Yahoo Finanza Western Digital Corp (WDC) (Q3 2024) Earnings Call Transcript Highlights: Robust Growth and ...
Total Revenue: $3.5 billion, up 14% sequentially and 23% year-over-year.
Non-GAAP Gross Margin: 29.3%, significantly improved from previous periods.
Non-GAAP Earnings Per Share (EPS): $0.63.
Free Cash Flow: $91 million.
Cloud Revenue: $1.6 billion, representing 45% of total revenue, up 45% sequentially and 29% year-over-year.
Client Revenue: $1.2 billion, 34% of total revenue, up 5% sequentially and 20% year-over-year.
Consumer Revenue: $0.7 billion, 21% of total revenue, down 13% sequentially but up 7% year-over-year.
Flash Revenue: $1.7 billion, up 2% sequentially and 30% from the previous year.
HDD Revenue: $1.8 billion, up 28% sequentially and 17% year-over-year.
Operating Cash Flow: $58 million.
Inventory Levels: Flat from prior quarter at $3.2 billion.
Gross Debt: $7.8 billion at the end of the quarter.
Cash and Equivalents: $1.9 billion.
Total Liquidity: $4.1 billion, including revolver capacity.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: On the HDD side, the gross margins are spectacular. And if we take out the underutilization you're north of 32%. So curious from here as you think about ongoing tightness, ongoing growth in demand led by the cloud and a pricing strategy where I think you and your main competitor are being extraordinarily rational. How do you think the progression for that part of your business will look through the remainder of calendar '24 and into '25? A: David Goeckeler - We're really happy with where the HDD portfolio is, focusing on delivering high-capacity, low-cost products that resonate with customers, leading to margin expansion. We expect to continue driving better TCO for our customers and are optimistic about maintaining profitability improvements.
Q: On the NAND side, I think you guided last kind of high-teens bit growth. And I'm just curious, is that still a number in play? Or given your prioritization of highest profitable areas of NAND, should we be thinking about a different number? A: David Goeckeler - For calendar '24, we still see demand in the mid to high teens for the market. We forecast bits down double digits this quarter, maybe a bit more flat next quarter as we optimize our supply throughout the year for best profitability.
Q: In terms of the outlook, looking for 4 points of gross margin improvement. It seems like the like-for-like pricing, certainly in NAND is a lot better than that. HDD seems pretty good as well. What are the offsets that you only would see sort of 4 points of gross margin expansion given the improvement that we're seeing in absolute pricing? A: Wissam G. Jabre - Our guide comprehends a balanced view with the current outlook. Yes, we see improvement in margins in both of the businesses. On the flash side, we still anticipate improvement in pricing that will help gross margin move a bit higher from here.
Q: You sort of talked about these higher density SSDs in the second half of the calendar year for AI purposes. Can you talk about what has to happen to sort of get those drives out? A: David Goeckeler - We're seeing enterprise SSD demand return, with customers wanting SSDs in much bigger capacity points for AI-related applications. We're in the process of increasing capacity and going through qualification with customers.
Q: On the HDD side, you had a very outsized exabyte quarter-on-quarter growth in the quarter relative to your nearest competitor. How are you thinking about the continued trajectory here in terms of exabyte growth perhaps both quarter-on-quarter basis, but also maybe calendar '24 versus calendar '23. A: David Goeckeler - We're seeing a return in demand and expect sequential exabyte growth going forward throughout this calendar year. Our products are resonating strongly with customers, and we expect to continue this trend.
Q: On sort of reinvesting on capacity side, right, on the HDD side? I think you said when conditions are ripe for reinvesting, and I know to Aaron's question earlier, you commented on certain gross margin ranges. But this cycle, your gross margin is much higher at lower revenue levels than past cycles. So clearly, it feels as though, at least the capability to drive peak margins much higher than your established long-term range. So why should 33% be maybe the level at which you reinvest? Why wouldn't it be 34%, 35% or higher than that? A: David Goeckeler - We haven't set a specific target for reinvestment. We're focused on delivering great products and maintaining a balanced market with supply and demand. As market dynamics become clearer and we gain more confidence, we'll consider how to appropriately expand capacity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
