Penguin Solutions, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page Consolidated Balance Sheets 73 Consolidated Statements of Operations 74 Consolidated Statements of Comprehensive Income (Loss) 75 Consolidated Statements of Stock holders’ Equity 76 Consolidated Statements of Cash Flows 77 Notes to Consolidated Financial Statements 78 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 118 72 Penguin Solutions, Inc. Consolidated Balance Sheets (In thousands, except par value amount) As of August 29, 2025 August 30, 2024 Assets Cash and cash equivalents $ 453,754 $ 383,147 Short-term investments — 6,337 Accounts receivable, net 307,904 251,743 Inventories 255,182 151,213 Other current assets 47,387 75,264 Total current assets 1,064,227 867,704 Property and equipment, net 92,603 106,548 Operating lease right-of-use assets 58,847 60,349 Intangible assets, net 87,754 121,454 Goodwill 145,895 161,958 Deferred tax assets 99,107 85,078 Other noncurrent assets 68,767 71,415 Total assets $ 1,617,200 $ 1,474,506 Liabilities, Temporary Equity and Stockholders' Equity Accounts payable and accrued expenses $ 318,761 $ 219,090 Current debt 19,945 — Deferred revenue 73,893 63,954 Other current liabilities 61,300 44,552 Total current liabilities 473,899 327,596 Long-term debt 441,893 657,347 Noncurrent operating lease liabilities 62,736 60,542 Other noncurrent liabilities 30,445 29,813 Total liabilities 1,008,973 1,075,298 Commitments and contingencies Temporary equity Preferred stock, $ 0.03 par value; authorized 30,000 shares; 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 202,710 — Penguin Solutions stockholders’ equity: Common stock, $ 0.03 par value; authorized 200,000 shares; 62,756 shares issued and 52,738 shares outstanding as of August 29, 2025; 60,226 shares issued and 53,277 shares outstanding as of August 30, 2024 1,883 1,807 Additional paid-in capital 551,712 513,335 Retained earnings 46,709 29,985 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 18 10 Total Penguin Solutions stockholders’ equity 394,246 391,381 Noncontrolling interest in subsidiary 11,271 7,827 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. 73 Penguin Solutions, Inc. Consolidated Statements of Operations (In thousands, except per share amounts) Year ended August 29, 2025 August 30, 2024 August 25, 2023 Net sales: Products $ 1,072,738 $ 925,827 $ 1,192,890 Services 263,706 244,969 248,360 Related party 32,350 — — Total net sales 1,368,794 1,170,796 1,441,250 Cost of sales: Products 863,136 722,634 916,005 Services 111,384 107,386 110,074 Total cost of sales 974,520 830,020 1,026,079 Gross profit 394,274 340,776 415,171 Operating expenses: Research and development 79,801 81,537 90,565 Selling, general and administrative 238,177 233,880 260,722 Impairment of goodwill 16,063 — 19,092 Change in fair value of contingent consideration — — 29,000 Other operating expense 2,098 7,064 7,047 Total operating expenses 336,139 322,481 406,426 Operating income 58,135 18,295 8,745 Non-operating (income) expense: Interest expense, net 7,305 28,378 36,421 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 ) Income tax provision (benefit) 20,066 10,618 ( 49,203 ) Net income (loss) from continuing operations 28,835 ( 41,785 ) 9,690 Net loss from discontinued operations — ( 8,148 ) ( 195,384 ) Net income (loss) 28,835 ( 49,933 ) ( 185,694 ) Net income attributable to noncontrolling interest 3,444 2,539 1,832 Net income (loss) attributable to Penguin Solutions $ 25,391 $ ( 52,472 ) $ ( 187,526 ) 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 Discontinued operations — ( 0.15 ) ( 3.94 ) $ 0.29 $ ( 1.00 ) $ ( 3.78 ) Diluted earnings (loss) per share of common stock: Continuing operations $ 0.28 $ ( 0.85 ) $ 0.15 Discontinued operations — ( 0.15 ) ( 3.80 ) $ 0.28 $ ( 1.00 ) $ ( 3.65 ) Common stock used in per share calculations: Basic 53,154 52,428 49,566 Diluted 54,368 52,428 51,322 The accompanying notes are an integral part of these consolidated financial statements. 74 Penguin Solutions, Inc. Consolidated Statements of Comprehensive Income (Loss) (In thousands) Year ended August 29, 2025 August 30, 2024 August 25, 2023 Net income (loss) $ 28,835 $ ( 49,933 ) $ ( 185,694 ) Other comprehensive income (loss), net of tax: Cumulative translation adjustment — ( 6,352 ) 15,686 Cumulative translation adjustment reclassified to net income (loss) — 212,321 — Gain (loss) on investments 8 5 5 Comprehensive income (loss) 28,843 156,041 ( 170,003 ) Comprehensive income attributable to noncontrolling interest 3,444 2,539 1,832 Comprehensive income (loss) attributable to Penguin Solutions $ 25,399 $ 153,502 $ ( 171,835 ) The accompanying notes are an integral part of these consolidated financial statements. 75 Penguin Solutions, Inc. Consolidated Statements of Stockholders’ Equity (In thousands) Common Preferred Shares Issued Amount Shares Issued Amount Additional Paid-in Capital Retained Earnings Treasury Shares Accumulated Other Comprehensive Income (Loss) Total Penguin Solutions Stockholders’ Equity Non- controlling Interest in Subsidiary Total Equity As of August 26, 2022 52,880 $ 1,586 — $ — $ 448,112 $ 251,344 $ ( 107,776 ) $ ( 221,655 ) $ 371,611 $ 6,935 $ 378,546 Net income (loss) — — — — — ( 187,526 ) — — ( 187,526 ) 1,832 ( 185,694 ) Other comprehensive income (loss) — — — — — — — 15,691 15,691 — 15,691 Shares issued under equity plans 4,662 140 — — 42,904 — — — 43,044 — 43,044 Repurchase of shares — — — — — — ( 24,671 ) — ( 24,671 ) — ( 24,671 ) Purchase of 2029 Capped Calls — — — — ( 15,090 ) — — — ( 15,090 ) — ( 15,090 ) Settlement of 2026 Capped Calls — — — — 10,786 — — — 10,786 — 10,786 Stock-based compensation expense — — — — 40,813 — — — 40,813 — 40,813 Distribution to noncontrolling interest — — — — — — — — — ( 2,009 ) ( 2,009 ) Adoption of ASU 2020-06 — — — — ( 50,822 ) 18,639 — — ( 32,183 ) — ( 32,183 ) As of August 25, 2023 57,542 1,726 — — 476,703 82,457 ( 132,447 ) ( 205,964 ) 222,475 6,758 229,233 Net income (loss) — — — — — ( 52,472 ) — — ( 52,472 ) 2,539 ( 49,933 ) Other comprehensive income (loss) — — — — — — — 205,974 205,974 — 205,974 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 ) 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. 76 Penguin Solutions, Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended August 29, 2025 August 30, 2024 August 25, 2023 Cash flows from operating activities Net income (loss) $ 28,835 $ ( 49,933 ) $ ( 185,694 ) Net loss from discontinued operations — ( 8,148 ) ( 195,384 ) Net income (loss) from continuing operations 28,835 ( 41,785 ) 9,690 Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: Depreciation expense and amortization of intangible assets 56,216 65,716 71,632 Amortization of debt issuance costs 3,493 3,724 4,064 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 debt 2,908 22,763 15,924 Deferred income taxes, net ( 14,112 ) ( 11,042 ) ( 63,603 ) Other ( 2,293 ) ( 2,689 ) 4,008 Changes in operating assets and liabilities: Accounts receivable ( 56,160 ) ( 32,495 ) 162,515 Inventories ( 101,610 ) 23,765 95,217 Other assets 7,653 9,098 6,767 Accounts payable and accrued expenses and other liabilities 131,014 54,306 ( 256,133 ) Payment of acquisition-related contingent consideration — ( 29,000 ) ( 73,724 ) Net cash provided by operating activities from continuing operations 113,183 105,521 63,677 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 Cash flows from investing activities Capital expenditures and deposits on equipment ( 9,012 ) ( 19,424 ) ( 39,421 ) 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 ) Purchases of non-marketable investments — ( 11,000 ) ( 4,150 ) Acquisition of business, net of cash acquired — — ( 213,073 ) Other ( 1,660 ) ( 1,272 ) 475 Net cash used for investing activities from continuing operations ( 3,377 ) ( 11,804 ) ( 281,184 ) 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 common stock ( 52,320 ) ( 21,309 ) ( 24,671 ) Payment of acquisition-related contingent consideration — ( 21,000 ) ( 28,100 ) Net cash paid for settlement and purchase of capped calls — ( 16,300 ) ( 4,304 ) Distribution to noncontrolling interest — ( 1,470 ) ( 2,009 ) Proceeds from debt — 192,694 295,287 Proceeds from issuance of common stock 8,804 9,809 43,045 Payment of premium in connection with convertible note exchange — — ( 14,141 ) 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 used for financing activities from discontinued operations — ( 606 ) ( 805 ) Net cash provided by (used for) financing activities ( 63,464 ) ( 210,101 ) 236,416 Effect of changes in currency exchange rates — ( 1,256 ) 4,765 Net increase (decrease) in cash, cash equivalents and restricted cash 70,593 ( 26,587 ) 46,999 Cash, cash equivalents and restricted cash at beginning of period 383,477 410,064 363,065 Cash, cash equivalents and restricted cash at end of period $ 454,070 $ 383,477 $ 410,064 Cash, cash equivalents and restricted cash at end of period: Continuing operations $ 454,070 $ 383,477 $ 365,563 Discontinued operations — — 44,501 $ 454,070 $ 383,477 $ 410,064 The accompanying notes are an integral part of these consolidated financial statements. 77 Penguin Solutions, Inc. Notes to Consolidated Financial Statements (Tabular amounts in thousands, except per share amounts) Significant Accounting Policies Basis of Presentation U.S. 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”). The U.S. 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. Company Name Change : On October 15, 2024, we changed our name from SMART Global Holdings, Inc. to Penguin Solutions, Inc. 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 : On June 13, 2023, we entered into an agreement to divest of an 81 % interest in SMART Modular Technologies do Brasil – Indústria e Comércio de Componentes Ltda. (“SMART Brazil”). We concluded that, as of August 25, 2023, (i) the net assets of SMART Brazil met the criteria for classification as held for sale and (ii) the proposed sale represented a strategic shift that was expected to have a major effect on our operations and financial results. On November 29, 2023, we completed the divestiture. The balance sheets, results of operations and cash flows of SMART Brazil have been presented as discontinued operations for all periods presented. SMART Brazil was previously included within our Integrated Memory segment. See “Divestiture of SMART Brazil.” Unless otherwise noted, amounts and discussion within these notes to the consolidated financial statements relate to our continuing operations. Reclassifications : Certain reclassifications have been made to prior period amounts to conform to current period presentation. Fiscal Year : Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2025, 2024 and 2023 contained 52, 53 and 52 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated. Financial information for our subsidiaries in Brazil was included in our consolidated financial statements on a one-month lag because their fiscal years ended on July 31 of each year. 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 78 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 Cash equivalents include highly liquid investments, readily convertible to known amounts of cash, with original maturities of three months or less. Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Cash paid for interest, net of amounts capitalized, was $ 26.2 million, $ 47.7 million and $ 41.8 million for 2025, 2024 and 2023, respectively. Income taxes paid, net of refunds, were $ 34.5 million, $ 13.1 million and $ 35.5 million for 2025, 2024 and 2023, respectively. Derivative Instruments We use derivative instruments to manage our exposure to changes in currency exchange rates from certain monetary assets and liabilities denominated in currencies other than the U.S. dollar. Derivative instruments are measured at their fair values and recognized as either assets or liabilities. The accounting for changes in the fair value of derivative instruments is based on the intended use of the derivative and the resulting designation. For derivative instruments that are not designated for hedge accounting, gains or losses from changes in fair values are recognized in other non-operating (income) expense. We do not use foreign currency contracts for speculative or trading purposes. Fair Value Measurements We measure and report certain financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. U.S. GAAP has established a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that can be obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party might use in pricing an asset or liability. The fair value hierarchy is categorized into three levels, based on the reliability of inputs, as follows: • Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities; • Level 2 – Valuations based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and • Level 3 – Valuations based on unobservable inputs for the asset or liability. Functional Currency The functional currency for all of our operations is the U.S. dollar. Monetary balances recorded in currencies other than the U.S. dollar are remeasured into U.S. dollars at prevailing exchange rates in effect as of the end of each reporting period. Gains or losses resulting from the remeasurement of monetary balances are recognized in other non-operating (income) expense. Goodwill We test goodwill for impairment in the fourth quarter of each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying value. 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 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.” 79 Income Taxes We recognize current and deferred income taxes based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences and carryforwards recognized for financial reporting and income tax purposes. Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, utilizing tax rates that are expected to apply in the years in which temporary differences are expected to be recovered or settled. We recognize valuation allowances to reduce deferred tax assets to the amounts that we estimate, based on available evidence and management judgment, will more likely than not be realized. We record a valuation allowance in the period the determination is made that all or part of the net deferred tax assets will not be realized. We record interest and penalties related to unrecognized tax benefits in tax expense. 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 and trade names. Intangible assets are retired in the period they become fully amortized. We review the carrying value of identified intangible assets for impairment when events and circumstances indicate that their carrying value may not be recoverable from the estimated future cash flows expected to result from their 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 identifiable intangible assets. Inventories Inventories are stated at the lower of cost or net realizable value. In our Optimized LED segment, cost is determined on a first-in, first-out basis. For our other segments, inventory value is determined on a specific identification basis for material and an allocation of labor and manufacturing overhead. At each balance sheet date, we evaluate ending inventories for excess quantities and obsolescence, including analyses of sales levels by product family, historical demand and forecasted demand in relation to inventory on hand, competitiveness of product offerings, market conditions and product life cycles. Leases We have operating leases through which we acquire or utilize facilities, offices and equipment in our manufacturing operations, research and development activities and selling, general and administrative functions. In determining the lease term, we assess whether it is reasonably certain we will exercise options to renew or terminate a lease and when or whether we would exercise an option to purchase the right-of-use asset. Measuring the present value of the initial lease liability requires exercising judgment to determine the discount rate, which we base on interest rates for similar borrowings issued by entities with credit ratings similar to ours. We recognize right-of use assets and corresponding lease liabilities for leases with an initial term of more than 12 months and do not separate lease and non-lease components. Recognized leases are included in operating lease right-of-use assets and corresponding lease liabilities are included in other current liabilities or noncurrent operating lease liabilities. For operating leases of buildings, we account for non-lease components, such as common area maintenance, as a component of the lease and include the components in the initial measurement of our right-of-use assets and corresponding liabilities. Operating lease assets are amortized on a straight-line basis over the lease term. Property and Equipment Property and equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of generally 2 to 8 years for equipment, 5 to 40 years for buildings and building improvements and 2 to 5 years for furniture, fixtures and software. 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 80 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. Research and Development Research and development expenditures are expensed in the period incurred. Revenue Recognition 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. Product Revenue : Product revenue is generally recognized when control of the promised goods is transferred to customers. Contracts with customers are generally short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. We estimate a liability for returns using the expected value method based on historical rates of return. In addition, we generally offer price protection to our distributors, which is a form of variable consideration that decreases the transaction price. We use the expected value method, based on historical price adjustments and current pricing trends, to estimate the amount of revenue recognized from sales to distributors. Differences between the estimated and actual amounts are recognized as adjustments to revenue. Noncancellable, nonrefundable customized product sales are recognized over time on a cost-incurred basis. In connection with these arrangements, customers obtain control and benefit from products as they are completed. The terms for these arrangements provide us with a legally enforceable right to receive payment, including a reasonable profit margin, upon customer cancellation for performance completed to date. Accordingly, we recognize revenue over time as we complete the manufacture of these products. A portion of our revenue is derived from the sale of customized products. In certain cases, we recognize revenue when control of the underlying assets passes to the customer when the customer is able to direct the use of, and obtain substantially all of the remaining benefit from, the assets; the customer has the significant risks and rewards associated with ownership of the assets; and we have a present right to payment. Under the terms of these arrangements, we cannot repurpose products without the customer’s consent and accordingly, we recognize revenue at the point in time when products are completed and made available to the customer. Service Revenue : 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 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. 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, 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. However, only the amount related to the agent component is recognized as revenue in our results of operations. We generally recognize revenue for these procurement, logistics and inventory management services upon the completion and/or acceptance of such services, which typically occurs at the time of shipment of product to the customer. 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 81 inventories. Amounts in accounts receivable and inventories impact the determination of cash flows from operating activities. Transaction Price : The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. We allocate the transaction price to each distinct product and service based on its relative standalone selling price. The standalone selling price for products primarily involves the cost to produce the deliverable plus the anticipated margin and for services is estimated based on our approved list price. A portion of our service revenue is from professional services, including installation and other services and hardware and software related support. Each contract may contain multiple performance obligations, which requires the transaction price to be allocated to each performance obligation. We allocate the consideration to each performance obligation based on the relative selling price, determined as the best estimate of the price at which we would transact if it sold the deliverable regularly on a stand-alone basis. Contract Costs : 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. We record shipping and handling costs related to revenue transactions within cost of sales as a period cost. 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. Treasury Shares Treasury shares are carried at cost. When treasury shares are retired, any excess of the repurchase price paid over par value is allocated between additional capital and retained earnings. Use of Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. 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 stock-based compensation. Actual results could differ from the estimates made by management. 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”). 82 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). 83 Divestiture of SMART Brazil Overview of Transaction 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”). At the closing of the Brazil Divestiture, Brazil Purchaser paid to Brazil Seller (based on a total enterprise value of $ 204.6 million for SMART Brazil) an upfront cash purchase price, subject to certain customary adjustments as set forth in the Brazil Purchase Agreement. In addition, pursuant to the Brazil Purchase Agreement, Brazil Seller has a right to receive, and Brazil Purchaser is obligated to pay, (i) a deferred payment due 18 months following the closing and (ii) subject to and at the time of exercise of the Put/Call Option (as defined below), an additional deferred cash adjustment equal to 19 % of the amount of SMART Brazil’s net cash as of the closing (as calculated pursuant to the Brazil Purchase Agreement). Put/Call Option : Pursuant to the Brazil Purchase Agreement, at the closing, SMART Brazil, Brazil Seller, Brazil Purchaser and Longsys entered into a Quotaholders Agreement, which provides Brazil Seller with a put option to sell the Retained Interest in SMART Brazil to Brazil Purchaser (the “Put Option”) during three exercise windows following SMART Brazil’s fiscal years ending December 31, 2026, December 31, 2027 or December 31, 2028 (the “Exercise Windows”), with such Exercise Windows beginning on June 15, 2027 and ending on July 15, 2027, beginning on June 15, 2028 and ending on July 15, 2028 and beginning on June 15, 2029 and ending on July 15, 2029, respectively. A call option has also been granted to Brazil Purchaser to require Brazil Seller to sell the Retained Interest to Brazil Purchaser during the Exercise Windows (together with the Put Option, the “Put/Call Option”). 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. 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). 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. Presentation of SMART Brazil Operations As of August 25, 2023, we concluded that the net assets of SMART Brazil met the criteria for classification as held for sale. In addition, the divestiture of SMART Brazil was expected to have a major effect on our operations and financial results. As a result, we have presented the results of operations, cash flows and financial position of SMART Brazil as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented. 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 84 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. In addition, we concluded that the outside basis of SMART Brazil inclusive of any withholding taxes should be recognized upon the classification as held for sale as of August 25, 2023. Accordingly, we recognized withholding taxes on the expected capital gain and deferred tax liabilities of $ 28.6 million in 2023. Assets and liabilities of SMART Brazil as of the November 29, 2023 disposal date and as of August 25, 2023 were as follows: As of November 29, 2023 August 25, 2023 Cash and cash equivalents $ 40,927 $ 44,501 Accounts receivable, net 16,482 17,055 Inventories 26,103 25,877 Other current assets 17,800 17,732 Total current assets 101,312 105,165 Property and equipment, net 66,870 58,321 Operating lease right-of-use assets 6,912 5,213 Goodwill 19,856 20,668 Other noncurrent assets 27,490 34,243 Total assets 222,440 223,610 Impairment of SMART Brazil assets ( 153,036 ) ( 153,036 ) Total assets, net of impairment 69,404 70,574 Accounts payable and accrued expenses 20,576 25,867 Current debt 3,872 4,006 Other current liabilities 1,023 1,030 Total current liabilities 25,471 30,903 Long-term debt 11,938 13,689 Noncurrent operating lease liabilities 5,686 4,614 Noncurrent deferred tax liabilities 28,564 28,564 Other noncurrent liabilities 93 — Total liabilities 71,752 77,770 Net assets (liabilities) of discontinued operations $ ( 2,348 ) $ ( 7,196 ) Reported as: Current assets of discontinued operations $ 70,574 Current liabilities of discontinued operations 77,770 Net assets (liabilities) of discontinued operations $ ( 7,196 ) 85 The following table presents the results of operations for SMART Brazil: Year ended August 30, 2024 August 25, 2023 Net sales $ 55,159 $ 185,377 Cost of sales 50,560 184,016 Gross profit 4,599 1,361 Operating expenses: Research and development 157 5,887 Selling, general and administrative 5,421 12,509 Other operating (income) expense 64 657 Total operating expenses 5,642 19,053 Operating income (loss) ( 1,043 ) ( 17,692 ) Non-operating (income) expense: Loss from divestiture of 81 % interest in SMART Brazil 10,888 153,036 Interest (income) expense, net ( 1,262 ) ( 4,174 ) Other non-operating (income) expense 138 996 Total non-operating (income) expense 9,764 149,858 Income (loss) before taxes ( 10,807 ) ( 167,550 ) Income tax provision (benefit) ( 2,659 ) 27,834 Net income (loss) from discontinued operations $ ( 8,148 ) $ ( 195,384 ) Loss from Divestiture of SMART Brazil The following table presents the calculation of the loss from the divestiture of an 81 % interest in SMART Brazil: Proceeds, less costs to sell and other expenses: Consideration $ 194,092 Costs to sell and other expenses ( 4,150 ) 189,942 Basis in 81 % interest in SMART Brazil: Net assets of SMART Brazil 145,194 Cumulative translation adjustment (1) 212,397 357,591 Gain on revalue of 19 % Retained Interest in SMART Brazil (2) 3,725 Pre-tax loss on divestiture of 81 % interest in SMART Brazil 163,924 Income tax provision 26,580 Loss on divestiture of 81% interest in SMART Brazil $ 190,504 (1) The sale of an 81 % interest in SMART Brazil resulted in the de-consolidation of SMART Brazil and, accordingly, the release of the related cumulative translation adjustment. Included in the basis calculation above is the balance of cumulative translation adjustment for SMART Brazil as of the closing. The release of the cumulative translation adjustment is included in net income (loss) from discontinued operations in the accompanying consolidated statement of operations. (2) In connection with the transaction, we revalued our 19 % Retained Interest in SMART Brazil based on the implied value for 100 % of SMART Brazil, adjusted for lack of control premium. As of August 29, 2025, the carrying value of our remaining 19 % interest in SMART Brazil was $ 37.8 million and was included in other noncurrent assets in the accompanying consolidated balance sheet as a non-marketable equity investment as of August 29, 2025. 86 Recognition Periods : The loss from the divestiture of an 81 % interest in SMART Brazil was recognized as follows: Three Months Ended December 1, 2023 August 25, 2023 Total 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 Loss on divestiture of 81% interest in SMART Brazil $ 8,904 $ 181,600 $ 190,504 Recently Adopted Accounting Standards 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): Improvements to Income Tax Disclosures. 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 87 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. Business Acquisitions Stratus Technologies On August 29, 2022 (the “Stratus Acquisition Date”), we completed the acquisition of Storm Private Holdings I Ltd., a Cayman Islands exempted company (“Stratus Holding Company” and together with its subsidiaries, “Stratus Technologies”), pursuant to the terms of that certain Share Purchase Agreement (the “Stratus Purchase Agreement”), dated as of June 28, 2022, by and among Penguin Solutions, Stratus Holding Company and Storm Private Investments LP, a Cayman Islands exempted limited partnership (the “Stratus Seller”). Pursuant to the Stratus Purchase Agreement, among other matters, the Stratus Seller sold to Penguin Solutions, and Penguin Solutions purchased from the Stratus Seller, all of the Stratus Seller’s right, title and interest in and to the outstanding equity securities of Stratus Holding Company. Stratus Technologies is a global leader in simplified, protected and autonomous computing platforms and services in the data center and at the edge. For more than 40 years, Stratus Technologies has provided high-availability, fault-tolerant computing to Fortune 500 companies and small-to-medium sized businesses enabling them to securely and remotely run critical applications with minimal downtime. Stratus Technologies operates as part of Penguin Solutions’ Advanced Computing segment. The acquisition of Stratus Technologies further enhances Penguin Solutions’ growth and diversification strategy and complements and expands Penguin Solutions’ Advanced Computing business in data center and edge environments. Purchase Price : At the closing of the transaction, we paid the Stratus Seller a cash purchase price of $ 225.0 million, subject to certain adjustments. In addition, the Stratus Seller had the right to receive, and we were obligated to pay, contingent consideration of up to $ 50.0 million (the “Stratus Earnout”) based on the gross profit performance of Stratus Technologies during the first full 12 fiscal months following the closing of the acquisition. In the second quarter of 2024, we paid in full $ 50.0 million related to the Stratus Earnout. Cash paid was utilized, in part, to settle the outstanding debt of Stratus Technologies as of the closing of the transaction and was recognized as a component of consideration transferred. As a result, the assets acquired and liabilities assumed do not include an assumed liability for the outstanding debt of Stratus Technologies. The purchase price for Stratus Technologies was as follows: Cash $ 225,000 Additional payment for net working capital adjustment (1) 17,246 Fair value of Stratus Earnout 20,800 $ 263,046 (1) Includes $ 14.4 million paid at closing and $ 2.8 million paid in the second quarter of 2023 upon completion of the review of the working capital assets acquired and liabilities assumed. Contingent Consideration : The Stratus Earnout was accounted for as contingent consideration. As of the Stratus Acquisition Date, the fair value of the Stratus Earnout was estimated to be $ 20.8 million and was valued using a Monte Carlo simulation analysis in a risk-neutral framework with assumptions for volatility, market price of risk adjustment, risk-free rate and cost of debt. The fair value measurement was based on significant inputs, not observable in the market, including forecasted gross profit, comparable company volatility, discount rate and cost of debt. The fair value of the Stratus Earnout was estimated based on the Company’s evaluation of the probability and amount of the Stratus Earnout to be achieved based on the expected gross profit of Stratus Technologies, using an estimated gross profit volatility of 33.4 % and a discount rate of 7.3 % as of the Stratus Acquisition Date. 88 Valuation : We estimated the fair value of the assets and liabilities of Stratus Technologies as of the Stratus Acquisition Date. The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed as follows: Cash and cash equivalents $ 29,174 Accounts receivable 26,685 Inventories 10,890 Other current assets 6,536 Property and equipment 7,292 Operating lease right-of-use assets 9,216 Intangible assets 123,700 Goodwill 125,929 Other noncurrent assets 11,661 Accounts payable and accrued expenses ( 32,656 ) Other current liabilities ( 36,723 ) Noncurrent operating lease liabilities ( 7,067 ) Other noncurrent liabilities ( 11,591 ) Total net assets acquired $ 263,046 The goodwill arising from the acquisition of Stratus Technologies was assigned to our Advanced Computing segment. None of the goodwill recognized is deductible for income tax purposes. The fair values and useful lives of identifiable intangible assets were as follows: Amount Estimated useful life (in years) Technology $ 82,000 5 Customer relationships 27,800 8 Trademarks/trade names 10,000 9 In-process research and development 3,900 N/A $ 123,700 • Technology intangible assets were valued using the multi-period excess earnings method based on the discounted cash flow and technology obsolescence rate. Discounted cash flow requires the use of significant unobservable inputs, including projected revenue, expenses, capital expenditures and other costs, and discount rates calculated based on the cost of equity adjusted for various risks, including the size of the acquiree, industry risk and other risk factors. • Customer relationship intangible assets were valued using the multi-period excess earnings method, which is the present value of the projected cash flows that are expected to be generated by the existing intangible assets after reduction by an estimated fair rate of return on contributory assets required to generate the customer relationship revenues. Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates. • Trademark/trade name intangible assets were valued using the relief from royalty method, which is the discounted cash flow savings accruing to the owner by virtue of the fact that the owner is not required to license the trademarks/trade names from a third party. Key assumptions included attributable revenue expected from the trademarks/trade names, royalty rates and assumed asset life. • In-process research and development (“IPR&D”) relates to next generation fault tolerant architecture. IPR&D is indefinite-lived and will be reviewed for impairment at least annually. IPR&D was valued based on discounted cash flow, which requires the use of significant unobservable inputs, including projected revenue, expenses, capital expenditures and other costs. 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. 89 Cash and Investments As of August 29, 2025 and August 30, 2024, all of our debt securities, the fair values of which approximated their carrying values, were classified as held to maturity. As of August 29, 2025, restricted cash, which is included in other noncurrent assets, was $ 0.3 million . Cash, cash equivalents and short-term investments were as follows: August 29, 2025 August 30, 2024 As of Cash and Cash Equivalents Short-term Investments Cash and Cash Equivalents Short-term Investments Cash $ 426,870 $ — $ 354,037 $ — Level 1: Money market funds 26,884 — 29,110 — U.S. Treasury securities — — — 6,337 $ 453,754 $ — $ 383,147 $ 6,337 Non-marketable Equity Investments 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. Accounts Receivable In the third quarter of 2023, we entered into a trade accounts receivable sale program with a third-party financial institution to sell certain of our trade accounts receivable on a non-recourse basis pursuant to a factoring arrangement. This program allows us to sell certain of our trade accounts receivables up to $ 60.0 million. As of August 29, 2025, there have been no trade accounts receivables sold under this program. Inventories As of August 29, 2025 August 30, 2024 Raw materials $ 92,393 $ 75,514 Work in process 32,002 18,742 Finished goods 130,787 56,957 $ 255,182 $ 151,213 As of August 29, 2025 and August 30, 2024, 21 % and 14 %, respectively, of total inventories were owned and held under our logistics services program. Property and Equipment As of August 29, 2025 August 30, 2024 Equipment $ 90,160 $ 89,848 Buildings and building improvements 69,245 70,462 Furniture, fixtures and software 46,784 48,027 Land 14,983 16,126 221,172 224,463 Accumulated depreciation ( 128,569 ) ( 117,915 ) $ 92,603 $ 106,548 90 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 August 29, 2025 August 30, 2024 As of Gross Amount Accumulated Amortization Gross Amount Accumulated Amortization Intangible assets: Technology $ 144,445 $ ( 83,375 ) $ 142,539 $ ( 58,948 ) Customer relationships 33,000 ( 13,602 ) 72,500 ( 45,556 ) Trademarks/trade names 15,786 ( 8,500 ) 27,964 ( 17,045 ) $ 193,231 $ ( 105,477 ) $ 243,003 $ ( 121,549 ) 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 $ 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. Goodwill by segment Advanced Computing Integrated Memory Total Balance as of August 25, 2023 Gross $ 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 Gross 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 Gross 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 91 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 As of August 29, 2025 August 30, 2024 Accounts payable (1) $ 267,498 $ 182,037 Salaries, wages and benefits 34,169 22,819 Income and other taxes 15,304 11,863 Other 1,790 2,371 $ 318,761 $ 219,090 (1) Included accounts payable for property and equipment of $ 1.7 million and $ 0.4 million as of August 29, 2025 and August 30, 2024, respectively. Debt As of August 29, 2025 August 30, 2024 Amended 2022 TLA $ — $ 297,297 2030 Notes 193,906 192,778 2029 Notes 147,987 147,439 2026 Notes 19,945 19,833 2025 Loans 100,000 — 461,838 657,347 Less current debt ( 19,945 ) — Long-term debt $ 441,893 $ 657,347 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 92 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 : 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. 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 2025 Credit Agreement. Security : 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. Covenants : 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; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends; make distributions or repurchase capital stock; make investments, loans or advances; repay or repurchase certain subordinated debt (except as scheduled or at maturity); 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 the Borrowers’ subordinated debt and fundamentally change the Borrowers’ business. 93 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; and • 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. Other : 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 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. Accordingly, we recognized a loss in the fourth quarter of 2024, included in other non-operating expense, of $ 20.4 million, consisting of $ 19.7 million premium paid to extinguish the 2026 Notes and $ 0.7 million for the write-off of unamortized issuance costs. Convertible Senior Notes Exchange 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. Transactions involving contemporaneous exchanges between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation are accounted for as debt extinguishments if the debt instruments have substantially different terms. An exchange is deemed to have substantially different terms if: • The present value of the remaining cash flows of the old instrument differs by more than 10% of the present value of the cash flows of the new instrument, or • The change in the fair value of the conversion option immediately before and after the exchange is greater than 10% of the carrying value of the debt instrument immediately prior to the exchange. We concluded that the exchanged 2026 Notes and the 2029 Notes had substantially different terms, and accordingly, we accounted for the Exchange Transactions as the extinguishment of the 2026 Notes and the issuance of the 2029 Notes. 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. 94 2030 Notes 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. The 2030 Notes bear interest at a rate of 2.00 % per annum on the principal amount thereof, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2025, to the noteholders of record of the 2030 Notes as of the close of business on the immediately preceding February 1 and August 1, respectively. 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 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 shares of common stock. Conversion Rights : Holders of the 2030 Notes may convert them under the following circumstances: i. 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; ii. 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; iii. upon the occurrence of certain corporate events or distributions on our common stock, as provided in the 2030 Indenture; iv. if we call the 2030 Notes for redemption; and v. on or after February 15, 2030 until the close of business on the second scheduled trading day immediately before the 2030 Maturity Date. 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 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. Calling any 2030 Note for redemption will constitute a make-whole fundamental change with respect to such note, in which case the conversion rate applicable to the conversion of such note will be increased in certain circumstances if it is converted after it is called for redemption. 2029 Notes The 2029 Notes bear interest at a rate of 2.00 % per annum on the principal amount thereof, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2023, to the noteholders of record of the 2029 Notes as of the close of business on the immediately preceding January 15 and July 15, respectively. The 2029 Notes will mature on February 1, 2029 (the “2029 Maturity Date”), unless earlier converted, redeemed or repurchased. 95 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. 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 common stock. Conversion Rights : Holders of the 2029 Notes may convert them under the following circumstances: i. 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; ii. 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; iii. upon the occurrence of certain corporate events or distributions on our common stock, as provided in the 2029 Indenture; iv. if we call the 2029 Notes for redemption; and v. on or after August 1, 2028 until the close of business on the second scheduled trading day immediately before the 2029 Maturity Date. 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 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. Calling any 2029 Note for redemption will constitute a make-whole fundamental change with respect to such note, in which case the conversion rate applicable to the conversion of such note will be increased in certain circumstances if it is converted after it is called for redemption. 2026 Notes In February 2020, we issued $ 250.0 million in aggregate principal amount of 2026 Notes. 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 (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 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. On January 18, 2023, we exchanged $ 150.0 million principal amount of 2026 Notes for $ 150.0 million principal amount of new 2029 Notes. As a result, as of August 30, 2024, $ 100.0 million in aggregate principal amount of 2026 Notes were outstanding. 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. As of August 29, 2025, $ 20.0 million in aggregate principal amount of 2026 Notes were outstanding. See “Repurchase of Convertible Senior Notes” and “Convertible Senior Notes Exchange.” First Supplemental Indenture to Indenture Governing the 2026 Notes : On August 26, 2022, Penguin Solutions entered into the First Supplemental Indenture (the “2026 First Supplemental Indenture”) to the 2026 Indenture governing the 2026 Notes. 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 96 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: i. 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; ii. 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; iii. upon the occurrence of certain corporate events or distributions on our common stock, as provided in the 2026 Indenture; iv. if we call the 2026 Notes for redemption; and v. on or after August 15, 2025 until the close of business on the second scheduled trading day immediately before the 2026 Maturity Date. Cash Redemption at Our Option : 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 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. Calling any 2026 Note for redemption will constitute a make-whole fundamental change with respect to such note, in which case the conversion rate applicable to the conversion of such note will be increased in certain circumstances if it is converted after it is called for redemption. Ranking Our convertible notes are senior, unsecured obligations of the Company and are equal in right of payment with our existing and future senior, unsecured indebtedness, senior in right of payment to our existing and future indebtedness that is expressly subordinated to the respective notes and effectively subordinated to our existing and future senior, secured indebtedness, to the extent of the value of the collateral securing that indebtedness. Our convertible notes are structurally subordinated to all other existing and future indebtedness and other liabilities, including trade payables and (to the extent the Company is not a holder thereof) preferred equity, if any, of our subsidiaries. Make-Whole Fundamental Change Upon the occurrence of a “make-whole fundamental change” (as defined in each of our convertible note indentures), we will in certain circumstances increase the conversion rate for a specified period of time. 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 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 97 Indentures. 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 Unamortized debt issuance costs are amortized over the terms of our 2026 Notes, 2029 Notes and 2030 Notes using the effective interest method. As of August 29, 2025 and August 30, 2024, the effective interest rate for our 2026 Notes was 2.83 %. As of August 29, 2025 and August 30, 2024, the effective interest rate for our 2029 Notes was 2.40 %. As of August 29, 2025, the effective interest rate for our 2030 Notes was 2.65 %. Aggregate interest expense for our convertible notes consisted of contractual stated interest and amortization of issuance costs and included the following: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Contractual stated interest $ 7,430 $ 5,470 $ 5,397 Amortization of debt issuance costs 1,788 1,167 1,160 $ 9,218 $ 6,637 $ 6,557 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 (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. In the first quarter of 2023, and substantially simultaneously with entering into the First Amendment, we repaid in full the $ 101.8 million outstanding under the LED Earnout Note. 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. 98 Maturities of Debt As of August 29, 2025, maturities of debt were as follows: 2026 $ 20,000 2027 — 2028 — 2029 150,000 2030 300,000 2031 and thereafter — Less unamortized debt issuance costs ( 8,162 ) $ 461,838 Leases We have operating leases through which we utilize facilities, offices and equipment in our manufacturing operations, research and development activities and selling, general and administrative functions. Sublease income was not significant in any period presented. The components of operating lease expense were as follows: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Fixed lease cost $ 11,486 $ 12,894 $ 16,574 Variable lease cost 2,433 1,834 1,386 Short-term lease cost 1,903 2,086 2,266 $ 15,822 $ 16,814 $ 20,226 Cash flows used for operating activities included payments for operating leases of $ 8.0 million , $ 9.0 million and $ 7.7 million in 2025, 2024 and 2023, respectively. 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 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 . In determining the present value of our operating lease liabilities, we have assumed we will not extend any lease terms. As of August 29, 2025, minimum payments of lease liabilities were as follows: 2026 $ 9,687 2027 9,615 2028 9,606 2029 9,665 2030 9,835 2031 and thereafter 43,812 92,220 Less imputed interest ( 23,734 ) Present value of total lease liabilities $ 68,486 Commitments and Contingencies Commitments As of August 29, 2025, we had commitments of $ 25.5 million for purchase obligations, a substantial majority of which will be due within one year . Purchase obligations include payments for the acquisition of inventories, property and equipment and other goods or services of either a fixed or minimum quantity. 99 Product Warranty and Indemnities We generally provide a limited warranty that our products are in compliance with applicable specifications existing at the time of delivery. Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of amounts paid for such items. Our warranty obligations are not material. We are party to a number of agreements in which we have agreed to defend, indemnify and hold harmless our customers and suppliers from damages and costs, which may arise from product defects as well as from any alleged infringement by our products of third-party patents, trademarks or other proprietary rights. We believe our internal development processes and other policies and practices limit our exposure related to such indemnities. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. However, to date, we have not had to reimburse any of our customers or suppliers for any significant losses related to these indemnities. We have not recorded any liability for such indemnities. Contingencies 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 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. 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. 100 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. Conversion 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). Dividends 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 101 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. Equity 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.” Capped Calls 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 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. The cost of capped calls, which are considered capital transactions, were recognized as decreases to additional paid-in capital. Capped calls are separate transactions, each between the Company and the counterparties to the various capped calls, and are not part of the terms of any of the convertible notes and do not affect any holder’s rights under the convertible notes or related indentures. Holders of any of the convertible notes do not have any rights with respect to any 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 102 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. The following table presents information related to outstanding capped calls as of August 29, 2025: Expiration Date Strike Price Cap Price Shares Maximum Value at Expiration 2026 Capped Calls February 15, 2026 $ 20.3044 $ 27.0725 4,925 $ 33,333 2029 Capped Calls February 1, 2029 $ 21.2288 $ 29.1375 7,066 55,883 2030 Capped Calls August 15, 2030 $ 28.0085 $ 37.7038 7,141 69,231 19,132 $ 158,447 As part of the Exchange Transactions, we settled a portion of the 2026 Capped Calls in a notional amount of $ 150.0 million, equal to the amount of the 2026 Notes exchanged. 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. Other Comprehensive Income Changes in accumulated other comprehensive income (loss) by component for 2025 were as follows: Gains (Losses) on Investments As of August 30, 2024 $ 10 Other comprehensive income (loss) before reclassifications 18 Reclassifications out of accumulated other comprehensive income — Other comprehensive income (loss) 18 As of August 29, 2025 $ 28 In connection with our divestiture of an 81 % interest in SMART Brazil, we reclassified $ 212.4 million of cumulative translation adjustment related to SMART Brazil from other accumulated comprehensive income to results of operations in the first quarter of 2024. See “Divestiture of SMART Brazil.” Noncontrolling Interest in Subsidiary We have a 51 % ownership interest in Cree Venture LED Company Limited (“Cree Joint Venture”), with the remaining 49 % ownership interest held by San’an Optoelectronics Co., Ltd (“San’an”). The Cree Joint Venture has a five -member board of directors, three of which are designated by us and two of which are designated by San’an. As a result of our majority voting interest, we consolidate the operations of the Cree Joint Venture and report its results of operations within our Optimized LED segment. The Cree Joint Venture has a manufacturing agreement pursuant to which San’an supplies it with mid-power LED products and we and the Cree Joint Venture have a sales agent agreement pursuant to which we are the independent sales representative of the Cree Joint Venture. The Cree Joint Venture produces and delivers to market high performing, mid-power lighting class LEDs in an exclusive arrangement serving the markets of North and South America, Europe and Japan, and serves China markets and the rest of the world on a non-exclusive basis. The 49 % ownership interest held by San’an is classified as noncontrolling interest. Cash and other assets of the Cree Joint Venture are generally not available for use by us in our other operations. 103 Fair Value Measurements August 29, 2025 August 30, 2024 As of Fair Value Carrying Value Fair Value Carrying Value Assets: Derivative financial instruments $ 4,223 $ 4,223 $ 3,929 $ 3,929 Liabilities: Amended 2022 TLA $ — $ — $ 300,015 $ 297,297 2030 Notes 224,048 193,906 199,160 192,778 2029 Notes 197,363 147,987 178,760 147,439 2026 Notes 25,713 19,945 23,918 19,833 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. The asset’s fair value, as measured on a recurring basis, was based on Level 2 measurements, including market-based observable inputs of interest rates and credit-risk spreads. The fair value of the Amended 2022 TLA, as measured on a non-recurring basis, was estimated based on Level 2 measurements, including discounted cash flows and interest rates based on similar debt issued by parties with credit ratings similar to ours. 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. Equity Plans 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, stock options and employee stock purchase plan include both our continuing and discontinued operations. 104 Restricted Stock Awards and Restricted Stock Units Awards (“Restricted Awards”) Shares Weighted- Average Grant Date Fair Value Per Share Aggregate Intrinsic Value Outstanding as of August 30, 2024 4,199 $ 21.12 $ 87,006 Granted 2,137 $ 18.85 Vested ( 1,803 ) $ 20.91 Forfeited and cancelled ( 689 ) $ 19.15 Outstanding as of August 29, 2025 3,844 $ 21.49 $ 93,751 Restricted Award activity was as follows: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Restricted awards granted 2,137 2,085 2,579 Weighted-average grant date fair value per share $ 18.85 $ 22.96 $ 17.77 Aggregate vesting date fair value of shares vested $ 33,911 $ 36,286 $ 31,686 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 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 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. Shares Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding as of August 30, 2024 724 $ 12.72 4.33 $ 5,911 Granted — $ — Exercised ( 197 ) $ 9.95 Forfeited and cancelled ( 5 ) $ 16.09 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- 105 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 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 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, 2025 August 30, 2024 August 25, 2023 Stock-based compensation expense by caption: Cost of sales $ 6,136 $ 7,113 $ 6,334 Research and development 6,300 7,120 6,016 Selling, general and administrative 28,740 28,927 26,878 $ 41,176 $ 43,160 $ 39,228 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 common stock. We may make matching contributions, which vest immediately, at our discretion. Contribution expense for our 401(k) plan was $ 4.7 million , $ 3.9 million and $ 4.6 million in 2025, 2024 and 2023, respectively. Revenue and Customer Contract Balances We disaggregate revenue by segment and geography and by product and service revenue. See “Segment and Other Information.” Net Sales and Gross Billings 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. As a result, we recognize only the amount related to the agent component as revenue in our results of operations. The cost of products, materials and services invoiced to our customers under these arrangements, but not recognized as revenue or cost of sales in our results of operations, were as follows: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Cost of materials and services invoiced in connection with logistics services $ 893,715 $ 518,685 $ 765,796 106 Customer Contract Balances As of August 29, 2025 August 30, 2024 Contract assets (1) $ 1,929 $ 1,801 Contract liabilities: (2) Deferred revenue $ 89,943 $ 76,178 Customer advances 21,525 6,036 $ 111,468 $ 82,214 (1) Contract assets are included in other current and noncurrent assets. (2) Contract liabilities are included in other current and noncurrent liabilities based on the timing of when our customers are expected to take control of the asset or receive the benefit of the service. Contract assets represent amounts recognized as revenue for which we do not have the unconditional right to consideration. Deferred revenue represents amounts received from customers in advance of satisfying performance obligations. As of August 29, 2025, we expect to recognize revenue of $ 73.9 million of the balance of $ 89.9 million in the next 12 months and the remaining amount thereafter. In 2025, we recognized revenue of $ 63.1 million from satisfying performance obligations related to amounts included in deferred revenue as of August 30, 2024. In addition, as of August 29, 2025, other current liabilities included $ 15.3 million that is not included in the above remaining performance obligations. While this liability relates to amounts received from customers in connection with arrangements that are cancellable at the customer’s discretion, we have not had to refund any such amounts to our customers in the periods presented. Customer advances represent amounts received from customers for advance payments to secure product. In 2025, we recognized revenue of $ 0.5 million from satisfying performance obligations related to amounts included in customer advances as of August 30, 2024. As of August 29, 2025 and August 30, 2024, other current liabilities included $ 17.7 million and $ 12.2 million, respectively, for estimates of consideration payable to customers, including estimates for pricing adjustments and returns. Other Operating (Income) Expense 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 $ 1,063 107 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 Year ended August 29, 2025 August 30, 2024 August 25, 2023 Loss on extinguishment or prepayment of debt $ 2,908 $ 22,763 $ 15,924 Loss (gain) on disposition of assets 76 179 ( 2,986 ) Other ( 1,055 ) ( 1,858 ) ( 1,101 ) $ 1,929 $ 21,084 $ 11,837 Income Taxes Income (loss) before provision for income taxes consisted of the following: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Income (loss) before income taxes: U.S. $ 39,438 $ 38,246 $ 20,118 Non-U.S. 9,463 ( 69,413 ) ( 59,631 ) $ 48,901 $ ( 31,167 ) $ ( 39,513 ) Income tax provision (benefit) consisted of the following: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Income tax provision (benefit): Current: Federal $ 17,444 $ 10,930 $ 3,253 State 4,000 1,821 2,417 Foreign 12,768 9,253 8,418 34,212 22,004 14,088 Deferred: Federal ( 12,227 ) ( 6,815 ) ( 51,540 ) State ( 1,099 ) 540 ( 6,998 ) Foreign ( 820 ) ( 5,111 ) ( 4,753 ) ( 14,146 ) ( 11,386 ) ( 63,291 ) Income tax provision (benefit) $ 20,066 $ 10,618 $ ( 49,203 ) 108 In applying the statutory tax rate in the effective income tax rate reconciliation below, we used the U.S. statutory tax rate rather than the Cayman Islands zero percent tax rate. The table below reconciles our tax provision (benefit) based on the U.S. federal statutory rate to our effective tax rate: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Statutory tax rate $ 10,269 21.0 % $ ( 6,545 ) 21.0 % $ ( 8,298 ) 21.0 % Foreign income taxes at different rates 6,665 13.6 % 15,870 ( 50.9 ) % 16,992 ( 43.0 ) % State income tax, net of federal benefit 1,903 3.9 % 2,278 ( 7.3 ) % 2,793 ( 7.1 ) % Goodwill impairment — — % — — % 2,876 ( 7.3 ) % Tax on uncertain tax positions 313 0.6 % ( 3,825 ) 12.3 % 5,679 ( 14.4 ) % 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 % Non-deductible expenses (non-taxable income) 2,177 4.5 % 1,053 ( 3.4 ) % 2,151 ( 5.4 ) % Foreign withholding tax 2,429 5.0 % 4,548 ( 14.6 ) % 3,371 ( 8.5 ) % Tax credits ( 1,814 ) ( 3.7 ) % ( 3,337 ) 10.7 % ( 4,339 ) 11.0 % Effect of cross-border tax laws 1,409 2.9 % — — % — — % U.S. Domestication ( 75,126 ) ( 153.6 ) % — — % — — % Return to Provision 2,283 4.7 % — — % — — % Other ( 246 ) ( 0.7 ) % ( 435 ) 1.4 % ( 101 ) 0.2 % Effective tax rate $ 20,066 41.0 % $ 10,618 ( 34.1 ) % $ ( 49,203 ) 124.5 % 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 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. 109 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. Deferred tax assets and liabilities consisted of the following: As of August 29, 2025 August 30, 2024 Deferred tax assets: Accruals and allowances $ 16,868 $ 13,868 Deferred revenue 371 1,838 Stock-based compensation 2,028 3,027 Research and other tax credit carryforwards 4,479 4,762 Capitalized research and development 29,584 22,059 Operating lease liabilities 15,823 15,199 Tax amortizable goodwill 13,370 14,097 Interest carryforward 91,125 21,873 Intangible assets 11,704 5,039 Loss carryforwards 10,690 11,908 Gross deferred tax assets 196,042 113,670 Valuation allowance ( 73,443 ) ( 3,774 ) Net deferred tax assets 122,599 109,896 Deferred tax liabilities: Operating right-of-use assets 13,531 13,306 Property and equipment 9,346 10,717 Brazil capital gains tax — 4,138 Other liabilities 922 1,143 Gross deferred tax liabilities 23,799 29,304 Net deferred tax assets $ 98,800 $ 80,592 Reported as: Deferred tax assets $ 99,107 $ 85,078 Deferred tax liabilities (included in other noncurrent liabilities) ( 307 ) ( 4,486 ) Net deferred tax assets $ 98,800 $ 80,592 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 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. As of August 29, 2025, we had U.S. federal and state net operating loss carryforwards of $ 23.6 million and $ 36.2 million, respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2027. State net operating loss carryforwards of $ 35.9 million will begin to expire in 2031, while the remaining state net operating loss carryforwards do not expire. In addition, we had U.S. 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 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 $ 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. Federal and state tax attributes can be subject to an annual limitation under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and state tax laws. Further, under Section 382 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards to offset its post-change taxable income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by certain “5-percent shareholders” (including 110 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 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. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into U.S. law. 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: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Balance at beginning of period $ 3,774 $ 2,663 $ 52,267 Charged (credited) to operations 69,669 1,111 ( 69,789 ) Charged to other accounts (1) — — ( 4,073 ) Business acquisitions — — 24,258 Balance at end of period $ 73,443 $ 3,774 $ 2,663 (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 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. We have operations in Malaysia, where we have tax incentive arrangements for our pioneer status activities and our global supply chain operations. The statutory rate for Malaysia is 24%. 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. Below is a reconciliation of our unrecognized tax benefits: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Beginning unrecognized tax benefits $ 21,428 $ 25,603 $ 18,920 Acquired balances — — 871 Increases related to prior year tax provisions — 129 6,271 Increases related to current year tax provisions 495 1,099 4,248 Decreases related to prior year tax provisions ( 602 ) ( 5,348 ) ( 3,468 ) Lapse of statute of limitation ( 280 ) ( 55 ) ( 1,239 ) Ending unrecognized tax benefits $ 21,041 $ 21,428 $ 25,603 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 111 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. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months would not be material. We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states and various foreign jurisdictions throughout the world. We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented. Our U.S. federal and state tax returns remain open to examination for 2007 through 2024. In addition, tax returns that remain open to examination in non-U.S. subsidiaries, including Malaysia, Luxembourg, Ireland, United Kingdom, Hong Kong and China, vary by country. We believe that adequate amounts of taxes and related interest and penalties have been provided and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations or financial condition. 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. 112 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, 2025 August 30, 2024 August 25, 2023 Net income (loss) from continuing operations $ 25,391 $ ( 44,324 ) $ 7,858 Net income (loss) from discontinued operations — ( 8,148 ) ( 195,384 ) Net income (loss) attributable to Penguin Solutions – Basic and Diluted $ 25,391 $ ( 52,472 ) $ ( 187,526 ) Less: Preferred stock dividends 8,667 — — 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 Senior Notes 1,214 — 1,756 Weighted-average shares outstanding – Diluted 54,368 52,428 51,322 Basic earnings (loss) per common share: Continuing operations $ 0.29 $ ( 0.85 ) $ 0.16 Discontinued operations — ( 0.15 ) ( 3.94 ) $ 0.29 $ ( 1.00 ) $ ( 3.78 ) Method used: Two-Class Diluted earnings (loss) per common share: Continuing operations $ 0.28 $ ( 0.85 ) $ 0.15 Discontinued operations — ( 0.15 ) ( 3.80 ) $ 0.28 $ ( 1.00 ) $ ( 3.65 ) 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 (“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 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. 113 • Integrated Memory : Our Integrated Memory group, under our SMART Modular Technologies brand, provides high-performance and reliable integrated memory solutions through the design, development and advanced packaging of leading-edge to extended lifecycle products. These specialty products are tailored to meet customer-specific requirements across networking and communications, enterprise storage and computing, including server applications and other vertical markets. These products are marketed to original equipment manufacturers and to commercial and government customers. The Integrated Memory group also offers SMART Supply Chain Services, which provides customized, integrated supply chain services to enable our customers to better manage supply chain planning and execution, reduce costs and increase productivity. • Optimized LED : Our Optimized LED group, under our Cree LED brand, offers a broad portfolio of application-optimized LEDs focused on improving lumen density, intensity, efficacy, optical control and/or reliability. 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 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. Operating expenses directly associated with the activities of a specific segment are charged to that segment. Certain other indirect operating income and expenses are generally allocated to segments based on their respective percentage of net sales. 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. August 29, 2025 Advanced Computing Integrated Memory Optimized LED Total Net sales: $ 648,417 $ 464,249 $ 256,128 $ 1,368,794 Less: 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 ( 41,176 ) 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 ) Other ( 2,729 ) Total unallocated ( 109,517 ) Total non-operating expense ( 9,234 ) Income (loss) before taxes $ 48,901 114 August 30, 2024 Advanced Computing Integrated Memory Optimized LED Total Net sales: $ 554,552 $ 356,426 $ 259,818 $ 1,170,796 Less: 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: $ 95,291 $ 22,413 $ 2,553 120,257 Reconciliation of profit (loss) Stock-based compensation expense ( 43,160 ) 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 ) Other ( 1,088 ) Total unallocated ( 101,962 ) Total non-operating expense ( 49,462 ) Income (loss) before taxes $ ( 31,167 ) August 25, 2023 Advanced Computing Integrated Memory Optimized LED Total Net sales: $ 749,708 $ 443,264 $ 248,278 $ 1,441,250 Less: 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 ( 39,228 ) Amortization of acquisition-related intangibles ( 44,601 ) Flow through of inventory step up ( 2,599 ) Cost of sales-related restructuring ( 6,813 ) Diligence, acquisition and integration expense ( 20,869 ) Impairment of goodwill ( 19,092 ) Change in fair value of contingent consideration ( 29,000 ) Restructuring charges ( 7,047 ) Other ( 1,800 ) Total unallocated ( 171,049 ) Total non-operating expense ( 48,258 ) Income (loss) before taxes $ ( 39,513 ) 115 Depreciation included in segment operating income was as follows: Year ended August 29, 2025 August 30, 2024 August 25, 2023 Advanced Computing $ 7,946 $ 9,495 $ 9,196 Integrated Memory 4,053 3,873 3,891 Optimized LED 8,580 12,352 13,411 $ 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 Our concentrations of credit risk consists principally of cash and cash equivalents, investments and accounts receivable. Our revenues and related accounts receivable reflect a concentration of activity with certain customers. We generally do not require collateral or other security to support accounts receivable. We perform periodic credit evaluations of our customers to minimize collection risk on accounts receivable and maintain allowances for potentially uncollectible accounts. A significant portion of our net sales is concentrated with a select number of customers. 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 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. 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. We rely on a limited number of suppliers for a significant portion of our raw materials. Purchases from our two largest suppliers were $ 0.6 billion , $ 0.4 billion and $ 0.5 billion in each of 2025, 2024 and 2023, respectively. As of August 29, 2025 and August 30, 2024, accounts payable and accrued expenses included $ 77.4 million and $ 63.4 million, respectively, for amounts owed to our two largest suppliers in each of 2025 and 2024. 116 Geographic Information Net sales by geographic area, based on customer ship-to location, were as follows: Year ended August 29, 2025 August 30, 2024 August 25, 2023 United States $ 776,506 $ 672,751 $ 877,416 China 186,848 190,654 192,104 Europe 96,999 114,298 114,118 Mexico 147,298 27,301 9,902 Other 161,143 165,792 247,710 $ 1,368,794 $ 1,170,796 $ 1,441,250 Long-lived assets, including property and equipment and right-of-use assets, by geographic area were as follows: As of August 29, 2025 August 30, 2024 United States $ 107,380 $ 116,901 China 33,180 37,229 Malaysia 8,655 8,660 Other 2,235 4,107 $ 151,450 $ 166,897 Quarterly Financial Data (Unaudited) The table below sets forth selected quarterly financial data from our continuing operations: Q4 FY25 Q3 FY25 Q2 FY25 Q1 FY25 Q4 FY24 Q3 FY24 Q2 FY24 Q1 FY24 Net sales $ 337,922 $ 324,251 $ 365,519 $ 341,102 $ 311,148 $ 300,580 $ 284,821 $ 274,247 Gross profit 96,731 95,083 104,648 97,812 87,086 88,906 81,934 82,850 Operating income (loss) 12,448 9,843 18,488 17,356 8,791 11,511 ( 3,312 ) 1,305 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: Basic $ 0.11 $ ( 0.01 ) $ 0.09 $ 0.10 $ ( 0.46 ) $ 0.11 $ ( 0.26 ) $ ( 0.23 ) Diluted $ 0.11 $ ( 0.01 ) $ 0.09 $ 0.10 $ ( 0.46 ) $ 0.10 $ ( 0.26 ) $ ( 0.23 ) Shares used in per share calculations: Basic 52,553 53,130 53,454 53,482 53,071 52,570 52,031 52,068 Diluted 54,371 53,738 54,384 54,312 53,071 54,283 52,031 52,068 117 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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. 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 29, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 21, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition — Refer to the Significant Accounting Policies and Revenue and Customer Contract Balances notes to the financial statements Critical Audit Matter Description The Company had $1.37 billion of revenue for the year ended August 29, 2025, of which $648 million related to the Advanced Computing segment. A portion of the Company’s revenue is derived from the sale of customized products. The Company recognizes revenue when control of the underlying assets passes to the customer, which is when the customer is able to direct the use of and obtain substantially all of the remaining benefit from the assets, the customer has the significant risks and rewards associated with ownership of the assets, and the Company has a present right to 118 payment. Under the terms of these arrangements, the Company cannot repurpose products without the customer’s consent and accordingly, the Company recognizes revenue at the point in time when products are completed and made available to the customer. A portion of the Company’s service revenue is from professional services, including installation and other services as well as hardware and software related support. Each contract may contain multiple performance obligations, which requires the transaction price to be allocated to each performance obligation. The Company allocates the consideration to each performance obligation based on the relative selling price, determined as the best estimate of the price at which the Company would transact if it sold the deliverable regularly on a stand-alone basis. We identified both the evaluation of performance obligations and the determination of the timing of recognition as performance obligations are satisfied in certain contracts within the Advanced Computing segment to be a critical audit matter. This required a high degree of auditor judgment and an increased extent of audit effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s identification of performance obligations and the recognition of revenue as performance obligations are satisfied for the Advanced Computing segment included the following, among others: – We tested the effectiveness of internal controls related to revenue for the Advanced Computing segment including those related to the identification of the performance obligations and the recognition of revenue as performance obligations were satisfied. – We evaluated management’s significant accounting policies related to revenue recognition for compliance with generally accepted accounting principles. – We selected a sample of contract documents for customers in the Advanced Computing segment and performed the following procedures: • Obtained and read the arrangement with the customer for each selection, including the contract, amendments, purchase order, and other documents (together the “contractual documents”) that were part of the arrangement, each as applicable. • Held inquiries with management outside of accounting, as needed, to identify the performance obligations in the contract and assist in evaluating when performance obligations are satisfied. • Assessed the terms and conditions in the contractual documents and evaluated the appropriateness of management’s application of their accounting policies in the evaluation of performance obligations and the recognition of revenue as performance obligations are satisfied. /s/ DELOITTE & TOUCHE LLP San Jose, California October 21, 2025 We have served as the Company’s auditor since 2014. 119 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.