Western Digital Reports Fiscal First Quarter 2021 Financial Results

News Summary

  • First quarter revenue was $3.9 billion, down 3% year-over-year (YoY). Client Devices increased 20%, Data Center Devices and Solutions revenue declined 26%, and Client Solutions declined 5% YoY.

  • First quarter GAAP earnings per share (EPS) was ($0.20) and non-GAAP EPS was $0.65. Both GAAP and non-GAAP EPS include $28 million in costs related to COVID-19 in the first quarter.

  • Generated operating cash flow of $363 million and free cash flow of $196 million in the first quarter.

  • Expecting fiscal second quarter 2021 revenue to be in the range of $3.75 billion to $3.95 billion with non-GAAP EPS in the range of $0.40 to $0.60. Non-GAAP EPS outlook includes costs related to COVID-19.

SAN JOSE, Calif. - Oct 28, 2020

Western Digital Corp. (Nasdaq: WDC) today reported fiscal first quarter 2021 financial results.

"I am pleased with our results, as we continued to focus our execution on the massive market opportunity for data storage technology that stems from the ongoing expansion of cloud infrastructure connected to intelligent endpoints and powered by high performance networks," said David Goeckeler, Western Digital CEO. "While we are still managing through macro uncertainty, during the quarter we benefitted from strength particularly in the retail sector, driven by favorable macro and market dynamics, as well as the brand recognition of our products. Our diversified storage portfolio strategy implemented through our recently announced organizational structure will enable us to accelerate growth, improve our focus, and drive sustainable, long-term shareholder value."

Q3 2021 Financial Highlights

 

GAAP

Non-GAAP

 

Q1 2021

Q1 2020

vs. Q1 2020

Q1 2021

Q1 2020

vs. Q1 2020

Revenue ($M)

$3,992

$4,040

down 3%

$3,922

$4,040

down 3%

Gross Margin

23.0%

18.8%

up 4.2 ppt

26.3%

24.8%

up 1.5 ppt

Operating Expenses ($M)

$834

$887

down 6%

$708

$767

down 8%

Operating Income (Loss) ($M)

$70

($129)

*

$323

$235

up 37%

Net Income (Loss)

($60)

($276)

*

$196

$101

up 94%

Earnings Per Share

($0.20)

($0.93)

*

$0.65

$0.34

up 91%

*not a meaningful figure

Note: The company's fiscal first quarter of 2021 was a 13-week fiscal quarter, compared to a 14-week fiscal quarter a year ago.

Key End Market Summary


Revenue ($M)

Q1 2021

Q1 2020

vs. Q1 2020

Client Devices

$1,946

$1,616

up 20%

Data Center Devices & Solutions

$1,129

$1,532

down 26%

Client Solutions

$847

$892

down 5%

Total Revenue

$3,922

$4,040

down 3%

Note: The company's fiscal first quarter of 2021 was a 13-week fiscal quarter, compared to a 14-week fiscal quarter a year ago.

In the fiscal first quarter of 2021, Western Digital's revenue decreased 3% year-over-year to $3.9 billion. The decrease is largely attributable to the uncertainty associated with the global economic contraction and geopolitical headwinds, which resulted in shifts in customer buying patterns impacting Data Center Devices & Solutions and Client Solutions.

In Client Devices, Western Digital's industry leading client SSD solutions for notebook and desktops benefitted from the acceleration of work from home and remote learning trends. Gaming experienced significant growth as upcoming game consoles transition from hard drive-based storage solutions to flash, powering a more real-time, immersive gaming experience. In addition, mobile revenue more than doubled, driven by recent 5G phone launches and a broadening of end customers within China.

In Data Center Devices & Solutions, both Capacity Enterprise hard drive and Enterprise SSD (eSSD) demand were negatively impacted by shifts in customer ordering patterns. Important product transitions in hard drive and flash-based storage solutions also impacted demand trends as customers are still ramping up on these newer products.

In Client Solutions, Western Digital continued to recover as many brick and mortar customers reopened from COVID-19-related lock downs during the period. In addition, demand related to work from home and distance learning benefitted both hard drive and flash-based solutions.

Business Outlook for Fiscal Second Quarter of 2021

Three Months Ending
January 1, 2021

 

GAAP(1)

Non-GAAP(1)

Revenue ($B)

$3.75 - $3.95

$3.75 - $3.95

Gross margin

21% - 23%

24% - 26%

Operating expenses ($M)

$790 - $810

$680 - $700

Interest and other expense, net ($M)

$80 - $85

$70 - $75

Tax rate

N/A

21% - 25% (2)

Diluted earnings per share

N/A

$0.40 - $0.60

Diluted shares outstanding (in millions)

~ 306

~ 306

(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense, totaling approximately $110 million to $130 million. The company's non-GAAP operating expenses guidance excludes amortization of acquired intangible assets; stock-based compensation expense; and employee termination, asset impairment and other charges, 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 $220 million to $260 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 fiscal second quarter of 2021 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, analyze, 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 first quarter ended October 2, 2020; the company's business outlook for the fiscal second quarter of 2021; expectations regarding the impact of COVID-19; demand trends and market conditions; expansion of the cloud infrastructure; benefits of the company's organizational structure; the company's brand recognition and product portfolio; 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 first quarter ended October 2, 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-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 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; impact of business and market conditions; 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 high level of debt and other financial obligations; changes to our relationships with key customers; disruptions in operations from cyberattacks or other 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 28, 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.

First Quarter Fiscal 2021 Press Release with Financial Tables and Guidance Summary

First Quarter Fiscal 2021 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


Corporate Communications

Mark Karayan
Mark.karayan@wdc.com

Analyst Relations

Erin Hartin
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erin.hartin@wdc.com

Product & Technology
Media Inquiries

Lisa Neitzel
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Asia Pacific

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jolin.tan@wdc.com

China

Cathy Ding
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EMEA

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

 

India

Bhawna Ningthoujam
Bhawna.Ningthoujam@wdc.com

 

Japan - Corporate

Jun.Takahashi
+81-3-4334-7144
Jun.takahashi@wdc.com

Japan - Products

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