Company: PENG
Filing Date: 2025-10-21
Form Type: 10-K
Source: 0001616533-25-000061
Chunk: 57

Company: Penguin Solutions, Inc.
Filing Date: 2025-10-21
Form: 10-K
Item: Item 1A
Chunk 57
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 earnings generated in countries with particularly high or low statutory tax rates; changes in tax exemptions available in certain jurisdictions or in connection with certain transactions; or changes in the valuation of our deferred tax assets and liabilities.

Taxable income in any jurisdiction depends in part on whether local tax authorities accept our operational practices and intercompany transfer pricing as being conducted on an arm’s-length basis. Due to inconsistencies in how taxing authorities apply the arm’s-length standard and the limited protection provided by treaties, transfer pricing challenges by tax authorities could, if successful, substantially increase our income tax expense. While we currently benefit from preferential tax treatment in certain foreign jurisdictions, most notably Malaysia, such treatment is contingent upon our continued compliance with specific conditions and may be subject to change. Further changes in tax laws could arise as a result of the base erosion and profit shifting project that was undertaken by the Organisation for Economic Co-operation and Development (“OECD”). For example, the OECD introduced an international tax framework under Pillar Two, which establishes a global minimum tax rate of 15%. This framework has been adopted by several jurisdictions, including those in which we operate, effective January 1, 2024, with additional jurisdictions expected to implement similar measures. The effect of Pillar Two taxes is applicable for our fiscal year ended August 29, 2025. We continue to monitor developments in jurisdictions that are expected to implement Pillar Two in the future, and we have evaluated the potential impact of the enactment of Pillar Two by such jurisdictions on our consolidated financial statements.

We regularly assess the likelihood of outcomes resulting from tax examinations in the United States and abroad to determine the adequacy of our provision for taxes and have recorded reserves for potential adjustments that may result from ongoing examinations. We believe these estimates are reasonable; however, there can be no assurance that the final determination of any examinations will align with our estimates.

Any significant variance between the results of tax examinations and our estimates, any failure to continue to receive any beneficial tax treatment in any of our foreign locations or any increase in our future effective tax rates due to any of the factors set forth above or otherwise could reduce our net income and have a material adverse effect on our business, results of operations, and financial condition.

Our ability to use our tax attributes is limited.

As of August 29, 2025, we had U.S. federal and state net operating loss carryforwards of $23.6 million and $36.2 million, respectively. If not utilized, the federal net operating loss carryforwards will begin to expire