Western Digital Corporation · NASDAQ:WDC
Western Digital — Q3 2023 Earnings Presentation
22 slides from Western Digital's earnings presentation, May 8, 2023
Slide 1: Fiscal Third Quarter 2023 Financial Results
Fiscal Third Quarter 2023 Financial Results Western Digital May 8, 2023
Slide 2: Forward Looking Statements
2 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Forward Looking Statements SAFE HARBOR This presentation contains forward-looking statements within the meaning of federal securities laws, including statements regarding expectations for the company’s
Slide 3: Fiscal Third Quarter Executive Summary
3 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Fiscal Third Quarter Executive Summary Financial Results1 • Revenue of $ 2.8B • Operating cash flow of $ (381)M • Non-GAAP EPS of $ (1.37) • Free cash flow of $ (527)M • Non-GAAP gross margin of 11% • C
Slide 4: Revenue Trends by End Market
4 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Revenue Trends by End Market Cloud Client Consumer In billions In billions In billions $ 2.4 $ 2.4 $ 2.4 $ 2.0 $ 2.0 $ 2.0 $ 1.6 $ 1.6 $ 1.6 $ 1.2 $ 1.2 $ 1.2 $ 0.8 $ 0.8 $ 0.8 $ 0.4 $ 0.4 $ 0.4 $- $- $
Slide 5: Flash and Hard Drive Metrics
5 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Flash and Hard Drive Metrics Flash Revenue and Gross Margin Hard Drive Revenue and Gross Margin In billions In billions $ 2.8 40% $ 2.8 40% $ 2.4 $ 2.4 30% 30% $ 2.0 $ 2.0 $ 1.6 20% $ 1.6 20% $ 1.2 10%
Slide 6: Non-GAAP Financial Results
6 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Non-GAAP Financial Results ($ in millions, except for EPS) Q3F22 Q2F23 Q3F23 QoQ YoY Revenue $ 4,381 $ 3,107 $ 2,803 down 10% down 36% Gross Margin % 31.7% 17.4% 10.6% down 6.8 ppt down 21.1 ppt Operati
Slide 7: Cash Flow Walk
7 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Cash Flow Walk In millions $ 882 $ 2,220 $ 1,871 $ (6) $ (381) $ (146) (1) (2) Q2F23 Operating Cash Cash CapEx Convertible Other Q3F23 Cash & Cash Flow Preferred Equity Cash & Cash Equivalents Equivalen
Slide 8: Fiscal Fourth Quarter Guidance
8 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Fiscal Fourth Quarter Guidance(1) GAAP Non-GAAP(2) Revenue ($ B) $ 2.40 - $ 2.60 $ 2.40 - $ 2.60 Gross Margin % 2.4% - 4.4% 3.0% - 5.0% Operating Expenses ($ M) $ 730 - $ 750 $ 580 - $ 600 Interest and
Slide 9: Joint Venture Operational Framework
9 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Joint Venture Operational Framework For more information on Flash Ventures, please visit investor.wdc.com for a recently published Flash Ventures presentation. Flash Ventures 49.9% Owned by Western Digi
Slide 10: Capital Expenditure Framework
10 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Capital Expenditure Framework 1 2 3 Flash Cash Capital HDD CapEx Non-Fab Flash Ventures (1) Parent Loans(2) Expenditures CapEx 3 4 5 Flash Ventures Capital Flash Ventures Flash Ventures Flash Ventures
Slide 11: Gross Capital Expenditure Trends
11 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Gross Capital Expenditure Trends In billions $ 3.5 $ 3.0 $ 2.5 $ 1.6 $ 2.0 $ 1.0 $ 1.5 $ 1.9 $ 1.5 ~$ 1.4 $ 1.0 $ 2.0 $ 1.6 ~ $ 1.4 $ 1.2 $ 0.5 $ 0.8 ~$ 0.8 $ - $ (0.3) $ (0.5) (1) FY18 FY19 FY20 FY21
Slide 12: Capital Allocation Framework
12 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Capital Allocation Framework Highest Priority Reinvestment in the Strategically reinvest to drive innovation Company Reduce Leverage Target 1.0x – 3.25x Debt-to-EBITDA Shareholder Return Dividend Share
Slide 13: Appendix
13 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Appendix
Slide 14: Quarterly Fact Sheet
14 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Quarterly Fact Sheet In millions, except Average Selling Price (ASP), Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 percentages, and working capital related metrics Revenue by End Market(1) Cloud $ 1,774 $ 2,098 $ 1,8
Slide 15: Quarterly Fact Sheet (continued)
15 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Quarterly Fact Sheet (continued) FOOTNOTES FORMULAS Days Sales Outstanding (DSO) = Accounts Receivable / (Revenue / # of days in quarter) Days Inventory Outstanding (DIO) = Inventories / (Cost of Reven
Slide 16: Debt Capital Structure
16 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Debt Capital Structure Current Cap Table Debt Maturity Profile (in billions) All-in As of March Rate Maturity 31, 2023 Over 80% of debt to mature in 2026 or later Rate1 (in millions) Delayed Draw Term
Slide 17: Credit Agreement Defined Leverage Ratio
17 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Credit Agreement Defined Leverage Ratio In millions; unaudited; trailing 12 months Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Net Income (Loss) $ 1,821 $ 1,500 $ 917 $ (93) $ (690) Income tax expense 387 623 586 56
Slide 18: GAAP to Non-GAAP Reconciliations
18 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED GAAP to Non-GAAP Reconciliations In millions; unaudited Q3F22 Q2F23 Q3F23 GAAP Gross Profit $ 1,181 $ 528 $ 286 Stock-based compensation expense 13 12 12 Contamination related charges 203 — — Recoverie
Slide 19: GAAP to Non-GAAP Reconciliations (cont'd)
19 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED GAAP to Non-GAAP Reconciliations (cont'd) In millions, except per share amounts; unaudited Q3F22 Q2F23 Q3F23 GAAP Net Income (loss) $ 25 $ (446) $ (572) Stock-based compensation expense 86 86 74 Amorti
Slide 20: Supplemental Operating Segment Results
20 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED Supplemental Operating Segment Results In millions, except percentages; unaudited Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Net Revenue Flash $ 2,243 $ 2,400 $ 1,722 $ 1,657 $ 1,307 HDD 2,138 2,128 2,014 1,450 1,4
Slide 21: GAAP to Non-GAAP Reconciliations
21 © 2023 WEST ERN DI G I T AL CO RPO RAT I O N O R I T S AF F I L I AT ES AL L RI G HT S RESERVED GAAP to Non-GAAP Reconciliations FOOTNOTES This presentation contains the following financial measures that are not in accordance with U.S. generally accepted accounting principles (“GAAP”): Non-GAAP g
Slide 22: Western Digital. Create What's Next
N. Western Digital. Create What’s Next