Western Digital Corp. (Nasdaq: WDC) today reported fiscal first quarter 2022 financial results.
"Strong demand across diverse end markets, particularly for our cloud products, combined with Western Digital's strong innovation engine, broad routes to market and sharpened execution, enabled us to deliver solid results within our guidance range, even in the face of significant COVID impacts and supply chain disruptions," said David Goeckeler, Western Digital CEO. "While these disruptions are transitory, the long-term opportunities for Western Digital remain unchanged as the world's digital transformation continues to accelerate. We believe that the migration to the cloud and demand for storage solutions throughout the client and consumer markets will continue to drive a huge opportunity for Western Digital and our customers."
Q1 2022 Financial Highlights
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GAAP
|
Non-GAAP
|
|
Q1 2022
|
Q4 2021
|
Q/Q
|
Q1 2022
|
Q4 2021
|
Q/Q
|
Revenue ($M)
|
$5,051
|
$4,920
|
up 3%
|
$5,051
|
$4,920
|
up 3%
|
Gross Margin
|
33.0%
|
31.8%
|
up 1.2 ppt
|
33.9%
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32.9%
|
up 1.0 ppt
|
Operating Expenses ($M)
|
$887
|
$891
|
-
|
$761
|
$790
|
down 4%
|
Operating Income ($M)
|
$778
|
$675
|
up 15%
|
$952
|
$828
|
up 15%
|
Net Income ($M)
|
$610
|
$622
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down 2%
|
$787
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$680
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up 16%
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Earnings Per Share
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$1.93
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$1.97
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down 2%
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$2.49
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$2.16
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up 15%
|
|
GAAP
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Non-GAAP
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|
Q1 2022
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Q1 2021
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Y/Y
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Q1 2022
|
Q1 2021
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Y/Y
|
Revenue ($M)
|
$5,051
|
$3,922
|
up 29%
|
$5,051
|
$3,922
|
up 29%
|
Gross Margin
|
33.0%
|
23.0%
|
up 10.0 ppt
|
33.9%
|
26.3%
|
up 7.6 ppt
|
Operating Expenses ($M)
|
$887
|
$834
|
up 6%
|
$761
|
$708
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up 7%
|
Operating Income ($M)
|
$778
|
$70
|
up 1,011%
|
$952
|
$323
|
up 195%
|
Net Income ($M)
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$610
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($60)
|
*
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$787
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$196
|
up 302%
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Earnings Per Share
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$1.93
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($0.20)
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*
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$2.49
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$0.65
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up 283%
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* not a meaningful figure
The company generated $521 million in cash flow from operations, made a total debt repayment of $213 million, and ended the quarter with $3.3 billion of total cash and cash equivalents. Average shares outstanding were 316 million for the quarter. In addition, as a result of strong financial results and free cash flow generation, on October 22, 2021, the company fully repaid the remaining balance of Term Loan B in an amount of $943 million, bringing total gross debt outstanding to $7.7 billion.
Additional details can be found within the company's earnings presentation, which is accessible online at investor.wdc.com.
New End Market Summary
Revenue ($M) |
Q1 2022
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Q4 2021
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Q/Q
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Q1 2021
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Y/Y
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Cloud
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$2,225
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$1,995
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up 12%
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$1,291
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up 72%
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Client
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$1,853
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$1,895
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down 2%
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$1,750
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up 6%
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Consumer
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$973
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$1,030
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down 6%
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$881
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up 10%
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Total Revenue
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$5,051
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$4,920
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up 3%
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$3,922
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up 29%
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In the fiscal first quarter of 2022, Western Digital refined the end-markets we report to be Cloud (primarily products for public or private cloud environments), Client (primarily products sold directly to OEMs or via distribution), and Consumer (primarily retail and other end-user products).
Cloud represented a record 44% of total revenue, led by record capacity enterprise hard drive revenue and nearly 30% sequential growth in enterprise SSD revenue. During the quarter, Western Digital announced OptiNAND, a revolutionary technology that utilizes flash in the HDD control plane to further increase areal density with industry proven PMR technology. Next month, the company will begin volume shipments of its 20 terabyte CMR hard drives utilizing OptiNAND technology. Within enterprise SSDs, the company experienced continued success in the cloud with another successful quarter of qualifications.
In Client, the flash business unit experienced growth– specifically in mobile, gaming, automotive, IOT and industrial applications. Western Digital's strength in this end market was more than offset by pressure in desktop and notebook hard drives due to supply disruptions at our customers and within the company's own operations.
In Consumer, revenue from both the flash and hard drive business units declined on a sequential basis due to supply disruptions, in addition to uneven geographic demand due to COVID lockdowns.
Business Outlook for Fiscal Second Quarter of 2022
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Three Months Ending
December 31, 2021
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GAAP(1)
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Non-GAAP(1)
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Revenue ($B)
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$4.70 - $4.90
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$4.70 - $4.90
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Gross margin
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31.0% - 33.0%
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32.0% - 34.0%
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Operating expenses ($M)
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$870 - $890
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$760 - $780
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Interest and other expense, net ($M)
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~ $80
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~ $70
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Tax rate
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N/A
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~ 11% (2)
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Diluted earnings per share
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N/A
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$1.95 - $2.25
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Diluted shares outstanding (in millions)
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~ 316
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~ 316
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(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense, totaling approximately $30 million to $50 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 $140 million to $180 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. Due to differences in the tax treatment of items excluded from our non-GAAP net income and because our tax rate is based on an estimated forecasted annual GAAP tax rate, our estimated non-GAAP tax rate may differ from our GAAP tax rate and from our actual tax rates.
Investor Communications
The investment community conference call to discuss these results and the company's business outlook for the fiscal second quarter of 2022 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 business outlook for the fiscal second quarter of 2022; our market position and portfolio synergies; consumer trends and market conditions; and expectations regarding product availability and momentum, market opportunities and demand trends. 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 first quarter ended October 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 substantial 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 27, 2021, 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 2022 Press Release with Financial Tables and Guidance Summary
First Quarter Fiscal 2022 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.
