SMART Global Beats Earnings Forecast Amid Expense Cuts, Shares Surge 5.6%

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SMART Global’s fiscal third-quarter results showed a notable decline compared to the prior year, yet the company managed to exceed the midpoint of its earlier earnings projections due to a significant reduction in operating expenses. The manufacturer of computer memory chips and LEDs reported adjusted earnings of $0.37 per share for the quarter ending May 31, a decrease from $0.57 per share the previous year. Nonetheless, this exceeded the expectations of the five analysts surveyed by Capital IQ, who predicted an adjusted EPS of $0.31. In April, SMART Global had forecasted adjusted EPS would range between $0.15 and $0.45.

A notable drop in operating expenses contributed to the improved earnings performance. The expenses fell to $77.4 million from $102.9 million in the same quarter last year. Chief Operating Officer Jack Pacheco attributed this decline primarily to lower variable expenses and strategic cost reduction actions during an earnings call, as captured in a Capital IQ transcript. Following this news, shares of SMART Global saw a 5.6% increase in premarket trading on Wednesday.

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Revenue dropped to $300.6 million, down from $344.4 million in the previous year, slightly missing the $301.6 million estimated by four analysts polled by Capital IQ. The company’s memory solutions revenue also declined to $91.6 million, compared to $109.5 million, while revenue from intelligent platform solutions fell to approximately $145 million from $170.9 million. The LED solutions division registered sales of nearly $64 million, almost unchanged from $64.1 million last year.

Looking ahead to the current quarter, SMART Global projects an adjusted EPS of $0.40, plus or minus $0.15, and an expected revenue of $325 million, plus or minus $25 million. Analysts have set their sights on a normalized EPS of $0.41 and revenue of $329.5 million. Pacheco noted, “Our forecast for the fourth quarter of 2024 is based on the current environment, which contemplates the global macroeconomic headwinds and ongoing supply chain constraints. We continue to manage our operations in a prudent manner as we navigate a challenging environment while also investing in our long-term growth.”

The company foresees a sequential low-double-digit revenue growth at the midpoint for its intelligent platform solutions segment, while the memory business is expected to see slight growth in the low-single digits. For LED solutions, Pacheco projected a slight sequential rise in sales within the low-single-digit range at the midpoint.