Western Digital Corp. (Nasdaq: WDC) today reported fiscal second quarter 2023 financial results.
"The Western Digital team delivered revenue at the high end of our guidance range, despite a challenging flash price environment and continued cloud inventory digestion," said David Goeckeler, Western Digital CEO. "We continue to take action to reset the business in response to the post-pandemic environment by optimizing our cost structure and strengthening our liquidity. These actions, including strategically reducing our capital expenditures across both flash and HDD and our operating expenses, as well as amending our financial covenants and securing recent financings, will give us the financial flexibility and optionality to weather this cycle, while also positioning us to continue executing our product roadmap and furthering our technical leadership over the long term."
Q2 2023 Financial Highlights
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GAAP
|
Non-GAAP
|
|
Q2 2023
|
Q1 2023
|
Q/Q
|
Q2 2023
|
Q1 2023
|
Q/Q
|
Revenue ($M)
|
$3,107
|
$3,736
|
down 17%
|
$3,107
|
$3,736
|
down 17%
|
Gross Margin
|
17.0%
|
26.3%
|
down 9.3 ppt
|
17.4%
|
26.7%
|
down 9.3 ppt
|
Operating Expenses ($M)
|
$849
|
$823
|
up 3%
|
$659
|
$689
|
down 4%
|
Operating Income (Loss) ($M)
|
$(321)
|
$158
|
*
|
$(119)
|
$307
|
*
|
Net Income (Loss) ($M)
|
$(446)
|
$27
|
*
|
$(135)
|
$64
|
*
|
Earnings Per Share
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$(1.40)
|
$0.08
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*
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$(0.42)
|
$0.20
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*
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* not a meaningful figure
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GAAP
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Non-GAAP
|
|
Q2 2023
|
Q2 2022
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Y/Y
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Q2 2023
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Q2 2022
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Y/Y
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Revenue ($M)
|
$3,107
|
$4,833
|
down 36%
|
$3,107
|
$4,833
|
down 36%
|
Gross Margin
|
17.0%
|
32.8%
|
down 15.8 ppt
|
17.4%
|
33.6%
|
down 16.2 ppt
|
Operating Expenses ($M)
|
$849
|
$856
|
down 1%
|
$659
|
$741
|
down 11%
|
Operating Income (Loss) ($M)
|
$(321)
|
$727
|
*
|
$(119)
|
$882
|
*
|
Net Income (Loss) ($M)
|
$(446)
|
$564
|
*
|
$(135)
|
$724
|
*
|
Earnings Per Share
|
$(1.40)
|
$1.79
|
*
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$(0.42)
|
$2.30
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*
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* not a meaningful figure
The company generated $35 million in cash flow from operations and ended the quarter with $1.87 billion of total cash and cash equivalents.
Additional details can be found within the company's earnings presentation, which is accessible online at investor.wdc.com.
End Market Summary
Revenue ($M) |
Q2 2023
|
Q1 2023
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Q/Q
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Q2 2022
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Y/Y
|
Cloud
|
$1,224
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$1,829
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down 33%
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$1,920
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down 36%
|
Client
|
1,089
|
1,229
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down 11%
|
1,854
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down 41%
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Consumer
|
794
|
678
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up 17%
|
1,059
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down 25%
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Total Revenue
|
$3,107
|
$3,736
|
down 17%
|
$4,833
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down 36%
|
In the fiscal second quarter:
Cloud represented 39% of total revenue. Sequentially, declines in both capacity enterprise drives sold to Cloud customers and smart video customers were partly offset by an increase in flash shipments. The year-over-year decline was primarily due to inventory digestion in hard drives.
Client represented 35% of total revenue. Sequentially, the decline was driven by pricing pressure across our flash products, which was partly offset by an increase in hard drive shipments. The year-over-year decline was also due to pricing pressure in flash as well as lower client SSD shipments for PC applications.
Consumer represented 26% of revenue. Sequentially, the increase was driven by a seasonal uptick in both retail hard drives and flash. The year-over-year decline was driven by lower retail hard drive shipments and pricing pressure in flash.
Business Outlook for Fiscal Third Quarter of 2023
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Three Months Ending
March 31, 2023
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|
GAAP(1)
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Non-GAAP(1)
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Revenue ($B)
|
$2.60 - $2.80
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$2.60 - $2.80
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Gross margin
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8.4% - 10.5%
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9.0% - 11.0%
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Operating expenses ($M)
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$710 - $730
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$600 - $620
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Interest and other expense, net ($M)
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~$90
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~$90
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Tax benefit ($M)(2)
|
N/A
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$60 - $70
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Diluted earnings per share
|
N/A
|
$(1.70) - $(1.40)
|
Diluted shares outstanding (in millions)
|
~ 319
|
~ 319
|
(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 amortization of acquired intangible assets and stock-based compensation expense, totaling approximately $100 million to $120 million. In the aggregate, Non-GAAP diluted earnings per share guidance excludes these items totaling $110 million to $135 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 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 tax expense and Non-GAAP diluted earnings per share to the most directly comparable GAAP financial measures (income tax expense and diluted earnings per share, respectively) are not available without unreasonable effort.
(2) Due to differences in the tax treatment of items excluded from our Non-GAAP net income and because our GAAP taxes recorded in any interim period are dependent on the timing and determination of certain GAAP operating expenses, our estimated Non-GAAP tax dollars may differ from our GAAP tax dollars.
Investor Communications
The investment community conference call to discuss these results and the company's business outlook for the fiscal third quarter of 2023 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 memory 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 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 both fiscal third quarter of 2023 and longer term; demand trends; market conditions; product innovations; market access; and cost reductions. 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 December 30, 2022 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: 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; disruptions in operations from cybersecurity incidents 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 25, 2022, 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.
Second Quarter Fiscal 2023 Press Release with Financial Tables and Guidance Summary
Second Quarter Fiscal 2023 Earnings Presentation
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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.
