Smart Modular: Fiscal 1Q11 Financial Results

SMART Modular Technologies, Inc. reported financial results for the first quarter of fiscal 2011 ended November 26, 2010.

 
First Quarter Fiscal 2011 Highlights:

• Net sales of $216.4 million
• Gross profit of $44.0 million
• GAAP diluted EPS of $0.12
• Non-GAAP diluted EPS of $0.27
• Adjusted EBITDA of $29.6 million

Net sales for the first quarter of fiscal 2011 were $216.4 million, as compared to $218.7 million for the fourth quarter of fiscal 2010, and $123.1 million for the first quarter of fiscal 2010.

Gross profit for the first quarter of fiscal 2011 was $44.0 million, compared to $49.8 million for the fourth quarter of fiscal 2010, and $28.8 million for the first quarter of fiscal 2010.

On a GAAP basis, net income for the first quarter of fiscal 2011 was $8.0 million or $0.12 per diluted share, compared to $17.0 million or $0.26 per diluted share for the fourth quarter of fiscal 2010, and $4.6 million or $0.07 per diluted share for the first quarter of fiscal 2010. The first quarter of fiscal 2011 net income of $8.0 million includes a one-time technology access charge of $7.5 million to accelerate our development of enterprise solid state drives.

On a non-GAAP basis, net income was $17.6 million or $0.27 per diluted share for the first quarter of fiscal 2011, compared to $18.8 million or $0.29 per diluted share for the fourth quarter of fiscal 2010, and net income of $5.4 million or $0.08 per diluted share for the first quarter of fiscal 2010.

Adjusted EBITDA for the first quarter of fiscal 2011 was $29.6 million, compared to $33.2 million for the fourth quarter of fiscal 2010, and $15.0 million for the first quarter of fiscal 2010.

Please refer to the Non-GAAP Information section and the "Reconciliation of Non-GAAP Financial Measures" table below for further detail on non-GAAP net income and Adjusted EBITDA.

"We are pleased to have achieved our earnings per share guidance, notwithstanding significant pricing pressures in the DRAM market," commented Iain MacKenzie, President and CEO of SMART. "In Brazil, despite a greater than 20% increase in module capacity, gross profit was slightly below expectations due to end-of-quarter DRAM price declines. In our specialty memory business, end user demand was somewhat weaker than we had anticipated due in part to delays in orders resulting from the weaker DRAM pricing environment. Despite these pressures, we were able to lower overall operating expenses and achieve our expectations for earnings per share."

"Longer term, we continue to make progress with our enterprise solid state storage and Brazil flash business initiatives, both of which are important drivers of our future growth. We were particularly pleased with our second Enterprise XceedIOPS SSD design win, in this instance with IBM’s Power7 Supercomputing group. Although we are going through a period of significant DRAM pricing declines, we expect such pricing declines to be temporary and we believe that our strong customer relationships and operational excellence will enable us to remain solidly profitable and successful as the year unfolds," concluded Mr. MacKenzie.

Business Outlook
SMART expects that the combination of the substantial DRAM price declines and the reduced number of business days in the second fiscal quarter will put pressure on its second quarter results.

For the second quarter of fiscal 2011, SMART expects net sales will be in the range of $165 to $185 million and gross profit in the range of $31 to $34 million. Net income per diluted share is expected to be in the range of $0.06 to $0.08 on a GAAP basis. On a non-GAAP basis, SMART expects net income per diluted share will be in the range of $0.09 to $0.11. The guidance for the second quarter of fiscal 2011 includes an income tax provision expected to be in the range of $3.4 to $3.7 million.