Exchange: XETRA | Sector: Technology | Industry: Hardware Equipment Parts
Q4 2024
Published: Aug 20, 2024
Earnings Highlights
Revenue of $3.76B up 24.1% year-over-year
EPS of $0.88 increased by 203.4% from previous year
Gross margin of 35.9%
Net income of 39.00M
"Transcript not available for QQ4 2024 call." - N/A
Western Digital Corporation (WDC.DE) QQ4 2024 Results: Revenue Growth Amid Margin Pressure and Balance Sheet Recalibration
Executive Summary
Western Digital delivered a revenue win in QQ4 2024 with reported revenue of $3.764 billion, up 24.14% year over year and 8.88% quarter over quarter, and a gross margin of 35.95%. Despite top-line growth, profitability remained modest, with net income of $39 million and a net margin of 1.04%, reflecting elevated other expenses and interest costs. EBITDA stood at $343 million, and operating income was $216 million, yielding an operating margin of roughly 5.74%. The quarter generated strong operating cash flow of $366 million and free cash flow of $250 million, supporting a positive liquidity position as of quarter end. Balance sheet leverage remains substantial: total debt of $7.434 billion and net debt of $5.883 billion, with cash and cash equivalents of $1.551 billion, and a cash balance of about $1.889 billion at the start of the period. The company continued debt reduction (net debt decline via $337 million debt repayment) and executed a modest amount of share repurchases ($21 million), while no cash dividends were paid. Valuation metrics imply a premium to earnings and cash flow relative to many peers, underscoring the importance of margin expansion and de-leveraging to unlock better risk-adjusted returns going forward.
Net income: $39 million; net margin 1.04%; YoY net income growth 113.59%; QoQ change -71.11%.
Financial Highlights
Revenue and profitability:
- Revenue: $3.764 billion; YoY +24.14%, QoQ +8.88% (per provided metrics).
- Gross profit: $1.353 billion; gross margin 35.95%; YoY gross profit growth reported at 175.0% and QoQ 35.16% (from dataset).
- Operating income: $216 million; operating margin 5.74%; YoY operating income growth 202.86%; QoQ change -20.88%.
- EBITDA: $343 million; EBITDA margin 9.11%.
- Net income: $39 million; net margin 1.04%; YoY net income growth 113.59%; QoQ change -71.11%.
- Earnings per share (EPS): $0.92 (GAAP), $0.88 (diluted); Weighted average shares outstanding: 346 million.
Cash flow and liquidity:
- Net cash from operating activities: $366 million; capital expenditures: $(116) million; free cash flow: $250 million.
- Cash and cash equivalents: $1.551 billion; total cash at period end approximately $1.879 billion; cash at beginning of period approximately $1.894 billion.
- Net debt: $5.883 billion; total debt: $7.434 billion; debt repayment in the quarter: $337 million; no cash dividends reported; share repurchases: $21 million.
Balance sheet health and efficiency:
- Total assets: $24.188 billion; total liabilities: $13.141 billion; total stockholders’ equity: $11.047 billion.
- Current ratio: 1.324; quick ratio: 0.775; cash ratio: 0.309.
- Working capital dynamics show notable movements in accounts receivable (-$366 million) and inventory (-$127 million) contributing to operating cash flow.
- Efficiency metrics include DSO 51.8 days, DIO 124.8 days, and a cash conversion cycle around 112 days.
Capital structure and positioning:
- Enterprise value and equity metrics imply a high earnings multiple with limited near-term earnings power; leverage remains a key consideration as margins recover and debt is reduced.
- Balance sheet includes goodwill and intangible assets totaling $4.319 billion, presenting potential impairment risk if market conditions deteriorate.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.76B
24.14%
8.88%
Gross Profit
1.35B
175.00%
35.16%
Operating Income
216.00M
202.86%
-20.88%
Net Income
39.00M
113.59%
-71.11%
EPS
0.92
203.37%
162.86%
Key Financial Ratios
currentRatio
1.32
grossProfitMargin
35.9%
operatingProfitMargin
15.8%
netProfitMargin
1.04%
returnOnAssets
0.16%
returnOnEquity
0.34%
debtEquityRatio
0.66
operatingCashFlowPerShare
$0.82
freeCashFlowPerShare
$0.56
priceToBookRatio
2.98
priceEarningsRatio
216.68
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript data not provided in the QQ4 2024 dataset. As a result, no management quotes or theme-based highlights from the earnings call can be extracted. Inference about management priorities is drawn from the reported financials: emphasis on data-center storage solutions, ongoing cost optimization, and modest debt reduction, with a focus on sustaining free cash flow generation and balance sheet resilience. Investors should monitor any forthcoming guidance on margin improvement, capital allocation, and product mix shifts in subsequent communications.
Transcript not available for QQ4 2024 call.
— N/A
Transcript not available for QQ4 2024 call.
— N/A
Forward Guidance
No explicit quarterly guidance was disclosed within the provided QQ4 2024 data. Given industry dynamics, the outlook hinges on continued data-center capex and cloud storage demand, as well as the company’s ability to improve margins through product mix optimization (accelerating enterprise SSDs and high-margin data-center solutions) and ongoing cost controls. Key factors to watch include: (1) cadence of margin expansion and cost savings initiatives, (2) pace of debt reduction and its impact on interest expense, (3) any changes in capex plans affecting free cash flow, and (4) management commentary on the trajectory for HDD vs. SSD revenue contribution as storage technologies evolve.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WDC.DE Focus
35.95%
15.80%
0.34%
216.68%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
QQ4 2024 results reflect a growth-led top line with meaningful cash generation but persistent profitability headwinds driven by product mix and non-operating costs. The company’s balance sheet shows meaningful leverage, yet the cash flow profile is robust enough to support modest deleveraging and capital allocation via stock repurchases without cash dividends. Valuation suggests a premium multiple relative to earnings and cash flow, signaling investor expectations for margin expansion and stronger earnings trajectory. The core investment thesis rests on WD’s ability to execute a favorable mix shift toward high-margin enterprise storage solutions, improve operational leverage, and sustain free cash flow to reduce leverage over time. Key factors to monitor include management’s forward-looking commentary on margin improvement, debt reduction pace, capex plans, and any strategic initiatives to further monetize WD’s data-center and enterprise storage platforms.
Key Investment Factors
Growth Potential
Sustained demand for data storage driven by cloud infrastructure, AI, and data analytics presents long-term revenue potential. A shift toward higher-margin enterprise SSDs and data-center solutions could lift profitability if WD accelerates its mix shift and achieves better pricing power in the enterprise segment. Additionally, WD’s brand breadth (WD, SanDisk) and diversified product portfolio may support growth across consumer external storage and embedded solutions in mobile/enterprise ecosystems.
Profitability Risk
Key risks include cyclicality of HDD demand and aggressive competition in both HDD and SSD segments, ongoing high leverage with net debt of approximately $5.88 billion, sensitivity to memory and component pricing, potential impairment risk from goodwill/intangibles if market conditions worsen, and macro headwinds impacting data-center capex and enterprise spending. Residual risk also exists around execution of cost optimization and sustainment of free cash flow under variable demand.
Financial Position
Balance sheet demonstrates liquidity support with cash around $1.55B and positive quarterly operating cash flow ($366M), but leverage remains elevated with total debt of $7.434B and net debt of $5.883B. The company generated free cash flow of $250M in the quarter, enabling modest buybacks and debt reduction. Near-term focus should be on deleveraging, maintaining liquidity, and converting topline growth into sustainable margin improvement to support a healthier capital structure.
SWOT Analysis
Strengths
Solid liquidity position with cash and equivalents around $1.55B and positive operating cash flow of $366M in the quarter
Free cash flow generation of $250M supports selective deleveraging and minimal capex optimization
Diversified product portfolio across HDDs, SSDs, external storage, and data center solutions
Established brand portfolio (WD, SanDisk) and global distribution network
Debt reduction progress evidenced by $337M in debt repayments during the period
Weaknesses
Profitability remains limited with net income of $39M and net margin around 1.0%
High leverage: total debt of $7.434B and net debt of $5.883B
Working capital intensity: elevated accounts receivable ($1.231B) and inventory ($1.389B) contributing to cash flow volatility
Significant goodwill/intangible asset base (~$4.319B) introduces impairment risk in adverse scenarios
Opportunities
Growth in data-center and cloud storage demand supports potential top-line expansion
Margin upside from product mix shift toward enterprise SSDs and higher-margin data-center solutions
Cost optimization and supply-chain efficiencies could improve gross margins
Expand usage of WD/SanDisk brands in enterprise and consumer segments, including embedded storage opportunities
Threats
Cyclicality of HDD demand and price competition from lower-cost rivals
Technology shift toward NVMe and SSDs may compress legacy HDD margins
Macro headwinds affecting data-center capex and overall IT spending
Geopolitical and supply-chain disruptions impacting memory supply and pricing dynamics
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