- Revenue of $2.58 billion - GAAP diluted earnings per share
(EPS) of $0.74; non-GAAP diluted EPS of $1.03 - Cash flow from
operations of $456 million and free cash flow of $309 million -
Repurchased 9.2 million shares for $450 million - Raised the
quarterly cash dividend to $0.65 per share payable on January 8,
2020
Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal first
quarter ended October 4, 2019.
"Seagate had a solid start to the fiscal year; we grew revenue,
expanded non-GAAP operating income, and increased non-GAAP EPS
quarter-over-quarter reflecting our focus on optimizing
profitability to drive free cash flow,” said Dave Mosley, Seagate’s
chief executive officer.
"Exabyte shipments were near record levels in the first quarter
driven by improving demand conditions for mass capacity storage. We
are ramping shipments of our industry capacity leading 16-terabyte
drives to support strong customer demand. We continue to gain
momentum with these products, which deliver lower total cost of
ownership to our customers. While business conditions remain
challenging over the near-term amidst ongoing geopolitical
uncertainties, our innovative technology roadmap makes us well
positioned to capture current and future mass capacity storage
demand while also driving long-term value for our
shareholders.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ1 2020
FQ1 2019
FQ1 2020
FQ1 2019
Revenue ($M)
$2,578
$2,991
$2,578
$2,992
Gross Margin
26.0%
30.5%
26.7%
31.1%
Net Income ($M)
$200
$450
$278
$514
Diluted Earnings Per Share
$0.74
$1.54
$1.03
$1.76
The Company generated $456 million in cash flow from operations
and $309 million in free cash flow during the fiscal first quarter
2020. Seagate has a healthy balance sheet and during the fiscal
first quarter 2020, the Company paid cash dividends of $170 million
and repurchased 9.2 million ordinary shares for $450 million. Cash
and cash equivalents totaled $1.8 billion at the end of the
quarter. The Company restructured debt, lowering annual interest
expense and reducing total debt to $4.1 billion at the end of the
quarter. There were 263 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 January 8, 2020 to shareholders of record as of the close of
business on December 26, 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
The business outlook for the fiscal second 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
second quarter 2020:
- Revenue of $2.72 billion, plus or minus 5%
- Non-GAAP diluted EPS of $1.32, plus or minus 5%
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 6:00 a.m.
Pacific Time 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
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 fiscal second 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 and expectations on the
Company’s business as well as dividend issuance plans for the
fiscal quarter ending January 3, 2020 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. 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, which is 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 October 4, 2019. 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)
October 4, 2019
June 28, 2019
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
1,784
$
2,220
Accounts receivable, net
1,065
989
Inventories
1,041
970
Other current assets
141
184
Total current assets
4,031
4,363
Property, equipment and leasehold
improvements, net
1,991
1,869
Goodwill
1,237
1,237
Other intangible assets, net
97
111
Deferred income taxes
1,128
1,114
Other assets, net
254
191
Total Assets
$
8,738
$
8,885
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
1,750
$
1,420
Accrued employee compensation
149
169
Accrued warranty
86
91
Accrued expenses
564
552
Total current liabilities
2,549
2,232
Long-term accrued warranty
98
104
Long-term accrued income taxes
3
4
Other non-current liabilities
178
130
Long-term debt
4,140
4,253
Total Liabilities
6,968
6,723
Total Equity
1,770
2,162
Total Liabilities and Equity
$
8,738
$
8,885
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In
millions, except per share data) (Unaudited)
For the Three Months
Ended
October 4, 2019
September 28, 2018
Revenue
$
2,578
$
2,991
Cost of revenue
1,907
2,078
Product development
255
266
Marketing and administrative
122
115
Amortization of intangibles
4
6
Restructuring and other, net
17
23
Total operating expenses
2,305
2,488
Income from operations
273
503
Interest income
11
24
Interest expense
(55
)
(58
)
Other, net
(31
)
(1
)
Other expense, net
(75
)
(35
)
Income before income taxes
198
468
(Benefit) provision for income taxes
(2
)
18
Net income
$
200
$
450
Net income per share:
Basic
$
0.75
$
1.57
Diluted
0.74
1.54
Number of shares used in per share
calculations:
Basic
266
287
Diluted
270
292
Cash dividends declared per ordinary
share
$
0.63
$
0.63
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
millions) (Unaudited)
For the Three Months
Ended
October 4, 2019
September 28, 2018
OPERATING ACTIVITIES
Net income
$
200
$
450
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
92
134
Share-based compensation
26
18
Deferred income taxes
(12
)
2
Other non-cash operating activities,
net
44
(18
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(77
)
(9
)
Inventories
(65
)
(66
)
Accounts payable
281
119
Accrued employee compensation
(20
)
(79
)
Accrued expenses, income taxes and
warranty
(7
)
45
Other assets and liabilities
(6
)
(9
)
Net cash provided by operating
activities
456
587
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(147
)
(177
)
Proceeds from sale of properties
previously classified as held for sale
—
6
Purchases of strategic investments
(4
)
(5
)
Net cash used in investing activities
(151
)
(176
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
(645
)
—
Dividends to shareholders
(170
)
(181
)
Repurchases of ordinary shares
(450
)
(150
)
Taxes paid related to net share settlement
of equity awards
(37
)
(27
)
Net proceeds from issuance of long-term
debt
498
—
Proceeds from issuance of ordinary shares
under employee stock plans
39
32
Net cash used in financing activities
(765
)
(326
)
Effect of foreign currency exchange rate
changes on cash, cash equivalents and restricted cash
(5
)
3
(Decrease) increase in cash, cash
equivalents and restricted cash
(465
)
88
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
$
1,786
$
1,945
Use of non-GAAP financial information
The Company uses non-GAAP measures of adjusted revenue, gross
margin, operating expenses, income from operations, 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 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 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 PLC
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (In millions, except
per share amounts and gross margin) (Unaudited)
For the Three Months
Ended
October 4, 2019
June 28, 2019(a)
September 28, 2018(a)
GAAP Revenue
$
2,578
$
2,371
$
2,991
Adjustment to discontinued products
—
—
1
Non-GAAP Revenue
$
2,578
$
2,371
$
2,992
GAAP Gross Margin
$
671
$
624
$
913
Adjustment to discontinued products
—
—
1
Amortization of acquired intangible
assets
10
12
13
Share-based compensation
7
6
5
Non-GAAP Gross Margin
$
688
$
642
$
932
GAAP Gross Margin
26.0
%
26.3
%
30.5
%
Non-GAAP Gross Margin
26.7
%
27.1
%
31.1
%
GAAP Operating Expenses
$
398
$
292
$
410
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
(1
)
Amortization of acquired intangible
assets
(3
)
(5
)
(4
)
Restructuring and other, net
(17
)
63
(23
)
Share-based compensation
(19
)
(20
)
(13
)
Non-GAAP Operating Expenses
$
359
$
330
$
369
GAAP Income From Operations
$
273
$
332
$
503
Adjustment to discontinued products
—
—
1
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
1
Amortization of acquired intangible
assets
13
17
17
Restructuring and other, net
17
(63
)
23
Share-based compensation
26
26
18
Non-GAAP Income From Operations
$
329
$
312
$
563
GAAP Net Income
$
200
$
983
$
450
Adjustment to discontinued products
—
—
1
Accelerated depreciation, impairment and
other charges related to cost saving efforts
—
—
1
Amortization of acquired intangible
assets
13
17
17
Restructuring and other, net
17
(63
)
23
Losses recognized on the early redemption
and repurchase of debt
30
—
—
Strategic investment losses or impairment
recognized
—
—
4
Share-based compensation
26
26
18
Other charges
—
4
—
Income tax adjustments
(8
)
(702
)
—
Non-GAAP Net Income
$
278
$
265
$
514
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
October 4, 2019
June 28, 2019(a)
September 28, 2018(a)
Shares used in diluted net income per
share calculation
270
278
292
GAAP Diluted Net Income Per
Share
$
0.74
$
3.54
$
1.54
Non-GAAP Diluted Net Income Per
Share
$
1.03
$
0.95
$
1.76
GAAP Net Cash Provided by Operating
Activities
$
456
$
448
$
587
Acquisition of property, equipment and
leasehold improvements
147
151
177
Free Cash Flow
$
309
$
297
$
410
(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 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.
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 write-offs 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. 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 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. For Q4'19, it also includes impacts from a release of
valuation allowance related primarily to the Company's U.S.
deferred tax assets. This was driven by improvements in the
Company's profitability outlook in the U.S. including the Company's
effort to structurally and operationally align its enterprise data
solutions business with the rest of the Company. This does not
materially change the Company's future worldwide effective tax
rate.
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/20191101005090/en/
Investor Relations Contact: Shanye Hudson, (408) 658-1863
shanye.hudson@seagate.com
Media Contact: Gregory Belloni, (408) 658-1018
gregory.belloni@seagate.com
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