Sandisk Corporation(SNDK) - 2025 Q2 - Quarterly Report

Financial Performance - The Company reported net revenue of $1,876 million for the three months ended December 27, 2024, representing a 13$1,665 million in the prior year[174]. - Cost of revenue decreased by 16% to $1,270 million, down from$1,504 million, resulting in a gross profit of $606 million, a significant increase of 276$161 million in the previous year[174]. - Operating income improved to $195 million, compared to a loss of$245 million in the same period last year, marking a turnaround of $440 million[174]. - The Company incurred a net income of$104 million, a substantial recovery from a net loss of $301 million in the prior year, reflecting a 135$3,759 million for the six months ended December 27, 2024, compared to $3,198 million for the same period in the prior year[177]. - Gross profit increased by$1,359 million for the six months ended December 27, 2024, resulting in a gross profit margin increase of 36%[183][184]. - Cloud revenue surged 848% in the six months ended December 27, 2024, driven by a 571% increase in exabytes sold[178]. - Client revenue rose 7% in the six months ended December 27, 2024, primarily due to a 37% increase in average selling prices per gigabyte[179]. - Consumer revenue decreased 5% in the six months ended December 27, 2024, attributed to an 8% decrease in exabytes sold[180]. Expenses and Cash Flow - Total operating expenses increased by $141 million to$846 million for the six months ended December 27, 2024[182]. - Interest and other expense, net increased by $24 million for the six months ended December 27, 2024, primarily due to increased foreign exchange losses[189]. - Income tax expense for the six months ended December 27, 2024, was$125 million, with an effective tax rate of 28%[193]. - Research and development expenses increased by $76 million for the six months ended December 27, 2024, reflecting continued investment in innovation[185]. - Selling, general and administrative expenses rose by$41 million for the six months ended December 27, 2024, primarily due to increased compensation and benefits[186]. - For the six months ended December 27, 2024, net cash provided by operating activities was $(36) million, compared to$(167) million for the same period in 2023[196]. - Net cash provided by investing activities was $169 million for the six months ended December 27, 2024, compared to$113 million for the same period in 2023[196]. - Net cash provided by financing activities was $344 million for the six months ended December 27, 2024, compared to$186 million for the same period in 2023[196]. Operational Metrics - The cash conversion cycle increased to 151 days for the three months ended December 27, 2024, compared to 96 days for the same period in 2023[200]. - Days sales outstanding (DSO) increased by 7 days to 44 days for the three months ended December 27, 2024, compared to 37 days for the same period in 2023[202]. - Days in inventory (DIO) increased by 58 days to 156 days for the three months ended December 27, 2024, compared to 98 days for the same period in 2023[202]. Future Outlook and Commitments - The Company expects to incur charges for unabsorbed manufacturing overhead costs due to reduced utilization of manufacturing capacity in fiscal 2025[169]. - The Company anticipates that digital transformation, including the artificial intelligence data-cycle, will drive improved market conditions for data storage products in the long term[169]. - The company expects cash capital expenditures in 2025 to be higher than in 2024 but remain below 2023 expenditures[196]. - Total known material cash requirements as of December 27, 2024, amounted to $7,660 million, with$4,442 million related to Flash Ventures commitments[206]. - As of December 27, 2024, the liability for unrecognized tax benefits was approximately $60 million, with potential cash payments of approximately$66 million[210]. Corporate Developments - The Company entered into a five-year supply agreement with SDSS with a minimum annual commitment of $550 million following the sale of 80$191 million, with $134 million allocated to the Company, and an annual lease expense of$16 million for the first year[162]. - The Company completed a spin-off from WDC, distributing 80.1% of its outstanding shares to WDC stockholders, and began trading independently under the symbol "SNDK" on February 24, 2025[159]. - The Company has drawn no amounts under its $1.5 billion Revolving Credit Facility as of March 7, 2025[167]. - A total of$692 million of cash and cash equivalents were held outside of the U.S. as of December 27, 2024[198].