Western Digital Reports Fiscal First Quarter 2023 Financial Results

News Summary

• First quarter revenue was $3.74 billion, above the midpoint of guidance.

• First quarter GAAP earnings per share (EPS) was $0.08 and Non-GAAP EPS was $0.20, non-GAAP EPS was impacted by higher tax rate.

• First quarter GAAP operating income was $158 million and Non-GAAP operating income was $307 million.

• Expect fiscal second quarter 2023 revenue to be in the range of $2.90 billion to $3.10 billion with Non-GAAP EPS in the range of $(0.25) to $0.05.

Western Digital Corp. (Nasdaq: WDC) today reported fiscal first quarter 2023 financial results.

"I am pleased to see the Western Digital team work together to deliver revenue at the upper half of the guidance range and operating income at the upper half as implied by the midpoints of our guidance, in the midst of an incredibly dynamic and challenging macroeconomic environment," said David Goeckeler, Western Digital CEO. "Overall, the organizational and portfolio improvements we have made over the past few years have equipped us to effectively manage through this consumer-led downturn, which is showing signs of stabilization. As we remain focused on innovation and execution, I am optimistic that Western Digital will emerge stronger as we continue to ramp multiple new products into data centers worldwide and market conditions improve."

Q1 2023 Financial Highlights

* not a meaningful figure

The company generated $6 million in cash flow from operations and ended the quarter with $2.05 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

In the fiscal first quarter:

• Cloud represented 49% of total revenue. Sequentially, continued momentum in capacity enterprise drives sold to U.S. cloud customers and an increase in smart video hard drives demand partly offset the decline in all other hard drive product channels and flash. The year-over-year decrease was due to broad-based decline across both hard drive and flash products.

• Client represented 33% of total revenue. Sequentially, the decline was attributed to flash, driven by inventory reduction at PC OEMs and lower pricing. The year-over-year decrease resulted primarily from reduced flash pricing.

• Consumer represented 18% of revenue. On both a sequential and year-over-year basis, the revenue decline was due to flash pricing and lower retail HDD shipments.

(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 benefit 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 benefit and Non-GAAP diluted earnings per share to the most directly comparable GAAP financial measures (income tax benefit and diluted earnings per share, respectively) are not available without unreasonable effort.

(2) The Non-GAAP tax benefit in dollars is determined based on a percentage of Non-GAAP pre-tax income or loss. Due to differences in the tax treatment of items excluded from our Non-GAAP net income; the fact that our GAAP tax expense or benefit in dollars recorded in any interim period is based on an estimated forecasted GAAP tax rate for the full year, excluding loss jurisdictions; 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 second quarter of 2023 will be broadcast live online today at 5:30 a.m. Pacific/8:30 a.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 the fiscal second quarter of 2023; demand trends; market conditions; product ramps; and the impact of organizational and portfolio improvements. 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 first quarter ended September 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..

First Quarter Fiscal 2023 Press Release with Financial Tables and Guidance Summary

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