Fiscal Q1 2024 Highlights
- Revenue of $1.45 billion
- GAAP (loss) per share of $(0.88); non-GAAP (loss) per share of
$(0.22)
- Cash flow from operations of $127 million and free cash flow of
$57 million
- Declared cash dividend of $0.70 per share
- Strong execution on mass capacity product roadmap extending
areal density leadership
Seagate Technology Holdings plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal first
quarter ended September 29, 2023.
“Seagate’s first quarter results were in line with our revised
expectations. During a longer-than-typical downcycle we have
prioritized financial discipline, positive free cash flow
generation and execution on our HAMR product roadmap, which will
extend our industry leadership in areal density and improve the
total cost of ownership for our customers,” said Dave Mosley,
Seagate’s chief executive officer.
“With indications that demand fundamentals in certain markets
are starting to improve, including a modest uptick in U.S. cloud,
Seagate is well positioned to enhance profitability and capture
attractive long-term opportunities for Mass Capacity storage.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ1 2024
FQ1 2023
FQ1 2024
FQ1 2023
Revenue ($M)
$
1,454
$
2,035
$
1,454
$
2,035
Gross Margin
10.2
%
23.7
%
19.8
%
24.5
%
Operating Margin
(8.9
)%
5.3
%
2.8
%
9.0
%
Net (Loss) Income ($M)
$
(184
)
$
29
$
(46
)
$
101
Diluted (Loss) Earnings Per Share
$
(0.88
)
$
0.14
$
(0.22
)
$
0.48
During the fiscal first quarter the Company generated $127
million in cash flow from operations, $57 million in free cash
flow, and returned $145 million of capital to shareholders through
its quarterly dividend. Additionally, the Company issued $1.5
billion convertible notes due 2028 bearing an interest rate of 3.5%
with the proceeds primarily used to retire the outstanding balance
on its remaining term loans. As of the end of the quarter, cash and
cash equivalents totaled $795 million, and there were 209 million
ordinary shares issued and outstanding.
For a detailed reconciliation of GAAP to non-GAAP results, see
accompanying financial tables.
Seagate has issued a Supplemental Financial Information
document, which is available on Seagate’s Investor Relations
website at investors.seagate.com.
Quarterly Cash Dividend
The Board of Directors of the Company (the “Board”) declared a
quarterly cash dividend of $0.70 per share, which will be payable
on January 9, 2024 to shareholders of record as of the close of
business on December 21, 2023. The payment of any future quarterly
dividends will be at the discretion of the Board and will be
dependent upon Seagate’s financial position, results of operations,
available cash, cash flow, capital requirements and other factors
deemed relevant by the Board.
Business Outlook
The business outlook for the fiscal second quarter 2024 is based
on our current assumptions and expectations; actual results may
differ materially, as a result of, among other things, the
important factors discussed in the Cautionary Note Regarding
Forward-Looking Statements section of this release.
The Company is providing the following guidance for its fiscal
second quarter 2024:
- Revenue of $1.55 billion, plus or minus $150 million
- Non-GAAP (loss) per share of $(0.10), plus or minus $0.20
Guidance regarding non-GAAP (loss) per share excludes known
pre-tax charges related to estimated share-based compensation
expenses of $0.14 per share.
We have not reconciled our non-GAAP (loss) per share guidance
for fiscal second quarter 2024 to the most directly comparable GAAP
measure, other than estimated share-based compensation expenses,
because material items that may impact these measures are out of
our control and/or cannot be reasonably predicted, including, but
not limited to, accelerated depreciation, impairment and other
charges related to cost saving efforts, net (gain) loss recognized
from early redemption of debt, purchase order cancellation fees,
strategic investment losses (gains) or impairment charges, income
tax adjustments on these measures, and other charges or benefits
that may arise. The amounts of these measures are not currently
available but may be material to future results. A reconciliation
of the non-GAAP (loss) per share guidance for fiscal second quarter
2024 to the corresponding GAAP measures is not available without
unreasonable effort. A reconciliation of our historical non-GAAP
financial measures to their nearest GAAP equivalent is contained in
this release.
Investor Communications
Seagate management will hold a public webcast today at 6:00 AM
PT / 9:00 AM ET that can be accessed on its Investor Relations
website at investors.seagate.com.
An archived audio webcast of this event will be available on
Seagate’s Investor Relations website at investors.seagate.com
shortly following the event conclusion.
About Seagate
Seagate Technology is the leading innovator of mass-capacity
data storage solutions. We create breakthrough technology so you
can confidently store your data and easily unlock its value.
Founded over 45 years ago, Seagate has shipped over four billion
terabytes of data capacity and offers a full portfolio of storage
devices, systems, and services from edge to cloud. To learn more
about how Seagate leads storage innovation, visit www.seagate.com
and our blog, or follow us on Twitter, Facebook, LinkedIn, and
YouTube.
© 2023 Seagate Technology LLC. All rights reserved. Seagate,
Seagate Technology, and the Spiral logo are registered trademarks
of Seagate Technology LLC in the United States and/or other
countries.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements provide current expectations of
future events based on certain assumptions and include any
statement that does not directly relate to any historical fact.
Forward-looking statements include, among other things, statements
about the Company’s plans, programs, strategies and prospects;
financial outlook for future periods, including the fiscal second
quarter 2024; expectations regarding our ability to service debt
and continue to generate free cash flow; expectations regarding our
ability to make timely quarterly payments under the settlement
agreement with the U.S. Department of Commerce’s Bureau of Industry
and Security; expectations regarding logistical, macroeconomic, or
other factors affecting the Company; expectations regarding our
ability to execute on our cost saving plans as currently
contemplated; changes to the assumptions on which the projected
cost saving initiatives are based; expectations regarding market
demand for the Company’s products and our ability to optimize our
level of production and meet market and industry expectations and
the effects of these future trends on Company’s performance;
anticipated shifts in technology and storage industry trends, and
anticipated demand and performance of new storage product
introductions, including HAMR-based products; and expectations
regarding the Company’s business strategy and performance, as well
as dividend issuance plans for the fiscal quarter ending December
29, 2023 and beyond. Forward-looking statements generally can be
identified by words such as “expects,” “intends,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “projects,”
“should,” “may,” “will,” “will continue,” “can,” “could” or the
negative of these words, variations of these words and comparable
terminology, in each case, intended to refer to future events or
circumstances. However, the absence of these words or similar
expressions does not mean that a statement is not forward-looking.
Forward-looking statements are subject to various uncertainties and
risks that could cause our actual results to differ materially from
historical experience and our present expectations or projections.
These risks and uncertainties include, but are not limited to,
those described under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” in the Company’s latest periodic report on Form 10-Q or
Form 10-K filed with the U.S. Securities and Exchange Commission.
Undue reliance should not be placed on the forward-looking
statements in this press release, which are based on information
available to us on, and which speak only as of, the date hereof.
The Company undertakes no obligation to update forward-looking
statements to reflect events or circumstances after the date they
were made, unless required by applicable law.
The inclusion of Seagate’s website addresses in this press
release are provided for convenience only. The information
contained in, or that can be accessed through, Seagate’s websites
and social media channels are not part of this press release.
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
September 29, 2023
June 30, 2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
795
$
786
Accounts receivable, net
521
621
Inventories
1,052
1,140
Other current assets
268
358
Total current assets
2,636
2,905
Property, equipment and leasehold
improvements, net
1,652
1,706
Goodwill
1,237
1,237
Deferred income taxes
1,087
1,117
Other assets, net
584
591
Total Assets
$
7,196
$
7,556
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current liabilities:
Accounts payable
$
1,511
$
1,603
Accrued employee compensation
88
100
Accrued warranty
84
78
Current portion of long-term debt
—
63
Accrued expenses
790
748
Total current liabilities
2,473
2,592
Long-term accrued warranty
92
90
Other non-current liabilities
667
685
Long-term debt, less current portion
5,666
5,388
Total Liabilities
8,898
8,755
Total Shareholders' Deficit
(1,702
)
(1,199
)
Total Liabilities and Shareholders’
Deficit
$
7,196
$
7,556
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
data)
(Unaudited)
For the Three Months
Ended
September 29, 2023
September 30, 2022
Revenue
$
1,454
$
2,035
Cost of revenue
1,305
1,553
Product development
171
234
Marketing and administrative
105
129
Amortization of intangibles
—
3
Restructuring and other, net
2
9
Total operating expenses
1,583
1,928
(Loss) income from operations
(129
)
107
Interest income
2
1
Interest expense
(84
)
(71
)
Net gain recognized from termination of
interest rate swap
104
—
Net loss recognized from early redemption
of debt
(29
)
—
Other, net
(11
)
(10
)
Other expense, net
(18
)
(80
)
(Loss) income before income taxes
(147
)
27
Provision for (benefit from) income
taxes
37
(2
)
Net (loss) income
$
(184
)
$
29
Net (loss) income per share:
Basic
$
(0.88
)
$
0.14
Diluted
$
(0.88
)
$
0.14
Number of shares used in per share
calculations:
Basic
208
208
Diluted
208
210
Cash dividends declared per ordinary
share
$
0.70
$
0.70
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Three Months
Ended
September 29, 2023
September 30, 2022
OPERATING ACTIVITIES
Net (loss) income
$
(184
)
$
29
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization
76
135
Share-based compensation
25
29
Deferred income taxes
28
(5
)
Net loss on redemption and repurchase of
debt
7
—
Other non-cash operating activities,
net
(50
)
13
Changes in operating assets and
liabilities:
Accounts receivable, net
100
434
Inventories
88
(41
)
Accounts payable
(70
)
(300
)
Accrued employee compensation
(12
)
(146
)
Accrued expenses, income taxes and
warranty
54
4
Other assets and liabilities
65
93
Net cash provided by operating
activities
127
245
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(70
)
(133
)
Proceeds from the sale of assets
—
1
Purchases of investments
—
(1
)
Net cash used in investing activities
(70
)
(133
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
(1,288
)
—
Dividends to shareholders
(145
)
(147
)
Repurchases of ordinary shares
—
(408
)
Taxes paid related to net share settlement
of equity awards
(25
)
(39
)
Proceeds from issuance of long-term
debt
1,500
600
Proceeds from issuance of ordinary shares
under employee stock plans
35
29
Other financing activities, net
(126
)
(1
)
Net cash (used in) provided by financing
activities
(49
)
34
Effect of foreign currency exchange rate
changes on cash, cash equivalents and restricted cash
1
—
Increase in cash, cash equivalents and
restricted cash
9
146
Cash, cash equivalents and restricted cash
at the beginning of the period
788
617
Cash, cash equivalents and restricted cash
at the end of the period
$
797
$
763
Use of non-GAAP financial information
The Company uses non-GAAP measures of gross profit, gross
margin, operating expenses, income from operations, operating
margin, net income, diluted EPS, free cash flow, EBITDA, adjusted
EBITDA and last twelve months adjusted EBITDA, which are adjusted
from results based on GAAP to exclude certain benefits, expenses,
gains and losses. These non-GAAP financial measures are provided to
enhance the user’s overall understanding of the Company’s current
financial performance and its prospects for the future.
Specifically, the Company believes non-GAAP results provide useful
information to both management and investors as these non-GAAP
results exclude certain benefits, expenses, gains and losses that
it believes are not indicative of its core operating results and
because it is similar to the approach used in connection with the
financial models and estimates published by financial analysts who
follow the Company.
These non-GAAP results are some of the measurements management
uses to assess the Company’s performance, allocate resources and
plan for future periods. Reported non-GAAP results should only be
considered as supplemental to results prepared in accordance with
GAAP, and not considered as a substitute or replacement for, or
superior to, GAAP results. These non-GAAP measures may differ from
the non-GAAP measures reported by other companies in its
industry.
SEAGATE TECHNOLOGY HOLDINGS
PLC
RECONCILIATIONS OF GAAP TO
NON-GAAP MEASURES
(In millions, except per share
amounts, gross margin and operating margin)
(Unaudited)
For the Three Months
Ended
September 29, 2023
September 30, 2022
GAAP Gross Profit
$
149
$
482
Accelerated depreciation, impairment and
other charges related to cost saving efforts
13
—
Amortization of acquired intangible
assets
—
1
Pandemic-related lockdown charges
—
7
Purchase order cancellation fees
118
—
Share-based compensation
7
8
Other charges
1
—
Non-GAAP Gross Profit
$
288
$
498
GAAP Gross Margin
10.2
%
23.7
%
Non-GAAP Gross Margin
19.8
%
24.5
%
GAAP Operating Expenses
$
278
$
375
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
(22
)
Amortization of acquired intangible
assets
—
(3
)
Restructuring and other, net
(2
)
(9
)
Share-based compensation
(18
)
(21
)
Other charges
(10
)
(6
)
Non-GAAP Operating Expenses
$
248
$
314
GAAP (Loss) Income From
Operations
$
(129
)
$
107
Accelerated depreciation, impairment and
other charges related to cost saving efforts
13
22
Amortization of acquired intangible
assets
—
4
Pandemic-related lockdown charges
—
7
Purchase order cancellation fees
118
—
Restructuring and other, net
2
9
Share-based compensation
25
29
Other charges
11
6
Non-GAAP Income From Operations
$
40
$
184
GAAP Operating Margin
(8.9
)%
5.3
%
Non-GAAP Operating Margin
2.8
%
9.0
%
GAP Net (Loss) Income
$
(184
)
$
29
Accelerated depreciation, impairment and
other charges related to cost saving efforts
13
22
Amortization of acquired intangible
assets
—
4
Net loss recognized from early redemption
of debt
29
—
Net gain recognized from termination of
interest rate swap
(104
)
—
Pandemic-related lockdown charges
—
7
Purchase order cancellation fees
118
—
Restructuring and other, net
2
9
Share-based compensation
25
29
Other charges
11
6
Income tax adjustments
44
(5
)
Non-GAAP Net (Loss) Income
$
(46
)
$
101
GAAP Diluted Net (Loss) Income Per
Share
$
(0.88
)
$
0.14
Accelerated depreciation, impairment and
other charges related to cost saving efforts
0.06
0.10
Amortization of acquired intangible
assets
—
0.02
Net loss recognized from early redemption
of debt
0.14
—
Net gain recognized from termination of
interest rate swap
(0.50
)
—
Pandemic-related lockdown charges
—
0.03
Purchase order cancellation fees
0.57
—
Restructuring and other, net
0.01
0.04
Share-based compensation
0.12
0.14
Other charges
0.05
0.03
Income tax adjustments
0.21
(0.02
)
Non-GAAP Diluted Net (Loss) Income Per
Share1
$
(0.22
)
$
0.48
Shares used in diluted net (loss)
income per share calculation
GAAP
208
210
Non-GAAP
208
210
GAAP Net Cash Provided by Operating
Activities
$
127
$
245
Acquisition of property, equipment and
leasehold improvements
70
133
Free Cash Flow
$
57
$
112
1 For the three months ended September 29,
2023, GAAP and non-GAAP diluted net loss per share were computed
using weighted average basic shares of 208 million, as a result of
the net loss reported during the period.
For the Three Months
Ended
September 29, 2023
June 30, 2023
March 31, 2023
December 30, 2022
Last Twelve Months
GAAP Net loss
$
(184
)
$
(92
)
$
(433
)
$
(33
)
$
(742
)
Depreciation and amortization
76
104
126
148
454
Interest expense
84
84
81
77
326
Interest income
(2
)
(6
)
(2
)
(1
)
(11
)
Income tax expense (benefit)
37
7
33
(5
)
72
Non-GAAP EBITDA
11
97
(195
)
186
99
BIS settlement penalty
—
—
300
—
300
Net loss (gain) recognized from early
redemption of debt
29
17
(3
)
(204
)
(161
)
Net gain recognized from termination of
interest rate swap
(104
)
—
—
—
(104
)
Purchase order cancellation fees
118
—
—
108
226
Restructuring and other, net
2
(8
)
20
81
95
Share-based compensation
25
22
31
33
111
Strategic investment losses or impairment
charges
—
9
1
—
10
Underutilization charges, net of
depreciation and amortization
51
29
60
45
185
Other charges
11
12
7
7
37
Non-GAAP Adjusted EBITDA
143
178
221
256
798
The Company’s Non-GAAP measures are adjusted for the
following items:
Accelerated depreciation, impairment and other charges
related to cost saving efforts
These expenses are excluded in the non-GAAP measures due to the
inconsistency in amount and frequency and are excluded to
facilitate a more meaningful evaluation of the Company’s current
operating performance and comparison to its past periods' operating
performance.
Amortization of acquired intangible assets
The Company records expense from amortization of intangible
assets that were acquired in connection with its business
combinations over their estimated useful lives. Such charges are
inconsistent in size and are significantly impacted by the timing
and magnitude of the Company’s acquisitions. Consequently, these
expenses are excluded in the non-GAAP measures to facilitate a more
meaningful evaluation of its current operating performance and
comparison to its past periods’ operating performance.
BIS settlement penalty
The Company accrued a settlement penalty of $300 million for the
fiscal third quarter of 2023 related to the alleged violations of
the U.S. Export Administration Regulations between August 17, 2020
and September 29, 2021 by the U.S. Department of Commerce’s Bureau
of Industry and Security (“BIS”), which were subsequently resolved
by a settlement agreement on April 18, 2023. This settlement
penalty is excluded from the non-GAAP measures to facilitate a more
meaningful evaluation of the Company's current operating
performance and comparison to its past periods' operating
performance.
Net loss (gain) recognized from early redemption of debt and
termination of interest rate swap
From time to time, the Company incurs gains, losses and fees
from the early redemption and repurchase of certain long-term debt
instruments and termination of related interest rate swap
agreements. The amount of these charges may be inconsistent in size
and varies depending on the timing of the early redemption of debt
and/or termination of interest rate swap and consequently is
excluded from the non-GAAP measures to facilitate a more meaningful
evaluation of its current operating performance and comparison to
its past periods' operating performance.
Pandemic-related lockdown charges
Pandemic-related lockdown charges are factory under-utilization
costs incurred due to the pandemic-related lockdown measures at our
factory in Wuxi, China. These charges are inconsistent in amount
and frequency and are excluded in the non-GAAP measures to
facilitate a more meaningful evaluation of its current operating
performance and comparison to its past periods’ operating
performance.
Purchase order cancellation fees
Purchase order cancellation fees are the costs incurred to
cancel certain purchase commitments made with the Company's
suppliers for component and equipment purchases that will not be
received due to change in forecasted demand. These charges are
inconsistent in amount and frequency and are excluded in the
non-GAAP measures to facilitate a more meaningful evaluation of its
current operating performance and comparison to its past periods’
operating performance.
Restructuring and other, net
Restructuring and other, net are costs associated with
restructuring plans that are primarily related to costs associated
with reduction in the Company’s workforce, exiting certain
facilities and other related costs, as well as charges or gains
from sale of properties. These costs or benefits do not reflect the
Company’s ongoing operating performance and consequently are
excluded from the non-GAAP measures to facilitate a more meaningful
evaluation of its current operating performance and comparison to
its past periods’ operating performance.
Share-based compensation
These expenses consist primarily of expenses for employee
share-based compensation. Given the variety of equity awards used
by companies, the varying methodologies for determining share-based
compensation expense, the subjective assumptions involved in those
determinations, and the volatility in valuations that can be driven
by market conditions outside the Company’s control, the Company
believes excluding share-based compensation expense enhances the
ability of management and investors to understand and assess the
underlying performance of its business over time and compare it
against the Company’s peers, a majority of whom also exclude
share-based compensation expense from their non-GAAP results.
Strategic investment gains, losses and impairment
charges
From time to time, the Company incurs gains, losses or
impairment charges from strategic investments that are measured and
accounted at fair value, under the equity method of accounting, as
available-for-sale debt securities or adjust for downward or upward
adjustments to the carrying value under the measurement alternative
if an impairment or observable price adjustment is recognized in
the current period that are not considered as part of its ongoing
operating performance. The resulting expense, gain or impairment
loss is inconsistent in amount and frequency and consequently is
excluded from the non-GAAP measures to facilitate a more meaningful
evaluation of its current operating performance and comparison to
its past periods’ operating performance
Other charges
The other charges primarily include IT transformation costs.
These charges are inconsistent in amount and frequency and are
excluded in the non-GAAP measures to facilitate a more meaningful
evaluation of its current operating performance and comparison to
its past periods’ operating performance.
Income tax adjustments
Provision or benefit for income taxes represents the tax effects
of non-GAAP adjustments determined using a hybrid with and without
method and effective tax rate for the applicable adjustment and
jurisdiction.
Free cash flow
Free cash flow is a non-GAAP measure defined as net cash
provided by operating activities less acquisition of property,
equipment and leasehold improvements. Free cash flow does not
reflect non-cash items, net cash used or provided by financing
activities and net cash used or provided by investing activities,
other than acquisition of property, equipment and leasehold
improvements. This non-GAAP financial measure is used by management
to assess the Company's sources of liquidity, capital structure and
operating performance.
EBITDA, adjusted EBITDA and last twelve months (LTM) adjusted
EBITDA
EBITDA is defined as net income (loss) before income tax
expense, interest expense, interest income, depreciation and
amortization. Adjusted EBITDA excludes certain expenses, gains and
losses that the Company believes are not indicative of its core
operating results. These adjustments primarily include impairment
and other charges related to cost saving efforts, net loss (gain)
recognized from early redemption of debt, net gain recognized from
termination of interest rate swap, pandemic-related lockdown
charges, purchase order cancellation fees, restructuring and other,
net, share-based compensation, strategic investment losses or
impairment charges, other extraordinary charges such as factory
underutilization charges and BIS settlement penalty. LTM adjusted
EBITDA is defined as the total of last twelve months adjusted
EBITDA. These non-GAAP financial measures are used by management to
evaluate the Company’s debt portfolio and structure to comply with
its financial debt covenants.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231026307326/en/
Investor Relations Contact: Shanye Hudson, (510) 661-1600
shanye.hudson@seagate.com
Media Contact: Gregory Belloni, (415) 235-9092
gregory.belloni@seagate.com
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