v3.26.3
Preferred Stock Investment
 12 Months Ended
Aug. 28, 2026
Equity [Abstract]  
Preferred Stock Investment
Preferred Stock Investment
On December 13, 2024, we closed the SKT Investment (as defined below). Pursuant to the terms of the Securities Purchase Agreement (the “SKT Purchase Agreement”) by and between Penguin Solutions and SK Telecom Co., Ltd. (“SKT”), we sold to Astra AI Infra LLC (“Astra AI Infra”), an affiliate of SKT, 200,000 convertible preferred shares, par value $0.03 per share, of Penguin Solutions (the “Issued Cayman CPS”) at a price of $1,000 per share or an aggregate price of $200.0 million (the “SKT Investment”).
Additionally, on the closing date of the SKT Investment, we and Astra AI Infra entered into an Investor Agreement (the “Investor Agreement”), and the Certificate of Designation relating to the Issued Cayman CPS (the “CPS Cayman Certificate of Designation”) became effective. The Investor Agreement and the CPS Cayman Certificate of Designation provided for certain rights and restrictions relating to the SKT Investment, including but not limited
to board representation rights, pro rata rights, registration rights and consent rights, and standstill provisions, disposition restrictions and voting obligations.
Amended and Restated Investor Agreement
On June 30, 2025, effective upon consummation of the U.S. Domestication, Penguin Solutions Delaware assumed the Investor Agreement from Penguin Solutions Cayman and Penguin Solutions Delaware and SKT amended and restated the Investor Agreement (as amended and restated, the “Amended and Restated Investor Agreement”) such that the rights and restrictions relating to SKT’s beneficial ownership of the Issued Cayman CPS in place prior to the U.S. Domestication apply in respect of SKT’s holdings of Issued CPS (as defined below) following consummation of the U.S. Domestication.
Delaware Certificate of Designation for Convertible Preferred Stock
On June 27, 2025, in connection with the U.S. Domestication, Penguin Solutions Delaware executed and adopted a Certificate of Designation of Convertible Preferred Stock (the “CPS Delaware Certificate of Designation”) that sets forth the terms, rights and obligations of a series of 200,000 shares of preferred stock of Penguin Solutions Delaware, par value $0.03 per share, designated as convertible preferred stock (the “Issued CPS”). The principal attributes of the Issued Cayman CPS and the Issued CPS are substantially the same, with changes to give effect to requirements of Delaware law.
The Issued CPS have an initial liquidation preference of 1x. Shares of Issued CPS are not redeemable upon or repurchased upon the election of the holders of shares of Issued CPS and are only redeemable, at our option, in one installment upon notice, provided that no such notice shall be sent until at least five years after the date of the closing of the SKT Investment. The shares of Issued CPS vote together with the common stock, par value $0.03 per share, of Penguin Solutions, on an as-converted basis, and entitle the holder to receive dividends of six percent per annum, cumulative, payable quarterly in-kind or in cash at our option, subject to certain conditions.
The holder of shares of Issued CPS may convert the shares of Issued CPS into common stock at any time, provided that the Issued CPS may, at our option, automatically be converted into common stock on any date following the second anniversary of the closing of the SKT Investment upon which the volume-weighted average price of the common stock for any 15 consecutive trading day period equals or exceeds 150% of the then-applicable conversion price. The shares of Issued CPS are convertible into common stock at an initial conversion price of $32.81, subject to adjustment upon the occurrence of certain events. Holders of Issued CPS are also entitled to certain protective provisions.
For more details, refer to the CPS Delaware Certificate of Designation, filed as Exhibit 3.3 hereto, to the description of the Issued CPS contained in the description of the Registrant’s capital stock, filed as Exhibit 4.1 hereto, and to the information under the heading “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” in Penguin Solutions Cayman’s definitive proxy statement on Schedule 14A filed with the SEC on May 2, 2025.
Equity
Penguin Solutions Stockholders’ Equity
Common Stock Repurchase Authorization
On each of April 4, 2022 and January 8, 2024, our Board of Directors approved $75.0 million stock repurchase authorizations (the “2022 Authorization” and “2024 Authorization”, respectively), under which we may repurchase our outstanding common stock from time to time through open market repurchases, privately-negotiated transactions or otherwise. On October 6, 2025, the Audit Committee of the Board of Directors approved an additional $75.0 million stock repurchase authorization (the “2025 Authorization” or the “Current Authorization”). The Current Authorization, which consists solely of amounts approved pursuant to the 2025 Authorization as all amounts under the 2022 Authorization and 2024 Authorization have been utilized, has no expiration date but may be suspended or terminated by the Board of Directors at any time. In 2026, 2025 and 2024, we repurchased 2.9 million, 2.5 million and 0.9 million shares, respectively, for $55.7 million, $41.2 million and $13.9 million, respectively, under the 2022, 2024, and 2025 Authorizations. As of August 28, 2026, an aggregate of $55.8 million remained available for the repurchase of our common stock under the Current Authorization. Certain of our agreements, including the 2025 Credit Agreement and the CPS Delaware Certificate of Designation, contain restrictions that limit our ability to repurchase our common stock.
Other Stock Repurchases
Common stock withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are treated as common stock repurchases. In 2026, 2025 and 2024, we repurchased 696 thousand, 597 thousand and 377 thousand shares of common stock as payment of withholding taxes for $18.7 million, $11.1 million and $7.4 million, respectively.
Capped Calls
In connection with our convertible notes, we have entered into privately-negotiated capped call transactions, which are intended to reduce the effect of potential dilution upon conversion of our convertible notes. The capped calls associated with the 2029 Notes, 2030 Notes, and 2031 Notes provide for our receipt of cash or shares, at our election, from counterparties if the trading price of our common stock is above the strike price on the expiration date. The capped calls are subject to anti-dilution adjustments substantially similar to those applicable to the corresponding convertible notes. The cost of capped calls, which are considered capital transactions, were recognized as decreases to additional paid-in capital.
Capped calls are separate transactions, each between the Company and the counterparties to the various capped calls, and are not part of the terms of any of the convertible notes and do not affect any holder’s rights under the convertible notes or related indentures. Holders of any of the convertible notes do not have any rights with respect to any of the capped calls.
As of August 28, 2026, the dollar value of cash or common stock that we would receive from our outstanding capped calls upon their expiration dates range from $0, if the trading price of our common stock is at or below the strike prices for each of the capped calls at expiration, to $500.3 million, if the trading price of our common stock is at or above the cap prices for each of the capped calls. Settlement of a capped call prior to its expiration date may be for an amount different than the value at expiration. The following table presents information related to outstanding capped calls as of August 28, 2026:
Expiration DateStrike PriceCap Price
Shares
Maximum Value at Expiration
2029 Capped CallsFebruary 1, 2029$21.2288 $29.1375 7,066 $55,883 
2030 Capped CallsAugust 15, 2030$28.0085 $37.7038 7,141 69,231 
2031 Capped CallsAugust 1, 2031$116.6997 $175.0500 6,430 375,178 
20,637 $500,292 
Other Comprehensive Income
Changes in accumulated other comprehensive income by component for 2026 were as follows:
Pension Liability Adjustment
Gains
on
Investments
Total
As of August 29, 2025$— $18 $18 
Other comprehensive income before reclassifications177 16 193 
Other comprehensive income177 16 193 
As of August 28, 2026$177 $34 $211 
In connection with our divestiture of an 81% interest in SMART Brazil, we reclassified $212.4 million of cumulative translation adjustment related to SMART Brazil from accumulated other comprehensive income to results of operations in the first quarter of 2024. See “Divestiture of SMART Brazil.”
Noncontrolling Interest in Subsidiary
We have a 51% ownership interest in Cree Venture LED Company Limited (“Cree Joint Venture”), with the remaining 49% ownership interest held by San’an Optoelectronics Co., Ltd (“San’an”). The Cree Joint Venture has a five-member board of directors, three of which are designated by us and two of which are designated by San’an. As a result of our majority voting interest, we consolidate the operations of the Cree Joint Venture and report its results of operations within our Optimized LED segment.
The Cree Joint Venture has a manufacturing agreement pursuant to which San’an supplies it with mid-power LED products and we and the Cree Joint Venture have a sales agent agreement pursuant to which we are the independent sales representative of the Cree Joint Venture. The Cree Joint Venture produces and delivers to market high performing, mid-power lighting class LEDs in an exclusive arrangement serving the markets of North and South America, Europe and Japan, and serves China markets and the rest of the world on a non-exclusive basis. The 49% ownership interest held by San’an is classified as noncontrolling interest. Cash and other assets of the Cree Joint Venture are generally not available for use by us in our other operations.