Penguin Solutions, Inc.PENG
Penguin Solutions, Inc. Goodwill & Intangibles Disclosure
Intangible Assets and Goodwill
August 29, 2025 | August 30, 2024 | ||||||||||||||||||||||
| As of | Gross Amount | Accumulated Amortization | Gross Amount | Accumulated Amortization | |||||||||||||||||||
| Intangible assets: | |||||||||||||||||||||||
| Technology | $ | 144,445 | $ | (83,375) | $ | 142,539 | $ | (58,948) | |||||||||||||||
| Customer relationships | 33,000 | (13,602) | 72,500 | (45,556) | |||||||||||||||||||
| Trademarks/trade names | 15,786 | (8,500) | 27,964 | (17,045) | |||||||||||||||||||
| $ | 193,231 | $ | (105,477) | $ | 243,003 | $ | (121,549) | ||||||||||||||||
In 2025 and 2024, we capitalized $1.9 million and $1.4 million, respectively, for intangible assets, with weighted-average useful lives of 18.6 years and 18.2 years, respectively. Amortization expense for intangible assets was $35.6 million, $40.0 million and $45.1 million in 2025, 2024 and 2023, respectively. Amortization expense is expected to be $30.3 million for 2026, $29.7 million for 2027, $10.0 million for 2028, $6.1 million for 2029 and $5.4 million for 2030 and $6.2 million for 2031 and thereafter.
In connection with our acquisition of Stratus Technologies, we capitalized $3.9 million of in-process research and development related to next generation fault tolerant architecture. Amortization of this technology commenced in the second quarter of 2024.
Goodwill by segment | Advanced Computing | Integrated Memory | Total | ||||||||||||||
Balance as of August 25, 2023 | |||||||||||||||||
Gross | $ | 166,330 | $ | 14,720 | $ | 181,050 | |||||||||||
Accumulated impairment losses | (19,092) | — | (19,092) | ||||||||||||||
Carrying value | 147,238 | 14,720 | 161,958 | ||||||||||||||
Balance as of August 30, 2024 | |||||||||||||||||
Gross | 166,330 | 14,720 | 181,050 | ||||||||||||||
Accumulated impairment losses | (19,092) | — | (19,092) | ||||||||||||||
Carrying value | 147,238 | 14,720 | 161,958 | ||||||||||||||
Impairment losses during the year-ended August 29, 2025 | $ | (16,063) | $ | — | $ | (16,063) | |||||||||||
Balance as of August 29, 2025 | |||||||||||||||||
Gross | 166,330 | 14,720 | 181,050 | ||||||||||||||
Accumulated impairment losses | (35,155) | — | (35,155) | ||||||||||||||
Carrying value | $ | 131,175 | $ | 14,720 | $ | 145,895 | |||||||||||
During the second quarter of 2023, we initiated a plan within our Advanced Computing segment pursuant to which we are winding down manufacturing and discontinuing the sale of products offered through our Penguin Edge business by approximately the end of calendar 2025. The Penguin Edge technology is becoming obsolete and is only sold to a small number of customers who we expect to phase out the technology. In each quarter of 2025, to assess the fair value of the Penguin Edge business and reporting unit for the purpose of goodwill impairment, we utilized a discounted cash flow model using assumptions for how a market participant would value the business based on expected future cash flows through the expected completion of the wind down. We used this valuation approach because there were no comparable transactions in the marketplace of a similar business being sold while in the process of winding down. Further, since the Penguin Edge business has no expansion or product initiatives, those expected future cash flows incorporated expected revenues, the costs associated with fulfilling customer contracts, and the costs associated with winding down the Penguin Edge business. In determining the fair value of the Penguin Edge business, it was our expectation that the business would continue to be profitable and generate positive free cash flow through the wind down of the business. We calculated the expected remaining cash flows based on existing contracts, future expected orders based on historical order volumes, and future expected orders identified through customer engagements for last-time buy planning, which were expected to fully consume all inventory on hand. Net estimated discounted cash flows were calculated by taking the total
proceeds expected from sales, minus cash outflows for costs associated with fulfilling customer contracts, operating expenses, collection of receivables recognized as of August 29, 2025, and costs associated with the wind down of the Penguin Edge business. We assumed no capital expenditures because we are no longer investing in the business.
We applied a discount rate of 16.25%, which we believe reflects the return a market participant would require when purchasing the Penguin Edge business given the risk profile of the remaining operations and the limited future cash flows from winding down. However, given the short period of time associated with the remaining cash flows for the business, changes to the discount rate would not have produced a materially different fair value estimate. Since the Penguin Edge business is no longer investing in growth initiatives and operating costs are significantly lower than for an ongoing business, we observed a positive present value of future expected cash flows, which we then compared to the carrying value of the business.
Based on our analysis, the fair value of the Penguin Edge business was determined to be lower than its carrying value, resulting in an impairment charge for the remaining goodwill balance of $16.1 million for the year-ended August 29, 2025. The goodwill impairments were recorded to align the carrying value of the Penguin Edge reporting unit with the fair value of the Penguin Edge reporting unit as of the end of the respective reporting periods. The goodwill impairment loss recognized reduced the Penguin Edge reporting unit’s carrying value to zero.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Oct 21, 2025 | Showing above |
| 2024 | Oct 24, 2024 | |
| 2023 | Oct 20, 2023 | |
| 2022 | Oct 14, 2022 | |
| 2021 | Oct 25, 2021 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.