- Revenue of $2.7 billion
- GAAP diluted earnings per share (EPS)
of $1.34; non-GAAP diluted EPS of $1.41
Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for the quarter ended
December 28, 2018.
“In the December quarter, we executed well against a more
challenging demand environment and delivered solid financial
results reflecting strong operational efficiency. While there are
market and geo-political uncertainties impacting the storage
industry, our belief in the long-term growth of data creation and
storage demand remains unchanged. By delivering competitive
cost-effective mass storage solutions, Seagate enables the Data Age
digital transformations for businesses across many industries. Our
deep storage industry expertise and leading technology portfolio
will continue to drive long-term success for the company and
deliver value to our shareholders,” said Dave Mosley, Seagate’s
chief executive officer.
Quarterly Financial Results
GAAP Non-GAAP FQ2 2019 FQ2 2018 FQ2
2019 FQ2 2018 Revenue ($M) $2,715 $2,914 $2,715
$2,908 Gross Margin 29.2% 30.1% 29.7% 30.4% Net Income ($M)
$384 $159 $405 $431 Diluted Earnings Per Share $1.34 $0.55 $1.41
$1.48
In the second quarter, the Company generated $288 million in
cash flow from operations and $161 million in free cash flow. Year
to date, the Company has generated $875 million in cash flow from
operations and $571 million in free cash flow. Seagate’s balance
sheet is healthy and during the second quarter, the Company paid
cash dividends of $180 million, repurchased 3.2 million ordinary
shares for $136 million and repaid $499 million of the 2018 Senior
Notes. Cash and cash equivalents totaled $1.4 billion at the end of
the quarter. There were 283 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 Investors Relations
website at www.seagate.com/investors.
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 April 3, 2019 to shareholders of record as of the close of
business on March 20, 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.
Investor Communications
Seagate management will hold a public webcast today at 2:00 p.m.
Pacific Time that can be accessed on its Investor Relations website
at www.seagate.com/investors. During today’s webcast, the Company
will provide an outlook for its third fiscal quarter of 2019,
including key underlying assumptions.
An archived audio webcast of this event will be available on
Seagate’s Investors Relations website at www.seagate.com/investors
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 projections,
expectations regarding market demand and the Company’s products,
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 and shareholder value and
dividend issuance plans for the fiscal quarter ending March 29,
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 report 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 report; 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, 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)
December 28, 2018
June 29,2018 (a)
ASSETS Current assets: Cash and cash equivalents $ 1,357 $
1,853 Accounts receivable, net 1,058 1,184 Inventories 1,097 1,053
Other current assets 164 220 Total current assets 3,676
4,310 Property, equipment and leasehold improvements, net 1,823
1,792 Investment in debt security 1,300 1,275 Goodwill 1,237 1,237
Other intangible assets, net 149 188 Deferred income taxes 416 417
Other assets, net 188 191 Total Assets $ 8,789 $
9,410
LIABILITIES AND EQUITY Current liabilities: Accounts
payable $ 1,442 $ 1,728 Accrued employee compensation 164 253
Accrued warranty 105 112 Current portion of long-term debt — 499
Accrued expenses 589 598 Total current liabilities 2,300
3,190 Long-term accrued warranty 117 125 Long-term accrued income
taxes 6 10 Other non-current liabilities 108 100 Long-term debt,
less current portion 4,324 4,320 Total Liabilities 6,855
7,745 Total Equity 1,934 1,665 Total Liabilities and
Equity $ 8,789 $ 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 Six
Months Ended December 28, 2018 December
29, 2017 December 28, 2018
December 29, 2017 Revenue $ 2,715 $ 2,914 $ 5,706 $
5,546 Cost of revenue 1,921 2,037 3,999 3,933 Product
development 246 250 512 513 Marketing and administrative 120 142
235 287 Amortization of intangibles 5 19 11 41 Restructuring and
other, net 7 33 30 84 Total operating
expenses 2,299 2,481 4,787 4,858
Income from operations 416 433 919 688 Interest income 22 6
46 13 Interest expense (56 ) (61 ) (114 ) (122 ) Other, net 16
(7 ) 15 (20 ) Other expense, net (18 ) (62 ) (53 )
(129 ) Income before income taxes 398 371 866 559 Provision
for income taxes 14 212 32 219 Net
income $ 384 $ 159 $ 834 $ 340
Net income per share: Basic $ 1.35 $ 0.55 $ 2.92 $ 1.18 Diluted
1.34 0.55 2.88 1.17 Number of shares used in per share
calculations: Basic 285 288 286 289 Diluted 287 291 290 291
Cash dividends declared per ordinary share $ 0.63 $ 0.63 $ 1.26 $
1.26
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Six Months Ended December 28,
2018 December 29, 2017 OPERATING
ACTIVITIES Net income $ 834 $ 340 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 272 318 Share-based compensation 45 59 Deferred
income taxes 1 204 Other non-cash operating activities, net (44 ) 3
Changes in operating assets and liabilities:
Accounts receivable, net 135 145 Inventories (47 ) (32 ) Accounts
payable (240 ) 59 Accrued employee compensation (89 ) (54 ) Accrued
expenses, income taxes and warranty (16 ) 3 Other assets and
liabilities 24 42 Net cash provided by operating
activities 875 1,087
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements (304
) (201 ) Proceeds from settlement of foreign currency forward
exchange contracts 66 — Proceeds from sale of strategic investments
10 — Proceeds from sale of properties previously classified as held
for sale 6 — Proceeds from sale of property and equipment — 2
Purchases of strategic investments (8 ) — Other investing
activities, net — (11 ) Net cash used in investing
activities (230 ) (210 )
FINANCING ACTIVITIES Redemption and
repurchase of debt (499 ) (152 ) Dividends to shareholders (361 )
(366 ) Repurchases of ordinary shares (286 ) (361 ) Taxes paid
related to net share settlement of equity awards (30 ) (21 )
Proceeds from issuance of ordinary shares under employee stock
plans 35 35 Net cash used in financing activities
(1,141 ) (865 ) Effect of foreign currency exchange rate changes on
cash, cash equivalents and restricted cash (1 ) 5 (Decrease)
increase in cash, cash equivalents and restricted cash (497 ) 17
Cash, cash equivalents and restricted cash at the beginning of the
period 1,857 2,543 Cash, cash equivalents and
restricted cash at the end of the period $ 1,360 $ 2,560
Use of non-GAAP financial information
The Company uses non-GAAP measures of adjusted revenue, gross
margin, operating expenses, net income, diluted earnings per share
and free cash flow which are adjusted from results based on GAAP to
exclude certain gains, losses and expenditures. 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 gains, losses
and expenditures 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 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
December 28,2018
December 29,2017
December 28,2018
December 29,2017
GAAP Revenue
$
2,715
$
2,914
$
5,706
$
5,546
Adjustment to discontinued products — (6 ) 1
(6 )
Non-GAAP Revenue
$
2,715
$
2,908
$
5,707
$
5,540
GAAP Gross Margin
$
794
$
877
$
1,707
$
1,613
Adjustment to discontinued products — (6 ) 1 (6 ) Accelerated
depreciation, impairment and other charges related to cost saving
efforts — — — 1 Amortization of acquired intangible assets 13 14 26
28 Other charges (1 ) — (1 ) 11
Non-GAAP Gross Margin
$
806
$
885
$
1,733
$
1,647
GAAP Gross Margin 29.2 % 30.1 % 29.9 % 29.1 %
Non-GAAP Gross Margin 29.7 % 30.4 % 30.4 % 29.7 %
GAAP Operating Expenses
$
378
$
444
$
788
$
925
Accelerated depreciation, impairment and other charges related to
cost saving efforts (1 ) (2 ) (2 ) (2 ) Amortization of acquired
intangible assets (5 ) (18 ) (9 ) (39 ) Restructuring and other,
net (7 ) (33 ) (30 ) (84 ) Other charges — (1
) — (2 )
Non-GAAP Operating Expenses
$
365
$
390
$
747
$
798
GAAP Net Income
$
384
$
159
$
834
$
340
Adjustment to discontinued products — (6 ) 1 (6 ) Accelerated
depreciation, impairment and other charges related to cost saving
efforts 1 2 2 3 Amortization of acquired intangible assets 18 32 35
67 Restructuring and other, net 7 33 30 84 Losses recognized on the
early redemption and repurchase of debt — 3 — 3 Strategic
investment (gains) losses or impairment recognized (2 ) — 2 — Other
charges (1 ) 1 (1 ) 12 Income tax adjustments (2 )
207 (2 ) 207
Non-GAAP Net Income
$
405
$
431
$
901
$
710
Shares used in diluted net income per share
calculation 287 291 290 291
GAAP Diluted Net Income Per
Share
$
1.34
$
0.55
$
2.88
$
1.17
Non-GAAP Diluted Net Income Per Share
$
1.41
$
1.48
$
3.11
$
2.44
GAAP Net Cash Provided by Operating Activities
$
288
$
850
$
875
$
1,087
Acquisition of property, equipment and leasehold improvements
127 77 304 201
Free Cash Flow
$
161
$
773
$
571
$
886
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 classified as held-for-sale. 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.
Strategic investment (gains) 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
Provision 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. It also includes a provisional tax benefit for 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/20190204005681/en/
Helen Farrier +44 (0) 7500 838045helen.farrier@seagate.com
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