Sandisk Corporation(SNDK) - 2025 Q3 - Quarterly Report

Financial Performance - Net revenue decreased by 1% to $1,695 million for the three months ended March 28, 2025, compared to$1,705 million in the prior year, primarily due to an 11% decrease in average selling prices per gigabyte[197]. - Net revenue increased by 11% to $5,454 million for the nine months ended March 28, 2025, compared to$4,903 million in the prior year, driven by a 12% increase in average selling prices per gigabyte[198]. - Cloud revenue surged by 103% to $197 million for the three months ended March 28, 2025, and increased by 382$747 million for the nine months ended March 28, 2025, primarily due to a 75% increase in exabytes sold[199]. - Client revenue decreased by 10% to $927 million for the three months ended March 28, 2025, but increased by 1$3,024 million for the nine months ended March 28, 2025, primarily due to a 17% increase in average selling prices per gigabyte[200]. - Gross profit decreased by $81 million to$382 million for the three months ended March 28, 2025, primarily due to lower revenue and increased start-up costs[204]. - Gross profit increased by $1,278 million to$1,714 million for the nine months ended March 28, 2025, primarily due to improved pricing and a favorable product mix[205]. Expenses and Charges - The Company incurred charges of $24 million for unabsorbed manufacturing overhead costs in the third quarter of fiscal year 2025[189]. - Research and development expenses increased by$8 million to $285 million for the three months ended March 28, 2025, reflecting continued investment in innovation[208]. - Selling, general and administrative expenses increased by$32 million to $139 million for the three months ended March 28, 2025, primarily due to higher compensation and benefits[210]. - Total operating expenses increased by$1,865 million to $2,263 million for the three months ended March 28, 2025, reflecting a substantial rise in costs associated with the business separation[196]. - Employee termination and other charges increased by$49 million in the nine months ended March 28, 2025, compared to the prior year, primarily due to a $60 million gain on the sale-leaseback of a facility in the prior period[213]. Goodwill Impairment - The Company recorded a goodwill impairment charge of$1.8 billion for the three months ended March 28, 2025[184]. - Goodwill impairment of $1,830 million was recorded for the three and nine months ended March 28, 2025, significantly impacting operating income[196]. - Goodwill impairment rose by$1.8 billion in the three and nine months ended March 28, 2025, due to an impairment charge from the difference between the carrying value and fair value of the reporting unit[214]. - The company uses qualitative factors to assess goodwill impairment and may require a quantitative assessment if impairment is likely[246]. - The company identified potential impairment indicators related to macroeconomic conditions and the trading price of its common stock[248]. Financing Activities - The Company entered into a seven-year Term Loan B facility of $2 billion and a five-year revolving credit facility of$1.5 billion on February 21, 2025[186]. - The company entered into a loan agreement on February 21, 2025, consisting of a $1.5 billion revolving credit facility and a$2 billion term loan facility due in 2032[233]. - The Company received net proceeds of $191 million from a sale-leaseback transaction, with$134 million allocated to it[183]. - Gain on business divestiture increased by $34 million in the nine months ended March 28, 2025, due to a pre-tax gain on the sale of SDSS[216]. - Interest and other expense, net increased by$33 million in the nine months ended March 28, 2025, primarily due to a $26 million increase in foreign exchange losses and a$15 million increase in interest expense from the Term Loan Facility[218]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $(10) million for the nine months ended March 28, 2025, compared to$(179) million for the same period in the prior year[223]. - Net cash provided by investing activities was $573 million for the nine months ended March 28, 2025, compared to$213 million for the same period in the prior year[223]. - Net cash provided by financing activities was $620 million for the nine months ended March 28, 2025, compared to$51 million for the same period in the prior year[223]. - The company expects cash capital expenditures in fiscal 2025 to be higher than in fiscal 2024 but remain below fiscal 2023 expenditures[223]. Corporate Developments - The Company became an independent publicly traded company on February 21, 2025, trading under the stock symbol "SNDK" on Nasdaq[180]. - The company recorded a tax indemnification liability of $112 million on February 21, 2025, which was reduced to$110 million as of March 28, 2025[239]. - The remaining tax indemnification liability of $110 million is classified as Other liabilities in the Condensed Consolidated Balance Sheets as of March 28, 2025[239]. - As of March 28, 2025, the liability for unrecognized tax benefits was approximately$127 million, with accrued interest and penalties totaling $4 million[237]. - The company maintains director and officer insurance to cover certain liabilities arising from indemnification obligations[240]. - The company has not incurred material costs from indemnification agreements historically[241]. - The company’s financial statements are prepared using judgments and estimates that can materially affect reported amounts[243]. - The company’s impairment calculations involve significant estimates and assumptions, including revenue forecasts and a weighted average cost of capital[251].