- Revenue of $2.04 billion
- GAAP diluted earnings per share (EPS) of $0.14; non-GAAP
diluted EPS of $0.48
- Cash flow from operations of $245 million and free cash flow of
$112 million
- Announced restructuring plan with expected annualized savings
of approximately $110 million
- Declared cash dividend of $0.70 per share
Seagate Technology Holdings plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for its fiscal first
quarter ended September 30, 2022.
“Global economic uncertainties and broad-based customer
inventory corrections worsened in the latter stages of the
September quarter, and these dynamics are reflected in both
near-term industry demand and Seagate's financial performance. We
have taken quick and decisive actions to respond to current market
conditions and enhance long-term profitability, including adjusting
our production output and annual capital expenditure plans, and
announcing a restructuring plan that will deliver meaningful cost
savings while maintaining investments in the mass capacity
solutions driving our future growth,” said Dave Mosley, Seagate’s
chief executive officer.
“We continue to meet our development milestones for the 30+
terabyte product family, which is based on industry leading HAMR
technology. Our team is executing well on our innovation roadmap,
and we are seeing strong engagement from cloud customers. Looking
beyond the current macro uncertainties, we are confident in the
secular demand for mass capacity storage driven by the underlying
growth in data and believe Seagate is in a great position to
capture growth opportunities over the long-term.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ1 2023
FQ1 2022
FQ1 2023
FQ1 2022
Revenue ($M)
$
2,035
$
3,115
$
2,035
$
3,115
Gross Margin
23.7
%
30.7
%
24.5
%
31.0
%
Operating Margin
5.3
%
18.8
%
9.0
%
20.1
%
Net Income ($M)
$
29
$
526
$
101
$
544
Diluted Earnings Per Share
$
0.14
$
2.28
$
0.48
$
2.35
During the fiscal first quarter the Company generated $245
million in cash flow from operations and $112 million in free cash
flow, paid cash dividends of $147 million and repurchased 5.4
million ordinary shares for $408 million. The Company raised $600
million in new capital through a new term loan facility, exiting
the fiscal first quarter with cash and cash equivalents totaling
$761 million. There were 206 million ordinary shares issued and
outstanding as of the end of the quarter.
For a detailed reconciliation of GAAP to non-GAAP results, see
accompanying financial tables.
Seagate has issued a Supplemental Financial Information
document, which is available on Seagate’s 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 January 5, 2023 to shareholders of record as of the close of
business on December 21, 2022. 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.
Restructuring Plan
On October 24, 2022, the Company’s Board of Directors approved
and committed to a restructuring plan (the “Plan”) to reduce its
cost structure to better align the Company’s operational needs to
current economic conditions while continuing to support the
long-term business strategy. The Plan includes reducing its
worldwide headcount by approximately 3,000 employees, or 8% of the
global workforce, along with other cost saving measures.
The Plan, which the Company expects to be substantially
completed by the end of the fiscal second quarter 2023, is expected
to result in total pre-tax charges between $60 million and $70
million. The charges are expected to be primarily cash-based and
consist of employee severance and other one-time termination
benefits.
The Company expects to realize run-rate savings of approximately
$110 million on an annualized basis starting in the fiscal third
quarter 2023.
Business Outlook
The business outlook for the fiscal second 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
second quarter 2023:
- Revenue of $1.85 billion, plus or minus $150 million
- Non-GAAP diluted EPS of $0.15, plus or minus $0.20
Guidance regarding non-GAAP diluted EPS excludes known pre-tax
charges related to amortization of acquired intangible assets of
$0.01 per share, estimated share-based compensation expenses of
$0.18 per share, and restructuring costs of $0.29 to $0.34 per
share.
We have not reconciled our non-GAAP diluted EPS guidance for
fiscal second 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, pandemic-related
lockdown charges, losses and costs on the modification or
redemption and repurchase of debt, 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 second 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 6:00 AM
PT / 9:00 AM 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.
© 2022 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 second
quarter 2023; expectations regarding any logistical, macroeconomic,
or other factors affecting the Company and its ability to execute
the Plan as currently contemplated; statements and beliefs about
the outcome of any regulatory or legal actions or events and their
effect on the Company; changes to the assumptions on which the
projected Plan-related charges are based; expectations regarding
market demand for Company’s products, our ability to optimize our
level of production, our ability to reduce costs, storage industry
trends, the Company’s ability to meet market and industry
expectations and the effects of these future trends on Company’s
performance, shifts in technology; expectations regarding the
effects of the pandemic on the economic conditions worldwide and
other macro disruptions, including the likelihood or significance
of continuing supply chain disruptions, high inflation, and high
interest rates; and expectations on the Company’s business strategy
and performance, as well as dividend issuance plans for the fiscal
quarter ending December 30, 2022 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 Annual Report
on Form 10-K for the year ended July 1, 2022, filed with the U.S.
Securities and Exchange Commission on August 5, 2022. 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)
September 30,
2022
July 1, 2022
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
761
$
615
Accounts receivable, net
1,098
1,532
Inventories
1,606
1,565
Other current assets
275
321
Total current assets
3,740
4,033
Property, equipment and leasehold
improvements, net
2,196
2,239
Goodwill
1,237
1,237
Other intangible assets, net
5
9
Deferred income taxes
1,137
1,132
Other assets, net
296
294
Total Assets
$
8,611
$
8,944
LIABILITIES AND (DEFICIT)
EQUITY
Current liabilities:
Accounts payable
$
1,712
$
2,058
Accrued employee compensation
106
252
Accrued warranty
66
65
Current portion of long-term debt
636
584
Accrued expenses
618
596
Total current liabilities
3,138
3,555
Long-term accrued warranty
83
83
Other non-current liabilities
128
135
Long-term debt, less current portion
5,613
5,062
Total Liabilities
8,962
8,835
Total Shareholders’ (Deficit) Equity
(351
)
109
Total Liabilities and Shareholders’
(Deficit) Equity
$
8,611
$
8,944
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
data)
(Unaudited)
For the Three Months
Ended
September 30,
2022
October 1, 2021
Revenue
$
2,035
$
3,115
Cost of revenue
1,553
2,159
Product development
234
233
Marketing and administrative
129
133
Amortization of intangibles
3
3
Restructuring and other, net
9
1
Total operating expenses
1,928
2,529
Income from operations
107
586
Interest income
1
—
Interest expense
(71
)
(59
)
Other, net
(10
)
6
Other expense, net
(80
)
(53
)
Income before income taxes
27
533
(Benefit from) provision for income
taxes
(2
)
7
Net income
$
29
$
526
Net income per share:
Basic
$
0.14
$
2.33
Diluted
$
0.14
$
2.28
Number of shares used in per share
calculations:
Basic
208
226
Diluted
210
231
Cash dividends declared per ordinary
share
$
0.70
$
0.67
SEAGATE TECHNOLOGY HOLDINGS
PLC
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Three Months
Ended
September 30,
2022
October 1, 2021
OPERATING ACTIVITIES
Net income
$
29
$
526
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
135
104
Share-based compensation
29
34
Deferred income taxes
(5
)
(4
)
Other non-cash operating activities,
net
13
2
Changes in operating assets and
liabilities:
Accounts receivable, net
434
(143
)
Inventories
(41
)
16
Accounts payable
(300
)
28
Accrued employee compensation
(146
)
(92
)
Accrued expenses, income taxes and
warranty
4
11
Other assets and liabilities
93
14
Net cash provided by operating
activities
245
496
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements
(133
)
(117
)
Proceeds from the sale of assets
1
—
Purchases of investments
(1
)
(18
)
Proceeds from sale of investments
—
15
Net cash used in investing activities
(133
)
(120
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
—
(6
)
Dividends to shareholders
(147
)
(153
)
Repurchases of ordinary shares
(408
)
(425
)
Taxes paid related to net share settlement
of equity awards
(39
)
(43
)
Proceeds from issuance of long-term
debt
600
—
Proceeds from issuance of ordinary shares
under employee stock plans
29
33
Other financing activities, net
(1
)
—
Net cash provided by (used in) financing
activities
34
(594
)
Increase (decrease) in cash, cash
equivalents and restricted cash
146
(218
)
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
$
763
$
993
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
September 30,
2022
October 1, 2021
GAAP Gross Profit
$
482
$
956
Amortization of acquired intangible
assets
1
1
Share-based compensation
8
9
Pandemic-related lockdown charges
7
—
Non-GAAP Gross Profit
$
498
$
966
GAAP Gross Margin
23.7
%
30.7
%
Non-GAAP Gross Margin
24.5
%
31.0
%
GAAP Operating Expenses
$
375
$
370
Accelerated depreciation, impairment and
other charges related to cost saving efforts
(22
)
—
Amortization of acquired intangible
assets
(3
)
(3
)
Restructuring and other, net
(9
)
(1
)
Share-based compensation
(21
)
(25
)
Other charges
(6
)
(2
)
Non-GAAP Operating Expenses
$
314
$
339
GAAP Income From Operations
$
107
$
586
Accelerated depreciation, impairment and
other charges related to cost saving efforts
22
—
Amortization of acquired intangible
assets
4
4
Restructuring and other, net
9
1
Share-based compensation
29
34
Pandemic-related lockdown charges
7
—
Other charges
6
2
Non-GAAP Income From Operations
$
184
$
627
GAAP Operating Margin
5.3
%
18.8
%
Non-GAAP Operating Margin
9.0
%
20.1
%
GAAP Net Income
$
29
$
526
Accelerated depreciation, impairment and
other charges related to cost saving efforts
22
—
Amortization of acquired intangible
assets
4
4
Restructuring and other, net
9
1
Strategic investment gains or impairment
charges
—
(9
)
Share-based compensation
29
34
Pandemic-related lockdown charges
7
—
Other charges
6
2
Income tax adjustments
(5
)
(14
)
Non-GAAP Net Income
$
101
$
544
Shares used in diluted net income per
share calculation
210
231
GAAP Diluted Net Income Per
Share
$
0.14
$
2.28
Non-GAAP Diluted Net Income Per
Share
$
0.48
$
2.35
GAAP Net Cash Provided by Operating
Activities
$
245
$
496
Acquisition of property, equipment and
leasehold improvements
133
117
Free Cash Flow
$
112
$
379
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.
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.
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.
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.
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.
Losses and costs on the modification or redemption and
repurchase of debt
From time to time, the Company incurs losses and fees from the
early redemption and repurchase of certain long-term debt
instruments. The losses represent the difference between the
reacquisition costs and the par value of the debt extinguished.
Fees include certain costs associated with a debt modification or
extinguishment, and the write-off of any unamortized debt issuance
costs associated with an extinguishment of debt. The amount of
these charges may be inconsistent in size and varies depending on
the timing of the repurchase 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.
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.
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/20221026005040/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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