Fiscal Q4 2019 Highlights
- Revenue of $2.37 billion
- GAAP diluted earnings per share (EPS) of $3.54; reflects a
one-time deferred tax benefit of $702 million
- Non-GAAP diluted EPS of $0.86
- Cash flow from operations of $448 million and free cash flow of
$297 million
- Repurchased 7.8 million shares for $350 million
- Declared cash dividend of $0.63 per share
Fiscal Year 2019 Highlights
- Revenue of $10.4 billion
- GAAP diluted EPS of $7.06
- Non-GAAP diluted EPS of $4.82
- Cash flow from operations of $1.8 billion and free cash flow of
$1.2 billion
- Returned $1.7 billion to shareholders through dividends and
share repurchases
Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal fourth
quarter and fiscal year ended June 28, 2019.
“We continued to execute well in the June quarter in the midst
of an uncertain global environment. We once again delivered on all
of our financial expectations, while driving higher operating
profit and earnings per share quarter-over-quarter, and
demonstrating our ongoing focus on optimizing free cash flow,” said
Dave Mosley, Seagate’s chief executive officer.
“As we enter our next fiscal year, global industry conditions
have started to improve, particularly among cloud and hyperscale
customers. Seagate is in a strong strategic position to address
growing demand for mass storage. In March, we began shipping the
industry’s highest capacity 16 terabyte drives. Qualifications are
progressing well and we remain on track to ramp production in order
to meet future demand. We have also begun to qualify our
dual-actuator technology with multiple customers, which doubles
drive performance while maintaining the same capacity. Seagate’s
strong technology pipeline continues to deliver efficient and
cost-effective solutions for customers to manage ever-increasing
amounts of data.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ4 2019
FQ4 2018
FQ4 2019
FQ4 2018
Revenue ($M)
$2,371
$2,835
$2,371
$2,835
Gross Margin
26.3%
31.9%
26.8%
32.4%
Net Income ($M)
$983
$461
$239
$475
Diluted Earnings Per Share
$3.54
$1.57
$0.86
$1.62
Annual Financial Results
GAAP
Non-GAAP
FY 2019
FY 2018
FY 2019
FY 2018
Revenue ($M)
$10,390
$11,184
$10,391
$11,178
Gross Margin
28.2%
30.1%
28.7%
30.7%
Net Income ($M)
$2,012
$1,182
$1,375
$1,609
Diluted Earnings Per Share
$7.06
$4.05
$4.82
$5.51
In the fiscal fourth quarter, the Company recognized a one-time
deferred tax benefit of $702 million resulting from a release of a
valuation allowance related primarily to our U.S. deferred tax
assets, which is reflected in GAAP Net Income, but excluded from
Non-GAAP Net Income. This was driven by improvements in the
Company’s profitability outlook in the U.S. including our efforts
to structurally and operationally align our enterprise data
solutions business with the rest of the Company. This does not
materially change our future worldwide effective tax rate.
The Company generated $448 million in cash flow from operations
and $297 million in free cash flow during the fiscal fourth
quarter. For fiscal year 2019, the Company generated $1.8 billion
in cash flow from operations and $1.2 billion in free cash flow.
Seagate’s balance sheet is healthy and during the fiscal fourth
quarter, the Company paid cash dividends of $174 million and
repurchased 7.8 million ordinary shares for $350 million. For the
full year, the Company paid cash dividends of $713 million and
repurchased 21 million ordinary shares for $963 million. Cash and
cash equivalents totaled $2.2 billion at the end of the quarter.
There were 269 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 $0.63 per share, which will be payable
on October 9, 2019 to shareholders of record as of the close of
business on September 25, 2019. 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 of 2020 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.
Starting in the fiscal first quarter of 2020 share-based
compensation will be excluded from the Company’s non-GAAP results.
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. This is consistent with the
majority of our industry peers.
The Company is providing the following guidance for its 14-week
fiscal first quarter 2020:
- Revenue of $2.55 billion, plus or minus 5%
- Non-GAAP diluted EPS of $0.90, plus or minus 5%
Guidance regarding non-GAAP diluted EPS excludes known charges
related to amortization of acquired intangible assets and estimated
share-based compensation expenses of $0.05 per share and $0.12 per
share, respectively.
We have not reconciled our non-GAAP diluted EPS 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 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 a.m.
Pacific Time 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
To learn more about the Company’s products and services, visit
www.seagate.com and follow us on Twitter, Facebook, LinkedIn,
Spiceworks, YouTube and subscribe to our blog. The contents of our
website and social media channels are not a part of this
release.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, each as
amended, including, in particular, statements about the Company’s
plans, strategies and prospects, financial outlook for future
periods, including the first quarter of fiscal 2020, 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 and expectations on the
Company’s business as well as dividend issuance plans for the
fiscal quarter ending October 4, 2019 and beyond. These statements
identify prospective information and may include words such as
“expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “projects,” “should,” “may,” “will,” or
the negative of these words, variations of these words and
comparable terminology. These forward-looking statements are based
on information available to the Company as of the date of this
press release and are based on management’s current views and
assumptions. These forward-looking statements are conditioned upon
and also involve a number of known and unknown risks,
uncertainties, and other factors that could cause actual results,
performance or events to differ materially from those anticipated
by these forward-looking statements. Such risks, uncertainties, and
other factors may be beyond the Company’s control and may pose a
risk to the Company’s operating and financial condition. Such risks
and uncertainties include, but are not limited to: items that may
be identified during its financial statement closing process that
cause adjustments to the estimates included in this press release;
the uncertainty in global economic and political conditions; the
impact of the variable demand and adverse pricing environment for
storage products; the Company’s ability to successfully qualify,
manufacture and sell its storage products in increasing volumes on
a cost-effective basis and with acceptable quality; the impact of
competitive product announcements; the Company’s ability to achieve
projected cost savings in connection with restructuring plans and
consolidation of manufacturing activities; possible excess industry
supply with respect to particular storage products and competing
alternative storage technology solutions; the impact of trade
barriers or regulatory actions, such as import/export duties and
restrictions, tariffs and quotas, imposed by the U.S. or other
countries in which the Company conducts business; disruptions to
its supply chain or production capabilities; unexpected advances in
competing technologies or changes in market trends; the development
and introduction of products based on new technologies and
expansion into new data storage markets; the Company’s ability to
effectively manage its debt obligations and comply with certain
covenants in its credit facilities with respect to financial ratios
and financial condition tests; currency fluctuations that may
impact the Company’s margins, international sales and results of
operations; cyber-attacks or other data breaches that disrupt the
Company’s operations or result in the dissemination of proprietary
or confidential information and cause reputational harm;
cybersecurity threats and vulnerabilities associated with the
Company’s infrastructure updates to its information technology
systems; and fluctuations in interest rates. Information concerning
risks, uncertainties and other factors that could cause results to
differ materially from the expectations described in this press
release is contained in the Company’s Annual Report on Form 10-K
filed with the U.S. Securities and Exchange Commission (“SEC”) on
August 3, 2018, the “Risk Factors” section of which is incorporated
into this press release by reference, and other documents filed
with or furnished to the SEC. These forward-looking statements
should not be relied upon as representing the Company’s views as of
any subsequent date and the Company undertakes no obligation to
update forward-looking statements to reflect events or
circumstances after the date they were made, except as required by
applicable law.
The inclusion of Seagate’s website address in this press release
is intended to be an inactive textual reference only and not an
active hyperlink. The information contained in, or that can be
accessed through, Seagate’s website and social media channels are
not part of this press release.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
(Unaudited)
June 28, 2019
June 29, 2018(a)
ASSETS
Current assets:
Cash and cash equivalents
$
2,220
$
1,853
Accounts receivable, net
989
1,184
Inventories
970
1,053
Other current assets
184
220
Total current assets
4,363
4,310
Property, equipment and leasehold
improvements, net
1,869
1,792
Investment in debt security
—
1,275
Goodwill
1,237
1,237
Other intangible assets, net
111
188
Deferred income taxes
1,114
417
Other assets, net
191
191
Total Assets
$
8,885
$
9,410
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
1,420
$
1,728
Accrued employee compensation
169
253
Accrued warranty
91
112
Current portion of long-term debt
—
499
Accrued expenses
552
598
Total current liabilities
2,232
3,190
Long-term accrued warranty
104
125
Long-term accrued income taxes
4
10
Other non-current liabilities
130
100
Long-term debt, less current portion
4,253
4,320
Total Liabilities
6,723
7,745
Total Equity
2,162
1,665
Total Liabilities and Equity
$
8,885
$
9,410
(a) The information in this column was derived from the
Company’s audited Consolidated Balance Sheet as of June 29,
2018.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
data)
(Unaudited)
For the Three Months
Ended
For the Fiscal Years
Ended
June 28, 2019
June 29, 2018
June 28, 2019
June 29, 2018 (a)
Revenue
$
2,371
$
2,835
$
10,390
$
11,184
Cost of revenue
1,747
1,931
7,458
7,820
Product development
241
259
991
1,026
Marketing and administrative
108
140
453
562
Amortization of intangibles
6
6
23
53
Restructuring and other, net
(63
)
(6
)
(22
)
89
Total operating expenses
2,039
2,330
8,903
9,550
Income from operations
332
505
1,487
1,634
Interest income
17
15
84
38
Interest expense
(55
)
(54
)
(224
)
(236
)
Other, net
(3
)
—
25
(18
)
Other expense, net
(41
)
(39
)
(115
)
(216
)
Income before income taxes
291
466
1,372
1,418
(Benefit) provision for income
taxes
(692
)
5
(640
)
236
Net income
$
983
$
461
$
2,012
$
1,182
Net income per share:
Basic
$
3.57
$
1.61
$
7.13
$
4.10
Diluted
3.54
1.57
7.06
4.05
Number of shares used in per share
calculations:
Basic
275
287
282
288
Diluted
278
293
285
292
Cash dividends declared per ordinary
share
$
0.63
$
0.63
$
2.52
$
2.52
(a) The information in this column was derived from the
Company’s audited Consolidated Statement of Operations for the year
ended June 29, 2018.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Fiscal Years
Ended
June 28, 2019
June 29, 2018 (a)
OPERATING ACTIVITIES
Net income
$
2,012
$
1,182
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
541
598
Share-based compensation
99
112
Impairment of assets
3
—
Deferred income taxes
(690
)
193
Other non-cash operating activities,
net
(97
)
(11
)
Changes in operating assets and
liabilities:
Accounts receivable, net
204
16
Inventories
80
(71
)
Accounts payable
(268
)
65
Accrued employee compensation
(84
)
16
Accrued expenses, income taxes and
warranty
(81
)
(46
)
Other assets and liabilities
42
59
Net cash provided by operating
activities
1,761
2,113
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(602
)
(366
)
Proceeds from the sale of assets
144
71
Proceeds from settlement of foreign
currency forward exchange contracts
29
—
Purchase of debt security
—
(1,279
)
Proceeds from redemption of debt
security
1,283
—
Purchases of strategic investments
(18
)
—
Proceeds from sale of strategic
investments
10
—
Other investing activities, net
—
(14
)
Net cash provided by (used in) investing
activities
846
(1,588
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
(819
)
(214
)
Dividends to shareholders
(713
)
(726
)
Repurchases of ordinary shares
(963
)
(361
)
Taxes paid related to net share settlement
of equity awards
(31
)
(23
)
Net proceeds from issuance of long-term
debt
245
—
Proceeds from issuance of ordinary shares
under employee stock plans
69
113
Net cash used in financing activities
(2,212
)
(1,211
)
Effect of foreign currency exchange rate
changes on cash, cash equivalents and restricted cash
(1
)
—
Increase (decrease) in cash, cash
equivalents and restricted cash
394
(686
)
Cash, cash equivalents and restricted cash
at the beginning of the year
1,857
2,543
Cash, cash equivalents and restricted cash
at the end of the year
$
2,251
$
1,857
(a) The information in this column was derived from the
Company’s audited Consolidated Statement of Cash Flows for the year
ended June 29, 2018.
Use of non-GAAP financial information
The Company uses non-GAAP measures of adjusted revenue, gross
margin, net income, diluted EPS and operating expenses which are
adjusted from results based on GAAP to exclude certain benefits,
expenses, gains and losses. These non-GAAP financial measures may
be 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 primary 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 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 Twelve Months
Ended
June 28, 2019
June 29, 2018
June 28, 2019
June 29, 2018
GAAP Revenue
$
2,371
$
2,835
$
10,390
$
11,184
Adjustment to discontinued products
—
—
1
(6
)
Non-GAAP Revenue
$
2,371
$
2,835
$
10,391
$
11,178
GAAP Gross Margin
$
624
$
904
$
2,932
$
3,364
Adjustment to discontinued products
—
—
1
(6
)
Accelerated depreciation, impairment and other charges related to
cost saving efforts
—
—
—
2
Amortization of acquired intangible assets
12
14
52
57
Other charges
—
—
(1
)
11
Non-GAAP Gross Margin
$
636
$
918
$
2,984
$
3,428
GAAP Gross Margin
26.3
%
31.9
%
28.2
%
30.1
%
Non-GAAP Gross Margin
26.8
%
32.4
%
28.7
%
30.7
%
GAAP Operating Expenses
$
292
$
399
$
1,445
$
1,730
Accelerated depreciation, impairment and other charges related to
cost saving efforts
—
—
(2
)
(6
)
Amortization of acquired intangible assets
(5
)
(5
)
(19
)
(48
)
Restructuring and other, net
63
6
22
(89
)
Other charges
—
(1
)
—
(5
)
Non-GAAP Operating Expenses
$
350
$
399
$
1,446
$
1,582
GAAP Net Income
$
983
$
461
$
2,012
$
1,182
Adjustment to discontinued products
—
—
1
(6
)
Accelerated depreciation, impairment and other charges related to
cost saving efforts
—
—
2
8
Amortization of acquired intangible assets
17
19
71
105
Restructuring and other, net
(63
)
(6
)
(22
)
89
Losses recognized on the early redemption and repurchase of debt
—
—
—
4
Strategic investment losses or impairment recognized
—
8
2
11
Other charges
4
1
3
16
Income tax adjustments
(702
)
(8
)
(694
)
200
Non-GAAP Net Income
$
239
$
475
$
1,375
$
1,609
Shares used in diluted net income per share calculation
278
293
285
292
GAAP Diluted Net Income Per Share
$
3.54
$
1.57
$
7.06
$
4.05
Non-GAAP Diluted Net Income Per Share
$
0.86
$
1.62
$
4.82
$
5.51
GAAP Net Cash Provided by Operating Activities
$
448
$
468
$
1,761
$
2,113
Acquisition of property, equipment and leasehold improvements
151
96
602
366
Free Cash Flow
$
297
$
372
$
1,159
$
1,747
The Company’s Non-GAAP measures are adjusted for the
following items:
Adjustment to discontinued products These adjustments
relate to sales of certain discontinued products or changes in
sales provision for discontinued products. These adjustments are
inconsistent in amount and frequency and are excluded in the
non-GAAP measures as these adjustments are not indicative of the
underlying ongoing operating performance.
Accelerated depreciation, impairment and other charges
related to cost saving efforts These expenses are excluded in
the non-GAAP measure due to its 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.
Other charges The other charges primarily include
write-off of certain discontinued inventory and expense related to
disposed business. 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 charges 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 Recognized on the early redemption and repurchase of
debt From time to time, the Company incurs losses from the
early redemption and repurchase of certain long-term debt
instruments. These losses represent the difference between the
reacquisition costs and the par value of the debt extinguished and
include the write off of any related unamortized debt issuance
costs. The amount of these charges may be inconsistent in size and
varies depending on the timing of the repurchase of debt.
Strategic investment gains or losses or impairment
recognized From time to time, the Company incurs losses or
gains from strategic investment accounted under equity method of
accounting or records impairments charges which are not considered
as part of its ongoing operating performance. The resulting expense
or gain is inconsistent in amount and frequency 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.
Income tax adjustments Benefit or provision for income
taxes represents the tax effect of non-GAAP adjustments determined
using a hybrid with and without method and effective tax rate for
the applicable adjustment and jurisdiction. For fiscal year 2019,
it also includes impacts from a release of valuation allowance
related primarily to the Company’s U.S. deferred tax assets. This
was driven by improvements in the Company’s profitability outlook
in the U.S. including the Company’s effort to structurally and
operationally align its enterprise data solutions business with the
rest of the Company. This does not materially change the Company’s
future worldwide effective tax rate. For fiscal year 2018, it
includes impacts from the re-measurement of the Company’s U.S.
deferred tax assets at the lower 21% tax rate resulting from the
U.S. Tax Cuts and Jobs Act enacted on December 22, 2017.
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/20190802005072/en/
Investor Relations Contact: Shanye Hudson, (408) 658-1863
shanye.hudson@seagate.com
Media Contact: Gregory Belloni, (408) 658-1018
gregory.belloni@seagate.com
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