01—Abstract
Summary
Summary of the 10-K filed August 29, 2017. Cited figures are marked; the original filing is the authoritative source.
Western Digital Corporation (WDC) reported strong revenue growth in fiscal year 2017, primarily driven by the full year impact of the SanDisk acquisition completed in May 2016.
Revenue increased by 47% to $19.09 billiona. The company's gross margin also saw significant improvement, rising to 31.8% from 26.4% in the prior year, largely due to the higher-margin nature of SanDisk's NAND-flash products and ongoing manufacturing integration efforts. Despite increased operating expenses, particularly in R&D and SG&A related to the acquisition, operating income saw a substantial jump from $466 million to $1.95 billion.
However, the significant increase in debt to finance the SanDisk acquisition led to a substantial rise in interest expense, impacting net income, which grew to $397 millionb from $242 million in fiscal year 2016. The company's strategy focuses on leveraging innovation and execution to be an industry leader in storage solutions, optimizing its core HDD business, and leading in NAND-flash memory and solutions. Key developments include advancements in 3D NAND technology with BiCS3 (64 layers) and development of BiCS4 (96 layers).
The company continues to manage its debt and expects to meet its working capital and capital expenditure needs from current cash flows and available credit facilities. Investors should note the significant debt burden and ongoing integration activities as key factors for consideration.
02—Key points
Key Highlights
- Revenue surged by 47% to $19.09 billion in fiscal year 2017, largely driven by the full-year consolidation of SanDisk's operations.
- Gross margin improved to 31.8% from 26.4% in the prior year, aided by higher-margin NAND-flash products from the SanDisk acquisition and manufacturing efficiencies.
- Operating income saw a significant increase, rising from $466 million in FY2016 to $1.95 billion in FY2017, reflecting strong revenue growth and operational improvements.
- R&D and SG&A expenses increased significantly due to the SanDisk acquisition and ongoing technology development, impacting overall profitability.
- Net income grew to $397 million ($1.34 diluted EPS) from $242 million ($1.00 diluted EPS) in the prior year, though substantially impacted by increased interest expenses from acquisition financing.
- The company's debt level increased significantly due to the SanDisk acquisition, with total debt standing at $13.36 billion as of June 30, 2017.
- Western Digital is advancing its NAND-flash technology with the introduction of 3D NAND (BiCS3) and development of the next generation (BiCS4).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Western Digital Corp kept $0.02.
- Revenue$19.09B100.0%
- Cost of revenue−$13.02B68.2%
- Gross profit$6.07B31.8%
- Operating costs−$4.12B21.6%
- Operating income$1.95B10.2%
- Interest, other & tax−$1.56B8.2%
- Net income$397.0M2.1%
Where FY2017 revenue went
$19.09B- Cost of revenue: $13.02B, 68% of revenue
- Other operating costs: $2.67B, 14% of revenue
- Net income: $397.0M, 2.1% of revenue
- SG&A: $1.45B, 7.6% of revenue
- Interest, other & tax: $1.56B, 8.2% of revenue
Kept 2.1% as net incomeNet income $397.0M · 2.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed August 29, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $19.09B$12.99B | +46.9% |
| Cost of Revenue | $13.02B$9.56B | +36.2% |
| Gross Profit | $6.07B$3.44B | +76.8% |
| SG&A Expenses | $1.45B$997.00M | +44.9% |
| Operating Expenses | $4.12B$2.97B | +38.7% |
| Operating Income | $1.95B$466.00M | +319.3% |
| Interest Expense | $847.00M$266.00M | +218.4% |
| Net Income | $397.00M$242.00M | +64.0% |
| EPS (Basic) | $1.38$1.01 | +36.6% |
| EPS (Diluted) | $1.34$1.00 | +34.0% |
| Shares Outstanding (Basic) | 288.00M239.00M | +20.5% |
| Shares Outstanding (Diluted) | 296.00M242.00M | +22.3% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in fiscal year 2017?
The primary driver of Western Digital's revenue growth in fiscal year 2017 was the full-year impact of the SanDisk acquisition, which was completed in May 2016. This acquisition significantly expanded the company's NAND-flash storage solutions portfolio and contributed substantially to the 47% year-over-year revenue increase.
How did the SanDisk acquisition impact the company's profitability and expenses?
The SanDisk acquisition positively impacted profitability through higher-margin NAND-flash products, leading to a significant increase in gross margin. However, it also led to increased operating expenses, particularly in Research & Development (R&D) and Selling, General, and Administrative (SG&A) costs, due to integration activities and expanded operations. Additionally, the debt incurred to finance the acquisition resulted in substantially higher interest expenses.
What is the company's current debt situation and outlook?
Western Digital's total debt stood at $13.36 billion as of June 30, 2017, a significant increase resulting from the financing of the SanDisk acquisition. The company stated that its current cash, cash equivalents, and cash generated from operations, along with available credit facilities, are expected to be sufficient to meet its working capital, debt, dividend, and capital expenditure needs for at least the next twelve months. However, the high debt level remains a key factor for investors to monitor.
What are Western Digital's key technological advancements mentioned in the report?
The report highlights Western Digital's advancements in NAND-flash technology. Specifically, the company successfully introduced and commercialized 3-dimensional (3D) NAND technology, referred to as BiCS3, with 64 layers. They also successfully developed their next generation of 3D NAND, BiCS4, with 96 layers of vertical storage capability.
06—Continue