Western Digital Corporation

Good afternoon and thank you for standing by. Welcome to Western Digital's fiscal second quarter 2021 conference call. Presently, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you would like to ask a question, you may press star 1 on your phone. As a reminder, this call is being recorded.

Now, I'll turn the call over to Mr. Peter Andrew. You may begin. Thank you and good afternoon, everyone. Joining me today are David Geckler, Chief Executive Officer, and Bob Ulau, Chief Financial Officer. Before we begin, let me remind everyone that today's discussion contains forward-looking statements, including product portfolio expectations, business plans, trends in financial outlook, based on management's current assumptions and expectations, and as such, does include risks and uncertainties. We assume no obligation to update these statements. please refer to our most recent financial report on Form 10-K filed with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially. We will also make references to non-GAAP financial measures today. Reconciliations between the non-GAAP and comparable GAAP financial measures are included in the press release and other materials that are being posted in the investor relations section of our website. With that, I will now turn the call over to David.

Thanks, Peter, and thanks, everyone, for joining us today. To start, our second quarter results were at or above the upper end of guidance ranges we provided in October. We reported revenue of $3.9 billion and non-GAAP earnings per share of 69 cents. These results reflect continued growth in retail in what was a seasonally strong quarter. In addition, Stronger demand for our client SSD products, as well as our notebook and desktop hard drives, contributed to upside in revenue. We continue to work hard delivering for our shareholders, customers, partners, and communities. We adapted to changes in our business and continue to manage the ongoing challenges presented by the pandemic. Our results reflect the benefits of having such a diverse and deep product portfolio. fantastic franchises, a vast customer base, and now an optimized organizational structure. As a result, we have a solid foundation to capitalize on the significant growth opportunities in front of us. I'm excited about the progress we've made over the last few months in the recently established Flash and HDD business units. Both franchises are led by exceptional leaders who are highly focused on executing their respective strategies by establishing their teams, evaluating technology and product development, engaging with customers, and analyzing and effectively capturing target end markets. As we've highlighted in previous earnings calls, we are committed to delivering on our product roadmap, including advancing our product transitions, notably We are making great headway with the product transitions of our energy-assisted hard drives and enterprise SSDs. As you all know, these transitions are multi-quarter journeys, but I'm pleased with our progress, which I'll detail shortly. Although our progress to date is showing tangible results, there's still work to be done. We remain extremely focused on enhancing our ability to derive continued innovation and sustainable long-term shareholder value. Let me now provide a recap of our Flash and HDD businesses. Within Flash, we remain well positioned to address the digital transformation driven by businesses, schools, and consumers that continue to leverage technology as a daily necessity for work, learning, and a much-needed form of entertainment. The pandemic has has not only accelerated this transformation by the way we all use the cloud, but it has spurred technological innovation by driving the ability to access the cloud using very powerful and advanced end devices. The increasingly pervasive ability to access, store, and share data from anywhere on any device has resulted in robust storage demand, particularly in smaller form factors such as notebook, tablet, and Chromebook. The attach rate of client SSDs into notebooks now exceeds 80%, while desktop penetration of client SSDs is around 40%. Furthermore, tablets and Chromebooks, which are all flash-based, represent a growing percentage of total PC demand. Our leading position in client NVMe-based SSDs and our strong relationships with the major PC OEMs drove our client SSD business to a record level of exabyte shipments. Retail continued to perform well in a seasonally strong quarter, and we achieved a two-year high in revenue, supported by the strength of our brand and the breadth of our portfolio. We continued to make progress with our second-generation enterprise SSD products, completing nearly 150 qualifications. Importantly, We completed the qualification process at one Cloud Titan, which was an objective we committed to last quarter. We are shipping to this Cloud Titan in the fiscal third quarter. The second-generation Enterprise SSD qualification process is well underway with additional Cloud Titans and large OEMs. From a technology perspective, we began shipping our 112-layer BIX5 technology and client SSD products in the December quarter. Bix 5 remains the most capital-efficient technology node in the recent history of NAND going back to the 2D era, and we are preparing for a significant ramp of this node through 2021. Ultimately, customers want the best product that offers a blend of cost, performance, and power, and Western Digital provides that. Our focus on technological and architectural innovations, coupled with the benefits of size and scale that we have with our joint venture with Keoxia, has enabled us to deliver the industry's highest bit density per layer at the lowest cost per bit. As the result of our inherent advantages with the joint venture, particularly our scale and consistent track record of technological innovation, we are able to deliver the required bit growth and performance with the lowest capital intensity in the industry. We are highly confident in our ability to continue this momentum as we ramp BICS 5 through calendar year 2021 and begin BICS 6 productization. On the HDD side of the business, upside demand in PC, notebook, and smart video more than offset weakness in capacity enterprise. The persisting work-from-home and distance learning trends I touched upon earlier drove higher demand for both desktop and notebook PC hard drives and propelled retail hard drive revenue to a three-year high. The smart video business continued to recover, growing 30% sequentially. The biggest HD update is our solid progress against the initiative we outlined last quarter, completing the qualification process at the Cloud Titans with our mass market energy assisted hard drives. I'm pleased to share that we have now completed qualifications at three of the four U.S. Cloud Titans. While one now completed Cloud Titan qualification slipped beyond our anticipated timeline in the fiscal second quarter, another Cloud Titan qualification scheduled to complete in the fiscal third quarter was completed in the second quarter. With these significant milestones now behind us, we have staged products in anticipation of the ramp of these drives as we continue through 2021. With cloud digestion abating and the stabilization of OEM demand, we believe the demand and capacity enterprise bottomed in the fiscal second quarter and are anticipating a rebound in the fiscal third quarter. 18 terabyte is expected to be our leading capacity point as we head into the second half of the calendar year, which should propel nice growth in this segment going forward. As the volume of these drives continues to ramp through the calendar year, we expect our revenue and gross margin to recover. Before I turn it over to Bob, I'll quickly summarize our perspective on what's to come. We continue to deal with the far-reaching effects of the pandemic and no one can be certain of what the new normal will look like. However, there is no question the accelerated digital transformation has only increased the reliance on data and technology in both our professional and our personal lives, which we are confident will have a lasting impact for years to come. To this point, some industry analysts are raising the possibility that in certain portions of the market, such as the cloud, the storage industry will not be able to meet the extraordinary demand for both flash and hard drive solutions over the course of the next 10 years. Western Digital's unique ability to provide flash and hard drive storage solutions for customers spanning individual consumers to cloud titans highlights the value and importance of our broad portfolio and strong competitive position. I'll now turn the call over to Bob to share details on our financial results.