SanDisk: Fiscal 1Q10 Financial Results

SanDisk Corporation announced results for the first quarter ended April 4, 2010.

Total first quarter revenue of $1.1 billion increased 65% on a year-over-year basis and decreased 12% on a sequential basis. Net income, in accordance with U.S. Generally Accepted Accounting Principles (GAAP), was $235 million, or $0.99 per diluted share, compared to GAAP net loss of ($208) million, or ($0.92) per share, in the first quarter of 2009 and GAAP net income of $340 million, or $1.45 per diluted share, in the fourth quarter of 2009.

On a non-GAAP basis, which excludes the impact of share-based compensation expense, amortization of acquisition-related intangible assets, non-cash economic interest expense associated with the cash-settled convertible note, and related tax adjustments and valuation allowance, first-quarter net income was $225 million, or $0.95 per diluted share, compared to a net loss of ($108) million, or ($0.48) per share, in the first quarter of 2009 and net income of $277 million, or $1.18 per diluted share, in the fourth quarter of 2009. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

“We delivered SanDisk’s first ever billion dollar Q1 in total revenue. This performance was driven by several factors including our OEM business which grew to 63% of product revenues balancing out Q1 retail seasonality, and mobile product sales which more than doubled from this time last year. Total gross margin of 46% was achieved through a combination of a stable pricing environment, excellent cost reduction and our increasingly diversified customer base. With the year off to a record start, SanDisk is poised to benefit from flash memory demand in growth markets in 2010 and beyond,” said Eli Harari, Chairman and CEO.

First quarter 2010 metrics and highlights:

• Total revenue was $1.1 billion, up 65% year-over-year and down 12% sequentially. Product revenue was $993 million, up 69% year-over-year and down 13% sequentially. License and royalty revenue was $93 million, up 31% year-over-year and down 6% sequentially.
• Total gross margin, product gross margin and operating income compared on a year-over-year and sequential basis are shown in the table below:

• Cash flow from operations was $328 million and free cash flow was $329 million.
• Total cash and equivalents, short and long-term marketable securities at the end of the first quarter were $3.30 billion compared to $2.38 billion at the end of the first quarter of 2009 and $3.02 billion at the end of the fourth quarter of 2009.
• Average price per gigabyte sold remained unchanged year-over-year and declined 7% sequentially.

Other key announcements:

• SanDisk introduced its 64 gigabyte SanDisk iNAND Embedded Flash Drives based on 3-bit-per-cell NAND flash technology, that can be used for boot, system code and mass storage functions in mobile phones and portable devices.
• SanDisk began shipping its highest capacity SD card, the 64 gigabyte SanDisk Ultra SDXC card, that is capable of up to 15 megabytes/sec read speed and has a Class 4 speed rating, designed for capturing and storing massive 1080p High-Definition video files.
• SanDisk began shipping its SanDisk G3 Solid State Drives to retailers in North America and Europe at capacities of 60 and 120 gigabytes.
• SanDisk began shipping the industry’s highest capacity 32 gigabyte microSDHC card for mobile phones.