10-KPeriod: FY2020

WESTERN DIGITAL CORP Annual Report, Year Ended Jul 3, 2020

Filed August 28, 2020For Securities:WDC

Summary

Western Digital Corporation (WDC) reported relatively flat net revenue for the fiscal year ended July 3, 2020, compared to the prior year, at approximately $16.7 billion. This stability was achieved despite a 12% decline in Client Devices revenue, largely due to a 24% increase in Data Center Devices and Solutions revenue, driven by strong demand for enterprise HDDs and Flash products, partly attributed to the accelerated shift to cloud services amid the COVID-19 pandemic. The company experienced a net loss of $250 million for the fiscal year, a significant improvement from the $754 million net loss in the prior year. This improvement, however, was accompanied by a substantial increase in R&D expenses and a decrease in SG&A expenses. The company suspended its quarterly cash dividend in April 2020 to reinvest in the business and support deleveraging efforts.

Financial Highlights

57 data points
Beta

Revenue

$16.74B

22.6% Gross Margin

Net Income

-$250.00M

-1.5% Net Margin

EPS (Diluted)

$-0.84

Total Assets

$25.66B

Cash & Equivalents

$3.05B

Free Cash Flow

$177.00M

Financial Statements
Beta
Revenue$16.74B
Cost of Revenue$12.96B
Gross Profit$3.78B
SG&A Expenses$1.15B
Operating Expenses$3.45B
Operating Income$335.00M
Interest Expense$413.00M
Net Income-$250.00M
EPS (Basic)$-0.84
EPS (Diluted)$-0.84
Shares Outstanding (Basic)298.00M
Shares Outstanding (Diluted)298.00M

Key Highlights

  • 1Net revenue remained stable at approximately $16.7 billion for the fiscal year ended July 3, 2020.
  • 2Data Center Devices and Solutions revenue saw a significant increase of 24%, driven by cloud demand.
  • 3Client Devices revenue decreased by 12%, impacted by lower average selling prices.
  • 4The company reported a net loss of $250 million, an improvement from the $754 million net loss in the prior year.
  • 5Operating income stood at $335 million, a notable increase from $87 million in the previous year.
  • 6Western Digital suspended its quarterly cash dividend in April 2020.
  • 7The company has a significant joint venture with Kioxia Corporation for flash-based memory wafer manufacturing.

Frequently Asked Questions

While the COVID-19 pandemic caused some reductions in production levels and increased logistics costs, Western Digital's net revenue for the year ended July 3, 2020, was not significantly impacted. The company saw strong demand in its Data Center Devices and Solutions segment due to accelerated cloud adoption, which offset declines in other areas like retail. Management continued to adapt operations to ensure employee safety while serving global customers.

Western Digital operates three business ventures with Kioxia Corporation (Flash Ventures) for flash-based memory wafer manufacturing. The company is contractually obligated to pay for its share of variable costs and half of the fixed costs, regardless of actual output. They also fund a portion of capital investments. This strategic relationship is crucial for their flash-based product supply, and they continue to jointly invest in technology and capacity expansions with Kioxia.

As of July 3, 2020, Western Digital had $3.05 billion in cash and cash equivalents and $2.25 billion available under its revolving credit facility. The company believes its liquidity is sufficient for at least the next twelve months. However, they carry substantial debt, with total indebtedness of $9.71 billion. The company suspended its dividend to reinvest in the business and support deleveraging efforts, indicating a focus on strengthening its financial position.

In fiscal year 2020, Western Digital's revenue was distributed across its end markets as follows: Client Devices generated $7.16 billion, Data Center Devices & Solutions generated $6.23 billion, and Client Solutions generated $3.35 billion.