Western Digital Reports Fiscal Third Quarter 2021 Financial Results

News Summary

• Third quarter revenue was $4.1 billion, down 1% year-over-year (YoY). Client Devices revenue increased 10%, Data Center Devices and Solutions revenue declined 19%, and Client Solutions revenue increased 8% YoY.

• Third quarter GAAP earnings per share (EPS) was $0.63 and non-GAAP EPS was $1.02.

• Generated operating cash flow of $116 million and free cash flow was negative $11 million in the third quarter.

• Expecting fiscal fourth quarter 2021 revenue to be in the range of $4.40 billion to $4.60 billion with non-GAAP EPS in the range of $1.30 to $1.60.

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

"We reported solid results above the guidance range, driven by increasing momentum of our energy-assisted drives and our second-generation NVMe enterprise SSDs, improving NAND flash pricing trends, along with the continued accelerated digital transformation across end markets," said David Goeckeler, Western Digital CEO. "Western Digital's strengths in technology and cost leadership, expansive product portfolio and broad routes to market are providing a foundation upon which we are solidifying our position as an essential building block of the digital economy. These strengths, combined with our increased operational and strategic focus enabled by our new business unit structure, are driving results. As we continue to face a dynamic environment, we are seeing the benefits of the synergistic value in the breadth of Western Digital's portfolio, and our unique ability to deliver both hard drive and flash solutions to our diverse end-markets and customer base."

Q3 2021 Financial Highlights

The company generated $116 million in cash flow from operations, made a total debt repayment of $212 million, and ended the quarter with $2.7 billion of total cash and cash equivalents. There were 313 million ordinary shares outstanding at the end of the quarter.

Additional details can be found within the company's earnings presentation, which is accessible online at investor.wdc.com.

Key End Market Summary

In the fiscal third quarter of 2021, Western Digital's revenue decreased 1% year-over-year to $4.1 billion, driven by a decline in Data Center Devices & Solutions offset by strong performance in gaming and consumer markets.

In Client Devices, continued strength in notebook and desktop PC demand, along with new game console ramps, drove solid revenue growth.

In Data Center Devices and Solutions, while revenue was down 19% from the prior year, Western Digital experienced significant sequential growth with its second generation, NVMe enterprise SSD at a cloud titan. In addition, many cloud customers also utilize NAND flash for their consumer product lines, creating additional end market opportunities for Western Digital as the company continues to diversify and balance the end markets served. Qualifications of Western Digital's energy-assisted hard drives have also been completed with nearly all cloud and enterprise customers, including all cloud titans.

In Client Solutions, revenue increased due to strength in retail, which remains a high performing end market, as Western Digital's brand recognition, broad product portfolio, and extensive distribution channels continue to distinguish Western Digital from its competitors.

(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 $90 million to $110 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 fourth 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 third quarter ended April 2, 2021; the company's business outlook for the fiscal fourth quarter of 2021; our market position and portfolio synergies; consumer trends and market conditions; and expectations regarding pricing trends, product momentum, diversification strategies and market opportunities. 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 April 2, 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.

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

Third Quarter Fiscal 2021 Earnings Presentation

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