Western Digital Corp. (Nasdaq: WDC) today reported fiscal second quarter 2021 financial results.
“The team delivered solid results this quarter, especially as we continue adapting our business and technology portfolio to take advantage of the immense opportunities in the storage industry,” said, David Goeckeler, Western Digital CEO. “During the quarter, we captured strength in the retail business and also delivered on our target outcome to complete qualification of our energy-assisted hard drives and second-generation enterprise SSD products with some of the world’s largest data center operators. While there is still more work to be done, we remain extremely focused on meeting the needs of our customers and ramping our next-generation products throughout calendar 2021.”
Q2 2021 Financial Highlights
|
GAAP
|
Non-GAAP
|
|
Q2 2021
|
Q2 2020
|
vs. Q2 2020
|
Q2 2021
|
Q2 2020
|
vs. Q2 2020
|
Revenue ($M)
|
$3,943
|
$4,234
|
down 7%
|
$3,943
|
$4,234
|
down 7%
|
Gross Margin
|
24.3%
|
22.1%
|
up 2.2 ppt
|
26.4%
|
25.9%
|
up 0.5 ppt
|
Operating Expenses ($M)
|
$802
|
$885
|
down 9%
|
$696
|
$765
|
down 9%
|
Operating Income ($M)
|
$158
|
$50
|
up 216%
|
$343
|
$333
|
up 3%
|
Net Income (Loss) ($M)
|
$62
|
($139)
|
*
|
$212
|
$187
|
up 13%
|
Earnings Per Share
|
$0.20
|
($0.47)
|
*
|
$0.69
|
$0.62
|
up 11%
|
*not a meaningful figure
Key End Market Summary
Revenue ($M) |
Q2 2021
|
Q2 2020
|
vs. Q2 2020
|
Client Devices
|
$2,131
|
$1,797
|
up 19%
|
Data Center Devices & Solutions
|
$807
|
$1,489
|
down 46%
|
Client Solutions
|
$1,005
|
$948
|
up 6%
|
Total Revenue
|
$3,943
|
$4,234
|
down 7%
|
In the fiscal second quarter of 2021, Western Digital's revenue decreased 7% year-over-year to $3.9 billion. The decrease is largely attributable to a decline in our Data Center Devices & Solutions end market, more than offsetting growth in Client Devices and Client Solutions.
In Client Devices, Western Digital's industry leading NVMe-based client SSDs and strong relationships with major PC OEMs drove a record level of exabyte shipments. The pandemic has not only accelerated the digital transformation, but it has also spurred technological innovation, driving the ability to access the cloud using very powerful and advanced end-devices. The ability to access, store, and share data from anywhere, on any device, has resulted in robust storage demand for notebook, tablet, and Chromebook devices.
In Data Center Devices & Solutions, qualifications of the second-generation eSSD products have progressed well, with nearly 150 qualifications completed, including at one cloud titan. There has been solid progress made completing the qualifications of our energy-assisted hard drives, including at three of the four US cloud titans. While one now-completed cloud titan qualification slipped beyond our anticipated timeline in the fiscal second quarter, another cloud titan qualification was completed, ahead of schedule. With cloud digestion abating and the stabilization of OEM demand, we believe the demand in capacity enterprise bottomed in the fiscal second quarter and are anticipating a rebound in the fiscal third quarter.
In Client Solutions, revenue increased during the seasonally strong quarter, to a two-year high. This solid performance was driven by continued growth in retail, supported by the strength of our brand and the breadth of our portfolio.
Business Outlook for Fiscal Third Quarter of 2021
|
Three Months Ending
April 2, 2021
|
|
GAAP(1)
|
Non-GAAP(1)
|
Revenue ($B)
|
$3.85 - $4.05
|
$3.85 - $4.05
|
Gross margin
|
24.5% - 26.5%
|
25.5% - 27.5%
|
Operating expenses ($M)
|
$770 - $790
|
$705 - $725
|
Interest and other expense, net ($M)
|
~ $80
|
~ $70
|
Tax rate
|
N/A
|
~ 23% (2)
|
Diluted earnings per share
|
N/A
|
$0.55 - $0.75
|
Diluted shares outstanding (in millions)
|
~ 310
|
~ 310
|
(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense, totaling approximately $40 million to $60 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 $50 million to $70 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 $100 million to $140 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 rate provided is 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 third 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 second quarter ended January 1, 2021; the company's business outlook for the fiscal third quarter of 2021; demand trends and market conditions; expectations regarding our next-generation products and product qualifications; expectations regarding technological innovation and product and end market growth; 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 second quarter ended January 1, 2021 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.
Second Quarter Fiscal 2021 Press Release with Financial Tables and Guidance Summary
Second 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.
