Sandisk Corp
For the period ended Mar 28, 2025. Filed May 12, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 28, 2025 · Filed May 12, 2025
SNDK$835.06+3.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-12-27; filed 2025-03-07.
0002023554-25-000004
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-28; filed 2025-05-12.
0002023554-25-000027
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 97 previous paragraphs and 122 current paragraphs.
45 unchanged; 46 reworded; 27 added; 6 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
Additionally, the United States has recently announced changes to U.S. trade policy, including increased tariffs on imported goods. Currently, the majority of our products sold in the U.S. are exempt from tariffs, but additional tariff increases or the loss of applicable exemptions would increase the cost of goods sold for our products sold in the U.S., which could negatively impact our margins and financial performance. Increases in the price of our products in response to increased costs may adversely impact demand for those products in the U.S., which could also negatively impact our performance and financial results. Future trade policies and regulations in the U.S. and other countries, the terms of any trade arrangements that may be negotiated between the U.S. and other countries, the scope, amount, or duration of tariffs that may be imposed by any country, and the impact of these factors on our business are uncertain and may contribute to increased costs and reduced demand for our products, each of which could harm our financial performance.
Current report
On February 21, 2025, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the separation, the Company’s historical combined financial statements were derived from WDC’s consolidated financial statements and accounting records and prepared as if the Company existed on a standalone basis. The financial statements for all periods presented, including the historical results of the Company prior to February 21, 2025, are now referred to as “Consolidated Financial Statements” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
Current report
Client revenue decreased 10%in the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to a 13% decrease in ASP per gigabyte due to pricing pressure, partially offset by a 5% increase in exabytes sold, primarily due to increased shipments to gaming customers. Client revenue increased 1% in the nine months ended March 28, 2025 from the comparable period in the prior year primarily due to a 17% increase in ASP per gigabytedue to improved pricing, partially offset by a 15% decrease in exabytes sold mostly due to a decrease in demand.
Current report
Gross profit decreased $81 million for the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to a decrease in revenue due to lower ASP, a $29 million increase in start-up costs related to the construction of our K2 facility, and a $24 million charge as a result of thereduced utilization of our manufacturing capacity not incurred in the comparable period in the prior year.
Current report
Gross profit increased $1,278 million for the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to improved pricing, a favorable product mix, and a decrease in manufacturing underutilization charges incurred in the three months ended March 28, 2025 compared to the comparable prior year period, partially offset by a $36 million insurance recoveries received in thenine months ended March 29, 2024 for losses incurred due to acontamination incident in 2022. In thenine months ended March 29, 2024, we recognized a $249 million charge as a result of the reduced utilization of our manufacturing capacity as compared to an underutilization charge of $24 million incurred in thethree months ended March 28, 2025.
Current report
Gross profit margin decreased by 5% for the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to a decline in revenue and a charge as a result of the reduced utilization of our manufacturing capacity for which a similar charge was not incurred in the comparable period in the prior year.
Current report
Selling, general and administrative expenses increased $32 million in the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to a $25 million increase in compensation and benefits mainly due to higher headcount and higher variable compensation, including short-term incentives and separation bonuses, and a $8 million increase in rent expense, primarily due to new leases entered in connection with the separation from WDC.
Current report
Selling, general and administrative expenses increased $73 million in the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to a $52 million increase in compensation and benefits due to higher variable compensation, including short-term incentives, which were not incurred in the comparable period in the prior year, and increased headcount, a $24 million increase in legal and outside service fees, a $9 million increase in sales and marketing expenses, a$8 million increasein rent expense, primarily due to new leases entered in connection with the separation from WDC, partially offset by a $20 million decrease in strategic review costs.
Current report
Goodwill impairment
Current report
Goodwill impairment increased $1.8 billion in thethree and nine months ended March 28, 2025 from the comparable period in the prior year due to an impairment charge resulting from the difference between the carrying value of our reporting unit and its fair value.
Current report
Business separation costs
Current report
Business separation costs decreased $3 million in the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to completion of the separation from WDC.
Current report
Business separation costs increased $4 million in the nine months ended March 28, 2025 from the comparable period in the prior year, primary due to an increase in outside service fees to support the execution of the separation from WDC.
Current report
Gain on business divestiture
Current report
Gain on business divestiture increased $34 million in the nine months ended March 28, 2025 from the comparable period in the prior year due to the pre-tax gain on the sale of SDSS.
Current report
(1) Principal portion of debt, excluding issuance costs.
Current report
Debt
Current report
In connection with the separation, on February 21, 2025, the Company entered into a loan agreement comprised of a $1.5 billion revolving credit facility, which was undrawn at the separation date, and a $2 billion term loan facility due in 2032. The Company used a portion of the proceeds received from the term loan facility, as well as cash on hand, to make a net distribution payment of $1.5 billion to WDC in exchange for assets, liabilities and certain legal entities of WDC associated with the Company.
Current report
As of March 28, 2025, the Company was in compliance with the loan agreement financial covenant that requires the Company tomaintain a maximum Leverage Ratio. Additional information regarding our indebtedness, including information about availability under our revolving credit facility and the principal repayment terms, interest rates, covenants, collateral and other key terms of our outstanding indebtedness, is included in Part I, Item INote 8, Debt of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Current report
Concurrent with the separation, the Company and WDC entered into a Tax Matters Agreement under which the Company and WDC agreed to indemnify each other for 50% of certain tax positions. As a result of this agreement, the Company recorded a tax indemnification liability of $112 million on February 21, 2025, which was recognized as an adjustment to the Net investment from Western Digital Corporation. This liability was subsequently reduced by approximately $2 million, reflecting the outstanding balance as of March 28, 2025. The remaining tax indemnification liability of $110 million is classified as Other liabilities in the Condensed Consolidated Balance Sheets as of March 28, 2025.
Current report
Goodwill and Other Long-Lived Assets
Current report
Goodwill attributed to the Company represents the amount by which the purchase price of businesses acquired in a business combination exceeded the estimated fair value of acquired net assets.
Current report
Goodwill is not amortized. Instead, it is tested for impairment annually as of the beginning of the Company’s fourth quarter or more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company uses qualitative factors to determine whether goodwill is more likely than not impaired and whether a quantitative test for impairment is considered necessary. If the Company concludes from the qualitative assessment that goodwill is more likely than not impaired, the Company is required to perform a quantitative assessment to determine the amount of impairment.
Current report
The Company is required to use judgment when assessing goodwill for impairment, including evaluating the impact of industry and macroeconomic conditions and the determination of the fair value of the reporting unit. In addition, the estimates and assumptions used to determine the fair value as well as the actual carrying value may change based on future changes in the Company’s results of operations, macroeconomic conditions, or other factors. Changes in these estimates and assumptions could materially affect the Company’s assessment of the fair value and goodwill impairment. In addition, if negative macroeconomic conditions continue or worsen, goodwill could become impaired, which could result in an impairment charge and materially adversely affect the Company’s financial condition and results of operations.
Current report
Subsequently, the Company performed a quantitative test, which indicated that the carrying value of our reporting unit exceeded its estimated fair value, resulting in the recognition of a $1.8 billion impairment charge as of, and for the period ended, March 28, 2025, which was recorded in the accompanying Condensed Consolidated Statements of Operations.
Current report
The tests for goodwill and long-lived asset impairment are further explained in Part I, Item 1, Note 5, Supplemental Financial Statement Data of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Current report
Determining the fair value used in our impairment calculations involves using significant estimates and assumptions, including revenue forecasts, terminal growth rate, tax rate, and a weighted average cost of capital adjusted for company-specific risk. These estimates and assumptions are based on the most current information available to the Company, and there is no assurance that these estimates and assumptions will accurately predict future outcomes. If our assumptions are not realized, or if any of these assumptions change due to changes in economic conditions, the Company’s results of operations, or other factors, it is possible that an additional impairment charge may be recorded.
Removed paragraphs (6)
Previous report
Client revenue increased 6%in the three months ended December 27, 2024 from the comparable period in the prior year, primarily due to a 22% increase in ASP per gigabyte due toimproved pricing as the supply-demand balance improved, partially offset by a 14% decrease in exabytes sold primarily due to a drop in demand. Client revenue increased 7% in the six months ended December 27, 2024 from the comparable period in the prior year primarily due to a 37% increase in ASP per gigabyte due toimproved pricing as the supply-demand balance improved, partially offset by a 22% decrease in exabytes sold primarily due to a drop in demand.
Previous report
Gross profit increased $445 million and $1,359 million, respectively, for the three and six months ended December 27, 2024 from the comparable period in the prior year, primarily due to improved pricing, favorable product mix, and prior year charges for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity of $107 million and $249 million, respectively, which were not incurred in the current period.
Previous report
Selling, general and administrative expense increased $29 million in the three months ended December 27, 2024 from the comparable period in the prior year, primarily due to a $19 million increase in compensation and benefits due to higher variable compensation and increased headcount and a $6 million increase in legal fees. Selling, general and administrative expense increased by $41 million in the six months ended December 27, 2024 from the comparable period in the prior year, primarily due to a$27 million increase in compensation and benefits due to higher variable compensation and increased headcountand a$13 million increase in materials purchases.
Previous report
The Tax Cuts and Jobs Act (the “2017 Act”) requires the Company to capitalize and amortize R&D expenses rather than expensing them in the year incurred. The tax effects related to the capitalization of R&D expenses are included in our effective tax rate for the three and six months ended December 27, 2024 and December 29, 2023. The tax effects related to the capitalization of R&D expenses had a material impact on our effective tax rate for the three and six months ended December 27, 2024 but did not have a material impact on the effective tax rate for the three and six months ended December 29, 2023.
Previous report
Notes due to Parent of $553 million are expected to be settled on or before the effectiveness of the spin-off.
Previous report
See Part 1, Item 1, Note 15. Subsequent Eventsof the Notes to the Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q for information regarding the Loan Agreement, including the Revolving Credit Facility, entered into on February 21, 2025.
Reworded paragraphs (46)
Previous wording
The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws and should be read in conjunction with the disclosures we make concerning risks and other factors that may affect our business and operating results. You should read this information in conjunction with the unaudited Condensed Combined Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited Combined Financial Statements and notes thereto for the fiscal year ended June 28, 2024, included in our Registration Statement on Form 10, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on November 25, 2024, and as further amended thereafter and declared effective on January 31, 2025 (as amended, the “Form 10”). See also “Forward-Looking Statements” immediately prior to Part I, Item 1 in this Quarterly Report on Form 10-Q.
Current wording
The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws and should be read in conjunction with the disclosures we make concerning risks and other factors that may affect our business and operating results. You should read this information in conjunction with the unaudited Condensed Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited Combined Financial Statements and notes thereto for the fiscal year ended June 28, 2024, included in our Registration Statement on Form 10, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on November 25, 2024, and as further amended thereafter and declared effective on January 31, 2025 (as amended, the “Form 10”). See also “Forward-Looking Statements” immediately prior to Part I, Item 1 in this Quarterly Report on Form 10-Q.
Previous wording
On October 30, 2023, WDC announced that its board of directors (“WDC Board of Directors”) authorized management to pursue a plan to separate the Company into an independent public company. The separation received final approval by the WDC Board of Directors and was completed on February 21, 2025.
Current wording
On October 30, 2023, Western Digital Corporation (“WDC”) announced that its board of directors (the “WDC Board of Directors”) authorized management to pursue a plan to separate the Company into an independent public company. The separation received final approval by the WDC Board of Directors and was completed on February 21, 2025. Prior to February 21, 2025, the Company was wholly owned by WDC.
Previous wording
WDC executed the spin-off of the Company through WDC’s pro rata distribution of 80.1% of the outstanding shares of common stock of the Company to holders of WDC’s common stock as of the close of business on February 21, 2025. Each WDC stockholder received one-third (1/3) of a share of the Company’s common stock for each share of WDC’s common stock held by such WDC stockholder as of February 12, 2025, the record date of the distribution. Upon completion of the separation, WDC owned 19.9% of the outstanding shares of the Company’s common stock, which WDC is expected to retain for a period of up to 12 months following the distribution. Following the distribution, the Company became an independent publicly listed company, and on February 24, 2025, the Company began trading as an independent publicly traded company under the stock symbol “SNDK” on Nasdaq.
Current wording
On February 21, 2025, WDC executed the spin-off of the Company through WDC’s pro rata distribution of 80.1% of the outstanding shares of common stock of the Company to holders of WDC’s common stock. Each WDC stockholder received one-third (1/3) of one share of the Company’s common stock for each share of WDC’s common stock held by such WDC stockholder as of February 12, 2025, the record date of the distribution. Upon completion of the separation, WDC owned 19.9% of the outstanding shares of the Company’s common stock, which WDC is expected to retain for a period of up to twelve months following the distribution. Following the distribution, the Company became an independent publicly listed company, and on February 24, 2025, the Company began trading as an independent publicly traded company under the stock symbol “SNDK” on Nasdaq.
Previous wording
As discussed in Part I, Item 1, Note 9, Related Parties and Related Commitments and Contingencies of the Notes to the Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q, on September 28, 2024, our wholly-owned subsidiary, SanDisk China Limited (“SanDisk China”) completed the sale of 80% of its equity interest in SDSS to JCET Management Co., Ltd. (“JCET”), a wholly-owned subsidiary of JCET Group Co., Ltd., a Chinese publicly-listed company, thereby forming a venture between SanDisk China and JCET. The transaction resulted in a pre-tax gain of $34 million.
Current wording
As discussed in Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, on September 28, 2024, prior to the separation, WDC’s wholly-owned subsidiary, SanDisk China Limited (“SanDisk China”) completed the sale of 80% of its equity interest in SDSS to JCET Management Co., Ltd. (“JCET”), a wholly-owned subsidiary of JCET Group Co., Ltd., a Chinese publicly listed company, thereby forming a venture between SanDisk China and JCET (the “SDSS Venture”). The transaction resulted in a pre-tax gain of $34 million.
Previous wording
In September 2023, WDC completed a sale and leaseback of its facility in Milpitas, California, and received net proceeds of $191 million in cash. A substantial majority of these assets are associated with the Company, and as a result, $134 million of the net proceeds from the sale-leaseback transaction has been allocated to us on a relative square footage basis. The property is being leased back to the Company at a total annual rate of $16 million for the first year and increasing by 3% per year thereafter through January 1, 2039. The lease includes three five-year renewal options and one four-year renewal option for the ability to extend through December 2057. The associated operating lease liability and right of use asset for this facility has been included in the Condensed Combined Balance Sheets as of December 27, 2024 and June 28, 2024. This facility is utilized in the Company’s operations, and the total lease expense has been allocated to the Company based on the continued usage of the facility.
Current wording
In September 2023, WDC completed a sale and leaseback of its facility in Milpitas, California, and received net proceeds of $191 million in cash. A substantial majority of these assets are associated with the Company, and as a result, $134 million of the net proceeds from the sale-leaseback transaction were allocated to us on a relative square footage basis. The property is being leased back to the Company at a total annual rate of $16 million for the first year and increasing by 3% per year thereafter through January 1, 2039. The lease includes three five-year renewal options and one four-year renewal option for the ability to extend through December 2057. The associated operating lease liability and right-of-use asset for this facility has been included in the Condensed Consolidated Balance Sheets as of March 28, 2025 and June 28, 2024. This facility is utilized in the Company’s operations, and the total lease expense has been allocated to the Company based on the continued usage of the facility.
Previous wording
As discussed in Part I, Item 1, Note 15, Subsequent Eventsof the Notes to the Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q, subsequent to the completion of the separation, the Company identified potential impairment indicators related to the trading price of the Company’s common stock and a resulting market capitalization that was below its December 27, 2024 net book value. In accordance with Accounting Standards Codification No. 350, Intangibles - Goodwill and Other, the Company initiated a quantitative analysis of potential impairment of goodwill and long-lived assets. That analysis is ongoing, and the Company believes it is more likely than not that it will record an impairment charge in the three months ended March 28, 2025.
Current wording
As discussed in Part I, Item 1, Note 5, Supplemental Financial Statement Data of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, subsequent to the separation, the Company performed a quantitative analysis of potential impairment of goodwill and long-lived assets, in accordance with Accounting Standards Codification (“ASC”) No. 350, Intangibles - Goodwill and Other. That analysis indicated that the estimated carrying value of our reporting unit exceeded its fair value. As a result, the Company has recorded a goodwill impairment charge of$1.8 billion for thethree months ended March 28, 2025.
Previous wording
The Company received financing from certain of WDC’s subsidiaries in the form of borrowings under revolving credit agreements and promissory notes to fund activities primarily related to Flash Ventures. Additional information regarding our outstanding notes due to (from) Parent is included in Part 1, Item 1, Note 9, Related Parties and Related Commitments and Contingencies of the Notes to Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
Prior to the separation, the Company received financing from certain of WDC’s subsidiaries in the form of borrowings under revolving credit agreements and promissory notes to fund activities primarily related to Flash Ventures. Additional information regarding our outstanding notes due to (from) Western Digital Corporation is included in Part 1, Item 1, Note 9, Related Parties and Related Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
As discussed in Part I, Item 1, Note 15, Subsequent Eventsof the Notes to the Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q, on February 21, 2025, the Company entered into a loan agreement comprised of a seven-year Term Loan B facility in an aggregate principal amount of $2.0 billion (the “Term Loan Facility”) and a five-year revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $1.5 billion with $150 million for letters of credit.
Current wording
As discussed in Part I, Item 1, Note 8, Debtof the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, on February 21, 2025, the Company entered into a loan agreement comprised of a seven-year Term Loan B facility in an aggregate principal amount of$2 billion (the “Term Loan Facility”) and a five-year revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of$1.5 billion with$150 million for letters of credit.
Previous wording
On February 21, 2025, the Company borrowed $2 billion under its Term Loan Facility. The Company used a portion of the proceeds of the borrowing to pay a dividend to WDC in the amount of approximately $1.5 billion, with the remainder to be used for general corporate purposes of the Company. The proceeds of the Revolving Credit Facility may be used by the Company for working capital and general corporate purposes.
Current wording
On February 21, 2025, the Company borrowed$2 billion under its Term Loan Facility. The Company used a portion of the proceeds of the borrowingto make a net distribution payment of$1.5 billion to WDC, with the remainder to be used for general corporate purposes of the Company. The proceeds of the Revolving Credit Facility may be used by the Company for working capital and general corporate purposes.
Previous wording
As of March 7, 2025, the date these financial statements were available to be issued, the Company has drawn no amounts under the Revolving Credit Facility.
Current wording
As of March 28, 2025, the Company has drawnno amounts under the Revolving Credit Facility.
Previous wording
During 2023 and the first half of 2024, macroeconomic factors such as inflation, changes in interest rates, and recession concerns softened demand of our products. As a result, we and our industry experienced a supply-demand imbalance, which resulted in reduced shipments and negatively impacted pricing during those periods. To adapt to these conditions, we implemented measures to reduce operating expenses and proactively manage supply and inventory to align with demand and improve our capital efficiency while continuing to deploy innovative products. These actions enabled us to scale back on capital expenditures, consolidate production lines, and reduce production, which resulted in incremental charges for employee termination and charges for unabsorbed manufacturing overhead costs due to the underutilization of facilities as we temporarily scaled back production.
Current wording
During the first half of 2024, macroeconomic factors such as inflation, changes in interest rates, and recession concerns softened demand of our products. As a result, we and our industry experienced a supply-demand imbalance, which resulted in reduced shipments and negatively impacted pricing during those periods. To adapt to these conditions, we implemented measures to reduce operating expenses and proactively manage supply and inventory to align with demand and improve our capital efficiency while continuing to deploy innovative products. These actions enabled us to scale back on capital expenditures, consolidate production lines, and reduce production, which resulted in incremental charges for employee termination and charges for unabsorbed manufacturing overhead costs due to the underutilization of facilities as we temporarily scaled back production.
Previous wording
In the first half of the year, we saw an improvement in the supply and demand dynamic, leading to improved revenues. The increase in demand resulted in increased revenue and gross margin in the first quarter of 2025 from the comparable period in the prior year. Recently, we are experiencing what we believe is a mid-cycle slowdown. We expect to incur charges for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity in the remainder of fiscal 2025 as we moderate production levels to align with demand for our products. We anticipate that digital transformation, including the artificial intelligence data-cycle, will drive improved market conditions in the long term for our data storage products.
Current wording
In the first half of fiscal 2025, we saw an improvement in the supply and demand dynamic, leading to improved revenues. The increase in demand resulted in increased revenue and gross margin in the first and second quarter of fiscal 2025 from the comparable period in the prior year. Recently, we have been experiencing what we believe is a mid-cycle slowdown. During the third quarter of fiscal year 2025, we incurred charges for unabsorbed manufacturing overhead costs due to reduced utilization of our manufacturing capacity totaling $24 million, and we anticipate to incur additional charges as we moderate production levels to align with demand for our products in the remainder of fiscal 2025.
Previous wording
The following discussion reflects the Company’s financial condition and results of operations as set forth in the unaudited Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q, which have been derived from Western Digital Corporation’s (“WDC”) historical accounting records and are presented on a stand-alone basis as if the Company’s operations had been conducted independently from WDC. The unaudited Condensed Combined Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), by aggregating financial information from the components of the Company and WDC’s accounting records directly attributable to the Company.
Current wording
The following discussion reflects the Company’s financial condition and results of operations as set forth in the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
The unaudited Condensed Combined Statements of Operations include all revenues and costs directly attributable to the Company, including costs for facilities, functions, and services used by the Company. The Company’s business has historically functioned together with the other businesses controlled by WDC. Accordingly, the Company relied on WDC’s corporate overhead and other support functions for its business. Therefore, certain corporate overhead and shared costs have been allocated to the Company including (i) certain general and administrative expenses related to WDC’s support functions that are provided on a centralized basis within WDC (e.g., expenses for corporate facilities, executive oversight, treasury, finance, legal, human resources, compliance, information technology, employee benefit plans, stock compensation plans and other corporate functions), and (ii) certain operations support costs incurred by WDC, including product sourcing, maintenance and support services, and other supply chain functions. These expenses have been specifically identified, when possible, or allocated based on revenues, headcount, usage or other allocation methods that are considered to be a reasonable reflection of the utilization of services provided or benefit received. While management considers that such allocations have been made on a reasonable basis consistent with benefits received, the Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q may not be indicative of our future performance, do not necessarily include the actual expenses that would have been incurred by us and may not reflect our results of operations, financial position, and cash flows had we been a separate, standalone company during the periods presented. For additional information, see Part I, Item 1, Note 1, Organization and Basis of Presentation of the Notes to Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
The unaudited Condensed Consolidated Statements of Operations include all revenues and costs directly attributable to the Company, including costs for facilities, functions, and services used by the Company. Prior to the separation, the Company’s business had historically functioned together with the other businesses controlled by WDC. Accordingly, the Company relied on WDC’s corporate overhead and other support functions for its business. Therefore, certain corporate overhead and shared costs were allocated to the Company including (i) certain general and administrative expenses related to WDC’s support functions that are provided on a centralized basis within WDC (e.g., expenses for corporate facilities, executive oversight, treasury, finance, legal, human resources, compliance, information technology, employee benefit plans, stock compensation plans and other corporate functions), and (ii) certain operations support costs incurred by WDC, including product sourcing, maintenance and support services, and other supply chain functions. These expenses were specifically identified, when possible, or allocated based on revenues, headcount, usage or other allocation methods that are considered to be a reasonable reflection of the utilization of services provided or benefit received. While management considers that such allocations were made on a reasonable basis consistent with benefits received, the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q may not be indicative of our future performance, do not necessarily include the actual expenses that would have been incurred by us and may not reflect our results of operations, financial position, and cash flows had we been a separate, standalone company during the periods presented. For additional information, see Part I, Item 1, Note 1, Organization and Basis of Presentation of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
The following table sets forth, for the periods presented, selected summary information from our Condensed Combined Statements of Operations by dollars and percentage of net revenue(1):
Current wording
The following table sets forth, for the periods presented, selected summary information from our Condensed Consolidated Statements of Operations by dollars and percentage of net revenue(1):
Previous wording
The Company’s broad portfolio of technology and products addresses multiple end markets. Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers. Through the Client end market, the Company provides its OEM and channel customers a broad array of high-performance flash solutions across personal computer, mobile, gaming, automotive, virtual reality headset, at-home entertainment, and industrial spaces. The Consumer end market is highlighted by the Company’s broad range of retail and other end-user products, which capitalize on the strength of the Company’s product brand recognition and vast points of presence around the world.
Current wording
The Company’s broad portfolio of technology and products addresses multiple end markets. Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers. Through the Client end market, the Company provides its OEM and channel customers a broad array of high-performance flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces. The Consumer end market is highlighted by the Company’s broad range of retail and other end-user products, which capitalize on the strength of the Company’s product brand recognition and vast points of presence around the world.
Previous wording
Net revenue increased 13% in the three months ended December 27, 2024 from the comparable period in the prior year, primarily due to a 14% increase in average selling prices (“ASP”) per gigabyte attributed to improved pricing as the supply-demand balance improved, partially offset by a 2% decrease in exabytes sold driven by softer demand in the Client and Consumer end markets.
Current wording
Net revenue decreased 1% in the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to an 11% decrease in average selling prices (“ASP”) per gigabyte due to pricing pressure caused by market oversupply, partially offset by a 13% increase in exabytes sold due to stronger demand in our Cloud end market.
Previous wording
Net revenue increased 18% in the six months ended December 27, 2024 from the comparable period in the prior year, primarily driven due to a 26% increase ASP per gigabyte attributed to improved pricing as the supply-demand balance improved, partially offset by a 7% decrease in exabytes sold driven by softer demand in the Client and Consumer end markets.
Current wording
Net revenue increased 11% in the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to a 12% increase in ASP per gigabyte due to improved pricing as the supply-demand balance improved, partially offset by a 1% decrease in exabytes sold due to softer demand in the Client and Consumer end markets.
Previous wording
Cloud revenue increased 525%in thethree months ended December 27, 2024 from the comparable period in the prior year, primarily due to a 305% increase in exabytes sold, primarily attributable to increased enterprise SSD shipments to data center customers, coupled with a 57% increasein ASP per gigabyte due to improved pricing as the supply-demand balance improved. Cloud revenue increased 848% in thesix months ended December 27, 2024 from the comparable period in the prior year, primarily due to a 571% increase in exabytes sold and a 31% increase in ASP per gigabyte due to the supply-demand balance recovery and improved pricing.
Current wording
Cloud revenue increased 103%in thethree months ended March 28, 2025 from the comparable period in the prior year, primarily due to a 75% increase in exabytes sold due to increased enterprise SSD shipments to data center customers and a 16% increasein ASP per gigabyte due to improved pricing. Cloud revenue increased 382% in thenine months ended March 28, 2025 from the comparable period in the prior year, primarily due to a 256% increase in exabytes sold and a 26% increase in ASP per gigabyte.
Previous wording
Consumer revenue decreased 9% in the three months ended December 27, 2024 from the comparable period in the prior year, primarily due to a 5% decrease in ASP per gigabyte and a 4% decrease in exabytes sold driven by softer demand. Consumer revenue decreased 5% in the six months ended December 27, 2024 from the comparable period in the prior year, primarily due to a 8% decrease in exabytes sold due to softer demand, partially offset by a 2% increase in ASP per gigabyte.
Current wording
Consumer revenue remained flat in the three months ended March 28, 2025 compared to the comparable period in the prior year, primarily due to a 15% increase in exabytes sold, offset by a 15% decrease in ASP per gigabyte due to pricing pressure. Consumer revenue decreased 4% in the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to a 4% decrease in ASP per gigabyte and 1% decrease in exabytes sold.
Previous wording
The changes in net revenue by geography in thethree and six months ended December 27, 2024 from the comparable period in the prior year primarily reflected higher revenue in the Americas region from Cloud customers.
Current wording
The changes in net revenue by geography in thethree and nine months ended March 28, 2025 from the comparable period in the prior year primarily reflected higher revenue in the Asia region from Client customers.
Previous wording
Consistent with standard industry practice, we offer sales incentive and marketing programs that provide customers with price protection and other incentives or reimbursements that are recorded as a reduction to gross revenue. For the three months ended December 27, 2024 and December 29, 2023, these programs represented 22% of gross revenues. For the six months ended December 27, 2024 and December 29, 2023, these programs represented 19% and 23%, respectively, of gross revenues. The amounts attributed to our sales incentive and marketing programs generally vary according to several factors, including industry conditions, list pricing strategies, seasonal demand, competitor actions, channel mix and overall availability of products. Changes in future customer demand and market conditions may require us to adjust our incentive programs as a percentage of gross revenue.
Current wording
Consistent with standard industry practice, we offer sales incentive and marketing programs that provide customers with price protection and other incentives or reimbursements that are recorded as a reduction to gross revenue. For the three months ended March 28, 2025 and March 29, 2024, these programs represented 19% and 16%, respectively, of gross revenues. For the nine months ended March 28, 2025 and March 29, 2024, these programs represented 19% and 21%, respectively, of gross revenues. The amounts attributed to our sales incentive and marketing programs generally vary according to several factors, including industry conditions, list pricing strategies, seasonal demand, competitor actions, channel mix and overall availability of products. Changes in future customer demand and market conditions may require us to adjust our incentive programs as a percentage of gross revenue.
Previous wording
Gross profit margin increased by 23% and 36%, respectively, for the three and six months ended December 27, 2024 from the comparable period in the prior year, primarily due to improved pricing, favorable product mix, and a prior year charge for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity representing 6% and 8%, respectively, which were not incurred in the current period.
Current wording
Gross profit margin increased by 23% for the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to improved pricing, a favorable product mix, and a prior year charge as a result of the reduced utilization of our manufacturing capacity.
Previous wording
Research and development (“R&D”) expense increased $33 million in the three months ended December 27, 2024 from the comparable period in the prior year, primarily due to a $16 million increase in compensation and benefits due to higher variable compensation and increased headcount, a $7 million increase in material purchases, and increases inspending for R&D projects as we continue to invest in innovation. R&D expense increased by $76 million in the six months ended December 27, 2024 from the comparable period in the prior year, primarily due to a $42 million increase in compensation and benefits due to higher variable compensation and increased headcount, a $16 million increase in material purchases, and increases in spending for R&D projects as we continue to invest in innovation.
Current wording
R&D expenses increased $84 million in the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to a $46 million increase in compensation and benefits due to higher variable compensation, including short-term incentives, which were not incurred in the comparable period in the prior year, and increased headcount, a $20 million increase in material purchases, a $13 million increase in spending for R&D projects, and a $5 million increase in Flash Venture R&D commitments as we continue to invest in innovation.
Previous wording
Employee termination and other charges decreased $10 million in the three months ended December 27, 2024 from the comparable period in the prior year, primarily due to fewer restructuring actions taken in the current period. Employee termination and other charges increased $51 million in the six months ended December 27, 2024 from the comparable period in the prior year, primarily due a $60 million gain on the sale-leaseback of a facility in the prior period. For additional information regarding employee termination and other charges, see Part I, Item 1, Note 13, Employee Termination and Other Charges of the Notes to Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
Employee termination and other charges increased $49 million in the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to a $60 million gain on the sale-leaseback of a facility in the prior period, partially offset by a $11 million decrease in employee termination costs as a result of fewer restructuring actions taken in the current period. For additional information regarding employee termination and other charges, see Part I, Item 1, Note 15, Employee Termination and Other Charges of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q,
Previous wording
Interest and other expense, net increased $7 million in the three months ended December 27, 2024 from the comparable period in the prior year, primarily due to an $11 million increase in losses on our equity investments and a $7 million increase in foreign exchange losses, partially offset by a $7 million decrease in interest expense on borrowings due to WDC and$4 million in interest income arising from the accretion of the present value discount on the outstanding SDSS consideration receivable.
Current wording
Interest and other expense, net increased $9 million in the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to a $15 million increase in interest expense from our Term Loan Facility and a $3 million increase in losses on our equity investments, partially offset by a $7 million decrease in interest expense on borrowings due to WDC and a $2 million increase in interest income arising from the accretion of the present value discount on the outstanding SDSS consideration receivable.
Previous wording
Interest and other expense, net increased $24 million in the six months ended December 27, 2024 from the comparable period in the prior year, primarily due to a $25 million increase in foreign exchange losses and a $20 million increase in losses on our equity investments, partially offset by a $16 million decrease in interest expense on borrowings due to WDC and$4 million in interest income arising from the accretion of the present value discount on the outstanding SDSS consideration receivable.
Current wording
Interest and other expense, net increased $33 million in the nine months ended March 28, 2025 from the comparable period in the prior year, primarily due to a $26 million increase in foreign exchange losses, a $23 million increase in losses on our equity investments, and a $15 million increase in interest expense from our Term Loan Facility, partially offset by a $21 million decrease in interest expense on borrowings due to WDC, a $6 million increase in interest income arising from the accretion of the present value discount on the outstanding SDSS consideration receivable and a $5 million increase in other income due to an increase in available cash.
Previous wording
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which contained significant changes to laws related to tax, climate, energy, and health care. The tax measures include, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion. The corporate alternative minimum tax was effective for us beginning with fiscal year 2024. We do not expect to be subject to the CAMT of 15% for fiscal year 2025 as our average annual AFSI did not exceed $1.0 billion for the preceding three-year period.
Current wording
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained significant changes to laws related to tax, climate, energy, and health care. The tax measures include, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion. We do not expect to be subject to the CAMT of 15% for fiscal year 2025 as our average annual AFSI did not exceed $1.0 billion for the preceding three-year period.
Previous wording
On December 20, 2021, the Organization for Economic Co-operation and Development G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two”). Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of the Pillar Two, some of which are effective for the Company in fiscal year 2025. For fiscal year 2025, we currently expect to be able to meet certain transitional safe harbors and do not expect any material Pillar Two taxes. As more jurisdictions adopt this legislation in fiscal year 2026, there may be material increases in our future tax obligations in certain jurisdictions.
Current wording
On December 20, 2021, the Organization for Economic Co-operation and Development G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two”). Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, some of which are effective for the Company in fiscal year 2025. For fiscal year 2025, we currently expect to be able to meet certain transitional safe harbors and do not expect any material Pillar Two taxes. As more jurisdictions adopt this legislation in fiscal year 2026, there may be material increases in our future tax obligations in certain jurisdictions.
Previous wording
The relative mix of earnings and losses by jurisdiction, the deduction for foreign-derived intangible income, credits and tax holidays in Malaysia that have or will expire at various dates during years 2025 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the three and six months ended December 27, 2024. However, the tax effects of the mandatory capitalization of R&D expenses offset these decreases, resulting in the effective tax rate being closer to the U.S. Federal statutory rate for the three and six months ended December 27, 2024.
Current wording
The relative mix of earnings and losses by jurisdiction, the goodwill impairment, the deduction for foreign-derived intangible income, credits and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the three and nine months ended March 28, 2025.
Previous wording
For additional information regarding income tax expense, see Part I, Item 1, Note 12, Income Tax Expense, in the Notes to the Condensed Combined Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
For additional information regarding income tax expense, see Part I, Item 1, Note 14, Income Tax Expenseof the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
The following table summarizes our Condensed Combined Statements of Cash Flows of December 27, 2024 and December 29, 2023:
Current wording
The following table summarizes our Condensed Consolidated Statements of Cash Flows of March 28, 2025 and March 29, 2024:
Previous wording
As noted previously, we have been scaling back on capital expenditures, consolidating production lines and reducing bit growth to align with market demand. We continue to be cautious in our capital investment and expect our cash capital expenditures in 2025 to be higher than in 2024, but remain below 2023 expenditures.
Current wording
As noted previously, we have been scaling back on capital expenditures, consolidating production lines and reducing bit growth to align with market demand. We continue to be cautious in our capital investment and expect our cash capital expenditures in fiscal 2025 to be higher than in fiscal 2024, but remain below our fiscal 2023 expenditures.
Previous wording
We believe our cash and cash equivalents, as discussed in “Key Developments—Financing Activities” above, will be sufficient to meet our working capital needs for at least the next twelve months and for the foreseeable future thereafter. We believe we can also access the various capital markets to further supplement our liquidity position if necessary. Our ability to sustain our working capital position is subject to a number of risks that we discuss under the heading “Risk Factors” included in the Form 10.
Current wording
We believe our cash and cash equivalents will be sufficient to meet our working capital needs for at least the next twelve months and for the foreseeable future thereafter. We believe we can also access the various capital markets to further supplement our liquidity position if necessary. Our ability to sustain our working capital position is subject to a number of risks that we discuss under the heading “Risk Factors” included in the Form 10.
Previous wording
A total of $692 million and $321 million of our cash and cash equivalents were held outside of the U.S. as of December 27, 2024 and June 28, 2024 respectively. There are no material tax consequences that were not previously accrued for on the repatriation of this cash.
Current wording
A total of $1.1 billion and $321 million of our cash and cash equivalents were held outside of the U.S. as of March 28, 2025 and June 28, 2024 respectively. There are no material tax consequences that were not previously accrued for the repatriation of this cash.
Previous wording
Net cash used in operating activities primarily consists of net income or loss, adjusted for non-cash charges, plus or minus changes in operating assets and liabilities. Net cash used as a result of changes in operating assets and liabilities was $487 million in the six months ended December 27, 2024, as compared to $449 million net cash provided in the six months ended December 29, 2023, reflecting an increase in the volume of our business, as discussed above.
Current wording
Net cash used in operating activities primarily consists of net income or loss, adjusted for non-cash charges, plus or minus changes in operating assets and liabilities. Net cash used as a result of changes in operating assets and liabilities was $436 million in the nine months ended March 28, 2025, as compared to $267 million net cash provided in the nine months ended March 29, 2024, reflecting an increase in the volume of our business, as discussed above.
Previous wording
Changes in days sales outstanding, or DSO, are generally due to the timing of shipments. Changes in days in inventory, or DIO, are generally related to the timing of inventory builds. Changes in days payables outstanding, or DPO, are generally related to production volume and the timing of purchases during the period. From time to time, we modify the timing of payments to our vendors. We make modifications primarily to manage our vendor relationships and to manage our cash flows, including our cash balances. Generally, we make the payment term modifications through negotiations with our vendors or by granting to, or receiving from, our vendors’ payment term accommodations.
Current wording
Changes in days sales outstanding, or DSO, are generally due to the timing of shipments. Changes in days in inventory, or DIO, are generally related to the timing of inventory builds. Changes in days payables outstanding, or DPO, are generally related to production volume and the timing of purchases during the period. From time to time, we modify the timing of payments to our vendors. We make modifications primarily to manage our vendor relationships and to manage our cash flows, including our cash balances. Generally, we make payment term modifications through negotiations with our vendors or by granting to, or receiving from, our vendors’ payment term accommodations.
Previous wording
For the three months ended December 27, 2024, DSO increased 7 days over the three months ended December 29, 2023, reflecting lower accounts receivable factoring and the timing of shipments and customer collections. During the three months ended December 27, 2024, DIO increased 58 days over the three months ended December 29, 2023, primarily reflecting lower consumption of inventory in the current period. DPO increased 10 days over the comparable period in the prior year, primarily due to routine variations in the timing of purchases and payments during the period.
Current wording
For the three months ended March 28, 2025, DSO increased 10 days over the three months ended March 29, 2024, reflecting lower accounts receivable factoring and the timing of shipments and customer collections. During the three months ended March 28, 2025, DIO increased 23 days over the three months ended March 29, 2024, primarily reflecting lower consumption of inventory in the current period. DPO increased 2 days over the comparable period in the prior year, primarily due to routine variations in the timing of purchases and payments during the period.
Previous wording
Net cash provided by investing activities in the six months ended December 27, 2024 primarily consisted of $191 million in net proceeds from our sale of a majority interest in one of our subsidiaries and $92 million in net proceeds from activity related to Flash Ventures, partially offset by $115 million in capital expenditures. Net cash provided by investing activities in the six months ended December 29, 2023 primarily consisted of $134 million of proceeds from the sale-leaseback of our Milpitas, California facility and $79 million in net proceeds from activity related to Flash Ventures, partially offset by $99 million in capital expenditures.
Current wording
Net cash provided by investing activities in the nine months ended March 28, 2025 primarily consisted of $401 million in net proceeds from our sale of a majority interest in one of our subsidiaries and $330 million in net proceeds from activity related to Flash Ventures, partially offset by $159 million in capital expenditures. Net cash provided by investing activities in the nine months ended March 29, 2024 primarily consisted of $134 million of proceeds from the sale-leaseback of our Milpitas, California facility and $207 million in net proceeds from activity related to Flash Ventures, partially offset by $128 million in capital expenditures.
Previous wording
Net cash provided by financing activities in the six months ended December 27, 2024 primarily consisted of $550 million in proceeds from borrowings on notes due to WDC and $101 million in proceeds from repayments on notes due from WDC, partially offset by $231 million transferred from WDC and $76 million in net repayments on notes due to WDC. Net cash provided by financing activities in the six months ended December 29, 2023 primarily consisted of $274 million net transfers from WDC, partially offset by $74 million in origination of notes due from WDC and $14 million in net repayments on notes due to WDC.
Current wording
Net cash provided by financing activities in the nine months ended March 28, 2025 primarily consisted of $1,970 million in proceeds from borrowings from the Term Loan Facility, $550 million proceeds from borrowings on notes due to WDC, and $101 million proceeds from principal repayments on notes due from WDC, partially offset by $1,887 million transferred to WDC, $76 million in net repayments on notes due to WDC and $32 million debt issuance discount. Net cash provided by financing activities in the nine months ended March 29, 2024 primarily consisted of $340 million net transfers from WDC, partially offset by $187 million in origination of notes due from WDC and $102 million in net repayments on notes due to WDC.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
With regard to technological advances, we anticipate that digital transformation, including the artificial intelligence data-cycle, will drive improved market conditions in the long term for our data storage products.
Current report — wording carried from elsewhere
Research and development (“R&D”) expenses increased $8 million in the three months ended March 28, 2025 from the comparable period in the prior year, primarily due to a $4 million increase in material purchases and a $4 million increase in spending for R&D projects as we continue to invest in innovation.
Current report — wording carried from elsewhere
Employee termination and other charges decreased $2 million in the three months ended March 28, 2025 from the comparable period in the prior year, as there were no restructuring actions taken in the current period.
Current report — wording carried from elsewhere
Subsequent to the completion of the separation, the Company identified potential impairment indicators related to macroeconomic indicators, industry developments, the trading price of the Company’s common stock and resulting market capitalization that warranted a quantitative impairment analysis of long-lived assets and goodwill.