Note (as defined below).

In connection with our prepayment of the LED Earnout Note, we recognized a gain of $ 0.8 million in the first quarter of 2023, which is included in other non-operating (income) expense in the accompanying consolidated statements of operations.

On June 24, 2025 (the “Refinancing Closing Date”), the Borrowers entered into a new Credit Agreement (the “2025 Credit Agreement”) by and among the Borrowers, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing bank.

The 2025 Credit Agreement provides for a revolving credit facility in an aggregate principal amount of $ 400.0 million (the “2025 Credit Facility” and the revolving loans thereunder, the “2025 Loans”), maturing on June 24, 2030.

The 2025 Credit Agreement provides that up to $ 35.0 million of the 2025 Credit Facility is available for issuances of letters of credit.

On the Refinancing Closing Date, we borrowed $ 100.0 million under the 2025 Credit Facility, and simultaneously applied such proceeds, together with $ 200.0 million cash on hand, to repay in full all borrowings and terminate all commitments under the 2022 Amended Credit Agreement.

Immediately prior to the repayment and termination of the 2022 Amended Credit Agreement, we had $ 300.0 million of principal outstanding under the Amended 2022 TLA, with unamortized issuance costs of $ 1.8 million and the effective interest rate was 7.17 %, and no amounts outstanding under the 2022 Revolver, with unamortized issuance costs of $ 1.5 million.

Following the extinguishment of the 2022 Amended Credit Agreement, we recognized a loss on extinguishment of $ 2.9 million.

Interest and Fees :

Loans under the Amended Credit Agreement bear interest at a rate per annum equal to either, at our option, a term SOFR or a base rate, in each case plus an applicable margin.

The applicable margin for our 2027 TLA and 2027 Revolver varies based on our Total Leverage Ratio (as defined in the Amended Credit Agreement) and ranges from 1.25 % to 3.00 % per annum with respect to term SOFR borrowings and from 0.25 % to 2.00 % per annum with respect to base rate borrowings.

In addition, we are required to pay a quarterly unused commitment fee at an initial rate of 0.25 %, which may increase up to a rate of 0.35 % based on certain Total Leverage Ratio levels specified in the Amended Credit Agreement.

The Amended Credit Agreement is jointly and severally guaranteed on a senior basis by certain subsidiaries of Penguin Solutions organized in the United States and Cayman Islands.

In addition, the Amended Credit Agreement is secured by a pledge of the capital stock of, or equity interests in, certain subsidiaries of Penguin Solutions organized in the United States and the Cayman Islands and by substantially all of the assets of certain subsidiaries of Penguin Solutions organized in the United States and the Cayman Islands.

The Amended Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our subsidiaries to:

Under the 2025 Credit Agreement, 2025 Loans bear interest at a rate per annum equal to either, at our option, a Term Secured Overnight Financing Rate (“Term SOFR”) rate or a base rate, in each case plus an applicable margin based on the Total Leverage Ratio (as defined in the 2025 Credit Agreement) and ranges from 1.25 % to 3.00 % per annum with respect to Term SOFR borrowings and from 0.25 % to 2.00 % per annum with respect to base rate borrowings.

The 2025 Credit Agreement is jointly and severally guaranteed on a senior basis by certain subsidiaries of the Parent Borrower (as defined in the 2025 Credit Agreement) organized in the United States and the Cayman Islands.

In addition, the 2025 Credit Agreement is secured by a pledge of the capital stock of, or equity interests in, certain subsidiaries of the Parent Borrower and by substantially all of the assets of certain subsidiaries of the Parent Borrower organized in the United States and the Cayman Islands.

The 2025 Credit Agreement contains customary representations and warranties and affirmative covenants, as described in the 2025 Credit Agreement.

The 2025 Credit Agreement also contains a number of negative covenants that, among other things, restrict, subject to certain exceptions, the Borrowers’ ability and the ability of the Borrowers’ subsidiaries to:

incur additional indebtedness;

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repay or repurchase certain subordinated debt (except as scheduled or at maturity);

create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries;

create restrictions on the payment of dividends or other amounts to the Borrowers from the Borrowers’ restricted subsidiaries;

make certain acquisitions;

engage in certain transactions with affiliates;

amend material agreements governing our subordinated debt;

and fundamentally change our business.

The Amended Credit Agreement also includes the following financial maintenance covenants tested on the final day of each fiscal quarter:

a First Lien Leverage Ratio (as defined in the Amended Credit Agreement) of a maximum of 3.25 to 1.00

a Total Leverage Ratio of a maximum of 4.50 to 1.00;

provided that in connection with any Material Acquisition (as defined in the Amended Credit Agreement), at the election of the Borrowers, the maximum Total Leverage Ratio for the next four testing periods after such Material Acquisition has been consummated will be automatically increased by 0.50 to 1.00 above the otherwise permitted Total Leverage Ratio for the applicable fiscal quarter (not to exceed a maximum of 5.00 to 1.00 in any event);

provided further, that (x) no more than two such elections may be made during the term of the Amended Credit Agreement and (y) following the first such election, no subsequent election may be made unless the Total Leverage Ratio has been less than or equal to a maximum of 5.00 to 1.00 as of the last day of at least two consecutive Test Periods (as defined in the Amended Credit Agreement) following the expiration of the first increase;

an Interest Coverage Ratio (as defined in the Amended Credit Agreement) of at least 3.00 to 1.00.

For purposes of calculating the First Lien Leverage Ratio and the Total Leverage Ratio, the consolidated debt of the Company and its Restricted Subsidiaries (as defined in the Amended Credit Agreement) is reduced by up to $ 125.0 million of the aggregate amount of unrestricted cash and Permitted Investments (as defined in the Amended Credit Agreement) of the Company and its Restricted Subsidiaries.

In 2024, we prepaid an aggregate of $ 230.0 million under the Amended 2027 TLA and, in connection therewith, wrote off $ 2.4 million of unamortized issuance costs.

As of August 30, 2024, there was $ 300.0 million of principal amount outstanding under the Amended 2027 TLA, unamortized issuance costs were $ 2.7 million and the effective interest rate was 8.62 %.

As of August 30, 2024, there were no amounts outstanding under the 2027 Revolver and unamortized issuance costs were $ 2.2 million.

amend material agreements governing the Borrowers’ subordinated debt and fundamentally change the Borrowers’ business.

The 2025 Credit Agreement also includes the following financial maintenance covenants tested on the final day of each fiscal quarter:

• First Lien Leverage Ratio (as defined in the 2025 Credit Agreement) of 3.25 to 1.00;

• Total Leverage Ratio of 4.50 to 1.00;

provided, that in connection with any Material Acquisition (as defined in the 2025 Credit Agreement), at the election of the Borrowers, the maximum Total Leverage Ratio for the next four quarterly testing periods after such Material Acquisition has been consummated will be increased to 5.00 to 1.00;

provided further, that (x) no more than two such elections may be made during the term of the 2025 Credit Agreement and (y) following the first such election, no subsequent election may be made unless the Total Leverage Ratio has been less than or equal to 4.50 to 1.00 as of the last day of at least two consecutive quarterly testing periods following the expiration of the first increase;

• Interest Coverage Ratio (as defined in the 2025 Credit Agreement) of at least 3.00 to 1.00.

For purposes of calculating the First Lien Leverage Ratio and the Total Leverage Ratio, the consolidated debt of the Parent Borrower and its Restricted Subsidiaries (as defined in the 2025 Credit Agreement) is reduced by up to $ 175.0 million of the aggregate amount of unrestricted cash and Permitted Investments (as defined in the 2025 Credit Agreement) of the Parent Borrower and its Restricted Subsidiaries.

As of August 29, 2025, there was $ 100.0 million outstanding under the 2025 Loans and unamortized issuance costs were $ 3.6 million.

Convertible Senior Notes

Repurchase of Convertible Senior Notes

On August 6, 2024, we repurchased $ 80.0 million aggregate principal amount of our 2026 Notes for $ 100.6 million cash (including payment for accrued interest) in privately-negotiated transactions.

On August 6, 2024, we repurchased $ 80.0 million aggregate principal amount of our 2.25 % Convertible Senior Notes due 2026 (the “2026 Notes”) for $ 100.6 million cash (including payment for accrued interest) in privately-negotiated transactions.

The repurchase was accounted for as debt extinguishment.

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Convertible Senior Notes Exchange

On January 18, 2023, we entered into separate, privately-negotiated exchange agreements with a limited number of holders of our 2.25 % Convertible Senior Notes due 2026 (the “2026 Notes”) to exchange $ 150.0 million principal amount of the 2026 Notes for (i) $ 150.0 million in aggregate principal amount of new 2.00 % Convertible Senior Notes due 2029 (the “2029 Notes”) and (ii) an aggregate of $ 15.6 million in cash, with such cash payment representing $ 14.1 million of premium paid for the 2026 Notes in excess of par value and $ 1.5 million of accrued and unpaid interest on the 2026 Notes (collectively, the “Exchange Transactions”).

The 2029 Notes were issued pursuant to, and are governed by, an indenture (the “2029 Indenture”), dated as of January 23, 2023, between the Company and U.S.

On January 18, 2023, we entered into separate, privately-negotiated exchange agreements with a limited number of holders of our 2026 Notes to exchange $ 150.0 million principal amount of the 2026 Notes for (i) $ 150.0 million in aggregate principal amount of new 2.00 % Convertible Senior Notes due 2029 (the “2029 Notes”) and (ii) an aggregate of $ 15.6 million in cash, with such cash payment representing $ 14.1 million of premium paid for the 2026 Notes in excess of par value and $ 1.5 million of accrued and unpaid interest on the 2026 Notes (collectively, the “Exchange Transactions”).

The 2029 Notes were issued pursuant to, and are governed by, an indenture (as supplemented, the “2029 Indenture”), dated as of January 23, 2023, between the Company and U.S.

Bank Trust Company, National Association, as trustee.

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As a result, we recognized an extinguishment loss in the second quarter of 2023, included in other non-operating expense, of $ 16.7 million consisting of the premium paid to extinguish the 2026 Notes and $ 2.5 million for the write-off of unamortized issuance costs.

On August 6, 2024 and August 14, 2024, we issued $ 175.0 million and $ 25.0 million aggregate principal amount, respectively, of our 2.00 % Convertible Senior Notes due 2030 (collectively, the “2030 Notes”) pursuant to, and governed by, an indenture (the “2030 Indenture”), dated August 6, 2024, between us and U.S.

On August 6, 2024 and August 14, 2024, we issued $ 175.0 million and $ 25.0 million aggregate principal amount, respectively, of our 2.00 % Convertible Senior Notes due 2030 (collectively, the “2030 Notes”) pursuant to, and governed by, an indenture (as supplemented, the “2030 Indenture”), dated August 6, 2024, between us and U.S.

Bank Trust Company, National Association, as trustee.

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The 2030 Notes will mature on August 15, 2030 (the “2030 Maturity Date”), unless earlier converted, redeemed or repurchased.

The initial conversion rate of the 2030 Notes is 35.7034 ordinary shares per $1,000 principal amount of the 2030 Notes, which represents an initial conversion price of approximately $ 28.01 per ordinary share.

The initial conversion rate of the 2030 Notes is 35.7034 shares of common stock per $1,000 principal amount of the 2030 Notes, which represents an initial conversion price of approximately $ 28.01 per share of common stock.

The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the 2030 Indenture.

Upon conversion, we are required to pay cash in an amount at least equal to the principal portion and have the option to settle any amount in excess of the principal portion in cash and/or ordinary shares.

Conversion Rights :

Holders of the 2030 Notes may convert them under the following circumstances:

during any fiscal quarter commencing after the fiscal quarter ended on November 29, 2024 (and only during such fiscal quarter) if the last reported sale price per ordinary share exceeds 130 % of the conversion price for at least 20 trading days, whether or not consecutive, in the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter;

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “2030 Notes Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the 2030 Notes Measurement Period was less than 98 % of the product of the last reported sale price per ordinary share on such trading day and the conversion rate on such trading day;

upon the occurrence of certain corporate events or distributions on our ordinary shares, as provided in the 2030 Indenture;

during any fiscal quarter commencing after the fiscal quarter ended on November 29, 2024 (and only during such fiscal quarter) if the last reported sale price per share of common stock exceeds 130 % of the conversion price for at least 20 trading days, whether or not consecutive, in the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter;

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “2030 Notes Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the 2030 Notes Measurement Period was less than 98 % of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day;

upon the occurrence of certain corporate events or distributions on our common stock, as provided in the 2030 Indenture;

if we call the 2030 Notes for redemption;

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Cash Redemption at Our Option :

We have the right to redeem the 2030 Notes, in whole or in part, at our option at any time, and from time to time, on or after August 20, 2027 and on or before the 31st scheduled trading day immediately before the 2030 Maturity Date, at a cash redemption price equal to the principal amount of the 2030 Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the 2030 Notes are “freely tradable” (as defined in the 2030 Indenture) and all accrued and unpaid additional interest, if any, has been paid in full as of the date we send the related redemption notice, and if the last reported per share sale price of our ordinary shares exceeds 130 % of the conversion price on (i) each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the redemption notice date for such redemption and (ii) the trading day immediately before the date we send such notice.

We have the right to redeem the 2030 Notes, in whole or in part, at our option at any time, and from time to time, on or after August 20, 2027 and on or before the 31st scheduled trading day immediately before the 2030 Maturity Date, at a cash redemption price equal to the principal amount of the 2030 Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the 2030 Notes are “freely tradable” (as defined in the 2030 Indenture) and all accrued and unpaid additional interest, if any, has been paid in full as of the date we send the related redemption notice, and if the last reported per share sale price of our common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the redemption notice date for such redemption and (ii) the trading day immediately before the date we send such notice.

In addition, we have the right to redeem all, but not less than all, of the 2030 Notes if certain changes in tax law occur.

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The 2029 Notes will mature on February 1, 2029 (the “2029 Maturity Date”), unless earlier converted, redeemed or repurchased.

The initial conversion rate of the 2029 Notes is 47.1059 ordinary shares per $1,000 principal amount of the 2029 Notes, which represents an initial conversion price of approximately $ 21.23 per ordinary share.

The initial conversion rate of the 2029 Notes is 47.1059 shares of common stock per $1,000 principal amount of the 2029 Notes, which represents an initial conversion price of approximately $ 21.23 per share of common stock.

The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the 2029 Indenture.

Conversion Rights :

Holders of the 2029 Notes may convert them under the following circumstances:

during any fiscal quarter commencing after the fiscal quarter ended on May 26, 2023 (and only during such fiscal quarter) if the last reported sale price per ordinary share exceeds 130 % of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter;

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “2029 Notes Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the 2029 Notes Measurement Period was less than 98 % of the product of the last reported sale price per ordinary share on such trading day and the conversion rate on such trading day;

upon the occurrence of certain corporate events or distributions on our ordinary shares, as provided in the 2029 Indenture;

during any fiscal quarter commencing after the fiscal quarter ended on May 26, 2023 (and only during such fiscal quarter) if the last reported sale price per share of common stock exceeds 130 % of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter;

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “2029 Notes Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the 2029 Notes Measurement Period was less than 98 % of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day;

upon the occurrence of certain corporate events or distributions on our common stock, as provided in the 2029 Indenture;

if we call the 2029 Notes for redemption;

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Cash Redemption at Our Option :

We have the right to redeem the 2029 Notes, in whole or in part, at our option at any time, and from time to time, on or after February 6, 2026 and on or before the 40th scheduled trading day immediately before the 2029 Maturity Date, at a cash redemption price equal to the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported per share sale price of our ordinary shares exceeds 130 % of the conversion price on (i) each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the redemption notice date for such redemption and (ii) the trading day immediately before the date we send such notice.

We have the right to redeem the 2029 Notes, in whole or in part, at our option at any time, and from time to time, on or after February 6, 2026 and on or before the 40th scheduled trading day immediately before the 2029 Maturity Date, at a cash redemption price equal to the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported per share sale price of our common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the redemption notice date for such redemption and (ii) the trading day immediately before the date we send such notice.

In addition, we have the right to redeem all, but not less than all, of the 2029 Notes if certain changes in tax law occur.

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The 2026 Notes are general unsecured obligations, bear interest at an annual rate of 2.25 % per year, payable semi-annually on February 15 and August 15, and mature on February 15, 2026 (the “2026 Maturity Date”), unless earlier converted, redeemed or repurchased.

The 2026 Notes are governed by an indenture (the “2026 Indenture”) between us and U.S.

The 2026 Notes are governed by an indenture (as supplemented, the “2026 Indenture” and, together with the 2030 Indenture and the 2029 Indenture, the “Indentures”) between us and U.S.

Bank Trust Company National Association, as trustee.

After the effect of the share dividend paid in the second quarter of 2022, the conversion rate of the 2026 Notes is 49.2504 ordinary shares per $1,000 principal amount of notes, which represents a conversion price of approximately $ 20.30 per ordinary share.

After the effect of the share dividend paid in the second quarter of 2022, the conversion rate of the 2026 Notes is 49.2504 shares of common stock per $1,000 principal amount of notes, which represents a conversion price of approximately $ 20.30 per share of common stock.

The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the 2026 Indenture.

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The 2026 First Supplemental Indenture became effective on August 27, 2022.

Pursuant to the 2026 First Supplemental Indenture, Penguin Solutions irrevocably elected (i) to eliminate Penguin Solutions’ option to elect Physical Settlement (as defined in the 2026 Indenture) on any conversion of the 2026 Notes that occurs on or after the date of the 2026 First Supplemental Indenture and (ii) with respect to any Combination Settlement (as defined in the 2026 Indenture) for a conversion of the 2026 Notes, the Specified Dollar Amount (as defined in the 2026 Indenture) that will be settled in cash per $1,000 principal amount of the 2026 Notes shall be no lower than $1,000.

As a result of our election, upon conversion, we are required to pay cash in an amount at least equal to the principal portion and have the option to settle any amount in excess of the principal portion in cash and/or ordinary shares.

Combination Settlement (as defined in the 2026 Indenture) for a conversion of the 2026 Notes, the Specified Dollar Amount (as defined in the 2026 Indenture) that will be settled in cash per $1,000 principal amount of the 2026 Notes shall be no lower than $1,000.

As a result of our election, upon conversion, we are required to pay cash in an amount at least equal to the principal portion.

We will settle any amount in excess of principal with respect to conversions of the 2026 Notes in common stock.

Conversion Rights :

Holders of the 2026 Notes may convert them under the following circumstances:

during any fiscal quarter commencing after the fiscal quarter ended on May 28, 2020 (and only during such fiscal quarter) if the last reported sale price per ordinary share exceeds 130 % of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter;

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “2026 Notes Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the 2026 Notes Measurement Period was less than 98 % of the product of the last reported sale price per ordinary share on such trading day and the conversion rate on such trading day;

upon the occurrence of certain corporate events or distributions on our ordinary shares, as provided in the 2026 Indenture;

during any fiscal quarter commencing after the fiscal quarter ended on May 28, 2020 (and only during such fiscal quarter) if the last reported sale price per share of common stock exceeds 130 % of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter;

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “2026 Notes Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the 2026 Notes Measurement Period was less than 98 % of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day;

upon the occurrence of certain corporate events or distributions on our common stock, as provided in the 2026 Indenture;

if we call the 2026 Notes for redemption;

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We have the right to redeem the 2026 Notes, in whole or in part, at our option at any time, and from time to time, on or after February 21, 2023 and on or before the 40th scheduled trading day immediately before the 2026 Maturity Date, at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any.

However, the repurchase right is only applicable if the last reported per share sale price of our ordinary shares exceeds 130 % of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the redemption notice date for such redemption.

However, the repurchase right is only applicable if the last reported per share sale price of our common stock exceeds 130 % of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the redemption notice date for such redemption.

In addition, we have the right to redeem all, but not less than all, of the 2026 Notes if certain changes in tax law occur.

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In addition, upon the occurrence of a “fundamental change” (as defined in each of our convertible note indentures), holders of the notes may require us to repurchase their notes at a cash repurchase price equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of fundamental change includes certain business combination transactions and certain de-listing events with respect to our ordinary shares.

The definition of fundamental change includes certain business combination transactions and certain de-listing events with respect to our common stock.

Ordinary Share Change Event and 2025 Supplemental Indentures

The consummation of the U.S.

Domestication on June 30, 2025 and the transactions associated therewith constituted an “Ordinary Share Change Event” (as defined in each of the Indentures) pursuant to the terms of the

As a result, noteholders had a 35-trading-day window, beginning on June 30, 2025, where such noteholders had the option to convert their convertible senior notes pursuant to the terms of the Indentures.

On June 30, 2025, immediately following the consummation of the U.S.

Domestication, Penguin Solutions Delaware entered into that certain (i) Second Supplemental Indenture, dated as of June 30, 2025 (the “2026 Second Supplemental Indenture”), by and among Penguin Solutions Delaware, Penguin Solutions Cayman and U.S.

Bank Trust Company, National Association, a national banking association organized under the laws of the United States of America, as trustee (in such capacity, the “Trustee”), to the 2026 Indenture;

(ii) First Supplemental Indenture, dated as of June 30, 2025 (the “2029 First Supplemental Indenture”), by and among Penguin Solutions Cayman, Penguin Solutions Delaware and the Trustee, to the 2029 Indenture;

and (iii) First Supplemental Indenture, dated as of June 30, 2025 (the “2030 First Supplemental Indenture,” and together with the 2026 Second Supplemental Indenture and the 2029 First Supplemental Indenture, the “2025 Supplemental Indentures”), by and among Penguin Solutions Cayman, Penguin Solutions Delaware and the Trustee, to the 2030 Indenture.

In connection with the U.S.

Domestication and the associated “Ordinary Share Change Event” under each Indenture, the 2025 Supplemental Indentures entered into as described in the foregoing paragraph provide that (i) our convertible senior notes will, in each case, be fully and unconditionally guaranteed by Penguin Solutions Delaware and (ii) Penguin Solutions Cayman will satisfy its conversion obligations under the convertible senior notes by paying or delivering, as applicable and in accordance with the terms of the Indentures, either (x) solely cash or (y) a combination of cash and common stock of Penguin Solutions Delaware, together, if applicable, with cash in lieu of fractional shares of common stock.

Pursuant to the terms of the Supplemental Indentures, Penguin Solutions Delaware agreed to deliver such common stock when issuable under the applicable Indentures.

Convertible Senior Note Interest

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$ 9,218 $ 6,637 $ 6,557

As of August 26, 2022, the carrying amount of the equity components of the 2026 Notes, which was included in additional paid-in-capital, was $ 50.8 million.

As of the beginning of 2023, we adopted ASU 2020-06.

In connection therewith, we reclassified $ 32.2 million from additional paid-in-capital to long-term debt and $ 18.6 million from additional paid-in-capital to retained earnings.

See “Recently Adopted Accounting Standards.”

LED Earnout Note

Part of our consideration for the acquisition of the Optimized LED business was the possibility of an earnout payment of up to $ 125.0 million based on the revenue and gross profit performance of the Optimized LED business in Cree’s first four full fiscal quarters following the closing, with a minimum payment of $ 2.5 million.

In the third quarter of 2022, we issued an unsecured promissory note to Cree for this earnout in the amount of $ 101.8 million.

In the third quarter of 2022, we issued an unsecured promissory note to Cree for this earnout in the amount of $ 101.8 million (the “LED Earnout Note”).

The LED Earnout Note bore interest at LIBOR plus 3.0 %, payable quarterly, and was scheduled to mature on March 27, 2025.

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In connection with our prepayment of the LED Earnout Note, we recognized a gain of $ 0.8 million in the first quarter of 2023, which is included in other non-operating income in the accompanying consolidated statements of operations.

LED Purchase Price Note

In connection with the acquisition of the Optimized LED business, we issued an unsecured promissory note to Cree in the amount of $ 125.0 million.

The LED Purchase Price Note bore interest at LIBOR plus 3.0 %, payable quarterly, and was due on August 15, 2023.

In the second quarter of 2022, we repaid in full the LED Purchase Price Note.

Maturities of Debt

As of August 29, 2025, maturities of debt were as follows:

2026 $ 20,000

2031 and thereafter —

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Acquisitions of right-of-use assets were $ 10.5 million , $ 2.3 million and $ 10.8 million in 2025, 2024 and 2023, respectively.

As of August 30, 2024 and August 25, 2023, the weighted-average remaining lease term for our operating leases was 10.1 years and 10.5 years, respectively, and the weighted-average discount rate was 6.1 % and 6.0 %, respectively.

As of August 29, 2025 and August 30, 2024, the weighted-average remaining lease term for our operating leases was 9.0 years and 10.1 years, respectively, and the weighted-average discount rate wa s 6.1 % respectively.

Certain of our operating leases include one or more options to extend the lease term for periods from two to five years .

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As of August 29, 2025, minimum payments of lease liabilities were as follows:

2025 $ 11,989

2031 and thereafter 43,812

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From time to time, we may be involved in legal matters that arise in the normal course of business.

Litigation in general, and intellectual property, employment and shareholder litigation in particular, can be expensive and disruptive to normal business operations.

Litigation in general, and intellectual property, employment and stockholder litigation in particular, can be expensive and disruptive to normal business operations.

Moreover, the results of complex legal proceedings are difficult to predict.

We regularly review contingencies to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made.

Penguin Solutions Shareholders’ Equity

Share Dividend

On January 3, 2022, our Board of Directors declared a share dividend of one ordinary share, $ 0.03 par value per share, for each outstanding ordinary share owned, to shareholders of record as of January 25, 2022.

The dividend was paid on February 1, 2022.

Share Repurchase Authorization

On April 4, 2022, our Board of Directors approved a $ 75.0 million share repurchase authorization (the “Initial Authorization”), under which we may repurchase our outstanding ordinary shares from time to time through open market repurchases, privately-negotiated transactions or otherwise.

On January 8, 2024, the Audit Committee of the Board of Directors approved an additional $ 75.0 million share repurchase authorization (the “Additional Authorization,” and together with the Initial Authorization, the “Current Authorization”).

The Current Authorization has no expiration date but may be suspended or terminated by the Board of Directors at any time.

In 2024, 2023 and 2022, we repurchased 0.9 million, 0.5 million and 2.6 million shares, respectively, for $ 13.9 million, $ 8.4 million and $ 50.0 million, respectively, under the Current Authorization.

As of August 30, 2024, an aggregate of $ 77.7 million remained available for the repurchase of our ordinary shares under the Current Authorization.

Certain of our agreements, including the Amended Credit Agreement and the Certificate of Designation, contain restrictions that limit our ability to repurchase our ordinary shares.

Other Share Repurchases

Ordinary shares withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are treated as ordinary share repurchases.

In 2024, 2023 and 2022, we repurchased 377 thousand, 506 thousand and 240 thousand ordinary shares as payment of withholding taxes for $ 7.4 million, $ 10.9 million and $ 7.2 million, respectively.

In connection with the Exchange Transactions in the second quarter of 2023, we repurchased 326 thousand ordinary shares for $ 5.4 million.

Temporary Equity

Convertible Preferred Stock

On December 13, 2024, we closed the SKT Investment.

Pursuant to the terms of the SKT Purchase Agreement, we sold to Astra AI Infra 200,000 Issued Cayman CPS at a price of $ 1,000 per share or an aggregate price of $ 200.0 million.

At the time of issuance, we evaluated the terms and conditions of the Issued Cayman CPS.

Based on this evaluation, we determined that the Issued Cayman CPS did not contain redemption features that were outside the Company’s control and therefore initially classified the Issued Cayman CPS as permanent equity within the consolidated balance sheet.

On June 30, 2025, we completed the U.S.

Domestication, at which time each ordinary share of Penguin Solutions Cayman was exchanged for one share of common stock of Penguin Solutions Delaware, and each convertible preferred share of Penguin Solutions Cayman was exchanged for one share of convertible preferred stock of Penguin Solutions Delaware.

In connection with this event, we reassessed the classification of the Issued CPS.

The terms of the Issued CPS are substantially the same as those of the Issued Cayman CPS.

However, the Cayman governing documents included protective provisions that set forth the Company's ability to solely control redemption features.

These provisions are not explicitly included in the Company's amended and restated certificate of incorporation or the CPS Delaware Certificate of Designation.

The Company evaluated the absence of these provisions in the Delaware governing documents and determined that the CPS should be classified as temporary equity beginning June 30, 2025.

Accordingly, the Issued CPS was reclassified to temporary equity effective June 30, 2025.

In accordance with SEC guidance on redeemable equity securities, we reclassified the Issued CPS out of permanent equity at its fair value as of the date of the U.S.

Domestication.

The reclassification resulted in an adjustment to additional paid-in capital, representing the difference between the historical carrying amount and the fair value at the reclassification date.

This adjustment had no impact on the Company’s net income, comprehensive income, or cash flows.

As of June 30, 2025, we recorded $ 202.7 million of Issued CPS within temporary equity on the consolidated balance sheet.

As of August 29, 2025, we did not adjust the carrying values of the Issued CPS to the redemption values of such shares because a deemed liquidation event did not occur and the shares were not probable of becoming redeemable in the future as of the consolidated balance sheet date.

Amended and Restated Investor Agreement

On June 30, 2025, effective upon consummation of the U.S.

Domestication, Penguin Solutions Delaware assumed the Investor Agreement from Penguin Solutions Cayman and Penguin Solutions Delaware and SKT amended and restated the Investor Agreement such that the rights and restrictions relating to SKT’s beneficial ownership of the Issued Cayman CPS in place prior to the U.S.

Domestication apply in respect of SKT’s holdings of Issued CPS following consummation of the U.S.

Domestication.

Delaware Certificate of Designation for Convertible Preferred Stock

On June 27, 2025, in connection with the U.S.

Domestication, Penguin Solutions Delaware executed and adopted the CPS Delaware Certificate of Designation that sets forth the terms, rights and obligations of the Issued CPS.

The principal attributes of the Issued Cayman CPS and the Issued CPS are substantially the same, subject to changes to give effect to requirements of Delaware law.

Refer to the Certificate of Designation of Penguin Solutions, Inc., effective as of June 27, 2025, filed as Exhibit 3.3 hereto, to the description of the Issued CPS contained in the description of the Registrant’s capital stock, filed as Exhibit 4.1 hereto, and to the information under the heading “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” in Penguin Solutions Cayman’s definitive proxy statement on Schedule 14A filed with the SEC on May 2, 2025.

A holder of Issued CPS may convert such holder’s Issued CPS into common stock at any time, provided that the shares of Issued CPS may, at our option, automatically be converted into common stock on any date following the second anniversary of the closing of the SKT Investment upon which the volume-weighted average price of the common stock for any fifteen consecutive trading day period equals or exceeds 150 % of the then-applicable conversion price.

The shares of Issued CPS are convertible into common stock at an initial conversion price of $ 32.81 , subject to customary adjustment upon the occurrence of certain events (including share subdivision and consolidation, certain dividends and distributions, and any reclassification or share exchange).

The shares of Issued CPS entitle the holder to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at our option, subject to certain conditions, including a stock issuance limitation.

In 2025, we declared $ 8.7 million of preferred dividends, with $ 7.9 million paid in cash in 2025,and $ 0.5 million of accrued preferred dividends as of as of August 29, 2025.

Liquidation Preference

In case of a Liquidation Trigger Event (as defined in the CPS Delaware Certificate of Designation), each holder of Issued CPS will be entitled to receive, in preference to holders of common stock, the greater of (i) the original issue price plus accrued but unpaid dividends (whether or not declared) to the date of the applicable Liquidation Trigger Event to the extent such accrued but unpaid dividends are not compounded dividends as of such time and (ii) the amount such holder of Issued CPS would receive had such holder, immediately prior to such Liquidation Trigger Event, converted the shares of Issued CPS into shares of common stock.

The liquidation preference associated with the Issued CPS was $ 1,000 per share at August 29, 2025.

Voting Rights

Except as specified under applicable law, each holder of Issued CPS will be entitled to vote or consent as a single class with the holders of common stock on all matters submitted for a vote of or consent by holders of common stock, such number of votes equal to the largest number of whole shares of common stock in which all Issued CPS held of record by such holder could then be converted.

Director Designation Rights

SKT (through Astra AI Infra) is entitled to nominate one director if the total number of directors of the Company is eleven or less, and two directors if the total number of directors of the Company is twelve or more, to be elected or appointed to the Board of Directors of the Company (any such director, an “Investor Designee”).

The right to nominate an Investor Designee continues until such time as SKT and its subsidiaries and affiliates (including Astra

AI Infra) beneficially own less than five percent of the common stock then issued and outstanding (calculated on a fully-diluted basis) directly or by holding Issued CPS.

Company Redemption Rights

Holders of Issued CPS do not have pre-emptive, subscription, or redemption rights.

We may repurchase the Issued CPS in one installment upon notice to the holders of Issued CPS, provided that no such notice shall be sent until at least five years after the date of the closing of the SKT Investment.

Penguin Solutions Stockholders’ Equity

Common Stock Repurchase Authorization

On April 4, 2022, our Board of Directors approved a $ 75.0 million stock repurchase authorization (the “2022 Authorization”), under which we may repurchase our outstanding common stock from time to time through open market repurchases, privately-negotiated transactions or otherwise.

On each of January 8, 2024 and October 6, 2025, the Audit Committee of the Board of Directors approved additional $ 75.0 million stock repurchase authorizations (the “2024 Authorization” and “2025 Authorization,” respectively, and together with the 2022 Authorization, the “Current Authorizations”).

The Current Authorizations, which consists solely of amounts approved pursuant to the 2024 Authorization and 2025 Authorization as all amounts under the 2022 Authorization have been utilized, has no expiration date but may be suspended or terminated by the Board of Directors at any time.

In 2025, 2024 and 2023, we repurchased 2.5 million, 0.9 million and 0.5 million shares, respectively, for $ 41.2 million, $ 13.9 million and $ 8.4 million, respectively, under the 2022 and 2024 Authorizations.

As of August 29, 2025, an aggregate of $ 36.5 million remained available for the repurchase of our common stock under the 2024 Authorization.

Certain of our agreements, including the 2025 Credit Agreement and the Certificate of Designation, contain restrictions that limit our ability to repurchase our common stock.

Other Stock Repurchases

Common stock withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are treated as common stock repurchases.

In 2025, 2024 and 2023, we repurchased 597 thousand, 377 thousand and 506 thousand shares of common stock as payment of withholding taxes for $ 11.1 million, $ 7.4 million and $ 10.9 million, respectively.

In connection with the Exchange Transactions in the second quarter of 2023, we repurchased 326 thousand shares of common stock for $ 5.4 million.

See “Debt – Convertible Senior Notes – Convertible Senior Notes Exchange.”

In connection with our convertible notes, we have entered into privately-negotiated capped call transactions, which are intended to reduce the effect of potential dilution upon conversion of our convertible notes.

The capped calls provide for our receipt of cash or shares, at our election, from counterparties if the trading price of our ordinary shares is above the strike price on the expiration date.

The capped calls associated with the 2026 Notes provide for our receipt of shares from the counterparties if the trading price of our common stock is above the strike price on the expiration date of the capped calls.

The capped calls associated with the 2029 Notes and 2030 Notes provide for our receipt of cash or shares, at our election, from counterparties if the trading price of our common stock is above the strike price on the expiration date.

The capped calls are subject to anti-dilution adjustments substantially similar to those applicable to the corresponding convertible notes.

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Holders of any of the convertible notes do not have any rights with respect to any of the capped calls.

As of August 30, 2024, the dollar value of cash or ordinary shares that we would receive from our outstanding capped calls upon their expiration dates range from $ 0 , if the trading price of our ordinary shares is at or below the strike prices for each of the capped calls at expiration, to $ 158.4 million, if the trading price of our ordinary shares is at or above the cap prices for each of the capped calls.

As of August 29, 2025, the dollar value of cash or common stock that we would receive from our outstanding capped calls upon their expiration dates range from $ 0 , if the trading price of our common stock is at or below the

strike prices for each of the capped calls at expiration, to $ 158.4 million, if the trading price of our common stock is at or above the cap prices for each of the capped calls.

Settlement of a capped call prior to its expiration date may be for an amount different than the value at expiration.

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In connection therewith, we received cash of $ 10.8 million, which was recognized as an increase in additional paid-in capital in the second quarter of 2024.

Accumulated Other Comprehensive Income (Loss)

Other Comprehensive Income

Changes in accumulated other comprehensive income (loss) by component for 2025 were as follows:

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2026 Notes 25,713 19,945 23,918 19,833

Acquisition-related contingent consideration — — 50,000 50,000

The deferred cash adjustment resulting from the divestiture of an 81 % interest in SMART Brazil is accounted for as a derivative financial instrument and is revalued at the end of each reporting period.

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The fair values of our convertible notes, as measured on a non-recurring basis, were determined based on Level 2 measurements, including the trading prices of the notes.

Acquisition-related contingent consideration in the table above related to our acquisition of Stratus Technologies.

The fair value as of August 25, 2023 was based on the gross profit performance of Stratus Technologies during the first full 12 fiscal months following the closing of the acquisition.

Our Amended and Restated 2017 Share Incentive Plan (the “2017 Plan”) provides for the issuance of equity awards to our employees, directors and consultants.

Such awards include both incentive and non-qualified options, share appreciation rights, restricted share awards (“RSAs”), restricted share units (“RSUs”) and performance-based awards, such as performance-based restricted share awards (“PRSAs”) and performance-based restricted share units (“PSUs”).

As of August 30, 2024, 4.5 million of our ordinary shares were available for issuance under the 2017 Plan.

Our 2021 Share Inducement Plan (the “Inducement Plan” and together with the 2017 Plan, our “Penguin Solutions Plans”) provides for the issuance of equity awards to provide inducements for certain individuals to enter into employment with us within the meaning of Rule 5635(c)(4) of the Nasdaq Marketplace Rules, and to motivate such persons to contribute to, and to enable them to share in, any long-term growth and financial success we may experience.

Such awards include options, share appreciation rights, RSAs, RSUs and performance-based awards such as PRSAs and PSUs.

As of August 30, 2024, 1.7 million of our ordinary shares were available for issuance under the Inducement Plan.

Our employee share purchase plan (“ESPP”) has been offered to substantially all employees since April 2018 and generally permits eligible employees to purchase our ordinary shares through payroll deductions of up to 15 % of their eligible compensation, subject to certain limitations.

As of August 30, 2024, 1.9 million of our ordinary shares were available for issuance under the ESPP.

Our Amended and Restated 2017 Stock Incentive Plan (the “2017 Plan”) provides for the issuance of equity awards to our employees, directors and consultants.

Such awards include both incentive and non-qualified options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance-based awards, such as performance-based restricted stock awards (“PRSAs”) and performance-based restricted stock units (“PSUs”).

As of August 29, 2025, 4.8 million of our common stock were available for issuance under the 2017 Plan.

Our Amended and Restated 2021 Stock Inducement Plan (the “Inducement Plan”) provides for the issuance of equity awards to provide inducements for certain individuals to enter into employment with us within the meaning of Rule 5635(c)(4) of the Nasdaq Marketplace Rules, and to motivate such persons to contribute to, and to enable them to share in, any long-term growth and financial success we may experience.

Such awards include options, stock appreciation rights, RSAs, RSUs and performance-based awards such as PRSAs and PSUs.

As of August 29, 2025, 1.9 million of our common stock were available for issuance under the Inducement Plan.

Our Amended and Restated 2018 Employee Stock Purchase Plan (“ESPP”) has been offered to substantially all employees since April 2018 and generally permits eligible employees to purchase our common stock through payroll deductions of up to 15 % of their eligible compensation, subject to certain limitations.

As of August 29, 2025, 2.0 million shares of our common stock were available for issuance under the ESPP.

Options and RSUs generally vest over a period of four years , and options generally have a ten-year term.

The disclosures related to our restricted awards, share options and employee share purchase plan include both our continuing and discontinued operations.

Restricted Share Awards and Restricted Share Units Awards (“Restricted Awards”)

The disclosures related to our restricted awards, stock options and employee stock purchase plan include both our continuing and discontinued operations.

Restricted Stock Awards and Restricted Stock Units Awards (“Restricted Awards”)

Shares Weighted-

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2024 August 25,

Awards granted 2,085 2,579 1,642

Restricted awards granted 2,137 2,085 2,579

Weighted-average grant date fair value per share $ 18.85 $ 22.96 $ 17.77

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Restricted Awards include grants with service, performance and/or market conditions with restrictions that generally lapse after a three - to four-year service period.

Awards with market conditions are based on either the Company’s share price or the Company’s total shareholder return (“TSR”) relative to companies included in a market index.

Awards with market conditions are based on either the Company’s stock price or the Company’s total stockholder return relative to companies included in a market index.

For awards with market conditions, the number of shares that will vest will vary between 0 % and 200 % of target amounts, depending upon the Company’s achievement level over the specified performance period.

The fair value of awards with market conditions were fixed at the grant date using a Monte Carlo simulation analysis and were based on significant inputs not observable in the market.

As of August 30, 2024, total unrecognized compensation costs for unvested Restricted Awards was $ 72.8 million, which was expected to be recognized over a weighted-average period of 2.3 years.

Share Options

As of August 30, 2024, there were 0.7 million share options outstanding, which are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant.

Share options generally expire seven to ten years from the date of grant.

As of August 29, 2025, total unrecognized compensation costs for unvested Restricted Awards was $ 68.3 million , which was expected to be recognized over a weighted-average period of 2 years, 6 months, 18 days .

Stock Options

As of August 29, 2025, there were 0.5 million stock options outstanding, which are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant.

Stock options generally expire seven to ten years from the date of grant.

The total intrinsic value for options exercised was $ 2.3 million, $ 2.6 million and $ 19.9 million in 2025, 2024 and 2023, respectively.

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Outstanding as of August 30, 2024

724 $ 12.72 4.33 $ 5,911

Granted — $ —

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Forfeited and cancelled ( 5 ) $ 16.09

Outstanding as of August 30, 2024 724 $ 12.72 4.33 $ 5,911

Exercisable as of August 30, 2024 714 $ 12.71 4.30 $ 5,836

The fair value of share options is estimated on the date of grant using the Black-Scholes option pricing model.

Outstanding as of August 29, 2025 522 $ 13.74 3 years, 3 months, 29 days $ 5,426

Exercisable as of August 29, 2025 522 $ 13.74 3 years, 3 months, 29 days $ 5,426

The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model.

The expected volatility is based on the historical volatilities of the common stock of comparable publicly traded companies.

The expected term of options granted represents the weighted-average period of time that options granted are expected to be outstanding.

We apply the simplified approach in which the expected term is the mid-point between the vesting date and the expiration date.

We apply the simplified approach in which the expected term is the mid-

point between the vesting date and the expiration date.

The risk-free interest rate is based on the average U.S.

Treasury yield curve at the end of the quarter in which the option was granted.

As of August 30, 2024, total aggregate unrecognized compensation costs for unvested options was $ 0.1 million, which was expected to be recognized over a weighted-average period of 0.1 years.

Employee Share Purchase Plan

The purchase price of shares under our ESPP is equal to 85 % of the lower of the fair market value of our ordinary shares on either the first or last day of each offering period, which is generally six months.

As of August 29, 2025, there were no unrecognized compensation costs for unvested options.

Employee Stock Purchase Plan

The purchase price of shares under our ESPP is equal to 85 % of the lower of the fair market value of our common stock on either the first or last day of each offering period, which is generally six months.

Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees’ purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period.

Under the ESPP, employees purchased 584 thousand ordinary shares for $ 6.8 million in 2024, 602 thousand shares for $ 6.6 million in 2023 and 307 thousand shares for $ 6.5 million in 2022.

Share-Based Compensation Expense

Share-based compensation expense for our continuing operations was as follows:

Under the ESPP, employees purchased 529 thousand shares of common stock for $ 6.8 million in 2025, 584 thousand shares for $ 6.8 million in 2024 and 602 thousand shares for $ 6.6 million in 2023.

Stock-Based Compensation Expense

Stock-based compensation expense for our continuing operations was as follows:

Year ended August 29,

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2024 August 25,

Share-based compensation expense by caption:

Stock-based compensation expense by caption:

Cost of sales $ 6,136 $ 7,113 $ 6,334

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$ 41,176 $ 43,160 $ 39,228

Income tax benefits for share-based awards were $ 6.6 million, $ 6.7 million and de minimis in 2024, 2023 and 2022, respectively.

Income tax benefits for stock-based awards were $ 5.9 million, $ 6.6 million and $ 6.7 million in 2025, 2024 and 2023, respectively.

Employee Savings and Retirement Plan

We have a 401(k) retirement plan under which U.S.

employees may make contributions, subject to Internal Revenue Service annual contribution limits, to various savings alternatives, none of which include direct investment in the Company’s ordinary shares.

We may make matching contributions, which vest immediately, at our discretion.

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Contract assets (1)

$ 1,929 $ 1,801

Contract liabilities:

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Other Operating (Income) Expense

In 2024 and 2023, we initiated plans that included workforce reductions and the elimination of certain projects across our businesses.

In connection therewith, we recorded restructure charges of $ 7.1 million and $ 7.0 million in 2024 and 2023, respectively, primarily for employee severance costs and other benefits.

We anticipate that

these activities will continue into future quarters and anticipate recording additional restructure charges.

As of August 30, 2024, $ 0.8 million remained unpaid, which is expected to be paid in 2025.

In recent periods, we executed plans that included the elimination of certain projects across our businesses, which resulted in workforce reductions.

In connection therewith, we recorded restructuring charges of $ 2.1 million and $ 7.1 million in the first year months of 2025 and 2024, respectively, consisting solely of employee severance costs and other benefits, reflected in Other Operating (Income) Expense in the Consolidated Statements of Operations.

These charges were primarily concentrated in the period management defined, committed, and communicated the plan, and therefore, they were accrued and recorded in the respective period announced.

We anticipate there will be additional restructuring activities in future quarters, for which we will record additional charges.

The following table summarizes the liabilities directly attributable to us that were recognized under the plans discussed above:

As of August 25, 2023 $ 1,367

Additions $ 7,064

Cash payments $ ( 7,582 )

As of August 30, 2024 $ 849

Additions 2,098

Cash payments ( 1,884 )

As of August 29, 2025

The 2024 beginning restructuring liability balance was $ 1.4 million, which was fully settled in 2024.

The $ 0.8 million balance as of August 30, 2024 was fully settled in the year ended August 29, 2025.

The unpaid balance as of August 29, 2025 is expected to be fully paid in 2026.

Other Non-operating (Income) Expense

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Tax on uncertain tax positions 313 0.6 % ( 3,825 ) 12.3 % 5,679 ( 14.4 ) %

Share-based compensation ( 100 ) 0.3 % ( 538 ) 1.4 % ( 2,681 ) ( 6.3 ) %

Stock-based compensation

135 0.3 % ( 100 ) 0.3 % ( 538 ) 1.4 %

Change in valuation allowance 69,669 142.5 % 1,111 ( 3.6 ) % ( 69,789 ) 176.6 %

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Tax credits ( 1,814 ) ( 3.7 ) % ( 3,337 ) 10.7 % ( 4,339 ) 11.0 %

Effect of cross-border tax laws 1,409 2.9 % — — % — — %

Domestication ( 75,126 ) ( 153.6 ) % — — % — — %

Return to Provision

2,283 4.7 % — — % — — %

Other ( 246 ) ( 0.7 ) % ( 435 ) 1.4 % ( 101 ) 0.2 %

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For 2025, the primary difference between the U.S.

federal statutory tax rate and the effective tax rate was due to losses in jurisdictions where no tax benefit can be recognized, non-deductible expenses and foreign withholding taxes, partially offset by benefits from decreases in reserves for uncertain tax provisions and U.S.

federal and state tax credits.

federal statutory tax rate and the effective tax rate was due to losses in jurisdictions where no tax benefit can be recognized prior to the U.S.

Domestication, non-deductible expenses, return to provision adjustments, and foreign withholding taxes, partially offset by benefits from the U.S.

Domestication (net of valuation allowance) and tax credits.

As a result of the U.S.

Domestication, we inherited $ 75.1 million of certain tax attributes, including interest expense carryforwards and capitalized R&D carryforwards.

The utilization of certain of these tax attributes is subject to various limitations under the Internal Revenue Code and applicable regulations, restricting the extent to which attributes generated in periods prior to the U.S.

Domestication may be used to offset future consolidated taxable income.

Under our current structure the Company has no ability to utilize a portion of these attributes.

Accordingly, the Company has recorded a $ 69.7 million valuation allowance against such portion which is not expected to be realized.

Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards.

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Deferred revenue 371 1,838

Share-based compensation 3,027 3,159

Stock-based compensation 2,028 3,027

Research and other tax credit carryforwards 4,479 4,762

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Brazil capital gains tax — 4,138

Intangible assets — 417

Other liabilities 922 1,143

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We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not existing deferred tax assets will be realized.

In 2024, we recorded $ 1.2 million of valuation allowance on certain U.S.

federal tax credits due to uncertainty regarding the realizability of these deferred tax assets.

We have a valuation allowance against certain acquired state tax attributes due to expected annual limitations on utilization.

In 2025, we recorded $ 69.0 million of valuation allowance on interest expense carryforward attributes inherited as part of the U.S.

Domestication due to uncertainty regarding the realizability of these deferred tax assets.

We also have a valuation allowance against certain acquired state and foreign tax attributes due to expected limitations on utilization.

We will continue to monitor the need for a valuation allowance against our remaining deferred tax assets.

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federal and state research and development credit carryforwards of $ 8.5 million and $ 4.5 million, respectively, and $ 1.2 million of foreign tax credit carryforwards.

If not utilized, the federal research and foreign tax credits will begin to expire in 2031 and 2032, respectively.

If not utilized, the federal research and foreign tax credits will begin to expire in 2032.

If not utilized, $ 2.0 million of state credits will begin to expire in 2030, while $ 2.5 million of state credits do not expire.

In addition, we had Section 163(j) interest expense carryforwards of $ 100.0 million from the acquisition of Stratus Technologies which do not expire.

In addition, we had Section 163(j) interest expense carryforwards of $ 99.0 million from the acquisition of Stratus Technologies as well as $ 318.5 million from the U.S.

Domestication, both of which do not expire.

Net operating loss carryforwards in Hong Kong of $ 29.6 million do not expire.

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In general, an “ownership change” will occur if there is a cumulative change in our ownership by certain “5-percent shareholders” (including

groups of shareholders) that exceeds 50 percentage points over a rolling three-year period.

groups of stockholders) that exceeds 50 percentage points over a rolling three-year period.

Similar rules may apply under state tax laws.

Our net operating loss, tax credit and section 163(j) interest expense carryforwards are subject to limitations per Sections 382 and 383 of the Code.

We have experienced ownership changes in the past, and we may experience ownership changes in the future, as a result of future transactions in our ordinary shares, some changes of which may be outside of our control.

We have experienced ownership changes in the past, and we may experience ownership changes in the future as a result of future transactions in our common stock, some changes of which may be outside of our control.

As a result, our ability to use our pre-change net operating loss, tax credit and section 163(j) interest expense carryforwards to offset post-change U.S.

federal and state taxable income may be subject to additional limitations.

Legislation enacted in 2017, titled the Tax Cuts and Jobs Act (“Tax Act”), as modified in 2020 by the Coronavirus Aid, Relief, and the Economic Security Act (“CARES Act”), changed the federal rules governing net operating loss carryforwards.

For net operating loss carryforwards arising in tax years beginning after December 31, 2017, the Tax Act limits a taxpayer’s ability to utilize such carryforwards to 80% of taxable income beginning after December 31, 2020.

In addition, net operating loss carryforwards arising in tax years ending after December 31, 2017 can be carried forward indefinitely, but carryback is generally prohibited, with the exception of carrybacks reinstated by the CARES Act.

Net operating loss carryforwards generated before January 1, 2018 are not subject to the Tax Act’s taxable income limitation and will continue to have a 20-year carryforward period.

Nevertheless, our net operating loss carryforwards and other tax assets could expire before utilization and could be subject to limitations.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into U.S.

Certain provisions were applicable to the Company beginning in 2025 while other provisions will become implemented in future periods.

As a result of OBBBA we expect a decrease to our deferred tax assets and income tax payable resulting from the restoration of full expensing of U.S.

research and experimentation expenditures.

We do not expect any current or ongoing material impact to our effective tax rate as a result of the OBBBA.

Activity related to our deferred tax valuation allowance was as follows:

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Balance at end of period $ 73,443 $ 3,774 $ 2,663

(1) In the period ended August 25, 2023, SMART Embedded Computing B.V.

(1) During the period ended August 25, 2023 , SMART Embedded Computing B.V.

entered liquidation, resulting in the existing Netherlands NOL carryforwards being considered to have a remote likelihood of being utilized.

Accordingly, a deferred tax asset of $ 4.1 million was written off and the related valuation allowance released.

We choose to maintain flexibility to pull excess cash from all jurisdictions where needed, except the U.S.

group, to manage debt balances.

We choose to maintain flexibility to repatriate excess cash from all jurisdictions where needed, to manage debt balances.

Provisions have been made for deferred income taxes on undistributed earnings of foreign subsidiaries to the extent that dividend payments by such foreign subsidiaries are expected to result in additional tax liability, which is primarily related to foreign withholding taxes which are not individually or cumulatively significant.

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The statutory rate for Malaysia is 24%.

These arrangements are scheduled to expire in August 2028 and are subject to certain conditions, with which we have partially complied with in 2024 and fully complied with in 2023 and 2022.

During the year ended August 25, 2025 the incentive agreement for the pioneer status activities was amended and extended to 2031.

As of August 29, 2025, the global supply chain operation incentives were scheduled to expire in August 2028.

Both incentive agreements are subject to certain conditions, with which we have fully complied for the pioneer status activities incentive in 2025, 2024, and 2023, and partially complied for the global supply chain operations incentive in 2025 and 2024 and fully complied in 2023.

The effect of the tax incentive arrangements noted above reduced our income tax provision by $ 1.8 million ($ 0.03 per diluted share) in 2025, $ 1.2 million ($ 0.02 per diluted share) in 2024 and $ 10.4 million ($ 0.20 per diluted share) in 2023.

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As of August 29, 2025 and August 30, 2024, the total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, was $ 18.3 million and $ 18.7 million, respectively.

Amounts accrued for interest and penalties related to uncertain tax positions were not material for any period presented.

Amounts accrued for interest

and penalties related to uncertain tax positions were not material for any period presented.

The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits.

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Earnings Per Share

We calculate basic earnings per common share (“EPS”) pursuant to the two-class method as a result of the issuance of the Issued Cayman CPS on December 13, 2024.

The two-class method is an earnings allocation formula that determines EPS for common stock and participating securities according to dividend and participation rights in undistributed earnings.

Under this method, all current period earnings, distributed and undistributed, are allocated to common stock and participating securities based on their respective rights to receive dividends.

The Issued CPS is considered a participating security.

The Issued CPS is not included in the computation of basic EPS in periods in which we have a net loss, as the Issued CPS is not contractually obligated to share in our net losses.

With respect to the Issued CPS, diluted EPS is calculated using the more dilutive of the two-class method or if-converted method.

The two-class method uses net income available to common stockholders and assumes conversion of all potential shares other than the participating securities.

The if-converted method uses net income and assumes conversion of all potential shares including the participating securities.

Dilutive potential common stock include outstanding stock options, unvested restricted stock units, convertible senior notes and convertible preferred stock.

The following table summarizes the computation of basic and diluted EPS under the two-class or if-converted method in applicable periods, as well as the anti-dilutive shares excluded:

Year ended August 29,

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Net income (loss) attributable to Penguin Solutions – Basic and Diluted $ 25,391 $ ( 52,472 ) $ ( 187,526 )

Preferred stock dividends

Income available for distribution 16,724 ( 52,472 ) ( 187,526 )

Income allocated to participating securities 1,263 — —

Net income available to common stockholders

$ 15,461 $ ( 52,472 ) $ ( 187,526 )

Weighted-average shares outstanding – Basic 53,154 52,428 49,566

Dilutive effect of equity plans and convertible notes — 1,756 4,976

Dilutive effect of equity plans and Convertible Senior Notes 1,214 — 1,756

Weighted-average shares outstanding – Diluted 54,368 52,428 51,322

Basic earnings (loss) per share:

Basic earnings (loss) per common share:

Continuing operations $ 0.29 $ ( 0.85 ) $ 0.16

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$ 0.29 $ ( 1.00 ) $ ( 3.78 )

Diluted earnings (loss) per share:

Diluted earnings (loss) per common share:

Continuing operations $ 0.28 $ ( 0.85 ) $ 0.15

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$ 0.28 $ ( 1.00 ) $ ( 3.65 )

Unweighted antidilutive employee share-based awards excluded from the computation of diluted earnings per share 5,184 2,238 329

Upon any conversion of our convertible notes, we will be required to pay cash in an amount at least equal to the principal portion and have the option to settle any amount in excess of the principal portion in cash and/or ordinary shares.

Unweighted anti-dilutive shares:

Equity plans 945 5,184 2,238

Convertible Senior Notes

Preferred stock 6,096 — —

7,041 5,184 2,238

Upon any conversion of our convertible notes, we will be required to pay cash in an amount at least equal to the principal portion.

We will settle any amount in excess of principal with respect to conversions of the 2026 Notes in common stock.

and we have the option to settle in cash and/or common stock for the 2029 Notes and 2030 Notes.

As a result, only the amounts expected to be settled in excess of the principal portion are considered in calculating diluted earnings per share under the if-converted method.

Segment and Other Information

Segment information presented below is consistent with how our chief operating decision maker evaluates operating results to make decisions about allocating resources and assessing performance.

Segment information presented below is consistent with how our Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, evaluates our results of operations to make decisions about allocating resources and assessing performance using segment net sales, cost of sales, operating expenses, and operating income (loss).

The CODM is regularly provided this segment information to assess relative segment performance and allocate resources to the segment in the annual planning process.

We have the following three business units, which are our reportable segments:

• Advanced Computing :

Our Advanced Computing group, under our Penguin Computing and Stratus brands, offers specialized platform solutions and services for high-performance computing, artificial intelligence, machine learning, advanced modeling and the internet of things that span the continuum of edge, core and cloud.

Our Advanced Computing group, under our Penguin Computing and Stratus brands, offers specialized platform solutions and services for HPC, AI, machine learning, advanced modeling and the internet of things that span the continuum of edge, core and cloud.

Our solutions are designed specifically for customers across multiple markets, including hyperscale, financial services, energy, government, education, healthcare and others.

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Backed by expert design assistance and superior sales support, our LED products enable our customers to develop and market LED-based products for general lighting, video displays and specialty lighting applications.

Segments are determined based on sources of revenue, types of customers and operating performance.

Segments are determined based on sources of sales, types of customers and operating performance.

There are no differences between the accounting policies for our segment reporting and our consolidated results of operations.

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We do not identify (other than goodwill) or report internally our assets nor allocate certain expenses and amortization, interest, other non-operating (income) expense or taxes to segments.

Year ended August 30,

August 29, 2025

Advanced Computing Integrated Memory Optimized LED Total

$ 648,417 $ 464,249 $ 256,128 $ 1,368,794

Costs of goods sold 404,032 362,612 177,549 944,193

Operating expense 129,376 57,998 69,575 256,949

Operating income:

$ 115,009 $ 43,639 $ 9,004 167,652

Reconciliation of profit (loss)

Stock-based compensation expense

Amortization of acquisition-related intangibles ( 34,838 )

Cost of sales-related restructuring ( 746 )

Diligence, acquisition and integration expense ( 1,829 )

Redomiciliation costs ( 10,038 )

Impairment of goodwill ( 16,063 )

Restructuring charges ( 2,098 )

Total unallocated ( 109,517 )

Total non-operating expense

Income (loss) before taxes $ 48,901

August 30, 2024

Advanced Computing $ 554,552 $ 749,708 $ 440,986

Integrated Memory 356,426 443,264 551,705

Optimized LED 259,818 248,278 403,185

Total net sales $ 1,170,796 $ 1,441,250 $ 1,395,876

Advanced Computing Integrated Memory Optimized LED Total

$ 554,552 $ 356,426 $ 259,818 $ 1,170,796

Costs of Goods Sold 324,152 283,821 188,838 796,811

Operating Expense 135,109 50,192 68,427 253,728

Segment operating income:

Advanced Computing $ 95,291 $ 110,975 $ 49,450

Integrated Memory 22,413 73,639 78,869

Optimized LED 2,553 ( 4,820 ) 49,142

Total segment operating income 120,257 179,794 177,461

Share-based compensation expense ( 43,160 ) ( 39,228 ) ( 37,284 )

$ 95,291 $ 22,413 $ 2,553 120,257

Reconciliation of profit (loss)

Stock-based compensation expense

Amortization of acquisition-related intangibles ( 39,272 )

Cost of sales-related restructuring ( 2,136 )

Diligence, acquisition and integration expense ( 8,772 )

Redomiciliation costs ( 470 )

Restructuring charges ( 7,064 )

Total unallocated ( 101,962 )

Total non-operating expense

Income (loss) before taxes $ ( 31,167 )

August 25, 2023

Advanced Computing Integrated Memory Optimized LED Total

$ 749,708 $ 443,264 $ 248,278 $ 1,441,250

Costs of Goods Sold 488,602 314,247 181,853 984,702

Operating Expense 150,131 55,378 71,245 276,754

Segment operating income:

$ 110,975 $ 73,639 $ ( 4,820 ) 179,794

Reconciliation of profit (loss)

Stock-based compensation expense

Amortization of acquisition-related intangibles ( 44,601 )

Flow through of inventory step up ( 2,599 )

Cost of sales-related restructure ( 2,136 ) ( 6,813 ) —

Cost of sales-related restructuring ( 6,813 )

Diligence, acquisition and integration expense ( 20,869 )

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Change in fair value of contingent consideration ( 29,000 )

Restructure charge ( 7,064 ) ( 7,047 ) ( 234 )

Restructuring charges ( 7,047 )

Other ( 1,800 )

Total unallocated ( 171,049 )

Consolidated operating income (loss) $ 18,295 $ 8,745 $ 67,176

Total non-operating expense

Income (loss) before taxes $ ( 39,513 )

Depreciation included in segment operating income was as follows:

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$ 20,579 $ 25,720 $ 26,498

Related Party Transactions

From time to time, we may enter into an agreement with a related party in the ordinary course of business.

These agreements are reviewed and approved or ratified by the Audit Committee of the Board pursuant to our related person transaction policy.

We follow Accounting Standards Codification 850, Related Party Disclosures , for the identification of related parties and disclosure of related party transactions, under which related parties are defined as members of our Board of Directors, affiliates of the Company, management and principal owners of our outstanding stock and members of their immediate families.

Related parties also include any other person or entity with significant influence over our management or operations.

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

We assess related parties each reporting period.

On May 26, 2025, we entered into an agreement with SKT, a related party, under which we anticipate providing solutions to support SKT’s future AI data center infrastructure initiatives.

SKT, through Astra AI Infra, a special purpose vehicle formed by SKT, holds more than 10 % of the voting interest of the Company.

Additionally, Min Yong Ha, an executive of SKT, is a member of our Board of Directors.

For the year ended August 29, 2025, we recognized a total transaction amount of $ 50.7 million for cash received for payment on the fulfillment of AI hardware solutions and installation services, of which $ 32.4 million of the order was completed and recognized as revenue for the year ended August 29, 2025.

The remaining $ 18.3 million is recorded as contract liability.

Concentrations

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Sales to our ten largest customers were 66 % , 58 % and 60 % of total net sales in each of 2025, 2024 and 2023, respectively.

As of August 30, 2024, one Advanced Computing customer and one Integrated Memory customer each accounted for more than 10% of accounts receivable.

Net sales to a number of customers each exceeded 10% of our total net sales in the past three years.

As of August 29, 2025, two Integrated Memory customers accounted for more than 10% of accounts receivable.

Net sales to certain customers each exceeded 10% of our total net sales in the past three years.

Net sales to an Advanced Computing customer were 18.2 % , 18.4 % and 23.3 % of total net sales in 2025, 2024 and 2023, respectively.

Additionally, net sales to another Advanced Computing customer were 11 % of total net sales in 2022.

Net sales to an Integrated Memory customer were 11 % of total net sales in 2022.

Net sales to an Integrated Memory customer was 14.1 % of total net sales in 2025.

No other customers accounted for more than 10% of our total net sales in 2025, 2024 and 2023.

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Europe 96,999 114,298 114,118

Mexico 147,298 27,301 9,902

Other 161,143 165,792 247,710

15 unchanged sentences

Net income (loss) attributable to Penguin Solutions 9,431 2,661 8,082 5,217 ( 24,547 ) 5,616 ( 13,620 ) ( 11,773 )

Preferred stock dividends 3,034 3,033 2,600 — — — — —

Income available for distribution 6,397 ( 372 ) 5,482 5,217 ( 24,547 ) 5,616 ( 13,620 ) ( 11,773 )

Income allocated to participating securities 666 — 482 — — — — —

Net income (loss) available to common stockholders 5,731 ( 372 ) 5,000 5,217 ( 24,547 ) 5,616 ( 13,620 ) ( 11,773 )

Earnings (loss) per share:

5 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Penguin Solutions, Inc.

To the Stockholders and the Board of Directors of Penguin Solutions, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Penguin Solutions, Inc.

(formerly SMART Global Holdings, Inc.) and subsidiaries (the “Company”) as of August 30, 2024 and August 25, 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended August 30, 2024, and the related notes, (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of August 29, 2025 and August 30, 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended August 29, 2025, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 29, 2025 and August 30, 2024, and the results of its operations and its cash flows for each of the three years in the period ended August 29, 2025, in conformity with accounting principles generally accepted in the United States of America.

39 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data