Western Digital Corporation Q2 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Overview

  • Revenue reached $4.2B, up 5% sequentially and flat year-over-year.
  • Non-GAAP EPS landed at the upper end of guidance, driven by stronger HDD margins and improving flash pricing.
  • Management reaffirmed that the June 2019 quarter marked the bottom of the flash pricing cycle, with a sharper recovery now underway.

Key Financial Highlights

  • Gross margin improved to 25.9%, up from 24.8% in the prior quarter.
  • Flash gross margin: 19.5%, up slightly from Q1 FY2020 as pricing improved but mobile mix diluted results.
  • HDD gross margin: nearly 31%, up from 28.5% in Q1 FY2020.
  • Operating cash flow: $257M; free cash flow: $377M.
  • Debt reduced by $388M, including $325M discretionary repayment.
  • Cash and equivalents: $3.1B with an unused $2.25B revolver.

Business Segment Performance

Data Center Devices & Solutions
  • Revenue: $1.5B, down 3% sequentially but up nearly 40% year-over-year.
  • Capacity enterprise HDDs continue strong: WD shipped record exabytes in fiscal Q1, holding 53–55% market share.
  • Sampling begun for 16TB, 18TB CMR and 20TB SMR drives; revenue shipments start in the March quarter.
  • Enterprise NVMe SSD revenue grew over 50% sequentially; WD achieved high-single-digit share and expects to double revenue in calendar 2020.
Client Devices

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Operator: Good afternoon. And thank you for standing by. Welcome to Western Digital's Second Quarter of Fiscal 2020 Conference Call. [Operator Instructions] Now I will turn the call over to Mr. Peter Andrew. You may begin. Peter Andrew: Okay. Thank you, and good afternoon, everyone. Joining me today are Steve Milligan, Chief Executive Officer; Mike Cordano, President and Chief Operating Officer; and Bob Eulau, Chief Financial Officer. Before we begin, let me remind everyone that today's discussion contains forward-looking statements including product development expectations, business plans, trends in financial outlook based on management's current assumptions and expectations, and as such, does include risks and uncertainties. We assume no obligation to update these statements. Please refer to our most recent financial report on Form 10-Q filed with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially. We will also make references to non-GAAP financial measures today. Reconciliations between the non-GAAP and comparable GAAP financial measures are included in the press release and other materials that are being posted in the Investor Relations section of our website. With that, I will now turn the call over to Steve. Steve Milligan: Thank you, Peter, and good afternoon. Western Digital delivered solid results in the second quarter as revenue came in at the midpoint of the guidance range and non-GAAP EPS was at the

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