sndk q114 rj conf slides

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Raymond James 35th Annual Conference

March 3, 2014

Judy Bruner Execu6ve Vice President, Administra6on and Chief Financial Ocer

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Forward-Looking Statements

During our mee6ng today we may make forward-looking statements.

Any statement that refers to expecta6ons, projec6ons or other characteriza6ons of future events or circumstances is a forward-looking statement, including those rela6ng to market posi6on, market growth, product sales, industry trends, supply chain, future memory technology, produc6on capacity, produc6on costs, technology transi6ons and future products. This presenta6on contains informa6on from third par6es, which reect their projec6ons as of the date of issuance.

Actual results may dier materially from those expressed in these forward-looking statements due to factors detailed under the cap6on Risk Factors and elsewhere in the documents we le from 6me to 6me with the SEC, including our annual and quarterly reports.

We undertake no obliga6on to update these forward-looking statements, which speak only as of the date hereof.

Raymond James 35th Annual Ins6tu6onal Investors Conference, Orlando, FL | March 3, 2014

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A Global Leader in Flash Storage SoluAons

Financials as of Q4, 13. Net Cash = [Cash + cash equivalents + short-term & long-term marketable securi6es] less [debt at maturity value] as of the end of Q4, 13. Patents as of Oct., 13; headcount Jan., 14. vNPD Es6mate, Nov., 13. Es6mates of the memory card & USB markets from NPD (Nov. 13) and GfK Retail and Technology, Sep., 13.

The Leading Retail Brand in Key Markets

Rankings Trailing 4 Qtr. Financials Global OperaAons Technology

5,500 Employees

Fabs World Class NAND Capacity

1Ynm Leading Manufacturing Technology Shipping

$6.2B Revenue $3.6B Net Cash $0.7B R&D Investment

CompuAng: Enterprise, Client and Retail SSDs

Qualied at 6 of the Top 7

Server & Storage OEMs

Mobile: All leading smartphone & tablet manufacturers use SanDisk Approved Supplier to

All Leading PC Manufacturers

Retail: The Leading Brand in Key Markets

#1 Global Retail Revenue Sharev


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VerAcally Integrated Business Model

wGartner: NAND Flash Supply & Demand, WW 1Q 12-4Q 14, 3Q 13. Update Sep 13. Thomson Reuters 2013 Top 100 Global Innovator program, hnp://top100innovators.com.

Close to Half of Industry Bit Output Together with manufacturing partner Toshibaw

Fabs: World class NAND capacity

CONTROLLER SCALE ASSY, TEST & PACKAGING

PRODUCTS SOFTWARE NAND TECH FLASH MGMT

World-Leading Innovator

4,900+ Patents

1991 2013


5

Diversied Porbolio of NAND Flash SoluAons Commercial: 63% of F2013 Revenue

Retail: 37% of F2013 Revenue


6

Secular Trends Drive Demand for NAND Mobile CompuAng Content CreaAon All Flash Data Center

SSD


7

$34

$21

$34

$30

$36 $38

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

HDD NAND

2010 2013 2016

TAM for NAND Flash Exceeds HDD by 2016

Source: SanDisk es6mates

TAM ($B)

13-16 ~8% CAGR


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SNDK: Increasing Mix of SSD, Mobile Embedded

Revenue Mix 2012 2013

Embedded 24% 27%

Removable 53% 43%

SSD Solu6ons 9% 19%

License & Royal6es 7% 6%

Other 7% 5%

Total 100% 100%


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Revenue: 2013 a Record with 22% Y/Y Growth 10-Yr CAGR: 19%, 3-Yr CAGR: 9%


$1,777

$2,306

$3,258

$3,896

$3,351 $3,567

$4,826

$5,662

$5,053

$6,170

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

In Millions

Base for 10-Yr CAGR is 2003 with revenue of $1,079M

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Gross Margin: 2013 a Record


36.7%

47.2% 43.9%

34.3%

47.4%

2009 2010 2011 2012 2013 Gross margin is non-GAAP see appendix for non-GAAP to GAAP deni6ons and reconcilia6ons

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OperaAng Income and Margin: 2013 OperaAng Income a Record


$629

$1,553 $1,637

$827

$1,806 17.6%

32.2% 28.9%

16.4%

29.3%

2009 2010 2011 2012 2013 Opera6ng income and margin are non-GAAP see appendix for non-GAAP to GAAP deni6ons and reconcilia6ons

In Millions

12

EPS: 2013 a Record


$1.84

$4.60 $4.65

$2.38

$5.31

2009 2010 2011 2012 2013 EPS is non-GAAP see appendix for non-GAAP to GAAP deni6ons and reconcilia6ons

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Record 2013 OperaAng & Free Cash Flows

Free Cash Flow equals Cash Flow from Opera6ons less Cash Used in Capex Inves6ng Cash Used in Capex Inves6ng includes Acquisi6ons of Property and Equipment and Net Investments in Joint Venture Fabs

In Millions

$488

$1,452

$1,054

$530

$1,864

($37) ($108) ($259)

($169) ($138)

$451

$1,344

$795

$361

$1,726

($500)

$0

$500

$1,000

$1,500

$2,000 Cash Flow from Opera6ons Cash Used in Capex Inves6ng Free Cash Flow

2010 2011 2012 2013


2009

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AgracAve Capital Return Program Stock Repurchases

Repurchase annually the greater of: 70% of free cash ow, OR Amount to oset dilu6on from employee equity awards

Spent more in 2013: $1.59B Remaining authoriza6on at end of 2013: $1.93 billion

Dividends Ini6ated quarterly dividend program in Q3-2013

$0.225 cents per share ($0.90 cents per share annualized) 2013: Total return of cash to shareholders 98% of free cash ow


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SanDisk Balance Sheet is a Strategic Asset

Net Cash = [Cash + Cash Equivalents + Short-term & Long-term Marketable Securi6es] LESS [Debt Value at Maturity] at the close of each scal period.


$1,719

$3,193 $3,687 $3,783 $3,585

$1,225

$2,150 $1,928 $1,928 $2,500

2009 2010 2011 2012 2013

Net Cash Debt

In Millions Top labels indicate gross cash

$2,944

$5,343 $5,615 $5,711

$6,085

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Well-PosiAoned for Long Term Success

Industry Recognized Diverse Porbolio

Retail, Embedded, Client & Enterprise SSD Solu6ons; leading brand 1

Financials Strong P&L, balance sheet -> exibility to invest + return cash to shareholders 3

VerAcal IntegraAon, Scale

State-of-the-art fab and manufacturing opera6ons -> supply, anrac6ve cost 2

Focus 4 Only pure play Flash manufacturer & global leader in Flash storage solu6ons


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Thank You


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Appendices

Basis of Presenta6on for Non-GAAP to GAAP Reconcilia6ons

Non-GAAP to GAAP Reconcilia6ons for Historical Results

Non-GAAP to GAAP Reconcilia6ons for Forecasts


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Basis of Presentation for Non-GAAP to GAAP Operating Results To supplement our condensed consolidated nancial statements presented in accordance with generally accepted accoun6ng principles (GAAP), we use non-GAAP measures of opera6ng results, net income and net income per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP nancial measures are provided to enhance the user's overall understanding of our current nancial performance and our prospects for the future. Specically, we believe the non-GAAP results provide useful informa6on to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indica6ve of our core opera6ng results and because they are consistent with the nancial models and es6mates published by many analysts who follow us. For example, because the non-GAAP results exclude the expenses we recorded for share-based compensa6on, amor6za6on of acquisi6on-related intangible assets related to acquisi6ons of Matrix Semiconductor, Inc. in January 2006, Pliant Technology, Inc. in May 2011, FlashSo| Corpora6on in February 2012, Schooner Informa6on Technology, Inc. in June 2012 and SMART Storage Systems in August 2013, impairment of acquisi6on-related intangible assets, non-cash economic interest expense associated with the conver6ble debt and related tax adjustments, we believe the inclusion of non-GAAP nancial measures provides consistency in our nancial repor6ng. In addi6on, our non-GAAP diluted shares include the impact of the call op6on which, when exercised, will oset the issuance of dilu6ve shares from the 1.5% Sr. Conver6ble Notes due 2017, while the GAAP diluted shares exclude the an6-dilu6ve impact of this call op6on. These non-GAAP results are some of the primary indicators management uses for assessing our performance, alloca6ng resources and planning and forecas6ng future periods. Further, management uses non-GAAP informa6on that excludes certain non-cash charges, such as amor6za6on of acquisi6on-related intangible assets, impairment of acquisi6on-related intangible assets, share-based compensa6on, non-cash economic interest expense associated with the conver6ble debt and related tax adjustments, as these non-GAAP charges do not reect the cash opera6ng results of the business or the ongoing results. These measures should be considered in addi6on to results prepared in accordance with GAAP, but should not be considered a subs6tute for, or superior to, GAAP results. These non-GAAP measures may be dierent than the non-GAAP measures used by other companies.


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Purchase Convertible

% of Share-based Accounting Debt % of

Non-GAAP Revenue Compensation Adjustments Interest Other GAAP RevenueProduct revenues 3,154,314$ 88.4% -$ -$ -$ -$ 3,154,314$ 88.4%License and royalty revenues 412,492 11.6% - - - - 412,492 11.6%Total revenues 3,566,806 100.0% - - - - 3,566,806 100.0%

Cost of product revenues 2,257,224 71.6% (a) 12,427 (b) - - - 2,269,651 72.0%Amortization of acquisition-related intangible assets - 0.0% (a) - 12,529 (c) - - 12,529 0.4%Total cost of product revenues 2,257,224 71.6% (a) 12,427 12,529 - - 2,282,180 72.4%

Product gross profit 897,090 28.4% (a) (12,427) (12,529) - - 872,134 27.6%Total gross profit 1,309,582 36.7% (12,427) (12,529) - - 1,284,626 36.0% (a)

(a)Research and development 347,759 9.7% 36,399 (b) - - - 384,158 10.8% (a)Sales and marketing 189,267 5.3% 19,247 (b) - - - 208,514 5.8%General and administrative 143,872 4.1% 27,487 (b) - - - 171,359 4.8% (a)Amortization of acquisition-related intangible assets - 0.0% - 1,167 (c) - - 1,167 0.0%Restructuring and other 38 0.0% - - - - 38 0.0%Total operating expenses 680,936 19.1% 83,133 1,167 - - 765,236 21.4% Operating income 628,646 17.6% (95,560) (13,696) - - 519,390 14.6%

Other income (expense) 38,865 1.1% - - (54,454) (d) - (15,589) -0.5%Income before income taxes 667,511 18.7% (95,560) (13,696) (54,454) - 503,801 14.1%

Provision for income taxes 240,304 6.7% (26,251) (5,150) (20,475) (99,937) (e) 88,491 2.5%

Net income 427,207$ 12.0% (69,309)$ (8,546)$ (33,979)$ 99,937$ 415,310$ 11.6%Net income per share, diluted 1.84$ 1.79$ Diluted shares used in computing net income per share 232,300 231,959Effective tax rate 36.0% 17.6%

(a)(b)

(c)(d)(e) Income taxes associated w ith certain non-GAAP to GAAP adjustments.

Percent of revenue calculations for cost of product revenues and product gross profit are based on product revenues only (license and royalty revenues are excluded).Share-based compensation expense. The fourth quarter and full f iscal year 2009 include a one-time cumulative adjustment of $16.2 million to increase share-based compensation due to the w ay in w hich the Company's third-party softw are application incorrectly accounted for estimated forfeitures in share-based compensation calculations. This cumulative adjustment relates to the nine months ended September 27, 2009 and the three years ended December 28, 2008, and is not material for any prior period.Amortization of acquisition-related intangible assets, primarily core and developed technology related to acquisitions of Matrix Semiconductor, Inc. (1/06) and MusicGremlin, Inc. (6/08).Incremental interest expense relating to the non-cash economic interest expense associated w ith the Company's cash-settled convertible debt.

ReconciliaAon of Non-GAAP to GAAP Statement of OperaAons For the year ended January 3, 2010 (in thousands, except percentages and per share amounts, unaudited)


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Reconciliation of Non-GAAP to GAAP Statements of Operations Twelve months ended January 2, 2011 (in thousands, except percentages and per share amounts, unaudited)

% of Rev Other % of RevProduct revenues 4,462,930$ 92.5% -$ -$ -$ -$ 4,462,930$ 92.5%License and royalty revenues 363,877 7.5% - - - - 363,877 7.5%Total revenues 4,826,807 100.0% - - - - 4,826,807 100.0%

Cost of product revenues 2,546,367 57.1% (a) 5,821 (b) - - - 2,552,188 57.2% (a)Amortization of acquisition-related intangible assets - - (a) - 12,529 (c) - - 12,529 0.3% (a)Total cost of product revenues 2,546,367 57.1% (a) 5,821 12,529 - - 2,564,717 57.5% (a)

Product gross profit 1,916,563 42.9% (a) (5,821) (12,529) - - 1,898,213 42.5% (a)Total gross profit 2,280,440 47.2% (5,821) (12,529) - - 2,262,090 46.9%

Research and development 396,270 8.2% 26,292 (b) - - - 422,562 8.8%Sales and marketing 198,863 4.1% 10,934 (b) - - - 209,797 4.3%General and administrative 131,942 2.7% 34,543 (b) - - - 166,485 3.5%Amortization of acquisition-related intangible assets - - - 1,672 (c) - - 1,672 - Total operating expenses 727,075 15.0% 71,769 1,672 - - 800,516 16.6% Operating income 1,553,365 32.2% (77,590) (14,201) - - 1,461,574 30.3%

Other income (expense) 64,757 1.3% - - (68,898) (d) - (4,141) (0.1%)Income before income taxes 1,618,122 33.5% (77,590) (14,201) (68,898) - 1,457,433 30.2%

Provision for (benefit from) income taxes 517,799 10.7% (26,720) (5,297) (25,699) (302,792) (e) 157,291 3.3%

Net income 1,100,323$ 22.8% (50,870)$ (8,904)$ (43,199)$ 302,792$ 1,300,142$ 26.9%

Net income per share, diluted 4.60$ 5.44$

Diluted shares used in computing net income per share 239,042 238,901

Effective tax rate 32.0% 10.8%

(a)(b)(c)(d)(e)

Percent of revenue calculations for cost of product revenues and product gross profit are based on product revenues only (license and royalty revenues are excluded).Share-based compensation expense.Amortization of acquisition-related intangible assets, primarily core and developed technology related to acquisitions of Matrix Semiconductor, Inc. (1/06) and MusicGremlin, Inc. (6/08).Incremental interest expense relating to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Notes due 2013 and 1.5% Sr. Convertible Notes due 2017.Income taxes associated with certain non-GAAP to GAAP adjustments and valuation allowances on deferred taxes.

FY 2010Non-GAAP

Share-based

Compen-sation

PurchaseAcctg

Adj

Convertible Debt

InterestFY 2010GAAP


22

Reconciliation of Non-GAAP to GAAP Statements of Operations Twelve months ended January 1, 2012 (in thousands, except percentages and per share amounts, unaudited)

% of Rev Other % of RevProduct revenues 5,287,555$ 93.4% -$ -$ -$ -$ 5,287,555$ 93.4%License and royalty revenues 374,590 6.6% - - - - 374,590 6.6%

Total revenues 5,662,145 100.0% - - - - 5,662,145 100.0%

Cost of product revenues 3,178,583 60.1% (a) 4,674 - - - 3,183,257 60.2% (a)Amortization of acquisition-related intangible assets - - (a) - 39,742 (b) - - 39,742 0.8% (a)

Total cost of product revenues 3,178,583 60.1% (a) 4,674 39,742 - - 3,222,999 61.0% (a)

Product gross profit 2,108,972 39.9% (a) (4,674) (39,742) - - 2,064,556 39.0% (a)Total gross profit 2,483,562 43.9% (4,674) (39,742) - - 2,439,146 43.1%

Research and development 513,196 9.1% 34,177 - - - 547,373 9.7%Sales and marketing 188,829 3.3% 10,593 - - - 199,422 3.5%General and administrative 144,100 2.5% 13,666 - - - 157,766 2.8%Amortization of acquisition-related intangible assets - - - 4,485 (b) - - 4,485 0.1%

Total operating expenses 846,125 14.9% 58,436 4,485 - - 909,046 16.1% Operating income 1,637,437 28.9% (63,110) (44,227) - - 1,530,100 27.0%

Other income (expense) 58,008 1.0% - - (111,354) (c) - (53,346) (0.9%)Income before income taxes 1,695,445 29.9% (63,110) (44,227) (111,354) - 1,476,754 26.1%

Provision for income taxes 557,437 9.8% (19,587) (d) (5,698) (d) (40,564) (d) (1,824) (d) 489,764 8.6%

Net income 1,138,008$ 20.1% (43,523)$ (38,529)$ (70,790)$ 1,824$ 986,990$ 17.4%



Effective tax rate 32.9% 33.2%

(a) Percent of revenue calculations for cost of product revenues and product gross profit are based on product revenues only (license and royalty revenues are excluded).(b) Amortization of acquisition-related intangible assets, primarily core technology, developed technology, customer relationships and trademarks related to acquisition of Matrix Semiconductor, Inc. (1/06) and Pliant Technology, Inc (5/11).(c) Incremental interest expense related to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Notes due 2013 and 1.5% Sr. Convertible Notes due 2017, and non-cash change in fair value of the liability component of the repurchased portion of the 1% Sr. Convertible Notes due 2013.(d) Income taxes associated with certain non-GAAP to GAAP adjustments.

FY 2011Non-GAAP

Share-based

Compen-sation

PurchaseAcctg

Adj

Convertible Debt

InterestFY 2011GAAP


23

Reconciliation of Non-GAAP to GAAP Statements of Operations Twelve months ended December 30, 2012 (in thousands, except percentages and per share amounts, unaudited)

% of Rev Other % of RevProduct revenues 4,678,504$ 92.6% -$ -$ -$ -$ 4,678,504$ 92.6%License and royalty revenues 374,005 7.4% - - - - 374,005 7.4% Total revenues 5,052,509 100.0% - - - - 5,052,509 100.0%

Cost of product revenues 3,319,288 70.9% (a) 7,459 (b) 3,326,747 71.1%Amortization of acquisition-related intangible assets - - (a) 42,542 (c) - - 42,542 0.9% Total cost of product revenues 3,319,288 70.9% (a) 7,459 42,542 - - 3,369,289 72.0%

Product gross profit 1,359,216 29.1% (a) (7,459) (42,542) - - 1,309,215 28.0%Gross profit 1,733,221 34.3% (7,459) (42,542) - - 1,683,220 33.3%

Research and development 561,755 11.1% 41,010 (b) - - - 602,765 11.9%Sales and marketing 209,469 4.1% 14,585 (b) - - - 224,054 4.4%General and administrative 135,012 2.7% 15,389 (b) - - - 150,401 3.0%Amortization and write-off of acquisition-related intangible assets - - - 9,905 (c) - - 9,905 0.2% Total operating expenses 906,236 17.9% 70,984 9,905 - - 987,125 19.5% Operating income 826,985 16.4% (78,443) (52,447) - - 696,095 13.8%

Other income (expense), net 20,784 0.4% - - (89,963) (d) (69,179) (1.4)%Income before taxes 847,769 16.8% (78,443) (52,447) (89,963) - 626,916 12.4%

Provision for income taxes 265,360 5.3% (17,520) (3,495) (32,389) (2,444) (e) 209,512 4.1%Net income 582,409$ 11.5% (60,923)$ (48,952)$ (57,574)$ 2,444$ 417,404$ 8.3%



Effective tax rate 31.3% 22.3% 6.7% 36.0% 33.4%

(a) Percent of revenue calculations for cost of product revenues and product gross profit are based on product revenues only (license and royalty revenues are excluded).

(b) Share-based compensation expense.

(c) Amortization and write-off of acquisition-related intangible assets, primarily core technology, developed technology, customer relationships and trademarks related to the acquisitions of

Matrix Semiconductor, Inc. (January 2006), Pliant Technology, Inc. (May 2011), FlashSoft Corporation (February 2012) and Schooner Information Technology, Inc. (June 2012).

(d) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Notes due 2013 and 1.5% Sr. Convertible Notes due 2017.

(e) Income taxes associated with certain non-GAAP to GAAP adjustments.

FY 2012Non-GAAP

Share-based

Compen-sation

PurchaseAcctg

Adj

Convertible Debt Adj

FY 2012GAAP


24

Reconciliation of Non-GAAP to GAAP Statements of Operations Twelve months ended December 29, 2013 (in thousands, except percentages and per share amounts, unaudited)

% of Rev Other % of RevRevenues 6,170,003$ 100.0% -$ -$ -$ -$ 6,170,003$ 100.0%

Cost of revenues 3,243,168 52.6% 9,820 (a) - - - 3,252,988 52.7%Amortization of acquisition-related intangible assets - - - 49,532 (b) - - 49,532 0.8% Total cost of revenues 3,243,168 52.6% 9,820 49,532 - - 3,302,520 53.5%

Gross profit 2,926,835 47.4% (9,820) (49,532) - - 2,867,483 46.5%

Research and development 690,747 11.2% 51,521 (a) - - - 742,268 12.0%Sales and marketing 257,119 4.2% 19,193 (a) - - - 276,312 4.5%General and administrative 173,088 2.8% 19,222 (a) - - - 192,310 3.1%Amortization of acquisition-related intangible assets - - - 11,155 (b) - - 11,155 0.2%Impairment of acquisition-related intangible assets - - - 83,228 (c) - - 83,228 1.3% Total operating expenses 1,120,954 18.2% 89,936 94,383 - - 1,305,273 21.2% Operating income 1,805,881 29.3% (99,756) (143,915) - - 1,562,210 25.3%

Other income (expense), net 21,543 0.3% - - (67,604) (d) - (46,061) (0.7%)Income before income taxes 1,827,424 29.6% (99,756) (143,915) (67,604) - 1,516,149 24.6%

Provision for income taxes 560,463 9.1% (32,226) (28,330) (24,493) (1,923) (e) 473,492 7.7%

Net income 1,266,961$ 20.5% (67,530)$ (115,585)$ (43,112)$ 1,923$ 1,042,657$ 16.9%


Diluted shares used in computing net income per share 238,419 (270) (f) 2,087 (g) 240,236

Effective tax rate 30.7% 32.3% 19.7% 36.2% 31.2%

(a) (b)

Pliant Technology, Inc. (May 2011), FlashSoft Corporation (February 2012), Schooner Information Technology, Inc. (June 2012) and SMART Storage Systems (August 2013).(c) Impairment of acquisition-related intangible assets and in-process research and development related to the Pliant Technology, Inc. acquisition.(d) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Notes due 2013, 1.5% Sr. Convertible Notes due 2017,

and 0.5% Sr. Convertible Notes due 2020.(e) Income taxes associated with certain non-GAAP to GAAP adjustments. (f) Impact of share-based compensation on diluted shares.(g) Impact of offsetting shares from call option related to the Company's 1.5% Sr. Convertible Notes due 2017.

Share-based compensation expense.Amortization of acquisition-related intangible assets, primarily core technology, developed technology, customer relationships and trademarks related to the acquisitions of

FY 2013Non-GAAP

Share-based

Compen-sation

PurchaseAcctg

Adj

Convertible Debt Adj

FY 2013GAAP


25

1GB=1,000,000,000 bytes. Actual user capacity less.

SanDisk, CompactFlash, SanDisk Extreme and SanDisk Extreme Pro are trademarks of SanDisk Corpora6on, registered in the United States and other countries. Lightning and Op6mus are U.S. registered trademarks of SanDisk Enterprise IP LLC. iNAND Extreme and iNAND Ultra are trademarks of SanDisk Corpora6on. Cloudspeed logo and ULLtraDIMM are trademarks of SanDisk Enterprise IP LLC. The microSDHC, microSDXC and SDXC logos are trademarks of SD-3C, LLC. Other brand names men6oned herein are for iden6ca6on purposes only and may be the trademarks of their respec6ve holder(s).

2014 SanDisk Corpora6on. All rights reserved.

sndk q114 rj conf slides

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