Western Digital Reports Fiscal Third Quarter 2024 Financial Results
Western Digital Corp. (Nasdaq: WDC) today reported fiscal third quarter 2024 financial results. “As evidenced by our excellent third quarter results, Western Digital continues improving through-cycl...
News Summary
- Third quarter revenue was $3.46 billion, up 14% sequentially (QoQ). Cloud revenue increased 45% (QoQ), Client revenue increased 5% (QoQ) and Consumer revenue decreased (13)% (QoQ).
- Third quarter GAAP earnings per share (EPS) was $0.34 and Non-GAAP EPS was $0.63, which includes underutilization-related charges in HDD.
- Expect fiscal fourth quarter 2024 revenue to be in the range of $3.60 billion to $3.80 billion.
- Expect Non-GAAP EPS in the range of $0.90 to $1.20.
SAN JOSE, Calif.: Western Digital Corp. (Nasdaq: WDC) today reported fiscal third quarter 2024 financial results.
“As evidenced by our excellent third quarter results, Western Digital continues improving through-cycle profitability and dampening business cycles by leveraging our strategy of developing a diversified portfolio of industry-leading products across a broad range of end markets,” said David Goeckeler, Western Digital CEO. “We are in the early innings of unlocking the full potential of this company, and as industry supply and demand dynamics continue to improve, we will remain disciplined around our capital spending and focused on driving innovation and efficiency across our businesses. We are confident in our strategy and the actions we have taken to-date, which successfully position us to capitalize on the promising growth prospects that lie ahead.”
Q3 2024 Financial Highlights
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| Non-GAAP | ||||
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| Q3 2024 | Q2 2024 | Q/Q |
| Q3 2024 | Q2 2024 | Q/Q |
Revenue ($M) |
| $3,457 | $3,032 | up 14% |
| $3,457 | $3,032 | up 14% |
Gross Margin |
| 29.0% | 16.2% | up 12.8 ppt |
| 29.3% | 15.5% | up 13.8 ppt |
Operating Expenses ($M) |
| $728 | $702 | up 4% |
| $632 | $561 | up 13% |
Operating Income (Loss) ($M) |
| $273 | $(210) | * |
| $380 | $(91) | * |
Diluted Net Income (Loss) Attributable to Common Shareholders ($M) |
| $113 | $(301) | * |
| $210 | $(243) | * |
Net Income (Loss) Per Share |
| $0.34 | $(0.93) | * |
| $0.63 | $(0.75) | * |
* not a meaningful figure |
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| Non-GAAP | ||||
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| Q3 2024 | Q3 2023 | Y/Y |
| Q3 2024 | Q3 2023 | Y/Y |
Revenue ($M) |
| $3,457 | $2,803 | up 23% |
| $3,457 | $2,803 | up 23% |
Gross Margin |
| 29.0% | 10.2% | up 18.8 ppt |
| 29.3% | 10.6% | up 18.7 ppt |
Operating Expenses ($M) |
| $728 | $758 | down 4% |
| $632 | $602 | up 5% |
Operating Income (Loss) ($M) |
| $273 | $(472) | * |
| $380 | $(304) | * |
Diluted Net Income (Loss) Attributable to Common Shareholders ($M) |
| $113 | $(580) | * |
| $210 | ($435) | * |
Net Income (Loss) Per Share |
| $0.34 | $(1.82) | * |
| $0.63 | $(1.36) | * |
* not a meaningful figure | ||||||||
The company had an operating cash inflow of $58 million and ended the quarter with $1.89 billion of total cash and cash equivalents.
Additional details can be found within the company’s earnings presentation, which is accessible online at investor.wdc.com.
End Market Summary
Revenue ($M) | Q3 2024 | Q2 2024 | Q/Q | Q3 2023 | Y/Y |
Cloud | $1,553 | $1,071 | up 45% | $1,205 | up 29% |
Client | 1,174 | 1,122 | up 5% | 975 | up 20% |
Consumer | 730 | 839 | down 13% | 623 | up 17% |
Total Revenue | $3,457 | $3,032 | up 14% | $2,803 | up 23% |
In the fiscal third quarter:
- Cloud represented 45% of total revenue. The growth was primarily attributed to higher nearline shipments and improved nearline per unit pricing with flash revenue up both sequentially and year-over-year.
- Client represented 34% of total revenue. Sequentially, the increase in flash ASP more than offset a decline in flash bit shipments while HDD revenue decreased. The year-over-year increase was driven by growth in both flash and HDD ASPs and flash bit shipments.
- Consumer represented 21% of total revenue. Sequentially, both flash and HDD were down at approximately similar rates and in line with seasonality. The year-over-year increase was driven by growth in flash bit shipments and ASP.
Business Outlook for Fiscal Fourth Quarter of 2024
| Three Months Ending | ||
| June 28, 2024 | ||
| GAAP(1) |
| Non-GAAP(1) |
Revenue ($B) | $3.60 - $3.80 |
| $3.60 - $3.80 |
Gross margin | 31.5% - 33.5% |
| 32.0% - 34.0% |
Operating expenses ($M) | $770 - $800 |
| $670 - $690 |
Interest and other expense, net ($M) | ~ $105 |
| ~ $105 |
Income tax expense ($M)(2) | N/A |
| $30 - $40 |
Diluted earnings per share | N/A |
| $0.90 - $1.20 |
Diluted shares outstanding (in millions) | ~342 |
| ~342 |
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(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense of approximately $10 million to $15 million. The company’s Non-GAAP operating expenses guidance excludes stock-based compensation expense, and expenses related to business separation costs, totaling approximately $100 million to $110 million. In the aggregate, Non-GAAP diluted earnings per share guidance excludes these items totaling approximately $110 million to $125 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. 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 (GAAP gross profit, GAAP operating expenses, income tax expense and diluted earnings per share, respectively) are not available without unreasonable effort.
(2) 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 or loss; (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.
Revisions to Prior Period Financial Results
As previously reported, in connection with the preparation of its condensed consolidated financial statements as of and for the three and six months ended December 29, 2023, the company identified certain errors related to the company’s reporting and recording of its interests in its equity method investments in Flash Ventures. These errors related to unadjusted differences between Flash Ventures’ application of Japanese generally accepted accounting principles to certain lease-related transactions compared to the applicable U.S. generally accepted accounting principles. These unadjusted differences resulted in differences in the equity in earnings from these entities recognized by the company in Other income (expense), net and the carrying value of the company’s equity method investments in Flash Ventures in the unaudited condensed consolidated financial statements. The company evaluated the errors and determined the related impacts were not material to its financial statements for the prior periods when they occurred. The company has revised previously reported financial information for such immaterial errors, and the unaudited preliminary condensed consolidated financial statements included in this press release incorporate revisions made to correct these errors for the periods presented. Please refer to the tables outlining revisions to results of operations in the company's earnings presentation, which is accessible online at investor.wdc.com, and to the company's upcoming Quarterly Report on Form 10-Q for the fiscal third quarter ending March 29, 2024, for additional information related to these revisions.
Investor Communications
The investment community conference call to discuss these results and the company’s business outlook for the fiscal fourth quarter of 2024 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 www.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 2024 and beyond; the company's ability to dampen cyclicality and improve through-cycle profitability; industry and supply conditions and dynamics; and the company's approach to capital spending and ability to capitalize on 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 March 29, 2024 included in this press release represent the most current information available to management. Actual results when disclosed in the company's 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 filing of the company's Form 10-Q. Other key 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; operational, financial and legal challenges and difficulties inherent in implementing a separation of the company's HDD and Flash businesses; the final approval of the separation by the company's board of directors; inflation; increase in interest rates and economic recession; future responses to and effects of global health crises; the impact of business and market conditions; the outcome and impact of the company's announced separation transaction, 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; the impact of competitive products and pricing; the company's 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 the company's strategic relationships; difficulties or delays in manufacturing or other supply chain disruptions; hiring and retention of key employees; the company's level of debt and other financial obligations; changes to the company's relationships with key customers; compromise, damage or interruption from cybersecurity incidents or other data system security risks; actions by competitors; the company's ability to achieve its GHG emissions reduction and other ESG goals; the impact of international conflicts; 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 Annual Report on Form 10-K filed with the SEC on August 22, 2023 and Quarterly Reports on Form 10-Q filed with the SEC on November 7, 2023 and February 12, 2024, 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.
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.
WESTERN DIGITAL CORPORATION | |||||
| March 29, |
| June 30, | ||
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ASSETS | |||||
Current assets: |
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Cash and cash equivalents | $ | 1,894 |
| $ | 2,023 |
Accounts receivable, net |
| 1,800 |
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| 1,598 |
Inventories |
| 3,215 |
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| 3,698 |
Other current assets |
| 623 |
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| 567 |
Total current assets |
| 7,532 |
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| 7,886 |
Property, plant and equipment, net |
| 3,253 |
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| 3,620 |
Notes receivable and investments in Flash Ventures |
| 1,099 |
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| 1,410 |
Goodwill |
| 10,034 |
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| 10,037 |
Other intangible assets, net |
| 78 |
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| 80 |
Other non-current assets |
| 1,805 |
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| 1,513 |
Total assets | $ | 23,801 |
| $ | 24,546 |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY | |||||
Current liabilities: |
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Accounts payable | $ | 1,400 |
| $ | 1,293 |
Accounts payable to related parties |
| 310 |
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| 292 |
Accrued expenses |
| 972 |
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| 1,288 |
Income taxes payable |
| 476 |
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| 999 |
Accrued compensation |
| 445 |
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| 349 |
Current portion of long-term debt |
| 450 |
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| 1,213 |
Total current liabilities |
| 4,053 |
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| 5,434 |
Long-term debt |
| 7,318 |
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| 5,857 |
Other liabilities |
| 1,433 |
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| 1,415 |
Total liabilities |
| 12,804 |
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| 12,706 |
Convertible preferred stock, aggregate liquidation preference of $968 and $924, respectively |
| 876 |
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| 876 |
Total shareholders’ equity |
| 10,121 |
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| 10,964 |
Total liabilities, convertible preferred stock and shareholders’ equity | $ | 23,801 |
| $ | 24,546 |
WESTERN DIGITAL CORPORATION | |||||||||||||||
