News Summary
- First quarter revenue was $2.75 billion, up 3% sequentially
(QoQ). Cloud revenue decreased 12% (QoQ), Client revenue increased
11% (QoQ) and Consumer revenue increased 14% (QoQ).
- First quarter GAAP earnings per share (EPS) was $(2.17) and
Non-GAAP EPS was $(1.76), which includes $225 million of
underutilization-related charges in Flash and HDD.
- Expect fiscal second quarter 2024 revenue to be in the range of
$2.85 billion to $3.05 billion.
- Expect Non-GAAP EPS in the range of $(1.35) to $(1.05), which
includes $110 to $130 million of underutilization-related charges
in Flash and HDD.
Western Digital Corp. (Nasdaq: WDC) today reported fiscal first
quarter 2024 financial results.
“Western Digital’s fiscal first quarter results exceeded our
expectations as the team’s efforts to bolster business agility and
develop differentiated and innovative products across a broad range
of end-markets have resulted in sequential margin improvement
across flash and HDD businesses,” said David Goeckeler, Western
Digital CEO. “Our Consumer and Client end markets continue to
perform well and we now expect our Cloud end market to grow going
forward. Our improved cost structure positions Western Digital to
capitalize on enhanced earnings power as market conditions continue
to improve.”
Q1 2024 Financial Highlights
GAAP
Non-GAAP
Q1 2024
Q4 2023
Q/Q
Q1 2024
Q4 2023
Q/Q
Revenue ($M)
$2,750
$2,672
up 3%
$2,750
$2,672
up 3%
Gross Margin
3.6%
3.4%
up 0.2 ppt
4.1%
3.9%
up 0.2 ppt
Operating Expenses ($M)
$695
$742
down 6%
$555
$582
down 5%
Operating Loss ($M)
$(596)
$(650)
*
$(443)
$(478)
*
Net Loss ($M)
$(685)
$(715)
*
$(554)
$(621)
*
Loss Per Share
$(2.17)
$(2.27)
*
$(1.76)
$(1.98)
*
* not a meaningful figure
GAAP
Non-GAAP
Q1 2024
Q1 2023
Y/Y
Q1 2024
Q1 2023
Y/Y
Revenue ($M)
$2,750
$3,736
down 26%
$2,750
$3,736
down 26%
Gross Margin
3.6%
26.3%
down 22.7 ppt
4.1%
26.7%
down 22.6 ppt
Operating Expenses ($M)
$695
$823
down 16%
$555
$689
down 19%
Operating Income (Loss) ($M)
$(596)
$158
*
$(443)
$307
*
Net Income (Loss) ($M)
$(685)
$27
*
$(554)
$64
*
Earnings (Loss) Per Share
$(2.17)
$0.08
*
$(1.76)
$0.20
*
* not a meaningful figure
The company had an operating cash outflow of $626 million and
ended the quarter with $2.03 billion of total cash and cash
equivalents.
Additional details can be found within the company’s earnings
presentation, which is accessible online at investor.wdc.com.
End Market Summary
Revenue ($M)
Q1 2024
Q4 2023
Q/Q
Q1 2023
Y/Y
Cloud
$872
$994
down 12%
$1,829
down 52%
Client
1,147
1,035
up 11%
1,229
down 7%
Consumer
731
643
up 14%
678
up 8%
Total Revenue
$2,750
$2,672
up 3%
$3,736
down 26%
In the fiscal first quarter:
- Cloud represented 32% of total revenue. Sequentially, the
decline was primarily due to lower nearline hard drive shipments to
data center customers. The year-over-year decrease was primarily
due to declines in shipments for both hard drive and flash
products.
- Client represented 42% of total revenue. Sequentially, the
increase was due to growth in flash bit shipments. The
year-over-year decrease was primarily due to declines in flash
pricing.
- Consumer represented 26% of total revenue. On both a sequential
and year-over-year basis, the increase was driven by both higher
content per unit and unit shipments in flash.
Business Outlook for Fiscal Second Quarter of 2024
Three Months Ending
December 29, 2023
GAAP(1)
Non-GAAP(1)
Revenue ($B)
$2.85 - $3.05
$2.85 - $3.05
Gross margin
9.5% - 11.5%
10.0% - 12.0%
Operating expenses ($M)
$650 - $670
$560 - $580
Interest and other expense, net ($M)
~$105
~$105
Income tax expense ($M)(2)
N/A
$20 - $30
Preferred dividend ($M)
$15
$15
Diluted earnings per share
N/A
$(1.35) - $(1.05)
Diluted shares outstanding (in
millions)
~325
~325
____________________
(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 $85 million to $95 million. In the
aggregate, Non-GAAP diluted earnings per share guidance excludes
these items totaling approximately $95 million to $110 million. 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. 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. 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 second
quarter of 2024 will be broadcast live online today at 5:30 a.m.
Pacific/8:30 a.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 second quarter of 2024 and
beyond; end-market performance; product developments; the impact of
the company's cost structure on earnings power; 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 first
quarter ended September 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 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; 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, 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)
September 29,
2023
June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
2,032
$
2,023
Accounts receivable, net
1,451
1,598
Inventories
3,497
3,698
Other current assets
597
567
Total current assets
7,577
7,886
Property, plant and equipment, net
3,371
3,620
Notes receivable and investments in Flash
Ventures
1,245
1,297
Goodwill
10,035
10,037
Other intangible assets, net
80
80
Other non-current assets
1,693
1,509
Total assets
$
24,001
$
24,429
LIABILITIES, CONVERTIBLE
PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
1,294
$
1,293
Accounts payable to related parties
277
292
Accrued expenses
1,347
1,288
Income taxes payable
675
999
Accrued compensation
349
349
Current portion of long-term debt
1,850
1,213
Total current liabilities
5,792
5,434
Long-term debt
5,822
5,857
Other liabilities
1,398
1,415
Total liabilities
13,012
12,706
Convertible preferred stock
876
876
Total shareholders’ equity
10,113
10,847
Total liabilities, convertible preferred
stock and shareholders’ equity
$
24,001
$
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
September 29,
2023
September 30,
2022
Revenue, net
$
2,750
$
3,736
Cost of revenue
2,651
2,755
Gross profit
99
981
Operating expenses:
Research and development
431
552
Selling, general and administrative
207
247
Employee termination, asset impairment,
and other
57
24
Total operating expenses
695
823
Operating income (loss)
(596
)
158
Interest and other income, net
(86
)
(74
)
Income (loss) before taxes
(682
)
84
Income tax expense
3
57
Net income (loss)
(685
)
27
Less: cumulative dividends allocated to
preferred shareholders
15
—
Net income (loss) attributable to common
shareholders
$
(700
)
$
27
Income (loss) per common share:
Basic
$
(2.17
)
$
0.09
Diluted
$
(2.17
)
$
0.08
Weighted average shares outstanding:
Basic
323
316
Diluted
323
319
WESTERN DIGITAL
CORPORATION
PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited; on a
US GAAP basis)
Three Months Ended
September 29,
2023
September 30,
2022
Operating Activities
Net income (loss)
$
(685
)
$
27
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operations:
Depreciation and amortization
147
216
Stock-based compensation
77
86
Deferred income taxes
(46
)
(42
)
Loss (Gain) on disposal of assets
(87
)
1
Non-cash portion of asset impairment
95
—
Amortization of debt issuance costs and
discounts
4
3
Other non-cash operating activities,
net
1
44
Changes in:
Accounts receivable, net
147
382
Inventories
201
(224
)
Accounts payable
25
(125
)
Accounts payable to related parties
(15
)
(25
)
Accrued expenses
63
(44
)
Income taxes payable
(325
)
117
Accrued compensation
1
(104
)
Other assets and liabilities, net
(229
)
(306
)
Net cash (used in) provided by operating
activities
(626
)
6
Investing Activities
Purchases of property, plant and
equipment, net
69
(320
)
Activity related to Flash Ventures,
net
13
99
Strategic investments and other, net
2
(3
)
Net cash provided by (used in) investing
activities
84
(224
)
Financing Activities
Employee stock plans, net
(43
)
(50
)
Net proceeds from convertible preferred
stock
(3
)
—
Proceeds from debt
600
—
Net cash provided by (used in) financing
activities
554
(50
)
Effect of exchange rate changes on
cash
(3
)
(10
)
Net increase (decrease) in cash and cash
equivalents
9
(278
)
Cash and cash equivalents, beginning of
period
2,023
2,327
Cash and cash equivalents, end of
period
$
2,032
$
2,049
WESTERN DIGITAL
CORPORATION
SUPPLEMENTAL OPERATING SEGMENT
RESULTS
(in millions; except
percentages; unaudited)
Three Months Ended
September 29,
2023
September 30,
2022
Net revenue:
Flash
$
1,556
$
1,722
HDD
1,194
2,014
Total net revenue
$
2,750
$
3,736
Gross profit:
Flash
$
(161
)
$
422
HDD
273
574
Total gross profit for segments
112
996
Unallocated corporate items:
Stock-based compensation expense
(13
)
(14
)
Amortization of acquired intangible
assets
—
(1
)
Total unallocated corporate items
(13
)
(15
)
Consolidated gross profit
$
99
$
981
Gross margin:
Flash
(10.3
)%
24.5
%
HDD
22.9
%
28.5
%
Total gross margin for segments
4.1
%
26.7
%
Consolidated gross margin
3.6
%
26.3
%
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
September 29,
2023
June 30, 2023
September 30,
2022
GAAP gross profit
$
99
$
92
$
981
Stock-based compensation expense
13
11
14
Amortization of acquired intangible
assets
—
(1
)
1
Other
—
2
—
Non-GAAP gross profit
$
112
$
104
$
996
GAAP operating expenses
$
695
$
742
$
823
Stock-based compensation expense
(64
)
(61
)
(72
)
Amortization of acquired intangible
assets
—
(17
)
(38
)
Employee termination, asset impairment,
and other
(57
)
(53
)
(24
)
Strategic review
(17
)
(27
)
—
Other
(2
)
(2
)
—
Non-GAAP operating expenses
$
555
$
582
$
689
GAAP operating income (loss)
$
(596
)
$
(650
)
$
158
Gross profit adjustments
13
12
15
Operating expense adjustments
140
160
134
Non-GAAP operating income
(loss)
$
(443
)
$
(478
)
$
307
GAAP interest and other income,
net
$
(86
)
$
(80
)
$
(74
)
Other
—
(6
)
(1
)
Non-GAAP interest and other income,
net
$
(86
)
$
(86
)
$
(75
)
GAAP income tax expense
(benefit)
$
3
$
(15
)
$
57
Income tax adjustments
22
72
111
Non-GAAP income tax expense
$
25
$
57
$
168
WESTERN DIGITAL
CORPORATION
PRELIMINARY RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(in millions, except per share
amounts; unaudited)
Three Months Ended
September 29,
2023
June 30, 2023
September 30,
2022
GAAP net income (loss)
$
(685
)
$
(715
)
$
27
Stock-based compensation expense
77
72
86
Amortization of acquired intangible
assets
—
16
39
Employee termination, asset impairment and
other
57
53
24
Strategic review
17
27
—
Other
2
(2
)
(1
)
Income tax adjustments
(22
)
(72
)
(111
)
Non-GAAP net income (loss)
(554
)
(621
)
64
Less: cumulative dividends allocated to
preferred shareholders
15
15
—
Non-GAAP net income (loss) attributable
to common shareholders
$
(569
)
$
(636
)
$
64
Diluted income (loss) per common
share
GAAP
$
(2.17
)
$
(2.27
)
$
0.08
Non-GAAP
$
(1.76
)
$
(1.98
)
$
0.20
Diluted weighted average shares
outstanding:
GAAP
323
321
319
Non-GAAP
323
321
319
Cash flows
Cash flow provided by (used in) operating
activities
$
(626
)
$
(68
)
$
6
Purchases of property, plant and
equipment, net
69
(119
)
(320
)
Activity related to Flash Ventures,
net
13
(32
)
99
Free cash flow
$
(544
)
$
(219
)
$
(215
)
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, employee termination,
asset impairment, and other, expenses related to our strategic
review, 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.
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 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.
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
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
(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/20231027801579/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
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