Penguin Solutions, Inc. (PENG)

Interest coverage

		Aug 31, 2024	Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	-2,789	-3,092	66,826	-15,124	24,360
Interest expense	US$ in thousands	28,378	36,421	24,345	17,141	15,000
Interest coverage		-0.10	-0.08	2.74	-0.88	1.62

August 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $-2,789K ÷ $28,378K
= -0.10

The interest coverage ratio for Penguin Solutions, Inc. exhibits significant variability over the period from August 31, 2020, to August 31, 2024. In the fiscal year ending August 31, 2020, the company demonstrated an interest coverage ratio of 1.62, indicating it earned approximately 1.62 times its interest expenses, suggesting a modest capacity to meet interest obligations.

However, the ratio declined markedly in the subsequent year, reaching a negative value of -0.88 as of August 31, 2021. A negative interest coverage ratio implies that the company's earnings before interest and taxes (EBIT) were insufficient to cover interest expenses, potentially indicating financial distress or substantial losses during that period.

In the following year, the interest coverage ratio improved substantially to 2.74 by August 31, 2022. This rebound suggests that the company's earnings before interest and taxes increased sufficiently to cover its interest expenses almost 2.7 times, pointing toward a period of improved financial performance and decreased risk of insolvency regarding interest obligations.

Nevertheless, the trend did not sustain, as the ratio again turned negative, recording -0.08 as of August 31, 2023, and further declining to -0.10 by August 31, 2024. The negative ratios in these latter years imply ongoing challenges in generating adequate earnings to cover interest expenses, which may reflect deteriorating operating performance, increased leverage, or other financial strains.

Overall, the fluctuating interest coverage ratios indicate that Penguin Solutions, Inc. experienced periods of both relative financial stability and significant stress concerning its ability to service interest obligations, with recent years showing persistent negative coverage ratios suggestive of financial difficulties.