SanDisk Corporation (NASDAQ: SNDK), a global leader in flash storage solutions, today announced results for the first quarter ended March 29, 2015. First quarter revenue of $1.33 billion declined 12 percent on a year-over-year basis and decreased 23 percent sequentially.

On a GAAP(1) basis, first quarter net income was $39 million, or $0.17 per share, compared to net income of $269 million, or $1.14 per share, in the first quarter of fiscal 2014 and $202 million, or $0.86 per share, in the fourth quarter of fiscal 2014. First quarter GAAP results include a $61 million impairment charge for an in-process R&D project from the Fusion-io acquisition and $41 million of restructuring and other charges.

On a non-GAAP(2)(3) basis, first quarter net income was $134 million, or $0.62 per share, compared to net income of $330 million, or $1.44 per share, in the first quarter of fiscal 2014 and net income of $294 million, or $1.30 per share, in the fourth quarter of fiscal 2014. First quarter non-GAAP results include $41 million of restructuring and other charges. For a reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

“We are disappointed with our financial and operational performance and are quickly taking aggressive measures to regain the excellence in execution that we have delivered in the past,” said Sanjay Mehrotra, president and chief executive officer, SanDisk. “Our top priorities for 2015 are to strengthen our product roadmap and rebuild our momentum across the business. We are excited about the long-term opportunities available to us and believe we are uniquely positioned in the industry to deliver innovative solutions to our growing customer base.”

KEY FINANCIAL RESULTS

       

(in millions, except percentages and per share amounts)

GAAP (1)

    Non-GAAP (2)     Q1’15   Q1’14   Q4’14     Q1’15   Q1’14   Q4’14 Revenue     $1,332   $1,512   $1,735     $1,332   $1,512   $1,735 Gross profit $545   $751   $740 $574   $774   $780 percent of revenue     41%   50%   43%     43%   51%   45% Operating income $57 $425 $328 $198 $476 $419 percent of revenue     4%   28%   19%     15%   32%   24% EPS (3)     $0.17   $1.14  

$0.86

    $0.62   $1.44   $1.30  

OTHER FINANCIAL INFORMATION

        (in millions)     Q1’15   Q1’14   Q4’14 Cash, cash equivalents, short and long-term marketable securities     $ 4,394   $ 6,318   $ 5,023   Less: aggregate principal amount of convertible senior notes outstanding     $ 2,497   $ 2,500   $ 2,428   Net cash (4)     $ 1,897   $ 3,818   $ 2,595   Net cash provided by operating activities     $ 309   $ 382   $ 488

 

Less: acquisition of property and equipment, net     $ 98   $ 35   $ 67   Less: net investment and notes receivable activity with Flash Ventures     $ 11   $ —  

($

55)

 

Free cash flow (5)     $ 200   $ 348   $ 476    

NEWS HIGHLIGHTS

  • SanDisk launched a new category of “Big Data Flash” with the launch of the InfiniFlashTM System, a next generation storage platform offering flash at massive scale and at a breakthrough cost metric for the customer.
  • SanDisk announced its 48-layer, second-generation 3D NAND planned for use in a broad range of solutions from removable products to enterprise SSDs.
  • SanDisk introduced iNAND® 7132, a 1Y-nanometer 3-bit-per-cell (X3) embedded storage solution for flagship mobile devices. The iNAND 7132 storage solution uses SmartSLC to drive near single-level-cell performance for high-performance, data-intensive applications.
  • SanDisk introduced the 200GB* SanDisk Ultra® microSDXC™ UHS-I card, the world’s highest capacity microSDTM card for use in mobile devices.
  • SanDisk introduced a suite of robust, automotive grade NAND flash solutions designed for next-generation ‘connected cars’ and automotive infotainment systems.
  • SanDisk announced today a second quarter 2015 dividend of $0.30 per share of common stock, payable on May 26, 2015 to stockholders of record as of the close of business on May 4, 2015.

CONFERENCE CALL

SanDisk’s first quarter of fiscal 2015 conference call is scheduled today at 2:00 P.M., Pacific Time, Wednesday, April 15, 2015. The conference call will be webcast and can be accessed live, and throughout the quarter, at SanDisk’s website at www.sandisk.com/IR. To participate in the call via telephone, the dial-in number is 719-325-4858 and the password is 3263627. Participants are encouraged to dial in at least 10 minutes before the call commences. A copy of this press release will be furnished to the Securities and Exchange Commission on a current report on Form 8-K and will be posted to SanDisk’s website prior to the conference call.

ABOUT SANDISK

SanDisk Corporation (NASDAQ: SNDK), a Fortune 500 and S&P 500 company, is a global leader in flash storage solutions. For more than 25 years, SanDisk has expanded the possibilities of storage, providing trusted and innovative products that have transformed the electronics industry. Today, SanDisk’s quality, state-of-the-art solutions are at the heart of many of the world's largest data centers, and embedded in advanced smartphones, tablets and PCs. SanDisk’s consumer products are available at hundreds of thousands of retail stores worldwide. For more information, visit www.sandisk.com.

©2015 SanDisk Corporation. All rights reserved. SanDisk, the SanDisk logo, iNAND and SanDisk Ultra are trademarks of SanDisk Corporation, registered in the United States and other countries. InfiniFlash is a trademark of SanDisk Corporation. microSDXC and microSD are trademarks of SD-3C, LLC.

This news release contains certain forward-looking statements, including those regarding our business prospects, our intended financial, operational and strategic plans and priorities, our future performance, our customer base and new products and technologies, that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate.

Risks that may cause these forward-looking statements to be inaccurate include, among others:

  • failure to effectively or efficiently execute on our financial, operational or strategic plans or priorities, which may change, may not have the effects that we anticipate or otherwise be successful on the timeline that we expect or at all or may have unanticipated consequences;
  • competitive pricing pressures or product mix changes, resulting in lower average selling prices, lower revenues and reduced gross margins;
  • excess or mismatched captive memory output, capacity or inventory, resulting in lower average selling prices, financial charges and impairments, lower gross margin or other consequences, or insufficient or mismatched captive memory output, capacity or inventory, resulting in lost revenue and growth opportunities;
  • weakness in demand in one or more of our product categories, such as embedded products or SSDs, or adverse changes in our product or customer mix;
  • potential delays in product development or lack of customer acceptance and qualification of our solutions, including on new technology nodes, particularly OEM products such as our embedded flash storage and SSD solutions;
  • failure to successfully sell enterprise solutions on the timelines or in the quantities we expect or transition our enterprise customers to our leading edge solutions;
  • inability to develop, or unexpected difficulties or delays in developing or ramping with acceptable yields, new technologies or the failure of new technologies to effectively compete with those of our competitors;
  • our 15-nanometer process technology, our X3 NAND memory architecture, our 3D NAND technology or our solutions utilizing these new technologies may not be available when we expect or perform as expected;
  • failure to manage the risks associated with our ventures and strategic partnerships with Toshiba;
  • inability to achieve the expected benefits from acquisitions in a timely manner, or at all; and
  • the other risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our Annual Report on Form 10-K for the fiscal year ended December 28, 2014.

All statements made in this news release are made only as of the date of this release. We undertake no obligation to update the information in this release in the event facts or circumstances change after the date of this release.

(1) GAAP represents U.S. Generally Accepted Accounting Principles.

(2) Non-GAAP represents GAAP excluding the impact of share-based compensation, amortization and impairment of acquisition-related intangible assets, non-cash economic interest expense associated with the convertible senior notes, non-cash change in fair value of the liability component of the convertible senior notes due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments.

(3) Non-GAAP shares are adjusted for the impact of expensing share-based compensation and include the impact of offsetting shares from the call options related to the convertible senior notes.

(4) Net cash is defined as cash, cash equivalents, short and long-term marketable securities, minus the aggregate principal amount of the convertible senior notes outstanding.

(5) Free cash flow is defined as net cash provided by operating activities less (a) acquisition of property and equipment, net, and (b) net investment and notes receivables activity with Flash Ventures.

* 1GB=1,000,000,000 bytes. Actual user storage may be less.

  SanDisk Corporation Preliminary Condensed Consolidated Statements of Operations (in thousands, except per share amounts, unaudited)       Three months ended   March 29, 2015 March 30, 2014     Revenue $ 1,332,241 $ 1,511,945   Cost of revenue 762,483 741,039 Amortization of acquisition-related intangible assets   24,756     19,616   Total cost of revenue   787,239     760,655   Gross profit 545,002 751,290   Operating expenses: Research and development 222,726 198,829 Sales and marketing 101,820 76,972 General and administrative 48,047 48,669 Amortization of acquisition-related intangible assets 13,681 1,646 Impairment of acquisition-related intangible assets 61,000 ― Restructuring and other   40,541   ―   Total operating expenses   487,815     326,116   Operating income 57,187 425,174   Other income (expense), net   (23,570 )   (15,635 )   Income before income taxes 33,617 409,539   Provision for (benefit from) income taxes (5,408 ) 140,591       Net income $ 39,025   $ 268,948     Net income per share: Basic $ 0.18 $ 1.19 Diluted $ 0.17 $ 1.14   Shares used in computing net income per share: Basic 211,428 225,845 Diluted 224,049 234,914   SanDisk Corporation Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1) (in thousands, except per share data, unaudited)       Three months ended March 29, 2015 March 30, 2014   SUMMARY RECONCILIATION OF NET INCOME:   GAAP NET INCOME $ 39,025 $ 268,948 Share-based compensation (a) 41,410 30,030 Amortization of acquisition-related intangible assets (b) 38,437 21,262 Impairment of acquisition-related intangible assets (c) 61,000 ― Convertible debt interest (d) 22,134 20,964 Income tax adjustments (e) (68,319) (11,174) NON-GAAP NET INCOME $ 133,687 $ 330,030   GAAP COST OF REVENUE $ 787,239 $ 760,655 Share-based compensation (a) (4,062) (2,610) Amortization of acquisition-related intangible assets (b) (24,756) (19,616) NON-GAAP COST OF REVENUE $ 758,421 $ 738,429   GAAP GROSS PROFIT $ 545,002 $ 751,290 Share-based compensation (a) 4,062 2,610 Amortization of acquisition-related intangible assets (b) 24,756 19,616 NON-GAAP GROSS PROFIT $ 573,820 $ 773,516   GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 222,726 $ 198,829 Share-based compensation (a) (21,043) (15,675) NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 201,683 $ 183,154   GAAP SALES AND MARKETING EXPENSES $ 101,820 $ 76,972 Share-based compensation (a) (9,535) (6,257) NON-GAAP SALES AND MARKETING EXPENSES $ 92,285 $ 70,715   GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 48,047 $ 48,669 Share-based compensation (a) (6,770) (5,488) NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 41,277 $ 43,181   GAAP TOTAL OPERATING EXPENSES $ 487,815 $ 326,116 Share-based compensation (a) (37,348) (27,420) Amortization of acquisition-related intangible assets (b) (13,681) (1,646) Impairment of acquisition-related intangible assets (c) (61,000) ― NON-GAAP TOTAL OPERATING EXPENSES $ 375,786 $ 297,050   GAAP OPERATING INCOME $ 57,187 $ 425,174 Cost of revenue adjustments (a) (b) 28,818 22,226 Operating expense adjustments (a) (b) (c) 112,029 29,066 NON-GAAP OPERATING INCOME $ 198,034 $ 476,466   GAAP OTHER INCOME (EXPENSE), NET $ (23,570) $ (15,635) Convertible debt interest (d) 22,134 20,964 NON-GAAP OTHER INCOME (EXPENSE), NET $ (1,436) $ 5,329   GAAP NET INCOME $ 39,025 $ 268,948 Cost of revenue adjustments (a) (b) 28,818 22,226 Operating expense adjustments (a) (b) (c) 112,029 29,066 Other income (expense) adjustments (d) 22,134 20,964 Income tax adjustments (e) (68,319) (11,174) NON-GAAP NET INCOME $ 133,687 $ 330,030   Diluted net income per share: GAAP $ 0.17 $ 1.14 Non-GAAP $ 0.62 $ 1.44   Shares used in computing diluted net income per share: GAAP 224,049 234,914 Non-GAAP (f) 216,842 229,508   SanDisk Corporation   Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1) (in thousands, unaudited)   Three months ended March 29, 2015 March 30, 2014 SUMMARY RECONCILIATION OF DILUTED SHARES:   GAAP 224,049 234,914 Adjustments for share-based compensation 220 296 Offsetting shares from call options (7,427) (5,702) Non-GAAP (f) 216,842 229,508 –––––––––––––––   (1)

To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), we use non-GAAP measures of operating results, net income and net income per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP financial measures are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because they are consistent with the financial models and estimates published by many analysts who follow us. For example, because the non-GAAP results exclude the expenses we recorded for share-based compensation, amortization of acquisition-related intangible assets related to acquisitions of Pliant Technology, Inc. in May 2011, FlashSoft Corporation in February 2012, Schooner Information Technology, Inc. in June 2012, SMART Storage Systems in August 2013 and Fusion-io, Inc. in July 2014, impairment of acquisition-related in-process research and development intangible assets, non-cash economic interest expense associated with the convertible senior notes, non-cash change in fair value of the liability component of the convertible senior notes due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments, we believe the inclusion of non-GAAP financial measures provides consistency in our financial reporting. In addition, our non-GAAP diluted shares are adjusted for the impact of expensing share-based compensation and include the impact of the call options which, when exercised, will offset the issuance of dilutive shares from the convertible senior notes, while our GAAP diluted shares exclude the anti-dilutive impact of these call options. These non-GAAP results are some of the primary indicators management uses for assessing our performance, allocating resources, and planning and forecasting future periods. Further, management uses non-GAAP information that excludes certain non-cash charges, such as share-based compensation, amortization of acquisition-related intangible assets, impairment of acquisition-related in-process research and development intangible assets, non-cash economic interest expense associated with the convertible senior notes, non-cash change in fair value of the liability component of the convertible senior notes due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments, as these non-GAAP charges do not reflect the cash operating results of the business or the ongoing results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies.

  (a)

Share-based compensation expense.

  (b) Amortization of acquisition-related intangible assets, primarily developed technology, customer relationships, and trademarks and trade names related to the acquisitions of Pliant Technology, Inc., FlashSoft Corporation, Schooner Information Technology, Inc., SMART Storage Systems and Fusion-io, Inc.   (c) Impairment of acquisition-related in-process research and development intangible assets related to the acquisition of Fusion-io, Inc.   (d) Incremental interest expense related to the non-cash economic interest expense associated with the convertible senior notes and the non-cash change in fair value of the liability component of the convertible senior notes due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017.   (e) Income taxes associated with certain non-GAAP to GAAP adjustments and the effects of one-time income tax adjustments recorded in a specific quarter for GAAP purposes are reflected on a forecast basis in our non-GAAP tax rate but not in our forecasted GAAP tax rate.   (f) Non-GAAP diluted shares are adjusted for the impact of expensing share-based compensation and include the impact of offsetting shares from the call options related to the convertible senior notes.   SanDisk Corporation Preliminary Condensed Consolidated Balance Sheets (in thousands, unaudited)       March 29, 2015 December 28, 2014   ASSETS Current assets: Cash and cash equivalents $ 649,940 $ 809,003 Short-term marketable securities 1,347,541 1,455,509 Accounts receivable, net 589,246 842,476 Inventory 713,053 698,011 Deferred taxes 162,298 180,134 Other current assets   290,908     214,992   Total current assets 3,752,986 4,200,125   Long-term marketable securities 2,396,950 2,758,475 Property and equipment, net 769,933 724,357 Notes receivable and investments in Flash Ventures 989,678 962,817 Deferred taxes 157,292 161,827 Goodwill 831,328 831,328 Intangible assets, net 437,858 542,351 Other non-current assets   125,196     108,677   Total assets $ 9,461,221   $ 10,289,957     LIABILITIES, CONVERTIBLE SHORT-TERM DEBT CONVERSION OBLIGATION AND EQUITY Current liabilities: Accounts payable trade $ 397,617 $ 404,237 Accounts payable to related parties 147,870 136,051 Convertible short-term debt (1) 880,653 869,645 Other current accrued liabilities 409,434 506,293 Deferred income on shipments to distributors and retailers and deferred revenue   255,102     274,657   Total current liabilities 2,090,676 2,190,883   Convertible long-term debt 1,211,097 1,199,696 Non-current liabilities   207,334     245,554   Total liabilities   3,509,107     3,636,133     Convertible short-term debt conversion obligation (1) 116,067 127,143   Stockholders' equity: Common stock 5,144,181 5,236,982 Retained earnings 876,252 1,499,149 Accumulated other comprehensive loss   (183,041 )   (208,072 ) Total stockholders' equity 5,837,392 6,528,059 Non-controlling interests   (1,345 )   (1,378 ) Total equity   5,836,047     6,526,681   Total liabilities, convertible short-term debt conversion obligation and equity $ 9,461,221   $ 10,289,957     ––––––––––––––– (1) The 1.5% Convertible Senior Notes due 2017 are convertible through June 30, 2015 as a result of the Company’s common stock price exceeding the trigger price set forth in the indenture. Accordingly, the carrying value of the notes is reported as short-term debt as of March 29, 2015 and will remain so while the notes are convertible. The Convertible short-term debt conversion obligation represents the difference between the carrying value of the convertible debt and the principal amount due in cash upon conversion.   SanDisk Corporation Preliminary Condensed Consolidated Statements of Cash Flows (in thousands, unaudited)       Three months ended March 29, 2015 March 30, 2014 Cash flows from operating activities: Net income $ 39,025 $ 268,948   Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes (965) 6,951 Depreciation 69,081 60,089 Amortization 83,374 72,598 Provision for doubtful accounts 330 (547) Share-based compensation expense 41,410 30,030 Excess tax benefit from share-based plans (8,865) (17,460) Impairment and other 63,709 ― Other non-operating (4,187) 1,020 Changes in operating assets and liabilities: Accounts receivable, net 252,899 86,689 Inventory (13,945) (42,117) Other assets (94,673) 54,547 Accounts payable trade (26,090) (36,546) Accounts payable to related parties 11,819 13,572 Other liabilities (104,057) (115,695) Total adjustments 269,840 113,131 Net cash provided by operating activities 308,865 382,079   Cash flows from investing activities: Purchases of short and long-term marketable securities (692,656) (1,266,899) Proceeds from sales of short and long-term marketable securities 1,045,097 1,015,605 Proceeds from maturities of short and long-term marketable securities 99,881 129,620 Acquisition of property and equipment, net (98,287) (34,517) Notes receivable issuances to Flash Ventures (100,499) (24,352) Notes receivable proceeds from Flash Ventures 89,693 24,352 Purchased technology and other assets (1,500) (869) Acquisitions, net of cash acquired ― 2,368 Net cash provided by (used in) investing activities 341,729 (154,692)   Cash flows from financing activities: Repayment of debt financing (68) ― Proceeds from employee stock programs 30,844 51,882 Excess tax benefit from share-based plans 8,865 17,460 Dividends paid (64,503) (51,560) Share repurchases (1) (783,899) (114,452) Net cash used in financing activities (808,761) (96,670) Effect of changes in foreign currency exchange rates on cash (896) (25)   Net increase (decrease) in cash and cash equivalents (159,063) 130,692   Cash and cash equivalents at beginning of period 809,003 986,246     Cash and cash equivalents at end of period $ 649,940 $ 1,116,938       ––––––––––––––– (1) Share repurchases include cash used to repurchase common stock and cash used to settle employee tax withholding obligations due upon the vesting of restricted stock units.   SanDisk Corporation Preliminary Quarterly Metrics                 Revenue Mix by Category (1) % of revenue (unaudited) Percentages may not add to 100% due to rounding   Q1'14   Q2'14   Q3'14   Q4'14   Q1'15 FY'14   Embedded (2) 20% 19% 24% 26% 25% 23%   Removable (3) 40% 40% 38% 33% 38% 38%   Client SSD Solutions (4) 22% 21% 17% 16% 13% 19%   Enterprise Solutions (5) 6% 8% 10% 15% 14% 10%   Other (6) 11% 12% 11% 10% 10% 11%   Total Revenue 100% 100% 100% 100% 100% 100%  

(1)Revenue by category is estimated based on analysis of the information the company collects in its sales reporting processes.

(2)Embedded includes products that attach to a host system board. (3)Removable includes products such as cards, USB flash drives and audio/video players. (4)Client SSD Solutions includes SSDs used in client devices and associated software. (5)Enterprise Solutions includes SSDs, system solutions and software used in datacenter applications. (6)Other includes wafers, components, accessories and license and royalty.       Revenue Mix by Channel         % of revenue (unaudited) Q1'14   Q2'14   Q3'14   Q4'14   Q1'15 FY'14   Retail 35% 33% 32% 31% 35% 33%   Commercial (1) 65% 67% 68% 69% 65% 67%   Total Revenue 100% 100% 100% 100% 100% 100%   (1)Commercial includes revenue from OEMs, system integrators, value-added resellers, direct sales and license and royalties.   SanDisk Corporation Preliminary Quarterly Metrics                 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q/Q Change in ASP/Gigabyte -3% -16% -3% -4% -10%   Y/Y Change in ASP/Gigabyte -7% -26% -26% -24% -29%   Q/Q Change in Gigabytes Sold -10% +31% +9% +4% -15%   Y/Y Change in Gigabytes Sold +20% +51% +43% +32% +24%   Average GB/Unit Capacity 13.9 14.1 16.5 22.3 20.8   As of end of period: Factory Headcount (1)(3) 1,366 2,874 3,276 3,284 3,149 Non-Factory Headcount(2) 4,490 4,664 5,461 5,412 5,490 Total Headcount(3) 5,856 7,538 8,737 8,696 8,639  

 

 

(1) Reflects SanDisk China and Malaysia factory employees, excluding temporary and contract workers.

(2) Reflects SanDisk non-factory employees, excluding temporary and contract workers.

(3) During fiscal 2014, 1,505 employees were converted from contractor to employee status in SanDisk's assembly and test facility in China.

SanDisk CorporationInvestor Contacts:Jay Iyer, 408-801-2067jay.iyer@sandisk.comorBrendan Lahiff, 408-801-1732brendan.lahiff@sandisk.comorMedia Contact:Michael Diamond, 408-801-1108michael.diamond@sandisk.com

Sandisk (NASDAQ:SNDK)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Sandisk Charts.
Sandisk (NASDAQ:SNDK)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Sandisk Charts.