Earnings call transcript Q4 2023

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Operator

Good afternoon, and thank you for standing by. Welcome to the Western Digital's Fiscal Fourth Quarter and Fiscal 2023 Conference Call. Presently all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded.

to call like to would I turn over the Mr. Now, and Vice Investor President, Andrew, Analyst Financial Peter Planning and Relations.

You may begin.

Peter Andrew

Thank everyone. you, afternoon, and good

me Goeckeler, Jabre, Joining David Officer; are Wissam and Chief Chief Executive Officer. Financial today

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

references materials measures and in will non-GAAP website. other and comparable We being section Investor of financial our Relations Reconciliations non-GAAP the measures GAAP to make are included posted in that between release the the also financial are press today.

to now over the call introductory for that, I'll With remarks. turn David

David Goeckeler

fiscal Thank XXXX and Good you and for you, results. the to discuss fourth quarter Peter. call thank our joining afternoon, year

was challenging broad enviable and consumer Non-GAAP exceeded end-markets, revenue as margin Western share fourth environment. of upsides loss client non-GAAP $X.X gross both enabled demand reported market Digital's a $X.XX. billion in We revenue SSD fiscal of X.X%. quarter us reaffirming retail strong portfolio strength our go-to-market access client expectations fourth and to and channels, franchise to per in quarter capture our

to our a year, the fiscal quarter XXXX. accomplishments moment I the to specifics would the and Before on of full diving year in reflect fiscal take like into

the for business reinforcing our we Throughout operations executed agility. ourselves drives year, innovative on enhancing leadership to demand continued optimize and we our product product profitability our and focused when rebounds roadmap, flash. hard fiscal were priming and greater across our Importantly, successfully

shipping Ultra groundbreaking In HDD, Flash, future drives latest XD foundation the which bonding and drive in XX-terabyte our in all our capacity technology we use pioneered we and high sets wafer In major of enterprise family XD NAND have of manufacturing SMR NAND successfully qualified advanced and introduced BiCSX, hard are the the that customers scaling. volume. for

fiscal On and cash supply drive our the customers’ Flash have HDD continuing capital innovative investments reduce quarterly us demand capital, reduced which expense, significantly expenditure we the second-half technologies growing that run product front, strategies hard expense enabled Further, needs. Digital address environment. consolidated post-pandemic while with streamlined across Western manufacturing executing storage in footprint. our These we while rate and aligning our XX% our to portfolio, products efforts to operating enabled deliver and preserve by over and effectively on to

dynamics. million nearly flexibility reduced a we $XXX to And than our level with Notably, at healthier by fiscal in exited financial Western additional Digital sequentially macro few ago. amendments which we significant we successfully and year June, much provide credit as agreements, our navigate completed XXXX inventory a quarters

opportunities from to conditions position, year to In industry an to position spanning client inventory continue market our long-term summary, capitalize enhance market agility, data across We and levels action capture our edge take leader. and and our well-positioned in as and liquidity optimize we exited proactively strengthened storage, Flash, improving bolster on to fiscal to HDD growth our XXXX cloud.

to ongoing. strategic that want is I the acknowledge Finally, review

as We appropriate. make we'll and provide to updates progress process on continue this

major consumer, unit higher product all exceeded Flash. We major average fourth both capacity in client and fiscal flash both product quarter, across HDD client in demand flash In to retail drive to returned end-markets and Turning demand results by revenue normalized end-market with SSD, hard in console, similar and consumer sequential our both client led categories. products almost gaming in per subdued. cloud, flash drives. the all upside categories, for hard Flash including In across growth expectations remained saw client and and embedded and

to fiscal weakness fourth the update, I'll business ongoing starting overall with a the in HDD. turn drove revenue. now In cloud HDD decline quarter,

have stabilized cloud at demand of improve However, shipments consumer setting XX terabyte all SMR and the hard the customers, drives hard and fourth stage client both for At quarter, variance exceeded of CMR fiscal terabyte and XX the drive all our platforms has major our expectations. and end qualified to profitability. Ultra we successfully

This upon worldwide. our drive. Ultra addition, In features XX success of technologies cutting-edge by built we SMR our product sampling Ultra is trusted customers of with and begin and terabyte the are SMR our product reliability to about ePMR

this staging are as and demand qualification product improves. ramp for We quick

PC content year-over-year, revenue as to and sequentially as shipments attributable in capacity demand, expectations XX% per increased returning growth Turning Flash, to exceeded flash and and by consumer shipments, increased year-over-year both led well and The bit growth. client consumer normalizing with XX% consumer respectively. our client bit total bit is stronger-than-expected growth to SSD Average which over growth.

to to to solidifies and Kioxia's Digital BiCSX on capital productize we performance and Western I/O in efficiency leadership continue based the future. architecture. technology aggressively BiCSX array Moving developments, into cost bonded a chip,

perspective expect to quarter, In stable. demand over the to we wanted outlook. I as Before overall I to look remain our to HDD, some turn on it we first fiscal Wissam, share

and first ramps fiscal we product drive anticipate revenue in the to both improving demand quarter, profitability. new growth Beyond and

unit and largest signaling market and two are is are client In several inventories Flash, by our encouraged declines are improving Notably, returning increasing moderating. content to price been growth, indicators dynamics. consumer end have markets, we normalizing, per

it turn to over Wissam. I'll that, With

Wissam Jabre

and Thanks, everyone. good afternoon, David,

quarter exceeded year-over-year. quarter billion, XX% Total was was revenue $X.X sequentially X% our $X.XX. and As fiscal revenue down fourth loss share mentioned, for expectations. per David Non-GAAP the

the Looking was due down exabytes, total cloud at Sequentially, revenue decline were down end the primarily drive and and XX% quarter, sequentially fourth to XX XX% XX% to markets of hard shipments ongoing product in $X flash was due cloud XX% sequentially, both bit declines in decrease Nearline for driven The shipments. weakness shipments. at year-over-year by at represented drive enterprise decrease billion, fiscal year-over-year. a primarily capacity customers.

revenue at Client in $X bit and year-over-year. shipments unit was was PC represented to in Sequentially, and pricing for year-over-year growth applications. and declines of XX% the XX% due up X% gaming increase client decrease down sequentially drive shipments hard consoles. driven billion, by flash total The lower SSD for

to lower hard XX% of drive The SSD Sequentially, and XX% up by represented year-over-year. year-over-year retail shipments. primarily Consumer and in shipments. decrease higher sequentially price billion, was total retail at increase X% revenue $X.X the due flash was driven down declines

Non-GAAP revenue points to Non-GAAP percentage XX.X from and declined XXXX. to fiscal For share XX.X was X.X%. negative the non-GAAP year, gross XX% margin was billion, per $XX.X margin XX.X%, decreased operating down points $X.XX. loss fiscal percentage

year year-over-year, declines cloud revenue due reduced drive pricing, well primarily for fiscal year-over-year, shipments for to applications. markets end and Client to as at shipments revenue decreased PC capacity due lower enterprise of decreased SSDs. primarily unit enterprise XXXX, XX% in and XX% hard hard Looking as drives SSD flash client

consumer Lastly, the by year growth shipments. decreased in consumer XX% lower broad-based offset was decline revenue retail as and for shipments price drive SSD more flash hard bit than

sequentially XX% by HDD and shipments decreased and revenue decreased year-over-year unit average segment. Turning On a quarter, price In XX% price $X.X fourth unit fiscal down XX% XX%. shipments billion, was X% now basis, exabyte total HDD decreased the average to per and exabyte HDD decreased XX% per to year-over-year. Sequentially, $XX. revenue

X% Flash down increased basis decreased revenue Sequentially, up X% bit year-over-year. sequentially like-for-like was XX% Flash on year-over-year. X% XX% blended billion, on X% $X.X shipments sequentially a and and a ASPs Flash and basis.

Gross costs to to for includes sequentially and expenses. million stated fourth in otherwise. and or Moving that percentage quarter related Please underutilization, comments my fiscal year-over-year. will $XXX costs note for XX.X XX.X points down was percentage X.X%, margin items. other be the write-downs results flash percentage and X.X inventory points manufacturing unless non-GAAP This points

sequentially X.X and were was margin the million, volume, gross year-over-year. lower percentage charges as X.X higher due X.X Underutilization as Sequentially, was primarily underutilization-related or XX.X%, percentage decrease charges. HDD enterprise $XX points points. down capacity points to well percentage

charges in XX.X%, manufacturing to points and margin inventory percentage gross volumes write-downs due reduction. points Flash resulting XX.X were and $XXX reduced percentage the were negative million, was XX.X percentage year-over-year. million, X.X sequentially point $XX Underutilization down

for manage loss million, totaling sequentially driven in and and expenses other mainly Operating million million $XXX was inventory tightly underutilization by items down quarter $XXX to year-over-year. quarter, the $XX our $XXX operating million continue of write-downs $XXX We million. the charges,

geographies tax equity. per share for $X.XX, dividend continue with resulting year in expense loss, certain $XX fiscal taxes in fiscal the taxable quarter inclusive Fiscal million preferred was Income million was fourth of and fourth for associated $XX million payable consolidated convertible areas. quarter loss those XXXX. in to income have a $XXX we Despite

outflow million include and million. of Gross million. of equipment to was related fourth $XXX quarter expenditures, activity an Operating ventures cash flow on cash capital the flow debt an $X.X the outflow and the was $XX free for our joint billion was Cash which at were of quarter. outstanding property, the purchase planning fourth fiscal end flow of flash statement $XXX and cash

in the at X.X was third a billion, as end our fourth-quarter fiscal the resulting leverage of times EBITDA $X.X times, adjusted in to XX-month X.X the ratio quarter. compared agreement, gross Trailing defined in credit of

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

amendment to the agreements. near-term. XXXX, flexibility fiscal fourth our of the to quarter, modifications year ratio in fiscal During provide an These quarter credit applicable leverage we executed include requirements additional through financial the fourth the amendments which

XXXX. to our commitment under XXth, for extended also the delayed-draw We refer term-loan to earnings Please agreement August presentation the details.

end-of-the billion, capacity term-loan equivalents liquidity and cash billion, $X unused undrawn of including $X.X million. $XXX At draw an quarter, billion, delayed and of the revolver total facility $X.XX cash was of

business cover I fiscal quarter, first our discuss guidance I'll outlook. the for Before

production be charges better quarter, HDD continuing expect product Flash are ASP. quarter, along fiscal For In relatively Flash pressures sequentially, with margins we fiscal and demand on revenue and to to underutilization and stable. impact mix anticipate gross adjust to first we match to Flash HDD first both both

the in normalizing to HDD. driven fiscal higher we improve as of is to and volume in demand first average fiscal per storage, charges higher driven the gradually Flash improve HDD and by and Flash as content Gross remainder HDD expected XXXX, Beyond underutilization year by in quarter, margin anticipate both lower well Flash. both revenue unit through

the cost and our manage tightly structure to continue navigate expenses we environment. as challenging will We

fiscal expenditures significantly. XXXX, capital decline For to year expect we

I'll now to guidance. turn

as the guidance first quarter, fiscal non-GAAP For follows. our is

to $X.XX billion. billion be range in of to revenue expect We $X.XX the

to to includes million. across $XXX margin totaling which $XXX gross between million X.X%, HDD expect X.X% Flash We and and be underutilization charges

We expenses expect million. million to $XXX operating $XXX be to between

expenses $XX be expected Interest and approximately other million. are to

$XX million fiscal to quarter million first fiscal between tax the for $XXX year expense We expect for income XXXX. and be $XXX million million $XX and to

assuming $X.XX, XXX to We $X.XX million shares approximately outstanding. per expect the loss share of

the turn now David. over I'll to call back

David Goeckeler

Thanks, Wissam.

wrap ourselves our operations progress me product XXXX hard inevitably Fiscal a for Let year of marked and Western Digital. period We for innovative optimized across roadmap, just priming flash. executed up. exceptional planning strategic and profitability rebounds greater and as demand drives our diligently

on remain capitalize success. As deliver confident we our emerging move in to opportunities and ability forward, we continued

in opportunity SanDisk all a to XX-years domain. Before leaving a Western Digital opening take best moment recognize up wish Technology is forward. and We like President past significant over esteemed Western Siva has to Siva technology different our of a to him contributions to wonderful would pursue and I leadership for a be and friend. Sivaram, great Strategy. going Digital the Q&A, he made Siva will the

let's start the Peter, Q&A.

Operator

question first from Thank line Moore going Stanley. Joseph you. of Our Instructions] Morgan to [Operator is with the come

is go Please ahead. open. Your line

Joseph Moore

a is bring you. similar. Great. I looks NAND to guess make And charges talk in able inventory Does progress. it unchanged? Does like that quarter current that underutilization wonder are to could I you point at you're that have up? some mean if like that the back mean utilization your you can to some Thank seems the line-of-sight

David Goeckeler

grower, Yes. were the returned in good, about growth both basis. we NAND in to sequential They incremental saw thanks we quarter, we in Joe, and business, were exabyte we happy Hey, the the I there, so reaction an both on as upside for saw client so a consumer question. guess said, current market good that.

underutilizing still that bit about are We fab. more I'll in a let detail. the talk Wissam little

moderating, up next quarters, of -- We good expect bit couple up market, inventory declines to the down, about are overall signs our the double-digits price we are in overall shipments we bit do plan is another feel to be again shipments and underutilize for the but quarter.

not right but we direction. of and -- want market where to the lot of So the in see is we stabilizing quite be metrics going good a a yet, things lot

Wissam Jabre

in fiscal underutilization, of to underutilization similar respect versus QX. with charges QX we And Joe. type Yes, saw

into would also the For QX. But of with And QX, had million XX% less I Flash, the also we look you say split similar if the similar fiscal levels Albeit, think $XXX I we're in Flash side, Flash, HDD. look we've to at sticking underutilization. of $XXX of stand noted our you million, range is the guidance, anticipate and say, where levels bit -- I underutilization or from HDD, at, of, of, when more if today. a more sort fiscal it XX% we let's

Joseph Moore

Great. Thank ask And if you. I follow-up. the could

In I convert early that the know the year. uses comes in terms next of next quarters, of due cash the you've got few

I to just sort there about update raise us you think do out? to payment. those issues Can there's a money pay some still tax need you potential and of

Wissam Jabre

February do the and you this or quarter noted, as in So convert plan that we with one. address to respect matures cash, to the ‘XX, uses we that of have next

the We But expect be we exiting is coming to payment IRS settlement of QX, liquidity. $X.X respect quarter. also likely fiscal had that this to approximately also billion and up liquidity, this with have very we

if delayed-draw event need we settlement. was term IRS so the in to recall the And address put place in the you loan

will to the address quarters. of to IRS in we'd settlement happens. two it And convert, coming mentioned when the be care I take drawn with respect it So that down the

Joseph Moore

much. Thank you very Great.

David Goeckeler

Joe. Thanks,

Wissam Jabre

You're welcome.

Operator

[Operator you. ISI. C.J. to next going from Thank Muse with Our question is the come of line Instructions] Evercore

line go open. ahead. Please Your is

C.J. Muse

as perspective, we've [Technical [Technical any we Good guess Yes. aggressively Difficulty] I Difficulty] [Technical Good realization Difficulty] this afternoon. seen. seen haven't question, supply question

XX-months? would So think current in about six, you impact supply-demand nine, normalization the of the next how

David Goeckeler

gist Okay. it I Flash? supply which was little the but a very Hey, of right? Is was in C.J., C.J., that was right the question, you normalization. demand hear we to -- there, tough got think that

C.J. Muse

Yes.

Yes. that. about Sorry

David Goeckeler

No, that's right.

Okay.

number the think of in look, market. I we saw are as there a So I said, things

up overall, This up we markets, and shipping -- client markets SSD saw this SSD quarter our clients with We XX%. at We growth to returning saw consumer XX%, exabyte point. the basis, we think consumer saw the PC client on demand content in year-over-year to sequential growth bit consumer and a down. basically inventory client in

We -- about for the saw flat fiscal bits our we our year, year-over-year. expect

down them see industry the For probably that. little We than calendar a year, see we low-single-digits. down lower the

that to a couple balance, -- there's our larger in and seeing the taking I markets. that better to demand is that's bring there we're supply-demand closer think So we're actions together, put seeing story, ago, Cloud supply quarters and still biggest it our into but that a balance markets of across move we're start still two for Flash, way.

C.J. Muse

Thank my training that underneath think some Difficulty] that be about a we I [Technical about hope there thing be thinking question. And might [Technical you How -- maybe was second [Technical should announced Difficulty] [Technical and deposits you. hearing underlying Difficulty] Difficulty] there

David Goeckeler

Okay.

was that I C.J. think and the strategic review timing,

look we process about conclusion. So a forward more reach active, to we is when it as the talking

C.J. Muse

Thank you.

David Goeckeler

you. Thank

Operator

of going to question Our Instructions] Fargo. next Wells come Aaron is from with Thank you. Rakers [Operator the line

ahead. Your is open. Please line go

Unidentified Analyst

just with give capacity you (ph) How guys This Aaron. how update that the us on forward? your is you in data to guys of And of you being are SSD [Michael] Flash to do that behalf you wanted related investment mix ask, -- you then are the on impacts would uptick guys qualifications? AI of how you, Thank relative deployed, the or I recent with that, where -- HDD in impact you how to can going Thank thinking guys. think kind an you. stand center? maybe enterprise

David Goeckeler

been the of in on infrastructure something obviously, about to days lot distribution been I we access a is the which clearly thinking thing. spend these That's big quite frankly, think, so out rapidly. model over lot cloud a built of very pretty new the out It's technology great a AI. a The is is all decade, this technology to build cloud, I've and going Yes. generative topic that amazing. get last

levels, when automate being tools infrastructure what enabled compute like now, in domain, is are to And of the creation about think to built this to data to but needs out different we're essentially many think going there incredible video Whatever that we're really to with the it our happens all storage clearly, I be ability data, be to create us stored. going it's at I whether that information all be, text accelerate data.

So see I this in kind a for is catalyst profound the of data just amount increase of a creation.

I way very I SSDs cloud. It's hard them, incremental tools think drives storage that a that those distributed going across for in growth we using that all start and the long-time. once drives I drives. mean to and be the get are foundational hard think

So disruptions -- the data the profound out, of business is near-term, while very in Gen profound built infrastructure for I it's in creation. as the - catalyst think a I as a this a gets have the a compute that it's some AI said, may on optimistic increase rate

So quite data innovation exactly that We drives excited just know what is which that. -- storage. there how you new for that except creation, yet, need the drives about new model don't

So adopted, as out built -- the it's impact and business. have we forward look this these gets infrastructure going on our rapidly to as

Now market of the on HDD qualified have places. or right or We've subdued. BiCSX now still in enterprise qualifications. depressed HDD along capacity some with we is enterprise That these nearline recently SSD,

we fully a back part comes good structured have we the cloud that position with So lot we're still vendors. expect in of that in market the growth the We're and investing back that. of position. not we'll about spending products seeing feel in a cloud that in major that But comes and be good when

Unidentified Analyst

Thank appreciate that. you. I

David Goeckeler

you. Thank

Operator

Tom of Thank O'Malley next Instructions] Our to from Barclays. you. line with come going the [Operator is question

ahead. open. Your line Please is go

Tom O'Malley

know I variance side. been on to expectation? of I have question. it going industry. I give just previously has you taking across but when recovery know just could afternoon, it's us to fourth there wanted recover? your health the you today. the been HDD good -- as the the portion comment guys, timing for you also There's of the narrow HDD thanks quarter, in I you're on is this health? business latest a cloud you business my of in And -- that think said and your just Hey, seeing of that Could any push the out quarter, just on down HDD

been today? and timing the it's of how just So the recovery

David Goeckeler

know, sequential in Yes, sight I you throughout be the the to to enterprise fiscal growth going to so end we're year, exabyte of get of to first customers see line but capacity towards HDD we coming back. we the going the moved, think think we as all, start of of the quarter where first all end year, of it's

I think ones the we customers have conversations, of what across quite have in but some of our digestion been while. a about we're all always discussions having big they're -- inventory for

end the quarters So better mix that. things next of of to a we're will It improving we I line there. go, to stable. impact But still getting be of bit have be quarter sight but couple a think of think will I

little We a more expect in this quarter. bit be challenged to client

into we I I couple as move more we get get a through better. and getting look of think And But as things to we timing things throughout better. early of next the phase year, year, expect your think quarters will

Tom O'Malley

comments also pricing areas Helpful. being be in more clients just Thank business, guys that have the you you. your on on more strategy Have And on any also of, your pricing then looked to the and in certain you kind aggressive aggressive talked side? competitor, on with HDD pricing. about

David Goeckeler

-- bring better next we're is the Ultra SMR in the there. where that's I that, starts I underpinnings really our already product opting our those TCO of is share with the pricing. market customers. able able XX of to as we're Ultra staging with to EPMR deployed. really That's We're innovation. more at. gets we as SMR where market T Pricing in of think proposition growth to driven Yes. product. and for we're The that And we're staging where a drives our rest do we mean, benefits happy

that channels, is of lot big we more typically different have different a lot a markets type around think just would of of demand. into. and is And of pricing any supply you what We in sell market

Tom O'Malley

you. Thank

David Goeckeler

Thanks, Tom.

Operator

Our of from with next comes you. Krish Thank Instructions] line Cowen. the question [Operator Sankar

is open. Your ahead. Please line go

Krish Sankar

question. Hi, [Technical told thanks Difficulty]. I personally taking Flash Difficulty] side my Yes. some them and was with [Technical for June

PCs improve the should improve that above pricing pricing a revenue December. then or And function have follow-up. that specific overall so Is should of NAND getting your to exposure or after a Just and better, I BU? after retail

David Goeckeler

missed I of question… part the first the

Peter Andrew

Yes.

Sorry.

Krish. Sorry, repeat? please Could you

David Goeckeler

Sorry, Krish.

on agreed. line. never we bit There a know, of little was the static You

Krish Sankar

or is apologize. the improvement. was revenue out just retail going to function pricing I Is [Indiscernible] the I get your a [Indiscernible] spoke targeted pricing June. NAND improving of figure We and trying in it statistic to about PC just better?

David Goeckeler

Okay.

it got I that think time. at I

so pricing, down all, last so quarter before. X%, X%, blended -- down NAND you So of NAND the in like-for-like quarter, saw first the price pricing from moderating

where quarter, Next which pick from it bit -- will drive a up, today. to to volume be more impacted expect is up volume we margin little pick

to answering help continue that I your I'm up. didn't questions, all I'm I it. but volume if don't sorry get moderate, Does question? so your of not So Krish. know. answer picking

Krish Sankar

No, no.

does. retail. the verticals, think is out and PCs to was trying does. I which specific it just and It I figure

David Goeckeler

you. got I Yes.

client So as growth -- and the sequential return we markets consumer revenue and exabyte we saw said, to growth. growth

kind as those that so inventory their see markets have to digestion forward. demand expect through and we shipping -- end more go we we to continue So of that

Krish Sankar

a David. hard then And follow-up quick Thanks Got on drive. it.

margin increasing Difficulty] You do road think terabyte terabyte? said that [Technical Is by number ePMR are map? the disks per to And how still the of X-terabyte your And about the like you're the you sampling that ePMR. you gross XX drive? on doing

David Goeckeler

Okay.

me again. let -- So

questions. got the I of I most think

ePMR, technology. adding and I SMR is of mean, SMR OptiNAND -- Ultra So our a combination Ultra we're more disks not it's

Ultra that of of step XX over with roadmap, the a roadmap. technologies the next is driving SMR. And still OptiNAND, next from a we've I this go. talked the more ePMR, couple have XX step lot to We steps on to in last set year, the a think this around about So plus plus

innovation. a the And and as announce one are be these with And time, continue staged into to XX-terabyte at we're where we SMR significant quickly happy quarter that we'll in drive can -- great set products technology. very scale And back, Ultra the comes quarter ramping but So we'll be products. products of demand we are a in established that drive, and drive, really sold and the ramp volumes well. in a that quickly, growth expect very at next this as we

Krish Sankar

Awesome. Very good update. you. Very helpful. Thank

David Goeckeler

you. Thank

Operator

comes Thank Bank you. with next Our Mohan [Operator Wamsi of Instructions] question line of America. from the

Your go line is ahead. open. Please

Wamsi Mohan

you Thank Yes. much. so

had we've demand And follow-up. phone starting you And noted as improvement So head have of, a fakes what's some cloud such contemplating through, signs to customers Curious changes. that few And on if any noted are the HDDs. you are some wondering seeing a guys sort also XQ, the this in side, think of particular You on your underpinning in primary you confidence? I taking recovery fiscal Are that? build-to-order a recovery. from competitor pointing changes, including philosophy. particularly

David Goeckeler

Wamsi. Hey,

So the first that's have. -- you that's have are can gives we the all, yes, many I productive what things underpins but quarters the significant of ongoing and point, change, our customers conversations and we very positive. a mean out, hit what view To that's so conversations and your I current it. mean, us on -- view with

is the industry about think us. out speak to build, let come look, of the I On well, -- me going order comment, the

business downturn. but a of pretty done cyclical a will of severe downturn we've come be this the things It's out the other Digital side in of is think industry, going lot that I Western to So different this. on a

talked amount to client I've capacity going and taken as of before system. long shifts We've we've been as years at from on the for capacity a it's many many, significant enterprise, least first that. all, of So out-of-the about been here

that on to on There have a enterprise fixed-cost on I come look the with any be forward. we'll focused spending done. our but infrastructure. unit lowest a we'll essentially we've business We'll HDD in long significant of this out is less going had technology, think client is going really on tail exclusively infrastructure, in our transition be if decade-plus basis, you a and that

have will -- industry I to a long-tail come more as It's going we we not as think will, you still opposed out Like of a said, will of technology. that, there. there's That's of get a me to part forecast. build this come be Don't build-the-order, still out client the of to But a if I wrong. and as business. a

our So we're customers we've these and conversations HDD, we're with having right a on is our to place, it sure the and in to make is the want time that's we time. a what got why components the build infrastructure long process an place. the that got need in it customers deliver because at We've running right

that Digital So is going -- I think process. that to will Western maybe of of yes, more the kind short answer is to your be question

Wamsi Mohan

for look a and pieces Dave, and similar there roughly quarter-on-quarter. HDD moving are September? just on flash charges charges, different this Are roughly underutilization clarification past quarter? Okay. those Or the that which flattish in underlying

Wissam Jabre

Sure, Wamsi.

of respect expect probably XX% to underutilization So Flash, the the to decrease also of I XX% the charges September X% the roughly the and XX% -- would to to quarter, all down split -- $XXX HDD. $XXX when most coming to and say, of million be at not if with guide And to would I million following underutilization from just -- quarter. you be sorry, they're add clarify charges HDD. at look let's related

Wamsi Mohan

you, Thank Wissam.

Wissam Jabre

You’re welcome.

David Goeckeler

Wamsi. Thanks,

Operator

line with Ho from of next Bank. Our Instructions] Deutsche comes the question Sidney [Operator

open. is go line Your Please ahead.

Sidney Ho

your more giving they start has given Are by stabilizing? around signals they How But in they that I to with wanted curious the the guys. will be are ask all the suppliers? weakness again. ago? inventory the quarter worried about changed you. cloud lumpy. conversations to And production Thank second about cloud about I large could understand things the receptive hyperscale Are supply commitments? cuts about purchase you half when a

David Goeckeler

a have Yes. clear hyperscalers. the in been we of business with amount a would still conversation phase severe and still of back of we're is buying very is growing. pause they're but them created conversations being those mean, took having digestion the storage say given customers. What It's anything, on to that inventory do always robust very with the And it's and I a I kind some growing.

and we've expect to the having to magnitude businesses conversations capacity in buying when aligned those all will of in and that we those just will our on make that reemerge sure what deliver the So conversations that. we're happen got to

road reception I getting we're product map. very think good the on

terabyte the all becoming major qualified for a the XX we point talked XX, of That's those expect And launching -- of about on especially next we're we of builders. cloud As quarter. XX been the platform products T vendors. the drive. We're major to by back XX, our T and capacity ramp just some UltraSMR significantly, have right XX a biggest cloud really now that,

and what proper on the the strong, to it's making are going we get about on their So alignment conversations are clear manufacturing that we to requirements place that. be sure and have deliver in

Sidney Ho

it the you quick to Hard drives, have today you Okay. than think the Maybe Can in last on few Clearly, in which us SMR want Thanks. adoption side. now? have said quarters and been quarter. But better cloud follow-up I a hone give Drive customers. you will all an competitor is SMR be you at guys qualified a what from idea major where on just the

David Goeckeler

for the standardizing cloud several and the an And at can last that the ramp a of inventory it's idiosyncratic. say going deployment, and current I are UltraSMR quarter next you very technology intersection quarters. very look major it mean makes we of of over digestion I quarter, adoption on have if that providers SMR, significant several expect the but us, lumpy. forward SMR or

Sidney Ho

you. thank Okay,

David Goeckeler

Thank Sidney. you,

Operator

you. Sachs. Hari Thank line next And Goldman with Instructions] comes question the of [Operator from our Toshiya

Your ahead. go open. line is Please

Toshiya Hari

you Thank then taking digits afternoon. and Good sequentially, up guys. about for talked question. I had ASPs the kind being current Hi, revenue I of quarter, and you're guess so NAND to sequentially. one much guiding you bids for on question. the double clarification David, a flat

are implied perhaps bit the quarter, the in down what guess, about were moderation. little June I than So more you down but they ASPs talked a

embedded or of there? guidance, a Or in that's price missing September sharper function implied the So in mix? primarily is guidance something am I in decline

David Goeckeler

be what a may lower bit sequentially, It maybe a little bit little modeling. than you're Yes. --

more Toshiya, think is. follow I on clarification. probably of that's up where with but I you think the it So kind can details, we that's

Toshiya Hari

my one then Okay. for follow-up, as Got Wissam. maybe it. And

'XX, But how CapEx we David, to down fiscal think shipments, related how significantly. about production to NAND? think be, for purely on for Or given you if right I you and you 'XX, single through you bit or map? going guys that ‘XX, production are that And plan any I calendar there should capacity it's digits. a think mentioned to to impacting road the the you're that, CapEx Curious shifts cut changes in your bit mentioned You now? think, decisions about low calendar in are cuts going

Wissam Jabre

I beginning -- we've than $X than from out billion was the bit continue start can of first me it's taken CapEx, look almost let to when calendar the for we're first we quite I fiscal CapEx spent, with year on maybe -- we've you $X of 'XX. cash. Well, see part comment -- the level, billion roughly almost at XX%. preserve plan 'XX, at mean plans at you lower well, Toshiya. The sorry, what think, lower XX% CapEx our question And of our the to the gross a on that is down CapEx as year-on-year, fiscal

what today projecting to of less meaning fiscal other transitions we necessarily of product other see For NAND map. no It types significantly lower. we're to doesn't our relative or it investments, line other It's planned. or mostly in types what is or impact investments basically 'XX, our be road -- more

to to And basis we're wouldn't major will planning. we in, dynamic already operating we've there's been environment a we've given But I and as what the macro in change continue monitor, needed. on relative fiscal say so quarterly 'XX any adjust like just done

Wissam Jabre

Toshiya. Thanks,

Operator

Credit Thank you. line question next Shannon Instructions] the comes Cross of Our [Operator from with Suisse.

Please Your go line is open. ahead.

Shannon Cross

and of HDDs storage Thanks centers and I'm you. wondering, have data think growing data takes worry from a want? or it if will having you. you use sorry, layer Thank growing out you coming of any mix vendors Thank There's Again, question. are kind you should I'm hearing and of then I we just hearing about what unique the how shift. secular like of how potential about SSDs. wondering a in or time, SSDs And some commentary extreme. to AI, just maybe [Technical the you for cloud over use taking the Pure think from -- And almost within But Difficulty] customers? other trend of I'm a about your cloud more both follow-up. of have and my Pure, within perspective

David Goeckeler

lot about thanks Hey We've years. Yes. the question. talked a Shannon, for over the this

center. in I the the storage are that is the we expect growing center that predominant data mechanism to in change. think data don't technologies both HDD

Our expect customers to that don't change.

drive to terabyte. road we're map XX -- already XX We're forward, ramping continue we we the terabytes. as long launching As just HCD

moving we're on data HDD. forward we of in HDD going robust growth forward. capacity center And So with the expect storage points

talk but the growth expect growing data to you're be any going our and cost the probably forward. technologies, than a way the SSD about future. case that where storage faster decade one way substitute looking out. enterprise significant, data horizon also we not We a is that's useful planning little It's mass are look complementary and certainly differences customers they're The we in of the to expect for HDD, bit in for at how centers. highly a the at scale building still other. center in We They're a

Shannon Cross

talk How start loan an you how maybe bit perspective? the from more spending have it you to And a more to about Wissam, normalized OpEx? can OpEx little And Great. as back before much a level? you're Okay. thinking come relative revenues about for model

Wissam Jabre

sure. Yes,

We million, OpEx, QX. very at same lower ended to around on you $XXX saw in it year. So last we than fiscal quarter manage $XXX is which continue tightly the million very,

your to variable the could But on coming up the expenses as of start within to range of some As back, expect that. question, starts as some I we over where we there term, sort increase the think near layering business small be. be we're the

However, we faster should revenue. in than never -- we shouldn't expect the increase in be OpEx increase the to

similarly, and to action very take would And us continue to it manage so if to OpEx for on that, need gradual. monitoring be tightly. be there's we a will additional And

some We also room to that. have do

David Goeckeler

have next question Michelle, please? we the can

Operator

can. sure We

moment. Just one

comes UBS. Our the of line question Timothy from with next Arcuri

go open. line Please Your is ahead.

Timothy Arcuri

Thanks a lot. I two, had Wissam.

And charges. it's underutilization on like of two-part is one kind a question. first The

is But start as the on HDD first could in what's of side, the go guiding current NAND? it maybe $XX mild So underutilization XX Because to you away December like in does for post go to then sounds It where goes September started And away? take because you're XX to the utilization to kind quarter. in underutilization it million charges. HDD. is a when for there these to

went sub when quarter. revenue per HDD $X-billion I think

to charges have get have away? back to we $X way do the a billion underutilization those to So go quarter HDD all

Wissam Jabre

Okay.

the the to QX can decisions roughly an respect with on charges make numbers, you Tim, to projected ongoing are tell to we So these And continue side, QX. from to were the underutilization Flash flat basis. be from related

December basically going, the coming or the let's you XX% December charges As declines that the HDD your underutilization think of But I and quarter, guidance think to is. QX the going in seeing start where in in say, is for -- the from down math HDD, the HDD, to decrease underutilization from I math QX is of quarter. QX on X% close think all some

today, And to the capacity. billion need see around too to were $X billion get of to making the fully our bit early fiscal the don't based year point it's you to revenue talk on utilize really to revenue what about we mark second-half But $X a mark, the we XXXX. the

you cost bit take Hard restructured aspect and optimize of quite cost business, our the a we've manufacturing the of that Drive If capacity to we and fixed continue recall, structure. in

current than cost utilized can level $X a lower we so And be structure. at fully billion, given the

Timothy Arcuri

And for just the on debt Wissam. service then cost. lot that, a Thanks

the have due you in convert February. So

at that's think a rate. pretty good I

it's think X.X%. at I

So that going pretty be the imagine, is going with, expensive. debt to to replace you're I

So does it costs debt my I go once debt leave to going guess cap that quarter seems service that. $XX structure? Obviously, where is to million for question issue a sort it you seems of have new of -- you like the sort maybe up in are

can of you sort solve So all you about Thanks. talk that? just how for

Wissam Jabre

X.X%. interest And to on convert rate that by that. is rate be current that than the given when environment the to would where replaced expensive the expect roughly be yes, replaced that -- more today, is So I by

various to it's that to definitely lot something of a early to it are little but up that focus potential in But for to we as think look So slightly is us. and said. capital be about to respect us bit a cost we the that look, we capital the the instance, it from lower make options at cost for all a here, I details, talk possible. a too available through this our is to With refinancing, goal of sure is maintain extent of expect

Timothy Arcuri

Thanks a lot, Wissam.

Operator

comes question Baruah you. Loop Thank next [Operator the Instructions] Our line Ananda with of from Capital.

Your line ahead. is open. go Please

Ananda Baruah

there follow-up Really then And crossover. that. guys. XX could. quick since would maybe through just Thanks. David, Appreciate to XX if quick two each Thanks, I terabyte -- Thanks taking ones, just you have even I Yes. in When there question. you a expect I'll much. so the you and mentioned it,

David Goeckeler

-- a Crossover that points. there's capacity as -- -- look, say there's let lot of me different multiple

bit XX, like XX, about It from we think just to I maybe little years two, did ago. different. need a it maybe So three move this talk doesn't XX,

using, of even Now there's they're of or bit to it's and technologies a some XXs different XXs or of or XXs. whether going distribution customers or kind what XXs XXs

are at or even million all X.X four across look the I drive. going them next more going as So where quarters, of or see points, to shipping three in a distribution couple capacity of you're be to things different pretty

to couple to next the leading a quarters. to take don't from that's want be very of rapid we getting it's the of happen now a capacity It's quick going ramp and being substantial So and very point expect close to going there. very away qualified I ramp in XX. that

Ananda Baruah

different in drives, Thanks think guys have That's somewhat the the follow-up on for any out when the do is, they have levels opinion, yet, they actually their classic been to return hyperscalers do you capacity? distinction. settle run the Or making what you things in the historically, utilization? how utilization any if And view normalize helpful. hard really on

David Goeckeler

I incrementally get through efficient. that's anytime there's through in some But technology, think would more that this, getting I period Like better. things of anything Look, improving, -- on like expect you and constantly a optimization you infrastructure I done you the constantly think consolidation, work go just and you're go happening.

always that the I growth and something is top still that's think going on to of see going exabytes on we're to that. that, go in

know but business. I we expect And So that in haven't think to those we're XX% at get the a XX%, in HDD last back the we growth looking year, to think and it's business, still clearly we I exabyte levels. cyclical seen

Ananda Baruah

Thanks That’s Right. lot. a awesome.

David Goeckeler

you. Thank

Operator

statement And going the we to come Karl a short before CEO. you. of is from Ackerman our line question our by have Thank last

Karl Ackerman

bit we you Could challenging think about implement in can and a should unit build-to-order that discuss units And process and differ you nearline a you how signed may process? to your as XXXX build-to-order this discuss were long-term implement pricing recovery time? address as over question, agreements a peer in how you that from

David Goeckeler

right? growth. we're to at exabyte recover, low to expect I going units. units, We're mean get So I point on a

world get expect actually exabyte say, am I all on AI. deployed. put to they were very we I'll in that gets this back again, to once I and it's generative to eclipse our growth. I a about know is. to as and everybody We continue excited But units storage get going where once to think recover come

see recover. expect units so And to I

is think have straightforward it's alignment better fairly a place consistent in between build of process a big a has there's think model of going hard the I set reduction significantly ways, have many talking for because infrastructure client now in been cloud we've benefited to this about from big to been customers place. deep the availability lot that Again, It's we of there's the a years the a infrastructure and drives. business in to getting And with where relationships build-to-order we It's be process relationship. I just here. a market.

more at we're now, to end And we transition that. just have of around have the that planning so

I think were into that. the a long-term step agreements

to that right to we I in great important, alignment step which to into delivering customers, sure value proposition storage got and how of center we a best data product sure maybe part making the is franchise next extremely our the make run important have is the think growth. the do place and infrastructure the incredibly between is this our an fuel that we've

of So expect the I be evolution on pretty Thank change be a positive I or model, and it sides. expect Karl. business natural it to all you, a to very

to right, care. you look to All Thanks the everyone. talking for joining We quarter. Take forward throughout all call. the

Operator

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

You may now disconnect.

Western Digital (WDC) 31 Jul 232023 Q4 Earnings call transcript