Western Digital Reports Fiscal Second Quarter 2024 Financial Results
- None.
- None.
Insights
The reported 10% sequential revenue growth and the 23% increase in cloud revenue are significant indicators of Western Digital's market performance, particularly in high-growth sectors. The cloud segment's expansion is reflective of the broader industry's shift towards cloud services and data center storage solutions. However, the 2% decline in client revenue suggests softening demand in certain customer segments, which could be due to market saturation or competitive pressures. The projected revenue range for the fiscal third quarter indicates optimism for continued growth, though the anticipated Non-GAAP EPS range, including underutilization charges, signals ongoing operational challenges.
From a shareholder perspective, the loss per share figures, both GAAP and Non-GAAP, are concerning, as they imply that the company is not currently profitable. The underutilization charges related to Flash and HDD indicate excess capacity or inefficiencies that need to be addressed to improve profitability. The operating cash outflow of $92 million further underscores the need for careful cash management and operational efficiency improvements.
Western Digital's performance in the cloud sector is particularly noteworthy amidst a competitive landscape. The year-over-year decrease in revenue from this segment could be attributed to dynamic pricing and fluctuating demand for eSSD bit shipments. The consumer segment's 15% growth is indicative of strong seasonal demand, which could be leveraged for future strategic planning. However, the decline in HDD shipments reflects the ongoing industry trend towards solid-state storage solutions.
It is crucial to analyze the market's reception of Western Digital's diversified product portfolio, as it is a key component of their strategy. The company's focus on inventory management and cost control through R&D and manufacturing might be a response to the commoditization of storage solutions, where differentiation is increasingly based on cost efficiency and technological innovation.
The financial results of Western Digital offer insights into broader economic trends, such as the health of the technology sector and consumer spending patterns. The increase in gross margin from the previous quarter suggests improving efficiency or pricing power, yet the year-over-year decrease highlights ongoing margin pressures. The economic implications of these results could point to a challenging environment for hardware manufacturers, with potential impacts on employment, investment and R&D within the sector.
Furthermore, the company's guidance for the next quarter, with an expected improvement in Non-GAAP EPS, may be interpreted as a cautiously optimistic outlook amid uncertain economic conditions. It also reflects the company's efforts to navigate supply chain issues, which have been a significant factor for many technology firms in recent times.
News Summary
-
Second quarter revenue was
$3.03 billion 10% sequentially (QoQ). Cloud revenue increased23% (QoQ), Client revenue decreased2% (QoQ) and Consumer revenue increased15% (QoQ). -
Second quarter GAAP earnings per share (EPS) was
$(0.87) $(0.69) $156 million -
Expect fiscal third quarter 2024 revenue to be in the range of
$3.20 billion $3.40 billion -
Expect Non-GAAP EPS in the range of
$(0.10) $0.20 $30 $40 million
“Western Digital’s second quarter results demonstrate that the structural changes we have put in place over the last few years and the strategy we have been executing are producing significant outperformance across our flash and HDD businesses,” said David Goeckeler, Western Digital CEO. “We are seeing our efforts come to fruition as our financial performance met, or exceeded, the non-GAAP guidance ranges we provided in October, and I am confident that our strategy of managing inventory proactively, offering a broad range of products, closely controlling our product cost through focused R&D and manufacturing, and bolstering the agility of our business will allow us to improve through-cycle profitability and dampen business cycles into the future.”
Q2 2024 Financial Highlights
|
|
GAAP |
|
Non-GAAP |
||||
|
|
Q2 2024 |
Q1 2024 |
Q/Q |
|
Q2 2024 |
Q1 2024 |
Q/Q |
Revenue ($M) |
|
|
|
up |
|
|
|
up |
Gross Margin |
|
|
|
up 12.6 ppt |
|
|
|
up 11.4 ppt |
Operating Expenses ($M) |
|
|
|
up |
|
|
|
up |
Operating Loss ($M) |
|
|
|
* |
|
|
|
* |
Net Loss ($M) |
|
|
|
* |
|
|
|
* |
Loss Per Share |
|
|
|
* |
|
|
|
* |
* not a meaningful figure |
||||||||
|
|
GAAP |
|
Non-GAAP |
||||
|
|
Q2 2024 |
Q2 2023 |
Y/Y |
|
Q2 2024 |
Q2 2023 |
Y/Y |
Revenue ($M) |
|
|
|
down |
|
|
|
down |
Gross Margin |
|
|
|
down 0.8 ppt |
|
|
|
down 1.9 ppt |
Operating Expenses ($M) |
|
|
|
down |
|
|
|
down |
Operating Loss ($M) |
|
|
|
* |
|
|
|
* |
Net Loss ($M) |
|
|
|
* |
|
|
( |
* |
Loss Per Share |
|
|
|
* |
|
|
|
* |
* not a meaningful figure |
||||||||
The company had an operating cash outflow of
Additional details can be found within the company’s earnings presentation, which is accessible online at investor.wdc.com.
End Market Summary
Revenue ($M) |
Q2 2024 |
Q1 2024 |
Q/Q |
Q2 2023 |
Y/Y |
Cloud |
|
|
up |
|
down |
Client |
1,122 |
1,147 |
down |
1,089 |
up |
Consumer |
839 |
731 |
up |
794 |
up |
Total Revenue |
|
|
up |
|
down |
In the fiscal second quarter:
-
Cloud represented
35% of total revenue. Sequentially, the growth was attributed to higher nearline shipments to data center customers and better nearline pricing. The year-over-year decrease was due to lower eSSD bit shipments.
-
Client represented
37% of total revenue. Sequentially, an increase in flash ASPs was more than offset by a decline in flash bit shipments. The year-over-year increase was due to higher flash shipments, primarily driven by client SSD shipments into PC applications, more than offsetting a decline in flash ASPs.
-
Consumer represented
28% of total revenue. Sequentially, the growth was primarily due to seasonal strength in flash bit shipments. On a year-over-year basis, the increase in flash bit shipments was partially offset by a decline in flash ASPs as well as lower HDD shipments.
Business Outlook for Fiscal Third Quarter of 2024
|
Three Months Ending |
||
|
March 29, 2024 |
||
|
GAAP(1) |
|
Non-GAAP(1) |
Revenue ($B) |
|
|
|
Gross margin |
|
|
|
Operating expenses ($M) |
|
|
|
Interest and other expense, net ($M) |
|
|
|
Income tax expense ($M)(2) |
N/A |
|
|
Preferred dividend ($M) |
|
|
|
Diluted earnings per share |
N/A |
|
|
Diluted shares outstanding (in millions) |
~330 |
|
~330 |
__________
(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense of approximately
(2) Non-GAAP income tax expense is determined based on a percentage of Non-GAAP pre-tax income or loss. Our estimated Non-GAAP tax dollars may differ from our GAAP tax dollars (i) due to differences in the tax treatment of items excluded from our Non-GAAP net income or loss; (ii) the fact that our GAAP income tax expense or benefit recorded in any interim period is based on an estimated forecasted GAAP tax rate for the full year, excluding loss jurisdictions; and (iii) because our GAAP taxes recorded in any interim period are dependent on the timing and determination of certain GAAP operating expenses.
Investor Communications
The investment community conference call to discuss these results and the company’s business outlook for the fiscal third quarter of 2024 will be broadcast live online today at 1:30 p.m. Pacific/4:30 p.m. Eastern. The live and archived conference call/webcast and the earnings presentation can be accessed online at investor.wdc.com.
About Western Digital
Western Digital is on a mission to unlock the potential of data by harnessing the possibility to use it. With Flash and HDD franchises, underpinned by advancements in storage technologies, we create breakthrough innovations and powerful data storage solutions that enable the world to actualize its aspirations. Core to our values, we recognize the urgency to combat climate change and have committed to ambitious carbon reduction goals approved by the Science Based Targets initiative. Learn more about Western Digital and the Western Digital®, SanDisk® and WD® brands at www.westerndigital.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws, including statements regarding expectations for the company’s business outlook and financial performance for the fiscal third quarter of 2024 and beyond; the impact of structural changes in the company’s business and corporate strategy on operating and financial performance; and the impact of the company’s inventory management, range of products, cost controls and business agility on cyclicality and through-cycle profitability. These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. The preliminary financial results for the company’s fiscal second quarter ended December 29, 2023 included in this press release represent the most current information available to management. Actual results when disclosed in the company's Form 10-Q may differ from these preliminary results as a result of the completion of the company’s financial closing procedures, final adjustments, completion of the review by the company’s independent registered accounting firm; and other developments that may arise between now and the filing of the company's Form 10-Q. Other key risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: volatility in global economic conditions; future responses to and effects of global health crises; the impact of business and market conditions; the outcome and impact of the company's planned separation of its HDD and Flash business units, including with respect to customer and supplier relationships, contractual restrictions, stock price volatility and the diversion of management’s attention from ongoing business operations and opportunities; the impact of competitive products and pricing; the company's development and introduction of products based on new technologies and expansion into new data storage markets; risks associated with cost saving initiatives, restructurings, acquisitions, divestitures, mergers, joint ventures and the company's strategic relationships; difficulties or delays in manufacturing or other supply chain disruptions; hiring and retention of key employees; the company's level of debt and other financial obligations; changes to the company's relationships with key customers; compromise, damage or interruption from cybersecurity incidents or other data system security risks; actions by competitors; the company's ability to achieve its GHG emissions reduction and other ESG goals; risks associated with compliance with changing legal and regulatory requirements and the outcome of legal proceedings; and other risks and uncertainties listed in the company’s filings with the Securities and Exchange Commission (the “SEC”), including the company’s Annual Report on Form 10-K filed with the SEC on August 22, 2023 and Quarterly Report on Form 10-Q filed with the SEC on November 7, 2023 to which your attention is directed. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the company undertakes no obligation to update or revise these forward-looking statements to reflect new information or events, except as required by law.
Western Digital, the Western Digital logo, SanDisk and WD are registered trademarks or trademarks of Western Digital Corporation or its affiliates in the US and/or other countries.
WESTERN DIGITAL CORPORATION PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS (in millions; unaudited; on a US GAAP basis) |
|||||
|
December 29,
|
|
June 30,
|
||
|
|
|
|
||
ASSETS |
|||||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
2,481 |
|
$ |
2,023 |
Accounts receivable, net |
|
1,523 |
|
|
1,598 |
Inventories |
|
3,216 |
|
|
3,698 |
Other current assets |
|
618 |
|
|
567 |
Total current assets |
|
7,838 |
|
|
7,886 |
Property, plant and equipment, net |
|
3,315 |
|
|
3,620 |
Notes receivable and investments in Flash Ventures |
|
1,248 |
|
|
1,297 |
Goodwill |
|
10,037 |
|
|
10,037 |
Other intangible assets, net |
|
79 |
|
|
80 |
Other non-current assets |
|
1,768 |
|
|
1,509 |
Total assets |
$ |
24,285 |
|
$ |
24,429 |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY |
|||||
Current liabilities: |
|
|
|
||
Accounts payable |
$ |
1,504 |
|
$ |
1,293 |
Accounts payable to related parties |
|
251 |
|
|
292 |
Accrued expenses |
|
1,037 |
|
|
1,288 |
Income taxes payable |
|
506 |
|
|
999 |
Accrued compensation |
|
353 |
|
|
349 |
Current portion of long-term debt |
|
1,042 |
|
|
1,213 |
Total current liabilities |
|
4,693 |
|
|
5,434 |
Long-term debt |
|
7,351 |
|
|
5,857 |
Other liabilities |
|
1,397 |
|
|
1,415 |
Total liabilities |
|
13,441 |
|
|
12,706 |
Convertible preferred stock, aggregate liquidation preference of |
|
876 |
|
|
876 |
Total shareholders’ equity |
|
9,968 |
|
|
10,847 |
Total liabilities, convertible preferred stock and shareholders’ equity |
$ |
24,285 |
|
$ |
24,429 |
WESTERN DIGITAL CORPORATION PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts; unaudited; on a US GAAP basis) |
|||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
December 29,
|
|
December 30,
|
|
December 29,
|
|
December 30,
|
||||||||
Revenue, net |
$ |
3,032 |
|
|
$ |
3,107 |
|
|
$ |
5,782 |
|
|
$ |
6,843 |
|
Cost of revenue |
|
2,540 |
|
|
|
2,579 |
|
|
|
5,191 |
|
|
|
5,334 |
|
Gross profit |
|
492 |
|
|
|
528 |
|
|
|
591 |
|
|
|
1,509 |
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||
Research and development |
|
444 |
|
|
|
523 |
|
|
|
875 |
|
|
|
1,075 |
|
Selling, general and administrative |
|
198 |
|
|
|
250 |
|
|
|
405 |
|
|
|
497 |
|
Employee termination, asset impairment, and other |
|
24 |
|
|
|
76 |
|
|
|
81 |
|
|
|
100 |
|
Business separation costs |
|
36 |
|
|
|
— |
|
|
|
36 |
|
|
|
— |
|
Total operating expenses |
|
702 |
|
|
|
849 |
|
|
|
1,397 |
|
|
|
1,672 |
|
Operating loss |
|
(210 |
) |
|
|
(321 |
) |
|
|
(806 |
) |
|
|
(163 |
) |
Interest and other expense: |
|
(30 |
) |
|
|
(64 |
) |
|
|
(116 |
) |
|
|
(138 |
) |
Loss before taxes |
|
(240 |
) |
|
|
(385 |
) |
|
|
(922 |
) |
|
|
(301 |
) |
Income tax expense |
|
28 |
|
|
|
61 |
|
|
|
31 |
|
|
|
118 |
|
Net loss |
|
(268 |
) |
|
|
(446 |
) |
|
|
(953 |
) |
|
|
(419 |
) |
Less: cumulative dividends allocated to preferred shareholders |
|
14 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
Net loss attributable to common shareholders |
$ |
(282 |
) |
|
$ |
(446 |
) |
|
$ |
(982 |
) |
|
$ |
(419 |
) |
|
|
|
|
|
|
|
|
||||||||
Net loss per common share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
(0.87 |
) |
|
$ |
(1.40 |
) |
|
$ |
(3.03 |
) |
|
$ |
(1.32 |
) |
Diluted |
$ |
(0.87 |
) |
|
$ |
(1.40 |
) |
|
$ |
(3.03 |
) |
|
$ |
(1.32 |
) |
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
325 |
|
|
|
318 |
|
|
|
324 |
|
|
|
317 |
|
Diluted |
|
325 |
|
|
|
318 |
|
|
|
324 |
|
|
|
317 |
|
WESTERN DIGITAL CORPORATION PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited; on a US GAAP basis) |
|||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
December 29,
|
|
December 30,
|
|
December 29,
|
|
December 30,
|
||||||||
Operating Activities |
|
|
|
|
|
|
|
||||||||
Net loss |
$ |
(268 |
) |
|
$ |
(446 |
) |
|
|
(953 |
) |
|
$ |
(419 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operations: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
143 |
|
|
|
214 |
|
|
|
290 |
|
|
|
430 |
|
Stock-based compensation |
|
72 |
|
|
|
86 |
|
|
|
149 |
|
|
|
172 |
|
Deferred income taxes |
|
(22 |
) |
|
|
67 |
|
|
|
(68 |
) |
|
|
25 |
|
Loss (Gain) on disposal of assets |
|
— |
|
|
|
— |
|
|
|
(87 |
) |
|
|
1 |
|
Non-cash portion of asset impairment |
|
— |
|
|
|
15 |
|
|
|
95 |
|
|
|
15 |
|
Gain on repurchase of debt |
|
(4 |
) |
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
Amortization of debt issuance costs and discounts |
|
5 |
|
|
|
2 |
|
|
|
9 |
|
|
|
5 |
|
Other non-cash operating activities, net |
|
(48 |
) |
|
|
25 |
|
|
|
(47 |
) |
|
|
69 |
|
Changes in: |
|
|
|
|
|
|
|
||||||||
Accounts receivable, net |
|
(72 |
) |
|
|
517 |
|
|
|
75 |
|
|
|
899 |
|
Inventories |
|
281 |
|
|
|
89 |
|
|
|
482 |
|
|
|
(135 |
) |
Accounts payable |
|
274 |
|
|
|
(396 |
) |
|
|
299 |
|
|
|
(521 |
) |
Accounts payable to related parties |
|
(26 |
) |
|
|
74 |
|
|
|
(41 |
) |
|
|
49 |
|
Accrued expenses |
|
(309 |
) |
|
|
(182 |
) |
|
|
(246 |
) |
|
|
(226 |
) |
Income taxes payable |
|
(169 |
) |
|
|
39 |
|
|
|
(494 |
) |
|
|
156 |
|
Accrued compensation |
|
3 |
|
|
|
(58 |
) |
|
|
4 |
|
|
|
(162 |
) |
Other assets and liabilities, net |
|
48 |
|
|
|
(11 |
) |
|
|
(181 |
) |
|
|
(317 |
) |
Net cash provided by (used in) operating activities |
|
(92 |
) |
|
|
35 |
|
|
|
(718 |
) |
|
|
41 |
|
Investing Activities |
|
|
|
|
|
|
|
||||||||
Purchases of property, plant and equipment, net |
|
(150 |
) |
|
|
(258 |
) |
|
|
(81 |
) |
|
|
(578 |
) |
Activity related to Flash Ventures, net |
|
66 |
|
|
|
(17 |
) |
|
|
79 |
|
|
|
82 |
|
Strategic investments and other, net |
|
24 |
|
|
|
17 |
|
|
|
26 |
|
|
|
14 |
|
Net cash provided by (used in) investing activities |
|
(60 |
) |
|
|
(258 |
) |
|
|
24 |
|
|
|
(482 |
) |
Financing Activities |
|
|
|
|
|
|
|
||||||||
Employee stock plans, net |
|
33 |
|
|
|
43 |
|
|
|
(10 |
) |
|
|
(7 |
) |
Net proceeds from convertible preferred stock |
|
(2 |
) |
|
|
— |
|
|
|
(5 |
) |
|
|
— |
|
Purchase of capped calls |
|
(155 |
) |
|
|
— |
|
|
|
(155 |
) |
|
|
— |
|
Repurchases of debt |
|
(505 |
) |
|
|
— |
|
|
|
(505 |
) |
|
|
— |
|
Proceeds from debt, net of repayments |
|
1,262 |
|
|
|
— |
|
|
|
1,862 |
|
|
|
— |
|
Debt issuance costs |
|
(36 |
) |
|
|
(5 |
) |
|
|
(36 |
) |
|
|
(5 |
) |
Net cash provided by (used in) financing activities |
|
597 |
|
|
|
38 |
|
|
|
1,151 |
|
|
|
(12 |
) |
Effect of exchange rate changes on cash |
|
4 |
|
|
|
7 |
|
|
|
1 |
|
|
|
(3 |
) |
Net increase (decrease) in cash and cash equivalents |
|
449 |
|
|
|
(178 |
) |
|
|
458 |
|
|
|
(456 |
) |
Cash and cash equivalents, beginning of period |
|
2,032 |
|
|
|
2,049 |
|
|
|
2,023 |
|
|
|
2,327 |
|
Cash and cash equivalents, end of period |
$ |
2,481 |
|
|
$ |
1,871 |
|
|
$ |
2,481 |
|
|
$ |
1,871 |
|
WESTERN DIGITAL CORPORATION SUPPLEMENTAL OPERATING SEGMENT RESULTS (in millions; except percentages; unaudited) |
|||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
December 29,
|
|
December 30,
|
|
December 29,
|
|
December 30,
|
||||||||
|
|
|
|
|
|
||||||||||
Net revenue: |
|
|
|
|
|
|
|
||||||||
Flash |
$ |
1,665 |
|
|
$ |
1,657 |
|
|
$ |
3,221 |
|
|
$ |
3,379 |
|
HDD |
|
1,367 |
|
|
|
1,450 |
|
|
|
2,561 |
|
|
|
3,464 |
|
Total net revenue |
$ |
3,032 |
|
|
$ |
3,107 |
|
|
$ |
5,782 |
|
|
$ |
6,843 |
|
Gross profit: |
|
|
|
|
|
|
|
||||||||
Flash |
$ |
131 |
|
|
$ |
240 |
|
|
$ |
(30 |
) |
|
$ |
662 |
|
HDD |
|
339 |
|
|
|
300 |
|
|
|
612 |
|
|
|
874 |
|
Total gross profit for segments |
|
470 |
|
|
|
540 |
|
|
|
582 |
|
|
|
1,536 |
|
Unallocated corporate items: |
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense |
|
(13 |
) |
|
|
(12 |
) |
|
|
(26 |
) |
|
|
(26 |
) |
Amortization of acquired intangible assets |
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Recovery from contamination incident |
|
36 |
|
|
|
— |
|
|
|
36 |
|
|
|
— |
|
Total unallocated corporate items |
|
22 |
|
|
|
(12 |
) |
|
|
9 |
|
|
|
(27 |
) |
Consolidated gross profit |
$ |
492 |
|
|
$ |
528 |
|
|
$ |
591 |
|
|
$ |
1,509 |
|
Gross margin: |
|
|
|
|
|
|
|
||||||||
Flash |
|
7.9 |
% |
|
|
14.5 |
% |
|
|
(0.9 |
)% |
|
|
19.6 |
% |
HDD |
|
24.8 |
% |
|
|
20.7 |
% |
|
|
23.9 |
% |
|
|
25.2 |
% |
Total gross margin for segments |
|
15.5 |
% |
|
|
17.4 |
% |
|
|
10.1 |
% |
|
|
22.4 |
% |
Consolidated gross margin |
|
16.2 |
% |
|
|
17.0 |
% |
|
|
10.2 |
% |
|
|
22.1 |
% |
The Company manages and reports under two reportable segments: flash-based products (“Flash”) and hard disk drives (“HDD”). In the table above, total gross profit for segments and total gross margin for segments are Non-GAAP financial measures, which are also referred to herein as Non-GAAP gross profit and Non-GAAP gross margin, respectively.
WESTERN DIGITAL CORPORATION PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (in millions; unaudited) |
|||||||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||
|
December 29,
|
|
September 29,
|
|
December 30,
|
|
December 29,
|
|
December 30,
|
||||||||||
GAAP gross profit |
$ |
492 |
|
|
$ |
99 |
|
|
$ |
528 |
|
|
$ |
591 |
|
|
$ |
1,509 |
|
Stock-based compensation expense |
|
13 |
|
|
|
13 |
|
|
|
12 |
|
|
|
26 |
|
|
|
26 |
|
Amortization of acquired intangible assets |
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
Recovery from contamination incident |
|
(36 |
) |
|
|
— |
|
|
|
— |
|
|
|
(36 |
) |
|
|
— |
|
Non-GAAP gross profit |
$ |
470 |
|
|
$ |
112 |
|
|
$ |
540 |
|
|
$ |
582 |
|
|
$ |
1,536 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP operating expenses |
$ |
702 |
|
|
$ |
695 |
|
|
$ |
849 |
|
|
$ |
1,397 |
|
|
$ |
1,672 |
|
Stock-based compensation expense |
|
(59 |
) |
|
|
(64 |
) |
|
|
(74 |
) |
|
|
(123 |
) |
|
|
(146 |
) |
Business separation costs |
|
(36 |
) |
|
|
— |
|
|
|
— |
|
|
|
(36 |
) |
|
|
— |
|
Employee termination, asset impairment, and other |
|
(24 |
) |
|
|
(57 |
) |
|
|
(76 |
) |
|
|
(81 |
) |
|
|
(100 |
) |
Strategic review |
|
(20 |
) |
|
|
(17 |
) |
|
|
— |
|
|
|
(37 |
) |
|
|
— |
|
Amortization of acquired intangible assets |
|
— |
|
|
|
— |
|
|
|
(39 |
) |
|
|
— |
|
|
|
(77 |
) |
Other |
|
(2 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(1 |
) |
Non-GAAP operating expenses |
$ |
561 |
|
|
$ |
555 |
|
|
$ |
659 |
|
|
$ |
1,116 |
|
|
$ |
1,348 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP operating loss |
$ |
(210 |
) |
|
$ |
(596 |
) |
|
$ |
(321 |
) |
|
$ |
(806 |
) |
|
$ |
(163 |
) |
Gross profit adjustments |
|
(22 |
) |
|
|
13 |
|
|
|
12 |
|
|
|
(9 |
) |
|
|
27 |
|
Operating expense adjustments |
|
141 |
|
|
|
140 |
|
|
|
190 |
|
|
|
281 |
|
|
|
324 |
|
Non-GAAP operating income (loss) |
$ |
(91 |
) |
|
$ |
(443 |
) |
|
$ |
(119 |
) |
|
$ |
(534 |
) |
|
$ |
188 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP interest and other expense, net |
$ |
(30 |
) |
|
$ |
(86 |
) |
|
$ |
(64 |
) |
|
$ |
(116 |
) |
|
$ |
(138 |
) |
Other |
|
(64 |
) |
|
|
— |
|
|
|
— |
|
|
|
(64 |
) |
|
|
(1 |
) |
Non-GAAP interest and other expense, net |
$ |
(94 |
) |
|
$ |
(86 |
) |
|
$ |
(64 |
) |
|
$ |
(180 |
) |
|
$ |
(139 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP income tax expense |
$ |
28 |
|
|
$ |
3 |
|
|
$ |
61 |
|
|
$ |
31 |
|
|
$ |
118 |
|
Income tax adjustments |
|
(3 |
) |
|
|
22 |
|
|
|
(109 |
) |
|
|
19 |
|
|
|
2 |
|
Non-GAAP income tax expense |
$ |
25 |
|
|
$ |
25 |
|
|
$ |
(48 |
) |
|
$ |
50 |
|
|
$ |
120 |
|
WESTERN DIGITAL CORPORATION PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (in millions, except per share amounts; unaudited) |
|||||||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||
|
December 29,
|
|
September 29,
|
|
December 30,
|
|
December 29,
|
|
December 30,
|
||||||||||
GAAP net loss |
$ |
(268 |
) |
|
$ |
(685 |
) |
|
$ |
(446 |
) |
|
$ |
(953 |
) |
|
$ |
(419 |
) |
Stock-based compensation expense |
|
72 |
|
|
|
77 |
|
|
|
86 |
|
|
|
149 |
|
|
|
172 |
|
Business separation costs |
|
36 |
|
|
|
— |
|
|
|
— |
|
|
|
36 |
|
|
|
— |
|
Employee termination, asset impairment and other |
|
24 |
|
|
|
57 |
|
|
|
76 |
|
|
|
81 |
|
|
|
100 |
|
Strategic review |
|
20 |
|
|
|
17 |
|
|
|
— |
|
|
|
37 |
|
|
|
— |
|
Amortization of acquired intangible assets |
|
1 |
|
|
|
— |
|
|
|
39 |
|
|
|
1 |
|
|
|
78 |
|
Recovery from contamination incident |
|
(36 |
) |
|
|
— |
|
|
|
— |
|
|
|
(36 |
) |
|
|
— |
|
Other |
|
(62 |
) |
|
|
2 |
|
|
|
1 |
|
|
|
(60 |
) |
|
|
— |
|
Income tax adjustments |
|
3 |
|
|
|
(22 |
) |
|
|
109 |
|
|
|
(19 |
) |
|
|
(2 |
) |
Non-GAAP net loss |
|
(210 |
) |
|
|
(554 |
) |
|
|
(135 |
) |
|
|
(764 |
) |
|
|
(71 |
) |
Less: cumulative dividends allocated to preferred shareholders |
|
14 |
|
|
|
15 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
Non-GAAP net loss attributable to common shareholders |
$ |
(224 |
) |
|
$ |
(569 |
) |
|
$ |
(135 |
) |
|
$ |
(793 |
) |
|
$ |
(71 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted loss per common share |
|
|
|
|
|
|
|
|
|
||||||||||
GAAP |
$ |
(0.87 |
) |
|
$ |
(2.17 |
) |
|
$ |
(1.40 |
) |
|
$ |
(3.03 |
) |
|
$ |
(1.32 |
) |
Non-GAAP |
$ |
(0.69 |
) |
|
$ |
(1.76 |
) |
|
$ |
(0.42 |
) |
|
$ |
(2.45 |
) |
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
||||||||||
GAAP |
|
325 |
|
|
|
323 |
|
|
|
318 |
|
|
|
324 |
|
|
|
317 |
|
Non-GAAP |
|
325 |
|
|
|
323 |
|
|
|
318 |
|
|
|
324 |
|
|
|
317 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows |
|
|
|
|
|
|
|
|
|
||||||||||
Cash flow provided by (used in) operating activities |
$ |
(92 |
) |
|
$ |
(626 |
) |
|
$ |
35 |
|
|
$ |
(718 |
) |
|
$ |
41 |
|
Purchases of property, plant and equipment, net |
|
(150 |
) |
|
|
69 |
|
|
|
(258 |
) |
|
|
(81 |
) |
|
|
(578 |
) |
Activity related to Flash Ventures, net |
|
66 |
|
|
|
13 |
|
|
|
(17 |
) |
|
|
79 |
|
|
|
82 |
|
Free cash flow |
$ |
(176 |
) |
|
$ |
(544 |
) |
|
$ |
(240 |
) |
|
$ |
(720 |
) |
|
$ |
(455 |
) |
To supplement the condensed consolidated financial statements presented in accordance with
As described above, the company excludes the following items from its Non-GAAP measures:
Stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the company’s control, the company believes excluding stock-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time and compare it against the company’s peers, a majority of whom also exclude stock-based compensation expense from their Non-GAAP results.
Business separation cost. The company incurred expenses associated with the separation of its HDD and Flash business units to create two independent, public companies. The Company believes these charges do not reflect the company's operating results and that they are not indicative of the underlying performance of its business.
Employee termination, asset impairment, and other. From time-to-time, in order to realign the company’s operations with anticipated market demand or to achieve cost synergies from the integration of acquisitions, the company may terminate employees and/or restructure its operations. From time-to-time, the company may also incur charges from the impairment of intangible assets and other long-lived assets. In addition, the company may record credits related to gains upon sale of property due to restructuring or reversals of charges recorded in prior periods. In addition, the Company has taken actions to reduce the amount of capital invested in facilities, including the sale-leaseback of facilities. These charges or credits are inconsistent in amount and frequency, and the company believes they are not indicative of the underlying performance of its business.
Strategic review. The company incurred expenses associated with its review of strategic alternatives that resulted in the planned separation of its HDD and Flash business units to create two independent, public companies. The company believes these charges do not reflect the company’s operating results and that they are not indicative of the underlying performance of its business.
Amortization of acquired intangible assets. The company incurs expenses from the amortization of acquired intangible assets over their economic lives. Such charges are significantly impacted by the timing and magnitude of the company’s acquisitions and any related impairment charges.
Recovery from contamination incident. In February 2022, a contamination of certain materials used in the company's manufacturing process occurred and affected production operations at the flash-based memory manufacturing facilities in Yokkaichi and Kitakami,
Other adjustments. From time-to-time, the company sells or impairs investments or other assets which are not considered necessary to its business operations, or incurs other charges or gains that the company believes are not a part of the ongoing operation of its business. The resulting expense or benefit is inconsistent in amount and frequency.
Income tax adjustments. Income tax adjustments include the difference between income taxes based on a forecasted annual Non-GAAP tax rate and a forecasted annual GAAP tax rate as a result of the timing of certain Non-GAAP pre-tax adjustments. The income tax adjustments also include adjustments for the re-measurement of certain unrecognized tax benefits primarily related to tax positions taken in prior quarters, including interest. These adjustments are excluded because the company believes that they are not indicative of the underlying performance of its ongoing business.
Additionally, free cash flow is defined as cash flows provided by (used in) operating activities less purchases of property, plant and equipment, net, and the activity related to Flash Ventures, net. The company considers free cash flow generated in any period to be a useful indicator of cash that is available for strategic opportunities including, among others, investing in the company’s business, making strategic acquisitions, repaying debt and strengthening the balance sheet.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240125462016/en/
Western Digital Corp.
Investor Contact:
T. Peter Andrew
949.672.9655
peter.andrew@wdc.com
investor@wdc.com
Media Contact:
Media Relations
408.801.0021
WD.Mediainquiries@wdc.com
Source: Western Digital Corp.
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