Western Digital Corp 10-Q for FY2024 Q2

Western Digital Corp (WDC)

10-Q 2024-02-12 For: 2023-12-29

Added on April 11, 2026

About this 10-Q

Western Digital Corp filed this 10-Q on February 12, 2024, covering the quarter ended December 29, 2023 (FY2024 Q2).

Headline figures

Quarter ended December 29, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.03B; down 2.4% from $3.11B a year earlier
Net loss: $287M; compared with a net loss of $451M a year earlier
Diluted EPS: -$0.93; compared with -$1.42 a year earlier

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Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	WDC	The Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)


		PAGE NO.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets — As of December 29, 2023 and June 30, 2023	6
	Condensed Consolidated Statements of Operations — Three and Six Months Ended December 29, 2023 and December 30, 2022	7
	Condensed Consolidated Statements of Comprehensive Loss — Three and Six Months Ended December 29, 2023 and December 30, 2022	8
	Condensed Consolidated Statements of Cash Flows — Six Months Ended December 29, 2023 and December 30, 2022	9
	Condensed Consolidated Statements of Convertible Preferred Stock and Shareholders' Equity — Six Months Ended December 29, 2023 and December 30, 2022	10
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	59

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60



Item 5.	Other Information	62
Item 6.	Exhibits	62


	December 29, 2023		June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	2,481	$	2,023
Accounts receivable, net	1,523		1,598
Inventories	3,216		3,698
Other current assets	618		567
Total current assets	7,838		7,886
Property, plant and equipment, net	3,315		3,620
Notes receivable and investments in Flash Ventures	1,344		1,410
Goodwill	10,037		10,037
Other intangible assets, net	79		80
Other non-current assets	1,772		1,513
Total assets	$	24,385	$	24,546
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,504	$	1,293
Accounts payable to related parties	251		292
Accrued expenses	1,037		1,288
Income taxes payable	506		999
Accrued compensation	353		349
Current portion of long-term debt	1,042		1,213
Total current liabilities	4,693		5,434
Long-term debt	7,351		5,857
Other liabilities	1,397		1,415
Total liabilities	13,441		12,706
Commitments and contingencies (Notes 9, 10, 12 and 16)
Convertible preferred stock, $0.01 par value; authorized — 5 shares; issued and outstanding — 1 shares; aggregate liquidation preference of $953 and $924, respectively	876		876
Shareholders’ equity:

Common stock, $0.01 par value; authorized — 450 shares; issued and outstanding — 326 shares and 322 shares, respectively	3		3
Additional paid-in capital	3,957		3,936
Accumulated other comprehensive loss	(493)		(548)
Retained earnings	6,601		7,573
Total shareholders’ equity	10,068		10,964
Total liabilities, convertible preferred stock and shareholders’ equity	$	24,385	$	24,546


	Three Months Ended				Six Months Ended
	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Revenue, net	$	3,032	$	3,107	$	5,782	$	6,843
Cost of revenue	2,540		2,579		5,191		5,334
Gross profit	492		528		591		1,509
Operating expenses:
Research and development	444		523		875		1,075
Selling, general and administrative	198		250		405		497
Employee termination, asset impairment, and other	24		76		81		100
Business separation costs	36		—		36		—
Total operating expenses	702		849		1,397		1,672
Operating loss	(210)		(321)		(806)		(163)
Interest and other expense:
Interest income	12		3		20		5
Interest expense	(108)		(73)		(206)		(143)
Other income, net	47		10		51		13
Total interest and other expense, net	(49)		(60)		(135)		(125)
Loss before taxes	(259)		(381)		(941)		(288)
Income tax expense	28		70		31		116
Net loss	(287)		(451)		(972)		(404)
Less: cumulative dividends allocated to preferred shareholders	14		—		29		—

Net loss attributable to common shareholders	$	(301)	$	(451)	$	(1,001)	$	(404)

Net loss per common share:
Basic	$	(0.93)	$	(1.42)	$	(3.09)	$	(1.27)
Diluted	$	(0.93)	$	(1.42)	$	(3.09)	$	(1.27)

Weighted average shares outstanding:
Basic	325		318		324		317
Diluted	325		318		324		317


	Three Months Ended				Six Months Ended
	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Net loss	$	(287)	$	(451)	$	(972)	$	(404)
Other comprehensive income, before tax:

Foreign currency translation adjustment	58		106		20		19


Net unrealized gain on derivative contracts	99		288		41		212
Total other comprehensive income, before tax	157		394		61		231
Income tax expense related to items of other comprehensive income, before tax	(19)		(49)		(6)		(33)
Other comprehensive income, net of tax	138		345		55		198
Total comprehensive loss	$	(149)	$	(106)	$	(917)	$	(206)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Convertible Preferred Stock			Common Stock			Additional Paid-In Capital	Accumulated Other Comprehensive Loss		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2023	1	$	876	322	$	3		$	3,936	$	(548)	$	7,573	$	10,964
Net loss	—	—		—	—			—		—		(685)		(685)

Employee stock plans	—	—		2	—			(43)		—		—		(43)
Stock-based compensation	—	—		—	—			77		—		—		77








Foreign currency translation adjustment	—	—		—	—			—		(38)		—		(38)
Net unrealized loss on derivative contracts	—	—		—	—			—		(45)		—		(45)
Balance at September 29, 2023	1	876		324	3			3,970		(631)		6,888		10,230
Net loss	—	—		—	—			—		—		(287)		(287)
Employee stock plans	—	—		2	—			33		—		—		33
Stock-based compensation	—	—		—	—			72		—		—		72







Purchase of capped calls related to the issuance of convertible notes, net of tax	—	—		—	—			(118)		—		—		(118)

Foreign currency translation adjustment	—	—		—	—			—		58		—		58
Net unrealized gain on derivative contracts	—	—		—	—			—		80		—		80
Balance at December 29, 2023	1	$	876	326	$	3		$	3,957	$	(493)	$	6,601	$	10,068


	Flash		HDD		Total
	(in millions)
Balance at June 30, 2023	$	5,716	$	4,321	$	10,037

Foreign currency translation adjustment	1		(1)		—

Balance at December 29, 2023	$	5,717	$	4,320	$	10,037


	Actuarial Pension Losses		Foreign Currency Translation Adjustment		Unrealized Losses on Derivative Contracts		Total Accumulated Comprehensive Loss
	(in millions)















Balance at June 30, 2023	$	(2)	$	(389)	$	(157)	$	(548)
Other comprehensive loss before reclassifications	—		20		(35)		(15)
Amounts reclassified from accumulated other comprehensive loss	—		—		76		76
Income tax expense related to items of other comprehensive loss	—		1		(7)		(6)
Net current-period other comprehensive loss	—		21		34		55
Balance at December 29, 2023	$	(2)	$	(368)	$	(123)	$	(493)


	December 29, 2023
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:

Cash equivalents - Money market funds	$	568	$	—	$	—	$	568


















Foreign exchange contracts	—		39		—		39


Total assets at fair value	$	568	$	39	$	—	$	607
Liabilities:
Foreign exchange contracts	$	—	$	87	$	—	$	87


Total liabilities at fair value	$	—	$	87	$	—	$	87


	June 30, 2023
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:

Cash equivalents - Money market funds	$	371	$	—	$	—	$	371


















Foreign exchange contracts	—		35		—		35


Total assets at fair value	$	371	$	35	$	—	$	406
Liabilities:
Foreign exchange contracts	$	—	$	192	$	—	$	192


Total liabilities at fair value	$	—	$	192	$	—	$	192


	December 29, 2023				June 30, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)
1.50% convertible notes due 2024	$	592	$	589	$	1,099	$	1,067
Variable interest rate Delayed Draw Term Loan due 2024	300		301		—		—
4.75% senior unsecured notes due 2026	2,295		2,257		2,293		2,193
Variable interest rate Term Loan A-2 maturing 2027	2,651		2,583		2,687		2,661
3.00% convertible notes due 2028	1,564		1,960		—		—
2.85% senior notes due 2029	496		430		496		400
3.10% senior notes due 2032	495		399		495		371
Total	$	8,393	$	8,519	$	7,070	$	6,692


	December 29, 2023
	(in millions)
Notes receivable	$	726
Equity investments	618
Operating lease guarantees	1,609
Inventory and prepayments	1,058
Maximum estimable loss exposure	$	4,011


	Lease Amounts
	(Japanese yen, in billions)		(U.S. dollar, in millions)
Total guarantee obligations	¥	228	$	1,609



	Three Months Ended				Six Months Ended
	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
	(in millions)





Revenue by End Market
Cloud	$	1,071	$	1,224	$	1,943	$	3,053
Client	1,122		1,089		2,269		2,318
Consumer	839		794		1,570		1,472
Total Revenue	$	3,032	$	3,107	$	5,782	$	6,843

Revenue by Geography
Asia	$	1,699	$	1,494	$	3,250	$	3,180
Americas	804		1,090		1,466		2,513
Europe, Middle East and Africa	529		523		1,066		1,150
Total Revenue	$	3,032	$	3,107	$	5,782	$	6,843


	December 29, 2023		June 30, 2023
	(in millions)
Inventories:
Raw materials and component parts	$	1,692	$	2,096
Work-in-process	966		979
Finished goods	558		623
Total inventories	$	3,216	$	3,698


	December 29, 2023		June 30, 2023
	(in millions)
Property, plant and equipment:
Land	$	235	$	269
Buildings and improvements	1,828		1,955
Machinery and equipment	8,684		8,704
Computer equipment and software	472		470
Furniture and fixtures	55		54
Construction-in-process	771		798
Property, plant and equipment, gross	12,045		12,250
Accumulated depreciation	(8,730)		(8,630)
Property, plant and equipment, net	$	3,315	$	3,620


Annual Installments	Payment of Principal Amortization		Purchase Option Exercise Price at Final Lease Terms		Guarantee Amount
	(in millions)
Remaining six months of 2024	$	237	$	57	$	294
2025	300		84		384
2026	362		127		489
2027	150		108		258
2028	47		104		151
2029	3		30		33
Total guarantee obligations	$	1,099	$	510	$	1,609


	Lease Amounts
	($ in millions)
Minimum lease payments by year:
Remaining six months of 2024	$	34
2025	67
2026	68
2027	60
2028	51
Thereafter	330
Total future minimum lease payments	610
Less: Imputed interest	170
Present value of lease liabilities	440
Less: Current portion (included in Accrued expenses)	47
Long-term operating lease liabilities (included in Other liabilities )	$	393

Operating lease right-of-use assets (included in Other non-current assets)	$	418

Weighted average remaining lease term in years	10.2
Weighted average discount rate	6.0		%


	Long-Term Commitments
	(in millions)
Year:
Remaining six months of 2024	$	148
2025	267
2026	73
2027	49
2028	20
Thereafter	130
Total	$	687


	Unamortized Compensation Costs		Weighted Average Service Period
	(in millions)		(years)

RSUs and PSUs (1)	$	516	2.6
ESPP	45		1.0
Total unamortized compensation cost	$	561


	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life
	(in millions)			(in years)






























Options outstanding at June 30, 2023	0.3	$	44.95	0.10



Canceled or expired	(0.3)	44.95
Options outstanding at December 29, 2023	—	$	—


	Number of Shares	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value at Vest Date
	(in millions)			(in millions)






























RSUs and PSUs outstanding at June 30, 2023	13.8	$	46.56
Granted	5.6	38.04

Vested	(4.0)	47.65		$	173
Forfeited	(1.0)	46.58
RSUs and PSUs outstanding at December 29, 2023	14.4	$	43.56


Accrual balance at June 30, 2023	$	1,021
Gross increases related to current year tax positions	4
Gross increases related to prior year tax positions	19
Gross decreases related to prior year tax positions	(3)
Settlements	(363)
Lapse of statute of limitations	(1)
Accrual balance at December 29, 2023	$	677


	Employee Termination Benefits		Contract Termination and Other		Total
	(in millions)
Accrual balance at June 30, 2023	$	31	$	5	$	36
Charges	43		29		72
Cash payments	(57)		(3)		(60)

Accrual balance at December 29, 2023	$	17	$	31	$	48


	Three Months Ended December 30, 2022
Condensed Consolidated Statement of Operations	As Previously Reported		Adjustment		As Revised
	(in millions, except per share amounts)









Operating loss	$	(321)	$	—	$	(321)
Interest and other expense:
Interest income	3		—		3
Interest expense	(73)		—		(73)
Other income, net	6		4		10
Total interest and other expense, net	(64)		4		(60)
Loss before taxes	(385)		4		(381)
Income tax expense	61		9		70
Net loss	$	(446)	$	(5)	$	(451)

Net loss per common share:
Basic	$	(1.40)	$	(0.02)	$	(1.42)
Diluted	$	(1.40)	$	(0.02)	$	(1.42)


	Six Months Ended December 30, 2022
Condensed Consolidated Statement of Operations	As Previously Reported		Adjustment		As Revised
	(in millions, except per share amounts)








Operating loss	$	(163)	$	—	$	(163)
Interest and other expense:
Interest income	5		—		5
Interest expense	(143)		—		(143)
Other income, net	—		13		13
Total interest and other expense, net	(138)		13		(125)
Loss before taxes	(301)		13		(288)
Income tax expense	118		(2)		116
Net loss	$	(419)	$	15	$	(404)

Net loss per common share:
Basic	$	(1.32)	$	0.05	$	(1.27)
Diluted	$	(1.32)	$	0.05	$	(1.27)


	Three Months Ended December 30, 2022
Condensed Consolidated Statement of Comprehensive Loss	As Previously Reported		Adjustment		As Revised
	(in millions)
Net loss	$	(446)	$	(5)	$	(451)
Other comprehensive income, before tax:

Foreign currency translation adjustment	95		11		106
Net unrealized gain on derivative contracts	288		—		288
Total other comprehensive income, before tax	383		11		394
Income tax expense related to items of other comprehensive income, before tax	(58)		9		(49)
Other comprehensive income, net of tax	325		20		345
Total comprehensive loss	$	(121)	$	15	$	(106)


	Six Months Ended December 30, 2022
Condensed Consolidated Statement of Cash Flows	As Previously Reported		Adjustment		As Revised
	(in millions)
Cash flows from operating activities
Net loss	$	(419)	$	15	$	(404)



Deferred income taxes	25		(4)		21



Other non-cash operating activities, net	69		(13)		56








Other assets and liabilities, net	(317)		2		(315)
Net cash provided by operating activities	41		—		41


Condensed Consolidated Statement of Shareholders’ Equity	As Previously Reported		Adjustment		As Revised
	(in millions)
Retained earnings as of:

July 1, 2022	$	9,039	$	127	$	9,166
December 30, 2022	8,711		142		8,853
Accumulated other comprehensive loss as of:
July 1, 2022	(554)		(25)		(579)
December 30, 2022	(369)		(12)		(381)
Foreign currency translation adjustment for the three months ended:
September 30, 2022	(80)		(7)		(87)
December 30, 2022	97		20		117


	As of June 30, 2023
Condensed Consolidated Balance Sheet	As Previously Reported		Adjustment		As Revised
	(in millions)








Notes receivable and investments in Flash Ventures	$	1,297	$	113	$	1,410


Other non-current assets	1,509		4		1,513
Total assets	24,429		117		24,546


















Accumulated other comprehensive loss	(516)		(32)		(548)
Retained earnings	7,424		149		7,573
Total shareholders’ equity	10,847		117		10,964
Total liabilities, convertible preferred stock and shareholders’ equity	24,429		117		24,546


	Total		1 Year (Remaining Six Months of 2024)		2-3 Years (2025-2026)		4-5 Years (2027-2028)		More than 5 Years (Beyond 2028)
	(in millions)


Long-term debt, including current portion(1)	$	8,454	$	967	$	2,600	$	3,887	$	1,000
Interest on debt	1,281		207		735		239		100
Flash Ventures related commitments(2)	3,928		1,096		2,078		704		50
Operating leases	610		34		135		111		330
Purchase obligations and other commitments	687		148		340		69		130
Mandatory deemed repatriation tax	464		—		464		—		—
Total	$	15,424	$	2,452	$	6,352	$	5,010	$	1,610


Exhibit Number						Description
3.1						Amended and Restated Certificate of Incorporation of Western Digital Corporation, as amended to date (Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (File No. 1-08703) with the Securities and Exchange Commission on February 8, 2006)
3.2						Certificate of Designations, Preferences and Rights of Series A Convertible Perpetual Preferred Stock (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on February 1, 2023)
3.3						Amended and Restated By-Laws of Western Digital Corporation, as amended effective as of February 10, 2021 (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on February 12, 2021)
4.1						Second Supplemental Indenture, dated as of October 10, 2023, by and among Western Digital Technologies, Inc. and U.S. Bank Trust Company, National Association, as Trustee (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on October 10, 2023)
4.2						Indenture, dated as of November 3, 2023 (the “Indenture”), among (i) Western Digital Corporation, (ii) Western Digital Technologies, Inc., as guarantor, and (iii) U.S. Bank Trust Company, National Association, as trustee (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on November 3, 2023)
4.3						Form of Global Note, representing Western Digital corporation’s 3.00% convertible senior notes due 2028 (included as Exhibit A to the Indenture filed as Exhibit 4.1) (Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on November 3, 2023)
10.1						Form of Confirmation for Capped Call Transactions (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on November 3, 2023)
10.2						Western Digital Corporation Amended and Restated 2021 Long-Term Incentive Plan, amended and restated as of August 22, 2023 (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on November 17, 2023)*



31.1						Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002†
31.2						Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002†
32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document†
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document†
101.LAB						XBRL Taxonomy Extension Label Linkbase Document†
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document†
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document†
104						Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101


			WESTERN DIGITAL CORPORATION

			By:			/s/ Gene Zamiska
						Gene Zamiska
						Senior Vice President, Global Accounting and Chief Accounting Officer
						(Principal Accounting Officer and Duly Authorized Officer)


			/s/ David V. Goeckeler
			David V. Goeckeler
			Chief Executive Officer


			/s/ Wissam Jabre
			Wissam Jabre
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)