– Revenue of $2.62 billion – GAAP operating margin
of 13.3%; non-GAAP operating margin of 14.7% – GAAP diluted
earnings per share (EPS) of $1.12; non-GAAP diluted EPS of $1.29
– Cash flow from operations of $473 million and free cash
flow of $314 million – Returned $1.2 billion to shareholders
through dividends and the repurchase of 18 million ordinary shares
– Declared cash dividend of $0.67 per share
Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal second
quarter ended January 1, 2021.
"Seagate delivered strong, double-digit revenue, earnings and
free cash flow growth in the December quarter supported by
broad-based improvement across nearly every served market and
geography, and we had solid customer demand for our mass capacity
products," said Dave Mosley, Seagate’s chief executive officer.
"We also achieved our technology milestone by shipping
20-terabyte HAMR drives in calendar 2020, paving the way for
Seagate’s continued success for years to come. As demand for data
increases in both the cloud and at the edge, Seagate's new Lyve
Storage Platform complements our HDD portfolio to help businesses
address both the secular demand for mass capacity storage and the
increasing complexity of managing data from edge-to-core cloud. We
are well positioned to benefit from the tremendous opportunities we
foresee ahead and remain focused on enhancing value for our
customers, employees and shareholders."
Quarterly Financial Results
GAAP
Non-GAAP
FQ2 2021
FQ2 2020
FQ2 2021
FQ2 2020
Revenue ($M)
$
2,623
$
2,696
$
2,623
$
2,696
Gross Margin
26.5
%
28.1
%
26.8
%
28.7
%
Operating Margin
13.3
%
14.2
%
14.7
%
15.7
%
Net Income ($M)
$
280
$
318
$
323
$
359
Diluted Earnings Per Share
$
1.12
$
1.20
$
1.29
$
1.35
The Company generated $473 million in cash flow from operations
and $314 million in free cash flow during the fiscal second quarter
2021. Seagate maintained a healthy balance sheet and during the
fiscal second quarter 2021, the Company paid cash dividends of $167
million and repurchased 18 million ordinary shares for $1 billion.
Additionally, the Company raised $1 billion of debt and ended the
fiscal second quarter with cash and cash equivalents totaling $1.8
billion. There were 240 million ordinary shares issued and
outstanding as of the end of the quarter.
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 $0.67 per share, which will be payable
on April 7, 2021 to shareholders of record as of the close of
business on March 24, 2021. 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, distributable
reserves, and other factors deemed relevant by the Board.
Business Outlook
The business outlook for the fiscal third quarter 2021 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
third quarter 2021:
- Revenue of $2.65 billion, plus or minus $200 million
- Non-GAAP diluted EPS of $1.30, plus or minus $0.15
Guidance regarding non-GAAP diluted EPS excludes known charges
related to amortization of acquired intangible assets of $0.02 per
share and estimated share-based compensation expenses of $0.13 per
share.
We have not reconciled our non-GAAP diluted EPS guidance for
fiscal third quarter 2021 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, strategic investment losses 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
third quarter 2021 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 1:30 p.m.
Pacific / 4:30 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 crafts the datasphere, helping to maximize humanity’s
potential by innovating world-class, precision-engineered data
management solutions with a focus on sustainable partnerships.
Learn more about Seagate by visiting www.seagate.com or following
us on Twitter, Facebook, LinkedIn, YouTube, and subscribing to our
blog.
© 2021 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, strategies and prospects, financial
outlook for future periods, including the fiscal third quarter
2021, 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, and expectations on the Company’s business as
well as dividend issuance plans for the fiscal quarter ending April
2, 2021 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. Information concerning risks, uncertainties and other
factors that could cause results to differ materially from the
expectations described in this press release include, among others,
those risks and uncertainties included 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 3, 2020 filed with the U.S.
Securities and Exchange Commission on August 7, 2020. Additional
information will also be set forth in the Company's Quarterly
Report on Form 10-Q for the quarter ended January 1, 2021. 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 PLC
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
January 1, 2021
July 3, 2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
1,799
$
1,722
Accounts receivable, net
801
1,115
Inventories
1,318
1,142
Other current assets
163
135
Total current assets
4,081
4,114
Property, equipment and leasehold
improvements, net
2,218
2,129
Goodwill
1,237
1,237
Other intangible assets, net
40
58
Deferred income taxes
1,120
1,120
Other assets, net
290
272
Total Assets
$
8,986
$
8,930
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
1,730
$
1,808
Accrued employee compensation
206
224
Accrued warranty
61
69
Current portion of long-term debt
25
19
Accrued expenses
599
602
Total current liabilities
2,621
2,722
Long-term accrued warranty
76
82
Other non-current liabilities
179
183
Long-term debt
5,120
4,156
Total Liabilities
7,996
7,143
Total Equity
990
1,787
Total Liabilities and Equity
$
8,986
$
8,930
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
data)
(Unaudited)
For the Three Months
Ended
For the Six Months
Ended
January 1, 2021
January 3, 2020
January 1, 2021
January 3, 2020
Revenue
$
2,623
$
2,696
$
4,937
$
5,274
Cost of revenue
1,927
1,938
3,645
3,845
Product development
221
250
444
505
Marketing and administrative
122
120
240
242
Amortization of intangibles
3
4
6
8
Restructuring and other, net
2
—
3
17
Total operating expenses
2,275
2,312
4,338
4,617
Income from operations
348
384
599
657
Interest income
—
4
1
15
Interest expense
(52
)
(48
)
(102
)
(103
)
Other, net
(5
)
(4
)
14
(35
)
Other expense, net
(57
)
(48
)
(87
)
(123
)
Income before income taxes
291
336
512
534
Provision for income taxes
11
18
9
16
Net income
$
280
$
318
$
503
$
518
Net income per share:
Basic
$
1.12
$
1.21
$
1.99
$
1.96
Diluted
1.12
1.20
1.97
1.93
Number of shares used in per share
calculations:
Basic
249
262
253
264
Diluted
251
265
255
268
Cash dividends declared per ordinary
share
$
0.67
$
0.65
$
1.32
$
1.28
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Six Months
Ended
January 1, 2021
January 3, 2020
OPERATING ACTIVITIES
Net income
$
503
$
518
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
195
185
Share-based compensation
58
53
Deferred income taxes
(13
)
(4
)
Other non-cash operating activities,
net
4
47
Changes in operating assets and
liabilities:
Accounts receivable, net
315
(124
)
Inventories
(176
)
(172
)
Accounts payable
(75
)
458
Accrued employee compensation
(18
)
22
Accrued expenses, income taxes and
warranty
(36
)
(38
)
Other assets and liabilities
13
(9
)
Net cash provided by operating
activities
770
936
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(270
)
(341
)
Proceeds from sale of investments
11
—
Proceeds from the sale of assets
—
1
Purchases of investments
(4
)
(45
)
Net cash used in investing activities
(263
)
(385
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
(21
)
(645
)
Dividends to shareholders
(334
)
(335
)
Repurchases of ordinary shares
(1,068
)
(600
)
Taxes paid related to net share settlement
of equity awards
(32
)
(39
)
Net proceeds from issuance of long-term
debt
1,000
498
Proceeds from issuance of ordinary shares
under employee share plans
40
69
Other financing activities, net
(15
)
(2
)
Net cash used in financing activities
(430
)
(1,054
)
Effect of foreign currency exchange rate
changes on cash, cash equivalents and restricted cash
—
(2
)
Increase (decrease) in cash, cash
equivalents and restricted cash
77
(505
)
Cash, cash equivalents and restricted cash
at the beginning of the period
1,724
2,251
Cash, cash equivalents and restricted cash
at the end of the period
$
1,801
$
1,746
Use of non-GAAP financial information
The Company uses non-GAAP measures of adjusted revenue, 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. Free cash flow does not
reflect all of the Company’s expenses and non-cash items, and does
not reflect the Company’s uses of cash in financing and investing
activities.
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 PLC
RECONCILIATIONS OF GAAP TO
NON-GAAP MEASURES
(In millions, except per share
amounts and gross margin)
(Unaudited)
For the Three Months
Ended
For the Six Months
Ended
January 1, 2021
January 3, 2020
January 1, 2021
January 3, 2020
GAAP Gross Profit
$
696
$
758
$
1,292
$
1,429
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
2
—
Amortization of acquired intangible
assets
1
10
10
20
Share-based compensation
7
6
14
13
Non-GAAP Gross Profit
$
704
$
774
$
1,318
$
1,462
GAAP Gross Margin
26.5
%
28.1
%
26.2
%
27.1
%
Non-GAAP Gross Margin
26.8
%
28.7
%
26.7
%
27.7
%
GAAP Operating Expenses
$
348
$
374
$
693
$
772
Amortization of acquired intangible
assets
(3
)
(3
)
(6
)
(6
)
Restructuring and other, net
(2
)
—
(3
)
(17
)
Share-based compensation
(23
)
(21
)
(44
)
(40
)
Other charges
(1
)
—
(1
)
—
Non-GAAP Operating Expenses
$
319
$
350
$
639
$
709
GAAP Income From Operations
$
348
$
384
$
599
$
657
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
2
—
Amortization of acquired intangible
assets
4
13
16
26
Restructuring and other, net
2
—
3
17
Share-based compensation
30
27
58
53
Other charges
1
—
1
—
Non-GAAP Income From Operations
$
385
$
424
$
679
$
753
GAAP Operating Margin
13.3
%
14.2
%
12.1
%
12.5
%
Non-GAAP Operating Margin
14.7
%
15.7
%
13.8
%
14.3
%
GAAP Net Income
$
280
$
318
$
503
$
518
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
2
—
Amortization of acquired intangible
assets
4
13
16
26
Restructuring and other, net
2
—
3
17
Losses and costs recognized on the
modification or early redemption and repurchase of debt
—
—
2
30
Strategic investment losses (gains)
recognized
7
1
(24
)
1
Share-based compensation
30
27
58
53
Other charges
1
—
15
—
Income tax adjustments
(1
)
—
(10
)
(8
)
Non-GAAP Net Income
$
323
$
359
$
565
$
637
Shares used in diluted net income per
share calculation
251
265
255
268
GAAP Diluted Net Income Per
Share
$
1.12
$
1.20
$
1.97
$
1.93
Non-GAAP Diluted Net Income Per
Share
1.29
1.35
2.22
2.38
GAAP Net Cash Provided by Operating
Activities
$
473
$
480
$
770
$
936
Acquisition of property, equipment and
leasehold improvements
159
194
270
341
Free Cash Flow
$
314
$
286
$
500
$
595
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.
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) recognized
From time to time, the Company incurs losses or gains from
strategic investments accounted for under the equity method of
accounting or records downward or upward adjustments on cost basis
investments 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 or gain 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 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.
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. 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/20210121005828/en/
Investor Relations Contact: Shanye Hudson, (510) 661-1714
shanye.hudson@seagate.com
Media Contact: Gregory Belloni, (415) 235-9092
gregory.belloni@seagate.com
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