Fiscal Q4 2022 Highlights - Revenue of $2.63 billion - GAAP
gross margin of 28.9%; non-GAAP gross margin of 29.3% - GAAP
diluted earnings per share (EPS) of $1.27; non-GAAP diluted EPS of
$1.59
Fiscal Year 2022 Highlights - Revenue of $11.66 billion - GAAP
gross margin of 29.7%; non-GAAP gross margin of 30.1% - GAAP
operating margin of 16.8%; non-GAAP operating margin of 18.4% -
GAAP diluted EPS of $7.36; non-GAAP diluted EPS of $8.18 - Cash
flow from operations of $1.7 billion and free cash flow of $1.3
billion - Returned $2.4 billion to shareholders through dividends
and share repurchases - Revenue from mass capacity storage markets
increased 24% year-over-year and represented 74% of annual HDD
revenue
Seagate Technology Holdings plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fourth quarter
and fiscal year ended July 1, 2022.
“Our June quarter results reflect stable mass capacity storage
demand, offset by the impacts of Covid restrictive measures in Asia
and weakening global economic conditions on our other end markets.
These impacts were most pronounced in our consumer facing Legacy
markets,” said Dave Mosley, Seagate’s chief executive officer.
“The confluence of macro-related challenges is continuing into
the September quarter. In this environment, we are reducing our
production plans to maintain supply discipline as our customers
manage through macro uncertainty and on-going non-HDD component
shortages, and we are diligently managing expenses to protect
profitability. Looking further ahead, I remain confident that the
multiple secular growth trends fueling demand for data and mass
capacity storage solutions remain intact. Seagate is well
positioned for macro recovery with a strong product roadmap, deep
customer relationships and proven track record for disciplined
execution.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ4 2022
FQ4 2021
FQ4 2022
FQ4 2021
Revenue ($M)
$
2,628
$
3,013
$
2,628
$
3,013
Gross Margin
28.9
%
29.4
%
29.3
%
29.6
%
Operating Margin
13.7
%
16.8
%
16.1
%
18.1
%
Net Income ($M)
$
276
$
482
$
345
$
466
Diluted Earnings Per Share
$
1.27
$
2.07
$
1.59
$
2.00
Annual Financial Results
GAAP
Non-GAAP
FY 2022
FY 2021
FY 2022
FY 2021
Revenue ($M)
$
11,661
$
10,681
$
11,661
$
10,681
Gross Margin
29.7
%
27.3
%
30.1
%
27.7
%
Operating Margin
16.8
%
14.0
%
18.4
%
15.4
%
Net Income ($M)
$
1,649
$
1,314
$
1,833
$
1,381
Diluted Earnings Per Share
$
7.36
$
5.36
$
8.18
$
5.64
The Company generated $180 million in cash flow from operations
and $108 million in free cash flow during the fiscal fourth quarter
2022. For fiscal year 2022, the Company generated $1.7 billion in
cash flow from operations and $1.3 billion in free cash flow.
During the fiscal fourth quarter, the Company paid cash dividends
of $152 million and repurchased 6 million ordinary shares for $486
million. For the full year, the Company paid cash dividends of $610
million and used $1.8 billion to repurchase 20 million ordinary
shares, or 9% of the outstanding shares. Cash and cash equivalents
totaled $615 million. There were 210 million ordinary shares issued
and outstanding as of the end of the fiscal year.
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 October 5, 2022 to shareholders of record as of the close of
business on September 21, 2022. 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 first quarter 2023 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
first quarter 2023:
- Revenue of $2.5 billion, plus or minus $150 million
- Non-GAAP diluted EPS of $1.40, plus or minus $0.20
Guidance regarding non-GAAP diluted EPS excludes known charges
related to amortization of acquired intangible assets of $0.01 per
share and estimated share-based compensation expenses of $0.19 per
share.
We have not reconciled our non-GAAP diluted EPS guidance for
fiscal first quarter 2023 to the most directly comparable GAAP
measure 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, restructuring
charges and other, net, losses and costs recognized on the
modification or early redemption and repurchase of debt, strategic
investment losses (gains) or impairment recognized, 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 diluted EPS guidance for fiscal first quarter 2023
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 2:00 p.m.
Pacific / 5:00 p.m. Eastern 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 crafts the datasphere, helping to maximize
humanity’s potential by innovating world-class,
precision-engineered data storage and management solutions with a
focus on sustainable partnerships. A global technology leader for
more than 40 years, the company has shipped over three billion
terabytes of data capacity. Learn more about Seagate by visiting
www.seagate.com or following us on Twitter, Facebook, LinkedIn,
YouTube, and subscribing to our blog.
© 2022 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 first
quarter 2023, expectations regarding the Company’s products, our
ability to ramp production, storage industry trends and market
demand, shifts in technology, the Company’s ability to meet market
and industry expectations and the effects of these future trends,
the possible effects of the economic conditions worldwide resulting
from the COVID-19 pandemic or other macro disruptions, including
the likelihood or significance of continuing supply chain
disruptions, and expectations on the Company’s business as well as
dividend issuance plans for the fiscal quarter ending September 30,
2022 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 Annual Report on Form 10-K for the
year ended July 2, 2021 filed with the U.S. Securities and Exchange
Commission on August 6, 2021, and in our Quarterly Reports on Form
10-Q filed with the SEC on October 28, 2021, January 27, 2022 and
April 28, 2022. Additional information will also be set forth in
the Company’s Annual Report on Form 10-K for the year ended July 1,
2022. 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)
July 1, 2022
July 2, 2021
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
615
$
1,209
Accounts receivable, net
1,532
1,158
Inventories
1,565
1,204
Other current assets
321
208
Total current assets
4,033
3,779
Property, equipment and leasehold
improvements, net
2,239
2,181
Goodwill
1,237
1,237
Other intangible assets, net
9
29
Deferred income taxes
1,132
1,117
Other assets, net
294
332
Total Assets
$
8,944
$
8,675
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
2,058
$
1,725
Accrued employee compensation
252
282
Accrued warranty
65
61
Current portion of long-term debt
584
245
Accrued expenses
596
608
Total current liabilities
3,555
2,921
Long-term accrued warranty
83
75
Other non-current liabilities
135
154
Long-term debt, less current portion
5,062
4,894
Total Liabilities
8,835
8,044
Total Equity
109
631
Total Liabilities and Equity
$
8,944
$
8,675
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
data)
For the Three Months
Ended
For the Fiscal Years
Ended
July 1, 2022
July 2, 2021
July 1, 2022
July 2, 2021
(unaudited)
(unaudited)
Revenue
$
2,628
$
3,013
$
11,661
$
10,681
Cost of revenue
1,869
2,128
8,192
7,764
Product development
247
232
941
903
Marketing and administrative
149
136
559
502
Amortization of intangibles
2
3
11
12
Restructuring and other, net
1
7
3
8
Total operating expenses
2,268
2,506
9,706
9,189
Income from operations
360
507
1,955
1,492
Interest income
1
—
2
2
Interest expense
(65
)
(59
)
(249
)
(220
)
Other, net
(15
)
49
(29
)
74
Other expense, net
(79
)
(10
)
(276
)
(144
)
Income before income taxes
281
497
1,679
1,348
Provision for income taxes
5
15
30
34
Net income
$
276
$
482
$
1,649
$
1,314
Net income per share:
Basic
$
1.30
$
2.11
$
7.50
$
5.43
Diluted
$
1.27
$
2.07
$
7.36
$
5.36
Number of shares used in per share
calculations:
Basic
213
228
220
242
Diluted
217
233
224
245
Cash dividends declared per ordinary
share
$
0.70
$
0.67
$
2.77
$
2.66
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
For the Fiscal Years
Ended
July 1, 2022
July 2, 2021
(unaudited)
OPERATING ACTIVITIES
Net income
$
1,649
$
1,314
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
451
397
Share-based compensation
145
112
Loss on redemption and repurchase of
debt
—
1
Deferred income taxes
(9
)
(4
)
Other non-cash operating activities,
net
64
(50
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(374
)
(42
)
Inventories
(361
)
(64
)
Accounts payable
228
(14
)
Accrued employee compensation
(30
)
58
Accrued expenses, income taxes and
warranty
(26
)
(38
)
Other assets and liabilities
(80
)
(44
)
Net cash provided by operating
activities
1,657
1,626
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(381
)
(498
)
Proceeds from sale of investments
47
29
Proceeds from the sale of assets
—
4
Purchases of investments
(18
)
(4
)
Maturities of short-term investments
—
3
Net cash used in investing activities
(352
)
(466
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
(701
)
(33
)
Dividends to shareholders
(610
)
(649
)
Repurchases of ordinary shares
(1,799
)
(2,047
)
Taxes paid related to net share settlement
of equity awards
(51
)
(33
)
Proceeds from issuance of long-term
debt
1,200
1,000
Proceeds from issuance of ordinary shares
under employee stock plans
68
108
Other financing activities, net
(6
)
(19
)
Net cash used in financing activities
(1,899
)
(1,673
)
Decrease in cash, cash equivalents and
restricted cash
(594
)
(513
)
Cash, cash equivalents and restricted cash
at the beginning of the year
1,211
1,724
Cash, cash equivalents and restricted cash
at the end of the year
$
617
$
1,211
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, and free cash flow, 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
For the Twelve Months
Ended
July 1, 2022
July 2, 2021
July 1, 2022
July 2, 2021
GAAP Gross Profit
$
759
$
885
$
3,469
$
2,917
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
1
2
Amortization of acquired intangible
assets
1
1
4
12
Share-based compensation
11
6
38
28
Non-GAAP Gross Profit
$
771
$
892
$
3,512
$
2,959
GAAP Gross Margin
28.9
%
29.4
%
29.7
%
27.3
%
Non-GAAP Gross Margin
29.3
%
29.6
%
30.1
%
27.7
%
GAAP Operating Expenses
$
399
$
378
$
1,514
$
1,425
Accelerated depreciation, impairment and
other charges related to cost saving efforts
(13
)
—
(13
)
—
Amortization of acquired intangible
assets
(2
)
(3
)
(11
)
(12
)
Restructuring and other, net
(1
)
(7
)
(3
)
(8
)
Share-based compensation
(28
)
(19
)
(107
)
(84
)
Other charges
(6
)
(3
)
(10
)
(7
)
Non-GAAP Operating Expenses
$
349
$
346
$
1,370
$
1,314
GAAP Income From Operations
$
360
$
507
$
1,955
$
1,492
Accelerated depreciation, impairment and
other charges related to cost saving efforts
13
—
14
2
Amortization of acquired intangible
assets
3
4
15
24
Restructuring and other, net
1
7
3
8
Share-based compensation
39
25
145
112
Other charges
6
3
10
7
Non-GAAP Income From Operations
$
422
$
546
$
2,142
$
1,645
GAAP Operating Margin
13.7
%
16.8
%
16.8
%
14.0
%
Non-GAAP Operating Margin
16.1
%
18.1
%
18.4
%
15.4
%
GAAP Net Income
$
276
$
482
$
1,649
$
1,314
Accelerated depreciation, impairment and
other charges related to cost saving efforts
13
—
14
2
Amortization of acquired intangible
assets
3
4
15
24
Restructuring and other, net
1
7
3
8
Losses and costs recognized on the
modification or early redemption and repurchase of debt
—
—
1
2
Strategic investment losses (gains) or
impairment recognized
6
(50
)
12
(87
)
Share-based compensation
39
25
145
112
Other charges
6
3
10
21
Income tax adjustments
1
(5
)
(16
)
(15
)
Non-GAAP Net Income
$
345
$
466
$
1,833
$
1,381
Shares used in diluted net income per
share calculation
217
233
224
245
GAAP Diluted Net Income Per
Share
$
1.27
$
2.07
$
7.36
$
5.36
Non-GAAP Diluted Net Income Per
Share
$
1.59
$
2.00
$
8.18
$
5.64
GAAP Net Cash Provided by Operating
Activities
$
180
$
478
$
1,657
$
1,626
Acquisition of property, equipment and
leasehold improvements
72
124
381
498
Free Cash Flow
$
108
$
354
$
1,276
$
1,128
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.
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.
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. These also exclude 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.
Other charges
The other charges primarily include write-offs related to an
internal reorganization and 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.
Losses and costs recognized on the modification or early
redemption and repurchase of debt
From time to time, the Company incurs losses and fees from the
early redemption and repurchase of certain long-term debt
instruments. The losses represent the difference between the
reacquisition costs and the par value of the debt extinguished.
Other fees include any new fees associated with a modification and
the write-off of any unamortized debt issuance costs associated
with an extinguishment of debt. The amount of these charges may be
inconsistent in size and varies depending on the timing of the
repurchase of debt 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.
Strategic investment losses (gains) or impairment
recognized
From time to time, the Company incurs losses, gains or
impairment 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.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220721005356/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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