Slide 1: SanDisk Third Quarter 2015 Results
SanDisk Third Quarter 2015 Results October 21, 2015 c 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains certain forward-looking statements, including those regarding our expectations for: GAAP and non-GAAP financial results in Q4 2015; our financial, operational and strategic plans and priorities; improving execution and financial results; progress
Slide 3: Forward-Looking Statements
Forward-Looking Statements All statements included or incorporated by reference in this document, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as a
Slide 4: Additional Information And Where To Find It
Additional Information And Where To Find It This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale
Slide 5: Q3 2015 Results & Metrics
Q3 2015 Results & Metrics Samisk:
Slide 6: Q3 2015 Summary P&L Results
Q3 2015 Summary P&L Results Q3 2015 Q2 2015 Q3 2014 Revenue $1.45B $1.24B $1.75B Non-GAAP Gross Margin(1a) 44% 42% 49% Non-GAAP Operating Expenses(1a) 22% 26% 21% as a % of revenue Non-GAAP Operating Margin(1a) 22% 15% 28% Non-GAAP EPS(1a)(1b) $1.09 $0.66 $1.45 (1a)(1b) See Endnotes for further info
Slide 7: Q3 2015 Key Balance Sheet and Cash Flow Metrics
Q3 2015 Key Balance Sheet and Cash Flow Metrics ($ in millions) Q3 2015 Q2 2015 Q3 2014 Net cash provided by operating activities $275 $29 $588 Capital Investments Acquisition of property and equipment, net ($89) ($96) ($87) Change in investment and notes receivable activity with Flash Ventures ($16
Slide 8: Outlook
Outlook(a) ($ in millions, except percentages) Q4 2015 Non-GAAP GAAP Revenue $1,400 - $1,475 $1,400 - $1,475 Gross Margin* 40% - 43% 37% - 40% Operating Expenses* $335 - $345 $390 - $400 Other Income (Expense)* ~$0 ~($26) Tax rate* 30.4% 42% (a) This guidance is exclusive of one-time transactions an
Slide 9: Revenue Mix by Category
Revenue Mix(3) by Category % of Revenue 100% 11% 12% 11% 10% 10% 11% 15% 90% 6% 8% 10% 14% 80% 15% 14% 11% 70% 22% 21% 17% 13% 10% 10% 16% 60% 50% 38% 38% 44% 37% 40% 40% 33% 40% 30% 20% 24% 26% 25% 27% 10% 20% 19% 20% 0% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 (4) (5) (6) (7) (8) Em
Slide 10: Revenue Mix by Channel
Revenue Mix(3) by Channel % of Revenue 80% 67% 68% 69% 67% 70% 65% 65% 61% 60% 50% 39% 40% 35% 33% 35% 33% 32% 31% 30% 20% 10% 0% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Retail Commercial (9) (3)(9) See Endnotes for further information SanDisk Third Quarter 2015 Results | October 21,
Slide 11: Quarterly Metrics
Quarterly Metrics Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q/Q change in gigabytes sold -10% 31% 9% 4% -15% -1% 49% Y/Y change in gigabytes sold 20% 51% 43% 32% 24% -6% 30% Q/Q change in ASP/gigabyte -3% -16% -3% -4% -10% -6% -22% Y/Y change in ASP/gigabyte -7% -26% -26% -24% -29% -21
Slide 12: Q3 2015 Business Review
Q3 2015 Business Review Samisk:
Slide 13: Product Updates
Product Updates Embedded Solutions – Qualified two 15 nanometer (nm) X3 mobile custom embedded solutions, shipments began in Q3 2015 – Completed re-qualification of an embedded solution for customer’s SSD application, shipments began Q3 2015 – Announced, qualified and shipped 15nm X3 technology ba
Slide 14: Product Updates
Product Updates Client SSDs – Achieved #1 share of client SSD at a large PC OEM – Generated numerous design wins for 15nm Z400s in the commercial sales channel, expect to ramp shipments in Q4 2015 – Well positioned with OEMs for the upcoming ramp of PCs with the Skylake platform Retail – Shipped
Slide 15: Technology & Manufacturing Updates
Technology & Manufacturing Updates 2D NAND – Mix of 15nm technology nearly 60% of total bit supply 3D NAND – SanDisk and Toshiba announced the start of equipment installation in the New Fab 2 facility at Yokkaichi Operations – Demonstrated USB and client SSD products manufactured on 48-layer 256
Slide 16: Strategic Agreements
Strategic Agreements SK Hynix – Signed multi-year IP licensing and DRAM supply agreements HP – Entered into a long-term partnership to collaborate on a new technology within the Storage Class Memory category – Partnering to enhance data center solutions with SSDs Toshiba – Signed definitive ag
Slide 17: Q3 2015 Takeaways
Q3 2015 Takeaways Solid progress in strengthening portfolio, deepening customer engagements Completed several new product qualifications Signed several strategic agreements Focus on execution, further improving financial results SanDisk Third Quarter 2015 Results | October 21, 2015 17
Slide 18: SanDisk Key Strengths
SanDisk Key Strengths Vertical integration Diverse customer IP portfolio base Deep expertise in Global brand flash systems recognition management JV scale, Broad NAND technology solutions portfolio development SanDisk Third Quarter 2015 Results | October 21, 2015 18
Slide 19: Endnotes, Appendices
• Endnotes Endnotes, Appendices • Basis of presentation for Non-GAAP to GAAP Operating Results • Reconciliations of Non-GAAP to GAAP Statements of Operations • Reconciliation of GAAP to Non-GAAP Cost of Revenue • Reconciliation of GAAP Condensed Consolidated Cash Flows from Operations to Free Cash F
Slide 20: Endnotes
Endnotes 1a Gross margin, operating expenses, operating margin and EPS are non-GAAP excluding the impact of share-based compensation, inventory step-up expense, amortization and impairment of acquisition-related intangible assets, non-cash economic interest expense associated with the convertible se
Slide 21: Basis of Presentation for Non-GAAP to GAAP Operating Results
Basis of Presentation for Non-GAAP to GAAP Operating Results To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), we use non-GAAP measures of operating results, net income and net income per share, which are adjus
Slide 22: Reconciliation of Preliminary Non-GAAP to GAAP Statements of Operations
Reconciliation of Preliminary Non-GAAP to GAAP Statements of Operations Three months ended September 27, 2015 (in thousands, except percentages and per share amounts, unaudited) Share- based Purchase Convertible Q3'15 Compen- Acctg Debt Q3'15 Non-GAAP % of Rev sation Adj Adj Other GAAP % of Rev Reve
Slide 23: Reconciliation of Preliminary Non-GAAP to GAAP Statements of Operations
Reconciliation of Preliminary Non-GAAP to GAAP Statements of Operations Nine months ended September 27, 2015 (in thousands, except percentages and per share amounts, unaudited) Share- based Purchase Convertible Q3'15 Compen- Acctg Debt Q3'15 Non-GAAP % of Rev sation Adj Adj Other GAAP % of Rev Reven
Slide 24: Reconciliation of Non-GAAP to GAAP Statements of Operations
Reconciliation of Non-GAAP to GAAP Statements of Operations Three months ended September 28, 2014 Q3'14 Share-based Purchase Convertible Q3'14 (in thousands, except percentages and per share amounts, unaudited) Non-GAAP % of Rev Compensation Accounting Debt Other GAAP % of Rev Revenue $ 1,746,491 10
Slide 25: Reconciliation of Non-GAAP to GAAP Statements of Operations
Reconciliation of Non-GAAP to GAAP Statements of Operations Nine months ended September 28, 2014 Q3'14 Share-based Purchase Convertible Q3'14 (in thousands, except percentages and per share amounts, unaudited) Non-GAAP % of Rev Compensation Accounting Debt Other GAAP % of Rev Revenue $ 4,892,447 100
Slide 26: Reconciliation of Non-GAAP to GAAP Statements of Operations
Reconciliation of Non-GAAP to GAAP Statements of Operations Three months ended June 28, 2015 (in thousands, except percentages and per share amounts, unaudited) Share- based Purchase Convertible Q2'15 Compen- Acctg Debt Q2'15 Non-GAAP % of Rev sation Adj Adj Other GAAP % of Rev Revenue $ 1,237,196 1
Slide 27: Reconciliation of Preliminary GAAP to Non-GAAP Cost of Revenue
Reconciliation of Preliminary GAAP to Non-GAAP Cost of Revenue (in thousands, unaudited) 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 GAAP COST OF REVENUE $809,213 $799,444 $823,160 $870,703 $760,655 $874,361 $929,353 $995,484 $787,239 $752,817 $849,45
Slide 28: Reconciliation of GAAP Cash Flows from Operations to Free Cash Flow
Reconciliation of Preliminary GAAP Condensed Consolidated Cash Flows from Operations to Free Cash Flow (in thousands, unaudited) Three months ended Nine months ended September 27, 2015 June 28, 2015 September 28, 2014 September 27, 2015 September 28, 2014 Net cash provided by operating activities $
Slide 29: Reconciliation of Non-GAAP to GAAP Outlook
Reconciliation of Non-GAAP to GAAP Outlook (in millions, except for percentages) Q4 2015 Non-GAAP GAAP Revenue $1,400 - $1,475 $1,400 - $1,475 Gross Margin (2) 40% - 43% 37% - 40% Operating Expenses (3) $335 - $345 $390 - $400 Other Income (Expense) (4) ~$0 ~($26) Tax Rate (5) 30.4% ~42% (1) This gu
Slide 30: Trademark notices
SanDisk and iNAND are trademarks of SanDisk Corporation, registered in the United States and other countries. CloudSpeed Eco and iXpand are trademarks of SanDisk Corporation. microSD is a trademark of SD-3C, LLC. Other brand names mentioned herein are for identification purposes only and may be the