Western Digital: Fiscal 1Q22 Financial Results

(in $ million)	1Q21	1Q22	Growth
Revenue	3,922	5,051	*29%*
Net income (loss)	(60)	610

Western Digital Corp. reported fiscal first quarter 2022 financial results.

“Strong demand across diverse end markets, particularly for our cloud products, combined with Western Digital’s strong innovation engine, broad routes to market and sharpened execution, enabled us to deliver solid results within our guidance range, even in the face of significant Covid impacts and supply chain disruptions,” said David Goeckeler, CEO. “While these disruptions are transitory, the long-term opportunities for Western Digital remain unchanged as the world’s digital transformation continues to accelerate. We believe that the migration to the cloud and demand for storage solutions throughout the client and consumer markets will continue to drive a huge opportunity for Western Digital and our customers.”

The company generated $521 million in cash flow from operations, made a total debt repayment of $213 million, and ended the quarter with $3.3 billion of total cash and cash equivalents.

Average shares outstanding were 316 million for the quarter. In addition, as a result of these financial results and free cash flow gen, on October 22, 2021, the company repaid the remaining balance of Term Loan B in an amount of $943 million, bringing total gross debt outstanding to $7.7 billion.

In 1FQ22, the company refined the end-markets we report to be Cloud (primarily products for public or private cloud environments), Client (primarily products sold directly to OEMs or via distribution), and Consumer (primarily retail and other end-user products).

Cloud represented a record 44% of total revenue, led by record capacity enterprise HDD revenue and nearly 30% sequential growth in enterprise SSD revenue. During the quarter, the manufacturer announced OptiNAND, a technology that utilizindustry proven PMR technology. Next month, the company will begin volume shipments of its 20TB CMR HDDs utilizing OptiNAND technology. Within enterprise SSDs, the company experienced continued success in the cloud with another successful quarter of qualifications.

In Client, the flash business unit experienced growth – specifically in mobile, gaming, automotive, IoT and industrial applications. Strength in this end market was more than offset by pressure in desktop and notebook HDDs due to supply disruptions at customers and within the company’s own operations.

In Consumer, revenue from both the flash and HDD business units declined on a sequential basis due to supply disruptions, in addition to uneven geographic demand due to Covid lockdowns.

Comments

WD surpassed $5 billion for the quarter, up 3% Q/Q and 29% Y/Y, within guidance range provided last August, and shipped a record level of exabytes, HDDs and SSDs combined.

HDD and flash revenue

in $ million

1FQ18

1FQ19

2FQ19

3FQ19

4FQ19

1FQ20

2FQ20

3FQ20

4FQ20

1FQ21

2FQ21

3FQ21

4FQ21

1FQ22

4FQ21/1FQ22 growth

HDDs

2,610

2,494

2,060

2,064

2,128

2,408

2,396

2,114

2,049

1,844

1,909

1,962

2,501

2,561

Flash

2,571

2,534

2,173

1,610

1,506

1,632

1,838

2,061

2,238

2,078

2,034

2,175

2,419

2,490

By business, and HDD

Client
revenue (1)

Cloud
revenue (1)

Consumer revenue (1)

Total HDDs (2)

HDD ASP

1FQ21

1,750

1,291

881

23.0

$79

2FQ21

1,869

1,014

1,060

25.7

$73

3FQ21

1,767

1,423

947

23.2

$82

4FQ21

1,895

1,995

1,030

25.4

$97

1FQ22

1,853

2,225

973

24.1

$102

(1) in $ million (2) in million
In 1FQ22, the company refined its end-markets: Client (primarily products sold directly to OEMs or via distribution), Cloud (primarily products for public or private cloud environments), and Consumer (primarily retail and other end-user products).

Flash
• This business represents 49% of global revenue or $2.5 billion, up 3% Q/Q and up 20% Y/Y.
• Flash bit shipments increased 8% Q/Q and 30% Y/Y.
• Revenue growth was driven by continued strong demand for firm's latest generation enterprise SSDs, now qualified at 3 cloud titans, and the ramp of new 5G phones incorporating BiCS5 node, with revenue growing over 20% sequentially.
• BiCS5 represented 17% of flash revenue.
• The client PC OEMs, distribution channel and retail were impacted by company's customers' ability to ship product, greater component sourcing constraints within firm's own operations and uneven geographic demand due to Covid lockdowns.
• Continued strong demand for company's latest gen energy assisted drives among cloud and enterprise customers drove record revenue and exabyte shipments in cloud end market.
• On a blended basis, flash ASPs were down 3% sequentially, primarily due to mix and pricing within firm's transactional markets. On a like-for-like basis, flash ASPs were flat.
• Announcement of OptiNAND, a technology that utilizes flash in the HDD control plane to increase areal density.

HDDs
• Revenue was $2.6 billion, up 2% Q/Q and up 39% Y/Y, representing 51% of global revenue. Per comparison for the same quarter, main competitor Seagate, essentially in HDDs, totalled $3,115 million in sales, up 35% Y/Y and 3% Q/Q, percentages being about the same.
• On a sequential basis, total exabyte shipments increased 4%, while the average price per drive increasing 5% to $102.
• Capacity shipment increased 4% sequentially to 159EB, average GB/drive being 5.7TB.
• Overall, cloud HDD exabyte shipments grew 9% Q/Q and over 70% Y/Y and comprised over 80% of total HDD exabyte shipments. Client represented 37% of revenue at $1.9 billion, down 2% Q/Q and up 6% Y/Y.
• Continued strong demand for latest generation energy assisted drives among cloud and enterprise customers drove record revenue and exabyte shipments in cloud end market.
• ASP per drive was $102, up 5% Q/Q.
• Covid impact is estimated here at $51 million.

2FQ22 guidance disappointing
Revenue between $4.70 billion and 4.90 billion or -7% to -3% sequentially. WDC expects flash revenue to increase and HDD revenue to decline as much as 15%, especially explained by the short supply of controllers.