SanDisk: Fiscal 3Q13 Financial Results

(in US$ million)	3Q12	3Q13	9 mo. 12	9 mo. 13
Revenues	1,273	1,635	3,511	4,442
*Growth*		28%		*27%*
Net income (loss)	76.5	276.9	203.9	704.9

SanDisk Corporation announced results for the third quarter ended September 29, 2013.

Third quarter revenue of $1.63 billion increased 28% on a year-over-year basis and increased 10% sequentially.

On a GAAP basis, third quarter net income was $277 million, or $1.18 per diluted share, compared to net income of $77 million, or $0.31 per diluted share, in the third quarter of fiscal 2012 and $262 million, or $1.06 per diluted share, in the second quarter of fiscal 2013.

On a non-GAAP( basis, third quarter net income was $371 million, or $1.59 per diluted share, compared to net income of $118 million, or $0.48 per diluted share, in the third quarter of fiscal 2012 and net income of $299 million, or $1.22 per diluted share, in the second quarter of fiscal 2013.

Third quarter GAAP results include an $83 million partial impairment of acquisition-related intangible assets stemming from the 2011 acquisition of Pliant Technologies, Inc.

“We delivered outstanding third quarter results driven by our strategy to shift to higher value solutions across our portfolio,” said Sanjay Mehrotra, president and CEO,SanDisk. “Our client and enterprise SSD products continue to gain momentum and our acquisition of SMART Storage Systems expands our presence in enterprise SSDs. With our solid execution, we also delivered strong year over year growth in retail and embedded products.”

At the end of the third quarter of fiscal 2013, SanDisk’s cash and short and long-term marketable investments totaled $4.3 billion. Cash flow from operations in the third quarter of fiscal 2013 totaled $382 million.

Other key developments

Established its first ever dividend program on July 31, 2013 with the first quarterly payment made in the third fiscal quarter.
Announced its fourth-quarter dividend of $0.225 per share of common stock, payable on November 25, 2013 to shareholders of record as of the close of business on November 4, 2013.
Spent a total of $1.07 billion on stock repurchases in the third fiscal quarter, including a previously announced $1.0 billion accelerated stock repurchase program.
Completed the acquisition of SMART Storage Systems.

Comments

Excellent quarter for SanDisk with 28% year-over-year revenue growth, 50% non-GAAP gross margin and 33% non-GAAP operating margin. For its current 2013 fiscal year, the company will exceed $6 billion in sales, compared to $5 billion in 2012 down 11% from $5.7 billion in 2011. With 50% mix from SSD and embedded solutions, 3Q13 revenue of $1.625 billion was comprised of Y/Y growth in gigabytes sold of 14% and an increase in blended ASP per gigabyte of 12%. Third quarter gigabytes sold grew 15% and ASP/GB decreased 3%. For the most recent quarter, client and enterprise SSD revenue contributed 20%. SanDisk is on a trajectory to exceed its 2013 goal to deliver 15% of its revenue from SSDs and remains on track to reach 25% in 2014. Client SSDs delivered record revenue for the fourth quarter in a row. Enterprise SSDs achieved sequential revenue growth to deliver another record quarter, and, following the acquisition of SMART Storage Systems, the company has now qualified at 6 of the top 7 storage OEMs, including Apple. As the SMART Storage Systems design is more scalable, Sandisk plans to implement the Guardian technology into more enterprise products. But its 12Gb SAS platform has been delayed and is now expected to be released around mid-2014 and PCIe SSD are scheduled for 2014 . The flash maker is accelerating investments in UltraDIMM, a product category aimed at the high-performance, low latency market, which, thus far, has been served mostly by PCIe-based products. Mobile producs represented 47% of quarterly revenue with the largest portion driven by embedded solutions. 3Q13 sales mix between commercial and retail customers and remained constant, sequentially, at 65% commercial and 35% retail. Retail revenue grew 11% sequentially and 18% Y/Y with sequential growth strongest in USB drives and yearly growth strongest in mobile cards. In term of manufacturing, 19nm technology has now fully ramped. SanDisk also commenced the ramp of 1Y technology with X2, as well as X3 memory, and has already shipped product to customers based on that technology. It expects 1Y to achieve cost crossover with 19nm in the fourth quarter and estimates approximately 15% of the production output to be on 1Y exiting the year. The firm expects 4Q13 sales to be between $1.650 billion and $1.725 billion. To read the earnings call transcript