Western Digital : Second Quarter Fiscal 2021 Press Release with Financial Tables

Western Digital Reports Fiscal Second Quarter 2021 Financial Results

News Summary

• Second quarter revenue was $3.9 billion, down 7% year-over-year (YoY). Client Devices revenue increased 19%, Data Center Devices and Solutions revenue declined 46%, and Client Solutions revenue increased 6% YoY.
• Second quarter GAAP earnings per share (EPS) was $0.20 and non-GAAP EPS was $0.69.
• Generated operating cash flow of $425 million and free cash flow of $149 million in the second quarter.
• Expecting fiscal third quarter 2021 revenue to be in the range of $3.85 billion to $4.05 billion with non- GAAP EPS in the range of $0.55 to $0.75.

SAN JOSE, Calif., - January 28, 2021 - Western Digital Corp. (Nasdaq: WDC) today reported fiscal second quarter 2021 financial results.

"The team delivered solid results this quarter, especially as we continue adapting our business and technology portfolio to take advantage of the immense opportunities in the storage industry," said, David Goeckeler, Western Digital CEO. "During the quarter, we captured strength in the retail business and also delivered on our target outcome to complete qualification of our energy-assisted hard drives and second-generation enterprise SSD products with some of the world's largest data center operators. While there is still more work to be done, we remain extremely focused on meeting the needs of our customers and ramping our next-generation products throughout calendar 2021."

Western Digital Reports Fiscal Second Quarter 2021 Financial Results

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Q2 2021 Financial Highlights

		GAAP				Non-GAAP
	Q2 2021	Q2 2020	vs. Q2 2020		Q2 2021	Q2 2020	vs. Q2 2020
Revenue ($M)	$3,943	$4,234	down 7%	$3,943	$4,234	down 7%
Gross Margin	24.3%	22.1%	up 2.2 ppt	26.4%	25.9%	up 0.5 ppt
Operating Expenses ($M)	$802	$885	down 9%	$696	$765	down 9%
Operating Income ($M)	$158	$50	up 216%	$343	$333	up 3%
Net Income (Loss) ($M)	$62	($139)	*	$212	$187	up 13%
Earnings Per Share	$0.20	($0.47)	*	$0.69	$0.62	up 11%
*not a meaningful figure

Western Digital Reports Fiscal Second Quarter 2021 Financial Results

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Key End Market Summary

Revenue ($M)	Q2 2021	Q2 2020 vs. Q2 2020
Client Devices	$2,131	$1,797	up 19%
Data Center Devices & Solutions	$807	$1,489	down 46%
Client Solutions	$1,005	$948	up 6%
Total Revenue	$3,943	$4,234	down 7%

In the fiscal second quarter of 2021, Western Digital's revenue decreased 7% year-over-year to $3.9 billion. The decrease is largely attributable to a decline in our Data Center Devices & Solutions end market, more than offsetting growth in Client Devices and Client Solutions.

In Client Devices, Western Digital's industry leading NVMe-based client SSDs and strong relationships with major PC OEMs drove a record level of exabyte shipments. The pandemic has not only accelerated the digital transformation, but it has also spurred technological innovation, driving the ability to access the cloud using very powerful and advanced end-devices. The ability to access, store, and share data from anywhere, on any device, has resulted in robust storage demand for notebook, tablet, and Chromebook devices.

In Data Center Devices & Solutions, qualifications of the second-generation eSSD products have progressed well, with nearly 150 qualifications completed, including at one cloud titan. There has been solid progress made completing the qualifications of our energy-assisted hard drives, including at three of the four US cloud titans. While one now-completed cloud titan qualification slipped beyond our anticipated timeline in the fiscal second quarter, another cloud titan qualification was completed, ahead of schedule. With cloud digestion abating and the stabilization of OEM demand, we believe the demand in capacity enterprise bottomed in the fiscal second quarter and are anticipating a rebound in the fiscal third quarter.

In Client Solutions, revenue increased during the seasonally strong quarter, to a two-year high. This solid performance was driven by continued growth in retail, supported by the strength of our brand and the breadth of our portfolio.

Western Digital Reports Fiscal Second Quarter 2021 Financial Results

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Business Outlook for Fiscal Third Quarter of 2021

		Three Months Ending
		April 2, 2021
	GAAP(1)		Non-GAAP(1)
Revenue ($B)	$3.85	- $4.05	$3.85 - $4.05
Gross margin	24.5%	- 26.5%	25.5% - 27.5%
Operating expenses ($M)	$770	- $790	$705 - $725
Interest and other expense, net ($M)	~ $80	~ $70
Tax rate	N/A	~ 23% (2)
Diluted earnings per share	N/A	$0.55 - $0.75
Diluted shares outstanding (in millions)	~ 310	~ 310

1. Non-GAAPgross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense, totaling approximately $40 million to $60 million. The company's non-GAAP operating expenses guidance excludes amortization of acquired intangible assets; stock-based compensation expense; and employee termination, asset impairment and other charges, totaling approximately $50 million to $70 million. The company's non-GAAP interest and other expense guidance excludes approximately $10 million of convertible debt activity. In the aggregate, non-GAAP diluted earnings per share guidance excludes these items totaling $100 million to $140 million. The timing and amount of these charges excluded from non-GAAP gross margin, non-GAAP operating expenses, non-GAAP interest and other expense, net and non-GAAP diluted earnings per share cannot be further allocated or quantified with certainty. Additionally, the timing and amount of additional charges the company excludes from its non-GAAP tax rate and non-GAAP diluted earnings per share are dependent on the timing and determination of certain actions and cannot be reasonably predicted. Accordingly, full reconciliations of non-GAAP gross margin, non-GAAP operating expenses, non-GAAP interest and other expense, non-GAAP tax rate and non-GAAP diluted earnings per share to the most directly comparable GAAP financial measures (gross margin, operating expenses, interest and other expense, tax rate and diluted earnings per share, respectively) are not available without unreasonable effort.
2. The non-GAAP tax rate provided is based on a percentage of non-GAAPpre-tax income.