Exhibit 99.1
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msystems Contact: Investor Relations Contacts:
Elana Holzman Jeff Corbin / Lee Roth
Director of Investor Relations KCSA
+972 (9) 764-5000 +1 (212) 682-6300
elana.holzman@m-systems.com jcorbin@kcsa.com / lroth@kcsa.com
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FOR IMMEDIATE RELEASE
MSYSTEMS REPORTS $209 MILLION IN REVENUES AND
NON GAAP EPS OF 26 CENTS FOR THE SECOND QUARTER OF 2006
KFAR-SABA, ISRAEL, AUGUST 7, 2006 - msystems(TM) (Nasdaq: FLSH), a leader in
smart personal storage, today announced financial results for the second quarter
ended June 30, 2006.
GAAP financial highlights for the second quarter:
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|X| Revenues totaled $209.5 million, reflecting a 72 percent
increase compared with revenues of $121.6 million in the
second quarter of 2005 and a 4 percent decrease compared with
revenues of $219.1 million in the first quarter of 2006.
|X| Gross margins were 23.3 percent, 2.9 percent higher than gross
margins of 20.4 percent in the first quarter of 2006.
|X| Net income was $3.1 million, or $0.08 per share on a fully
diluted basis, compared with first quarter net income of $5.7
million, or $0.14 per share on a fully diluted basis.
Non GAAP financial highlights for the second quarter:
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|X| Revenues totaled $209.5 million.
|X| Non GAAP gross margins were 23.4 percent, 2.8 percent higher
than non GAAP gross margins of 20.6 percent in the first
quarter of 2006.
|X| Non GAAP net income was $10.8 million, or $0.26 per share on a
fully diluted basis, compared with first quarter non GAAP net
income of $8.7 million, or $0.21 per share on a fully diluted
basis.
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Non GAAP adjustments for the second quarter of 2006 (and, to the extent
applicable, the first quarter of 2006) exclude the effects of stock-based
compensation, amortization of intangible assets related to an acquisition,
expenses attributable to the review of prior stock option grants and related
withholding tax expenses, and expenses attributable to the previously planned
securities offering. A reconciliation of all non GAAP results to the comparable
GAAP results is set forth below.
Commenting on the results, Dov Moran, President and Chief Executive
Officer of msystems, said, "I am pleased with our results for the second quarter
of 2006, which were better than we had anticipated. I am particularly pleased
with our performance in the mobile market. The growth we are experiencing in
mDOC sales reflects the considerable long term growth opportunity of the mobile
market."
He continued, "In early May, we announced our revolutionary x4
technology, designed to enable the utilization of 4-bit/cell NAND flash, which
was previously considered to be a practical and physical impossibility. x4 is
the culmination of over 15 years of work and innovation in flash memory at
msystems. During this time, we consistently introduced new technologies and
products, and shaped the markets in which we operate. I am confident that
completion of our pending transaction with SanDisk Corporation will further
strengthen our innovation, technology and product offering, and will enable us
to better realize the growth potential of the flash memory market."
CONFERENCE CALL
msystems' management will host a conference call to discuss its second
quarter financial results at 10:00 a.m. EDT today, August 7, 2006. In light of
the pending transaction with SanDisk, there will be no question and answer
session following management's prepared comments on the call.
The call can be accessed by dialing: +1 (973) 582-2830. The call will
also be available live on the Internet at www.msystems.com and www.kcsa.com.
Following the call, the webcast will be archived for a period of 90 days. A
replay of the call will be available beginning at approximately 12:00 p.m. EDT,
August 7, 2006, until August 14, 2006 at 11:59 p.m. To access the replay, please
call +1 (973) 341-3080; ID Code: 7678807.
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ABOUT MSYSTEMS
msystems has been transforming raw flash material into smarter storage solutions
since 1989. From embedded flash drives deployed in millions of mobile handsets
to U3 USB smart drives designed for leading global brands, msystems creates,
develops, manufactures and markets smart personal storage solutions for a myriad
of applications targeting high growth markets.
More information is available online at www.msystems.com. MSYSTEMS. MADE
SMARTER.
All company and product names mentioned may be trademarks or registered
trademarks of their respective holders and are used for identification purposes
only. msystems is a trademark of msystems Ltd.; MegaSIM is a trademark of
msystems Ltd. in the United States and other countries and registered in Israel
and Japan. U3 is a trademark of U3, LLP.
This press release includes forward-looking statements including statements
regarding the proposed merger with SanDisk Corporation, the future market for
the companies' products, as defined in the Private Securities Litigation Reform
Act of 1995, including statements about our business outlook for the future,
that our based on our current expectations. Readers are cautioned not to place
undue reliance on these forward-looking statements, as they are subject to
various risks and uncertainties which may cause actual results to vary
significantly. These risks include, but are not limited to: that the businesses
of msystems and SanDisk will not be integrated successfully and that any
synergies from the transaction may not be fully realized or may take longer to
realize than expected; all risk associated with the development and
implementation of x4 technology , including difficulties in utilization or
implementation of 4-bit/cell NAND flash, , any failure we may experience in
perfecting and/or protecting our intellectual property rights related to x4
technology, and the risk that flash manufacturers may opt to utilize such other
technologies and not our x4 technology; the risk that msystems business may not
perform as expected, risks relating to msystems prior stock option grants, the
effect of global economic conditions in general and conditions in msystems'
industry and target markets in particular, shifts in supply and demand,
difficulty in predicting the level of sales by our venture with a flash partner,
market acceptance, the impact of competitive products and pricing, product
development, commercialization and technological difficulties, and capacity and
supply constraints including dependence on flash component suppliers; changes in
msystems' and its customers' inventory levels and inventory valuations; timely
product and technology development/upgrades and the ability to manage changes in
market conditions as needed; market acceptance of new products and continuing
product demand; the impact of competitive products and pricing on msystems' and
its customers' products and markets; the development, release and sale of new
products by strategic suppliers and customers; the development and growth of
anticipated markets for msystems' and its customers' products; and other risk
factors detailed from time to time in msystems' filings with the Securities and
Exchange Commission. msystems assumes no obligation to update the information in
this press release and disclaims any obligation to publicly update or revise any
such forward-looking statements to reflect any change in its expectations or in
events, conditions, or circumstances on which any such statements may be based,
or that may affect the likelihood that actual results will differ from those set
forth in the forward-looking statements. Reference to msystems' website above
does not constitute incorporation of any of the information thereon into this
press release.
You may register to receive msystems' future press releases or to download a
complete Digital Investor Kit(TM) including press releases, regulatory filings
and corporate materials by clicking on the "Digital Investor Kit(TM)" icon at
www.kcsa.com.
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