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Seagate Technology Reports Fiscal Third Quarter 2024 Financial Results
"Seagate's March quarter revenue grew 6% and non-GAAP EPS more than doubled over the December quarter as we benefit from improving cloud demand, our strong operating discipline and price execution. This combination sets the foundation for a return to target margin performance as the markets recover," said Dave Mosley, Seagate's chief executive officer.
"This constructive demand backdrop is well-timed as we prepare to ramp our Mozaic products, anchored by industry-leading HAMR technology. HAMR-based products offer compelling economic value for our customers and position Seagate to drive further financial performance gains, as well as capitalize on favorable long-term demand for mass capacity storage."
Quarterly Financial Results
GAAP GAAP Non-GAAP
-------- -------------------------------------------------------------------------- --------------------------------------------------------------------------------------------
FQ3 2024 FQ3 2024 FQ3 2023 FQ3 2024 FQ3 2023
---------------------- -------- --------------------------- -------------------- --------------------------- --------------------------------------------- -------------------- ---------------------------
Revenue ($M) $ $ 1,655 $ $ 1,860 $ $ 1,655 $ $ 1,860
Gross Margin 25.7 25.7 % 17.2 17.2 % 26.1 % 18.7 18.7 %
Operating Margin 8.6 8.6 % (16.9 (16.9 %) 11.1 % 3.5 3.5 %
Net Income (Loss) ($M) $ $ 25 $ $ (433 ) $ $ 71 $ $ (58 )
During the fiscal third quarter the Company generated $188 million in cash flow from operations, $128 million in free cash flow, and returned $147 million of capital to shareholders through its quarterly dividend. As of the end of the quarter, cash and cash equivalents totaled $795 million, and there were 210 million ordinary shares issued and outstanding.
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 July 5, 2024 to shareholders of record as of the close of business on June 20, 2024. 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 2024 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 2024:
Revenue of $1.85 billion, plus or minus $150 million Non-GAAP diluted EPS of $0.70, plus or minus $0.20
Guidance regarding non-GAAP diluted EPS excludes known pre-tax charges related to estimated share-based compensation expenses of $0.16 per share.
We have not reconciled our non-GAAP diluted EPS guidance for fiscal fourth quarter 2024 to the most directly comparable GAAP measure, other than estimated share-based compensation expenses, 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) loss recognized from early redemption of debt, purchase order cancellation fees, 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 fourth quarter 2024 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 is the leading innovator of mass-capacity data storage solutions. We create breakthrough technology so you can confidently store your data and easily unlock its value. Founded over 45 years ago, Seagate has shipped over four billion terabytes of data capacity and offers a full portfolio of storage devices, systems, and services from edge to cloud. To learn more about how Seagate leads storage innovation, visit www.seagate.com and our blog, or follow us on X, Facebook, LinkedIn, and YouTube.
(C) 2024 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, prospects, and opportunities; financial outlook for future periods, including the fiscal fourth quarter 2024; expectations regarding our ability to service debt and continue to generate free cash flow; expectations regarding our ability to make timely quarterly payments under the settlement agreement with the U.S. Department of Commerce's Bureau of Industry and Security; expectations regarding logistical, macroeconomic, or other factors affecting the Company; expectations regarding market demand for the 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 regarding the Company's business strategy and performance, as well as dividend issuance plans for the fiscal quarter ending June 28, 2024 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)
March 29, 2024 March 29, 2024 June 30, 2023
-------------------- ---------------------------------------------- ----------------------------------------------
(unaudited) (unaudited)
ASSETS
Current assets:
$ $ 795 $ 786
Cash and cash equivalents
332 621
Accounts receivable, net
1,191 1,140
Inventories, net
297 358
Other current assets
-------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Total current assets 2,615 2,905
Property, equipment and leasehold improvements, net 1,639 1,706
Goodwill 1,237 1,237
Deferred income taxes 1,052 1,117
Other assets, net 553 591
-------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
$ $ 7,096 $ 7,556
Total Assets
==================== ==================== ====== ==================== ==================== ====== ====================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
$ $ 1,672 $ 1,603
Accounts payable
75 100
Accrued employee compensation
78 78
Accrued warranty
479 63
Current portion of long-term debt
758 748
Accrued expenses
-------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Total current liabilities 3,062 2,592
Long-term accrued warranty 78 90
Other non-current liabilities 653 685
Long-term debt, less current portion 5,192 5,388
-------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
8,985 8,755
Total Liabilities
(1,889 ) (1,199 )
Total Shareholders' Deficit
-------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
$ $ 7,096 $ 7,556
Total Liabilities and Shareholders' Deficit
==================== ==================== ====== ==================== ==================== ====== ====================
SEAGATE TECHNOLOGY HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
For the Three Months Ended For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------
March 29, March 29, March 31, March 29, March 31,
2024 2024 2023 2024 2023
-------------------------- ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------
Revenue $ $ 1,655 $ 1,860 $ 4,664 $ 5,782
Cost of revenue 1,230 1,541 3,728 4,735
Product development 164 191 496 625
Marketing and administrative 116 123 329 377
Amortization of intangibles -- -- -- 3
BIS settlement penalty -- 300 -- 300
Restructuring and other, net 2 20 (27 ) 110
-------------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Total operating expenses 1,512 2,175 4,526 6,150
-------------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Income (loss) from operations 143 (315 ) 138 (368 )
Interest income 3 2 8 4
Interest expense (82 ) (81 ) (250 ) (229 )
Net gain recognized from termination of interest rate swap -- -- 104 --
Net gain (loss) recognized from early redemption of debt -- 3 (29 ) 207
Other, net (6 ) (9 ) (64 ) (25 )
-------------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
(85 ) (85 ) (231 ) (43 )
Other expense, net
-------------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Income (loss) before income taxes 58 (400 ) (93 ) (411 )
Provision for income taxes 33 33 85 26
-------------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
$ $ 25 $ (433 ) $ (178 ) $ (437 )
Net income (loss)
========================== ==================== ============== ==================== ==================== ============== ==================== ==================== ============== ==================== ==================== ============== ====================
Net income (loss) per share:
$ $ 0.12 $ (2.09 ) $ (0.85 ) $ (2.11 )
Basic
$ $ 0.12 $ (2.09 ) $ (0.85 ) $ (2.11 )
Diluted
Number of shares used in per share calculations:
210 207 209 207
Basic
213 207 209 207
Diluted
Cash dividends declared per ordinary share $ $ 0.70 $ 0.70 $ 2.10 $ 2.10
SEAGATE TECHNOLOGY HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Nine Months Ended
--------------------------------------------------------------------------------------------------------------------------------
March 29, 2024 March 31, 2023
------------------------------------------------------ ------------------------------------------------------
OPERATING ACTIVITIES
Net loss $ $ (178 ) $ (437 )
Adjustments to reconcile net loss to net cash provided by operating activities:
201 409
Depreciation and amortization
89 93
Share-based compensation
64 4
Deferred income taxes
7 (207 )
Net loss (gain) on redemption and repurchase of debt
4 15
Other non-cash operating activities, net
Changes in operating assets and liabilities:
289 538
Accounts receivable, net
(51 ) 365
Inventories, net
108 (327 )
Accounts payable
(25 ) (168 )
Accrued employee compensation
(30 ) --
BIS settlement penalty
(20 ) 69
Accrued expenses, income taxes and warranty
26 370
Other assets and liabilities
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
484 724
Net cash provided by operating activities
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements (200 ) (266 )
Proceeds from the sale of assets 38 15
Purchases of investments -- (1 )
Proceeds from sale of investments 5 --
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
(157 ) (252 )
Net cash used in investing activities
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
FINANCING ACTIVITIES
Redemption and repurchase of debt (1,288 ) (71 )
Dividends to shareholders (438 ) (437 )
Repurchases of ordinary shares -- (408 )
Taxes paid related to net share settlement of equity awards (31 ) (41 )
Proceeds from issuance of long-term debt 1,500 600
Proceeds from issuance of ordinary shares under employee stock plans 66 59
Other financing activities, net (128 ) (23 )
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
(319 ) (321 )
Net cash used in financing activities
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
1 --
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Increase in cash, cash equivalents and restricted cash 9 151
Cash, cash equivalents and restricted cash at the beginning of the period 788 617
-------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Cash, cash equivalents and restricted cash at the end of the period $ $ 797 $ 768
==================== ==================== ============== ==================== ==================== ============== ====================
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, free cash flow, EBITDA, adjusted EBITDA and last twelve months adjusted EBITDA, 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 Nine Months Ended
-------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------
March 29, March 31, March 29, March 31,
2024 2023 2024 2023
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
GAAP Gross Profit $ $ 425 $ $ 319 $ $ 936 $ $ 1,047
Accelerated depreciation, impairment and other charges related to cost saving efforts -- 18 13 57
Amortization of acquired intangible assets -- 1 -- 3
Pandemic-related lockdown charges -- -- -- 7
Purchase order cancellation fees (1 ) -- 113 108
Share-based compensation 8 8 23 24
Other charges -- 1 2 2
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP Gross Profit $ $ 432 $ $ 347 $ $ 1,087 $ $ 1,248
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
GAAP Gross Margin 25.7 % 17.2 % 20.1 % 18.1 %
Non-GAAP Gross Margin 26.1 % 18.7 % 23.3 % 21.6 %
GAAP Operating Expenses $ $ 282 $ $ 634 $ $ 798 $ $ 1,415
Accelerated depreciation, impairment and other charges related to cost saving efforts -- (3 ) -- (25 )
Amortization of acquired intangible assets -- -- -- (3 )
BIS Settlement penalty -- (300 ) -- (300 )
Restructuring and other, net (2 ) (20 ) 27 (110 )
Share-based compensation (26 ) (23 ) (66 ) (69 )
Other charges (5 ) (6 ) (22 ) (18 )
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP Operating Expenses $ $ 249 $ $ 282 $ $ 737 $ $ 890
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
GAAP Income (Loss) From Operations $ $ 143 $ $ (315 ) $ $ 138 $ $ (368 )
Accelerated depreciation, impairment and other charges related to cost saving efforts -- 21 13 82
Amortization of acquired intangible assets -- 1 -- 6
BIS Settlement penalty -- 300 -- 300
Pandemic-related lockdown charges -- -- -- 7
Purchase order cancellation fees (1 ) -- 113 108
Restructuring and other, net 2 20 (27 ) 110
Share-based compensation 34 31 89 93
Other charges 5 7 24 20
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP Income From Operations $ $ 183 $ $ 65 $ $ 350 $ $ 358
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
GAAP Operating Margin 8.6 % (16.9 %) 3.0 % (6.4 %)
Non-GAAP Operating Margin 11.1 % 3.5 % 7.5 % 6.2 %
GAAP Net Income (Loss) $ $ 25 $ $ (433 ) $ $ (178 ) $ $ (437 )
Accelerated depreciation, impairment and other charges related to cost saving efforts -- 21 13 82
Amortization of acquired intangible assets -- 1 -- 6
BIS Settlement penalty -- 300 -- 300
Net gain recognized from termination of interest rate swap -- -- (104 ) --
Net (gain) loss recognized from early redemption of debt and debt modification costs -- (3 ) 29 (207 )
Pandemic-related lockdown charges -- -- -- 7
Purchase order cancellation fees (1 ) -- 113 108
Restructuring and other, net 2 20 (27 ) 110
Share-based compensation 34 31 89 93
Strategic investment losses or impairment charges -- 1 43 1
Other charges 5 7 24 20
Income tax adjustments 6 (3 ) 48 (6 )
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP Net Income (Loss) $ $ 71 $ $ (58 ) $ $ 50 $ $ 77
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
GAAP Diluted Net Income (Loss) Per Share $ $ 0.12 $ $ (2.09 ) $ $ (0.85 ) $ $ (2.11 )
Accelerated depreciation, impairment and other charges related to cost saving efforts -- 0.10 0.06 0.39
Amortization of acquired intangible assets -- -- -- 0.03
BIS Settlement penalty -- 1.45 -- 1.45
Net gain recognized from termination of interest rate swap -- -- (0.49 ) --
Net (gain) loss recognized from early redemption of debt and debt modification costs -- (0.01 ) 0.14 (0.99 )
Pandemic-related lockdown charges -- -- -- 0.03
Purchase order cancellation fees -- -- 0.54 0.52
Restructuring and other, net -- 0.10 (0.13 ) 0.53
Share-based compensation 0.16 0.15 0.42 0.45
Strategic investment losses or impairment charges -- -- 0.20 --
Other charges 0.02 0.03 0.12 0.10
Income tax adjustments 0.03 (0.01 ) 0.23 (0.03 )
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP Diluted Net Income (Loss) Per Share(1) $ $ 0.33 $ $ (0.28 ) $ $ 0.24 $ $ 0.37
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
Shares used in diluted net income (loss) per share calculation
GAAP 213 207 209 207
(1) As a result of the net loss reported during the period, GAAP diluted net loss per share for the nine months ended March 29, 2024 were computed using weighted average basic shares of 209 million; both GAAP and non-GAAP diluted net loss per share for the three months ended March 31, 2023 were computed using weighted average basic shares of 207 million; and GAAP diluted net loss per share for the nine months ended March 31, 2023 were computed using weighted average basic shares of 207 million. (2) For the three months ended March 29, 2024, non-GAAP shares used in diluted net income per share calculation excluded approximately 1 million shares that are issuable upon conversion of our 2028 exchangeable senior notes due to the expectation that the dilution from such shares will be offset by the related capped call transactions.
For the Three Months Ended For the Nine Months Ended
---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------
March 29, March 31, March 29, March 31,
2024 2023 2024 2023
------------------------------------------- ------------------------------------------- ------------------------------------------- -------------------------------------------
GAAP Net Cash Provided by Operating Activities $ $ 188 $ 228 $ 484 $ 724
Acquisition of property, equipment and leasehold improvements 60 54 200 266
-------------------- -------------------- --- -------------------- -------------------- --- -------------------- -------------------- --- -------------------- -------------------- --- --------------------
For the Three Months Ended For the Three Months Ended
-------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 29, March 29, December 29, September 29, June 30, Last Twelve Months
2024 2024 2023 2023 2023
-------------------------- ------------------------------------------------------ ---------------------------------------