WDC - Earnings call transcript Q4 2021 | Western Digital Corporation

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Operator

Good afternoon, and thank you for standing by. Welcome to Western Digital's Fiscal Fourth Quarter 2021 Analyst Call. Personally all participants are in a listen-only mode.

We will open the lines up for questions shortly. [Operator Instructions] Now I will turn the call over to Mr. Andrew. Peter

begin. may You

Peter Andrew

good and afternoon, you, everyone. Thank

today Bob Eulau, me are David and Officer; Executive Chief Chief Goeckeler, Joining Financial Officer.

Before product plans, remind forward-looking based risks we everyone that does as assumptions and current today's me begin, and include discussion on expectations, management's statements, portfolio and trends including business expectations, financial outlook uncertainties. such, let and contains risks filed We and materially. information recent report most refer to assume our more cause could no obligation that for Form uncertainties to with XX-K actual update on differ SEC these the statements. Please to the on results

the references to non-GAAP and Relations non-GAAP release are David website. our make over also will I'll section between financial comments. in Reconciliations included measures other the materials We turn of comparable measures Investor GAAP the that, to call in With for financial that press today. now introductory are the his and posted being

David Goeckeler

and discuss We and joining Good billion, Peter. for per the of thanks guidance in non-GAAP upside primarily continue our we flash this we March joined reported created you, fourth April. pandemic. by share $XX.XX. hard that The gross we accelerated above per world stages was solid reported value will day-to-day life. year importance is to transformation of call XXXX drive of revenue fiscal non-GAAP industry, has $X.XX, the transformation for and both ranges results were margin quarter afternoon, Western is of opportunity drives. only time, Thank share every earnings and person's with company, Last in digital capacity occurred I and every data increasing record and $X.X $XX.X before. dependent quarter digital The enabled ever and Western demand Fiscal technology fourth hard is Digital XXXX everyone, the a billion that capitalize early XX% as our of and technology the all Today to driven every enterprise has Digital year the totaled provided on provider undeniable revenue non-GAAP results. during of in a of the and conviction than period this that strong that with more the At solutions. reshaping earnings

to what diverse ability enables us commitment this us and combined drive to to quality technologies cloud to Our from sets results. to the and provide apart endpoints to of range us allows highest is deliver delivering the ultimately our products, with the innovation edge strong

fiscal of Western year, proud particularly company Digital that in supply of what our the impacted the accomplished, various As we very I'm on aspects of and this has light reflect the chain. fact pandemic

necessary goals we of Western As a position separate we throughout technology improve place respected by business created units layout our widely strength. greater the focus, and to the to execution, made a our sharpen right HDD led the leaders. technologies, changes two strategic flash achieve and in Digital To team year goals for these

continue are innovation customer to opportunities data accelerated additional on dependable and successfully capitalize of continue complete pandemic working the ramp second SSDs, the while to and in hard and successfully built momentum energy-assisted products industry-leading We able navigate economy. were also through qualifications. that providing cornerstones to the of renewed result a As our enterprise we our our drives NVMe this generation focus, roadmap, hard

of enterprise product from across growth client notebooks retail remained routes an our market. strong markets. recap OEM quality for the product Black prefer in continues that, revenue Within automotive That we growth demand gamers demand. VR, game underpin to came above as well for WD smart With the a and the growing our are cloud of large right enterprise recovery success, foundation home I'll We the attributable shift saw beginning COVID. strategically could HDD routes as and incremental robust NAND to was opportunities this positioned to standout revenue gross latest large the quarter in face growth growth, in Chia, our for lineup continued and cloud even was to fourth And in expanding results. lingering also our market-leading SSDs quarter-over-quarter quarter to and end solutions. our our expectations, ability now strength In and we of and us. impacts of growing performance growing of than for is breadth front on The needs our two enterprise flash manage our we another customer the we important to believe to our SSDs supply more shortages, products, we consoles, in line Within propelling the we as the of and our customers markets. remains a in both base experienced a qualification the end to flash completed line the the a through the gaming, our and bits we and Titan that capitalize right while industrial. broadly. to and market our data fourth our of continue both flash, products the quarter greater and provide In and of demand Western we to as with relates embedded devices of address devices, it large to are market, business foundation of NVMe channel forward SSD for Within driving and of of in solutions feel right continue number the progress the have we results Chromebooks. achieving we was meet generation demand due customer from primarily margin. our product while we center are and pleased demand experienced and businesses This Digital as and customized to ramping demand many demand component from strong emergence unique increasing today, some revenue Within

expect As most the bit To-date the BiCSX see picks year, node across ramp lines capital bit the we era efficient this our our profitable to we to increased growth. late will and is growth. ramp XD product in up achieve BiCSX contribute and crossover

our driven from with our capacity the incredible nearly terabyte capacity fiscal hard revenue We across in all energy-assisted record and growth bit with sequentially, with the the cloud impressive are for organic reflection performance engine successful last enterprise enterprise and success year. spending, in expect recovery drives, have qualified leading innovation data our shipment fully BiCSX of growth to commercialized the crypto I'm hard HDD drive center Chia. be highlighting we partnership is look to have and in our excited the leadership decade, the and Kioxia. a customers drives. those drives. and in are had is enterprise we lesser in underpinning benefits latest extent increase by ramp BiCSX our This the cost of drive tripled our announce same of hard again ramping important a edge significant drives XX driven we XX-terabyte hard XXteribyte This sequential the experience energy-assist perspective the to highlighting XX% and technology point Shipments workhorse for it. to once These we for business a achievement of In by capacity have growing drive, currency had energy-assisted demand, over highest hard for well forward into our successful confidence XXX as largest a hard sequentially. our a customers exabytes a

the throughout addition, desktop been due OEM In improving and demand client video strong demand. for quarter has to smart

sustainability we was increased we continue the was applications. currencies for consumer actively hard presents Chia, demand. in which HDD and above due as for strength great for expectations as There retail the demand monitoring vertical constraints, of While new smart for the saw a we opportunity interest to are but OEM fiscal of grow crypto in a crypto quarter. demand supply the in Proof-of-space believe quarter. emerged at video as closely currency the market we Proof-of-space first Within at We HDD beginning are us both managing also drives industry, such home expect storage to

new harness Moreover, in referenced strongly the both us Digital's July in to these powered portfolio enable as of data are data The unique a fueling At Technology both the exponential capture customer. focus right synergies meaningful ever-increasing to and the technology Siva ability highlighting industry-wide manufacturing, President we the innovation of of drives on solutions key the of I particular, and us in structure operating Dr. business opportunities. storage have are four the by Western which the gives center all potential. believe in growth our In a full devices importance XX, ahead, our the and this we full believe is capture flash the cloud. intelligent sustainable to and our the and ability technology device center to fundamental Strategy deliver need market, trend. in HDD Looking discussed across shift areas; And that we earlier Sivaram, is critical, webcast to demand, we range solutions.

Most disruptions to remain see of challenge we the factors we pandemic. components. shortages the are there are of a we across The closely managing have continue monitoring. actively the industry chain optimistic, continued we importantly, are and impact While several the presented supply to certain

has This different a as future. geographies logistics contributor been lead are and to in Additionally, various times major challenges challenge may of reopening. remain increase stages in the pose a

obstacles, supply our pricing. share and increased maintaining face on additional customers these results. Despite call we result diligently delivering approach to continue we a logistics cost continue financial turn disciplined now As to to our of the to I'll over pressures. are working a to Bob, challenges times, details disruptions, to the lead while

Robert Eulau

everyone. good Thank you and afternoon

As year-over-year. Dave quarter the above the were ranges $X.X for upper mentioned, share $X.XX. up of guidance billion, in quarter April. overall sequentially and Total Non-GAAP fiscal per the the earnings end up fourth was XX% was XX% revenue results provided for

up year fiscal full last fiscal was revenue XXXX the from X% $XX.X EPS non-GAAP from billion, XX% year. $X.XX, For was and up

revenue sequential $X.X On and a in Mobile video sequentially major across gaming, was our revenue sequential XX% experienced every growth a category; at basis, client smart Client end markets, essentially industrial. up flash Devices SSDs, up hard revenue automotive, Looking and on X% both drives was billion, basis. year-over-year. flat we client HDDs, and and product

revenue billion, up and was and Data Center from $X.X Moving Solutions, up to ago. X% sequentially XX% a Devices year on

in product just this growth our and from enterprises than Revenue more the the drove energy-assisted growth. drives hard ago. generation two generated latest to end quarters New double revenue from contributed ramps market SSDs

sequentially Demand enterprise shipments. exabytes hard capacity comprising for enterprise our our grew grew nearly particularly Our energy-assisted our was XX% hard XX-terabyte SSDs capacity and strong, drives drives XX% of enterprise sequentially. half

broad was based up Solutions a both product flash from Client $XXX major XX% year revenue HDD XX% was and ago. across up all growth Finally, categories. and again Once and million, sequentially revenue

Turning Hard a X% billion, basis, was total basis X% year-over-year. basis. by were bit Flash X% technology, on sequential average drive hard and $X.X sequentially. year-over-year. sequentially $XX. XX% hard drive up Flash like-for-like per while X% revenue sequentially increased blended XX% to billion, up a and XX% shipments on price a up revenue XX%, flash $X.X revenue the up increased up up sequentially XX% to drive shipments On was increased and exabyte ASPs

range will was we guidance costs non-GAAP was points percentage upper fourth note that comments above Gross quarter the expenses, end the X.X results move margin be April. This otherwise. for up unless provided As stated please related to sequentially. to of and the in XX.X%, my

market the to expand to XX.X%. margin end ship ability enabled points X.X routes by us markets broad percentage gross to Our to attractive our to and bits most sequentially proactively

expenditures, free include profitability, percentage Our cash impact and the and fiscal X.X $X.XX. up of joint of flow million. equipment, which million margin XX.X% quarter sequentially. XXXX. $XXX related points. Operating drive or Operating was range. was With increase and on the our fourth gross to year-over-year. the per quarter million outflow activity were plant share flow was an income COVID-related the year tax points also statement hard X.X% flash a was million. Operating of a flow Earnings quarter million ventures fiscal million cash within This was guidance cash the representing expenses improving tax approximately for Capital property, rate XX% includes $X.X $XX purchase $XXX our in $XXX rate for XX.X% and $XXX was and fourth $XXX our from our percentage prior increase XXX% was was our

a million. and million We the expect including growth CapEx for year CapEx billion the $X be to off $XXX billion. debt, $XXX cash fiscal to of fiscal payment $X quarter next we be discretionary debt around in fourth paid In approximately

For fiscal we total full the year paid $XXX of million. a down

the at debt of quarter. outstanding gross billion Our was end fiscal $X.X the

debt discretionary the made Additionally, already quarter. we have fiscal payment first million $XXX in of a

as a in of EBITDA credit Our compared ratio was agreement times year gross adjusted our resulting X.X defined ago. leverage $X.X billion, a in to X.X

reminder, in our further $X relations depreciation earnings in includes a refer agreement associated reflected the cash is statement. for the credit details. add with presentation As Please on not joint website to ventures. the billion our back investor This flow

position liquidity At the be end cash the equivalents. we Our $X.X quarter, continues of to in strong. billion and had cash

addition, In revolver $X.XX of unused we billion. capacity have

Moving fiscal on revenue billion. range to to first the our in of follows; guidance expect billion $X.X is outlook, to our non-GAAP quarter be we as $X.X

be XX%. margin expect We between and to XX% gross

expect We gross margin expect hard drive and margin we gross flash improve be sequentially. relatively to flat to

is be Interest XX% in the million. and rate $XXX the and to We year. quarter fiscal fiscal expect to to first be XX% approximately and is expenses other $XX operating million expense tax $XXX expected expected The between and between be million.

to $X.XX back approximately million expect earnings quarter and to fully Dave. the $X.XX $XXX over the turn We per I’ll share between now call first shares in outstanding. assuming diluted

David Goeckeler

Thanks Bob.

close with the pleased successfully very how we out the by conditions pandemic. I navigated brought on year team market Digital dynamic am As XXXX, fiscal Western

we While innovation the into the that will combine leaders. very forward innovation. newly focus on propel driving for of I has am us structure, you to ramp increased a as been market and new adapted our all, it execution challenging confident time our products continue growing will continue to When with markets focus organization large on two

are Our portfolio see to landscape eye enables the evolving safety the of the to and are consideration parts solution close seeing employees economy to is unique of be to foundation our customers' of are technology health our on certain of and time. COVID-XX. keeping for and and the ability challenges. we the we across In needs us entire data With storage a diverse their the employees, market spike our working status this move careful storage through technology a diligently the there of cases Asia also particular, support in meet

and the is it continue will for we complexities to a presented While shareholders. difficult customers value drive while innovation the pandemic we navigate situation, for by

Let’s begin the Q&A session.

Operator

have a go Joe We from Moore Please Instructions] Morgan [Operator question from ahead. Stanley.

Joseph Moore

you that Great, referenced, trickle kind NAND NAND of issue could to NAND I you if thank versus you. about talk into what degree in is and components wonder [ph] the tightness a that controllers products? other

David Goeckeler

hear you. Hey from Joe, to good

it's out is mixing There’s no there have, the controllers think we So, controllers also NAND shortage we to the in both. most portfolio I the well. what a doubt is of as and of are get doing shortage

we mean, able to demand we on I result more mixing satisfy the get but NAND the can, we're side. So than are best there’s to

we to So, both we them get it’s really, juggling the result and best are can. balancing

Joseph Moore

that the Okay and the September for as, you’re you guide quarter assumption constrained is supply kind for whole the of quarter? still

David Goeckeler

are a little for juggling from have upside, we quarter Yes, to well. still those both Mixes looking that. different we things. are We as Right? quarter juggling of customers is

to roll when together is where we to how that all -- you in get you QX. at yes, get are So

Joseph Moore

very Great, you thank much.

David Goeckeler

Sure thing.

Operator

you. Thank

from have question Rakers We Fargo. a from Wells Aaron

Aaron Rakers

agreement, last you. think can I how and also contribution of underneath question that, Yes, bit line results. a demand? you Chia a thanks term for about curious in that that ask and of talked taking hard then thinking drives, congratulations the capacity want last any and as the the sustainability XX% was the about of quarter? I from quarter the you how far thoughts year I’m to sequential disc little about your Thank as longer you this growth are significant shift purchase solid if

David Goeckeler

thanks, Aaron. Yes,

from the well has very and demand product strong the very think been cloud very, I So we received. did see

talked is the about of As fully AT&T saw We we've strong product. commercialized energy-assist now. very sequential growth

half, continue working to strong our see We growth second the in customers. with

to right to invest Chia exabyte capacity through about us hitting way maybe as additional in of in growth to we're, continued due best cohort where and going the in where head especially and the growth important, we the important, how kind think, first couple upside of we about talk agreements, the think cohort that, demand think on about there it visibility were to Chia. the expect I becoming they're first long-term call second last is week we're growth. was, the quarter, the We that The the a very in forward working the business. was because million was, business, half, the I of I just think think $XXX probably support of to thinking way more quarter and those we're the probably second it of getting to one the is expect more and about

Aaron Rakers

Thank you.

Operator

next you. from comes question from Thank Evercore. The C.J. Muse

C.J. Muse

taking hard demand with the guided strong you I afternoon. on call good time I'm the a having Yes, sequentially. the only Thank outlined for here trends reconciling question. X% guess, revenues up

walk you so your, through, both exiting perhaps grow guess, did And understand then can Thank backlog HDD the are more to than expect sequentially constraints other? one into I June you're NAND? help and visibility, September? to the seeing supply And you and So grow it where improving quarter I seeing your again you. you do presumed us

David Goeckeler

get exceptional on about doubt is pushing the both an that. there's We could there Yes, very out and was of demand across portfolios, it. so because were it every growth very, factories no it, drive tightness hard there to for we was quarter

amount there. that seeing And, look mid kind you top throughout strength quarter so and of cap top I so growth, find So sequentially, market. at were the not continue looking not guess It's in the hard you growth we it But drives for going, customers look just to sales huge good cloud. strong there's it's as strength when able upside surprising of we a do for But we sequential than the produce. we side, not everything to, we the of really so again, got well. at in We're we've when flat we more at basically had on a see markets, line that could the the opposite.

So the we can NAND doing demand environment the as have can good much with and we're satisfy to is and available. they we the with components best as the

Operator

Toshiya next Our Sachs. comes from question Goldman Hari from

Toshiya Hari

on Thanks on afternoon. much and had taking good the question congrats strong Hi, results. NAND. a very so I for question the

on saw about, were can quarter you bit talked your a the to the in lumpy, what next ramp, multi on from a coming quarter basis. downs costs quarterly you're think remarks, cost very in downs, and off strong the be And stretch I curious in very being your cost BiCSX, the up but a basis in BiCSX a of prepared perspective quarter little I I realize a over the expectations for NAND. BiCSX XX months. sequential sorry, you I'm BiCSX Dave, similar think cost

If super expectations that kind we make downs can of that will you cost how you think helpful? set as you. and Thank transition should about be

Robert Eulau

Hey, Toshiya, Bob. it's

the it have we the as So ahead a feel at we XX% looked year-over-year, takedowns, year-over-year goal we in of of for goal. mostly the actually continue XX% good to and cost about were bit little declines long-term terms and cost

ramp the transition. half. continue BiCSX this are We the second and starting through past quarter to We to nodal did that hard we'll

As Dave expect to the fourth in the mentioned, we calendar crossover get quarter.

in I in a of we're good think place. costs, terms I think So

Toshiya Hari

you. Thank

Operator

from Karl Ackerman question next Thank Cowen. you. comes from The

Karl Ackerman

today outlook to assumption gentlemen. decline that hard what drive a mix both seems is afternoon, you. have that saw wondering, I margins those of draws? drive know your negotiated or drives, good similar your favorable last address should but mix gross for volume place volume? price discuss you suggest with And was forecasting ASPS long-term whether in hard are you nearline you pricing, retail as question, for less could difficult, and Yes, in on implied and agreements assume by you driven we I of just And the year. Thank is

Robert Eulau

so on we and margins I'll then in. Bob. But We're quarter we're Dave add as from and to above good margins we've by continue good guide QX in be terms XX%, to terms want we margins want we time. start this that. again guiding improve really aren't add segment. in gross to Hi, to over here. because We capacity, can And, going gross drives drives, of feel expecting specifically how on hard to improve our in continue hard Karl, of it's we our XX% had about we above very be really actually judicious to said, the

David Goeckeler

kind a a of we baseline the the our sets into Karl at certain multiple Yes, quarters. doesn't those in about and and gives that kind customer, volume way It us said, a be mean for we'll going we're half be agreements, it some baseline as ones price. that's working everything but the and of to the goes first visibility cohort of year. long term I looking think over second through and the Like those, second of setting

said, sure As we do give the make growth. think exabyte demand to I I visibility they're on investments important becoming us to the to support more right we need the make

Karl Ackerman

you. Thank

Peter Andrew

get we next can Hilda, question, please? the

Operator

next comes Mehdi you. Thank from Hosseini The from question SIG.

Mehdi Hosseini

taking thanks for the and first David. is for my one Yes, question,

have understand Bob, But your September into past supply I be margin few the improving quarter, quarters, goes guide XX% is and to there chain understand the that I exceeded perhaps, conservatism you shipment why is is there there's of guide. also gross some I your understand you. want is flattish? And and Thank to but do for then guidance prudent. exabyte level XX%, is by disruption Over you

David Goeckeler

from there's mean, But tax a fair and anything the the when know, the always in quarter conservatism, amount I we overachieved natural this also, top I of we think you we get we in on we rate. saw Yes, model line leverage benefit in some do. there's

also took it. advantage drives was a and expected, we which is, pricing than We environment on which we of better had So great.

the good And we had really was did that very, most that situation a possibly managing of could. that and dynamic. team getting a we think out I very market the job through of

still managing there's working chain is, through very And we're been supply I was working we're mean, that. a we're there because managing we've also, lot a But it and still COVID, through still dynamic a that. there for out So is time issues at through. risk long some these very of of now which quarter. good

talking to qualification a think about time. is for because good strongly long with many the I into the now. very that very, quarters prudent sequential the been whole level. we but saw We've XX% Like we And I visibility of lot most be so the We're about it around we're been for worked We've we -- said, we I new been very quarter. where the it business, want that's at. giving process, on got think happy to out to very feel of are to cloud a a good by a on shipments to that really I the and situation innovation really, mean, strong exabyte about really record brought demand energy-assist in think the results bringing of customers this. think way and and driven our I enterprise, We and the I market. capacity that's to And responding the market. technology

really feel to we where are good So responding the customers it. about is and at portfolio really

Robert Eulau

range on we're we for had mean, gross percentage a of it's going to you the XX% point guidance to pleased Mehdi, gross margin look XX%. the of from at I QX. in margin, So all, QX, And if increase really X.X first QX with

So at expecting still the to see we're margin. improving it's midpoint, gross

of will quarter. healthy improve the gross flash deliver margin and guidance drive range very but again our really to margin I and going it hard gross As in a margins the we're we're profitability. ago, feel And think obviously improve, terms and is again, good had side, don't be I still and quite mix XX% good have to good different will mentioned as above the mix, each in a minutes as expecting it probably QX. we very about few But

Operator

Thank you.

from comes America. of from Our Wamsi question next Mohan Bank

Wamsi Mohan

and for And thank and $XXX as you Chia. top into some the there from handicap help expectation hoping to any the is level, couple I the your the that and think that I'm and baked do Thank the Yes, in really but I in impact you ongoing the can of mentioned magnitude this, supply look do you. was missed best maybe quarter was congrats a issues you that at that the margins from guide, guide way handicap way you, on of sorry, guide I to if line possible? results. benefit the as strong chain also well? Dave, million you sustains you have wondering,

David Goeckeler

That sustains from Chia.

-- had impact I a channel normalize. the that think all and while we're big inventory on and going little Chia take to to it's for a

Bob it's there. We're demand, well. think from very ask space you I have closely. We're mid lingering say impact certainly a it But overall clearly So watching quarter. off a but tapered watching. where comment I'll let's to was, watching we're as

we had all get possibly components is upside is there the to So we what do it how the in the can we you're is a which asking, could do mix with is, change somewhere the we what into we from you little a handicap But portfolio hard to to handicap I what get? the else think if put or the put have, -- you we have I and in or best I or numbers you're somewhere best where think we that much particular channel market, not the retail perspective? at route to spot, best feel whether know, return get any can that free the don't on it's component. Bob but product way, the do for to

Robert Eulau

channel on during shift we Dave mean, said, really mean, lot I as hard it's a that particularly to I the quarter. No, side, say.

levels inventory low our are So there.

to what on expecting had been mean, forced we're million we $XXX controllers be to the had to we're hard we we $XX But the chain all quarter And you we have million hard us the the what very that issues get going I really it'll like dynamic through missed the may before feel it's be work to do I wanted. quarter, good to we supply be, for as last revenue. to manage And and QX, we to quantify and quantify If even able environment we know, guess at a able on the to but going supply maybe we about in it's we guidance really very look would into fourth have revenue challenges we're the out few quarters. to don't gave.

Wamsi Mohan

quickly I wondering there on Thanks, the pieces could think up. impact just guys, are the variant if in if Thank here, and margin the on moving COVID, clearly, was the impact how happening a lot but guide. what are guide? Right? over you. of I So on you just some you are about of that to like were impact handicapping your Asia, margin in Delta things that follow

Robert Eulau

expecting Well, I'm hard year we've the have for the so. to certainly logistics challenges the had last drive we're same going on side, or

a make of in going you're And as Dave X.X quarters really sure factory of we X.X, drive now, it neighborhood perspective and points percentage And hard a continue we careful side. to lot chain for situation we've So have through to been COVID we're through of on perspective. we how the the said, have supply in that. situation something the to headwind not doing and Asia in need terms but work good the of work from is to really,

Wamsi Mohan

you. Thank

Operator

Jim from next you. from Suva Thank The comes question Citigroup.

James Suva

us ahead. costs keep hard pricing With months much. margins, the next or high to while flow very and few such, to I should see operating about leverage worse bit talk a it's contract going Shipping because NAND lower. can and in getting believe coming you the you higher little spot them costs, Thank through your your

more more talk model you ASPs and you through So walk flow be what leverage. about us or investments the we consider if higher. or things going can have margin through normally operating declines annual may price the Is fixit or with to there us needed

David Goeckeler

the and that come leverage saw good mean, job across of price products a think have of saw lot lot board, Chia We think saw impressive as on did a did margin play our dynamically you team I a quarter. went driven as in channel improvement saw we model environment. to I through. properly gross sequentially of And it I we the operating I said, a but most and of I we of side through think in flow reacting into trying a on pricing by and a the cases, terms the quarter. demand we what this was in lot good the the really mean, we

side, both only then we flat as forward very same terms as of do in to to the in going we see cost kind are we're to of flash continue going drive move the takedowns. We help side or and we takedowns had and that's even price, on to hard operating price on going So increase QX thing cost leverage. obviously that and good keep

James Suva

Thank you.

Operator

Thank you.

question next Ho from Our from Stifel. comes Patrick

Patrick Ho

please adoption drives? you Can you're even drives? mass about transitioning customers rate on qualitatively from XX-terabyte that or new the the adoption new whether activity you with who centers new much. qualitatively capacity are talk seeing terms storage you're greater weren't existing and cloud, there, Dave, data or any very wins in you talk seeing hyperscale can with doing the Thank customer the of cloud about and your whether hyperscale customers you're previously pickup and it's

David Goeckeler

technology Yes, it's they're of this data as in point the center far where qualification. at think evolution architectural as the at they're adopting how their of I

be the can. their of as I storage some So all, different can I the share I only customers, way a you're first seeing our mean, wide likely we're is adoption, are part, of you're of if fast it. drives XX different stages it's at cloud. in lion's will architectural But most cloud, going guess, to I Hard the customer. different mean, are building our evolution, as say they customers,

through will working second then of XX a are XX. Some year, in half move let's and the say the to transition,

XX. going are Some through

a point our transitioning throughout and said, half just So Again, it's the this as shipments quarter Bob question all XX. it saw nearly we strong at were growth they're really centers. of on exabyte how enterprise their of capacity, data is ship exabyte

where I So of the we innovation feel is our fully like been been by the product energy-assist commercialized and good has said, received really well and about has customers.

Patrick Ho

Great, thank you much. very

David Goeckeler

thing. Sure

Operator

you. Thank

comes from Harlan Our next from question Sur JPMorgan.

Harlan Sur

question. my Thanks afternoon. taking Good for

SSD and we've pretty stretched. pretty HDD as are controller chip of lead heard the supply partners preamp to controller are shortages, tight your times constrained addition ASIC In semiconductor and

disruptions. team in HDDs the of media HDD or preamp so, and more constraints September And component operations quarter able other related you shipment driven September the constraints had ship supply, or would controller if here potential to more the manufacturing pandemic is just head HDD being more and by in be or

Robert Eulau

We're get easy side, a December basically as it Harlan, not as September the Bob. hard true. that don't get capacity is we how parts the full quarter We'll the see drive quarter out plays to at beyond. But and running quarter, I to it's the in it on definitely big so that's and the see factor. in September

David Goeckeler

mean, the need, to to same overtime is was covered factories mean I say we folks to balancing components issues the out going can Harlan, we've in the and all get in September. drive I Yes, got but I that we've working every got get we chain obviously supply the thing. team

so can. something very these managing components been are got big we're and the but we really that, eye in on, hard And to we've good COVID about a we're can get we our drives, is really again -- where pushing through the keeping but places deal all all

Harlan Sur

I you. appreciate the Thank insights.

David Goeckeler

Sure thing.

Robert Eulau

Thank you.

Operator

The question Barclays. O'Malley next from from comes Tom

Thomas O'Malley

mix you wound the of HDD would during on the any thanks Is this quarter? taking been a businesses comment the flat I big inventory? that give my comment basis. kind want assume a channel about looking within bit. saw mix days of had quarter the kind days you guys, on there some inventory. a a the have a you of has Can you just on made Inventory of color I'm impact Hey, activity you said at channel. I can basis, are with earlier, dollars circle to question. of that the the on Chia down on down you for inventory

David Goeckeler

on inventory quite all surprise the slightly I'd transition, our terms even and a flat, of hard through turns nodal say Yes, that maybe side and you going a not see it's the the around in and relatively there. big a side drive bit worse flash on

during as up flow-through the significantly quarter. was the and you So saw

Thomas O'Malley

Thanks, Guys.

David Goeckeler

you. thank Sure,

Operator

Ho from next Deutsche question comes from Thank Sidney Bank. The you.

Sidney Ho

taking for thanks Is fiscal that the rate. Great, Can fiscal my for XX% being that quarter question. would gross CapEx intensity. you right My about of question XX billion run revenue capital first is be talk and $X.X roughly on both expecting we coming NAND, bit kind comment in Thanks. capital can that on the you growth what things? of of HDD should financial and And maybe out would assumptions terms be be you intensity thinking great? are main about, of

David Goeckeler

Yes so a there. few in questions

$X So CapEx XXXX. in we're around first expecting terms of CapEx we again FY and FY all exited that's what growth billion in in of XXXX

and capital way on are the investment, in the of got are going invest of terms We've forward. two and to require in going terms to we and will in our businesses. well ramp growing We obviously capital BiCSX to on have continue both they businesses

the client we the from drive the of the side, transition the at assets no enterprise the hard capacity to business On can where point we're longer side business.

have to bits think so to market of in able as saying the grow we of cautious at to And to investments terms place. is been going that of pretty in is be in over that the That's means put to be really careful we goal that. And long-term be part done and we agreements we've we're we've capacity we on flash side, do terms rate the the growing we've will why term very these long some continue make. and of the

Sidney Ho

Okay, thanks.

David Goeckeler

thank Sure, you.

Operator

next Cross Research. The from you. Thank Cross from question comes Shannon

Shannon Cross

thinking about price just cost environment? higher that Thank Are just less much. demand from question. how because quarter, we you customers managing had hearing wondering bigger then Thank you. And you just I'm but a you of and there's in how very face as next inflationary I you pushback picture maybe general more not the internally, inflation? about some increases? are necessarily given are thinking many

David Goeckeler

we've semiconductor lead we're about on question pressures And different on face definitely well. call, them inflationary we I -- going across already have And Yes, of commodities. pressures. side to and as across are the also inflationary facing challenges We're it's customers this that well, of as seeing to think cost a out. and need we components think times facing are we extend good our we're Shannon. seeing discussion And talked the to most the with going and number also we're board a the

in I a we're of you work that making we're costs each out think products. getting something adequate the not single we on over but from that to quarter, obviously in and can make CapEx a it's the investments sure return have standpoint we've time So got an

Shannon Cross

thank Okay, you.

David Goeckeler

Sure.

Operator

you. Thank

Research. Our next Longbow comes question from Nik from Todorov

Nikolay Todorov

and guys great as congrats Yes, well. good on from results afternoon me

David Goeckeler

Thank you.

Nikolay Todorov

can Dave, you I think, hear me?

David Goeckeler

Oh yes, please ahead. go

Nikolay Todorov

pricing guide in do us are wonder you if able as the better low mix are NAND can big any September on see leverage driver the you you on modest September sounds if the for best like ASP looking implies it the digit at changing why get and at the single I September talked it quarter, NAND you I about the lumpiness pretty give the quarter? shifting But in think enterprise there customers NAND? more constrained. how on Is a you mix that's in I the Thanks. about upside talked you mix NAND? to more in your detail, please yes, the Yes, side look the quarter not increase.

David Goeckeler

we going to portfolio mobile, any gaming, as in I markets, positions major and what four then that. a in clearly course And to going supply across is portfolio we the the our as and you think again We're pillars; as quarter are, we're different customers it. to is have mean, client little got quarter margin changing I consumer the across five the or different. a across the no, depending to SSD SSD, bit much is obviously to anchor given And shift every into Yes, but as those going quarter. rates commitments the automotive, mix on of commitments but higher we're mix markets. how every to trying be much can be running pricing IoT, enterprises, different

different way a little that's So and of coming difference when I in you the is put QX, the some that thinking got mix you're think all the about in together, from it. you've where

Nikolay Todorov

thanks. Good guys. luck, it, Got

David Goeckeler

Thank you.

Operator

from comes Ananda Loop Capital. Baruah The from next question

Ananda Baruah

business. sides Do Hey, question the around thanks or can on margins is structurally it's and questions the what you here, pulls nice, on get of results. the to margins have structurally the a to like, and structural congrats meaningfully, to really of of both what for over pushes the sides lot. guess think sort happen I business both things taking higher would kind -- higher, time dynamics, the of for have and the higher? like sort nicely on be the and and and margins structurally strong guys that move look the Thanks from done would would really of

David Goeckeler

yes. think answer that the is, that think I So the answer is to to don’t I

each through go business. Let's

enterprise play innovation we Chi number side We nearliner transition look -- several story us through point from for of this coming this forward client it on now going a a that is long to about much as drive got saw looking we been the end. an that's be growth XX-terabyte transition, a justified. saw that is On obviously more times It's this It's profitable. capacity inside quarter this better that up company about for number at of a now at era capacity quarters want believe go been capacity by things. exabyte We're going we be We've talked and it's talking big the that business some from step led when our We've investment investment benefit take taken well, the but out. and but is needs fully my but a we call. from enterprise, predominantly perspective, that to driven to to been to to we decade -- drives one.

it's in me and to we I these transacted I growth the to everything can demand came I ago, were whatever more of in again basis but So the or early remember more think now parts and those surprise days in visibility quarterly are business that about was because those, -- on into continue we when make we're with even no sure quarters the this quarter fuel a multi-quarter business, basis the to to again we're cloud. that five continue will of now moving agreements within the need customers. conversations and longer-term and talking

to, going to to think internals hard going innovate going our I want there going We're say the technology. take, comment one and continuing that. to support seminal as take drive era of to on in very I is like talk to important that's well. drives And technology is as think The that. and growth as be to growth side the XX% incredible I financial the cloud to our to business just and cost we're I of able also the flash on is investments -- continuing exabyte and see we're down fuel

the is to about down node of I think good next about know the that. to the as that pricing continue about our talked We that about good business, how flash, about that We're we feel more environment so all on dynamic is. feel cost we drive have roadmap, the in over dynamic We working we point think flash we very BiCSX. in quarters. the but couple technology we've at transition also transition as to business, drive we And well.

we're growth support investment as in We that foundational and helps a structurally the position with just better I that a bit business. pricing technology seeing have in roadmap, will business. think clearly Yes, us very that puts see margins margins our in to good Kioxia environment accelerate the

that's We our their the for customers getting we out be strong there are into we Like ever. a technology that's to to dependent is and they pretty telling we demand better far, products. I look us of we're but as we what said be quarter, us think year, are from the more second see next going way expect than telling what environment half it the guiding. beyond next looked to even And demand continue

good to be asking what they're going for continue about We next things hear year.

technology, these portfolios, position So to in driving structurally to innovation we're both puts in the in the we drive us that think with continue a profitability with good businesses.

Ananda Baruah

lot, a thanks That's helpful. I Yes, appreciate that.

Operator

you. Thank

from Our Nikko comes next Srini from Pajjuri America Securities question SMBC

Srini Pajjuri

front, SSD I strong XX% quarter-on-quarter, it obviously you grew Thank said you. enterprise very quarter. David, on think the

helpful. as there And from I Thank the side by well? contribution curious as if about think SSD well? if if if end could ramps customer there was be were also will talk driven demand any and you new Just it's primarily on Chia you.

David Goeckeler

Chia the of market. quickly, a we on while sequential Yes, which had one contribution happy very in growth minimal complete enterprise the the about. from qualification we've something another and the is are products, Yes, did for first with at Titan, just and talked cloud eyes a we've SSD we

ramping half we'll yet, started that but year. of the second haven't see We there in the

We demand in SSD. also saw on good channel enterprise the

in there. continued in players very layering We're now the we seeing the second year. additional and into with acceptance of one growth the go major there So growth big channel as the qualified and customers good and we're half see we of we

now the quarters, our being and accepted being product Lot good that where of by into giving for and the it's the we're So good again qualification going about to we again. being feel how innovation ramp our about accepted where many is We've it's about well talking products. we're and customers. feel in and at process, visibility how

Srini Pajjuri

Thanks David.

Operator

Thank you.

Company. Our next question comes from Mark from Miller The Benchmark

Mark Miller

you Just was feel wondering up the you are share? SSD space, do picking

David Goeckeler

has as I focused grew suspect we're but XX%. for share grow, Again, sequentially so up the think this been focus picking we're us we a market on share gains, don’t I profitable to attractive It's we're driving continue and over get in a market going very it But product many that we qualified as quarter. places quarter get can. growth introduced. as for to

Mark Miller

you. Thank

Operator

from Tristan from the And question you. comes Thank Gerra last Baird.

Tristan Gerra

afternoon. good Hi

you of the think are a term? the at provide data given possible center potential puts is have drive. expenses purchasing at gross a and about in new color we look full capacity. and large given criteria what have cover XX% longer bit to mix outlook You disk should mentioned are your just the and takes on go some for customers gross you margin hard longer some given forward? if You've higher for without customer power margin How that you Can already your term going could you catalysts more

David Goeckeler

you if long of business was the as our Yes, utilization client that where of cloud about, the talked we dominated percentage for way I build I hard clearly, a when it things, from it's the testing, period a to factories, driver [indiscernible] clients all can year-over-year drive decade versus and has been factory. point there very headed that steadily mean in kinds where takes think one to those a for at look we're we're over the looking cloud test, at also is investments shifting in see been longer now a the and the bigger about ones both of we've in it. business dominated think are we headed drives that we're were And is guess time the as that in to this a -- at I transitioning business for you capacity

that help drive in come the to those and foreseeable for go going agreements our in through see innovation it the mean and starts that we're align TCO same the their and XX% very, place from to I customers as is And that to we on delivering of exabyte we solves growth of growth build. want a the with it, of invest it's to So we for conversations, in profitability We make idea product yes, I that We that's they future. We're innovation. driving product is long-term business. where lot be. what cloud generation every growth model XX% important support customers problem this the with sure think to the see very really understand a we strong to this business that is amount. a We our delivering as think delivering,

world that something innovation. was which in many, into betting And on good It for good a largest data been that working quite and accomplishment. something accomplishment center for many ago, turn to take You know it years time. now we an quite great we've with feels it's some on customers talked a their here the their is business about energy-assist frankly the and the idea something where it that are team,

got that many we've meet important. continue to to of very can sure that many, economics is And the and our Getting continue and we up of portfolio so innovations engine right fuel growth in to customers. to drive innovation that the the making we lined got invest

Tristan Gerra

additional for thanks Great, color. the

David Goeckeler

All Sure, right your thanks. really We appreciate for it. time today. everybody thanks you. Thank

you very seeing will quarter. We be much. Thanks throughout the

Robert Eulau

thanks everybody. Yes,

Operator

you participating. Thank conference. This for today's Thank and you, gentlemen. ladies concludes

disconnect. You may now

Western Digital (WDC) 5 Aug 212021 Q4 Earnings call transcript