Company: PENG
Filing Date: 2025-07-08
Form Type: 10-Q
Source: 0001628280-25-034541
Chunk: 27

Company: Penguin Solutions, Inc.
Filing Date: 2025-07-08
Form: 10-Q
Item: Part I, Item 2
Chunk 27
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 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.

Our 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 Credit Agreement, as described in more detail in “PART I – Item 1. Financial Statements– Notes to Consolidated Financial Statements – Subsequent Events.” This agreement contains, and future credit agreements may contain, restrictive covenants that limit our ability to engage in specified transactions and prohibit us from voluntarily prepaying certain of our other indebtedness. For instance, the covenants in our 2025 Credit Agreement limit the ability of Penguin Solutions Cayman and certain of its subsidiaries to, 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 repurchase certain subordinated debt (except as scheduled or at maturity);

•create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries;

•make certain acquisitions;

•engage in certain transactions with affiliates; and

•amend material agreements governing our subordinated debt and fundamentally change our business.

Under the 2025 Credit Agreement, we also are required to satisfy and maintain certain specified financial ratios. Our ability to meet those financial ratios could be affected by events beyond our control, and there can be no assurance that we will meet those ratios.

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The failure to comply with any of these covenants would cause a default under the 2025 Credit Agreement. A default, if not waived, could result in acceleration of the outstanding indebtedness under the 2025 Credit Agreement as well as