Smart Modular Technologies: Fiscal 4Q10 Financial Results

(in US$ millions)	4Q09	4Q10	FY09	FY10
Revenues	99.8	218.7	441.3	703.1
*Growth*		120%		*-59*%
Net income (loss)	(0.3)	17.0	(11.4)	(52.6)

SMART Modular Technologies, Inc., manufacturer of memory modules and solid state storage products, reported financial results for the fourth quarter and fiscal year ended August 27, 2010.

Fourth Quarter Fiscal 2010 Highlights:

Net sales of $218.7 million
Gross profit of $49.8 million
GAAP diluted EPS of $0.26
Non-GAAP diluted EPS of $0.29
Adjusted EBITDA of $33.2 million

Fiscal 2010 Highlights:

Net sales of $703.1 million
Gross profit of $166.1 million
GAAP diluted EPS of $0.81
Non-GAAP diluted EPS of $0.87
Adjusted EBITDA of $106.4 million

Net sales for the fourth quarter of fiscal 2010 were $218.7 million, as compared to $201.2 million for the third quarter of fiscal 2010, and $99.8 million for the fourth quarter of fiscal 2009. Net sales for the fiscal year 2010 were $703.1 million, compared to $441.3 million for fiscal year 2009.

Gross profit for the fourth quarter of fiscal 2010 was $49.8 million, compared to $45.5 million for the third quarter of fiscal 2010, and $21.3 million for the fourth quarter of fiscal 2009. Gross profit for fiscal year 2010 was $166.1 million compared to $89.8 million for fiscal 2009.

On a GAAP basis, net income for the fourth quarter of fiscal 2010 was $17.0 million or $0.26 per diluted share, compared to $14.9 million or $0.23 per diluted share for the third quarter of fiscal 2010, and a net loss of $0.3 million or $0.00 per share for the fourth quarter of fiscal 2009. For fiscal year 2010, SMART reported GAAP net income of $52.6 million or $0.81 per diluted share, compared to a net loss of $11.4 million or ($0.18) per diluted share for fiscal 2009.

On a non-GAAP basis, net income was $18.8 million or $0.29 per diluted share for the fourth quarter of fiscal 2010, compared with $17.3 million or $0.26 per diluted share for the third quarter of fiscal 2010, and net income of $3.1 million or $0.05 per diluted share for the fourth quarter of fiscal 2009. For fiscal year 2010, SMART reported non-GAAP net income of $56.4 million or $0.87 per diluted share, compared to $11.0 million or $0.17 per diluted share for fiscal 2009. Non-GAAP net income excludes certain charges related to stock-based compensation expense, goodwill impairment charges, restructuring charges, and other infrequent or unusual items.

Adjusted EBITDA for the fourth quarter of fiscal 2010 was $33.2 million, compared to $29.8 million for the third quarter of fiscal 2010, and $9.9 million for the fourth quarter of fiscal 2009. For fiscal year 2010, Adjusted EBITDA was $106.4 million, compared to $35.6 million for fiscal 2009.

"SMART’s results for the fourth quarter of fiscal 2010 exceeded our expectations and demonstrate the continuing success of our strategic initiatives and the strength of our business model and market position," commented Iain MacKenzie, President and CEO of SMART. "The results were driven by the ongoing strength of the Brazilian PC unit demand; our capacity expansion, which enabled us to meet the robust demand for our products; and by demand in our defense and embedded flash businesses. This was an excellent finish to a year in which we continued SMART’s strong earnings growth and long term track record of non-GAAP profitability and cash flow generation."

"Our enterprise solid state storage and our Brazil flash business initiatives are moving forward as planned. In the near term, we plan to further accelerate R&D activities in our solid state storage business by investing to gain access to enabling technologies and to speed up hardware and firmware development. We believe we are well positioned for success as our existing momentum continues, and the fast growing markets that we are targeting allow us to leverage our strong customer relationships, technology integration expertise, established global manufacturing and supply chain capabilities, and our reputation for operational excellence," added Mr. MacKenzie.

Business Outlook
For the first quarter of fiscal 2011, SMART expects net sales will be in the range of $210 to $230 million, gross profit in the range of $47 to $50 million. We expect to incur a charge related to gaining access to technology in order to accelerate our development of enterprise solid state drives. This technology access charge is currently estimated to be approximately $7.5 million. Net income per diluted share, after taking into account the technology access charge, is estimated to be in the range of $0.09 to $0.11 on a GAAP basis. On a non-GAAP basis, excluding the technology access charge and stock-based compensation expense, SMART expects net income per diluted share will be in the range of $0.23 to $0.25. The guidance for the first quarter of fiscal 2011 includes an income tax provision expected in the range of $7.7 to $8.0 million.

To read the earnings call transcript