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Western Digital Reports Fiscal Fourth Quarter and Fiscal Year 2023 Financial Results
News Summary
- Fourth quarter revenue was
$2.7 billion , down 5% sequentially (QoQ). Cloud revenue decreased 18% (QoQ), Client revenue increased 6% and Consumer revenue increased 3% (QoQ). Fiscal year 2023 revenue was$12.3 billion . - Fourth quarter GAAP earnings per share (EPS) was
$(2.27) and Non-GAAP EPS was$(1.98) , which includes$211 million of underutilization related charges in Flash and HDD. Fiscal year 2023 GAAP EPS was$(5.44) and Non-GAAP EPS was$(3.59) . - Expect fiscal first quarter 2024 revenue to be in the range of
$2.55 billion to$2.75 billion . - Expect Non-GAAP EPS in the range of
$(2.10) to$(1.80) which includes$200 to$220 million of underutilization charges in Flash and HDD.
“Throughout the fiscal fourth quarter and fiscal year,
“We are encouraged by several indicators signaling improving Flash market dynamics. Our two largest end markets, Client and Consumer, are returning to growth, inventories are normalizing, content per unit is increasing and price declines have been moderating.
Q4 2023 Financial Highlights
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GAAP |
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Non-GAAP |
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Q4 2023 |
Q3 2023 |
Q/Q |
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Q4 2023 |
Q3 2023 |
Q/Q |
Revenue ($M) |
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|
|
down 5% |
|
|
|
down 5% |
Gross Margin |
|
3.4% |
10.2% |
down 6.8 ppt |
|
3.9% |
10.6% |
down 6.7 ppt |
Operating Expenses ($M) |
|
|
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down 2% |
|
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|
down 3% |
Operating Loss ($M) |
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|
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* |
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* |
Net Loss ($M) |
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* |
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* |
Earnings (Loss) Per Share |
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* |
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* |
* not a meaningful figure |
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GAAP |
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Non-GAAP |
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Q4 2023 |
Q4 2022 |
Y/Y |
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Q4 2023 |
Q4 2022 |
Y/Y |
Revenue ($M) |
|
|
|
down 41% |
|
|
|
down 41% |
Gross Margin |
|
3.4% |
31.9% |
down 28.5 ppt |
|
3.9% |
32.3% |
down 28.4 ppt |
Operating Expenses ($M) |
|
|
|
down 16% |
|
|
|
down 23% |
Operating Income (Loss) ($M) |
|
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* |
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* |
Net Income (Loss) ($M) |
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* |
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* |
Earnings (Loss) Per Share |
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* |
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* |
* not a meaningful figure |
The company had an operating cash outflow of
Fiscal Year 2023 Financial Highlights
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GAAP |
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Non-GAAP |
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2023 |
2022 |
Y/Y |
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2023 |
2022 |
Y/Y |
Revenue ($M) |
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|
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down 34% |
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|
|
down 34% |
Gross Margin |
|
15.3% |
31.3% |
down 16.0 ppt |
|
15.7% |
32.9% |
down 17.2 ppt |
Operating Expenses ($M) |
|
|
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down 9% |
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down 16% |
Operating Income (Loss) ($M) |
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* |
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* |
Net Income (Loss) ($M) |
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* |
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* |
Earnings (Loss) Per Share |
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* |
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* |
* not a meaningful figure |
Additional details can be found within the company’s earnings presentation, which is accessible online at investor.wdc.com.
End Market Summary
Revenue ($M) |
Q4 2023 |
Q3 2023 |
Q/Q |
Q4 2022 |
Y/Y |
2023 |
2022 |
Y/Y |
Cloud |
|
|
down 18% |
|
down 53% |
|
|
down 34% |
Client |
1,035 |
975 |
up 6% |
1,637 |
down 37% |
4,328 |
7,076 |
down 39% |
Consumer |
643 |
623 |
up 3% |
793 |
down 19% |
2,738 |
3,700 |
down 26% |
Total Revenue |
|
|
down 5% |
|
down 41% |
|
|
down 34% |
In the fiscal fourth quarter:
- Cloud represented 37% of total revenue. Sequentially, the decline was primarily due to a decrease in capacity enterprise drive shipments. The year-over-year decrease was primarily due to declines in both hard drive and flash product shipments.
- Client represented 39% of total revenue. Sequentially, the increase was driven by growth in bit shipments for gaming consoles. The year-over-year decrease was due to declines in flash pricing, and lower client SSD and hard drive unit shipments for PC applications.
- Consumer represented 24% of total revenue. Sequentially, the increase was primarily due to higher retail SSD shipments. The year-over-year decrease was driven by price declines in Flash and lower retail hard drive shipments.
In fiscal year 2023:
- Cloud represented 43% of total revenue. The year-over-year decrease was primarily due to reduced shipments of capacity enterprise hard drives and enterprise SSDs.
- Client represented 35% of total revenue. The year-over-year decrease was primarily due to declines in flash pricing, as well as lower client SSD and hard drive unit shipments for PC applications.
- Consumer represented 22% of total revenue. Revenue decreased year-over-year, as growth in retail SSD bit shipments was more than offset by broad-based flash price decline and lower consumer hard drive shipments.
Business Outlook for Fiscal First Quarter of 2024
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Three Months Ending |
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GAAP(1) |
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Non-GAAP(1) |
Revenue ($B) |
|
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Gross margin |
1.9% - 4.0% |
|
2.5% - 4.5% |
Operating expenses ($M) |
|
|
|
Interest and other expense, net ($M) |
|
|
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Income tax expense ($M)(2) |
N/A |
|
|
Diluted earnings per share |
N/A |
|
|
Diluted shares outstanding (in millions) |
~323 |
|
~323 |
_____________ |
(1) Non-GAAP gross margin guidance excludes stock-based compensation expense of approximately
(2) The Non-GAAP income tax expense is determined based on a percentage of Non-GAAP pre-tax income or loss. Our estimated Non-GAAP tax dollars may differ from our GAAP tax dollars (i) due to differences in the tax treatment of items excluded from our Non-GAAP net income or loss; (ii) the fact that our GAAP income tax expense or benefit recorded in any interim period is based on an estimated forecasted GAAP tax rate for the full year, excluding loss jurisdictions; and (iii) because our GAAP taxes recorded in any interim period are dependent on the timing and determination of certain GAAP operating expenses.
The investment community conference call to discuss these results and the company’s business outlook for the fiscal first quarter of 2024 will be broadcast live online today at
About
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws, including statements regarding expectations for the company’s business outlook and financial performance for the fiscal first quarter of 2024; future market dynamics and demand trends; product developments and mix; the position of the company and its products in the industry; and overall market conditions. These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. The preliminary financial results for the company’s fiscal fourth quarter and year ended
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PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS |
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(in millions; unaudited; on a US GAAP basis) |
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ASSETS |
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Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
2,023 |
|
$ |
2,327 |
Accounts receivable, net |
|
1,598 |
|
|
2,804 |
Inventories |
|
3,698 |
|
|
3,638 |
Other current assets |
|
567 |
|
|
684 |
Total current assets |
|
7,886 |
|
|
9,453 |
Property, plant and equipment, net |
|
3,620 |
|
|
3,670 |
Notes receivable and investments in |
|
1,297 |
|
|
1,396 |
|
|
10,037 |
|
|
10,041 |
Other intangible assets, net |
|
80 |
|
|
213 |
Other non-current assets |
|
1,509 |
|
|
1,486 |
Total assets |
$ |
24,429 |
|
$ |
26,259 |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY |
|||||
Current liabilities: |
|
|
|
||
Accounts payable |
$ |
1,293 |
|
$ |
1,902 |
Accounts payable to related parties |
|
292 |
|
|
320 |
Accrued expenses |
|
1,288 |
|
|
1,636 |
Income taxes payable |
|
999 |
|
|
869 |
Accrued compensation |
|
349 |
|
|
510 |
Current portion of long-term debt |
|
1,213 |
|
|
— |
Total current liabilities |
|
5,434 |
|
|
5,237 |
Long-term debt |
|
5,857 |
|
|
7,022 |
Other liabilities |
|
1,415 |
|
|
1,779 |
Total liabilities |
|
12,706 |
|
|
14,038 |
Convertible preferred stock |
|
876 |
|
|
— |
Total shareholders’ equity |
|
10,847 |
|
|
12,221 |
Total liabilities, convertible preferred stock and shareholders’ equity |
$ |
24,429 |
|
$ |
26,259 |
|
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PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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(in millions, except per share amounts; unaudited; on a US GAAP basis) |
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Three Months Ended |
|
Years Ended |
|||||||||||||
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|
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|
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Revenue, net |
$ |
2,672 |
|
|
$ |
4,528 |
|
|
$ |
12,318 |
|
|
$ |
18,793 |
|
Cost of revenue |
|
2,580 |
|
|
|
3,083 |
|
|
|
10,431 |
|
|
|
12,919 |
|
Gross profit |
|
92 |
|
|
|
1,445 |
|
|
|
1,887 |
|
|
|
5,874 |
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||
Research and development |
|
458 |
|
|
|
598 |
|
|
|
2,009 |
|
|
|
2,323 |
|
Selling, general and administrative |
|
231 |
|
|
|
266 |
|
|
|
970 |
|
|
|
1,117 |
|
Employee termination, asset impairment, and other charges |
|
53 |
|
|
|
19 |
|
|
|
193 |
|
|
|
43 |
|
Total operating expenses |
|
742 |
|
|
|
883 |
|
|
|
3,172 |
|
|
|
3,483 |
|
Operating income (loss) |
|
(650 |
) |
|
|
562 |
|
|
|
(1,285 |
) |
|
|
2,391 |
|
Interest and other income, net |
|
(80 |
) |
|
|
(51 |
) |
|
|
(275 |
) |
|
|
(268 |
) |
Income (loss) before taxes |
|
(730 |
) |
|
|
511 |
|
|
|
(1,560 |
) |
|
|
2,123 |
|
Income tax expense (benefit) |
|
(15 |
) |
|
|
210 |
|
|
|
146 |
|
|
|
623 |
|
Net income (loss) |
|
(715 |
) |
|
|
301 |
|
|
|
(1,706 |
) |
|
|
1,500 |
|
Less: cumulative dividends allocated to preferred shareholders |
|
15 |
|
|
|
— |
|
|
|
24 |
|
|
|
— |
|
Net income (loss) attributable to common shareholders |
$ |
(730 |
) |
|
$ |
301 |
|
|
$ |
(1,730 |
) |
|
$ |
1,500 |
|
|
|
|
|
|
|
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|
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Income (loss) per common share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
(2.27 |
) |
|
$ |
0.96 |
|
|
$ |
(5.44 |
) |
|
$ |
4.81 |
|
Diluted |
$ |
(2.27 |
) |
|
$ |
0.95 |
|
|
$ |
(5.44 |
) |
|
$ |
4.75 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
321 |
|
|
|
314 |
|
|
|
318 |
|
|
|
312 |
|
Diluted |
|
321 |
|
|
|
318 |
|
|
|
318 |
|
|
|
316 |
|
|
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PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(in millions; unaudited; on a US GAAP basis) |
|||||||||||||||
Three Months Ended |
|
Years Ended |
|||||||||||||
|
|
|
|
|
|
|
|
||||||||
Operating Activities |
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
(715 |
) |
|
$ |
301 |
|
|
$ |
(1,706 |
) |
|
$ |
1,500 |
|
Adjustments to reconcile net income (loss) to net cash provided by operations: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
185 |
|
|
|
221 |
|
|
|
828 |
|
|
|
929 |
|
Stock-based compensation |
|
72 |
|
|
|
77 |
|
|
|
318 |
|
|
|
326 |
|
Deferred income taxes |
|
(68 |
) |
|
|
73 |
|
|
|
(34 |
) |
|
|
114 |
|
Gain on disposal of assets |
|
— |
|
|
|
(2 |
) |
|
|
(7 |
) |
|
|
(16 |
) |
Non-cash portion of asset impairment |
|
1 |
|
|
|
— |
|
|
|
19 |
|
|
|
— |
|
Gain on business divestiture |
|
— |
|
|
|
(9 |
) |
|
|
— |
|
|
|
(9 |
) |
Amortization of debt issuance costs and discounts |
|
4 |
|
|
|
10 |
|
|
|
13 |
|
|
|
44 |
|
Other non-cash operating activities, net |
|
65 |
|
|
|
25 |
|
|
|
71 |
|
|
|
67 |
|
Changes in: |
|
|
|
|
|
|
|
||||||||
Accounts receivable, net |
|
(7 |
) |
|
|
(450 |
) |
|
|
1,206 |
|
|
|
(546 |
) |
Inventories |
|
281 |
|
|
|
23 |
|
|
|
(60 |
) |
|
|
(22 |
) |
Accounts payable |
|
(17 |
) |
|
|
(29 |
) |
|
|
(459 |
) |
|
|
(129 |
) |
Accounts payable to related parties |
|
26 |
|
|
|
(76 |
) |
|
|
(28 |
) |
|
|
(78 |
) |
Accrued expenses |
|
132 |
|
|
|
243 |
|
|
|
(352 |
) |
|
|
245 |
|
Income taxes payable |
|
(14 |
) |
|
|
(24 |
) |
|
|
130 |
|
|
|
(74 |
) |
Accrued compensation |
|
7 |
|
|
|
26 |
|
|
|
(162 |
) |
|
|
(123 |
) |
Other assets and liabilities, net |
|
(20 |
) |
|
|
(114 |
) |
|
|
(185 |
) |
|
|
(348 |
) |
Net cash provided by (used in) operating activities |
|
(68 |
) |
|
|
295 |
|
|
|
(408 |
) |
|
|
1,880 |
|
Investing Activities |
|
|
|
|
|
|
|
||||||||
Purchases of property, plant and equipment, net |
|
(119 |
) |
|
|
(278 |
) |
|
|
(807 |
) |
|
|
(1,107 |
) |
Activity related to |
|
(32 |
) |
|
|
(114 |
) |
|
|
14 |
|
|
|
(91 |
) |
Strategic investments and other, net |
|
9 |
|
|
|
22 |
|
|
|
31 |
|
|
|
6 |
|
Net cash used in investing activities |
|
(142 |
) |
|
|
(370 |
) |
|
|
(762 |
) |
|
|
(1,192 |
) |
Financing Activities |
|
|
|
|
|
|
|
||||||||
Employee stock plans, net |
|
33 |
|
|
|
55 |
|
|
|
13 |
|
|
|
32 |
|
Net proceeds from convertible preferred stock |
|
(1 |
) |
|
|
— |
|
|
|
881 |
|
|
|
— |
|
Repayments of debt |
|
— |
|
|
|
(150 |
) |
|
|
(1,180 |
) |
|
|
(3,621 |
) |
Proceeds from debt |
|
— |
|
|
|
— |
|
|
|
1,180 |
|
|
|
1,894 |
|
Debt issuance costs |
|
(13 |
) |
|
|
— |
|
|
|
(19 |
) |
|
|
(23 |
) |
Net cash provided by (used in) financing activities |
|
19 |
|
|
|
(95 |
) |
|
|
875 |
|
|
|
(1,718 |
) |
Effect of exchange rate changes on cash |
|
(6 |
) |
|
|
(8 |
) |
|
|
(9 |
) |
|
|
(13 |
) |
Net decrease in cash and cash equivalents |
|
(197 |
) |
|
|
(178 |
) |
|
|
(304 |
) |
|
|
(1,043 |
) |
Cash and cash equivalents, beginning of period |
|
2,220 |
|
|
|
2,505 |
|
|
|
2,327 |
|
|
|
3,370 |
|
Cash and cash equivalents, end of period |
$ |
2,023 |
|
|
$ |
2,327 |
|
|
$ |
2,023 |
|
|
$ |
2,327 |
|
|
|||||||||||||||
SUPPLEMENTAL OPERATING SEGMENT RESULTS |
|||||||||||||||
(in millions; except percentages; unaudited) |
|||||||||||||||
Three Months Ended |
|
Years Ended |
|||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
||||||||||||
Net revenue: |
|
|
|
|
|
|
|
||||||||
Flash |
$ |
1,377 |
|
|
$ |
2,400 |
|
|
$ |
6,063 |
|
|
$ |
9,753 |
|
HDD |
|
1,295 |
|
|
|
2,128 |
|
|
|
6,255 |
|
|
|
9,040 |
|
Total net revenue |
$ |
2,672 |
|
|
$ |
4,528 |
|
|
$ |
12,318 |
|
|
$ |
18,793 |
|
Gross profit: |
|
|
|
|
|
|
|
||||||||
Flash |
$ |
(164 |
) |
|
$ |
862 |
|
|
$ |
433 |
|
|
$ |
3,527 |
|
HDD |
|
268 |
|
|
|
600 |
|
|
|
1,505 |
|
|
|
2,661 |
|
Total gross profit for segments |
|
104 |
|
|
|
1,462 |
|
|
|
1,938 |
|
|
|
6,188 |
|
Unallocated corporate items: |
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense |
|
(11 |
) |
|
|
(12 |
) |
|
|
(49 |
) |
|
|
(48 |
) |
Amortization of acquired intangible assets |
|
1 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(66 |
) |
Contamination related charges |
|
— |
|
|
|
(4 |
) |
|
|
— |
|
|
|
(207 |
) |
Recoveries from a power outage incident |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
Non-cash economic interest and Other |
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
Total unallocated corporate items |
|
(12 |
) |
|
|
(17 |
) |
|
|
(51 |
) |
|
|
(314 |
) |
Consolidated gross profit |
$ |
92 |
|
|
$ |
1,445 |
|
|
$ |
1,887 |
|
|
$ |
5,874 |
|
Gross margin: |
|
|
|
|
|
|
|
||||||||
Flash |
|
(11.9 |
)% |
|
|
35.9 |
% |
|
|
7.1 |
% |
|
|
36.2 |
% |
HDD |
|
20.7 |
% |
|
|
28.2 |
% |
|
|
24.1 |
% |
|
|
29.4 |
% |
Total gross margin for segments |
|
3.9 |
% |
|
|
32.3 |
% |
|
|
15.7 |
% |
|
|
32.9 |
% |
Consolidated gross margin |
|
3.4 |
% |
|
|
31.9 |
% |
|
|
15.3 |
% |
|
|
31.3 |
% |
The Company manages and reports under two reportable segments: flash-based products (“Flash”) and hard disk drives (“HDD”). In the table above, total gross profit for segments and total gross margin for segments are Non-GAAP financial measures, which are also referred to herein as Non-GAAP gross profit and Non-GAAP gross margin, respectively.
|
|||||||||||||||||||
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
|||||||||||||||||||
(in millions; unaudited) |
|||||||||||||||||||
|
Three Months Ended |
|
Years Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP gross profit |
$ |
92 |
|
|
$ |
286 |
|
|
$ |
1,445 |
|
|
$ |
1,887 |
|
|
$ |
5,874 |
|
Stock-based compensation expense |
|
11 |
|
|
|
12 |
|
|
|
12 |
|
|
|
49 |
|
|
|
48 |
|
Amortization of acquired intangible assets |
|
(1 |
) |
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
66 |
|
Contamination related charges |
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
207 |
|
Recoveries from a power outage incident |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
Other |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
— |
|
|
Non-GAAP gross profit |
$ |
104 |
|
|
$ |
298 |
|
|
$ |
1,462 |
|
|
$ |
1,938 |
|
|
$ |
6,188 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP operating expenses |
$ |
742 |
|
|
$ |
758 |
|
|
$ |
883 |
|
|
$ |
3,172 |
|
|
$ |
3,483 |
|
Stock-based compensation expense |
|
(61 |
) |
|
|
(62 |
) |
|
|
(65 |
) |
|
|
(269 |
) |
|
|
(278 |
) |
Amortization of acquired intangible assets |
|
(17 |
) |
|
|
(39 |
) |
|
|
(39 |
) |
|
|
(133 |
) |
|
|
(155 |
) |
Employee termination, asset impairment and other charges |
|
(53 |
) |
|
|
(40 |
) |
|
|
(19 |
) |
|
|
(193 |
) |
|
|
(43 |
) |
Strategic review |
|
(27 |
) |
|
|
(15 |
) |
|
|
— |
|
|
|
(42 |
) |
|
|
— |
|
Other |
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(5 |
) |
Non-GAAP operating expenses |
$ |
582 |
|
|
$ |
602 |
|
|
$ |
760 |
|
|
$ |
2,532 |
|
|
$ |
3,002 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP operating income (loss) |
$ |
(650 |
) |
|
$ |
(472 |
) |
|
$ |
562 |
|
|
$ |
(1,285 |
) |
|
$ |
2,391 |
|
Gross profit adjustments |
|
12 |
|
|
|
12 |
|
|
|
17 |
|
|
|
51 |
|
|
|
314 |
|
Operating expense adjustments |
|
160 |
|
|
|
156 |
|
|
|
123 |
|
|
|
640 |
|
|
|
481 |
|
Non-GAAP operating income (loss) |
$ |
(478 |
) |
|
$ |
(304 |
) |
|
$ |
702 |
|
|
$ |
(594 |
) |
|
$ |
3,186 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP interest and other income, net |
$ |
(80 |
) |
|
$ |
(57 |
) |
|
$ |
(51 |
) |
|
$ |
(275 |
) |
|
$ |
(268 |
) |
Non-cash economic interest and other |
|
(6 |
) |
|
|
(6 |
) |
|
|
(14 |
) |
|
|
(13 |
) |
|
|
3 |
|
Non-GAAP interest and other income, net |
$ |
(86 |
) |
|
$ |
(63 |
) |
|
$ |
(65 |
) |
|
$ |
(288 |
) |
|
$ |
(265 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP income tax expense (benefit) |
$ |
(15 |
) |
|
$ |
43 |
|
|
$ |
210 |
|
|
$ |
146 |
|
|
$ |
623 |
|
Income tax adjustments |
|
72 |
|
|
|
17 |
|
|
|
(140 |
) |
|
|
91 |
|
|
|
(301 |
) |
Non-GAAP income tax expense |
$ |
57 |
|
|
$ |
60 |
|
|
$ |
70 |
|
|
$ |
237 |
|
|
$ |
322 |
|
|
|||||||||||||||||||
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
|||||||||||||||||||
(in millions, except per share amounts; unaudited) |
|||||||||||||||||||
Three Months Ended |
|
Years Ended |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP net income (loss) |
$ |
(715 |
) |
|
$ |
(572 |
) |
|
$ |
301 |
|
|
$ |
(1,706 |
) |
|
$ |
1,500 |
|
Stock-based compensation expense |
|
72 |
|
|
|
74 |
|
|
|
77 |
|
|
|
318 |
|
|
|
326 |
|
Amortization of acquired intangible assets |
|
16 |
|
|
|
39 |
|
|
|
40 |
|
|
|
133 |
|
|
|
221 |
|
Contamination related charges |
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
207 |
|
Recoveries from a power outage incident |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
Employee termination, asset impairment and other charges |
|
53 |
|
|
|
40 |
|
|
|
19 |
|
|
|
193 |
|
|
|
43 |
|
Strategic review |
|
27 |
|
|
|
15 |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
Non-cash economic interest and other |
|
(2 |
) |
|
|
(6 |
) |
|
|
(14 |
) |
|
|
(8 |
) |
|
|
8 |
|
Income tax adjustments |
|
(72 |
) |
|
|
(17 |
) |
|
|
140 |
|
|
|
(91 |
) |
|
|
301 |
|
Non-GAAP net income (loss) |
|
(621 |
) |
|
|
(427 |
) |
|
|
567 |
|
|
|
(1,119 |
) |
|
|
2,599 |
|
Less: cumulative dividends allocated to preferred shareholders |
|
15 |
|
|
|
9 |
|
|
|
— |
|
|
|
24 |
|
|
|
— |
|
Non-GAAP net income (loss) attributable to common shareholders |
$ |
(636 |
) |
|
$ |
(436 |
) |
|
$ |
567 |
|
|
$ |
(1,143 |
) |
|
$ |
2,599 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted income (loss) per common share |
|
|
|
|
|
|
|
|
|
||||||||||
GAAP |
$ |
(2.27 |
) |
|
$ |
(1.82 |
) |
|
$ |
0.95 |
|
|
$ |
(5.44 |
) |
|
$ |
4.75 |
|
Non-GAAP |
$ |
(1.98 |
) |
|
$ |
(1.37 |
) |
|
$ |
1.78 |
|
|
$ |
(3.59 |
) |
|
$ |
8.22 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
||||||||||
GAAP |
|
321 |
|
|
|
319 |
|
|
|
318 |
|
|
|
318 |
|
|
|
316 |
|
Non-GAAP |
|
321 |
|
|
|
319 |
|
|
|
318 |
|
|
|
318 |
|
|
|
316 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows |
|
|
|
|
|
|
|
|
|
||||||||||
Cash flow provided by (used in) operating activities |
$ |
(68 |
) |
|
$ |
(381 |
) |
|
$ |
295 |
|
|
$ |
(408 |
) |
|
$ |
1,880 |
|
Purchases of property, plant and equipment, net |
|
(119 |
) |
|
|
(110 |
) |
|
|
(278 |
) |
|
|
(807 |
) |
|
|
(1,107 |
) |
Activity related to |
|
(32 |
) |
|
|
(36 |
) |
|
|
(114 |
) |
|
|
14 |
|
|
|
(91 |
) |
Free cash flow |
$ |
(219 |
) |
|
$ |
(527 |
) |
|
$ |
(97 |
) |
|
$ |
(1,201 |
) |
|
$ |
682 |
|
To supplement the condensed consolidated financial statements presented in accordance with
As described above, the company excludes the following items from its Non-GAAP measures:
Stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the company’s control, the company believes excluding stock-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time and compare it against the company’s peers, a majority of whom also exclude stock-based compensation expense from their Non-GAAP results.
Amortization of acquired intangible assets. The company incurs expenses from the amortization of acquired intangible assets over their economic lives. Such charges are significantly impacted by the timing and magnitude of the company’s acquisitions and any related impairment charges.
Contamination related charges. In
Recoveries from a power outage incident. In
Employee termination, asset impairment and other charges. From time-to-time, in order to realign the company’s operations with anticipated market demand or to achieve cost synergies from the integration of acquisitions, the company may terminate employees and/or restructure its operations. From time-to-time, the company may also incur charges from the impairment of intangible assets and other long-lived assets. In addition, the company may record credits related to gains upon sale of property due to restructuring or reversals of charges recorded in prior periods. These charges or credits are inconsistent in amount and frequency, and the company believes they are not indicative of the underlying performance of its business.
Strategic review. The company incurred expenses associated with its ongoing review of potential strategic alternatives aimed at further optimizing the long-term value for stockholders. The company believes these charges do not reflect the company’s operating results and that they are not indicative of the underlying performance of its business.
Non-cash economic interest. The company has excluded non-cash economic interest expense associated with its convertible notes recognized in periods prior to the company’s adoption of the Financial Accounting Standards Board Accounting Standards Update No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which the company adopted at the beginning of its fiscal year ending
Other adjustments. From time-to-time, the company incurs charges or gains that the company believes are not a part of the ongoing operation of its business. The resulting expense or benefit is inconsistent in amount and frequency.
Income tax adjustments. Income tax adjustments include the difference between income taxes based on a forecasted annual Non-GAAP tax rate and a forecasted annual GAAP tax rate as a result of the timing of certain Non-GAAP pre-tax adjustments. The income tax adjustments also include adjustments to estimates related to the current status of the rules and regulations governing the transition to the Tax Cuts and Jobs Act and the re-measurement of certain unrecognized tax benefits primarily related to tax positions taken in prior quarters, including interest. These adjustments are excluded because the company believes that they are not indicative of the underlying performance of its ongoing business.
Additionally, free cash flow is defined as cash flows provided (used in) by operating activities less purchases of property, plant and equipment, net, and the activity related to
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