01—Abstract
Summary
Summary of the 10-Q filed February 12, 2024. Cited figures are marked; the original filing is the authoritative source.
Western Digital Corporation (WDC) reported its financial results for the quarter ending December 28, 2023.
The company experienced a net loss of $287 milliona for the quarter, a slight improvement from the $451 million net loss in the same period last year. Revenue for the quarter was $3.03 billion, a 2% decrease year-over-year, reflecting ongoing macroeconomic pressures and a supply-demand imbalance in the storage market, particularly impacting pricing in the Flash segment. Despite revenue challenges, the company is actively executing a strategic plan to separate its Hard Disk Drive (HDD) and Flash business units into two independent public companies, targeting completion in the second half of calendar year 2024.
This separation is intended to unlock value and position each business for distinct growth opportunities. Operating expenses were reduced, driven by decreases in R&D and SG&A. The company also highlighted progress in managing its debt, including the issuance of new convertible notes and the repurchase of existing ones.
02—Key points
Key Highlights
- Net loss of $287 million for the quarter, an improvement from $451 million in the prior year period.
- Revenue declined 2% year-over-year to $3.03 billion, primarily due to pricing pressures in the Flash segment.
- The company announced its intention to separate its HDD and Flash business units into two independent public companies, targeting completion in the second half of 2024.
- Operating expenses decreased by 17% year-over-year, driven by reductions in R&D and SG&A.
- Flash revenue was relatively flat year-over-year, with increased exabytes sold offset by a decline in average selling prices.
- HDD revenue decreased 6% year-over-year due to lower average selling prices.
- The company has approximately $2.48 billion in cash and cash equivalents as of December 29, 2023, providing liquidity.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2024, Western Digital Corp lost $0.21.
- Revenue$1.37B100.0%
- Cost of revenue−$1.05B77.1%
- Gross profit$313.0M22.9%
- Operating costs−$523.0M38.3%
- Operating income−$210.0M15.4%
- Interest, other & tax−$77.0M5.6%
- Net income−$287.0M21.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed February 12, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $1.37B$3.11B | −56.0% |
| Cost of Revenue | $2.54B$2.58B | −1.5% |
| Gross Profit | $313.00M$528.00M | −40.7% |
| SG&A Expenses | $198.00M$250.00M | −20.8% |
| Operating Expenses | $702.00M$849.00M | −17.3% |
| Operating Income | -$210.00M-$321.00M | +34.6% |
| Interest Expense | $108.00M$73.00M | +47.9% |
| Net Income | -$287.00M-$451.00M | +36.4% |
| EPS (Basic) | $-0.92$-1.42 | +35.2% |
| EPS (Diluted) | $-0.92$-1.42 | +35.2% |
| Shares Outstanding (Basic) | 325.00M318.00M | +2.2% |
| Shares Outstanding (Diluted) | 325.00M318.00M | +2.2% |
05—Questions
Frequently Asked Questions
What is the company's outlook for the next quarter?
The filing does not provide specific forward-looking guidance for the next quarter. However, the company notes that while the supply-demand imbalance has started to show signs of stabilization in certain segments, it continues to face a dynamic market environment. Investors should look for management's commentary in earnings calls for more granular short-term outlooks.
What are the main drivers of the company's net loss?
The net loss is primarily driven by lower revenues due to pricing pressures in the Flash segment and a challenging macroeconomic environment impacting overall demand. While operating expenses have been reduced, gross profit has been significantly impacted by lower average selling prices and charges related to reduced manufacturing utilization.
What is the strategic significance of separating the HDD and Flash businesses?
The company believes that separating its HDD and Flash business units into two independent public companies will better position each business to execute innovative technology and product development, capitalize on unique growth opportunities, extend respective leadership positions, and operate more efficiently with distinct capital structures. This move is intended to unlock value for shareholders.
How is the company managing its debt and liquidity?
The company has taken steps to manage its debt, including issuing $1.60 billion in convertible senior notes and repurchasing some of its existing convertible notes. As of December 29, 2023, the company had $2.48 billion in cash and cash equivalents and access to a revolving credit facility, which management believes is sufficient to meet its working capital, debt, and capital expenditure needs for the foreseeable future.
06—Continue