Company: PENG
Filing Date: 2025-04-02
Form Type: 10-Q
Source: 0001628280-25-016182
Chunk: 8

Company: Penguin Solutions, Inc.
Filing Date: 2025-04-02
Form: 10-Q
Item: Part I, Item 2
Chunk 8
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 of company performance, partially offset by decreased professional services stemming from increased cost in the prior year due to the SMART Brazil divestiture referenced above.

Impairment of Goodwill

During the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of certain legacy products offered through our Penguin Edge business by approximately the end of 2025. In connection therewith and with the preparation of the financial statements included in this Quarterly Report, we assessed goodwill associated with our Penguin Edge business within our Advanced Computing segment and concluded it was partially impaired. As a result, we recorded a charge of $6.1 million in the second quarter of 2025 to impair the carrying value of Advanced Computing goodwill. We currently anticipate that the goodwill of the Penguin Edge reporting unit of $10.0 million as of February 28, 2025 will become further impaired in future periods.

Other Operating (Income) Expense

Other operating expense in the first six months of 2025 and 2024 included restructuring charges of $1.0 million and $6.3 million, respectively, primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the wind down of our Penguin Edge business. We anticipate that these activities will continue into future quarters and anticipate recording additional restructuring charges.

Interest Expense, Net

Net interest expense decreased by $5.1 million in the first six months of 2025 compared to the same period in the prior year, primarily due to principal payments made on the Amended 2027 TLA (as defined below) during the last half of fiscal 2024.

Other Non-operating (Income) Expense

Other non-operating (income) expense in the first six months of 2025 and 2024 primarily reflected foreign currency gains (losses). See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Other Non-operating (Income) Expense.”

Income Tax Provision (Benefit)

Income tax provision in the second quarter and first six months of 2025 increased by $5.4 million and by $8.3 million, respectively, as compared to the same periods in the prior year, primarily due to an increase in profit before tax in jurisdictions subject to income tax, partially offset by a reduction in withholding tax and increase in research and development tax credit.

Our effective tax rate was 46.3% and 48.6% in the second