Company: PENG
Filing Date: 2025-06-27
Form Type: CORRESP
Source: 0001193125-25-151564
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Company: Penguin Solutions, Inc.
Filing Date: 2025-06-27
Form: CORRESP
Chunk 1
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 further declines in the fair value of the business and Sidley Austin (DC) LLP is a Delaware limited liability partnership doing business as Sidley Austin LLP and practicing in affiliation with other Sidley Austin partnerships.

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additional impairments of goodwill. In this regard, we would expect that the remaining cash flows have already been considered in the fair value calculation at the time of measurement. Please advise. Additionally, in your response, please be more specific in discussing the methods and key assumptions you used to estimate the fair value of the Penguin Edge business in connection with your goodwill impairment assessment during the second quarter of 2025. See guidance in ASC 350-10-50-2.

Response:We respectfully acknowledge the Staff’s comment.

As previously disclosed in the Company’s periodic reports, in the second fiscal quarter of
2023, the Company initiated a plan to wind down manufacturing and discontinue the sale of legacy products offered through its Penguin Edge business. As of February 28, 2025, the Company determined that it was more likely than not that the fair
value of the Penguin Edge business was less than its carrying amount and elected to bypass the qualitative assessment as allowed under ASC
350-20-35-70. Following the guidance in ASC 350-20-35-4 through 35-8 to perform the quantitative goodwill impairment test, the Company determined that as of February 28, 2025, the fair value of the
Penguin Edge business of $20.3M was lower than its carrying amount of $26.4M, resulting in a goodwill impairment charge of $6.1M.

While the Penguin Edge
business’s goodwill will become fully impaired upon the cessation of the Penguin Edge business, as of February 28, 2025, a full impairment of its goodwill was not appropriate because, after the partial $6.1M impairment, the reporting
unit’s carrying amount was equal to its fair value (including remaining goodwill). As provided in ASC 350-20-35-73, “A
goodwill impairment loss, if any, shall be measured as the amount by which the carrying amount of a reporting unit including goodwill exceeds its fair value, limited to the total amount of goodwill of the entity.” A key assumption in
determining the fair value of the Penguin Edge business as of February 28, 2025 was the Company’s expectation that the business would continue to be profitable and generate positive free cash flow through the wind down of the business.
Another key