WDC - Earnings call transcript Q2 2022 | Western Digital Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon and thank you for standing by. Welcome to Western Digital’s Fiscal Second Quarter 2022 Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

Now, we will turn the call over to Mr. Peter Andrew.

begin. may You

Peter Andrew

good and Thank afternoon, you everyone.

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

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

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

David Goeckeler

thanks $X.X margin fiscal of guidance fiscal Good to quarter are second Thank you, delivered our discuss non-GAAP and we revenue everyone range of both last call the for results. with of quarter, results afternoon, provided for joining second strong of We the the XX.X%, billion gross XXXX Peter. which and within quarter.

this increasingly ahead Additionally, per challenged as of seventh expectations. the our of was amid am quarter we a I exceeding earnings of of which supply guidance continuously non-GAAP team marks reported $X.XX, meeting consecutive proud the share chain. or

year takeaways to over coming and offer key important I XXXX. go trends, results want detailed the I Before out of calendar some business

energy-assisted opportunities enterprise large our qualifying These progress portfolio. hard for products our within the XX-terabyte significant drives product as X address shipments commercializing based well and We of strengthening fast OptiNAND hard our delivered cloud at and goals on commencing on storage. First, products titans growing OEMs, drives technologies. cloud we as X have made of the SSD in

remains demand Second, cloud, across markets consistently strong. storage consumer end Digital Western for solutions client and

about customers continue to will for other serve. optimistic year about markets are across XXXX we our calendar I factors We macro outlook and demand later. indicate that demand end the share solid as more our

continuing These is navigate are both that gross order our in In our that affecting primarily on we confident margins front changed. growth to through XXXX. issues an the increasingly chain normalizes. nature, products margin we of ability chain, profitability and products. not meet transitory long-term ship the and we complex build additional both the Third, our ability well year costs revenue in and customers’ subside first supply to remain calendar gross has We hard to as end weigh incurring them are drive are impacting demand, half of which customers’ as to as to supply us will our opportunity expect

strengthen flexibility an Lastly, have grade the to our milestone December, providing future. received greater from financial investment Western rating. grade important corporate Fitch in worked we This an as corporate last XX second with investment which in we over the us marks Digital’s hard position, represents financial months rating

we a in in levels, reengaging program forward fiscal our debt return year look As approach we capital to XXXX. targeted

period mitigate strong our last particular, disruptions. continue teams across markets customers results, chain supply work the In impact Digital same past demand for to revenue second the increased fiscal to by quarter, this our XX% the and Western year. remained cloud Turning to the our and from of quarter end diligently

digital potential market accomplished needs economy. can of to content the which continue storage through bring of to the of new anticipate by innovative ability creation to be our bolstered the in We The to and is to strength demand, continue products meet enabling been innovators in the businesses, never has push position has easily information to great bigger digital their a storage limits large we think access growing Digital further. are to creators built even With and Western technology, and ability the markets. greater. and our what

Our coupled capacity with to broad our increasing and remained Western to end-market a capitalize proven puts in led now I by In strong year-over-year market, will Flash many drives. our position HDD a opportunities product overall enterprise ability recap with of Digital develop routes balanced XX% on to growth revenue portfolio, businesses. innovate the us. and cloud hard demand ahead HDD, high,

after enterprise of capacity hard some quarters due we up chain shipments, challenges. were customers’ Although sequentially strong of two drives strongly to year-over-year, declined our partly supply

challenges, supply near-term experience earned Digital issues. chain As customers to Western some continue visibility will both we face

demand as stronger position good subside. a will However, the once signals we in through move year very our overall headwinds we be continue calendar these to and be

second volume XX-terabyte we fiscal our hard based CMR on commenced drives technologies. the shipments During OptiNAND quarter, of

We plane are control further the very a technology utilizes revolutionary to excited areal about that in flash OptiNAND, increase density.

ramp and technology Within over leading to of XX% led due of overall to and are BiCSX year-over-year cloud successful as quarter In took into second crossover strength accelerate sequentially of in high place later an smartphones shipment we XG BiCSX titans year-over-year, and mobile, this seasonal shipments the increased in BiCSX our XX% the Additionally, in interest and quarter. to drives by total SMR strong revenue growth. over expect represented production content in products in XX% calendar helped our customer year. mobile seeing The in the quarter deploy bit fiscal BiCSX Flash, adopting expected. volume XX% during in multiple shipments revenue growth SMR grew increase consumer.

from gain our experience XX% and XXXX. Along for calendar about gaming year in optimized SSD grown doubling Our sequentially of with for the WD_BLACK portfolio X products flash X years. revenue consoles, increasing has gaming last premium to product over revenue best over XX% the momentum, with continues to line flash

all integral As these ways and gaming emerging sequentially chain will whether disruptions last line client business the we of at transactional In declined to our more supply enable and of some consumers in demand portfolio pressure generate the pricing provided customers guidance and access, with to now strong more markets. Metaverse, SSD content, flash PC via or store due to applications. our growing be quarter, our the

the within far, the starting we stabilize. current see are So in more transactional markets to pricing quarter,

earlier, products significant titans OEMs, enterprise are at compared X to mentioned X progress ago. cloud major SSD I storage titan As year our and qualified marking X cloud a

products are product year. calendar this fiscal enterprise we know, Western my Digital’s you the BiCSX-based in top products of flash consoles, and has one launched we further success client year Building we portfolio third mobile later the early XXXX. of strengthening the as As been of BiCSX the SSD, have In move gaming with BiCSX upon through into and SSD ramping are ramping our in bedrock portfolio, quarter, priorities.

devices XD BiCSX the next-generation and second based commercial our quarter. Furthermore, QLC our technology shipment we qualified fiscal consumer on SSDs of initial began revenue For flash XXX-layer in commenced on shipment and of BiCSX. flash, we based client

still While and in its node to next-generation that will are of play an pave BiCSX the in early in role for starting the important evolution, the future way adoption our we QLC industry’s evolution.

offer anticipate end demand consumer. and data X the drive now to a last observations in technology-dependent we that created each The these more digital world growth has storage accelerated client before. than transformation technology-enabled and environment. me Let We years ever across on will market is a trends serve: the continue few cloud,

a capital in announced optimistic and customers In in demand build-out, XXXX, continued driven year-over-year strong. trends gaming end increased recovery our cloud flash and XX% spending, customers as In applications, the applications, the client, continued investment build-out. video XG increase growth cloud, end an capital has by devices. is in in calendar have cloud enterprise growth enterprise emerging trends in adoption video this smart market. PC with This phones, HDD for about demand such into remain in drive consumer Our expected smart for and to in investment coupled spending products growth remained for increase growing our VR/AR

demand driving the unit are of and ahead past several to continued be see pre-pandemic and Our quarters levels. customers robust we stabilization significantly PC XXXX. than consistent continue forecasts in shipment more

offer drive generation which content an client tend have to to PCs. phones commercial SSD In XG addition, latest to we shift PCs, anticipate mobile, site content mix consumer-oriented the doubled from eventual prior a In smartphones. return versus richer towards NAND

content endpoints and market is XXXX. end a device applications SanDisk storage value drive in optimized Professional new adoption the year in average strength for SanDisk drove SSD gaming in and along are capacity to of XG-enabled enthusiasts. to WD_BLACK in Revenue ongoing as the more both The than unit doubled cloud. the products brands, consumer mobile of this expect of highlight We growth the flash. with per consumer of in XG our year-over-year In demand expected XX% benefit WD_BLACK, line calendar recognition the consumer, and

and are of ongoing both challenges customer promising, to demand calendar increases our These components increasing. looks customer are safety meet costs the logistics in chain source ability and component end top on supply XXXX demand COVID health costs. costs. and limits While to elevated This

we the While are results impact the through first transitory calendar normalize, and chain year. will incremental of as these half our supply subside costs believe they will conditions this

turn the calendar detailed XXXX. to and outlook provide more over Bob Let fiscal for a will Bob? our discuss call me now year second results who quarter

Bob Eulau

everyone. afternoon good and Dave Thanks,

challenges. earnings sequentially Dave was or the down overall was share, per revenue consecutive our total the XX% Please seventh results a chain than $X.XX, note minute, the exceeded exceeded will we strong and better met costs delivered COVID-related that year-over-year. Total anticipated mentioned, the are was marking $XX quarter we up guidance. these figure quarter of higher and quarter. of were to billion, such high that entering As Non-GAAP but expectations, for have in results includes our COVID-related the X% we second quarter the supply this which million details I face fiscal for end than guidance $X.X pleased in have ongoing provide on issues more which in range. costs,

company’s hit solid milestone rating. we receiving this In to corporate from second financial performance, grade rating this This Fitch. an the in grade corporate addition quarter investment major marks investment a

stronger flexibility recognized is and to us We are to financial being for future. financial the pleased with a is providing our that foundation work see build greater

last a offering our bringing with debt and of and XX% of balance December January, XXXX to beyond. agreement Additionally, over amended maturity public our lenders we in the loan closed debt

our details, please more presentation. to earnings refer For

chain XX% year deployments impacted exabyte our hard represented at quarter. cloud total Supply sequential and decline disruptions at to led end from cloud XX% XX% drive sequentially the up which in a certain ago. billion, shipments of second to revenue fiscal down a markets, Turning customers, in $X.X

enterprise position revenue drives, at However, of healthy increase $X.X end market capacity capacity greater year-over-year XX% XX-terabyte XX% point, total represented client in a Western than overall The Digital’s leadership exabyte flat for shipments. along demand with the billion revenue drove client ramp hard to stay year-over-year. helped client client decline XG continued of of drive HDD XX% sequentially enabling X% The and phones both than offset SSD less and our total Client hard represent flat. revenue. down drives revenue, at in

and led consumer of basis, holiday in $X.X strong a With flash consumer represented retail by growth revenue growth a sequential HDD. XX% Lastly, offset the in decline X% at consumer. flat year-over-year was consumer up sequentially On in season, year-over-year. a flash billion,

exabyte year-over-year. by to Flash revenue Hard while drive flash due increased and to up X% in down bit total to of ASPs a $XX. seasonal shipments year-over-year. price hard XX% XX%, a down now per sequentially X% flash increase $X.X basis, drive to by On hard like-for-like On $X.X and exabyte blended up XX%. was a XX% down On average a basis, billion, reported and Turning by up and sequentially decreased flash revenue a XX% increased basis, shipments drive year-over-year XX% the sequentially segment, ASPs retail. sequentially shipments billion, shipments On by were decreased sequentially. year-over-year. sequential X% mobile total XX% basis, by were hard we revenue drive X%

results please Gross comments sequentially. otherwise. to As will for quarter was second margin we non-GAAP related unless to XX.X%, down the X.X and move that costs note expenses, points be percentage stated my

$XX noted COVID-related earlier, the $XX million. was As higher than at million impact we anticipated

included X.X of COVID-related was This percentage $XX million X.X XX.X%, down impact or Our flash points percentage sequentially. gross points. approximately margin

control outflow was ventures $XXX generation statement, expenditures, guidance Earnings XXX% million. to property, highlighting end growth. down decrease XX.X%, points. $X.XX, percentage expenses of and X.X the flow variable quarter. inventory strong purchase included X.X chain which and include joint and of current below fiscal or billion remain which flash cash increase quarter hard be expense. investing cash guidance lower plant points Despite ability approximately million, our COVID-related sequentially. flow now in equipment drive exceeded We we to cash $X due our our a maintained capacity quarter range. drive disruption, the CapEx a overall This $XX our range was in million year CapEx Our cash on compensation $XXX $XXX $XXX be million percentage slight $X.X Operating prior our We second was $XXX as due in to and and the expect the from spending. margin cost million. gross around Capital manage cash impact for was to the profitable supply X% prudent in was representing around related a cash income increase billion. were of expect to year-over-year, our Operating per Operating share, high continue prudent million, actively of with activity free manufacturing to gross to and of flow flow the for we

of repaid our Loan million October. last B amount we our fully the last Term As on in we call, $XXX earnings mentioned

public agreement lenders revise facility December, XXXX. earlier notes gross to addition, our our repaid quarter. from top A, of to credit Loan of extend entered billion on debt with ratings in and unsecured outstanding credit reflect at of and we In of and into loan revolving last loan maturity billion $X.X closed our our improved to month, senior fiscal On second of to terms bringing agreement offering the the billion term $X to XXXX end that, the $X.X Term our a this we an the our

in defined a greater second adjusted of achieve agreement to in plan focus leverage third flexibility. end to XX-month X.Xx quarter $X.X gross fiscal This resulting X.Xx. on EBITDA we quarter the when compares the financial was ratio trailing billion, of Our in of the credit XXXX, debt our at as repayment the to announced

in our As credit on quarter. Relations to is agreement transitory refer presentation ventures. with we our color sequential our discussed drive basis the in a the statement. Please to flash revenue supply like businesses to cash challenges further both would chain earnings not depreciation of billion the XXXX. in reflected on the flow our $X associated This more Within Considering reminder, website segment, includes third for calendar expect earlier, our in details. drive Investor hard on a bit provide I fiscal decrease drive we Flash view hard hard a and add-back

meet larger source to customers issue late are the expected of remain, While our customer some supply has demand. chain to disruptions been at our of ability the components to

to revenue fourth fiscal to sequential quarter. return the expect growth in We

second overall hard fiscal to pricing a our remain to Within expect on Flash ASP. in by to cost primarily quarter is we segment, gross While component points inflation. fiscal third drive expected due relatively the fourth percentage the decrease X stable, expect through the driven X Flash fiscal margins we basis revenue quarter to from sequential quarter to decline

revert cost fiscal to our is margins towards Furthermore, non-GAAP year growth expect this half quarter, We regard gross return to our year revenue in XXXX. on Flash third calendar of XX%. reductions as calendar to our follows. first pressure as In second of guidance target half anticipate for the of downward the we long-term

to We Flash for in billion $X.XX be to billion and expect drive revenue with $X.XX businesses. a of range revenue decline hard sequential both the

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

expect operating approximately Interest million. are between be to be expected $XX expenses $XXX million We other expenses $XXX million. and and to

year. fiscal the for to expected is rate tax approximately in the quarter and third be XX% Our

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

David Goeckeler

Thanks Bob.

year we business ahead, issues XXXX end indicate and cloud, demand outlook end in we across than as foundation the to technology continue clearer growth that long-term Despite and ever consumer about right in customers we client earlier, to discussed our is the portfolio business. ensure have we Looking transitory markets. optimistic our that calendar our strong for place scaling the are right in remain it successful

goals Digital greater and of Over sharpen to we necessary excited Western that those the changes execution have focus, And of couple in place a of fruits to set strength. made the changes. last years, strategic our I’m position we are starting improve significant see to

on a afternoon. like I’d to take we earlier today, finish to CFO I transition this moment Before announced comment the

As Chief joining Chief Financial most announced be Dialog at was Wissam have Western Officer that X. recently effective Jabre seen, we Wissam as you Officer the week of may will Semiconductor. Financial February Digital

and expertise, to addition semiconductor his expertise, importantly, innovation. Wissam deep of financial and values In Digital’s collaboration Western has also and technical shares

of You and to extend can the management read behalf work Western sincere more the in about and Bob thanks his at Digital. for like his Board entire dedication press the team on issued today. release hard service to I’d of background my

benefited He’s Among greatly of corporate debt, led instrumental key also repayment this leadership expertise. During many our other of my execute team, essential capital for strategy uncertainty us our company COVID an as by aspects CEO, allocation changes has marked I’ve Western significant to of and drove growth our that at part his and investment-grade Bob was us creation. contributions, rating. other and from quarter tenure a value to friendship insight been guiding Digital’s the in position second strategic navigate strategy. helping Bob’s

Next quarter, begin that, know opportunity you’ll from Q&A. I an it. forward have With looking let’s Wissam. to Peter, he’s the hear to

Operator

Our question ahead. Aaron Wells Please Instructions] Thank come with Fargo. you. will go Rakers from [Operator first

Aaron Rakers

I drive of taking into, results. question. want XX% about guess by teens declined into cloud nearline for in dissect you. X obviously, how the impact know costs comment COVID supply the X having this sequential. percentage to the I capacity your you gross component I to on help you shift expectation mean, margin the margin that, with like your to decline? the Thank factoring of high then points it you alluded And I my are of Can math, quarter, own top even Thanks your much relative hard Yes. dive but own to, availability? customers constraints next or larger their by in gross disk looks

David Goeckeler

Okay. question it. crack I’ll and Aaron for thanks thanks at as the always. take a joining us, for

don’t think it quite I down as as So said. much was you quite

talked it large challenges we kind piece And think mid-teens. our last one of that chain. with own some now we A about like that’s their of issues own. we through I supply is, very big we’re going customer of have quarter, have very,

started in say much to issue the on through as it’s customer quarter, next our the a on would the customer normalizes as was in move primarily last quarter, the I quarter, we more So went or it of out of creep the And into side. we components. own it And rest the as the market normalizes out. component

same On the this through up. COVID health and couple now of and spend up, last quarters, costs going component costs, the go let But increases. saw you continue far as in seen I’ll comment are over approaching and to that that more are Bob safety and as level almost that we’re costs of the detail. they logistics seeing We’ve

idea I’d I want sizing to... give But some you So thought it. you of Bob,

Bob Eulau

Yes. add detail. I a can little more

COVID the probably safe, keeping I associated in the are been our which costs we’ve in employees the think with the peaked logistics reporting, quarter $XX at and costs million. costs factory the second that fiscal the

are We get a we’re at two we logistics component lot some built those at or and have seeing will think of I expenses the you delivered. down to a know, inflationary come hopefully, as from quarter least can now. expedite component the associated we there. parts quarters The the and continue for the in transitory, lot the to trying and different elevated that’s quarter, think get six probably thing are costs, fees, products been on lot a costs. next look come of The so of in down it third as with costs, pressures the

that’s forward think next So different quarter as what’s really we the two. or look I

David Goeckeler

midway just mean, say that Aaron, our were drive next we we’re thing, would up the look expecting quarter, other the about there I do But The by wrap hoping as I better we of saying, on through a can’t business. into amount last we number. I’ll included, back earlier for even a demand But component constraints. right all with given that because forward to there. seasonality on – the quarter, hard we believe than seasonal demand meet that more we unmet saw we’re is just significant

Aaron Rakers

you. thank Okay,

David Goeckeler

thanks. Sure,

Operator

you. Thank

from Our come next question Please ahead. go with C.J. will Muse Evercore.

C.J. Muse

expect I Good you in there can of costs a guess higher when can as the part no in you a these Thanks can of Yes. be question. headwind? can to those where higher question, And and for costs, constraints your to is speak taking time you longer – follow-up Aaron’s point component afternoon. the on to pricing? contracts you where be terms increase renegotiated input

David Goeckeler

Yes.

all, So There of again. for there is to question. that is us – lot thanks for thanks in first unpack question the and a joining

a take Let it. me at crack bit of a

So them new. a the for necessarily component time. constraints long with been are not We’ve dealing

remix pandemic, think a went just were constrained. to what we we gotten were as it’s I suppliers, additional now quite components we get. we the that And early surprises either bit little qualify or of the canceled. And do even get the the diversify. component on, could getting delayed in then up things to and going always show out frankly, thought orders we to able most It’s get would to that point where more more could

work to continue through we So that.

get about the it we will very we many get future. stay as why and better. is the half year, point, things can the your And see better. So suppliers, into quarters a of of we close through One, to we gets dynamics obviously number there work our to first

And business technology in the we – to more that nodes some cases, also We have on semiconductor on just availability moves different forward. in move the them.

contracts it. longer more kind to we where both the shifts, know a with and free side the the are as relationship get And suppliers our look to portfolio the on point, and to the going all of to supply of at up. we can on predictability then side things it we your have longer goes, position pricing of So negotiate back

C.J. Muse

about leading things, as on kind very of historically as talked transactional helpful. And That’s of you’ve the NAND indicator. the a side think follow-up market I my

look you into know pricing? or you blended like-for-like is are as March, guide as mix? sit curious, don’t I the consider a how headwind you today about basis thinking there likely you here And pricing, but so curious, larger And and a on

David Goeckeler

would in Pricing in it I I look, markets. the – transactional has the say is said mean, stabilized pricing script. more I

did I given the I the the in some haven’t shutdowns through industry it’s of of in we narrative – it stabilization. that think there see we of Also that go China. priced is was going think and noting the events a We little on, a worth are that. portfolio the of quarter, into would shutdowns before immediately? majority any that seen But happened bit the flow before the

So going But would more to that’s we’re I or say up not show stabilization. seeing another quarter for two.

impact we – bit. has we’ve the think, NAND may them. pricing some be I pricing second out. seen half, and playing the half hitting impacts what better the impacts to of tool some now issues shutdowns, move in even way going we’re see the of little including is view, of on on more a Depending But it’s that’s think vendors, the Our the component much stuff the forward of mainly pretty on of been kind that favorable, the I second seeing will that

weeks. a watching X, So would closely. very over now, X stable got say more that last we’re environment we’ve right the I

C.J. Muse

Thank you.

David Goeckeler

you. Yes. Thank

Operator

Thank you.

come will Please Moore from question Our next go with ahead. Morgan Stanley. Joe

Joe Moore

you. Great. Thank

and more with markets. the that transition, traction a as transactional Just you standpoint? Is qualifications at March that do for you’re some and point NAND impact you waiting of end a as this markets been the that has to on are reversing through from in I up you negative part mix you quarter? guys controllers of question, know following up start Where – you in sort still in get BiCSX have those see And other BiCSX? going that

David Goeckeler

for Yes. Joe, the thanks question.

on we as out mix mobile, it’s into the in through transactional markets. into gaming. Consumer, gets starts definitely, better year, the more moved it’s BiCSX. It go So

year, the And will half we That’s the of enterprise in of gets the throughout comes as the together. year. to the the quarter, the SSD better whole ramp year, then we in BiCSX we into through really this we then and ramp all right shorter went through we And second mix then which year. supply. ramp – as story BiCSX that SSD. now, the client that will is go This as We’ve qualifications. got material year, that’s more we BiCSX go enterprise into start throughout where And

important talk really point about a portfolio setup the gets we for of reasons and XXXX, forward, go when stronger. one it’s So why the we the as

Joe Moore

Great. controllers as I you I’ve SSD HDD in of calls, NAND, on the if constraints And and anything then mentioned business? you had but been from as because don’t side the management, multiple have else on know constraining NAND well power that’s

David Goeckeler

$XXX the in in NAND the business, Flash But quarter higher business it’s the Yes. we’re table business I million $XXX significant million the – NAND of would leaving twice there. the business, in the say in that. the in on order the drive to the is than in third basically drive It’s business.

as enterprise parts well. controllers, it’s yes, of on number a it’s So SSDs ICs, embedded power different it’s and

Joe Moore

Great. Thank you.

David Goeckeler

Sure. Thanks.

Operator

Thank you.

Please come Karl next Our Cowen. ahead. Ackerman question from with will go

Karl Ackerman

It’s to see great BiCSX please. questions, follow-up, I cost have BiCSX? of may. I timing the of CapEx plans ask given quarter. this your discuss But in I declines. may to reduce for Two cash you. a And NAND Thank you if crossover a ramping moderation and Yes. expectations

David Goeckeler

of of all, side main about so me at – is ramping how first different it. the the mean think cost nodes. looking we’re we thing let I about So talk expect we

this numbers, cost the again quarter. good So

we now. BiCSX go always to the getting it, the million a a need $XX modeling. was closer great us cost revert above It’s in – been we quarters We we’re still, nodes yields. record But about forward. to that for are I that on expect the producing, yields, We nine talk row node think, as and we for

the capital-efficient to most BiCSX We expect built. ever node be the BiCSX team is – has that

we of point, got to expect BiCSX ‘XX BiCSX. ramp. lots type this at on be so runway in FY And We’ve of

Karl Ackerman

that. appreciate I

you curious hard of component amount For from of the retail that’s and visibility be you. whether constraints discuss if my market. you follow-up, helpful. given channel for increasing are But way Thank that could that for the investor non-enterprise very been would the I’m you you. a concerns been the and see channel inventory the areas drives of doesn’t that, leanness inventory have case It perspective. has or some there appear of just seeing level the NAND that

David Goeckeler

think across don’t that’s anything I about of quarter We noteworthy norm that’s portfolio. particularly normalized. little some a out it’s the stuff talked bit last Yes. the

perspective? there anything I So out. there to to is call don’t Bob, is know come from really mind your nothing to

Bob Eulau

No.

every ranges I region. normal in think within we’re

Karl Ackerman

Thank you.

David Goeckeler

you, Thank Karl.

Operator

you. Thank

Our Mehdi SIG. Hosseini next question will come with from

Mehdi Hosseini

would Thanks for matter that you the follow-ups. have – Is components supply back premium, you’re follow-ups be just taking want much the the holding a is actually two that to component for I if to follow-up. you pay go procure how you’re actually parts shortages, just to now, HDD. Yes. – able that to are going no chain in by not were premium supply And question. pay? you or that higher needed? willing available, dynamics now Two And chain my a the on willing a here, impacted to I

David Goeckeler

premium to there think get is them. I a Well,

our with And so suppliers. good contracts have we

that I get but pieces. orders we in timing, – many there placed many, variability push-outs. the the like quarters especially is more then just So premiums been get in that on are But fact advance, said, to there have many,

impacts. the especially a are getting get we have And definitely to to not the they it’s think mitigate Are mix. need, difficult are is, mean delayed just I think I your we more what more I some pay them? paying are and definitely just to where later – it’s pieces that for planning in question we there – cycle available? and we’re

Mehdi Hosseini

Thank and to your that now be and to loss December supply shipment, should that more September Does one especially when by particular were in it’s gradual? going revenue a step-function quarter, And these the you. shipment mean impacted look expect the I at in customer, you quarter, a HDD a recovery recouping issue. into is your or chain follow-up that, we is

David Goeckeler

obviously we Well, margin we a think look, I about are into back as it. on mean talk QX. I We let’s go impact. have seasonality Yes.

QX revenue be that – on the to revenue the We in bottom business. expect the

the What I we calendar signals see bottom strong. say the the the through end will when are the calendar sequential is quarter, but from our probably will think at of very the we demand QX some next can in customers margin QX, I look year, growth. hit

So, second assuming in in the we as freer get controllers. have move the the more like we as especially are the nodes that as far confidence and drive transitions, parts That’s year. said, I business, we why half getting on of the to the portfolio different

Mehdi Hosseini

endeavor. next best Thank Got And you. in your good it. luck Bob, – of

Bob Eulau

Thanks, Alright. Mehdi.

David Goeckeler

Mehdi. Thanks,

Operator

Thank you.

question Toshiya come Our will go ahead. from Goldman Hari Please with Sachs. next

Toshiya Hari

ACD taking the on, in your from more have little afternoon. LTA so Dave, shifting and you on perhaps that’s business the strategic I quarters? with engage Any guess more question. to as Thanks front your one the terms bit past longer a how couple over term of a Good have I progress kind guess customers. for transactional you business of been focused much got two well. of I more

David Goeckeler

Yes.

is XXXX. business of where we as we frame into let are we think I talked years. a me this when when just it a of XXXX definitely have walked up walk we kind were we for about And couple the into mean where I and changing.

And we in have meet. first demand customer into more clearly can are than we we demand. so we I as have we – clearly ‘XX, strong the mean go quarter,

am The say little I for starting your move to customers we asking get have And are We demand multi-quarter to a we good percentage point, more as us LTA through the precise. agreements. signals upsides. year.

knew drive third that’s like mid-single our percent we the exabytes as And ‘XX, of more to we the when into were walked had On a portfolio. walk to into agreements. low were going we of go maybe a through – we business, ‘XX,

obviously a helps So, going we are to they difference dramatic helps you That customers, dramatic seen much plan, of biggest us about how understand on have going – what are what the have a what look that their customers pricing. the demand big take, seen we especially work to our committing in to. is us like,

of that. the we So, gains commercializing our only on got we view, into front ‘XX having have areal got From were into ramped We from energy-assist launched ‘XX portfolio it, back different and year a it’s commercialized a very, we very density not We with calendar walked talking and foot point also energy-assist. situation. OptiNAND. when walk about XX

we XX. ramping Now are

we customers now which the big about the script, SMR. interest evolved in is seeing That’s over has talked in in more Something investing been the much we are year have from something many we for years.

good the density. titans to we the better helps SMR drive SMR areal always going end are scale. been have And of better expect have by at deploying thought we year, deliver multiple cloud it’s a OptiNAND and We technology.

BiCSX of we stronger On kind the talked are business, and a financial which To the we gets as we very And to to on as looking then – portfolio situation FY and about side just ‘XX, of through go we that there into were and in flash call, we the are the how we where forward the all are think year. I a return we we much getting than policy, talked better about move back as ‘XX. before. shareholder throughout

but broader little become the meaningful placed our and question, in sorry, of be than to have your a LTAs a the where maybe throughout increase percent going we So, – business they year. are drive the exabytes in

Toshiya Hari

you given mentioned year, change you and macro the any dividend What’s of about the the about evolving how business, Got high rate capital of Thank the just level? you my Thank shareholder fiscal backdrop, And follow-up, you. sort think repurchases? helpful. response a how share in at at as think your you is great. super end when and return the And versus it. backdrop approach allocation of you. it’s debate aspect the then of very internal That’s next on sort Dave, which

David Goeckeler

Yes.

that as we on then about I one question, get will that little about things input think is going our say and more are the do more we bit to have and we to get have of I we closer. it. say a will shareholders mean to talk to their

yet, point. getting that to really if to just debate looking forward know don’t just we internal are but I it’s So, an

We have spent XX months now paying down well over $X billion worth of debt.

– We our to the shareholders. generate changes have lot looking we that cash, to of more execution a have forward we ability our to in returning the and are in made portfolio

Toshiya Hari

you. Thank

David Goeckeler

you. Thank

Operator

next with ahead. from come UBS. Our go Arcuri Instructions] Timothy question [Operator will Please

Unidentified Analyst

Jason a Arcuri. Tim for on Park lot. is This Thanks Hi.

just have question. on So, I is one question HDD. My

is wanted ramping throughout just this to we So, how XX calendar year. ask terabyte your

your ever. competitor fastest provided some color there last XX guys saying As is you night, ramp one this of on know, terabyte the will be

So, you. be how provide if could details terabyte would you your XX terabyte year, and this guys helpful. going XX is Thank on ramp that any

David Goeckeler

guess some because ramping. XX – would It digit look in I I It’s is going of are are shipped up the we XX I I is out not interest to XX that we I already terabyte. percent is ramping. Yes. have units going to said, last terabyte ramp. say if very what to SMR. mean is at large going customers see And like units a at we high-single high very, quarter,

going a are you there so for with bang on more gains OptiNAND And that buck you makes technology SMR. efficient. And even get the more your to get is that

think just very the is. it we that. it’s good about successful So, where be we XX leave going about And really I at good where technology will feel is. to We a feel ramp. terabyte

Operator

Thank you.

with Vijay go Our next ahead. Please Mizuho. come Rakesh from question will

Vijay Rakesh

Bob. and Dave Hi

your price probably and comes etcetera. guide, it on because little Just pricing retail of, be Wondering, bit enterprise, might little a quarter you bit – about mobile I and be think have softer. be should a flash positive a more be a talked question you might in here, for March right, mix mix will you better guys,

margins cost So, the is mentioned March this costs And inflation. inflation if be component why also, flash stable actual side in wouldn’t what component wondering exactly the or I more quarter. cost component in costs, Thanks. was I the logistics think or I wondering was you was?

David Goeckeler

HDD, actual cost one, I are for mean the we the of it’s gets thing. yes, different a of more is component obviously, on guess on On component the enterprise which mix what But is is because better suppliers I the wafers more portfolio and the your second the question, will – the say go just cost the mix the what Like up. hitting flash go is cost. places forward on it’s impact of on is… into the itself. component one as I parts impact component we So, BiCSX portfolio mean I going portfolio. of us, mix

Peter Andrew

SSD. Enterprise

David Goeckeler

Peter. SSD. you, SSD. Enterprise Thank Enterprise

the anyway, the part shortage the the is portfolio – as there of on component equation So component a portfolio impact is on impact well.

Vijay Rakesh

Got it. Thanks.

David Goeckeler

Thank you.

Operator

you. Thank

Tom O’Malley will Barclays. come question from with go next Please Our ahead.

Tom O’Malley

on had or seasonality more think, just talked for about business. have afternoon you HDD guys taking two One, Good Hi. the and thanks question. my I march. I seasonal David, a

business. in flattening basis June, X color quarters, And the some what basis both Thank and talked I step-function Could classify us in Could you you seasonality XXX in second XXX have less You over us you is then over or the years gross seasonal. off fall the it business? margins for on past a cadence a in one the is to down points HDD March Do see you you. obviously points quarters? a the like sharp remind seen would next as looks about that that going any give marches there? two traditionally

David Goeckeler

question… First

Bob Eulau

seasonality. Was on

David Goeckeler

about X%, right? seasonality, Right,

Bob Eulau

usually about March yes, quarter. the overall, X% company the down For in

David Goeckeler

looks do on Bob, gross comment want then, And in… it you to like margin, what

Peter Andrew

HDD.

David Goeckeler

fiscal HDD QX, In fiscal QX?

Bob Eulau

peaked we big which for have had right one mentioned, I while, now. and COVID the logistics they quarter it the have the December costs been The $XX from we will quarter. two headwinds persistent are quite million, about at peaked in as down Well, December some a costs, hope and we while. The for Yes. a We they have in think come there.

able get the coming to it of comes think we more I passenger Asia, will be traffic which when to out down. So, cargo rates really down see

different as component go – costs, to have. to So, the persist that’s on one as then will better and able are And mentioned, the Dave through the And as continue challenge. think fourth available. get we those But I year, more the expect nodes on see I it’s through to of the quarter. get continue headwind we expecting we some have to quarter, are we really mean we them through to fourth a controllers we supply

Tom O’Malley

color. the for Thanks

Bob Eulau

Sure.

Operator

Thank you.

go next with Our question Citigroup. ahead. come Suva Please will from Jim

Jim Suva

peaking, of quarter can or costs come mass kind quick kind as when curious away, of away spring kind overcome Bob, for Probably I you pandemic Can hopefully talk quickly question of but about is said how up think fast warmer off you Thank go the COVID it? that summer and they peaking. going as you. too COVID come critical those pretty away, could if a and December that ends around? of they think they go Just to temperatures people about optimistic for

Bob Eulau

mentioned, of as Yes. I little is I very coming right passenger that Asia out I the – real now. there mean traffic think is driver

And times. so normal there is those in on a lot cargo of flights

we passenger going open say they the in are come carriers the of travel Then to with have and open the negotiate up you you good to are and obviously, lot to and then spring. see the starting come are indications. to up the A see seeing down. So, countries back obviously, rates have

it’s be it of going year. quick, don’t think the will come to know I course I that the So, but down super over

Jim Suva

Great. Thanks so much.

Bob Eulau

Sure.

David Goeckeler

Jim. Thanks

Operator

Thank you.

with Fox Please Advisors. next will go from Our Fox Steven question come ahead.

Steven Fox

Hi.

control I your understand congratulations, – you quarters, just September, the of to outlook, of can with else to in that feel as with it the am own doing I and a Thanks. different supply terms of out Bob, side December? say, me. into of freight Is things basic a a your Just nodes from little some you of sort bit just mentioned. be of couple will chain one more in appreciate makes always you. these that struggling you help, idea on costs, in controller different how control are And your destiny out some But and issues are manageable. there that anything terms guys I working

David Goeckeler

Yes.

of we to chain, supply especially this we diversify mean think environment. mean everything I are our kind we can. – always in I look doing So, we I are

variability exactly lately. more to staying what are understand there we we that understand they what Like understand I and our provide. We has close can been in suppliers need, very to they said,

efforts we get our we to future. redoubling many, there in I And are look – close to We quarters think the plan when it. many

the using. surprises some we forward, When And more you be will issues. the we a product, that big fab are components better position. of nodes in which a different at, as I think of bomb start look we the where you will out said, we there able change to that can we roll up, to portfolio so in And you if the set the be at gives get when get are there, you of and of the are better free like

the when second you at what So, gives on look confidence that planning half. us is

Steven Fox

Thank That’s much. very really helpful. you

Bob Eulau

And your thanks, Appreciate Steve. comments.

Operator

Thank you.

Our ahead. from Capital. next question with will Loop come go Please Ananda Baruah

Ananda Baruah

And question. guys appreciate afternoon guys yes, the with and Bob, good as well. enjoyed Hey, taking you really you working

Bob Eulau

Thank you.

Ananda Baruah

Yes. And still case? do constraints, with impede I ramp a guess believe maybe had do year? the is those the about talked lot. the XX I reaching Guys, component is terabytes. the that past, Thanks XX the kind and midyear sometime question the you my through in sticking velocity TB of of crossover

David Goeckeler

deploying. what the right, controllers XX% ramp. is and is on saying component I into are are point, and where what no earlier. the Where better because right maybe that we XXs mean The roadmap, But spot that XX, is to there I that’s that’s way customers portfolio – problems of of running said impeding of is at sweet XX% of now, I better mean, this situation a Yes. is so on

So, I I think free we as we into move will through to the XX, get up. and things mean year we move

well. move we as But help closer capacity more dynamics We will products have also forward, that get the on to our and other we some us. suppliers get current as

Ananda Baruah

helpful. super That’s

Okay. Great. you. Thank

Operator

Thank you.

Pajjuri SMBC will Nikko question Srini go with come ahead. from Please Securities. next Our

Srini Pajjuri

you. Thank

side of chain. Just IC on some pricing, permanent a gone has perhaps it Obviously, the are when things. transitory no previous cost supply to questions it’s that the the follow-up secret I costs up, But of to the guess comes basis. a on, semiconductor pricing, one of

understand conversations through just what are quarters. as to So, through customers, ability I your Dave, talk kind of of next your am increases as few And some these we I you go curious, customers? pass your cost with permanent of to am the to sort having you trying

David Goeckeler

Yes.

certainty on to to That working we this exabyte – of is process. helped our – where continued the I them. first work of our industry to mean course, conversation to been we and a will the going of growth. to the like looks agreements. order we customers drive they multi-quarter as to drive future I the and have long-term, it be So, their environment. investment earlier planning. had goes bit frankly, the through to then in with customers stabilize close back what the reset these costs mitigate us this think the I – pricing business quite to we quite mean well, more economics think gives in are And on point have If aligned they gets that’s I be with staying to is the are what mean there

It’s we So, – see it’s will loosens If and a subsiding that, are thinking have our little them then we drive supply look right the chain other now. technology bit forward. in up is calculation business. all as we we the about of on the how we off it at the levers

Srini Pajjuri

Bob, Got help, it. for you all luck. thank good your And and

Bob Eulau

Srini. Appreciate Thank you. it,

Operator

final with our Nik come Todorov question will from Longbow ahead. go And Research. Please

Nik Todorov

the thanks client side. what and appetite doing Thanks obviously the on NAND for as side, is the Yes. talked LTAs the SSD the is enterprise HDD LTAs We for maybe on I on on me supply the squeezing the for SSD business wonder question. particularly side, from impacting? about customers taking and

David Goeckeler

the routine market buying – anybody NAND say I OEMs works the and would that’s way are on consistent LTAs I with a basis. definitely mean,

a time. been of a long that’s the for part So, market

in – over talked as am why earlier walk borrowing I I I we ideas into as we it’s the more go about Again, we moving and the are some ‘XX business. and of to drive think year those forward. confident

under already our percentage two-thirds. we into of the year, LTAs portfolio. year, half We was walked of into over have gone has – it like portfolio I channel. up big it consumer On in more And over side, was realize portfolio percentage markets the the last the well. it’s this NAND as we mean when the walk of a in

business NAND There But share us envelope. is SSD and So, to And just customers of is way negotiate multi-quarter seeing the in we is share upsides it’s NAND upside negotiate fair on a customers of then for market, that about the quarterly NAND. customers then PC that done that a you customers. in those share in right the products agreements for price And amount. think are there a within always different opportunity course, lot is business. of are for customers, with where coming with to now amount enterprise not beyond things your the looking basis,

year. So, gives demand in that about – that’s again, us of that optimistic. makes us When them talk we strong signals confidence one that the

the signals. through roadmap technology customer the manage good good about demand issues. will the a in is, relationships And super component X.X we that’s this years underpinning where to and spent We And it where the wrap stronger look about is. feel We feel to And to we the much shareholder return forward getting financial company back all position. again, up, a getting policy. we

business. prevalent the NAND in more much, So – much summarize to but question, again, LTAs, your

Nik Todorov

it. Got Thanks.

David Goeckeler

Thank you. Peter? it, that Is Alright.

Peter Andrew

Yes.

David Goeckeler

Thanks. we us Alright. Look, joining everyone, today. you really appreciate

We to we will very be will Thank forward then. engaging you look and talking the throughout much. quarter,

Bob Eulau

Thanks, everybody.

Operator

conference Thank This concludes joining. call. today’s you for

now may disconnect. You

Western Digital (WDC) 28 Jan 222022 Q2 Earnings call transcript