Announces Two-for-One Share Split

7^th Consecutive Quarter of Year-over-Year Revenue Growth

SMART Global Holdings, Inc. ("SGH" or the "Company") (NASDAQ:SGH) today reported financial results for the first quarter of fiscal 2022.

First Quarter Fiscal 2022 Highlights

Net sales of $470 million, up 61% versus the year ago quarter
GAAP gross margin of 26.0%, up approximately 800 basis points versus the year ago quarter
Non-GAAP gross margin of 27.0%, up approximately 850 basis points versus the year ago quarter
GAAP EPS of $0.73, up 813% versus the year ago quarter
Non-GAAP EPS of $2.16, up 177% versus the year ago quarter

"We continued our strong momentum into the first quarter of fiscal 2022, achieving record revenue and non-GAAP gross margins, while delivering non-GAAP earnings per share at the upper end of our EPS guidance range," said CEO Mark Adams.

The Company also announced a two-for-one share split in the form of a share dividend of one ordinary share for every one ordinary share owned. The share dividend will be paid on February 1, 2022, and the shares will begin trading on a post-split basis on February 2, 2022. Ordinary shares and per share data in this press release have not been adjusted for the impact of the share dividend.

"The two-for-one share split, which was approved by our board of directors, is a significant milestone for our Company and is intended to further improve our liquidity and broaden our shareholder base," noted Adams.

Quarterly Financial Results

	GAAP ⁽¹⁾						Non-GAAP ⁽²⁾
(in millions, except per share amounts)	Q1 FY22		Q4 FY21		Q1 FY21		Q1 FY22		Q4 FY21		Q1 FY21
Net sales	$	469.9	$	467.7	$	291.7	$	469.9	$	467.7	$	291.7
Gross profit		122.2		117.8		52.6		127.0		123.6		54.1
Operating income		34.8		31.7		7.6		69.2		66.6		23.7
Net income attributable to SGH		20.0		20.7		2.0		56.3		55.1		19.6
Diluted earnings per share ⁽³⁾	$	0.73	$	0.78	$	0.08	$	2.16	$	2.16	$	0.78

(1)		GAAP represents U.S. Generally Accepted Accounting Principles.
(2)		Non-GAAP represents GAAP excluding the impact of certain activities. Further information regarding our use of non-GAAP measures and reconciliations between GAAP and non-GAAP measures is included within this press release.
(3)		Diluted earnings per share amounts have not been adjusted for the impact of the share dividend.

Business Outlook

As of January 4, 2022, SGH is providing the following financial outlook for its second quarter of fiscal 2022:

	GAAP Outlook	Adjustments	Non-GAAP Outlook
Net sales	$415 to $455 million	—	$415 to $455 million
Gross margin	23% to 25%	1% (A)	24% to 26%
Diluted earnings per share ⁽¹⁾	$0.70 ± $0.15	$0.75 (A)(B)(C)	$1.45 ± $0.15
Diluted shares ⁽¹⁾	29 million	(1) million	28 million
(1) Diluted earnings per share and diluted share amounts have not been adjusted for the impact of the share dividend.

Non-GAAP adjustments: (in millions)
(A) Share-based compensation and amortization of acquisition-related intangibles included in cost of sales			$	5
(B) Share-based compensation and amortization of acquisition-related intangibles included in R&D and SG&A				11
(C) Amortization of convertible debt discount and other costs				4
			$	20

First Quarter Fiscal 2022 Earnings Conference Call and Webcast Details

SGH will hold a conference call and webcast to discuss the Q1 fiscal 2022 results and related matters at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Tuesday, January 4, 2022. Interested parties may access the call by dialing +1-888-550-5584 in the U.S. or +1-646-960-0157 from international locations using access code 2316162. The webcast link is located on the SGH Investor Relations section of our website at https://sghcorp.com. We will also post the presentation to our website prior to the call.

Shortly after the conclusion of the conference call, a replay of the audio webcast will be available on the SGH Investor Relations website for approximately seven days.

Use of Forward-Looking Statements

This press release contains, and statements made during the above-referenced conference call will contain, "forward-looking statements," including, among other things, statements regarding future events and the future financial performance of SGH (including the business outlook for the next fiscal quarter) and statements regarding growth drivers in SGH's industries and markets. These forward-looking statements are based on current expectations and preliminary assumptions that are subject to factors and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside SGH's control, including, among others: global business and economic conditions and growth trends in technology and lighting industries, our customer markets and various geographic regions; uncertainties in the geopolitical environment; disruptions in our operations or our supply chain as a result of COVID-19 pandemic or otherwise; changes in trade regulations or adverse developments in international trade relations and agreements; changes in currency exchange rates; overall information technology spending; appropriations for government spending; the success of our strategic initiatives including additional investments in new products and additional capacity; acquisitions of companies or technologies, the failure to successfully integrate and operate them, or customers' negative reactions to them; limitations on or changes in the availability of supply of materials and components; fluctuations in material costs; the temporary or volatile nature of pricing trends in memory or elsewhere; deterioration in customer relationships; production or manufacturing difficulties; competitive factors; technological changes; difficulties with or delays in the introduction of new products; slowing or contraction of growth in the memory market in Brazil; reduction in or termination of incentives for local manufacturing in Brazil; changes to applicable tax regimes or rates; prices for the end products of our customers; strikes or labor disputes; deterioration in or loss of relations with any of our limited number of key vendors; the inability to maintain or expand government business; and other factors and risks detailed in SGH's filings with the U.S. Securities and Exchange Commission, which include SGH's most recent reports on Form 10-K and Form 10-Q, including SGH's future filings.

Such factors and risks as outlined above and in such filings do not constitute all factors and risks that could cause actual results of SGH to be materially different from our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements are made as of today, and SGH does not intend, and has no obligation, to update or revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release, except as required by law.

Statement Regarding Use of Non-GAAP Financial Measures

SGH management uses non-GAAP measures to supplement SGH's financial results under GAAP. Management uses these measures to analyze its operations and make decisions as to future operational plans, and believes that this supplemental non-GAAP information is useful to investors in analyzing and assessing the Company's past and future operating performance. These non-GAAP measures exclude certain items, such as share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related inventory adjustments, acquisition-related expenses, restructure charges and integration expenses, changes in the fair value of contingent consideration, (gains) losses from changes in currency exchange rates, COVID-19 expenses, amortization of convertible debt discount and other costs and other infrequent or unusual items. Management believes the presentation of operating results that exclude certain items provides useful supplemental information to investors and facilitates the analysis of the Company's core operating results and comparison of operating results across reporting periods. Management also uses adjusted EBITDA, which represents GAAP net income (loss), adjusted for net interest expense, income tax expense, depreciation and amortization expense, share-based compensation expense, acquisition-related inventory adjustments, acquisition-related expenses, restructure charges and integration expenses, changes in the fair value of contingent consideration, COVID-19 expenses and other infrequent or unusual items.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, as they exclude important information about our financial results, as noted above. In addition, adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities in accordance with GAAP and should not be used as a measure of liquidity. Investors are encouraged to review the "Reconciliation of GAAP to Non-GAAP Financial Measures" tables below.

About SMART Global Holdings – SGH

At SGH, our companies are united by a drive to raise the bar, execute with discipline and focus on what's next for the technologies that support and advance the world. Across computing, memory and LED lighting solutions, we build long-term strategic partnerships with our customers.

Backed by a proven leadership team, we operate with excellence around the globe while unlocking new avenues of growth for our business and industry.

Learn more about us at SGHcorp.com.

SMART Global Holdings, Inc. Consolidated Statements of Operations (In thousands, except per share amounts)

	Three months ended
	November 26, 2021		August 27, 2021			November 27, 2020
Net sales:
Memory Solutions	$	239,401	$	247,281		$	225,823
Intelligent Platform Solutions		118,654		97,616			65,874
LED Solutions		111,889		122,812			—
Total net sales		469,944		467,709			291,697
Cost of sales		347,743		349,915			239,053
Gross profit		122,201		117,794			52,644

Operating expenses:
Research and development		17,657		16,740			6,964
Selling, general and administrative		52,550		51,261			38,056
Change in fair value of contingent consideration		17,200		16,000			—
Other operating (income) expense		—		2,054			—
Total operating expenses		87,407		86,055			45,020
Operating income		34,794		31,739			7,624

Non-operating (income) expense:
Interest expense, net		5,106		5,031			3,154
Other non-operating (income) expense		1,235		(1,563	)		(832	)
Total non-operating (income) expense		6,341		3,468			2,322
Income before taxes		28,453		28,271			5,302

Income tax provision		7,755		6,981			3,275
Net income		20,698		21,290			2,027
Net income attributable to noncontrolling interest		671		638			—
Net income attributable to SGH	$	20,027	$	20,652		$	2,027

Earnings per share: ⁽¹⁾
Basic	$	0.82	$	0.85		$	0.08
Diluted	$	0.73	$	0.78		$	0.08

Shares used in per share calculations: ⁽¹⁾
Basic		24,506		24,302			24,561
Diluted		27,318		26,417			25,103

(1) Earnings per share and shares used in per share calculations have not been adjusted for the impact of the share dividend.

SMART Global Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures (In thousands, except per share amounts)

	Three months ended
	November 26, 2021			August 27, 2021			November 27, 2020
GAAP gross profit	$	122,201		$	117,794		$	52,644
Share-based compensation expense		1,731			1,785			838
Amortization of acquisition-related intangibles		3,096			3,997			647
Non-GAAP gross profit	$	127,028		$	123,576		$	54,129

GAAP operating expenses	$	87,407		$	86,055		$	45,020
Share-based compensation expense		(8,044	)		(7,225	)		(10,250	)
Amortization of acquisition-related intangibles		(3,247	)		(3,247	)		(2,766	)
Change in fair value of contingent consideration		(17,200	)		(16,000	)		—
Restructure charges		—			(2,054	)		—
Other		(1,038	)		(542	)		(1,617	)
Non-GAAP operating expenses	$	57,878		$	56,987		$	30,387

GAAP operating income	$	34,794		$	31,739		$	7,624
Share-based compensation expense		9,775			9,010			11,088
Amortization of acquisition-related intangibles		6,343			7,244			3,413
Change in fair value of contingent consideration		17,200			16,000			—
Restructure charges		—			2,054			—
Other		1,038			542			1,617
Non-GAAP operating income	$	69,150		$	66,589		$	23,742

GAAP net income attributable to SGH	$	20,027		$	20,652		$	2,027
Share-based compensation expense		9,775			9,010			11,088
Amortization of acquisition-related intangibles		6,343			7,244			3,413
Change in fair value of contingent consideration		17,200			16,000			—
Restructure charges		—			2,054			—
Amortization of convertible debt discount and other costs		2,210			2,172			2,062
Foreign currency (gains) losses		1,467			(477	)		(642	)
Other		1,038			(460	)		1,617
Tax effects of non-GAAP adjustments		(1,752	)		(1,057	)		64
Non-GAAP net income attributable to SGH	$	56,308		$	55,138		$	19,629

Weighted-average shares outstanding - Diluted: ⁽¹⁾
GAAP weighted-average shares outstanding - Diluted		27,318			26,417			25,103
Adjustment for capped calls		(1,292	)		(867	)		—
Non-GAAP weighted-average shares outstanding - Diluted		26,026			25,550			25,103

Diluted earnings per share: ⁽¹⁾
GAAP diluted earnings per share	$	0.73		$	0.78		$	0.08
Effect of above adjustments		1.43			1.38			0.70
Non-GAAP diluted earnings per share	$	2.16		$	2.16		$	0.78

(1) Share data and diluted earnings per share have not been adjusted for the impact of the share dividend.

SMART Global Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures (In thousands)

	Three months ended
	November 26, 2021		August 27, 2021			November 27, 2020
Net income attributable to SGH	$	20,027	$	20,652		$	2,027
Interest expense, net		5,106		5,031			3,154
Income tax provision		7,755		6,981			3,275
Depreciation expense and amortization of intangible assets		15,813		16,642			8,367
Share-based compensation expense		9,775		9,010			11,088
Change in fair value of contingent consideration		17,200		16,000			—
Restructure charges		—		2,054			—
Other		1,038		(460	)		1,617
Adjusted EBITDA	$	76,714	$	75,910		$	29,528

SMART Global Holdings, Inc. Consolidated Balance Sheets (In thousands)

As of	November 26, 2021			August 27, 2021
Assets
Cash and cash equivalents	$	233,050		$	222,986
Accounts receivable, net		344,107			313,393
Inventories		317,851			363,601
Other current assets		48,829			50,838
Total current assets		943,837			950,818
Property and equipment, net		148,897			156,266
Operating lease right-of-use assets		37,723			40,869
Intangible assets, net		95,331			101,073
Goodwill		72,487			74,255
Other noncurrent assets		25,423			21,517
Total assets	$	1,323,698		$	1,344,798

Liabilities and Equity
Accounts payable and accrued expenses	$	426,883		$	484,107
Current debt		35,802			25,354
Other current liabilities		72,434			74,337
Total current liabilities		535,119			583,798
Long-term debt		341,150			340,484
Acquisition-related contingent consideration		77,700			60,500
Noncurrent operating lease liabilities		29,396			32,419
Other noncurrent liabilities		8,049			8,673
Total liabilities		991,414			1,025,874

Commitments and contingencies

SMART Global Holdings shareholders' equity:
Ordinary shares		784			773
Additional paid-in-capital		411,608			396,851
Retained earnings		204,814			184,787
Treasury shares		(53,211	)		(50,545	)
Accumulated other comprehensive income (loss)		(241,055	)		(221,615	)
Total SGH shareholders' equity		322,940			310,251
Noncontrolling interest in subsidiary		9,344			8,673
Total equity		332,284			318,924
Total liabilities and equity	$	1,323,698		$	1,344,798

SMART Global Holdings, Inc. Consolidated Statements of Cash Flows (In thousands)

	Three months ended
	November 26, 2021			August 27, 2021			November 27, 2020
Cash flows from operating activities:
Net income	$	20,698		$	21,290		$	2,027
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense and amortization of intangible assets		15,813			16,642			8,367
Amortization of debt discounts and issuance costs		2,332			2,295			2,116
Share-based compensation expense		9,775			9,010			11,088
Change in fair value of contingent consideration		17,200			16,000			—
Amortization of operating lease right-of-use assets		2,548			2,593			1,413
Other		(192	)		342			(14	)
Changes in operating assets and liabilities:
Accounts receivable		(36,053	)		(35,985	)		(1,930	)
Inventories		39,640			(71,396	)		12,919
Other current assets		(932	)		(3,317	)		(9,277	)
Accounts payable and accrued expenses		(53,751	)		92,865			10,142
Operating lease liabilities		(2,141	)		(2,391	)		(1,504	)
Deferred income taxes, net		209			76			222
Net cash provided by operating activities		15,146			48,024			35,569

Cash flows from investing activities:
Capital expenditures and deposits on equipment		(12,766	)		(7,563	)		(14,644	)
Acquisition of business, net of cash acquired		—			(7,064	)		—
Other		(611	)		(1,143	)		16
Net cash used for investing activities		(13,377	)		(15,770	)		(14,628	)

Cash flows from financing activities:
Proceeds from borrowing under line of credit		60,000			50,000			19,500
Proceeds from issuance of ordinary shares		5,029			1,765			3,105
Repayments of borrowings under line of credit		(50,000	)		(50,000	)		(19,500	)
Payments to acquire ordinary shares		(2,666	)		(212	)		(3,483	)
Net cash provided by (used for) financing activities		12,363			1,553			(378	)

Effect of changes in currency exchange rates on cash and cash equivalents		(4,068	)		187			(7,277	)
Net increase in cash and cash equivalents		10,064			33,994			13,286
Cash and cash equivalents at beginning of period		222,986			188,992			150,811
Cash and cash equivalents at end of period	$	233,050		$	222,986		$	164,097

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SGH Reports First Quarter Fiscal 2022 Financial Results