PENG 10-K & 10-Q changes, risk factors and insider trading

You should carefully consider the risks and uncertainties described below and the other information in this Annual Report, including “PART II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs and, as a result, the market price of our ordinarycommon sharesstock could decline and you could lose all or part of your investment. As noted above in “Item 1. Business,” the financial results and operations of SMART Brazil have been presented as discontinued operations. While the divestiture of our SMART Brazil business continues to pose certain risks and uncertainties described below, unless otherwise noted, the financial results included in the risks below relate solely to our continuing operations and do not include the operations of SMART Brazil.

•Changing worldwide economic conditions could adversely affect our operatingresults resultsof operations and financial condition.

•Our operatingresults resultsof operations fluctuate from quarter to quarter, which make them difficult to predict.

•Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our operations.business, results of operations and financial condition.

•Issues in the development of, our investment in, and use of AI or AI solutions,technologies, combined with an uncertain regulatory environment, may result in a material adverse impact on our business, results of operations and financial condition, reputational harm, liability or other adverse consequences to our business operations.

•We may fail to realize the anticipated benefits of recentour acquisitions or the sale of our SMART Brazil business.

•We may be unable to completesuccessfully environmental,manage environmental or social and governance (“ESG”)sustainability initiatives, in whole or in part, which could lead to less opportunity for us to have ESGsustainability investors and partners and could negatively impact our reputation or options for capital acquisition.

•Our worldwide operations, and those of our suppliers, business partners and customers, may be disrupted by events outside of our control.control, including the effects of climate change, natural disasters, man-made disasters or other events, as well as societal and governmental responses to such events.

•We are a holding company. If enacted, exchange controls may limit our ability to receive dividends and other distributions from our foreign subsidiaries.

•High rates of inflation incould thehave futurea wouldmaterial materiallyadverse adverselyeffect affecton our business, results of operations and financial condition.

•Our indebtedness, and the terms of our debt instruments, including our credit agreement and the agreements governing our convertibleConvertible notesSenior Notes (as defined below) and capped call transactions, could impair our financial condition, harm our ability to operate our business or hinder third-party acquisition attempts, and affect the value of our debt and ordinarycommon shares.stock.

Risks Related to Our OrdinaryCommon SharesStock

•The trading price of our ordinarycommon sharesstock has been and may continue to be volatile, and actual or perceived future sales of our ordinarycommon sharesstock could cause our sharestock price to fall.

•If our estimates or judgments relating to our critical accounting estimates are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our ordinarycommon shares.stock.

•We do not anticipate paying any cash dividends on our ordinarycommon sharesstock in the foreseeable future.

Changing worldwide economic conditions could adversely affect our operatingresults resultsof operations and financial condition.

The United States and global economies are facing increased levels of inflation, higher interest rates and potential recession. Adverse changes in economic conditions could harm our operatingresults resultsof operations and financial conditionscondition in a variety of ways. For example, regional or global economic downturns could have an impact on the financial condition of our customers, particularly in challenging macroeconomic environments, and adversely affect demand for our products, which could adversely affect our revenue and potentially result in write-offs of excess or obsolete inventory. Inflation could also drive increases in our costs of revenue and operations, which we may not be able to successfully pass along to our customers. Higher interest rates could result in increased cash usage to service our variable rate indebtedness and increase the cost to us of refinancing our indebtedness.

Our operatingresults resultsof operations fluctuate from quarter to quarter, which make them difficult to predict.

Our quarterly operatingresults resultsof operations have fluctuated in the past and may fluctuate in the future. As a result, our past quarterly operatingresults resultsof operations are not necessarily indicative of future performance. Furthermore, we may not be able to maintain the margins we have achieved in recent periods. Our operatingresults resultsof operations in any given quarter can be and have been influenced by numerous factors, many of which we are unable to predict or are outside of our control, including:

Due to the various factors mentioned above and other factors, the results of any prior quarterly or annual period should not be relied upon as an indication of our future operating performance. In one or more future periods, as has happened in the past, our results of operations may fall below the expectations of securities analysts and investors. In that event, the market price of our ordinarycommon sharesstock would likely decline. In addition, the market price of our ordinarycommon sharesstock may fluctuate or decline regardless of our operating performance.

Our business has experienced quarterly and annual operating losses. For example, in 2024, we had a net loss of $52.5 million. Our ability to achieve or maintain profitability depends in part on revenue growth from, among other things, increased demand for our integrated memory solutions, products and related service offerings in our current markets, growth in our Advanced Computing and Optimized LED segments, the performance of our acquired companiescompanies, as well as our ability to expand into new markets, including those related to AI. We may not be successful in achieving the revenue and revenue growth necessary to achieve and maintain profitability. Moreover, as we continue to expend substantial funds for research and development projects, enhancements to sales and marketing efforts, integration of acquisitions and to otherwise operate our business, we cannot assure you that we will achieve or maintain profitability on an annual or quarterly basis even if our revenue does grow.

Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our operations.business, results of operations and financial condition.

We source a significant portion of our materials fromfrom, manufacture products in, and sell and manufacture products in foreign countries, including China, making the price and availability of our merchandise susceptible to international trade risks and other international conditions. ForThe example,United anyStates economichas implemented new tariffs and significant increases and changes to existing tariffs, including on goods from China, and has proposed further changes and new tariffs. In response to such tariffs announced by the United States, other countries have imposed or are considering imposing new or increased tariffs on certain imports from the United States. There is currently significant uncertainty about the future relationship between the United States and other countries with respect to tariffs, trade policies, taxes and other related government regulations, which have and will likely to continue to evolve rapidly and unpredictably, and we cannot predict whether, and to what extent, current tariffs will continue or trade policies will change in the future or their impact on our business. Economic and political uncertainty caused by the U.S. tariffs imposed on goods from China,China amongand other potentialcountries countries,by the current administration, and any corresponding tariffs and related retaliatory actions or currency devaluations from China or such other countries in response, has negatively impacted,impacted and may in the future,future negatively impact, demand and/or increase the cost for certain ofimpact our products, particularly within our LED business. In addition, many of our customers also rely heavily on international trade.trade Theand may experience impacts similar to our own, which could in turn affect their relationship with us. Furthermore, the imposition of additional tariffs, duties, border adjustment taxes or other trade restrictions by the United States couldhave also resultresulted in the adoption of newadditional or increased tariffs or other trade restrictions by other countries. Tariffs have in the past increased, and may in the futurefuture, increase our cost of materialsmaterials, particularly within our LED business, and have in the past caused us and may in the future cause us to increase prices to our customerscustomers, which we believe may have reduced or may in the future reduce demand for our products. Our price increases or other efforts to address these risks may not be sufficient to fully offset the impact of tariffs and may result in lowering our margin on products sold. IfThe thevolatility Unitedand Statesunpredictability Governmentof increases or implements additional tariffs, or if additional tariffs orinternational trade restrictionspolicies areand implementedconditions byadd otherfurther countries,complexity the resulting trade barriers could have a significant adverse impact onto our suppliers,operations, ourmaking customersit challenging to forecast and onplan our business. We are not able to predict future trade policy of the United States (including any potential changes in U.S. trade policy if there is a change in administration) or of any foreign countries in which we operate or purchase goods, or the terms of any trade agreements or their impact on our business.effectively. The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence or threat of a trade war or other governmental action related to tariffs or trade agreements or policies, has the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the world and U.S. economies, which in turn could have a material adverse effect on our business, operatingresults resultsof operations and financial condition.

Our principal customers include global distributors, enterprise users, government agencies and OEMs that compete in the computing, networking, communications, storage, aerospace, government, mobile, industrial automation, IoT,Internet of Things (“IoT”), industrial IoT, government, military and lighting markets. In 2024,2025, 20232024 and 2022,2023, sales to our ten largest end customers (including sales to contract manufacturers or ODMs at the direction of such end customers) accounted for 58%,66%, 60%58% and 62%60% of net sales, respectively. In 2024,2025, 20232024 and 2022,2023, we had one,two, one and threeone customers account individually for over 10% of our net sales. In some cases, our customers also compete with us and/or are our major suppliers. We expect that sales to relatively few customers, including distributors in our Optimized LED business, will continue to account for a significant percentage of our net sales for the foreseeable future. However, we can provide no assurance that any of these customers or any of our other customers will continue to utilize our products or our services at current levels, or at all, since sales of our products are made primarily pursuant to purchase orders and are not based on long-term supply agreements. The select number of customers from whom we derive a significant percentage of our sales, and the timing and volume of customer orders and renewals, some of which are substantial, may be significantly reduced due to several factors including discounting, churning of significant customers, incorporating work in-house, or reduced spending due to economic pressures among others. Although we have master agreements with some of our customers, these agreements govern the terms and conditions of the relationship and do not typically contain requirements for them to purchase minimum volumes. Because of the uncertainty of the timingtiming, volume and volumerenewals or non-renewals of orders from our customers, sales to our customers have varied from period to period and may vary significantly in the future, and our ability to forecast our sales have been, and may in the future be, difficult. Our customer concentration may also subject us to perceived or actual bargaining leverage that our key customers may have, given their relative size and importance to us. Since a large percentage of our sales is to a small number of customers that are primarily large enterprises or OEMs, these customers are able to exert, have exerted and we expect will continue to exert, pressure on us to make concessions on price and on terms and conditions which can adversely affect our business, results of operations and financial condition. If our key customers seek to negotiate their agreements on terms less favorable to us and we accept such unfavorable terms, such unfavorable terms may have a material adverse effect on our business, results of operations and financial condition. Additionally, our services include point-in-time services, such as design and implementation, as well as longer-term managed services that are typically subject to renewal after an initial term of a year or sometimes longer. Accordingly, unless and until we diversify and expand our customer base, our future success will significantly depend upon the timing and volume of business from our largest customers and the financial and operational success of these customers. Furthermore, many of our customer and supplier markets are characterized by a limited number of large companies. Industry consolidation and company failures could decrease the number of potential significant customers for our products and services. The decrease in the number of potential significant customers will increase our reliance on key customers and, due to the increased size of these companies, may negatively impact our bargaining position and thus our profit margins. If we were to lose one of our key customers or have a key customer cancel a key program or otherwise significantly reduce its volume of business with us or fail to pay us in full for the goods or services purchased from us, our sales and profitability would be materially reduced and our business and financial condition would be seriously harmed.

Issues in the development of, our investment in, and use of AI or AI solutions,technologies, combined with an uncertain regulatory environment, may result in a material adverse impact on our business, results of operations and financial condition, reputational harm, liability or other adverse consequences to our business operations.

We are making significant investments in AI initiatives, including designing, building, deploying and managing AI and high-performance computingHPC infrastructure. AI and accelerated computing technologies, markets and related demand trends are complex and rapidly evolving, and we face significant competition from other companies, including companies with greater resources than ours, and an evolving regulatory landscape. If we faildo tonot develop and timely offer AI solutions or keep pace with the product offerings of our competitors, or if demand for such products does not grow as anticipated, our business could be adversely affected. We may incur significant costs, invest substantial resources, investments and experience delays andwithout not achieveachieving a return on investment or capitalizecapitalizing on opportunities presented by AI.

The introduction of AI technologies into newour orinternal existingbusiness productspractices and the use of our proprietary software to manage AI compute environments may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could materially and adversely affect our business, results of operations or financial condition. Existing laws and regulations may apply to us or our customers or partners in new ways, and new laws and regulations may be instituted, the effects of which are difficult to predict. The intellectual property ownership and license rights, including copyright, surrounding AI technologies has not been fully addressed by courts or national or local laws or regulations, and any use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation.

Additionally, theThe rapid evolution of AI technologies and regulations requires the application of resources to help to ensure that AI is implemented responsibly in order to minimize unintended, harmful impact. There is a risk that AI technologies could produce inaccurate or misleading content or other discriminatory or unexpected results or behaviors, such as hallucinatory behavior that can generate irrelevant, nonsensical, or factually incorrect results, all of which could harm our reputation, business, or customer relationships. The development and use of AI technologies presents emerging ethical and social issues, and if we enable or offer solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a whole, we may experience brand or reputational harm, competitive harm and/or legal liability.

Many of our specialty products are specifically designed for our OEM customers’ systems or products. In an effort to reduce costs, a number of our OEM customers design standardized or commodity components, modules or subsystems into their products. Although we also manufacture standard components, modules and subsystems, an increase in such efforts by our customers could reduce the demand for our higher priced specialized or customized solutions, which in turn would have a significant negative impact on our business, results of operations and financial condition. In addition, when customers utilizing custom solutions choose to adopt a standard instead of custom or specialty components, modules or subsystems, new competitors producing standard components, modules or subsystems may take a portion of our customers’ business previously purchased from us.

The markets in which we operate have in the past experienced, are currently experiencing, and may in the future experience, shortages andshortages, long lead times and price fluctuations in certain materials, including certain critical components,components and raw materials that we use in manufacturing our products. These shortages cause some suppliers to place their customers, including us, on supply allocation. As a result, we may not be able to obtain the materials that we need to fill customer orders in a timely fashion or at all. If any of our suppliers experience quality control or intellectual property infringement problems, this may further impact our ability to fill customer orders. Furthermore, our products that utilize that supplier’s materials may be disqualified by one or more of our customers and we may not be able to fill their orders.

We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”). We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and related products and services. Additionally, we sometimes provide network connections and system access to customers and vendors to facilitate product builds and collaborative development processes, which creates potential additional attack vectors and potential additional entry points for cybersecurity incidents that could compromise our systems or data.

We and certain of our third-party service providers have experienced cybersecurity incidents in the past,incidents, though none have materially impacted our Company, including our operations or financial condition. There can be no guarantee that future cyberattacks or incidentsevents, whether originating from us, our suppliers or our customers, will not materially impact our Company generally or our IT Systems or data or that of critical service providers specifically. We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and data. Those risks include data security incidents, cybersecurity events, data breaches, ransomware attacks or other compromises of the IT Systems we or that our vendors use to provide services or process data on our behalf, which may lead to compromised network security and misappropriation or compromise of our information or that of third parties, system disruptions or lead to shutdowns. Cyberattack actors include criminal hackers, hacktivists, state-sponsored intrusions, and may involve industrial espionage, employee malfeasance and human or technological error. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers and other third parties to disclose information or unwittingly provide access to systems or data. The risk of such attacks includes attempted breaches not only of our own products, services and systems, but also those of customers, contractors, business partners, vendors and other third parties.

Our products, services and systems may be used in critical company, customer, government or other third-party operations, or involve the storage, processing and transmission of sensitive data, including valuable intellectual property, classified information, other proprietary or confidential data, regulated data and personal information of employees, customers and others. In our on-demand and hosted solutions, such as POD, we process, store and transmit data provided by our customers, which may include sensitive and personal data. We also manage, store, transmit and otherwise process various sensitive personal or confidential data related to our company and our employees in the regular course of business. Successful breaches, employee malfeasance or human or technological error could resultmaterially in,impact our business due to, for example, unauthorized access to, disclosure, modification, misuse, loss or destruction of company, customer, government or other third party data or systems; theft of sensitive, regulated, classified or confidential data including personal information and intellectual property; the loss of access to critical data or systems through distributed denial-of-service attacks, denial-of-service attacks, ransomware attacks, supply chain attacks, destructive attacks or other means; and business delays, service or system disruptions or denials of service. Further, hardware and operating system software and applications that we produce or procure from third parties may contain significant defects in design or manufacture, including “bugs” and other problems that could interferematerially withdisrupt the operation of such systems. Given the nature of complex systems, software and services like ours, and the scanning tools that we deploy across our networks, infrastructure and products, we regularly identify and track security vulnerabilities. We are unable to comprehensively guarantee patches or confirm that measures are in place to mitigate all such vulnerabilities, or that patches will be applied before vulnerabilities are exploited by a threat actor. If attackers are able to exploit critical vulnerabilities before patches are installed or mitigating measures are implemented, significant compromises could materially impact our and our customers’ systems and data.

The information technology systems we and our vendors use are vulnerable to outages, breakdowns or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war, and telecommunication and electrical failures. For example, in July 2024, a software update by CrowdStrike Holdings, Inc. (“CrowdStrike”), a cybersecurity technology company, caused widespread crashes of Windows systems into which it was integrated. Although we have not experienced any material impacts as a result of the CrowdStrike software update, we couldhave and expect to continue in the future to experience similarother third-party software-inducedsoftware- interruptionsand toservice-related ourincidents operations,and/or operational disruptions, which wouldmay adverselymaterially affect our business, results of operations and financial condition.

Cyberattacks are expected to accelerate on a global basis in both frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques and tools (including AI) that circumvent controls, evade detection and even remove forensic evidence. Further, the use of AI technologies by us, our customers, suppliers, and third-party service providers, among others, may also introduceintroduces unique and/or unknown vulnerabilities. As a result, there can be no assurance that the systems we have designed to protect against cyberattacks, or our cybersecurity risk management program and processes, will be fully implemented, complied with or sufficient to identify, detect or prevent material consequences arising from such attacks in the future. In addition, we have acquired and continue to acquire companies that may havewith cybersecurity vulnerabilities and/or unsophisticated security measures, which could exposeexposes us to significant cybersecurity, operational, and financial risks.

In particular, certain states have adopted new or modified privacy and security laws and regulations that may apply to our business, for example, the California Consumer Privacy Act (“CCPA”) imposes obligations on businesses that process personal information of California residents. Among other things, the CCPA: requires disclosures to such residents about the data collection, use and disclosure practices of covered businesses; provides such individuals expanded rights to access, delete and correct their personal information and opt-out of certain transfers of personal information; requires covered businesses enter into specific contractual provisions with service providers that process California resident personal information on the covered business’s behalf; and provides such individuals with a private right of action and statutory damages for data breaches. The enactment of the CCPA has prompted a wave of similar laws being passed in the United States, which creates the potential for a patchwork of overlapping but different state laws. For example, since the CCPA went into effect, certaincomprehensive otherprivacy states,statutes includingthat Colorado,share Connecticut,similarities Delaware,with Florida,the Indiana,CCPA Iowa,are Kentucky,now Maryland,in Minnesota, Montana, Nebraska, Nevada, New Hampshire, Oregon, Rhode Island, Tennessee, Texas, Utaheffect and Virginia,enforceable havein allnumerous enacted comprehensive data privacy legislation.states. We cannot predict the full impact of these laws on our business or operations. Many other states are currently reviewing or proposing the need for greater regulation of the collection, sharing, use and other processing of information related to individuals for marketing purposes or otherwise, and there remains increased interest at the federal level as well. Additionally, other jurisdictions outside of the United States have or have recently enacted privacy and cybersecurity laws, such as the EUUnited Kingdom and the European Union wherethat have enacted the UK General Data Protection Regulation (“GDPR”)and tookthe effectEU inGeneral MayData 2018,Protection Regulation respectively and Brazil which has enacted the Lei Geral de Proteção de Dados, creating the potential for a patchwork of overlapping but different laws.

We have incurred, and will continue to incur, significant expenses to comply with mandatory privacy and security standards and protocols under applicable laws, regulations, industry standards and contractual obligations. Despite such expenditures, we may face regulatory and other legal actions in the event of perceived or actual non-compliance with such applicable obligations. Many of these laws would also require us to notify regulators and customers, employees or other individuals of any data security breach as described above. The various data privacy enactments impose significant obligations and compliance with these requirements depends in part on how particular regulators apply and interpret them. EvenIn thoughaddition, weas believea contractor to the Department of Defense (“DoD”), we are generallycontractually required to protect “controlled unclassified information” and comply with DoD cybersecurity requirements, including controls specified in compliancethe withNational applicableInstitute laws,of rulesStandards and regulationsTechnology Special Publication 800-171. The DoD has implemented certain information security requirements and obligations relating to privacy and data security, these laws are in some cases relatively new and the interpretationCybersecurity andMaturity applicationModel ofCertification these(“CMMC”). lawsWhen areincorporated uncertain.into Anyour failurecontracts or perceivedsolicitations, failurewe bywill usneed to comply with datathe privacy laws, rules, regulations, industry standardsCMMC and otherflow requirements could result in proceedings or actions against us by individuals, consumer rights groups, government agencies or others. We could incur significant costs in investigating and defendingdown such claimsrequirements, and,as if found liable, pay significant damages or fines or be required to make changesappropriate, to our business. Further, these proceedingsvendors and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust. If any of these events were to occur, our business, results of operations and financial condition could be materially adversely affected.suppliers.

See “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

Macro-Economic Demand Factors. Our business segments each have their own unique set of demand factors. Our Advanced Computing business is driven by demand for high-performanceour computeHPC solutions acrossand AI and machine learning initiatives,products, as well as traditional workload optimization and efficiency applications. We expect increased AI adoption and broader implementation by enterprises within but not limited to verticals such as financial services, energy, government and education, as well as increased sovereign AI adoption, as organizations seek scalable infrastructure solutions, though the extent and timing of such adoption and implementation may vary and may affect our results of operations. Demand in our Integrated Memory segment is driven by end-market demand from OEMs for customer-specific solutions in vertical markets such as industrial, government, networking, high-performance computeHPC and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments.deployments, and we anticipate growing demand for higher performance and reliability memory solutions, such as our CXL family of products, to support both traditional use cases and increasingly complex AI applications, although there can be no assurance that such demand will materialize as expected or at all. Finally, demand for our Optimized LED products is derived from targeted end-market applications, such as general high-power and mid-power lighting and specialty lighting, including video display and horticulture applications. We believe our diversified business segments may sometimes provide a natural hedge against downturns in any particular industry. However, broader macro-economic trendstrends, including global conflicts impacting international relations, recessionary indicators, high inflation rates, uncertainty and costs associated with trade policies and tariffs, and interest rates, can adversely affect all three segments concurrently.

Shifts in the Mix and Timing of Our Revenue. Shifts in the mix of revenue from our operating segments, and in the timing of revenue, which can vary significantly from period to period, have impacted and can continue to impact our business and operatingresults results,of operations, including gross and operating margins. For example, our Advanced Computing segment has shown solid growth, but is subject to variability in its sales and margin profile from period to period fordue reasonsto factors such as the following: recognition of revenue issometimes sometimesbeing tied to customer decisions as to the completion of delivery and system go-live events,events; certain sales can bebeing affected by the timing of customer deployments and shipments or customer budget considerations; changes in customer spending on our products and services (including as a result of the macro-economic demand factors discussed above); the impact of customer churn rates (including discounting and churn of significant customers from whom we derive a significant percentage of our revenue); discontinuation of certain of our products from time to time; shifts in our customer mix, including expected trends with respect to growth in demand from non-hyperscaler customers for HPC and AI solutions; and margin isbeing driven by the extentproportion to whichof higher margin software and managed services comprisewithin our Advanced Computing sales. Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected revenue mix willmay have direct implications for our operating income and margins. Additionally, our revenue and margins will be negatively impacted by the winding down of our Penguin Edge business, which we expect to wind down and discontinue by approximately the end of calendar 2025. The comparability of our results of operations against prior periods will also be affected following the wind down of our Penguin Edge business.

Our Ability to Identify, Complete and Successfully Integrate Acquisitions. A substantial portion of our growth over the last several years has been driven by acquisitions, and we intend to continue to use corporate development as an engine for growth. Within our existing segments, we plan to pursue acquisitions to expand features and functionality, expand into adjacent businesses and grow our customer base and geographic footprint. From time to time, we may seek to expand our addressable market by entering new business segments where, as we did with our Cree LED and Stratus Technologies acquisitions,where we identify a business opportunity at scale with a path to being accretive to our overall operations in the near term. If we are unable to identify and complete attractive acquisitions,acquisitions and successfully integrate such businesses, we may not be successful in growing our revenue and/or expanding our margins. Any acquisitions we do complete may require us to incur debt or raise capital through equity financings or may subject us to unforeseen liabilities or costs, or operational challenges, that in turn impede our ability to realize the expected returns on our investment.

Disruptions in Our Supply Chain May Adversely Affect Our Businesses. We depend on third-party suppliers for key components of our products,products as well as certain raw materials, such as commodity DRAM components from offshore foundries that we use in our specialty memory products, third-party wafers that we use in our memory and LED businesses and HPC and AI components for our Advanced Computing business.business; the costs of such components and raw materials may fluctuate from time to time due to market conditions. In our memory and LED businesses, we have adopted a “Fab-Light” business model to reduce our capital expenditures and operating expenses, while affording greater flexibility in adapting to shifts in demand and other market trends. Our Fab-Light business model contributed to margin expansion in our overall business. However, our reliance on third-party manufacturers exposes us to risk of supply chain disruption and lost business. For example, the recent global semiconductor shortageshortage, particularly during its peak, has adversely affected our operatingresults results.of operations. In addition, in our Advanced Computing business, where we source components from third parties, the high demand for and limited supply of AI components globally, as well as any delays in the production of such components, continues to affect our sourcing of these components and the timing of deployments. In particular, we continue to experience extended lead times for certain components that are incorporated into our overall solutions, which impacts how quickly we are able to ramp existing and new customer projects.projects and may negatively affect gross margins due to changes in shipment timing and product mix. If such disruptions worsen or are prolonged, or if there is meaningful disruption in our supply arrangement with any of our third-party suppliers, our operatingresults resultsof operations and financial condition may continue to be adversely affected.

Cost of sales increased by $144.5 million, or 17.4%, in 2025 compared to the prior year, primarily due to our Advanced Computing and Integrated Memory segments having increased products sales for the year. Cost of sales decreased by $196.1 million, or 19.1%, in 2024 compared to the prior year, primarily due to our Advanced Computing and Integrated Memory segments, which had lower material and production costs from lower sales, as well as lower personnel-related expenses mainly driven by cost reduction efforts. Cost of sales increased by $21.2 million, or 2.1%, in 2023 compared to the prior year, primarily due to the Stratus Technologies acquisition and from higher costs of materials and production costs due to higher sales for our Advanced Computing segment.

Below is a table of our operating income, measured on a non-GAAP basis, which Penguin Solutions management uses to supplement Penguin Solutions’ financial results under GAAP to analyze its operations and make decisions as to future operational plansplans, and which management believes that thisprovides supplemental non-GAAPinformation informationthat is useful to investors in analyzing and assessing the company’sour past and future operating performance. These non-GAAP measures exclude certain items, such as share-basedstock-based compensation expense; amortization of acquisition-related intangible assets (consisting of amortization of developed technology, customer relationships, trademarks/trade names and backlog acquired in connection with business combinations); acquisition-related inventory adjustments; diligence, acquisition and integration expense; restructurerestructuring charges; impairment of goodwill; changes in the fair value of contingent consideration; redomiciliation costs; and other infrequent or unusual items. While amortization of acquisition-related intangible assets is excluded, the revenues from acquired companies is reflected in our non-GAAP measures and these intangible assets contribute to revenue generation. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Segment and Other Information.”

OptimizedAdvanced LEDComputing operating lossincome improvedincreased by $7.4$19.7 million, or 153.0%,20.7%, in 20242025 compared to the prior year primarily due to higherincreased revenuenet fromsales driven by increased demand,demand betterfor factoryAI leveragesolutions, andas productwell mix andas lower subcontract services, partially offset by increased operating expenses, mainly driven by increased personnel-related expenses duestemming tofrom headcountbonus reductions.achievement. OptimizedAdvanced LEDComputing operating income decreased by $54.0$15.7 million, or 109.8%,14.1%, in 20232024 compared to the prior year primarily due to lower sales from demandour challengesPenguin inComputing China,business, partially offset by lower personnel-relatedoperating costsexpenses, mainly driven in part by costpersonnel-related reductionexpenses actions.due to lower headcount and lower subcontract services.

In the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of certain legacy products offered through our Penguin Edge business by approximately the end of calendar 2025. WeIn connection therewith and with the preparation of the financial statements included in this Annual Report, we assessed goodwill associated with our Penguin Edge business within our Advanced Computing segment and concluded it is now fully impaired. As a result, we recorded impairment charges of $16.1 million and $19.1 million in 20232025 and 2023, respectively, to impair the carrying value of Penguin Edge goodwill. We currently anticipate that the remaining goodwill of the Penguin Edge reporting unit of $16.1 million as of August 30, 2024 may become further impaired in future periods. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill – Impairment of Penguin Edge Goodwill.”

Our acquisitions of Stratus Technologies in the first quarter of 2023 and our Optimized LED business in the third quarter of 2021 each included contingent consideration. We estimate the fair value of the contingent consideration as of the date of acquisition and subsequently recognize changes in the fair value in results of operations. During 2023 and 2022,2023, we recorded charges of $29.0 million and $41.3 million, respectively, to adjust the fair value of the contingent consideration. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions.”

Other operating expense in 20242025, 2024, and 2023 included restructurerestructuring charges of $2.1 million, $7.1 millionmillion, and $7.0 million, respectively, primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the wind down of our Penguin Edge business. We anticipate that such activities will continue into future quarters and anticipate recording additional restructurerestructuring charges.

Other non-operating (income) expense in 2025, 2024 and 2023 included losses of $2.9 million, $22.8 millionmillion, and $15.9 million, respectively, from the extinguishment or prepayment of debt. Other non-operating (income) expense in 20232024 also included net gains of $3.0$0.2 million from the disposition of assets. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.”

Our provision for income taxes increased by $9.4 million, or 89.0%, in 2025 compared to 2024 primarily due to an increase in profit before tax in jurisdictions subject to income tax. Our provision for income taxes increased by $59.8 million in 2024,million, or 121.6%, compared to the prior year primarily due to a decrease in tax benefit for the 2023 U.S. federal and state valuation allowance release. Our provision for income taxes decreased by $67.3 million in 2023, or 372.2%,2024 compared to the prior year2023 primarily due to the tax benefit on the release of the U.S. federal and state valuation allowance in 2023, partially offset by tax add backsaddbacks for nondeductible goodwill impairment in 2023 and additional uncertain tax positions recorded in 2023.

In 2024,2025, our tax expense of $10.6$20.1 million and effective tax rate of (34.1)%,41.0% which was differentdiffered from the U.S. statutory tax rate primarily due to losses,losses generated in a jurisdiction where no tax benefit can be recognized, non-deductible expenses, return to provision adjustments, and foreign withholding taxes, partiallyoffset offsetin part by benefits associatedfrom with decreases in reserves for uncertain tax provisions andthe U.S. federalDomestication (net of valuation allowance) and state tax credits.

In 2022,2024, our tax expense of $18.1$10.6 million and effective tax rate of 42.5%,(34.1)% which was differentdiffered from the U.S. statutory tax rate primarily due to losses generated in jurisdictionsa withjurisdiction rateswhere lower than the U.S. statutoryno tax rate,benefit nondeductiblecan be recognized, non-deductible expenses and additionalforeign valuationwithholding allowancetaxes, recordedoffset againstin part by benefits associated with decreases in reserves for uncertain tax provisions and U.S. federal and state deferred tax assets.credits.

We have operations in Malaysia, where we have tax incentive arrangements for our pioneer status activities and our global supply chain operations.business. The statutory tax rate for Malaysia is 24%. TheseThis arrangementsMalaysia arearrangement for the pioneer status activities is scheduled to expire in August 2028 and areis subject to certain conditions, with which we have fully complied in 2025, 2024, and 2023. This Malaysia arrangement for the global supply chain activities is scheduled to expire in August 2028 and is subject to certain conditions, with which we have partially complied in 2025 and 2024 and fully complied in 2023 and 2022.2023. The impact of partial compliance is reflected within the 2025 and 2024 income tax provision.provisions. Our effective income tax rate in the future may be higher depending on a combination of our overall and jurisdictional profitability, the general expectation that future tax holidays willmay have tax rates greater than our prior approved tax holidaysholidays, and the impact of the OECD’sOrganisation for Economic Co-operation and Development's Pillar Two modelModel rules,rules which aims to implement a global minimum tax rate of 15%. SeeFor additional information, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Income Taxes.”

As discussed above, we have presented the results of SMART Brazil as discontinued operations in our consolidated statements of operations for all periods presented. As of August 25, 2023, SMART Brazil was classified as held for sale. Accordingly, in 2023 we evaluated the carrying value of the net assets of SMART Brazil (including $206.3 million recognized within shareholder’sstockholder’s 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 a result, we recognized an impairment charge of $153.0 million in 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. In the first quarter of 2024, we completed the divestiture, and in connection therewith, recognized an additional loss of $8.9 million. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

As of August 30,29, 2024,2025, we had cash, cash equivalents and short-term investments of $389.5$453.8 million, of which $299.1$315.5 million was held by subsidiaries outside of the United States. Our principal uses of cash and capital resources have been acquisitions, debt service requirements, capital expenditures, investments in working capital, research and development expendituresexpenditures, and workingother capitaloperating requirements.expenses. We expect that future capital expenditures will focus on expandingexpansion of our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades. Cash and cash equivalents generally consist of funds held in demand deposit accounts, money market funds and time deposits. We do not acquire investments for trading or speculative purposes.

On February 7, 2022, Penguin Solutions Cayman and 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 that provided for (i) a term loan credit facility in an aggregate principal amount of $275.0 million (the “20272022 TLA”) and (ii) a revolving credit facility in an aggregate principal amount of $250.0 million (the “20272022 Revolver”), in each case, maturing on February 7, 2027. The 2022 Original Credit Agreement providesprovided that up to $35.0 million of the 20272022 Revolver iswas available for issuances of letters of credit. TheOn August 29, 2022, the 2022 Original Credit Agreement has subsequently beenwas amended (the ”2022 Amended Credit Agreement”) to, among other things, provide for incremental term loans in an aggregate amount of $300.0 million (together with the 20272022 TLA, the “Amended 20272022 TLA”), amend the First Lien Leverage Ratio (as defined in the 2022 Amended Credit Agreement) and increase the aggregate amount of unrestricted cash and permitted investments netted from the definitions of Consolidated First Lien Debt and Consolidated Net Debt. As of August 30, 2024, there was $300.0 million of aggregate principal amount outstanding under the Amended 20272022 TLA and there were no amounts outstanding under the 20272022 Revolver. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Credit Facility.”

SeeFor additional details regarding the 2025 Credit Agreement, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – PreferredDebt Share– Investment.Credit Agreement.”

Macro-Economic Demand Factors: Our business segments each have their own unique set of demand factors. Our Advanced Computing business is driven by demand for our High Performance Computing (HPC) and AI products, as well as traditional workload optimization and efficiency applications. We expect increased AI adoption and broader implementation by enterprises within but not limited to verticals such as financial services, oil and gas, telecommunications, government, manufacturing and education, as well as increased neocloud and sovereign AI adoption, as organizations seek scalable infrastructure solutions, though the extent and timing of such adoption and implementation may vary and may affect our results of operations. Demand in our Integrated Memory segment is driven by end-market demand from OEMs for customer-specific solutions in vertical markets such as industrial, government, networking, HPC and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments, and we anticipate growing demand for higher performance and reliability memory solutions, such as our CXL family of products, to support both traditional use cases and increasingly complex AI applications, although there can be no assurance that such demand will materialize as expected or at all. Finally, demand for our Optimized LED products is derived from targeted end-market applications, such as general high-power and mid-power lighting and specialty lighting, including video display and horticulture applications. However, broader macro-economic trends, including regional market demand and the global macro-economic environment, including those related to global conflicts, such as those in the Middle East and Ukraine, and the global effects thereof on international relations, transport and trade, recessionary indicators, high inflation rates, uncertainty and costs associated with trade policies and tariffs, and interest rates, can adversely affect all three segments concurrently.

Shifts in the Mix and Timing of Our Net Sales: Shifts in the mix of net sales from our operating segments, and in the timing of net sales, which can vary significantly from period to period, have impacted and can continue to impact our business and results of operations, including gross and operating margins. For example, our Advanced Computing segment has shown solid growth, but is subject to variability in its sales and margin profile from period to period due to factors such as the following: recognition of revenue sometimes being tied to customer decisions as to the completion of delivery and system go-live events; certain sales being affected by the timing of customer deployments and shipments or customer budget considerations; changes in customer spending on our products and services (including as a result of the macro-economic demand factors discussed above); the impact of customer churn rates (including discounting and churn of significant customers from whom we derive a significant percentage of our net sales); discontinuation of certain of our products from time to time; shifts in our customer mix, including expected trends with respect to growth in demand from non-hyperscaler customers for HPC and AI solutions; and margin being driven by the proportion of higher margin software and managed services within our Advanced Computing sales. In particular,Within our Advanced Computing segment, our “AI infrastructure business” refers to customer engagements focused on AI workloads, including designing, building, deploying, and managing AI infrastructure hardware, software, and services. When we refer to our non-hyperscale AI infrastructure business, we are referring to our AI infrastructure business excluding sales to hyperscaler customers. Our AI infrastructure business is transitioning from a hyperscaler concentration toward a more diversified non-hyperscaler customer base across enterprise, neocloud, and sovereign AI, which may negatively impact our net sales during the transition. Additionally, our net sales and margins willhave bebeen negatively impacted by the winding down of our Penguin Edge business, which we expect to wind down and discontinue prior toby the end of fiscal 2026. The comparability of our results of operations against prior periods will also be affected following the wind down of our Penguin Edge business. Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected net sales mix may have direct implications for our operating income and margins. Our Integrated Memory business has gross margins which are lower than the Company average and if net sales from this business growsgrow faster than net sales for the Company overall, it may negatively impact total Company gross margins.

Net sales decreasedincreased by $22.5$154.5 million, or 6.2%,47.6%, and $20.6$133.9 million, or 2.9%,13.0%, in the secondthird quarter and first sixnine months of 2026, respectively, compared to the same periods in the prior year, primarily driven by lower hardware sales for our Advanced Computing segment, partially offset by strong growth for our Integrated Memory segment. Integrated Memory net sales increased by $66.4$144.9 million, or 63.1%,111.4%, and $106.2$251.1 million, or 52.6%,75.6%, in the secondthird quarter and first sixnine months of 2026, respectively, compared to the same periods in the prior year, primarily duedriven toby higherstrong salesmomentum volumesacross of FlashDRAM and DRAMFlash, productsas stemmingaccelerating from improved marketAI-driven demand drove favorable pricing and higherincreased pricing.volume. Advanced Computing net sales decreasedincreased by $84.4$5.1 million, or 42.2%,3.8%, and $110.4decreased by $105.3 million, or 29.2%,20.6%, in the secondthird quarter and first sixnine months of 2026, respectively, compared to the same periods in the prior year, reflectingwith the ongoingthird-quarter increase driven by strength in our non-hyperscale AI infrastructure business, partially offset by the wind down of our Penguin Edge businessbusiness, and the nine-month decrease reflecting both the ongoing Penguin Edge wind down and hyperscale hardware sales in 2025 that did not occurrecur in 2026. Optimized LED net sales decreasedincreased by $4.4 million, or 7.4%,7.2%, and $16.3decreased by $11.9 million, or 12.8%,6.3%, in the secondthird quarter and first sixnine months of 2026, respectively, compared to the same periods in the prior year, reflectingwith the third quarter increase primarily attributable to stronger channel demand and higher direct sales, while the decrease for the nine-month period reflects a broad-based decline in demand across the business.

Cost of sales decreasedincreased by $11.6$116.3 million, or 4.4%,50.8%, and $7.9$108.4 million, or 1.6%,14.8%, in the secondthird quarter and first sixnine months of 2026, respectively, compared to the same periods in the prior year. The decreaseincrease was primarily driven by lowerstrong salesgrowth fromfor our AdvancedIntegrated ComputingMemory segment in the second quarter of 2026, partially offset by a one-time $5.8 million inventory write-off related to goods stolen in transit, for which an insurance claim is pending; no comparable events occurred in prior periods.segment.

Gross margin decreased to 27.3%27.8% in the secondthird quarter of 2026 compared to 28.6%29.3% in the same period in 2025, and to 27.7% in the first sixnine months of 2026 compared to 28.7%28.9% in the same period in 2025, primarily attributable to the ongoing wind down of our Penguin Edge business,business and a shift in the overall mix of sales across our business units, along with inventory write-off noted above.units.

Below is a table of our operating income, measured on a non-GAAP basis, which Penguin Solutions management uses to supplement Penguin Solutions’ financial results under GAAP to analyze its operations and make decisions as to future operational plans and which management believes provides supplemental non-GAAP information that is useful to investors in analyzing and assessing our past and future operating performance. These non-GAAP measures exclude certain items, such as stock-based compensation expense; amortization of acquisition-related intangible assets (consisting of amortization of developed technology, customer relationships, trademarks/trade names and backlog acquired in connection with business combinations); acquisition-related inventory adjustments; inventory write-off, stolen in transit shipmentshipment, net of insurance recovery; cost of sales-related restructuring; diligence, acquisition and integration expense; restructuring charges; impairment of goodwill; changes in the fair value of contingent consideration; redomiciliation costs; and other infrequent or unusual items. While amortization of acquisition-related intangible assets is excluded, the revenues from acquired companies is reflected in our non-GAAP measures and these intangible assets contribute to revenue generation. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Segment and Other Information.”

Advanced Computing operating income on a non-GAAP basis decreased by $23.9$26.6 million, or 64.6%,107.6%, and $31.9$58.4 million, or 47.5%,63.7%, in the secondthird quarter and first sixnine months of 2026, respectively, as compared to the same periods in the prior year, with the third-quarter decrease primarily driven by the continuedongoing wind down of our Penguin Edge business, while the nine-month decrease reflects both the ongoing wind down of our Penguin Edge business and the absence of hyperscale hardware sales recognized in 2025 that did not recur in 2026.

Integrated Memory operating income on a non-GAAP basis increased by $16.7$49.7 million, or 152.1%,399.2%, and $25.5$75.2 million, or 141.0%,246.3%, in the secondthird quarter and first sixnine months of 2026, respectively, as compared to the same periods in the prior year, primarily dueattributable to increased net revenuesales stemmingdriven fromby growthstrong inmomentum marketacross DRAM and Flash, as accelerating AI-driven demand supported higher pricing and increased pricing for Flash and DRAM products.volumes.

Optimized LED operating income on a non-GAAP basis increased by $3.3$2.7 million, or 281.0%,205.8%, and $3.1$5.9 million, or 64.2%,94.6%, in the secondthird quarter and first sixnine months of 2026, respectively, as compared to the same periods in the prior year, primarily dueattributable to lower personnel-related expenses dueresulting tofrom headcount reductionsreductions, andtogether with improved gross profit,profit stemmingdriven fromby a more favorable product mix and tariff recoveries.

Research and development expense decreasedincreased by $0.9$1.8 million, or 4.7%,8.7%, and $2.0decreased by $0.3 million, or 5.2%,0.5%, in the secondthird quarter and first sixnine months of 2026, respectively, as compared to the same periods in the prior year, primarilywith duethe third-quarter increase reflecting higher incentive compensation tied to company performance, while the nine-month decrease reflects lower personnel-related expenses mainly driven byfrom headcount reductions,reductions asand well as lowerreduced subcontract services for ourin Advanced Computing segment.Computing.

Selling, general and administrative expense decreased by $11.3$0.3 million, or 19.1%,0.5%, and $18.8$19.1 million, or 15.7%,10.6%, in the secondthird quarter and first sixnine months of 2026, respectively, as compared to the same periods in the prior year, primarily due to lower personnel-related expenses mainly driven by headcount reductions as well as lower subcontract services following the completion of our U.S. Domestication in 2025.

Other operating expenses in the first sixnine months of 2026 and 2025 included restructuring charges of $5.8$6.8 million and $1.0 million, respectively, primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the ongoing wind down of our Penguin Edge business. We anticipate that such activities will continue into future quarters, for which we expect to record additional restructuring charges.

Net interest expense decreased by $5.8$5.7 million in the first sixnine months of 2026 compared to the same period in the prior year, primarily due to the full repayment of the Amended 2022 TLA (as defined below) in the fourth quarter of 2025.

Other non-operating (income) expense in the first sixnine months of 2026 includes a net gain of $27.0$30.9 million from the disposition of equity investments, partially offset by a $10.0 million charge on impairment of a non-marketable equity investment. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Cash and Investments – Non-Marketable Equity Investments.”

In addition, other non-operating (income) expense in the first sixnine months of 2026 and 2025 included foreign currency gains (losses). See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Other Non-operating (Income) Expense.”

Income Tax Provision (Benefit)

Income tax provision in the secondthird quarter and first sixnine months of 2026 increased by $6.8$0.3 million and by $2.2$2.5 million, respectively, as compared to the same periods in the prior year, primarily dueattributable to anhigher increase in profitincome before taxincome taxes driven by improved operating performance, partially offset by the benefits fromassociated with the U.S. Domestication.

Our effective tax rate was 27.2%14.0% and 26.7%20.7% in the secondthird quarter and first sixnine months of 2026, respectively, and was higherlower than the U.S. statutory tax rate of 21.0%, primarily due to return-to-provision true-ups and certain tax credits, partially offset by cross border tax costs, state income taxes, and foreign withholding tax partially offset by tax credits.tax. The effective tax rate was 46.3%67.8% and 48.6%53.8% in the secondthird quarter and first sixnine months of 2025, respectively, and differed from the U.S. statutory rate primarily due to losses generated in a jurisdiction where no tax benefit can be recognized, withholding taxes, state income taxes, and nondeductible compensation paid to officers, partially offset by research and development tax credits.

As of FebruaryMay 27,29, 2026, we had cash,cash and cash equivalents and short-term investments of $489.2$440.3 million, of which $269.4$312.4 million was held by subsidiaries outside of the United States. Our principal uses of cash and capital resources have been acquisitions, repurchases of our common stock, debt service requirements, capital expenditures, investments in working capital, research and development expenditures, and other operationoperating expenses. We expect that future capital expenditures will focus on expansion of our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades. Cash and cash equivalents generally consist of funds held in demand deposit accounts, money market funds and time deposits. We do not acquire investments for trading or speculative purposes.

We expect that our existing cash and cash equivalents, short-term investments, borrowings available under our credit facilities and cash generated by operating activities will be sufficient to fund our operations for at least the next 12 months.

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 defined below). 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. In the second quarter of 2026, the 2026 Notes matured and we paid the remaining principal balance of $20.0 million, plus $0.3 million of accrued and unpaid interest. As of FebruaryMay 27,29, 2026, there were no 2026 Notes outstanding.

In February 2023, we issued $150.0 million in aggregate principal amount of 2.00% Convertible Senior Notes due 2029 (the “2029 Notes”) pursuant to an indenture (the “2029 Indenture”), dated as of January 23, 2023, between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes will mature on February 1, 2029, unless earlier converted, redeemed or repurchased. As of FebruaryMay 27,29, 2026, $150.0 million in aggregate principal amount of 2029 Notes were outstanding.

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,” and together with the 2026 Notes and the 2029 Notes, the “Convertible Senior Notes”) pursuant to, and governed by, an indenture (the “2030 Indenture”), dated August 6, 2024, between us and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes will mature on August 15, 2030, unless earlier converted, redeemed or repurchased. As of FebruaryMay 27,29, 2026, $200.0 million in aggregate principal amount of 2030 Notes were outstanding.

Net cash provided by operating activities in the first sixnine months of 2026 consisted primarily of net income of $44.6$90.8 million, adjusted for non-cash and non-operating items of $26.0$44.9 million. Operating cash flows were positivelynegatively affected by a $15.4$124.4 million net change in our operating assets and liabilities, primarily from the effects of an increase of $148.1$396.4 million in accounts receivable, driven by increased Integrated Memory sales, and $243.1 million in inventories to support future demand across all business units, partially offset by an increase of $505.2 million in accounts payable and accrued expenses and other liabilities primarily due to an increase in trade purchasing activities as well as an increase in deferred revenue from customer services, partially offset by an increase of $62.7 million in accounts receivable, driven by increased Integrated Memory sales, and $67.2 million in inventories to support future demand across all business units.services.

Net cash provided by operating activities in the first sixnine months of 2025 consisted primarily of net income of $14.8$18.3 million, adjusted for non-cash items of $58.8$89.2 million. Operating cash flows were positively affected by a $13.0$76.1 million net change in our operating assets and liabilities, primarily from the effects of an increase of $122.1$133.9 million in accounts payable and accrued expenses and other liabilities primarily due to an increase in deferred revenue from customer services and higher accounts payable related to the timing of trade purchases, and a decrease of $15.7$13.7 million in other assets, partially offset by an increase of $46.2$30.8 million in inventories, primarily to support future demand across both Advanced Computing and Integrated Memory, and an increase of $78.6$40.8 million in accounts receivable primarily due to increased sales.

Investing Activities: Net cash provided by investing activities in the first sixnine months of 2026 consisted primarily of $32.2$71.7 million from proceeds from the disposition of equity investmentsinvestments, partially offset by $4.5$7.3 million for capital expenditures and deposits on equipment.

Net cash used for investing activities in the first sixnine months of 2025 consisted primarily of $18.6 million net purchase of marketable investment securities and $4.2$6.1 million for capital expenditures and deposits on equipment.

Financing Activities: Net cash used for financing activities in the first sixnine months of 2026 consisted primarily of $57.1$68.9 million of payments to acquire our common stock (including $47.0$55.7 million under our stock repurchase program), $20.0 million of repayments on our 2026 Notes, and $6.2$9.1 million in payments of preferred stock cash dividends, partially offset by $5.9$38.0 million in proceeds from restricted cash advances and $10.2 million in proceeds from the issuance of common stock from our equity plans.

Net cash provided by financing activities in the first sixnine months of 2025 consisted primarily of $191.2 million of proceeds from the issuance of preferred shares, net of issuance costs of $8.8 million, and $3.7$7.7 million in proceeds from the issuance of ordinary shares from our equity plans, partially offset by $17.6$49.2 million of payments to acquire our ordinary shares (including $11.1$40.9 million under our share repurchase program).