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WESTERN DIGITAL CORP 8-K Report, Financial Results (Jan 25, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed January 25, 2024
Period End
January 25, 2024
Security
WDC
In the record · 2016–202610-K1110-Q328-K197

WDC filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 197 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · May ’18May ’18
  2. Leadership change8-K · Jun ’20Jun ’20
  3. Material agreement8-K · Jul ’22Jul ’22
  4. Leadership change8-K · May ’26May ’26

01—Abstract

Summary

Summary of the 8-K filed January 25, 2024. Cited figures are marked; the original filing is the authoritative source.

Western Digital reported fiscal Q2 2024 (quarter ended December 29, 2023) results that were in line with or above the non-GAAP guidance it issued in October.

Revenue was $3.03 billiona, up 10% sequentially but down 2% year over year. Cloud revenue rose 23% sequentially on higher nearline shipments and better nearline pricing, though it fell 13% year over year on lower eSSD bit shipments. Client revenue slipped 2% sequentially, and Consumer revenue grew 15% sequentially on seasonal strength.

Profitability remained deeply negative: GAAP EPS was $(0.87) and non-GAAP EPS was $(0.69), with non-GAAP results absorbing $156 millionb of underutilization charges across Flash and HDD. Non-GAAP gross margin improved to 15.5% from 4.1% in the prior quarter, but it was still down 1.9 points year over year from 17.4%. Free cash flow was $(176) million, and operating cash flow was $(92) million.

The balance sheet shows a notable shift toward debt. Cash rose to $2.48 billion, but long-term debt increased to $7.35 billionc from $5.86 billion, following debt repurchases of $505 million and net new debt proceeds of about $1.86 billion for the six months. Inventories fell to $3.22 billion from $3.70 billion, a sign of ongoing inventory discipline.

Management guided fiscal Q3 2024 revenue to $3.20d-$3.40 billion, with non-GAAP EPS of $(0.10) to $0.20, including $30-40 million of HDD underutilization charges. The filing also reflects costs tied to the planned separation of the HDD and Flash businesses into two independent public companies, including $36 million of business separation costs in the quarter and $20 million of strategic review expenses.

For investors, the key questions are whether the sequential recovery in Cloud and Consumer demand can translate into sustained margin expansion, how quickly underutilization charges fade, and how the higher debt load and pending separation will affect capital allocation and valuation. The Q3 guidance implies further sequential improvement, but profitability remains thin and cash generation remains negative in the near term.

02—Key points

Key Highlights

  1. Revenue of $3.03 billion, up 10% QoQ but down 2% YoY; Cloud up 23% QoQ, Client down 2% QoQ, Consumer up 15% QoQ
  2. Non-GAAP EPS of $(0.69) vs. GAAP EPS of $(0.87); non-GAAP results include $156 million of underutilization charges in Flash and HDD
  3. Non-GAAP gross margin of 15.5%, up 11.4 points QoQ from 4.1% but down 1.9 points YoY
  4. Negative free cash flow of $(176) million and operating cash outflow of $(92) million in the quarter
  5. Q3 FY2024 guidance: revenue of $3.20-$3.40 billion and non-GAAP EPS of $(0.10) to $0.20, including $30-40 million of HDD underutilization charges
  6. Long-term debt rose to $7.35 billion from $5.86 billion at June 30, 2023, while cash increased to $2.48 billion
  7. Ongoing HDD and Flash separation into two independent public companies drove $36 million of business separation costs and $20 million of strategic review expenses in the quarter

03—Questions

Frequently Asked Questions

  1. Did Western Digital meet its guidance for the quarter?

    Yes. Management said results met or exceeded the non-GAAP guidance ranges it provided in October, with non-GAAP EPS of $(0.69) for the fiscal second quarter.

  2. Why is the company still reporting losses despite higher revenue?

    Gross margins remain low, with non-GAAP gross margin at 15.5%, and the quarter included $156 million of underutilization charges in Flash and HDD. Operating expenses of $702 million on a GAAP basis, including separation and strategic review costs, also weighed on results.

  3. How did the balance sheet and cash flow change?

    Cash increased to $2.48 billion, but this was driven by new debt issuance. Long-term debt rose to $7.35 billion, and the company used $505 million for debt repurchases and $155 million for capped calls. Operating cash flow was negative at $(92) million for the quarter, and free cash flow was $(176) million.

  4. What is the outlook for the fiscal third quarter?

    Management guided to revenue of $3.20-$3.40 billion, a non-GAAP gross margin of 22.0%-24.0%, and non-GAAP EPS of $(0.10) to $0.20. The guidance includes $30-40 million of HDD underutilization charges.

  5. What does the planned separation of HDD and Flash mean for investors?

    The company is pursuing a split into two independent public companies. It incurred $36 million of business separation costs and $20 million of strategic review expenses this quarter, and these costs are excluded from non-GAAP results. The filing also flags risks around customer and supplier relationships, contractual restrictions, and stock price volatility during the transition.

04—Continue

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