News Summary
- Fourth quarter revenue was $2.7 billion, down 5% sequentially
(QoQ). Cloud revenue decreased 18% (QoQ), Client revenue increased
6% and Consumer revenue increased 3% (QoQ). Fiscal year 2023
revenue was $12.3 billion.
- Fourth quarter GAAP earnings per share (EPS) was $(2.27) and
Non-GAAP EPS was $(1.98), which includes $211 million of
underutilization related charges in Flash and HDD. Fiscal year 2023
GAAP EPS was $(5.44) and Non-GAAP EPS was $(3.59).
- Expect fiscal first quarter 2024 revenue to be in the range of
$2.55 billion to $2.75 billion.
- Expect Non-GAAP EPS in the range of $(2.10) to $(1.80) which
includes $200 to $220 million of underutilization charges in Flash
and HDD.
Western Digital Corp. (Nasdaq: WDC) today reported fiscal fourth
quarter and fiscal year 2023 financial results.
“Throughout the fiscal fourth quarter and fiscal year, Western
Digital continued to optimize our operations and successfully
execute our innovative product roadmap, priming ourselves for
greater profitability when demand rebounds across hard drives and
flash. As a result of these efforts, we delivered revenue above our
expectation and delivered a range of industry-leading products to
our customers,” said David Goeckeler, Western Digital CEO.
“We are encouraged by several indicators signaling improving
Flash market dynamics. Our two largest end markets, Client and
Consumer, are returning to growth, inventories are normalizing,
content per unit is increasing and price declines have been
moderating. Western Digital is well-positioned to capitalize on
improving market conditions and capture long-term growth
opportunities in data storage, spanning from client to edge to
cloud,” continued David Goeckeler.
Q4 2023 Financial Highlights
GAAP
Non-GAAP
Q4 2023
Q3 2023
Q/Q
Q4 2023
Q3 2023
Q/Q
Revenue ($M)
$2,672
$2,803
down 5%
$2,672
$2,803
down 5%
Gross Margin
3.4%
10.2%
down 6.8 ppt
3.9%
10.6%
down 6.7 ppt
Operating Expenses ($M)
$742
$758
down 2%
$582
$602
down 3%
Operating Loss ($M)
$(650)
$(472)
*
$(478)
$(304)
*
Net Loss ($M)
$(715)
$(572)
*
$(621)
$(427)
*
Earnings (Loss) Per Share
$(2.27)
$(1.82)
*
$(1.98)
$(1.37)
*
* not a meaningful figure
GAAP
Non-GAAP
Q4 2023
Q4 2022
Y/Y
Q4 2023
Q4 2022
Y/Y
Revenue ($M)
$2,672
$4,528
down 41%
$2,672
$4,528
down 41%
Gross Margin
3.4%
31.9%
down 28.5 ppt
3.9%
32.3%
down 28.4 ppt
Operating Expenses ($M)
$742
$883
down 16%
$582
$760
down 23%
Operating Income (Loss) ($M)
$(650)
$562
*
$(478)
$702
*
Net Income (Loss) ($M)
$(715)
$301
*
$(621)
$567
*
Earnings (Loss) Per Share
$(2.27)
$0.95
*
$(1.98)
$1.78
*
* not a meaningful figure
The company had an operating cash outflow of $68 million and
ended the quarter with $2.02 billion of total cash and cash
equivalents.
Fiscal Year 2023 Financial Highlights
GAAP
Non-GAAP
2023
2022
Y/Y
2023
2022
Y/Y
Revenue ($M)
$12,318
$18,793
down 34%
$12,318
$18,793
down 34%
Gross Margin
15.3%
31.3%
down 16.0 ppt
15.7%
32.9%
down 17.2 ppt
Operating Expenses ($M)
$3,172
$3,483
down 9%
$2,532
$3,002
down 16%
Operating Income (Loss) ($M)
$(1,285)
$2,391
*
$(594)
$3,186
*
Net Income (Loss) ($M)
$(1,706)
$1,500
*
$(1,119)
$2,599
*
Earnings (Loss) Per Share
$(5.44)
$4.75
*
$(3.59)
$8.22
*
* not a meaningful figure
Additional details can be found within the company’s earnings
presentation, which is accessible online at investor.wdc.com.
End Market Summary
Revenue ($M)
Q4 2023
Q3 2023
Q/Q
Q4 2022
Y/Y
2023
2022
Y/Y
Cloud
$994
$1,205
down 18%
$2,098
down 53%
$5,252
$8,017
down 34%
Client
1,035
975
up 6%
1,637
down 37%
4,328
7,076
down 39%
Consumer
643
623
up 3%
793
down 19%
2,738
3,700
down 26%
Total Revenue
$2,672
$2,803
down 5%
$4,528
down 41%
$12,318
$18,793
down 34%
In the fiscal fourth quarter:
- Cloud represented 37% of total revenue. Sequentially, the
decline was primarily due to a decrease in capacity enterprise
drive shipments. The year-over-year decrease was primarily due to
declines in both hard drive and flash product shipments.
- Client represented 39% of total revenue. Sequentially, the
increase was driven by growth in bit shipments for gaming consoles.
The year-over-year decrease was due to declines in flash pricing,
and lower client SSD and hard drive unit shipments for PC
applications.
- Consumer represented 24% of total revenue. Sequentially, the
increase was primarily due to higher retail SSD shipments. The
year-over-year decrease was driven by price declines in Flash and
lower retail hard drive shipments.
In fiscal year 2023:
- Cloud represented 43% of total revenue. The year-over-year
decrease was primarily due to reduced shipments of capacity
enterprise hard drives and enterprise SSDs.
- Client represented 35% of total revenue. The year-over-year
decrease was primarily due to declines in flash pricing, as well as
lower client SSD and hard drive unit shipments for PC
applications.
- Consumer represented 22% of total revenue. Revenue decreased
year-over-year, as growth in retail SSD bit shipments was more than
offset by broad-based flash price decline and lower consumer hard
drive shipments.
Business Outlook for Fiscal First Quarter of 2024
Three Months Ending
September 29, 2023
GAAP(1)
Non-GAAP(1)
Revenue ($B)
$2.55 - $2.75
$2.55 - $2.75
Gross margin
1.9% - 4.0%
2.5% - 4.5%
Operating expenses ($M)
$665 - $685
$570 - $590
Interest and other expense, net ($M)
~$90
~$90
Income tax expense ($M)(2)
N/A
$30 - $40
Diluted earnings per share
N/A
$(2.10) - $(1.80)
Diluted shares outstanding (in
millions)
~323
~323
_____________
(1) Non-GAAP gross margin guidance excludes stock-based
compensation expense of approximately $10 million to $15 million.
The company’s Non-GAAP operating expenses guidance excludes
stock-based compensation expense, and expenses related to strategic
review, totaling approximately $90 million to $100 million. In the
aggregate, Non-GAAP diluted earnings per share guidance excludes
these items totaling approximately $100 million to $115 million.
The timing and amount of these charges excluded from Non-GAAP gross
margin, Non-GAAP operating expenses, and Non-GAAP diluted earnings
per share cannot be further allocated or quantified with certainty.
Additionally, the timing and amount of additional charges the
company excludes from its Non-GAAP income tax expense and Non-GAAP
diluted earnings per share are dependent on the timing and
determination of certain actions and cannot be reasonably
predicted. Accordingly, full reconciliations of Non-GAAP gross
margin, Non-GAAP operating expenses, Non-GAAP income tax expense
and Non-GAAP diluted earnings per share to the most directly
comparable GAAP financial measures (GAAP gross profit, GAAP
operating expenses, income tax expense and diluted earnings per
share, respectively) are not available without unreasonable
effort.
(2) The 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 first
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 first quarter of 2024; future
market dynamics and demand trends; product developments and mix;
the position of the company and its products in the industry; and
overall market conditions. 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 fourth quarter and year ended June 30, 2023 included in this
press release represent the most current information available to
management. The company’s actual results when disclosed in its Form
10-K may differ from these preliminary results as a result of the
completion of the company’s financial closing procedures, including
completion of the annual assessment of impairment of goodwill;
completion of the audit by the company’s independent registered
accounting firm; and other developments that may arise between now
and the filing of its Form 10-K. Other 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 the COVID-19 pandemic or other similar global health
crises; impact of business and market conditions; the outcome and
impact of our ongoing strategic review, including with respect to
customer and supplier relationships, regulatory and contractual
restrictions, stock price volatility and the diversion of
management’s attention from ongoing business operations and
opportunities; impact of competitive products and pricing; our
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 our strategic
relationships; difficulties or delays in manufacturing or other
supply chain disruptions; hiring and retention of key employees;
our level of debt and other financial obligations; changes to our
relationships with key customers; compromise, damage or
interruption from cybersecurity incidents or other data system
security risks; actions by competitors; 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 Form 10-K filed
with the SEC on August 25, 2022 and Form 10-Q filed with the SEC on
May 10, 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)
June 30, 2023
July 1, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
2,023
$
2,327
Accounts receivable, net
1,598
2,804
Inventories
3,698
3,638
Other current assets
567
684
Total current assets
7,886
9,453
Property, plant and equipment, net
3,620
3,670
Notes receivable and investments in Flash
Ventures
1,297
1,396
Goodwill
10,037
10,041
Other intangible assets, net
80
213
Other non-current assets
1,509
1,486
Total assets
$
24,429
$
26,259
LIABILITIES, CONVERTIBLE
PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
1,293
$
1,902
Accounts payable to related parties
292
320
Accrued expenses
1,288
1,636
Income taxes payable
999
869
Accrued compensation
349
510
Current portion of long-term debt
1,213
—
Total current liabilities
5,434
5,237
Long-term debt
5,857
7,022
Other liabilities
1,415
1,779
Total liabilities
12,706
14,038
Convertible preferred stock
876
—
Total shareholders’ equity
10,847
12,221
Total liabilities, convertible preferred
stock and shareholders’ equity
$
24,429
$
26,259
WESTERN DIGITAL
CORPORATION
PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share
amounts; unaudited; on a US GAAP basis)
Three Months Ended
Years Ended
June 30, 2023
July 1, 2022
June 30, 2023
July 1, 2022
Revenue, net
$
2,672
$
4,528
$
12,318
$
18,793
Cost of revenue
2,580
3,083
10,431
12,919
Gross profit
92
1,445
1,887
5,874
Operating expenses:
Research and development
458
598
2,009
2,323
Selling, general and administrative
231
266
970
1,117
Employee termination, asset impairment,
and other charges
53
19
193
43
Total operating expenses
742
883
3,172
3,483
Operating income (loss)
(650
)
562
(1,285
)
2,391
Interest and other income, net
(80
)
(51
)
(275
)
(268
)
Income (loss) before taxes
(730
)
511
(1,560
)
2,123
Income tax expense (benefit)
(15
)
210
146
623
Net income (loss)
(715
)
301
(1,706
)
1,500
Less: cumulative dividends allocated to
preferred shareholders
15
—
24
—
Net income (loss) attributable to common
shareholders
$
(730
)
$
301
$
(1,730
)
$
1,500
Income (loss) per common share:
Basic
$
(2.27
)
$
0.96
$
(5.44
)
$
4.81
Diluted
$
(2.27
)
$
0.95
$
(5.44
)
$
4.75
Weighted average shares outstanding:
Basic
321
314
318
312
Diluted
321
318
318
316
WESTERN DIGITAL
CORPORATION
PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited; on a
US GAAP basis)
Three Months Ended
Years Ended
June 30, 2023
July 1, 2022
June 30, 2023
July 1, 2022
Operating Activities
Net income (loss)
$
(715
)
$
301
$
(1,706
)
$
1,500
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation and amortization
185
221
828
929
Stock-based compensation
72
77
318
326
Deferred income taxes
(68
)
73
(34
)
114
Gain on disposal of assets
—
(2
)
(7
)
(16
)
Non-cash portion of asset impairment
1
—
19
—
Gain on business divestiture
—
(9
)
—
(9
)
Amortization of debt issuance costs and
discounts
4
10
13
44
Other non-cash operating activities,
net
65
25
71
67
Changes in:
Accounts receivable, net
(7
)
(450
)
1,206
(546
)
Inventories
281
23
(60
)
(22
)
Accounts payable
(17
)
(29
)
(459
)
(129
)
Accounts payable to related parties
26
(76
)
(28
)
(78
)
Accrued expenses
132
243
(352
)
245
Income taxes payable
(14
)
(24
)
130
(74
)
Accrued compensation
7
26
(162
)
(123
)
Other assets and liabilities, net
(20
)
(114
)
(185
)
(348
)
Net cash provided by (used in) operating
activities
(68
)
295
(408
)
1,880
Investing Activities
Purchases of property, plant and
equipment, net
(119
)
(278
)
(807
)
(1,107
)
Activity related to Flash Ventures,
net
(32
)
(114
)
14
(91
)
Strategic investments and other, net
9
22
31
6
Net cash used in investing activities
(142
)
(370
)
(762
)
(1,192
)
Financing Activities
Employee stock plans, net
33
55
13
32
Net proceeds from convertible preferred
stock
(1
)
—
881
—
Repayments of debt
—
(150
)
(1,180
)
(3,621
)
Proceeds from debt
—
—
1,180
1,894
Debt issuance costs
(13
)
—
(19
)
(23
)
Net cash provided by (used in) financing
activities
19
(95
)
875
(1,718
)
Effect of exchange rate changes on
cash
(6
)
(8
)
(9
)
(13
)
Net decrease in cash and cash
equivalents
(197
)
(178
)
(304
)
(1,043
)
Cash and cash equivalents, beginning of
period
2,220
2,505
2,327
3,370
Cash and cash equivalents, end of
period
$
2,023
$
2,327
$
2,023
$
2,327
WESTERN DIGITAL
CORPORATION
SUPPLEMENTAL OPERATING SEGMENT
RESULTS
(in millions; except
percentages; unaudited)
Three Months Ended
Years Ended
June 30, 2023
July 1, 2022
June 30, 2023
July 1, 2022
Net revenue:
Flash
$
1,377
$
2,400
$
6,063
$
9,753
HDD
1,295
2,128
6,255
9,040
Total net revenue
$
2,672
$
4,528
$
12,318
$
18,793
Gross profit:
Flash
$
(164
)
$
862
$
433
$
3,527
HDD
268
600
1,505
2,661
Total gross profit for segments
104
1,462
1,938
6,188
Unallocated corporate items:
Stock-based compensation expense
(11
)
(12
)
(49
)
(48
)
Amortization of acquired intangible
assets
1
(1
)
—
(66
)
Contamination related charges
—
(4
)
—
(207
)
Recoveries from a power outage
incident
—
—
—
7
Non-cash economic interest and Other
(2
)
—
(2
)
—
Total unallocated corporate items
(12
)
(17
)
(51
)
(314
)
Consolidated gross profit
$
92
$
1,445
$
1,887
$
5,874
Gross margin:
Flash
(11.9
)%
35.9
%
7.1
%
36.2
%
HDD
20.7
%
28.2
%
24.1
%
29.4
%
Total gross margin for segments
3.9
%
32.3
%
15.7
%
32.9
%
Consolidated gross margin
3.4
%
31.9
%
15.3
%
31.3
%
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
Years Ended
June 30, 2023
March 31, 2023
July 1, 2022
June 30, 2023
July 1, 2022
GAAP gross profit
$
92
$
286
$
1,445
$
1,887
$
5,874
Stock-based compensation expense
11
12
12
49
48
Amortization of acquired intangible
assets
(1
)
—
1
—
66
Contamination related charges
—
—
4
—
207
Recoveries from a power outage
incident
—
—
—
—
(7
)
Other
2
—
—
2
—
Non-GAAP gross profit
$
104
$
298
$
1,462
$
1,938
$
6,188
GAAP operating expenses
$
742
$
758
$
883
$
3,172
$
3,483
Stock-based compensation expense
(61
)
(62
)
(65
)
(269
)
(278
)
Amortization of acquired intangible
assets
(17
)
(39
)
(39
)
(133
)
(155
)
Employee termination, asset impairment and
other charges
(53
)
(40
)
(19
)
(193
)
(43
)
Strategic review
(27
)
(15
)
—
(42
)
—
Other
(2
)
—
—
(3
)
(5
)
Non-GAAP operating expenses
$
582
$
602
$
760
$
2,532
$
3,002
GAAP operating income (loss)
$
(650
)
$
(472
)
$
562
$
(1,285
)
$
2,391
Gross profit adjustments
12
12
17
51
314
Operating expense adjustments
160
156
123
640
481
Non-GAAP operating income
(loss)
$
(478
)
$
(304
)
$
702
$
(594
)
$
3,186
GAAP interest and other income,
net
$
(80
)
$
(57
)
$
(51
)
$
(275
)
$
(268
)
Non-cash economic interest and other
(6
)
(6
)
(14
)
(13
)
3
Non-GAAP interest and other income,
net
$
(86
)
$
(63
)
$
(65
)
$
(288
)
$
(265
)
GAAP income tax expense
(benefit)
$
(15
)
$
43
$
210
$
146
$
623
Income tax adjustments
72
17
(140
)
91
(301
)
Non-GAAP income tax expense
$
57
$
60
$
70
$
237
$
322
WESTERN DIGITAL
CORPORATION
PRELIMINARY RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(in millions, except per share
amounts; unaudited)
Three Months Ended
Years Ended
June 30, 2023
March 31, 2023
July 1, 2022
June 30, 2023
July 1, 2022
GAAP net income (loss)
$
(715
)
$
(572
)
$
301
$
(1,706
)
$
1,500
Stock-based compensation expense
72
74
77
318
326
Amortization of acquired intangible
assets
16
39
40
133
221
Contamination related charges
—
—
4
—
207
Recoveries from a power outage
incident
—
—
—
—
(7
)
Employee termination, asset impairment and
other charges
53
40
19
193
43
Strategic review
27
15
—
42
—
Non-cash economic interest and other
(2
)
(6
)
(14
)
(8
)
8
Income tax adjustments
(72
)
(17
)
140
(91
)
301
Non-GAAP net income (loss)
(621
)
(427
)
567
(1,119
)
2,599
Less: cumulative dividends allocated to
preferred shareholders
15
9
—
24
—
Non-GAAP net income (loss) attributable
to common shareholders
$
(636
)
$
(436
)
$
567
$
(1,143
)
$
2,599
Diluted income (loss) per common
share
GAAP
$
(2.27
)
$
(1.82
)
$
0.95
$
(5.44
)
$
4.75
Non-GAAP
$
(1.98
)
$
(1.37
)
$
1.78
$
(3.59
)
$
8.22
Diluted weighted average shares
outstanding:
GAAP
321
319
318
318
316
Non-GAAP
321
319
318
318
316
Cash flows
Cash flow provided by (used in) operating
activities
$
(68
)
$
(381
)
$
295
$
(408
)
$
1,880
Purchases of property, plant and
equipment, net
(119
)
(110
)
(278
)
(807
)
(1,107
)
Activity related to Flash Ventures,
net
(32
)
(36
)
(114
)
14
(91
)
Free cash flow
$
(219
)
$
(527
)
$
(97
)
$
(1,201
)
$
682
To supplement the condensed consolidated financial statements
presented in accordance with U.S. generally accepted accounting
principles (“GAAP”), the table above sets forth Non-GAAP gross
profit; Non-GAAP gross margin; Non-GAAP operating expenses;
Non-GAAP operating income and loss; Non-GAAP interest and other
income, net; Non-GAAP income tax expense; Non-GAAP net income and
loss; Non-GAAP diluted income and loss per common share and free
cash flow (“Non-GAAP measures”). These Non-GAAP measures are not in
accordance with, or an alternative for, measures prepared in
accordance with GAAP and may be different from Non-GAAP measures
used by other companies. The company believes the presentation of
these Non-GAAP measures, when shown in conjunction with the
corresponding GAAP measures, provides useful information to
investors for measuring the company’s earnings performance and
comparing it against prior periods. Specifically, the company
believes these Non-GAAP measures provide useful information to both
management and investors as they exclude certain expenses, gains
and losses that the company believes are not indicative of its core
operating results or because they are consistent with the financial
models and estimates published by many analysts who follow the
company and its peers. As discussed further below, these Non-GAAP
measures exclude, as applicable, stock-based compensation expense,
amortization of acquired intangible assets, contamination related
charges, recoveries from a power outage incident, employee
termination, asset impairment and other charges, expenses related
to our strategic review, non-cash economic interest, other
adjustments, and income tax adjustments, and the company believes
these measures along with the related reconciliations to the GAAP
measures provide additional detail and comparability for assessing
the company’s results. These Non-GAAP measures are some of the
primary indicators management uses for assessing the company’s
performance and planning and forecasting future periods. These
measures should be considered in addition to results prepared in
accordance with GAAP, but should not be considered a substitute
for, or superior to, GAAP results.
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.
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.
Contamination related charges. In
February 2022, a contamination of certain materials used in the
company’s manufacturing process occurred and affected production
operation at the flash-based memory manufacturing facilities in
Yokkaichi and Kitakami, Japan, which are operated through the
company’s joint business ventures with Kioxia Corporation
(collectively, "Flash Ventures"). The contamination resulted in
scrapped inventory and rework costs, decontamination and other
costs needed to restore the facilities to normal capacity, and
under absorption of overhead costs, which are expensed as incurred.
These charges are inconsistent in amount and frequency, and the
company believes these charges are not part of the ongoing
production operation of its business.
Recoveries from a power outage
incident. In June 2019, an unexpected power outage incident
occurred at the flash-based memory manufacturing facilities
operated through the company’s joint venture with Kioxia
Corporation in Yokkaichi, Japan. The power outage incident resulted
in costs associated with the repair of damaged tools and the
write-off of damaged inventory and unabsorbed manufacturing
overhead costs which are expensed as incurred. During fiscal years
2021 and 2022, the company received recoveries for these losses
from other parties. The recoveries are inconsistent in amount and
frequency, and the company believes they are not part of the
ongoing production operation of its business.
Employee termination, asset impairment and
other charges. 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. 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 ongoing review of potential
strategic alternatives aimed at further optimizing the long-term
value for stockholders. 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.
Non-cash economic interest. The
company has excluded non-cash economic interest expense associated
with its convertible notes recognized in periods prior to the
company’s adoption of the Financial Accounting Standards Board
Accounting Standards Update No. 2020-06, “Debt—Debt with Conversion
and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity”, which the company adopted at the beginning of its
fiscal year ending June 30, 2023. The exclusion of such amounts
from prior periods facilitates a comparison of the company's prior
period results to the current period presentation.
Other adjustments. From
time-to-time, the company incurs 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 to
estimates related to the current status of the rules and
regulations governing the transition to the Tax Cuts and Jobs Act
and 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
(used in) by 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/20230731170808/en/
Western Digital Corp.
Investor Contact: T. Peter Andrew 949.672.9655
peter.andrew@wdc.com investor@wdc.com
Media Contact: Robin Schultz 408.573.5043
robin.schultz@wdc.com
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