– Achieved revenue of $2.72 billion
– Reported GAAP operating margin of 13.8%; non-GAAP operating
margin of 15.5%
– Delivered GAAP diluted earnings per share (EPS) of $1.22;
non-GAAP diluted EPS of $1.38
– Generated $390 million in operating cash flow and $260 million
in free cash flow
Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal third
quarter ended April 3, 2020.
“Seagate executed very well in the third quarter while
navigating the unprecedented challenges brought on by the COVID-19
pandemic. Our teams worked tirelessly to safeguard the health of
their colleagues, support customer demand, and execute our product
roadmap. In this challenging environment, we achieved strong
financial performance, delivering revenue and non-GAAP EPS that
were above our guidance midpoint and continuing to generate solid
free cash flow,” said Dave Mosley, Seagate’s chief executive
officer.
“Our results demonstrate the resilience of our business model,
which combined with our strong balance sheet and liquidity offer
stability to manage through this uncertain environment. Over the
long-term, we believe the strength of our technology innovation and
product portfolio position Seagate well to capitalize on secular
demand for mass capacity storage as well as the growing necessity
for cost effective data management solutions driven by the
transition to IT 4.0.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ3 2020
FQ3 2019
FQ3 2020
FQ3 2019
Revenue ($M)
$
2,718
$
2,313
$
2,718
$
2,313
Gross Margin
27.4
%
26.0
%
28.0
%
26.8
%
Operating Margin
13.8
%
10.2
%
15.5
%
12.7
%
Net Income ($M)
$
320
$
195
$
363
$
263
Diluted Earnings Per Share
$
1.22
$
0.69
$
1.38
$
0.93
The Company generated $390 million in cash flow from operations
and $260 million in free cash flow during the fiscal third quarter
2020. Seagate maintained a healthy balance sheet and during the
fiscal third quarter 2020, the Company paid cash dividends of $170
million and repurchased 4 million ordinary shares for $195 million.
Cash and cash equivalents totaled $1.6 billion at the end of the
quarter. There were 257 million ordinary shares issued and
outstanding as of the end of the quarter.
All periods presented exclude share-based compensation from
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 $0.65 per share, which will be payable
on July 8, 2020 to shareholders of record as of the close of
business on June 24, 2020. 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 fourth quarter 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.
The Company is providing the following guidance for its fiscal
fourth quarter 2020:
- Revenue of $2.6 billion, plus or minus 7%
- Non-GAAP diluted EPS of $1.28, plus or minus 10%
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 $0.11 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 2:00 p.m.
Pacific / 5:00 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.
© 2020 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 fourth quarter
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, 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 July
3, 2020 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 filed with the U.S. Securities and Exchange Commission
(“SEC”) on August 2, 2019, and in Item 8.01 in our Form 8-K filed
with the SEC on April 22, 2020, both of which are available on our
investor relations website at investors.seagate.com. Additional
information will also be set forth in our Quarterly Report on Form
10-Q for the quarter ended April 3, 2020. 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 intended to be inactive textual references only and not
active hyperlinks. 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)
April 3, 2020
June 28, 2019
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
1,612
$
2,220
Accounts receivable, net
1,160
989
Inventories
1,102
970
Other current assets
141
184
Total current assets
4,015
4,363
Property, equipment and leasehold
improvements, net
2,093
1,869
Goodwill
1,237
1,237
Other intangible assets, net
70
111
Deferred income taxes
1,112
1,114
Other assets, net
302
191
Total Assets
$
8,829
$
8,885
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
1,830
$
1,420
Accrued employee compensation
155
169
Accrued warranty
76
91
Current portion of long-term debt
12
—
Accrued expenses
617
552
Total current liabilities
2,690
2,232
Long-term accrued warranty
87
104
Long-term accrued income taxes
3
4
Other non-current liabilities
166
130
Long-term debt
4,091
4,253
Total Liabilities
7,037
6,723
Total Equity
1,792
2,162
Total Liabilities and Equity
$
8,829
$
8,885
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
April 3, 2020
March 29, 2019
April 3, 2020
March 29, 2019
Revenue
$
2,718
$
2,313
$
7,992
$
8,019
Cost of revenue
1,972
1,712
5,817
5,711
Product development
246
238
751
750
Marketing and administrative
119
110
361
345
Amortization of intangibles
3
6
11
17
Restructuring and other, net
2
11
19
41
Total operating expenses
2,342
2,077
6,959
6,864
Income from operations
376
236
1,033
1,155
Interest income
4
21
19
67
Interest expense
(49)
(55)
(152)
(169)
Other, net
7
13
(28)
28
Other expense, net
(38)
(21)
(161)
(74)
Income before income taxes
338
215
872
1,081
Provision for income taxes
18
20
34
52
Net income
$
320
$
195
$
838
$
1,029
Net income per share:
Basic
$
1.23
$
0.69
$
3.19
$
3.62
Diluted
1.22
0.69
3.15
3.57
Number of shares used in per share
calculations:
Basic
261
281
263
284
Diluted
263
284
266
288
Cash dividends declared per ordinary
share
$
0.65
$
0.63
$
1.93
$
1.89
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Nine Months
Ended
April 3, 2020
March 29, 2019
OPERATING ACTIVITIES
Net income
$
838
$
1,029
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
279
407
Share-based compensation
80
73
Deferred income taxes
3
15
Other non-cash operating activities,
net
55
(69
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(172
)
296
Inventories
(126
)
49
Accounts payable
424
(366
)
Accrued employee compensation
(14
)
(108
)
Accrued expenses, income taxes and
warranty
(18
)
(32
)
Other assets and liabilities
(23
)
19
Net cash provided by operating
activities
1,326
1,313
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(471
)
(451
)
Proceeds from settlement of foreign
currency forward exchange contracts
—
66
Proceeds from sale of strategic
investments
—
10
Proceeds from the sale of assets
1
30
Purchases of investments
(57
)
(14
)
Net cash used in investing activities
(527
)
(359
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
(685
)
(499
)
Dividends to shareholders
(505
)
(539
)
Repurchases of ordinary shares
(795
)
(613
)
Taxes paid related to net share settlement
of equity awards
(39
)
(30
)
Net proceeds from issuance of long-term
debt
498
196
Proceeds from issuance of ordinary shares
under employee stock plans
100
68
Other financing activities, net
(2
)
—
Net cash used in financing activities
(1,428
)
(1,417
)
Effect of foreign currency exchange rate
changes on cash, cash equivalents and restricted cash
(8
)
(3
)
Decrease in cash, cash equivalents and
restricted cash
(637
)
(466
)
Cash, cash equivalents and restricted cash
at the beginning of the period
2,251
1,857
Cash, cash equivalents and restricted cash
at the end of the period
$
1,614
$
1,391
Use of non-GAAP financial information
The Company uses non-GAAP measures of adjusted revenue, gross
margin, gross margin as a percentage of revenue, operating
expenses, income from operations, operating margin as a percentage
of revenue, 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 Nine Months
Ended
April 3, 2020
March 29, 2019 (a)
April 3, 2020
March 29, 2019 (a)
GAAP Revenue
$
2,718
$
2,313
$
7,992
$
8,019
Adjustment to discontinued products
—
—
—
1
Non-GAAP Revenue
$
2,718
$
2,313
$
7,992
$
8,020
GAAP Gross Margin
$
746
$
601
$
2,175
$
2,308
Adjustment to discontinued products
—
—
—
1
Amortization of acquired intangible
assets
9
14
29
40
Share-based compensation
7
6
20
17
Restructuring and other, net
—
—
—
(1)
Non-GAAP Gross Margin
$
762
$
621
$
2,224
$
2,365
GAAP Gross Margin
27.4
%
26.0
%
27.2
%
28.8
%
Non-GAAP Gross Margin
28.0
%
26.8
%
27.8
%
29.5
%
GAAP Operating Expenses
$
370
$
365
$
1,142
$
1,153
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
—
(2)
Amortization of acquired intangible
assets
(3)
(5)
(9)
(14)
Restructuring and other, net
(2)
(11)
(19)
(41)
Share-based compensation
(20)
(22)
(60)
(56)
Other charges
(5)
—
(5)
—
Non-GAAP Operating Expenses
$
340
$
327
$
1,049
$
1,040
GAAP Income From Operations
$
376
$
236
$
1,033
$
1,155
Adjustment to discontinued products
—
—
—
1
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
—
2
Amortization of acquired intangible
assets
12
19
38
54
Restructuring and other, net
2
11
19
41
Share-based compensation
27
28
80
73
Other charges
5
—
5
(1)
Non-GAAP Income From Operations
$
422
$
294
$
1,175
$
1,325
GAAP Operating Margin
13.8
%
10.2
%
12.9
%
14.4
%
Non-GAAP Operating Margin
15.5
%
12.7
%
14.7
%
16.5
%
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
April 3, 2020
March 29, 2019 (a)
April 3, 2020
March 29, 2019 (a)
GAAP Net Income
$
320
$
195
$
838
$
1,029
Adjustment to discontinued products
—
—
—
1
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
—
2
Amortization of acquired intangible
assets
12
19
38
54
Restructuring and other, net
2
11
19
41
Losses recognized on the early redemption
and repurchase of debt
—
—
30
—
Strategic investment losses or impairment
recognized
—
—
1
2
Share-based compensation
27
28
80
73
Other charges
4
—
4
(1
)
Income tax adjustments
(2
)
10
(10
)
8
Non-GAAP Net Income
$
363
$
263
$
1,000
$
1,209
Shares used in diluted net income per
share calculation
263
284
266
288
GAAP Diluted Net Income Per
Share
$
1.22
$
0.69
$
3.15
$
3.57
Non-GAAP Diluted Net Income Per
Share
1.38
0.93
3.76
4.20
GAAP Net Cash Provided by Operating
Activities
$
390
$
438
$
1,326
$
1,313
Acquisition of property, equipment and
leasehold improvements
130
147
471
451
Free Cash Flow
$
260
$
291
$
855
$
862
(a) In the fiscal first quarter of 2020, the Company began
excluding share-based compensation from non-GAAP results. To
provide improved visibility and comparability, the Company has
reflected this change to its non-GAAP results retrospectively to
the earliest date presented.
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 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
As disclosed in the Company’s fiscal fourth quarter 2019
earnings release, share-based compensation expense is excluded from
its non-GAAP results. 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.
Other charges
The other charges primarily include impairments or write-offs of
other assets and 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 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 or gains from the
early redemption and repurchase of certain long-term debt
instruments. These losses or gains 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 or impairment recognized
From time to time, the Company incurs losses or gains from
strategic investments accounted for under the equity method of
accounting or records impairment 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 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.
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/20200422005910/en/
Investor Relations Contact: Shanye Hudson, (510) 661-1714
shanye.hudson@seagate.com
Media Contact: Gregory Belloni, (408) 658-1018
gregory.belloni@seagate.com
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