Company: PENG
Filing Date: 2025-04-30
Form Type: CORRESP
Source: 0001193125-25-107591
Chunk: 4

Company: Penguin Solutions, Inc.
Filing Date: 2025-04-30
Form: CORRESP
Chunk 4
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 artificial intelligence, high-performance computing, machine learning, advanced modeling and the internet of things, and it is 
 objectively verifiable that it has experienced growth driven by the increased adoption and usage of artificial intelligence and related applications.                                           |

| 3) | As of the end of FY23, the Company projected future profitability and continued growth into FY24, which in turn                                                                                                                                    
 forecasted future taxable income for the US Group, exclusive of reversing temporary differences and carryforwards. Although the Company considered its objectively verifiable earnings history in forecasting future results, it notes that its    
 forecasted income for FY24 was more favorable than its FY23 earnings, albeit less objectively verifiable. This differential was due in part to the Company’s objectively verifiable position in a growth industry and the anticipated future trend 
 of continued growth in that industry.                                                                                                                                                                                                              |

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| 4) | The US Group had an objectively verifiable history of using NOLs and tax credit carryforwards before they                                                                                                                                                 
 expired: during FY23, the US Group generated significant US federal taxable income (before special deductions and the application of NOL carryforwards) and used all available NOLs and tax credit carryforwards that were not subject to IRC section 382 
 limitations or uncertain tax position reduction. As of the end of FY23, the net DTA remaining on the Company’s balance sheet was approximately $73.3 million. As of the end of FY23, based on the preceding historical performance, forecast of           
 future growth, and consideration of expirations, the Company expected to utilize remaining NOLs and tax credit carryforwards prior to expiration.                                                                                                         |

The negative evidence considered at the end of FY23 related to the Company, and in particular certain business segments of the Company, operating in cyclical industries, where the timing of cycles can make it more difficult to accurately forecast profitability for certain periods. Furthermore, at that time, the Company considered certain of its businesses to be in a cyclical downturn, though there were some signs of recovery. In addition, the Company’s forecast as of the end of FY23 for FY24 was subject to risks related to business execution and worldwide economic conditions, as summarized in the Company’s public filings. In prior years, these and other factors had resulted in difficulty accurately projecting future results. The negative evidence, which is based on industry trends and the realization of possible but uncertain risks, is less objectively verifiable. In weighting the evidence, the Company assigned more weight to the objectively