Western Digital Corp. (Nasdaq: WDC) today reported fiscal third quarter 2023 financial results.
"Over the last several years, our team has focused on enhancing business agility and delivering a range of innovative, industry-leading products that address the increasing data storage demands of our customers,” said David Goeckeler, Western Digital CEO. “The groundwork we laid, combined with the actions we have taken since the beginning of this fiscal year to right-size and refocus our businesses, have enabled us to navigate a dynamic environment. I am pleased that we delivered non-GAAP gross margin at the higher end of our guidance range due to strong execution across both our HDD and Flash businesses."
Q3 2023 Financial Highlights
|
GAAP
|
Non-GAAP
|
|
Q3 2023
|
Q2 2023
|
Q/Q
|
Q3 2023
|
Q2 2023
|
Q/Q
|
Revenue ($M)
|
$2,803
|
$3,107
|
down 10%
|
$2,803
|
$3,107
|
down 10%
|
Gross Margin
|
10.2%
|
17.0%
|
down 6.8 ppt
|
10.6%
|
17.4%
|
down 6.8 ppt
|
Operating Expenses ($M)
|
$758
|
$849
|
down 11%
|
$602
|
$659
|
down 9%
|
Operating Loss ($M)
|
$(472)
|
$(321)
|
up 47%
|
$(304)
|
$(119)
|
*
|
Net Loss ($M)
|
$(572)
|
$(446)
|
up 28%
|
$(427)
|
$(135)
|
*
|
Earnings Per Share
|
$(1.82)
|
$(1.40)
|
up 30%
|
$(1.37)
|
$(0.42)
|
*
|
|
GAAP
|
Non-GAAP
|
|
Q3 2023
|
Q3 2022
|
Y/Y
|
Q3 2023
|
Q3 2022
|
Y/Y
|
Revenue ($M)
|
$2,803
|
$4,381
|
down 36%
|
$2,803
|
$4,381
|
down 36%
|
Gross Margin
|
10.2%
|
27.0%
|
down 16.8 ppt
|
10.6%
|
31.7%
|
down 21.1 ppt
|
Operating Expenses ($M)
|
$758
|
$857
|
down 12%
|
$602
|
$740
|
down 19%
|
Operating Income (Loss) ($M)
|
$(472)
|
$324
|
*
|
$(304)
|
$650
|
*
|
Net Income (Loss) ($M)
|
$(572)
|
$25
|
*
|
$(427)
|
$521
|
*
|
Earnings Per Share
|
$(1.82)
|
$0.08
|
*
|
$(1.37)
|
$1.65
|
*
|
* not a meaningful figure
The company had an operating cash outflow of $381 million and ended the quarter with $2.22 billion of total cash and cash equivalents.
Additional details can be found within the company's earnings presentation, which is accessible online at investor.wdc.com.
End Market Summary
Revenue ($M) |
Q3 2023
|
Q2 2023
|
Q/Q
|
Q3 2022
|
Y/Y
|
Cloud
|
$1,205
|
$1,224
|
down 2%
|
$1,774
|
down 32%
|
Client
|
975
|
1,089
|
down 10%
|
1,732
|
down 44%
|
Consumer
|
623
|
794
|
down 22%
|
875
|
down 29%
|
Total Revenue
|
$2,803
|
$3,107
|
down 10%
|
$4,381
|
down 36%
|
In the fiscal second quarter:
Cloud represented 43% of total revenue. Sequentially, an increase in capacity enterprise drive shipments was offset by a decrease in flash shipments. The year-over-year decline was primarily due to a decline in shipments of both hard drive and flash products, as well as price decreases in Flash.
Client represented 35% of total revenue. On both a sequential and year-over-year basis, the decrease was driven by price declines across our flash products and a lower client SSD and hard drive shipments for PC applications.
Consumer represented 22% of total revenue. Sequentially, the decrease was due to a seasonal decline in shipments of both retail hard drive and flash products, as well as price declines in retail Flash. The year-over-year decrease was driven by lower retail hard drive shipments and price declines in Flash.
Business Outlook for Fiscal Fourth Quarter of 2023
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Three Months Ending
June 30, 2023
|
|
GAAP(1)
|
Non-GAAP(1)
|
Revenue ($B)
|
$2.40 - $2.60
|
$2.40 - $2.60
|
Gross margin
|
2.4% - 4.4%
|
3.0% - 5.0%
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Operating expenses ($M)
|
$730 - $750
|
$580 - $600
|
Interest and other expense, net ($M)
|
~$90
|
~$90
|
Tax benefit ($M)(2)
|
N/A
|
$60 - $70
|
Diluted earnings per share
|
N/A
|
$(2.20) - $(1.90)
|
Diluted shares outstanding (in millions)
|
~ 321
|
~ 321
|
(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, stock-based compensation expense, employee termination, asset impairment and other charges, and expenses related to strategic review, totaling approximately $140 million to $160 million. In the aggregate, Non-GAAP diluted earnings per share guidance excludes these items totaling $150 million to $175 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 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. 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 (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; (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 fourth 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 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 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 fourth quarter of 2023; the company's market position; overall market conditions; demand trends; product innovations 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 third quarter ended March 31, 2023 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; compromise, damage or interruption from cybersecurity incidents or other data 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.
Third Quarter Fiscal 2023 Press Release with Financial Tables and Guidance Summary
Third 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.
