Segment and Other Information

12 Months Ended

Aug. 26, 2022

Segment Reporting [Abstract]

Segment and Other Information

Segment and Other Information

Segment information presented below is consistent with how our chief operating decision maker evaluates operating results to make decisions about allocating resources and assessing performance. We have the following three business units, which are our reportable segments:

•Memory Solutions: Our Memory Solutions group, under our SMART Modular brand, provides high performance and reliable memory solutions through the design, development and advanced packaging of leading-edge to extended lifecycle products. These specialty products are tailored to meet customer-specific requirements across networking and communications, enterprise storage, computing, including desktop, notebook and server applications, smartphones and other vertical markets. These products are marketed to OEMs and to commercial and government customers. The Memory Solutions group also offers SMART Supply Chain Services, which provides

customized, integrated supply chain services to enable our customers to better manage supply chain planning and execution, reduce costs and increase productivity.

•Intelligent Platform Solutions (“IPS”): Our IPS group, under our Penguin Solutions brand, consists of two major product lines – Penguin Computing and Penguin Edge. Penguin Computing offers specialized platform solutions for high-performance computing, artificial intelligence, machine learning and advanced modeling for technology research. We provide these leading-edge solutions to customers in the government, hyperscale, energy, financial services and education markets. Penguin Edge offers solutions for embedded and wireless applications, specializing in high-reliability products for a wide range of customers in government, telecommunications, health care, smart city, network edge and industrial applications.

•LED Solutions: Our LED Solutions group, under our Cree LED brand, offers a broad portfolio of application-optimized LEDs focused on improving on lumen density, intensity, efficacy, optical control and reliability. Backed by expert design assistance and superior sales support, our LED products enable our customers to develop and market LED-based products for general lighting, video screens and specialty lighting applications. Our LED Solutions is comprised of the LED Business we acquired from Cree, Inc. on March 1, 2021.

Segments are determined based on sources of revenue, types of customers and operating performance. There are no differences between the accounting policies for our segment reporting and our consolidated results of operations. Operating expenses directly associated with the activities of a specific segment are charged to that segment. Certain other indirect operating income and expenses are generally allocated to segments based on their respective percentage of net sales. We do not allocate interest, other non-operating (income) expense or taxes to segments.

Year ended	August 26, 2022		August 27, 2021		August 28, 2020
Net sales:
Memory Solutions	$	975,181	$	931,818	$	857,237
Intelligent Platform Solutions	440,986		344,757		265,140
LED Solutions	403,185		224,567		—
Total net sales	$	1,819,352	$	1,501,142	$	1,122,377
Segment operating income:
Memory Solutions	$	119,849	$	91,737	$	71,867
Intelligent Platform Solutions	54,019		32,931		12,362
LED Solutions	53,761		36,126		—
Total segment operating income	227,629		160,794		84,229
Unallocated:
Share-based compensation expense	(40,119)		(33,877)		(18,716)
Amortization of acquisition-related intangibles	(23,729)		(20,255)		(13,654)
Flow through of inventory step up	—		(7,090)		—
Out of period import tax expense (1)	—		(4,345)		—
Acquisition and integration expenses	(7,090)		(5,314)		(5,532)
Change in fair value of contingent consideration	(41,324)		(32,400)		—
Other	(858)		(2,316)		(4,997)
Total unallocated	(113,120)		(105,597)		(42,899)
Consolidated operating income	$	114,509	$	55,197	$	41,330

(1)During the second quarter of 2021, we recorded an out-of-period adjustment to correct errors originating in previous periods related to understated import tax costs, which resulted in a $4.3 million increase in cost of sales, $0.7 million increase in interest expense and a $1.7 million benefit to income taxes. The adjustment was not considered material to the interim or annual consolidated financial statements for the year ended August 27, 2021 nor to any previously issued interim or annual consolidated financial statements.

Depreciation included in segment operating income was as follows:

Year ended	August 26, 2022		August 27, 2021		August 28, 2020
Memory Solutions	$	23,710	$	19,547	$	19,117
Intelligent Platform Solutions	4,664		3,275		3,659
LED Solutions	12,736		6,034		—
	$	41,110	$	28,856	$	22,776