- Revenue of $1.89 billion
- GAAP diluted (loss) per share of $(0.16); non-GAAP diluted
earnings per share (“EPS”) of $0.16
- Cash flow from operations of $251 million and free cash flow of
$172 million
- Declared cash dividend of $0.70 per share
Seagate Technology Holdings plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal second
quarter ended December 30, 2022.
“Seagate is effectively managing through a tough macroeconomic
environment. In the December quarter, we delivered revenue and
non-GAAP EPS slightly above our guidance midpoint and extended a
decade long trend of generating positive free cash flow,” said Dave
Mosley, Seagate’s chief executive officer.
“We are executing our industry leading product roadmap, which
positions us well as the markets ultimately recover. We expect to
launch our 30-plus terabyte HAMR-based product family in the June
quarter enabled by 3-plus terabyte per disk densities.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ2 2023
FQ2 2022
FQ2 2023
FQ2 2022
Revenue ($M)
$
1,887
$
3,116
$
1,887
$
3,116
Gross Margin
13.0
%
30.4
%
21.4
%
30.7
%
Operating Margin
(8.5
)%
18.6
%
5.8
%
19.9
%
Net (Loss) Income ($M)
$
(33
)
$
501
$
34
$
543
Diluted (Loss) Earnings Per Share
$
(0.16
)
$
2.23
$
0.16
$
2.41
During the fiscal second quarter the Company generated $251
million in cash flow from operations and $172 million in free cash
flow, and paid cash dividends of $145 million. The Company reduced
debt by $220 million, exiting the fiscal second quarter with total
debt of $6.0 billion, and cash and cash equivalents of $770
million. There were 206 million ordinary shares issued and
outstanding as of the end of the quarter.
In the fiscal second quarter, the Company recognized charges
related to the October 2022 Restructuring Plan, in addition to
various gains and charges associated with other cost saving
initiatives. These items are reflected in the GAAP results, but
excluded from the Non-GAAP results. 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 April 6, 2023 to shareholders of record as of the close of
business on March 22, 2023. 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 third 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
third quarter 2023:
- Revenue of $2.0 billion, plus or minus $150 million
- Non-GAAP diluted EPS of $0.25, plus or minus $0.20
Guidance regarding non-GAAP diluted EPS excludes known pre-tax
charges related to estimated share-based compensation expenses of
$0.17 per share.
We have not reconciled our non-GAAP diluted EPS guidance for
fiscal third 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, net (gain)
recognized from early redemption of debt and debt modification
costs, pandemic-related lockdown charges, purchase order
cancellation fees, restructuring and other, net, strategic
investment losses (gains) or impairment charges, 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 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 PM
PT / 5:00 PM ET 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.
© 2023 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 third
quarter 2023; expectations regarding our ability to service debt
and continue to generate free cash flow; expectations regarding
logistical, macroeconomic, or other factors affecting the Company;
expectations regarding our ability to execute on our cost saving
plans as currently contemplated; changes to the assumptions on
which the projected cost saving initiatives are based; expectations
regarding market demand for Company’s products and our ability to
optimize our level of production and meet market and industry
expectations and the effects of these future trends on Company’s
performance; anticipated shifts in technology and storage industry
trends, and anticipated demand and performance of new storage
product introductions, including HAMR-based products; and
expectations on the Company’s business strategy and performance, as
well as dividend issuance plans for the fiscal quarter ending March
31, 2023 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 latest periodic report on Form 10-Q or
Form 10-K filed with the U.S. Securities and Exchange Commission.
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)
December 30,
2022
July 1,
2022
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
770
$
615
Accounts receivable, net
840
1,532
Inventories
1,194
1,565
Other current assets
277
321
Total current assets
3,081
4,033
Property, equipment and leasehold
improvements, net
2,122
2,239
Goodwill
1,237
1,237
Other intangible assets, net
3
9
Deferred income taxes
1,135
1,132
Other assets, net
289
294
Total Assets
$
7,867
$
8,944
LIABILITIES AND (DEFICIT)
EQUITY
Current liabilities:
Accounts payable
$
1,085
$
2,058
Accrued employee compensation
107
252
Accrued warranty
68
65
Current portion of long-term debt
636
584
Accrued expenses
829
596
Total current liabilities
2,725
3,555
Long-term accrued warranty
85
83
Other non-current liabilities
134
135
Long-term debt, less current portion
5,393
5,062
Total Liabilities
8,337
8,835
Total Shareholders' (Deficit) Equity
(470
)
109
Total Liabilities and Shareholders’
(Deficit) Equity
$
7,867
$
8,944
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
data)
(Unaudited)
For the Three Months
Ended
For the Six Months
Ended
December 30,
2022
December 31,
2021
December 30,
2022
December 31,
2021
Revenue
$
1,887
$
3,116
$
3,922
$
6,231
Cost of revenue
1,641
2,168
3,194
4,327
Product development
200
228
434
461
Marketing and administrative
125
136
254
269
Amortization of intangibles
—
3
3
6
Restructuring and other, net
81
1
90
2
Total operating expenses
2,047
2,536
3,975
5,065
(Loss) income from operations
(160
)
580
(53
)
1,166
Interest income
1
1
2
1
Interest expense
(77
)
(62
)
(148
)
(121
)
Net gain recognized from early redemption
of debt
204
—
204
—
Other, net
(6
)
(5
)
(16
)
1
Other income (expense), net
122
(66
)
42
(119
)
(Loss) income before income taxes
(38
)
514
(11
)
1,047
(Benefit from) provision for income
taxes
(5
)
13
(7
)
20
Net (loss) income
$
(33
)
$
501
$
(4
)
$
1,027
Net (loss) income per share:
Basic
$
(0.16
)
$
2.27
$
(0.02
)
$
4.58
Diluted
$
(0.16
)
$
2.23
$
(0.02
)
$
4.50
Number of shares used in per share
calculations:
Basic
206
221
207
224
Diluted
206
225
207
228
Cash dividends declared per ordinary
share
$
0.70
$
0.70
$
1.40
$
1.37
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Six Months
Ended
December 30,
2022
December 31,
2021
OPERATING ACTIVITIES
Net (loss) income
$
(4
)
$
1,027
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization
283
212
Share-based compensation
62
70
Deferred income taxes
(4
)
—
Net gain on redemption and repurchase of
debt
(204
)
—
Other non-cash operating activities,
net
28
22
Changes in operating assets and
liabilities:
Accounts receivable, net
692
(241
)
Inventories
371
(83
)
Accounts payable
(919
)
63
Accrued employee compensation
(145
)
(54
)
Accrued expenses, income taxes and
warranty
228
40
Other assets and liabilities
108
(39
)
Net cash provided by operating
activities
496
1,017
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(212
)
(212
)
Proceeds from the sale of assets
3
—
Purchases of investments
(1
)
(18
)
Proceeds from sale of investments
—
34
Net cash used in investing activities
(210
)
(196
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
—
(481
)
Dividends to shareholders
(292
)
(304
)
Repurchases of ordinary shares
(408
)
(896
)
Taxes paid related to net share settlement
of equity awards
(39
)
(45
)
Proceeds from issuance of long-term
debt
600
1,200
Proceeds from issuance of ordinary shares
under employee stock plans
29
37
Other financing activities, net
(21
)
(6
)
Net cash used in financing activities
(131
)
(495
)
Increase in cash, cash equivalents and
restricted cash
155
326
Cash, cash equivalents and restricted cash
at the beginning of the period
617
1,211
Cash, cash equivalents and restricted cash
at the end of the period
$
772
$
1,537
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 Six Months
Ended
December 30,
2022
December 31,
2021
December 30,
2022
December 31,
2021
GAAP Gross Profit
$
246
$
948
$
728
$
1,904
Accelerated depreciation, impairment and
other charges related to cost saving efforts
39
—
39
—
Amortization of acquired intangible
assets
1
1
2
2
Pandemic-related lockdown charges
—
—
7
—
Purchase order cancellation fees
108
—
108
—
Share-based compensation
8
9
16
18
Other charges
1
—
1
—
Non-GAAP Gross Profit
$
403
$
958
$
901
$
1,924
GAAP Gross Margin
13.0
%
30.4
%
18.6
%
30.6
%
Non-GAAP Gross Margin
21.4
%
30.7
%
23.0
%
30.9
%
GAAP Operating Expenses
$
406
$
368
$
781
$
738
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
(22
)
—
Amortization of acquired intangible
assets
—
(3
)
(3
)
(6
)
Restructuring and other, net
(81
)
(1
)
(90
)
(2
)
Share-based compensation
(25
)
(27
)
(46
)
(52
)
Other charges
(6
)
—
(12
)
(2
)
Non-GAAP Operating Expenses
$
294
$
337
$
608
$
676
GAAP (Loss) Income From
Operations
$
(160
)
$
580
$
(53
)
$
1,166
Accelerated depreciation, impairment and
other charges related to cost saving efforts
39
—
61
—
Amortization of acquired intangible
assets
1
4
5
8
Pandemic-related lockdown charges
—
—
7
—
Purchase order cancellation fees
108
—
108
—
Restructuring and other, net
81
1
90
2
Share-based compensation
33
36
62
70
Other charges
7
—
13
2
Non-GAAP Income From Operations
$
109
$
621
$
293
$
1,248
GAAP Operating Margin
(8.5
)%
18.6
%
(1.4
)%
18.7
%
Non-GAAP Operating Margin
5.8
%
19.9
%
7.5
%
20.0
%
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 Six Months
Ended
December 30,
2022
December 31,
2021
December 30,
2022
December 31,
2021
GAAP Net (Loss) Income
$
(33
)
$
501
$
(4
)
$
1,027
Accelerated depreciation, impairment and
other charges related to cost saving efforts
39
—
61
—
Amortization of acquired intangible
assets
1
4
5
8
Net (gain) recognized from early
redemption of debt and debt modification costs
(204
)
1
(204
)
1
Pandemic-related lockdown charges
—
—
7
—
Purchase order cancellation fees
108
—
108
—
Restructuring and other, net
81
1
90
2
Share-based compensation
33
36
62
70
Strategic investment losses (gains)
recognized
—
2
—
(7
)
Other charges
7
—
13
2
Income tax adjustments
2
(2
)
(3
)
(16
)
Non-GAAP Net Income
$
34
$
543
$
135
$
1,087
GAAP Diluted Net (Loss) Income Per
Share
$
(0.16
)
$
2.23
$
(0.02
)
$
4.50
Accelerated depreciation, impairment and
other charges related to cost saving efforts
0.19
—
0.29
—
Amortization of acquired intangible
assets
—
0.02
0.02
0.04
Net (gain) recognized from early
redemption of debt and debt modification costs
(0.99
)
—
(0.98
)
—
Pandemic-related lockdown charges
—
—
0.03
—
Purchase order cancellation fees
0.52
—
0.52
—
Restructuring and other, net
0.39
—
0.43
0.01
Share-based compensation
0.16
0.16
0.30
0.31
Strategic investment losses (gains)
recognized
—
0.01
—
(0.03
)
Other charges
0.04
—
0.07
0.01
Income tax adjustments
0.01
(0.01
)
(0.01
)
(0.07
)
Non-GAAP Diluted Net Income Per
Share1
$
0.16
$
2.41
$
0.65
$
4.77
Shares used in diluted net (loss) income
per share calculation
GAAP
206
225
207
228
Non-GAAP
207
225
209
228
GAAP Net Cash Provided by Operating
Activities
$
251
$
521
$
496
$
1,017
Acquisition of property, equipment and
leasehold improvements
79
95
212
212
Free Cash Flow
$
172
$
426
$
284
$
805
1 For the three and six months ended December 30, 2022, GAAP
diluted net loss per share is computed using weighted average basic
shares of 206 million and 207 million, respectively, as a result of
the net loss reported during these periods.
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.
Net (gain) recognized from early redemption of debt and debt
modification costs
From time to time, the Company incurs gains, losses and fees
from the early redemption and repurchase of certain long-term debt
instruments. The gains and losses represent the difference between
the reacquisition price and the par value of the debt extinguished
less the write-off of any unamortized debt issuance costs and
discount. Fees include certain costs associated with a debt
extinguishment or modification. The amount of these charges may be
inconsistent in size and varies depending on the timing of the
early redemption 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.
Pandemic-related lockdown charges
Pandemic-related lockdown charges are factory under-utilization
costs incurred due to the pandemic-related lockdown measures at our
factory in Wuxi, China. 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.
Purchase order cancellation fees
Purchase order cancellation fees are the costs incurred to
cancel certain purchase commitments made with the Company's
suppliers for component and equipment purchases that will not be
received due to change in forecasted demand. 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 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, as well as 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.
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.
Strategic investment losses (gains) or impairment
charges
From time to time, the Company incurs losses, gains or
impairment charges 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.
Other charges
The other charges primarily include 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. 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/20230125005212/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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