What happened
Shares of Smart Global Holdings (SGH -0.81%) closed the trading session Friday down by 44.4% after the company announced disappointing quarterly results and weak forward guidance.
So what
For its fiscal fourth quarter, which ended Aug. 25, net sales from continuing operations declined by 12.6% year over year to $316.7 million, translating to adjusted (non-GAAP) net earnings of $0.35 per share. Analysts, on average, had been modeling for earnings of $0.46 per share on revenue of $375 million.
CEO Mark Adams noted the company is contending with "what remains a challenging global economic environment," adding that its "team has made significant progress in our transformational journey toward becoming an enterprise solutions company focused on higher quality revenue and improving gross margins."
Now what
To that end, in mid-June, Smart Global entered into an agreement to sell an 81% interest in its Smart Brazil operations, which are now classified as discontinued operations in the company's financial statements. That sale should close some time between late calendar 2023 and early 2024.
In the meantime, for the first quarter of its fiscal 2024, Smart Global expects revenue of $250 million to $300 million, with adjusted earnings ranging from breakeven to $0.15 per share. Here again -- the impact of discontinued operations notwithstanding -- both ranges were far below Wall Street's consensus estimates for fiscal first-quarter earnings of $0.40 per share on revenue closer to $383 million.
In the end, this was a painful quarter that fell far short of expectations, compounded by losses related to the divestiture of Smart Global's Brazil operations. That might well put the company in a better financial position, but investors obviously aren't pleased with the headwinds facing the remaining business in today's tough macro environment. The stock price reacted accordingly.
