Smart Modular Technologies: Fiscal 3Q09 Financial Results

SMART Modular Technologies, manufacturer of memory modules, solid state drives, embedded computing subsystems, and TFT-LCD display products, reported financial results for the third quarter of fiscal 2009.

Net sales for the third quarter of fiscal 2009 were $91.6 million, compared to $109.1 million for the second quarter of fiscal 2009, and $167.6 million for the third quarter of fiscal 2008.

Gross profit for the third quarter of fiscal 2009 was $18.6 million, compared to $24.1 million for the second quarter of fiscal 2009, and $27.8 million for the third quarter of fiscal 2008.

GAAP net loss for the third quarter of fiscal 2009 was $2.4 million, or $0.04 per share, compared to a loss of $1.8 million, or $0.03 per share for the second quarter of fiscal 2009, and a loss of $11.0 million, or $0.18 per share for the third quarter of fiscal 2008.

Non-GAAP net income was $0.9 million or $0.01 per diluted share for the third quarter of fiscal 2009, compared to a net income of $4.1 million, or $0.06 per diluted share for the second quarter of fiscal 2009, and a net income of $4.9 million, or $0.08 per diluted share for the third quarter of fiscal 2008. Non-GAAP net income excludes certain charges such as those related to goodwill impairment, restructuring, and other one-time charges, stock-based compensation, and for the third quarter of fiscal 2009, charges in connection with corporate headquarters relocation.

Adjusted EBITDA for the third quarter of fiscal 2009 was $5.2 million, compared to $10.2 million for the second quarter of fiscal 2009, and $12.6 million for the third quarter of fiscal 2008.

Operating cash flow for the third quarter of fiscal 2009 was $20.0 million. Year-to-date operating cash flow was $44.6 million. Cash and cash equivalents at the end of the third quarter of fiscal 2009 was $139.2 million and long-term debt, due in 2012, remained at $81.3 million.

"For the third quarter of fiscal 2009, gross profit, and GAAP and non-GAAP EPS results met our guidance as careful control of expenses in combination with a favorable mix of business and lower taxes more than offset the impact of the decline in net sales," commented Iain MacKenzie, President and CEO of SMART.

"Earlier this month, we were proud to announce our XceedIOPS PCIe SSD, further demonstrating our continued investment and development in support of the growing enterprise solid state storage business," continued Mr. MacKenzie. "This collaborative effort between SMART and Marvell involves multiple facets, which include research and development, product technology, packaging, sales, manufacturing and logistics. We believe that our XceedIOPS PCIe addresses the top three requirements in enterprise storage moving forward: increased performance, reduced power consumption and lower dollars per IOPS. Customer sampling is expected to begin this quarter with production volumes expected to begin in calendar Q4. The product joins our extensive portfolio of SSDs available today supporting customers in the defense/aerospace, industrial, embedded, telecom/datacom, enterprise and other OEM markets."

"On the DRAM portion of our business, we see the industry working towards the introduction of the next-generation DDR3 module for servers, and with our comprehensive suite of products, we believe that we are well-positioned to capture a meaningful portion of this market. The DDR3 ramp is underway, and the adoption of Intel’s Nehalem processor architecture across multiple platforms, combined with the diminishing price premium of DDR3 over DDR2, bode well for our future success on this front. In addition, we expect that the recent introduction of AMD’s Istanbul processor should generate growing demand for our high density DDR2 modules," added Mr. MacKenzie.

Business Outlook
The following statements are based upon management’s current expectations. These statements are forward-looking, and actual results may differ materially. The Company undertakes no obligation to update these statements.

For the fourth quarter of fiscal 2009, SMART estimates net sales will be in the range of $90 million to $100 million, gross profit in the range of $17 million to $19 million, and net (loss) per share will be in the range of ($0.02) to ($0.01) on a GAAP basis. On a non-GAAP basis, excluding charges related to stock-based compensation, the Company expects net income per diluted share will be in the range of $0.00 to $0.01.