Good afternoon. Thank you for attending today’s SGH Third Quarter Fiscal 2023 Earnings Call. My name is Tana, I'll be your operator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to turn the conference over to our host, Suzanne Schmidt with Investor Relations. You may go ahead.

Thank you, operator. Good afternoon, and thank you for joining us on today's earnings conference call and webcast to discuss SGH's third quarter fiscal 2023 results. On the call today are: Mark Adams, Chief Executive Officer; Jack Pacheco, Chief Operating Officer; and Ken Rizvi, Chief Financial Officer. You can find the accompanying slide presentation and press releases for this call on the Investor Relations section of our website. We encourage you to go to the site throughout the quarter for the most current information on the company. I would also like to remind everyone to read the use of forward-looking statements note that is included in the press release and the earnings call presentation. Please note that during this conference call the company will make projections and forward-looking statements, including statements about the company's growth trajectory and its 2023 financial outlook. Forward-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties including, without limitation, the risks and uncertainties reflected in the press release and the earnings call presentation filed today, as well as in the company's most recent annual and quarterly reports. The forward-looking statements are representative only as of the date they are made and except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements. We will also discuss both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from as a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. A reconciliation of the GAAP to non-GAAP measures is included in today's press release. And with that, let me turn the call over to Mark Adams, CEO.

Thanks, Suzanne, and thank you all for joining us today for our fiscal 2023 third quarter call. Over the past three years, we have made tremendous progress on the transformation of SGH. We have grown our top line, increased our gross margins, delivered strong earnings per share, and strengthen our balance sheet by generating positive operating cash flow. Earlier this month, we announced that we had agreed to divest a majority stake in our Brazil consumer memory business, enabling SGH to shift our business towards high performance, high availability solutions for enterprise customers. Although macroeconomic headwinds persist, we believe we are well positioned for long-term success, driven by secular tailwinds in AI, machine learning, and data analytics. While Ken will review the financials in more detail, I would like to call out some highlights from our third quarter performance. Our team achieved strong results for the third quarter and what remains a very challenging global economic environment. Non-GAAP gross margins was 28%, up 230 basis points from the year ago quarter and non-GAAP diluted earnings per share totaled $0.66 on sales of $383 million. We generated strong cash flow from operations of approximately $41 million in the quarter and exited Q3 with a strong balance sheet, including record cash and cash equivalents of $401 million. Now let me review each of our business lines. Starting with IPS, which is comprised of our Penguin Computing and Stratus Technologies brands. We design, manufacture, deploy, and provide managed services for high performance computing for the data center, the cloud, and the edge. AI, machine learning, and data analytics are becoming foundational technologies for the success of enterprises across a growing set of industries. We believe that Penguin Computing, which has more than 25-years of experience in the deployment of HPC Systems and Solutions…

Thanks, Mark. I will focus my remarks on our non-GAAP results, which are reconciled to GAAP in our earnings release tables. Now let me turn to our fiscal third quarter 2023 results. Total SGH revenues were $383 million and non-GAAP gross margins came in at 28% at the midpoint of our guidance. Non-GAAP diluted earnings per share were $0.66 for the third quarter. In the beginning of this fiscal year, we began providing the breakdown of our overall revenue by product and services. As a reminder, our services revenue includes longer-term services, as well as point-in-time services such as logistics and implementation services. In Q3, our overall services revenue totaled $58 million, up from $48 million in the year ago quarter and helped by the inclusion of Stratus, which we acquired in the beginning of this fiscal year. Product revenues were $326 million. Third quarter revenue by business unit was as follows: IPS was $171 million; memory was $148 million; and LED came in at $64 million. This translates into a sales mix of approximately 45% IPS, 39% memory and 17% LED. Non-GAAP gross margin for SGH in Q3 was 28%, up from 25.7% in the year-ago quarter, driven primarily by IPS. Non-GAAP operating expenses for the third quarter were $70.9 million, down from $72.5 million in the second quarter of 2023. Operating expenses were down from the prior quarter, primarily due to continued cost containment initiatives, as well as lower bonus accruals. Operating expenses benefited in third quarter of 2023 from $0.4 million in financial credits in Brazil, which was down from $1.4 million in the second quarter of 2023 and down from $3.3 million in the year-ago quarter. This credit is expected to provide minimal benefit in our fourth quarter of 2023. Non-GAAP diluted earnings per share for…

Thanks Ken. While we are in the early stages of AI, machine learning and data analytics deployment, we feel SGH is well-positioned to grow over the next three to five years. As such, we continue to transform into a business focused on delivering high-availability, high-performance enterprise solutions that help our customers solve for the future. We are not only benefiting from the right secular tailwinds in terms of end markets, but we have an operating model that has performed well throughout the cycle. The combination of our shift towards enterprise solutions and the secular tailwinds, coupled with this discipline on how we operate the company, make us optimistic about the future and our ability to deliver long-term value to our shareholders. With that operator, we are now ready for Q&A.

Certainly. [Operator Instructions] The first question is from the line of Kevin Cassidy with Rosenblatt Securities. You may proceed.

Hi, excuse me. Thanks for taking my question and congratulations on the great results and good guidance. Maybe, there's of course lot of questions around the IPS business right now and the interest in AI. Can you say how your RFQ funnel or maybe opportunity funnel has grown, say since the beginning of the year and how are you addressing it? I guess, how are you choosing which customers to pursue?

Yes, great. Kevin, this is Mark, thanks for the question. Well, needless to say, the level of activity is noticeably on the uptick. And the second part of your question is really an opportunity and a challenge for us because our model is a bit different. We're looking for customer relationships that really want us from a trusted adviser role and all the way from the beginning of our engagement on designing systems and solutions to implementing them and then managing them post deployment, if you will, post installation. And so, the criteria around how we do it just given the level of activity is really what's the best fit in terms of a partnership model with the customer and what role we can play. And so that's how we're looking at it, because, as you might imagine, if it's just a hardware play, that's a game we don't want to be in and we're trying to select the type of relationships we engage with to be those that are a little bit more full service oriented.

And maybe just add on to that, what interest are you seeing from various vertical markets? It's more than just cloud or are you seeing broad interest?

Yes, this is -- that's also interesting because it is -- it's really taken off in terms of the vertical kind of expansion, if you will. Certainly, the cloud hyperscalers kind of early to market on some of this and I'll come back to that in a second, because it's just not the big names. There's a -- with the class of what I would call Tier 2, Tier 3 cloud providers that are building out data centers for custom type application environments, which is obviously very interesting to us. But I think financial and health care are two that are very interesting for us. Oil and gas continues to be one that's very interesting to watch. And I'd say, one we continue to take a look at is just education and research, while that was kind of the original market segment for HPC to expand over the years. AI is taking on a new definition of what that opportunity looks like in terms of science and research and what have you. And so, I know that sounds like a lot, but, I mean, everyone is taking a look at how they can enable AI in their enterprise. So, it's been an interesting year to watch the horizontal expansion of customer interest.

Great. Thanks, Mark.

Thank you.

Thank you, Mr. Cassidy. Our next question is from the line of Tom O'Malley with Barclays. Please proceed.

Good afternoon, guys, and thanks for taking the question. I just wanted to hit on the AI topic again. Obviously, very important in these times. Is it possible -- you obviously have some exposure to “AI’ in the Specialty Memory business and then you have some to Penguin. If you were to assign just a percentage in terms of what you view as AI as a percent of total revenue today, would you be able to size that for us?

That's a tougher one for us to kind of do that. Let me -- in my script, I talked about our deployment of GPUs at scale, as kind of roughly over 50,000 GPUs. And if you kind of play that out in the industry, you can see that level of scale. It's kind of hard, because I've got to like take liberty with definitions when we talk about an AI system and that include the networking component, the storage component, service component or is it just the platform and so we don't really have a good metric and I just don't want to mislead you. But the index I just gave you of 50,000 NVIDIA GPUs under management, that's -- that should be telling that we're looking to continue to grow and invest in that area. But, Ken will take a little bit more…

Yes, Tom, it's a good question. I think if you look at it, and as Mark mentioned, it's tough to decipher one for one, but if I look at systems that either use a lot of GPUs or systems that in Jack's business and Specialty Memory that are going into the data center for these generative AI applications and the like. My guess is that number for our fiscal ‘23 is probably trending north of $250 million in aggregate, could be north of $300 million if we look at it on a blended basis.

So you're saying fiscal ‘23, the AI exposure is greater than $300 million.

I'd say two greater than $250 million, approaching the $300 million.

Got it, helpful. And then Mark, you made the comment that Q2, looking back, may have been the bottom for the LED business. Could you talk about what you've seen in terms of changing trends there. Obviously there were some tough times in China, but could you just remark on what's gotten better?

Sure. I think the primary index for us has been, despite some continued channel burn, the customer design activity, which is a good precursor and index for us, the customer design activity is up and positive. And look, I don't want to celebrate too much from the bottom, but revenue quarter-over-quarter [three, two] (ph) was up 15%-ish and that at a time where there was still more channel burn. So, we're not -- it's not like we're building inventory in the channel to achieve revenue growth. We got good revenue growth in the bottom at a time where the channel is still burning some revenues. So I would just say overall, that coupled with the design activity, is very favorable. The other thing I would say is, this LED market environment is not germane or specific to Cree. As a matter of fact, I would encourage you to benchmark Cree's performance relative to the competitive landscape. Cree has done a great job and it's just been a tough business very similar to the memory environment, Tom. But Cree has done a great job navigating some really tough headwinds during the macroeconomic environment they faced and I'm just really impressed how they've kind of navigated and gotten to today.

Helpful and then just if I could sneak in one more. Traditionally, you see some very strong seasonality for your IPS business into the November quarter. You commented in your slides for IPS that you just completed the second phase with Meta on the SuperCluster. Is there any reason why November seasonality would be any different than what you've seen historically there just given some of the programs have wound down?

Well, it's kind of a loaded question, but I'm going to try to answer, but it's a tough question being that. The timing of these deployments, when you're growing like we've grown, because we've been able to navigate a lot, the timing of somebody's deployments, not just the budgeting piece upfront with our customers or even the large-scale customers and other allocating budgets, but also just once you get the orders, when those get installed and how they get installed, the supply-chain challenges, I mean, the supply-chain has improved, broadly. But if you look at certain key technologies and networking component of these installations, the GPU availability at the leading-edge GPUs in the industry, I just can't commit that everything is going to be the same as the prior year, given all the factors that I just went through, lumpiness, concentration, deployment timing, capital budgets, supply-chain. We are long-term believers. We think we're in a really good place, but I want to stop short of calling quarters that far in advance.

Really appreciate all the color. Thank you guys.

Thank you.

Thank you, Mr. O'Malley. The next question is from the line of Sidney Ho with Deutsche Bank. You may proceed.

Thank you. It's great to hear about the demand strength that you guys have seen in AI. So a couple of quick questions here. One, do you see the demand for these AI servers to be crowding out spending on traditional servers, meaning it's coming out from the same fixed budget, but that may not be impacting you guys? And the second question I has, if you could -- if you can give us an update on your Penguin on demand solution, that would be great. But, what kind of customer appetite are you seeing for consumption model versus the traditional CapEx model, particularly as it relates to HPC and AI market?

Can you just repeat, restate the first part of the question?

Yes, the first part is just trying to figure out, everybody is spending a lot more money in AI and of course, you see a big uptick in the demand strength. But do you see that as the -- basically coming from the fixed IT budget that some of the money is being pulled from traditional spending -- spending on traditional servers?

I'm not sure that I can really give you a definitive answer there. I guess, I would say, we have seen in fiscal ‘23 money reallocated when there is commercial success in the deployment in the production side of the house for these type of systems. As far as next year's budget process and obviously our fiscal years off-cycle with the budget process of our largest enterprise customers, I think If I had to guess, I would say, yes, probably, there would be some shifting of budgets toward this. But, you're talking about different type of customer environments and the ultra-scale, hyperscale customers, they obviously have a lot of infrastructure, they have to build-out, not just AI, but just pure cloud resource capabilities. And in some of the more newer verticals, I think the map heads up and we got to remember that we're not quite out-of-the woods on the overall macroeconomic headwinds. And so I'm guessing that there'll be money that needs to be shifted appropriately, but it's just such a broad question that I want to just cautiously answer a little bit. The second thing on [Multiple Speakers] sorry go ahead.

Yes, Penguin on demand.

Yes, and the Penguin on demand piece, for us, is something that we're kind of shifting slightly our model on demand. We announced this year in fiscal ‘23, our partnership with Google Cloud as an HP partnership model with them. And so while we do have cycles being used on our part, Penguin on-demand platform, our strategy really is to leverage some of their capabilities in infrastructure with our Google partnership and in addition to that, leverage our control-plane software, the skilled cloud software platform that allows people to run their workloads in a hybrid environment, both on-prem and in the cloud. And just really focused on their workload optimization, not necessarily carrying where that workloads being processed.

Okay, great. Maybe a follow-up question. Looking at the Brazil memory divestiture, you talked about EPS being neutral to slightly positive. Can you talk about what's included in that assumption in terms of the use of proceeds from the divestiture and kind of relate to that now that you have divested the Brazil Memory business to focus on enterprise solutions, how are you thinking about other non-enterprise driven businesses, maybe you can touch on your M&A strategy going-forward, that will be great. Thank you.

Thank you. Yes, sure, good question, Sidney. So if we look at the accretion dilution, one, we said on the formal portion of the transcript that we would expect the gross margin accretion would be north of 200 basis-points and the transaction-based on the current run rates to be kind of neutral to slightly positive to our non-GAAP EPS. That does not include what the net proceeds that we would receive. And so it is just based on the current state and run-rate of the Brazil business. If we look at the net proceeds, I think this is your second question, in terms of how we look at and where we will deploy that, we said, we really have. I would say three to four vectors in terms of how we think about capital allocation. First and foremost, continue to invest in the business. I think Mark highlighted on the his formal comments, continued investment in the IPS segment. There's lots of opportunities as you could imagine with our platform and our ability to grow longer-term in that segment. Number two. It is to look at M&A and inorganic opportunities similar to Stratus, which we closed here earlier this fiscal year. Those have been great additions to our overall business line. Number three is returning capital back to shareholders. If you looked over the last 12 months or so, we've returned about $58 million in terms of share repurchases. And then also I would say, four, is looking at reducing our gross debt levels. Our net-debt levels are very reasonable, but just looking at potentially reducing gross debt. So in terms of the net proceeds from Brazil, once that transaction closes, we would look at those opportunities.

Thank you, Mr. Ho. Our next question is from the line of Raji Gill with Needham and Co. You may proceed.

Yes, thank you and congrats as well on great results. A question again on the AI business, the IPS business. So you mentioned it grew 31% year-over-year excluding Stratus. When we're thinking about the overall market size for this opportunity, is there a way to think about it from kind of a bottoms up view? How are you kind of valuing the overall market opportunity? Are you kind of valuing it in terms of potential projects based on certain verticals that you're targeting. You mentioned conceptually some of these vertical here you're focusing on, financial services, healthcare. Just any kind of thoughts on long-term in terms of how you're identifying and quantifying the size of the market and how that leads into your pipeline of business that you want to try to go after?

Sure, I'll start and let Ken jump in as warranted. Raji, thanks for the question. I think the best way to think about it is that there is a broad market opportunity that you can size up AI and I would -- one way we look at it is there's kind of those large companies that will deploy the technologies and systems and not really need or want initial outside services and capabilities that we'd like to provide. And as I've mentioned before, and you can see from a comparison on where our gross margins are relative to our competitors, we're just not going to play that game. That's just not a good game for us to be in. That's not what we're good at. And so, I'd like to think of us as a subset of the AI market where we're really playing the role of not just the system designer and developer, but the service and trusted advisor consulting type model that we're full-service end-to-end. And that's a small subset of -- smaller subset of the bigger pie, because there are large companies that are looking to deploy with their in-house capabilities and that's something that quite frankly some of our customers will eventually look for us to do more or don't build their own capabilities and we have to kind of continue to bring on new customers that way. And that's the dynamic nature of the business. There's so much activity that way that we're excited about, our go-forward business. But, we're not the whole AI market and I want to be transparent. We're going to be disciplined because at the end-of-the day, I just don't want to take us through a hardware-only business. That's not going to be one we're going to be very profitable nor are we going to be as competitive as we are in the core trusted adviser model.

Got it. I think that's really helpful to try to understand the distinction between your model versus say others. Just with respect to the competitive advantage and again you mentioned your focus being on more, kind of, smaller customized solutions. Where do you think, kind of, Penguin Computing ultimate competitive advantage is relative to the other competitors and can you talk about who are you competing with head-to-head. Is that changing at all, given kind of the deployment of AI inside companies? Are you seeing the competitive landscape change? Any thoughts in terms of, kind of, Penguin Computing competitive advantage, and why are you winning. And if you do lose, what are the reasons why you might lose? Thank you.

Yes, let me do my best with that. And then if I don't, get to everything just kind of re-ask what I miss. But that’s how we look at it internally. If I kind of broke down the pyramid of engagements that we have and that we're talking the type of customers we have, the top-tier or the major enterprises looking to deploy AI in the middle tier might be again significantly large enterprises, but not necessarily with the spend at the level of a Tier 1 project. And so it might be considered like a middle tier project. And then, of course, there's kind of, I would say, early-stage technology deployment, but really more for test of applications and really kind of getting their feet wet. So if you think at three different tiers, we look at each of the opportunities and how we play in them. I think the differentiation and you asked about competitors. The primary competitors we see out there are Dell, HP, Supermicro. And each one of those is a large-scale hardware player, with margins substantially lower than us in the business today. Now, I'm not here to try to argue whose models per se is better. It's just what we're good at and what we're focused on. Of course, the three companies I mentioned are not the only companies, but they are the examples of what we compete against. And if someone is trying to roll their own internal AI deployments and it's a hardware-only game, with those folks, that’s the line of business, that's the margin structure they are set-up to win on. For us, what we're good at and it comes with 25-years of history of deploying these type of systems and like, we're not talking about one server and generic software application. Just yesterday, I was over -- we have one of the earliest deployments of liquid immersion technology for a big customer of ours. That's in our lab, and our differentiation is we're out in front of the technology, we're learning about it. So we can bring it to market and we can design it for an environment that we've seen before, because over 25-years, a lot of organization, know-how. So whether it'd be on the design side, the actual deployment side, when you think of datacenters and the complexity of connecting massive amount of compute power with the memory, with the storage, with the networking and making sure the right power infrastructure is in place, this is not easy. It's probably just understated and with 25-years of history of this type of experience and as Ken mentioned, and I mentioned in my script, we've had some of the largest AI deployments in the world to-date. And so when you combine all that, our value-add, yes, we know-how to manufacture these products and systems, sure, but our value-add is how to design them for customer environment, how to deploy it and how to manage it.

I appreciate that from that insight. And just last question, Ken, just on the model. You mentioned that the IP business ex-Stratus grew 31% so maybe just kind of do the basic math, it looks like Stratus might have been around like $45 million, up in the quarter. Is that kind of the run-rate that you guys are thinking about, $45 million a quarter. And are there -- how would you describe some of the growth drivers in the Stratus business?

Yes, so I mean, that business has been just to put it in perspective, last quarter, it did closer to $41 million, this quarter, you are right, it's closer to that $45 million, $46 million range. So it does move around a little bit quarter-to-quarter to some extent based on some of these hardware deployments relative to Stratus specifically as well. But if we look at it, where has that business has been growing. It's been growing, primarily at the edge where they have a leading solution for high availability fault tolerant applications. And so, what does that mean and why is that important? If you are trying to run an application and it can't go down for more than five minutes a year, you go to Stratus and those types of applications can be in the oil refining area, oil, and gas. They can be in retail. They can be on oil rigs, can be in water treatment plants. But areas where you require a business-critical compute system to run those applications is why customers go to Stratus. That's where that business has been growing over the last 12 months.

And the follow-on, I'd just like to add one more comment, Raji, if that's okay. We've said all along that, sure, AI and the HPC environment on-premise is where a lot of the early movement is going to be. But over the long-term, we believe AI will be more broadly deployed throughout the enterprise and certainly at the edge. And what Ken just described is going to give us an opportunity to extend the AI and the enterprise customer relationships we have.

Thank you, Mr. Gil. Our next question is from the line of Mark Lipacis with Jefferies. You may proceed.

Hi, thanks for taking my question. Mark, for the IPS business, you described it as lumpy. Can you describe the process that you expect to undertake that, kind of, transition that to a less lumpy business? And I'm wondering, is that each time you do a project, it ends up being a kind of a recurring service or management stream over multi-year period. And then these just kind of stack-up on top of one another for each project that you do and then -- is that it or is it like you become the in-house? Go ahead, sorry.

Thanks very much for that question. It's a great question and it really reinforces the differentiation I think we are achieving with our capabilities and the byproduct of that should help us on some of the lumpiness over the long-term. But as you said, because of our strategy, our aspiration is to build out these services over time that become more and more kind of recurring and predictable. And remember we're early on, we're two years into this guys. I mean, if you look at, the services have grown dramatically and we're excited about that. But our focus is on, if we select the right engagements with our customers, we will be continuing to build that over time. And right now, given that we have been growing so substantially, yes, services are up, but we're only going to be able to do that with continued execution and that's why when I had been asked earlier on this call how we differentiate ourselves? Well because of our capabilities and our skillsets, we're going to tend to select customers that value that as opposed to hardware-only transactions that don't give us that stability. They tend to be one-offs, it's going to take us time to build that guys. I mean, if you think about where we've come from, I mean, with the divestiture of Brazil, we've got a business that is now a compute story, with gross margin percentages dramatically up, operating income performance is pretty stellar through a hard difficult cycle. I mean, the memory business has been, this is about as bad as it's been in 15-years in the memory business. Generating cash and investing in this new transformation and we're a long-term company builders guys, we're not trying to one-off people on a quarter-by-quarter basis. We are excited about this opportunity. The Specialty Memory business really plays well into this enterprise solutions for AI, machine learning and data analytics because the biggest bottleneck right now in high-performance compute AI is the memory connectivity and I think SMART Modular is a leader. So if you put this all together, we have a pretty bright future. It might not be perfect every quarter, because of the lumpiness, but as we design and get our customer relationships more aligned to a full engagement model with solutions and services over the long-term, I think we can work out some of the lumpiness and concentration issues that we've had in the past.

Got you. And appreciate you're only a couple of years into this. I mean, do you have like the starting base of services and management and would you care to break it out?

I think Ken talked about it, and I'll let him clarify in terms of the percentage of our topline revenue. Now remember this, I think this -- I better not go, but services are up a multiple -- a big multiple four to five times since we started here three years ago.

Yes, I think even if you look over the last nine months or so, I think services are up about year-to-date, so the first-nine months versus the first-nine months last year are up about 60% year-over-year. Now within that, there are point in time services like logistics and design and implementation. And then there are ongoing services that we've been growing over time as well.

Got it, thank you, very helpful.

Mark, one more comment, as you asked the question. I think -- I think for us and this is where I'm super committed in working with the team is that the discipline is going to be stay away from the hardware bidding one-offs. Do what you're doing, stick to your knitting and do what you're good at and we can certainly design great system. We've proven that. But the question is, does the customer value the overall offering and that's going to be something we continue to focus on, as we continue to expand and invest in IPS.

Got you. Thank you.

Thank you.

Thank you, Mr. Lipacis. Our last question is from the line of Brian Chin with Stifel. You may proceed.

Hi, great, thank you. Good afternoon, nice job. And thanks for letting us ask a few questions. Maybe backtrack to Brazil, I guess, any consideration to reporting Brazil in discontinued ops, but I guess more importantly, I'm also little surprised by the limited EPS impact when you strip out Brazil. So basically, Brazil was operating at a slight loss in Specialty Memory. Op margins seemed to be in the low-to mid-teens. But also thinking across the cycle, what the op margins in Brazil when the business was operating at peak revenue run rates maybe going back four to five quarters ago?

Yes, so, I think if you look at the Brazil business and where it is today, we tried to outline the first three quarters, Brian and also where the current run-rate was as of Q3, which was in that $39 million range in terms of revenues. So not a surprise in the sense that above the margin profile -- gross margin profile for that business is lower than where it was, call it a year-ago. But this has always been a business that has had the lowest margins or the lower-end of the margin profile for SGH, if you look it on a historical basis and well below the corporate average. Even at peak times, it's been well below the corporate average. And where we've done better in terms of both margin profile on the gross margin size and operating margin profile is in the Specialty segment where we are targeting Enterprise Solutions and higher-value added solution for our customer-base. I don't know if that answers the question, but that's where -- where the business is today.

Okay, fair enough. And then maybe kind of be a bit direct to the point on IPS. I guess, broadly speaking, are you starting to rebuild the funnel there in IPS and then rather than asking you about a quarter, I'll just go ahead and ask about the full-year. So how are you thinking about IPS growth rates in fiscal '24 based on current visibility?

Well, I think look, we're seeing a lot of activity right now. Brian, it's difficult for all the factors I mentioned at the front-end of the call, meaning the timing of budgets and deployments and how we're working on that, we are long-term bullish. We're not ready to forecast the year at this point, just given the timing of our fiscal year and the budgeting process at our customers. But the budgets are kind of being worked on. We've got tremendous activity. There are some supply-chain issues that we're working through that as it relates to how that would impact future deployments, obviously the broader macro trends. I'm not sure we're out-of-the woods on the macroeconomic environment. So we're trying to be careful just to not overstate where things are. We're excited about our long-term obviously and will be kind of giving you more color as we get closer to our customers budgeting process and future Q1 and Q2 activity.

Yes, Brian, [Multiple Speakers] you asked about the disc ops. That -- we will take that because the deal was announced here in our Q4. We will evaluate that as we head through the end of Q4, whether or not the Brazil business will be available for -- held as available-for sale/disc ops and we'll evaluate that as we exit Q4.

Okay, that makes sense. And then maybe just lastly, to hone in back on the discussion around AI, when you think about the duration of your sales cycle, I guess your sales, design, and implementation cycle, as well as those possible supply constraints, it’s something like the middle of next year be reasonable to maybe expect some of this upswing in AI engagement to translate into revenue?

I think that's fair as we sit here today and I'm not trying to over hedge, Brian, but I think that's fair based on what we're seeing in terms of some of the core technology lead times and manufacturing ramps and some of the newer launches in the industry. I'm sure you follow the industry, as well as we do and there's been some technology announcements and early customer shipping in some areas and from the market leaders in GPUs, for example. I would anticipate in the middle of next year we start to see a little bit more favorable conditions for availability of supply.

All right. That’s helpful. Thanks.

Thank you, Mr. Chin. That concludes the question-and-answer session. I will now turn the call over to Mark Adams for any further remarks.

Well, thank you all for joining today. We are continuing to be very positive about the business. If you look-back over the last three years, we're -- we feel like we're way ahead of where the transformation might have been, as we looked at starting in August of ‘20. A lot of good things going on here at the company. We're excited for both ourselves and our Brazil team on the path that we have for each other going in different directions, but supporting each other through the process. And we like the secular tailwinds we have in AI, machine-learning, and data analytics to drive our future and we appreciate you attending today's call. Thank you.

That concludes the SGH third quarter fiscal 2023 earnings call. Thank you for your participation. You may now disconnect your lines.