Penguin Solutions, Inc.

Item 1A. Risk Factors

Other than as set forth below, there have been no material changes to the risks described in PART I Item 1A. Risk Factors in the 2024 Annual Report. You should carefully consider the risks and uncertainties and the other information in this Quarterly Report, including PART I. Financial Information Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and related notes, in PART I Item 1A. Risk Factors in our the 2024 Annual Report on Form 10-K for t. 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 fiscal year ended August market price of our common stock could decline and you could lose all or part of your investment.

This Quarterly Report also contains forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements for additional information. Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks facing our Company described below, in the 2024 Annual Report.

The anticipated benefits of the U.S. Domestication may not be realized.

On June 30, 2024, and 5, we consummated the redomiciliation of the parent company of our corporate group from the Cayman Islands to the State of Delaware in the section titled Risk FUnited States. We may not realize the benefits we anticipate from the U.S. Domestication, particularly as the achievement of the benefits are in many important respects subject to factors that we do not and cannot control, including the reaction of third parties with whom we enter into contractors in our preliminary proxy statement on Schedule 14A filed on March 24, 2025. Os and do business and the reaction of investors. Additionally, the anticipated benefits from the U.S. Domestication may not offset the direct and indirect costs and expenses incurred in connection with the U.S. Domestication. Our failure to realize those benefits could have a material and adverse effect on our business, results of operations or financial condition.

The U.S. Domestication may adversely impact our effective tax rate.

Although we do not expect the U.S. Domestication to increase our effective tax rate, there is a risk that our effective tax rate may increase after the U.S. Domestication. Following the U.S. Domestication, our effective tax rate may change significantly, which could materially impact our financial results, including our earnings and cash flow, for periods after the U.S. Domestication, and may fluctuate significantly from period to period. Our effective tax rate is based upon the application of currently applicable income tax laws, regulations and treaties, as well as current judicial and administrative interpretations of these income tax laws, regulations and treaties in various jurisdictions, including other than the United States.

In light of these factors, there can be no assurance that our effective tax rate will not increase in future periods, including as a result of and following the U.S. Domestication. Moreover, U.S. tax laws significantly limit our business, ability to redomicile outside of the United States. Accordingly, if our effective tax rate were to increase as a result of the U.S. Domestication, our business and financial condition or performance could be adversely affected.

The market for our common stock may differ from the market for the Penguin Solutions Cayman ordinary sharesults o and the market price of our common stock may as a result be subject to volatility.

The market price, trading volume or volatility, or potential investor pool of operur common stock may be different from those of the Penguin Solutions Cayman ordinary shares.

As a result, the market price of our common stock could be subject to wide fluctuations could be materia, which may be unrelated to the Penguin Solutions group of companies operating performance and prospects but nevertheless affect the price of our common stock. This volatility may affect the ability of holders of our common stock to sell their shares at an advantageous price.

Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylly and adversely affected if any aws, as well as provisions of Delaware law, could delay, defer, discourage, or prevent a takeover attempt.

Our amended and restated certificate of incorporation and amended and restated bylaws contain, and the General Corporation Law of the State of Delaware (the Delaware General Corporation Law) contains, provisions which could have the effect of delaying, deferring, discouraging or preventing acquisitions of the Company that some stockholders may favor. These provisions provide for the following:

a classified board of directors with three-year staggered terms, who can only be removed for cause, and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all then-outstanding voting stock entitled to vote at an election of directors, which may delay the ability of these risks occurs and, as a result, the market price of our orstockholders to change the membership of a majority of our board of directors;

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

the exclusive right of our board of directors to set the size of the board of directors and to elect a director to fill a vacancy, however occurring, including by an expansion of the board of directors, which prevents stockholders from being able to fill vacancies on our board of directors;

the ability of our board of directors to authorize the issuance of shares of undesignated preferred stock and to determine the price and other terms of those shares, including voting or other rights or preferences, without stockholder approval, which could impede the success of any attempt to change control of the Company and be used to significantly dilute the ownership of a hostile acquirer;

the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;

in addition to our board of directors ability to adopt, amend, or repeal our amended and restated bylaws, our stockholders may adopt, amend, or repeal our amended and restated bylaws only with the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of voting stock of the Company entitled to vote generally in an election of directors;

the required approval of at least 66 2/3% of the voting power of all then outstandinary shares could declineg shares of the Company entitled to vote thereon, voting together as a single class, to adopt, amend, or repeal certain provisions of our amended and restated certificate of incorporation;

the requirement that any action required or permitted to be taken by its stockholders must be effected at a duly called annual or special meeting of its stockholders and may not be taken by written consent in lieu of a meeting; however, and you could lose all or part of yoy action required or permitted to be taken by the holders of the CPS, voting separately as a series or class, may be taken by written consent;

the requirement that a special meeting of stockholders may be called only by or at the direction of our board of directors, the chairperson of our board of directors, or our chief executive officer or president, thus prohibiting a stockholder from calling a special meeting;

advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to bring other business before a stockholders meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to obtain control of us;

certain litigation against us can only be brought in Delaware; and

the limitation of liability of, and provision of indemnification to, our investmedirectors and officers.

These provisions, alone or together, could delay, defer, discourage or prevent hostile takeovers and changes in control or changes in our management.

This Quarterly Re These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire.

As a Delaware corport aation, we are also contains forward-looksubject to provisions of the Delaware General Corporation Law, including Section 203 thereof, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding statecommon stock.

Any provision of our amended and restated certificate of incorporation, aments that involded and restated bylaws or the Delaware General Corporation Law that has the effect of delaying, deferring, discouraging or preventing a change in control could limit the opportunity for our stockholders to receive risks ana premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Claims for ind unemnification by our directors and officertainties. See Cautionary Note Regarding Forward-Looking Statements for additional information. Our actual results could differ materially and advers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered or intend to enter into with our directors and officers provide that:

we will indemnify our directors and officers to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such persons conduct was unlawful;

we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;

we are required to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, except that such directors or officers will undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;

the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and

we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees, and agents.

Our directors and officers liability insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability that may be imposed.

Our amended and restated certificate of incorporation provides for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, and that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act.

Our amended and restated certificate of incorporation provides that unless we consent in writing to the sely from those anticipated in these forward-looking stateection of an alternative forum, (a) the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court for the District of Delaware or other state courts of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action, suit or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder to the Company or our stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the Delaware General Corporation Law or our aments as a result of certain factors, ded and restated certificate of incorporation or amended and restated bylaws (as either may be amended from time to time), or (iv) any action, suit or proceeding asserting a claim against the Company that is governed by the internal affairs doctrine; and (b) the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended, including the risks faciall causes of action asserted against any defendant to such complaint.

Any person or entity purchasing or otherwise acquiring our any interest in any security of the Company described below, in will be deemed to have notice of and consented to these provisions. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Exchange Act, from bringing such claims in federal cour Annual Report t to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.

We believe these provisions may benefit us by providing increased consistency in the application Form 10-K for tof Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. If a court were to find the fiscal year enchoice of forum provision that is contained in our amended and restated certificate of incorporation or amended August 30, 2024 and our pand restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, results of operations, and financial condition. For example, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts

overeliminary proxy statement on Schedule 14A filed on Mar all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

The choice of forum provisions may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our current or former director, officer or stockholder to the Company, which may discourage such 24, 2025claims against us or any of our current or former director, officer or stockholder to the Company and result in increased costs for investors to bring a claim.

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

We source materials from, manufacture products in, and sell products in foreign countries, including China, making the price and availability of our merchandise susceptible to international trade risks and other international conditions. For example, any economic and political uncertainty caused by the U.S. tariffs imposed on goods from China and other countries by the current administration, among additional potential countries, and annd any corresponding tariffs or currency devaluations from China or such other countries in response, has negatively impacted, and may in the future negatively impact, demand and/or has in the past increased, or may in the future increase, the cost for certain of our products, particularly within our LED business. In addition, many of our customers also rely on international trade and 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 could result in the adoption of additional or increased tariffs or other trade restrictions by other countries. Tariffs may in the future increase our cost of materials and may cause us to increase prices to our customers, which we believe may reduce demand for our products. Our price increases may not be sufficient to fully offset the impact of tariffs and may result in lowering our margin on products sold. In sum, if the United States Government increases or implements additional tariffs, or if additional tariffs or trade restrictions are implemented by other countries, the resulting trade barriers could have a significant adverse impact on our suppliers, our customers and on our business. The volatility and unpredictability of international trade policies and conditions add further complexity to our operations, making it challenging to forecast and plan effectively. 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. 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, operating results and financial condition.

The anticipated benefits of the planned U.S. Domestication may not be realized.

On March 24, 2Our credit agreement may limit our flexibility in operating our business.

We, through Penguin Solutions Cayman and SMART Modular Technologies, as Borrowers, are party to the 2025, we announc Credit Agreement, as described our expecin more detail in PART I Item 1. Financial Station to redomicile our parements Notes to Consolidated Financial Statements Subsequent Event holdings. This agreement company from the Cayman Islandntains, and future credit agreements may contain, restrictive covenants to the State of Delaware hat limit our ability to engage in specified transactions and prohibit us from voluntarily prepaying certain of our othe Unir indebted States (ness. For instance, the U.S. Domestication), subjectcovenants in our 2025 Credit Agreement limit the ability of Penguin Solutions Cayman and certain of its subsidiaries to shareholder approval and Cayman court approval. We may not, among other things:

incur additional indebtedness;

create liens on assets;

engage in mergers or consolidations;

sell assets;

pay dividends, make distributions or repurchase capital stock;

make investments, loans or advances;

repay or realize the benefits we anticippurchase certain subordinated debt (except as scheduled or at maturity);

create from restrictions on the planned U.S. Domayment of dividends or other amounts to us from our restication, particularly as the achievricted subsidiaries;

make certain acquisitions;

engage in certain transactions with affiliates; and

amend material agreement of the benefitss governing our subordinated debt and fundamentally change our business.

Under the 2025 Credit Agreement, we also are inrequired to satisfy and many impointain certant rein spects subjecified financial ratios. Our ability to meet to factors that we do not ahose financial ratios could be affected by events beyond cannotour control, includingand the reaction of third partiesre can be no assurance that we with whom we entll meet those ratios.

Ther in failure to contracts and do business and

mply with any of these covenants would cause a default under the reaction of investors. Our failure to realize tho2025 Credit Agreement. A default, if not waived, could result in acceleration of the outstanding indebtedness under the 2025 Credit Agreement as well as under our outstanding Convertible Senior Notes, in which case benefits csuch indebtedness would have a material become immediately due and adverse effect on payable. If any default occurs, we may not be able to pay our business, results of operadebt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be available on terms that are acceptable to us. Complying with these covenants may cause us to take actions or financial conditionthat we otherwise would not take or not take actions that we otherwise would take.