SanDisk: Fiscal 4Q11 Financial Results

(in US$ millions)	4Q10	4Q11	FY10	FY11
Revenues	1,327	1,577	4,827	5,662
*Growth*		19%		*17%*
Net income (loss)	485.5	281.2	1,300	997.0

SanDisk Corporation announced results for the fourth quarter and fiscal year ended January 1, 2012.

Total fourth quarter revenue of $1.58 billion increased 19% on a year-over-year basis and increased 11% on a sequential basis. Total revenue for fiscal 2011 of $5.66 billion increased 17% from $4.83 billion in fiscal 2010.

On a GAAP basis, fourth quarter net income was $281 million, or $1.14 per diluted share, compared to net income of $485 million, or $2.01, per diluted share in the fourth quarter of fiscal 2010 and $233 million, or $0.96 per diluted share, in the third quarter of fiscal 2011. Net income for fiscal 2011 was $987 million, or $4.04 per diluted share.

On a non-GAAP basis, fourth-quarter net income was $317 million, or $1.29 per diluted share, compared to net income of $307 million, or $1.27 per diluted share, in the fourth quarter of fiscal 2010 and net income of $292 million, or $1.20 per diluted share, in the third quarter of fiscal 2011. Net income for fiscal 2011 was $1.14 billion, or $4.65 per diluted share. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

"We are pleased to deliver record quarterly and annual revenues with robust profitability," said Sanjay Mehrotra, President and CEO. "The secular demand trends for NAND flash remain vibrant and we are particularly excited about the new growth opportunities for our business in the Enterprise and Client Computing markets."

Cash flow from operations in the fourth quarter of fiscal 2011 was $210 million and free cash flow was $299 million.

Total cash and cash equivalents and short and long-term marketable securities at the end of the fourth quarter of fiscal 2011 were $5.62 billion compared to $5.34 billion at the end of the fourth quarter of fiscal 2010 and $5.27 billion at the end of the third quarter of fiscal 2011.

Cash flow from operations in fiscal 2011 was $1.05 billion and free cash flow was $377 million.

Comments

Abstracts of the earnings call transcript:

Sanjay Mehrotra, president and CEO:
"Starting with our OEM results, we experienced strong growth in the mobile and SSD markets, including Client and Enterprise SSD segments. Revenue from our Mobile Embedded business almost doubled in 2011, approaching $1.5 billion, primarily driven by smartphones and tablets. Additionally, our Embedded business gained traction in digital camcorders and new product categories such as smart TVs and other connected devices.
"Switching to our Enterprise SSD business, we delivered strong sequential revenue growth in the fourth quarter.
"(...) we expect 2012 to mark the inflection point of SSD growth for SanDisk, with both the Enterprise and Client markets becoming strong contributors to our revenue growth in 2012 and beyond.
"Our overall retail business grew 8% on a year-over-year basis.
"We began production of 19-nanometer technology in Q4, and it will ramp throughout 2012.
"Turning to fab operations, we have just completed the plant capacity expansion within Phase I of Fab 5, and we have now equipped approximately 30% of the Phase I space. We expect future Phase I expansion to begin no sooner than July 2012."

Judy Bruner, CFO:
"For Q4, our gigabytes sold grew 28% sequentially and 83% year-over-year. And for 2011, our gigabytes sold grew 80%. Our captive supply grew 77% for the full year, and we supplemented this with non-captive purchases, which accounted for approximately 10% of our 2011 revenue.
"Our ASP per gigabyte declined 13% sequentially and 36% year-over-year, with a higher rate of price decline experienced in the latter part of Q4. For the full year, our ASP per gigabyte declined 34%, which we believe reflected a generally balanced industry supply-demand environment.
"The mix of our products business in Q4 was 63% OEM and 37% retail, up from 35% in Q3, reflecting Q4 holiday seasonality. Our Q4 license and royalty revenue was up 10% sequentially and 20% year-over-year, reflecting growth in both memory and system-level royalties, as well as a one-time favorable royalty adjustment of $7 million.
"Our retail revenue in Q4 grew 18% sequentially and 8% year-over-year.
"Our OEM revenue in Q4 grew 8% sequentially and 26% year-over-year.
"For the full year 2011, our OEM revenue grew 25%, and the highest dollar growth continued to come from the mobile market.
"Looking at total revenue for 2011 by end market, the 3 largest end markets for us continue to be mobile, imaging and USBs; mobile with 54% of our revenue, imaging, 16%; and USBs 9%.
"For the full year 2011, our cost per gigabyte improved by 31%, including the impact of the yen, higher non-captive mix and Fab 5 start-up costs.
"(...) forecasting full year 2012 revenue of $6.2 billion to $6.6 billion, with first quarter revenue of $1.3 billion to $1.35 billion. We expect the majority of our 2012 year-over-year revenue growth to be in the second half as overall demand improves and as the continued strong ramp of our SSD sales becomes even more significant.
"We forecast our total non-GAAP gross margins for Q1, as well as for the full year 2012 to be in the range of 39% to 42% compared to 44% in 2011."