SanDisk: Fiscal 2Q13 Financial Results

(in US$ million)	2Q12	2Q13	6 mo. 12	6 mo. 13
Revenues	1,032	1,476	2,238	2,817
*Growth*		43%		*26%*
Net income (loss)	13.0	261.8	127.4	428.0

SanDisk Corporation announced results for the second quarter ended June 30, 2013.

Second quarter revenue of $1.48 billion increased 43% on a year-over-year basis and increased 10% sequentially.

On a GAAP basis, second quarter net income was $262 million, or $1.06 per diluted share, compared to net income of $13 million, or $0.05 per diluted share, in the second quarter of fiscal 2012 and $166 million, or $0.68 per diluted share, in the first quarter of fiscal 2013.

On a non-GAAP basis, second quarter net income was $299 million, or $1.21 per diluted share, compared to net income of $51 million, or $0.21 per diluted share, in the second quarter of fiscal 2012 and net income of $207 million, or $0.84 per diluted share, in the first quarter of fiscal 2013. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

"We delivered record second quarter results driven by increasing momentum across our business. We achieved solid revenue growth in our embedded solutions portfolio with many design wins ramping into production," said Sanjay Mehrotra, president and CEO, SanDisk. "We are excited about our pending acquisition of SMART Storage Systems, as it accelerates our growth in enterprise storage. The growth drivers of our business are vibrant and SanDisk is poised for further gains."

At the end of the second quarter of fiscal 2013, SanDisk’s cash and short and long-term marketable investments totaled $5.4 billion. Cash flow from operations in the second quarter of fiscal 2013 totaled $391 million.

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Abstracts the earnings call transcript:

Sanjay Mehrotra, president and CEO:
"Our second quarter performance was driven by strong growth in our mobile embedded products with iNAND and iNAND MCP, causing the largest revenue gains during the quarter.
"In enterprise SSDs, we are pleased to report another quarter of solid double-digit sequential growth, representing our third consecutive quarter of record revenue.
"From a manufacturing standpoint, in the second quarter, our 19-nanometer technology represented approximately 85% of fab output.
"Switching to supply topics, our forecast for SanDisk captive bit supply growth remains unchanged in the 20% range for 2013 and between 25% and 35% for 2014."

Judy Bruner, CFO:
"Our ASP per gigabyte was up 5% from Q1, increasing sequentially for the third consecutive quarter, driven by a higher revenue mix of embedded products, coupled with a stable supply-demand environment. And this is the first time in our history that our ASP per gigabyte increased on a year-over-year basis, rising 6% from Q2 of last year, reflecting an increased mixed of SSDs and embedded products, along with a strong pricing environment. The year-over-year shift in our product mix toward SSDs and embedded products is also manifesting itself in an increased average capacity of per unit sales. Average capacity per unit increased a strong 92% year-over-year. Our bit sold increased 4% sequentially and 35% year-over-year, with the growth in our bit supply coming primarily from continued transition to 19-nanometer memory.
"Our second quarter revenue came 65% from our commercial customers and 35% from retail with strong year-over-year growth in both channels. Our retail sales grew 22% year-over-year with continued improving mix of high-performance products and particularly strong growth in the average capacity of our retail mobile cards. Geographically, we achieved strong year-over-year retail growth in all major regions. Our commercial revenue grew 57% year-over-year with embedded products and SSDs being the biggest contributors.
"Looking at the mix of our total revenue by form factor, the combination of embedded and SSD products achieved the highest ever proportion of our revenue at 46% with embedded revenue at 30% and SSDs at 16%. Our removable product revenue was flat year-over-year with retail card and USB revenue growing enough to offset the decline from OEM bundled card sales and our de-prioritization of non-branded card sales.
"Our third quarter revenue forecast is $1,525,000,000 to $1,575,000,000. And we now expect our full year revenue to be between $5.95 billion and $6.05 billion, a substantial increase from our previous estimate.
"We now expect our full year gross margin to be north of 45%, higher than our previous forecast of 42% to 44%."