Western Digital Reports Fourth Quarter and Fiscal Year 2020 Financial Results

News Summary

  • Fourth quarter revenue was $4.3 billion, up 18% year-over-year (YoY). Data Center Devices and Solutions revenue grew 32%, Client Devices grew 19%, and Client Solutions declined 9% YoY. Fiscal year 2020 revenue was $16.7 billion, up 1.0% YoY.

  • Fourth quarter GAAP earnings-per-share (EPS) was $0.49 and non-GAAP EPS was $1.23. Both GAAP and non-GAAP EPS include $96 million in costs related to COVID-19 in the fourth quarter. Fiscal year 2020 GAAP EPS was ($0.84) and non-GAAP EPS was $3.04.

  • Generated operating cash flow of $172 million and free cash flow of $261 million in the fourth quarter. Generated operating cash flow of $824 million and free cash flow of $1.1 billion in fiscal year 2020.

  • Expecting first fiscal quarter 2021 revenue to be in the range of $3.7 to $3.9 billion with non-GAAP EPS in the range of $0.45 to $0.65. Non-GAAP EPS outlook includes costs related to COVID-19.

SAN JOSE, Calif. - Aug 5, 2020

Western Digital Corp. (Nasdaq: WDC) today reported fourth quarter and fiscal year 2020 financial results.

"I am extremely proud of the way our team has navigated the complexities and uncertainties inherent in this unprecedented environment, as we continue to adapt to provide supply continuity and high-quality products to our customers and drive value for our shareholders," said David Goeckeler, Western Digital CEO. "While we continue to navigate through a dynamic environment, we remain focused on managing the business for the long-term, including ramping two important product lines to high volume: our SSD products and our energy-assisted capacity enterprise drives. We will continue to deliver the quality, performance and cost-effectiveness our customers rely on, and I am confident that our end market diversity and breadth, broad customer base, channel reach, and innovative leadership all position Western Digital to benefit from the multi-year growth in data creation and storage."

Q4 2020 Financial Highlights

 

GAAP

Non-GAAP

 

Q4 2020

Q4 2019

vs. Q4 2019

Q4 2020

Q4 2019

vs. Q4 2019

Revenue ($M)

$4,287

$3,634

up 18%

$4,287

$3,634

up 18%

Gross Margin

25.3%

12.8%

up 12.5 ppt

28.9%

24.2%

up 4.7 ppt

Operating Expenses ($M)

$822

$846

down 3%

$713

$722

down 1%

Operating Income (Loss) ($M)

$261

($381)

*

$527

$158

up 234%

Net Income (Loss) ($M)

$148

($197)

*

$369

$50

up 638%

Earnings Per Share

$0.49

($0.67)

*

$1.23

$0.17

up 624%

*not a meaningful figure

Fiscal Year 2020 Financial Highlights

 

GAAP

Non-GAAP

 

2020

2019

vs. 2019

2020

2019

vs. 2019

Revenue ($M)

$16,736

$16,569

up 1%

$16,736

$16,569

up 1%

Gross Margin

22.6%

22.6%

26.9%

30.5%

down 3.6 ppt

Operating Expenses ($M)

$3,446

$3,665

down 6%

$2,983

$3,022

down 1%

Operating Income (Loss) ($M)

$335

$87

up 285%

$1,522

$2,024

down 25%

Net Income (Loss) ($M)

($250)

($754)

*

$914

$1,429

down 36%

Earnings Per Share

($0.84)

($2.58)

*

$3.04

$4.84

down 37%

*not a meaningful figure

Key End Market Summary


Revenue ($M)

Q4 2020

Q4 2019

vs. Q4 2019

2020

2019

vs. 2019

Client Devices

$1,916

$1,606

up 19%

$7,160

$8,095

down 12%

Data Center Devices & Solutions

$1,684

$1,273

up 32%

$6,228

$5,038

up 24%

Client Solutions

$687

$755

down 9%

$3,348

$3,436

down 3%

Total Revenue

$4,287

$3,634

up 18%

$16,736

$16,569

up 1%

In the fourth quarter of fiscal 2020, Western Digital's revenue increased 18% year-over-year to $4.3 billion, led by strength within Data Center Devices & Solutions and Client Devices end markets.

In Client Devices, Western Digital's robust family of client SSDs, which are ideally suited for remote learning and work from home applications, achieved another record quarter of revenue. Notebook and desktop-related hard drive revenue declined slightly sequentially as the market continued to transition to SSD-based products. Smart video was weaker than expected due to continued headwinds associated with the pandemic. In gaming, Western Digital began shipping flash solutions for the upcoming new game console launches.

In Data Center Devices & Solutions, cloud demand increased in the quarter due to the work from home trend. Western Digital was the first in the industry to ship energy-assisted drives for mass production and the Company expects a strong ramp into the second fiscal quarter and beyond. In addition, Western Digital's innovative flash-based enterprise SSDs more than doubled in revenue from a year ago.

In Client Solutions, while Western Digital has a robust distribution channel with over 350,000 points of purchase around the world and well-established brands, the Company was impacted by COVID-related lockdowns at many brick-and-mortar customers. This business recovered as the quarter progressed due to easing of lockdowns and a transition to online buying with curbside pickup.

Business Outlook for Fiscal First Quarter of 2021

Three Months Ending
October 2, 2020

 

GAAP(1)

Non-GAAP(1)

Revenue ($B)

$3.7 - $3.9

$3.7 - $3.9

Gross margin

21% - 23%

25% - 27%

Operating expenses ($M)

$820 - $840

$700 - $720

Interest and other expense, net ($M)

$80 - $90

$70 - $80

Tax rate

N/A

22% - 26% (2)

Diluted earnings per share

N/A

$0.45 - $0.65

Diluted shares outstanding (in millions)

~ 304

~ 304

(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets, stock-based compensation expense, and charges related to cost saving initiatives totaling approximately $150 million to $170 million. The company's non-GAAP operating expenses guidance excludes amortization of acquired intangible assets; stock-based compensation expense; employee termination, asset impairment and other charges; and charges related to cost saving initiatives totaling approximately $100 million to $120 million. The company's non-GAAP interest and other expense guidance excludes approximately $10 million of convertible debt activity. In the aggregate, non-GAAP diluted earnings per share guidance excludes these items totaling $260 million to $300 million. The timing and amount of these charges excluded from non-GAAP gross margin, non-GAAP operating expenses, non-GAAP interest and other expense, net 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 tax rate 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 interest and other expense, non-GAAP tax rate and non-GAAP diluted earnings per share to the most directly comparable GAAP financial measures (gross margin, operating expenses, interest and other expense, tax rate and diluted earnings per share, respectively) are not available without unreasonable effort.

(2) The non-GAAP tax rates provided are based on a percentage of non-GAAP pre-tax income.

Investor Communications

The investment community conference call to discuss these results and the company's business outlook for the fourth quarter and fiscal year 2020 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, a leader in data infrastructure, creates environments for data to thrive. The company is driving the innovation needed to help customers capture, preserve, access and transform an ever-increasing diversity of data. Everywhere data lives, from advanced data centers to mobile sensors to personal devices, the company's industry-leading solutions deliver the possibilities of data. Western Digital data-centric solutions are comprised of the Western Digital®, G-Technology™, SanDisk® and WD® brands. Financial and investor information is available on the company's Investor Relations website at investor.wdc.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning the company's preliminary financial results for its fiscal fourth quarter ended July 3, 2020 and fiscal year 2020; the company's business outlook for the fiscal first quarter of 2021; expectations regarding the impact of COVID-19; demand trends and market conditions; the data storage ecosystem; the company's positioning for future growth; the company's product portfolio; the ramp of the company's products; and expected future financial performance. 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 ended July 3, 2020 and fiscal year 2020 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; final adjustments; completion of the review and audit by the company's independent registered accounting firm; and other developments that may arise between now and the disclosure of the final results. Other risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: future responses to and effects of the COVID-19 pandemic; volatility in global economic conditions; business conditions and growth in the storage ecosystem; impact of restructuring activities and cost saving initiatives; impact of competitive products and pricing; market acceptance and cost of commodity materials and specialized product components; actions by competitors; unexpected advances in competing technologies; our development and introduction of products based on new technologies and expansion into new data storage markets; risks associated with acquisitions, divestitures, mergers and joint ventures; difficulties or delays in manufacturing; 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-Q filed with the SEC on May 8, 2020, 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 these forward-looking statements to reflect new information or events.

Fourth Quarter Fiscal 2020 Press Release with Financial Tables and Guidance Summary

Fourth Quarter Fiscal 2020 Earnings Presentation

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Western Digital, the Western Digital logo, G-Technology, SanDisk and WD are registered trademarks or trademarks of Western Digital Corporation or its affiliates in the US and/or other countries.

Press Contacts


Media Relations

Lisa Neitzel
+1-408-717-7607
lisa.neitzel@wdc.com

Analyst Relations

Erin Hartin
+1-303-834-3211
erin.hartin@wdc.com

Asia Pacific

Jolin Tan
+65-6840-9326
jolin.tan@wdc.com

China

Cathy Ding
+86-213-2063-843
cathy.ding@wdc.com

EMEA

Jon White
+44 (0)7826 292026
Jonathan.White@wdc.com

 

India - Corporate

Jayanthi Sethuraman
+91-984-5325-527
Jayanthi.sethuraman@wdc.com

 

India - Products

Bhawna Ningthoujam
Bhawna.Ningthoujam@wdc.com

 

Japan - Corporate

Emi Hatano
+81-343-347-115
emi.hatano@wdc.com

Japan - Products

Kenji Suzuki
+81-3-3642-265
kenji.suzuki@wdc.com