- Revenue of $2.31 billion
- GAAP diluted earnings per share (EPS)
of $0.69; non-GAAP diluted EPS of $0.83
- Cash flow from operations of $438
million and free cash flow of $291 million
- Returned $505 million to shareholders;
declared cash dividend of $0.63 per share
Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal third
quarter ending March 29, 2019.
“Seagate executed very well in the third quarter while
navigating near-term demand head-winds. Our focus on operational
efficiency and expense discipline drove better-than-expected EPS
and free cash flow generation,” said Dave Mosley, Seagate’s chief
executive officer.
“We began shipping the industry’s first 16-terabyte high
capacity drives in the fiscal third quarter and expect to ramp high
volume production in the second half calendar 2019. The Data Age
digital transformation has given rise to many new applications
including machine learning, autonomous vehicles, and Smart Cities,
which all rely on faster access to an increasing amount of data.
These trends are creating significant opportunities for our mass
data storage solutions and we are successfully executing our
technology roadmap to address growing demand.”
Quarterly Financial Results
GAAP Non-GAAP FQ3 2019 FQ3 2018 FQ3 2019
FQ3 2018 Revenue ($M) $2,313 $2,803 $2,313
$2,803 Gross Margin 26.0% 30.2% 26.6% 30.8% Net Income ($M) $195
$381 $235 $424 Diluted Earnings Per Share $0.69 $1.31 $0.83 $1.46
In the third quarter, the Company generated $438 million in cash
flow from operations and $291 million in free cash flow. Year to
date, the Company has generated $1.3 billion in cash flow from
operations and $862 million in free cash flow. Seagate’s balance
sheet is healthy and during the third quarter, the Company paid
cash dividends of $178 million and repurchased 7.2 million ordinary
shares for $327 million. Cash and cash equivalents totaled $1.4
billion at the end of the quarter. There were 277 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 July 3, 2019 to shareholders of record as of the close of
business on June 19, 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
Our outlook for the fourth fiscal quarter 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
fourth quarter 2019:
- Revenue of approximately $2.32 billion,
plus or minus 5%
- Non-GAAP diluted earnings per share of
approximately $0.83, plus or minus 5%
Guidance regarding non-GAAP diluted earnings per share excludes
known charges related to amortization of acquired intangible assets
of $0.06 per share.
We have not reconciled our non-GAAP diluted earnings per share
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 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 earnings per share 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 www.seagate.com/investors.
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 outlook for future
periods, including the fourth quarter of fiscal 2019, expectations
regarding the Company’s products, our ability to ramp production,
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 June 28, 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)
March 29, 2019 June 29,
2018 (a)
ASSETS Current assets: Cash and cash equivalents $ 1,388 $
1,853 Accounts receivable, net 897 1,184 Inventories 1,001 1,053
Other current assets 201 220 Total current assets 3,487
4,310 Property, equipment and leasehold improvements, net 1,822
1,792 Investment in debt security 1,318 1,275 Goodwill 1,237 1,237
Other intangible assets, net 129 188 Deferred income taxes 416 417
Other assets, net 187 191 Total Assets $ 8,596 $
9,410
LIABILITIES AND EQUITY Current liabilities: Accounts
payable $ 1,310 $ 1,728 Accrued employee compensation 145 253
Accrued warranty 100 112 Current portion of long-term debt — 499
Accrued expenses 591 598 Total current liabilities 2,146
3,190 Long-term accrued warranty 112 125 Long-term accrued income
taxes 5 10 Other non-current liabilities 122 100 Long-term debt,
less current portion 4,522 4,320 Total Liabilities 6,907
7,745 Total Equity 1,689 1,665 Total Liabilities and
Equity $ 8,596 $ 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 Nine
Months Ended March 29, 2019 March
30, 2018 March 29, 2019 March
30, 2018 Revenue $ 2,313 $ 2,803 $ 8,019 $ 8,349
Cost of revenue 1,712 1,956 5,711 5,889 Product development 238 254
750 767 Marketing and administrative 110 135 345 422 Amortization
of intangibles 6 6 17 47 Restructuring and other, net 11 11
41 95 Total operating expenses 2,077
2,362 6,864 7,220 Income from
operations 236 441 1,155 1,129 Interest income 21 10 67 23
Interest expense (55 ) (60 ) (169 ) (182 ) Other, net 13 2
28 (18 ) Other expense, net (21 ) (48 ) (74 ) (177 )
Income before income taxes 215 393 1,081 952 Provision for
income taxes 20 12 52 231 Net income $
195 $ 381 $ 1,029 $ 721 Net
income per share: Basic $ 0.69 $ 1.33 $ 3.62 $ 2.50 Diluted 0.69
1.31 3.57 2.48 Number of shares used in per share calculations:
Basic 281 286 284 288 Diluted 284 291 288 291 Cash dividends
declared per ordinary share $ 0.63 $ 0.63 $ 1.89 $ 1.89
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Nine Months Ended March 29,
2019 March 30, 2018 OPERATING
ACTIVITIES Net income $ 1,029 $ 721 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization 407 461 Share-based compensation 73
85 Deferred income taxes 15 209 Gain on sale of property and
equipment (1 ) — Other non-cash operating activities, net (68 ) 9
Changes in operating assets and liabilities: Accounts receivable,
net 296 124 Inventories 49 (20 ) Accounts payable (366 ) 74 Accrued
employee compensation (108 ) (49 ) Accrued expenses, income taxes
and warranty (32 ) (24 ) Other assets and liabilities 19 55
Net cash provided by operating activities 1,313 1,645
INVESTING ACTIVITIES Acquisition of property,
equipment and leasehold improvements (451 ) (270 ) 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 27 43 Proceeds
from sale of property and equipment 3 2 Purchases of strategic
investments (14 ) (8 ) Other investing activities, net — (6
) Net cash used in investing activities (359 ) (239 )
FINANCING
ACTIVITIES Redemption and repurchase of debt (499 ) (209 )
Dividends to shareholders (539 ) (545 ) Repurchases of ordinary
shares (613 ) (361 ) Taxes paid related to net share settlement of
equity awards (30 ) (22 ) Net proceeds from issuance of long-term
debt 196 — Proceeds from issuance of ordinary shares under employee
stock plans 68 110 Net cash used in financing
activities (1,417 ) (1,027 ) Effect of foreign currency exchange
rate changes on cash, cash equivalents and restricted cash (3 ) 8
(Decrease) increase in cash, cash equivalents and restricted
cash (466 ) 387 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 $ 1,391
$ 2,930
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 Nine
Months Ended
March 29,2019
March 30,2018
March 29,2019
March 30,2018
GAAP Revenue $ 2,313 $ 2,803 $ 8,019 $ 8,349 Adjustment to
discontinued products — — 1
(6 )
Non-GAAP Revenue $ 2,313 $ 2,803
$ 8,020 $ 8,343
GAAP Gross
Margin $ 601 $ 847 $ 2,308 $ 2,460 Adjustment to discontinued
products — — 1 (6 ) Accelerated depreciation, impairment and other
charges related to cost saving efforts — 1 — 2 Amortization of
acquired intangible assets 14 15 40 43 Other charges —
— (1 ) 11
Non-GAAP
Gross Margin $ 615 $ 863 $ 2,348 $ 2,510
GAAP Gross Margin 26.0 % 30.2 % 28.8 % 29.5 %
Non-GAAP Gross Margin 26.6 % 30.8 % 29.3 % 30.1 %
GAAP Operating Expenses $ 365 $ 406 $ 1,153 $ 1,331
Accelerated depreciation, impairment and other charges related to
cost saving efforts — (4 ) (2 ) (6 ) Amortization of acquired
intangible assets (5 ) (4 ) (14 ) (43 ) Restructuring and other,
net (11 ) (11 ) (41 ) (95 ) Other charges — (2
) — (4 )
Non-GAAP Operating Expenses $
349 $ 385 $ 1,096 $ 1,183
GAAP Net Income $ 195 $ 381 $ 1,029 $ 721 Adjustment to
discontinued products — — 1 (6 ) Accelerated depreciation,
impairment and other charges related to cost saving efforts — 5 2 8
Amortization of acquired intangible assets 19 19 54 86
Restructuring and other, net 11 11 41 95 Losses recognized on the
early redemption and repurchase of debt — 1 — 4 Strategic
investment losses or impairment recognized — 3 2 3 Other charges —
3 (1 ) 15 Income tax adjustments 10 1
8 208
Non-GAAP Net Income $ 235
$ 424 $ 1,136 $ 1,134 Shares
used in diluted net income per share calculation 284 291 288 291
GAAP Diluted Net Income Per Share $ 0.69 $ 1.31 $ 3.57 $
2.48
Non-GAAP Diluted Net Income Per Share $ 0.83 $ 1.46 $
3.94 $ 3.90
GAAP Net Cash Provided by Operating
Activities $ 438 $ 558 $ 1,313 $ 1,645 Acquisition of property,
equipment and leasehold improvements 147 69
451 270
Free Cash Flow $
291 $ 489 $ 862 $ 1,375
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.
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 losses, (gains) 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/20190430005112/en/
Media Contact:Andrew Larg, (408)
658-1059andrew.larg@seagate.com
Investor Relations Contact:Shanye Hudson, (408)
658-1863shanye.hudson@seagate.com
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