SMART Modular Technologies (WWH), Inc. ("SMART" or the "Company") (Nasdaq: SMOD), a leading independent manufacturer of memory modules, embedded computing subsystems, and TFT-LCD display products, today reported financial results for the second quarter of fiscal 2007.
Second Quarter Fiscal 2007 Results versus Second Quarter Fiscal 2006:
-- Net Sales of $239.1 Million, up 46% from the year ago quarter
-- Gross Profit of $41.2 Million, up 39% from the year ago quarter
-- GAAP diluted EPS of $0.22, vs. $0.01 in the year ago quarter
Net sales for the second quarter of fiscal 2007 were $239.1 million, up 1% compared to $237.2 million for the first quarter of fiscal 2007, and up 46% compared to $163.7 million for the second quarter of fiscal 2006.
Gross profit for the second quarter of fiscal 2007 was $41.2 million, up 9% compared to $37.9 million for the first quarter of fiscal 2007, and up 39% compared to $29.7 million for the second quarter of fiscal 2006.
GAAP net income for the second quarter of fiscal 2007 was $14.0 million, or $0.22 per diluted share, compared to net income of $14.6 million, or $0.23 per diluted share for the first quarter of fiscal 2007, and $0.8 million, or $0.01 per diluted share for the second quarter of fiscal 2006. Non-GAAP net income and GAAP net income for the second and first quarters of fiscal 2007 were the same, totaling $14.0 and $14.6 million, or $0.22 and $0.23 per diluted share, respectively. Non-GAAP net income for the second quarter of fiscal 2006 was $8.5 million, or $0.15 per diluted share. Please refer to the "Non-GAAP Information" below for further detail.
SMART ended the second quarter of fiscal 2007 with $107.4 million in cash and cash equivalents.
"Our second quarter results mark another period of solid performance and growth for SMART. The increase in gross profit in a declining ASP environment demonstrates strong customer demand for our high quality value add products and services," stated Iain MacKenzie, President and CEO of SMART. "We strengthened our leadership position in the high-end memory module and subsystem markets with the introduction of three new innovative products during the quarter, one of which is being packaged and shipped from our Brazil facility, leveraging the cost efficiency, technology and time-to-market advantages of our global design and manufacturing capabilities. Additionally, we continue to gain traction with our revenue diversification strategy and have garnered favorable customer response to our embedded PC and industrial Flash product families, particularly our XceedUltra solid state serial ATA drive -- the industry's fastest SATA solid state drive, with sustained read speeds greater than 100MB/second and write speeds greater than 60MB/second. This new product family is targeted at the high growth enterprise computing and storage markets and is designed for streaming video-on-demand, internet search, online transaction processing, and other data-intensive storage applications. Our robust product pipeline creates the opportunities for us to continue to grow our embedded and TFT-LCD display businesses."
The following statements are based upon management's current expectations. These statements are forward-looking, and actual results may differ materially. The Company undertakes no obligation to update these statements.
For the third quarter of fiscal 2007, SMART estimates net sales will be in the range of $235 to $245 million, gross profit will be in the range of $39 to $40 million, GAAP diluted net income per share to be approximately the same as our just completed second quarter of fiscal 2007. The shares used in computing diluted net income per ordinary share will be in the range of 63.8 million to 64.2 million.
Conference Call Details
SMART's second quarter, fiscal 2007 teleconference and webcast is scheduled to begin at 1:30 p.m. Pacific Daylight Time (PDT), or 4:30 p.m. Eastern Daylight Time (EDT), on Wednesday, March 28, 2007. The call may be accessed U.S. toll free by calling (888) 323-9686 or U.S. toll by calling (210) 839-8502. Please join the conference call at least ten minutes early in order to register. The passcode for the call is "SMART". SMART will also offer a live and archived webcast of the conference call, accessible from the Company's website at http://www.smartm.com. A telephonic replay of the conference call will be available through midnight PDT, April 11, 2007, by dialing (888) 562-6891. Callers outside the U.S. and Canada may access the replay by dialing (203) 369-3496.
Forward-Looking Statements
Statements contained in this press release, including the quotations attributed to Mr. MacKenzie, that are not statements of historical fact, including any statements that use the words "will," "believes," "anticipates," "estimates," "expects," "intends" or similar words that describe the Company's or its management's future plans, objectives, or goals, are "forward-looking statements" and are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include the Company's financial performance, technical capabilities, business strategies and product plans.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, memory IC packaging and other production or manufacturing difficulties, competitive factors, new products and technological changes, fluctuations in product prices and raw material costs, dependence upon third-party vendors, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. Such risk factors as outlined in these reports may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. The Company operates in a continually changing business environment and new factors emerge from time to time. The Company cannot predict such factors, nor can it assess the impact, if any, from such factors on the Company or its results. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company is not obligated to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release.
Non-GAAP Information
Certain non-GAAP financial measures are included in this press release, including non-GAAP net income and non-GAAP diluted net income per ordinary share. Non-GAAP financial results do not include restructuring costs, impairment charges and other infrequent or unusual items. These non-GAAP financial measures are provided to enhance the user's overall understanding of our financial performance. By excluding these charges, as well as the related tax effects, our non-GAAP results provide information to management and investors that is useful in assessing SMART's core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results and to plan and forecast future periods. The presentation of this additional information is not meant to be a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures, which are included below.
(Unaudited)
(In thousands)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
February 28, February 28, February 28, February 28,
2007 2006 2007 2006
Net income $13,970 $783 $28,523 $10,129
Add:
One-time charge
to terminate
advisory service
fees, net of tax - 7,667 - 7,667
Non-GAAP net income $13,970 $8,450 $28,523 $17,796
Shares used in
computing diluted
net income per
ordinary share 63,790 56,304 63,653 55,015
For the second quarter of fiscal 2006, non-GAAP financial results were adjusted to exclude a $9.0 million one-time charge ($7.7 million net of taxes) to terminate annual fees payable under certain advisory service agreements.
About SMART
SMART is a leading independent designer, manufacturer and supplier of electronic subsystems to original equipment manufacturers, or OEMs. SMART offers more than 500 standard and custom products to OEMs engaged in the computer, industrial, networking, gaming, telecommunications, and embedded application markets. Taking innovations from the design stage through manufacturing and delivery, SMART has developed a comprehensive memory product line that includes DRAM, SRAM, and Flash memory in various form factors. Its Embedded Products Division develops embedded computing subsystems, backed by design and manufacturing, for markets supporting test equipment, 3G infrastructure and network processing applications. SMART's Display Products Group designs, manufactures and sells thin film transistors (TFT) liquid crystal display (LCD) solutions to customers developing casino gaming systems as well as embedded applications such as kiosk, ATM, point-of-service, and industrial control systems. SMART's presence in the U.S., Europe, Asia, and Latin America enables it to provide its customers with proven expertise in international logistics, asset management, and supply-chain management worldwide. See http://www.smartm.com for more information.
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
February 28, February 28, February 28, February 28,
2007 2006 2007 2006
(In thousands, except per share data)
Net sales $239,137 $163,732 $476,307 $321,994
Cost of sales* 197,975 133,987 397,233 261,648
Gross profit 41,162 29,745 79,074 60,346
Research and
development* 4,450 3,912 8,490 7,380
Selling, general
and administrative* 16,756 12,862 31,010 25,764
Advisory service
agreements' fees - 9,553 - 10,303
Total operating
expenses 21,206 26,327 39,500 43,447
Income from
operations 19,956 3,418 39,574 16,899
Interest expense,
net (2,336) (2,891) (4,423) (5,873)
Other (expense)
income, net (265) 246 (336) 377
Total other expense,
net (2,601) (2,645) (4,759) (5,496)
Income before
provision (benefit)
for income taxes 17,355 773 34,815 11,403
Provision (benefit)
for income taxes 3,385 (10) 6,292 1,274
Net income $13,970 $783 $28,523 $10,129
Net income per
ordinary share,
basic $0.24 $0.02 $0.48 $0.20
Shares used in
computing basic net
income per ordinary
share 59,396 51,273 59,043 50,166
Net income per
ordinary share,
diluted $0.22 $0.01 $0.45 $0.18
Shares used in
computing diluted net
income per ordinary
share 63,790 56,304 63,653 55,015
* Stock-based
compensation by
category:
Cost of sales $133 $41 $246 $71
Research and development 271 128 543 223
Selling, general
and administrative 813 279 1,377 590
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
February 28, August 31,
2007 2006
(In thousands)
ASSETS
Cash and cash equivalents $107,426 $85,620
Accounts receivable, net of
allowances of $2,547 and $2,592
as of February 28, 2007 and
August 31, 2006, respectively 218,819 208,652
Inventories 86,999 65,902
Prepaid expenses and other current assets 13,723 17,531
Total current assets 426,967 377,705
Property and equipment, net 27,396 25,971
Goodwill 3,187 3,187
Other non-current assets 15,399 19,593
Total assets $472,949 $426,456
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $182,828 $169,349
Accrued expenses and other
current liabilities 27,626 27,325
Total current liabilities 210,454 196,674
Long-term debt 81,250 81,250
Other long-term liabilities 1,637 1,637
Total liabilities 293,341 279,561
Shareholders' equity:
Ordinary shares 10 10
Additional paid-in capital 88,800 85,251
Deferred stock-based compensation (436) (555)
Accumulated other comprehensive income 794 272
Retained earnings 90,440 61,917
Total shareholders' equity 179,608 146,895
Total liabilities and
shareholders' equity $472,949 $426,456