01—Abstract
Summary
Summary of the 10-K filed August 28, 2020. Cited figures are marked; the original filing is the authoritative source.
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 billiona.
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 millionb 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.
02—Key points
Key Highlights
- Net revenue remained stable at approximately $16.7 billion for the fiscal year ended July 3, 2020.
- Data Center Devices and Solutions revenue saw a significant increase of 24%, driven by cloud demand.
- Client Devices revenue decreased by 12%, impacted by lower average selling prices.
- The company reported a net loss of $250 million, an improvement from the $754 million net loss in the prior year.
- Operating income stood at $335 million, a notable increase from $87 million in the previous year.
- Western Digital suspended its quarterly cash dividend in April 2020.
- The company has a significant joint venture with Kioxia Corporation for flash-based memory wafer manufacturing.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Western Digital Corp lost $0.01.
- Revenue$16.74B100.0%
- Cost of revenue−$12.96B77.4%
- Gross profit$3.78B22.6%
- Operating costs−$3.45B20.6%
- Operating income$335.0M2.0%
- Interest, other & tax−$585.0M3.5%
- Net income−$250.0M1.5%
Where FY2020 revenue went
$16.74B- Cost of revenue: $12.96B, 77% of revenue
- Other operating costs: $2.29B, 14% of revenue
- Operating income: $335.0M, 2.0% of revenue
- SG&A: $1.15B, 6.9% of revenue
Kept 2.0% as operating incomeOperating income $335.0M · 2.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed August 28, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $16.74B$16.57B | +1.0% |
| Cost of Revenue | $12.96B$12.82B | +1.1% |
| Gross Profit | $3.78B$3.75B | +0.8% |
| SG&A Expenses | $1.15B$1.32B | −12.5% |
| Operating Expenses | $3.45B$3.67B | −6.0% |
| Operating Income | $335.00M$87.00M | +285.1% |
| Interest Expense | $413.00M$469.00M | −11.9% |
| Net Income | -$250.00M-$754.00M | +66.8% |
| EPS (Basic) | $-0.84$-2.58 | +67.4% |
| EPS (Diluted) | $-0.84$-2.58 | +67.4% |
| Shares Outstanding (Basic) | 298.00M292.00M | +2.1% |
| Shares Outstanding (Diluted) | 298.00M292.00M | +2.1% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic affect Western Digital's financial performance?
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.
What is the company's strategy regarding its joint venture with Kioxia Corporation?
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.
What is Western Digital's current financial health and liquidity situation?
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.
How did the company's revenue split across its end markets in fiscal year 2020?
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.
06—Continue