Seagate Technology Reports Fiscal First Quarter 2024 Financial Results
Seagate Technology Holdings plc (NASDAQ: STX) reported financial results for its fiscal Q1 2024. Revenue of $1.45 billion, GAAP loss per share of $(0.88), and non-GAAP loss per share of $(0.22). Cash flow from operations of $127 million and free cash flow of $57 million. Declared cash dividend of $0.70 per share. Seagate's CEO highlights strong execution on product roadmap and potential for improved profitability.
Positive
Seagate reported revenue of $1.45 billion for fiscal Q1 2024, indicating stability in demand. The company also demonstrated strong execution on its product roadmap, which will enhance its industry leadership in areal density. Seagate's positive free cash flow generation and declared cash dividend of $0.70 per share are favorable for investors.
Negative
Seagate's GAAP loss per share of $(0.88) and non-GAAP loss per share of $(0.22) may negatively impact investor sentiment. The decline in gross margin from 23.7% to 10.2% is a cause for concern. The company's operating margin also decreased from 5.3% to -8.9%, indicating potential challenges in cost management.
10/26/2023 - 08:05 AM
Fiscal Q1 2024 Highlights
Revenue of $1.45 billion
GAAP (loss) per share of $(0.88) $(0.22)
Cash flow from operations of $127 million $57 million
Declared cash dividend of $0.70
Strong execution on mass capacity product roadmap extending areal density leadership
FREMONT, Calif. --(BUSINESS WIRE)--
Seagate Technology Holdings plc (NASDAQ: STX) (the “Company” or “Seagate”) today reported financial results for its fiscal first quarter ended September 29, 2023.
“Seagate’s first quarter results were in line with our revised expectations. During a longer-than-typical downcycle we have prioritized financial discipline, positive free cash flow generation and execution on our HAMR product roadmap, which will extend our industry leadership in areal density and improve the total cost of ownership for our customers,” said Dave Mosley, Seagate’s chief executive officer.
“With indications that demand fundamentals in certain markets are starting to improve, including a modest uptick in U.S. cloud, Seagate is well positioned to enhance profitability and capture attractive long-term opportunities for Mass Capacity storage.”
Quarterly Financial Results
GAAP
Non-GAAP
FQ1 2024
FQ1 2023
FQ1 2024
FQ1 2023
Revenue ($M)
$
1,454
$
2,035
$
1,454
$
2,035
Gross Margin
10.2
%
23.7
%
19.8
%
24.5
%
Operating Margin
(8.9
)%
5.3
%
2.8
%
9.0
%
Net (Loss) Income ($M)
$
(184
)
$
29
$
(46
)
$
101
Diluted (Loss) Earnings Per Share
$
(0.88
)
$
0.14
$
(0.22
)
$
0.48
During the fiscal first quarter the Company generated $127 million $57 million $145 million $1.5 billion 3.5% with the proceeds primarily used to retire the outstanding balance on its remaining term loans. As of the end of the quarter, cash and cash equivalents totaled $795 million
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
Business Outlook
The business outlook for the fiscal second 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 second quarter 2024:
Revenue of $1.55 billion $150 million
Non-GAAP (loss) per share of $(0.10) $0.20
Guidance regarding non-GAAP (loss) per share excludes known pre-tax charges related to estimated share-based compensation expenses of $0.14
We have not reconciled our non-GAAP (loss) per share guidance for fiscal second 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 (loss) per share guidance for fiscal second 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 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 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 Twitter, Facebook, LinkedIn, and YouTube.
© 2023 Seagate Technology LLC. All rights reserved. Seagate, Seagate Technology, and the Spiral logo are registered trademarks of Seagate Technology LLC in the United States and/or other countries.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact. Forward-looking statements include, among other things, statements about the Company’s plans, programs, strategies and prospects; financial outlook for future periods, including the fiscal second 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 our ability to execute on our cost saving plans as currently contemplated; changes to the assumptions on which the projected cost saving initiatives are based; expectations regarding market demand for 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 December 29, 2023 and beyond. Forward-looking statements generally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” “will continue,” “can,” “could” or the negative of these words, variations of these words and comparable terminology, in each case, intended to refer to future events or circumstances. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are subject to various uncertainties and risks that could cause our actual results to differ materially from historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s latest periodic report on Form 10-Q or Form 10-K filed with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on, and which speak only as of, the date hereof. The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, unless required by applicable law.
The inclusion of Seagate’s website addresses in this press release are provided for convenience only. The information contained in, or that can be accessed through, Seagate’s websites and social media channels are not part of this press release.
SEAGATE TECHNOLOGY HOLDINGS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
September 29, 2023
June 30, 2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
795
$
786
Accounts receivable, net
521
621
Inventories
1,052
1,140
Other current assets
268
358
Total current assets
2,636
2,905
Property, equipment and leasehold improvements, net
1,652
1,706
Goodwill
1,237
1,237
Deferred income taxes
1,087
1,117
Other assets, net
584
591
Total Assets
$
7,196
$
7,556
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$
1,511
$
1,603
Accrued employee compensation
88
100
Accrued warranty
84
78
Current portion of long-term debt
—
63
Accrued expenses
790
748
Total current liabilities
2,473
2,592
Long-term accrued warranty
92
90
Other non-current liabilities
667
685
Long-term debt, less current portion
5,666
5,388
Total Liabilities
8,898
8,755
Total Shareholders' Deficit
(1,702
)
(1,199
)
Total Liabilities and Shareholders’ Deficit
$
7,196
$
7,556
SEAGATE TECHNOLOGY HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
For the Three Months Ended
September 29, 2023
September 30, 2022
Revenue
$
1,454
$
2,035
Cost of revenue
1,305
1,553
Product development
171
234
Marketing and administrative
105
129
Amortization of intangibles
—
3
Restructuring and other, net
2
9
Total operating expenses
1,583
1,928
(Loss) income from operations
(129
)
107
Interest income
2
1
Interest expense
(84
)
(71
)
Net gain recognized from termination of interest rate swap
104
—
Net loss recognized from early redemption of debt
(29
)
—
Other, net
(11
)
(10
)
Other expense, net
(18
)
(80
)
(Loss) income before income taxes
(147
)
27
Provision for (benefit from) income taxes
37
(2
)
Net (loss) income
$
(184
)
$
29
Net (loss) income per share:
Basic
$
(0.88
)
$
0.14
Diluted
$
(0.88
)
$
0.14
Number of shares used in per share calculations:
Basic
208
208
Diluted
208
210
Cash dividends declared per ordinary share
$
0.70
$
0.70
SEAGATE TECHNOLOGY HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
For the Three Months Ended
September 29, 2023
September 30, 2022
OPERATING ACTIVITIES
Net (loss) income
$
(184
)
$
29
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization
76
135
Share-based compensation
25
29
Deferred income taxes
28
(5
)
Net loss on redemption and repurchase of debt
7
—
Other non-cash operating activities, net
(50
)
13
Changes in operating assets and liabilities:
Accounts receivable, net
100
434
Inventories
88
(41
)
Accounts payable
(70
)
(300
)
Accrued employee compensation
(12
)
(146
)
Accrued expenses, income taxes and warranty
54
4
Other assets and liabilities
65
93
Net cash provided by operating activities
127
245
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements
(70
)
(133
)
Proceeds from the sale of assets
—
1
Purchases of investments
—
(1
)
Net cash used in investing activities
(70
)
(133
)
FINANCING ACTIVITIES
Redemption and repurchase of debt
(1,288
)
—
Dividends to shareholders
(145
)
(147
)
Repurchases of ordinary shares
—
(408
)
Taxes paid related to net share settlement of equity awards
(25
)
(39
)
Proceeds from issuance of long-term debt
1,500
600
Proceeds from issuance of ordinary shares under employee stock plans
35
29
Other financing activities, net
(126
)
(1
)
Net cash (used in) provided by financing activities
(49
)
34
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash
1
—
Increase in cash, cash equivalents and restricted cash
9
146
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
$
763
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
September 29, 2023
September 30, 2022
GAAP Gross Profit
$
149
$
482
Accelerated depreciation, impairment and other charges related to cost saving efforts
13
—
Amortization of acquired intangible assets
—
1
Pandemic-related lockdown charges
—
7
Purchase order cancellation fees
118
—
Share-based compensation
7
8
Other charges
1
—
Non-GAAP Gross Profit
$
288
$
498
GAAP Gross Margin
10.2
%
23.7
%
Non-GAAP Gross Margin
19.8
%
24.5
%
GAAP Operating Expenses
$
278
$
375
Accelerated depreciation, impairment and other charges related to cost saving efforts
—
(22
)
Amortization of acquired intangible assets
—
(3
)
Restructuring and other, net
(2
)
(9
)
Share-based compensation
(18
)
(21
)
Other charges
(10
)
(6
)
Non-GAAP Operating Expenses
$
248
$
314
GAAP (Loss) Income From Operations
$
(129
)
$
107
Accelerated depreciation, impairment and other charges related to cost saving efforts
13
22
Amortization of acquired intangible assets
—
4
Pandemic-related lockdown charges
—
7
Purchase order cancellation fees
118
—
Restructuring and other, net
2
9
Share-based compensation
25
29
Other charges
11
6
Non-GAAP Income From Operations
$
40
$
184
GAAP Operating Margin
(8.9
)%
5.3
%
Non-GAAP Operating Margin
2.8
%
9.0
%
GAP Net (Loss) Income
$
(184
)
$
29
Accelerated depreciation, impairment and other charges related to cost saving efforts
13
22
Amortization of acquired intangible assets
—
4
Net loss recognized from early redemption of debt
29
—
Net gain recognized from termination of interest rate swap
(104
)
—
Pandemic-related lockdown charges
—
7
Purchase order cancellation fees
118
—
Restructuring and other, net
2
9
Share-based compensation
25
29
Other charges
11
6
Income tax adjustments
44
(5
)
Non-GAAP Net (Loss) Income
$
(46
)
$
101
GAAP Diluted Net (Loss) Income Per Share
$
(0.88
)
$
0.14
Accelerated depreciation, impairment and other charges related to cost saving efforts
0.06
0.10
Amortization of acquired intangible assets
—
0.02
Net loss recognized from early redemption of debt
0.14
—
Net gain recognized from termination of interest rate swap
(0.50
)
—
Pandemic-related lockdown charges
—
0.03
Purchase order cancellation fees
0.57
—
Restructuring and other, net
0.01
0.04
Share-based compensation
0.12
0.14
Other charges
0.05
0.03
Income tax adjustments
0.21
(0.02
)
Non-GAAP Diluted Net (Loss) Income Per Share1
$
(0.22
)
$
0.48
Shares used in diluted net (loss) income per share calculation
GAAP
208
210
Non-GAAP
208
210
GAAP Net Cash Provided by Operating Activities
$
127
$
245
Acquisition of property, equipment and leasehold improvements
70
133
Free Cash Flow
$
57
$
112
1 For the three months ended September 29, 2023, GAAP and non-GAAP diluted net loss per share were computed using weighted average basic shares of 208 million, as a result of the net loss reported during the period.
For the Three Months Ended
September 29,
June 30,
March 31,
December 30,
Last Twelve
GAAP Net loss
$
(184
)
$
(92
)
$
(433
)
$
(33
)
$
(742
)
Depreciation and amortization
76
104
126
148
454
Interest expense
84
84
81
77
326
Interest income
(2
)
(6
)
(2
)
(1
)
(11
)
Income tax expense (benefit)
37
7
33
(5
)
72
Non-GAAP EBITDA
11
97
(195
)
186
99
BIS settlement penalty
—
—
300
—
300
Net loss (gain) recognized from early redemption of debt
29
17
(3
)
(204
)
(161
)
Net gain recognized from termination of interest rate swap
(104
)
—
—
—
(104
)
Purchase order cancellation fees
118
—
—
108
226
Restructuring and other, net
2
(8
)
20
81
95
Share-based compensation
25
22
31
33
111
Strategic investment losses or impairment charges
—
9
1
—
10
Underutilization charges, net of depreciation and amortization
51
29
60
45
185
Other charges
11
12
7
7
37
Non-GAAP Adjusted EBITDA
143
178
221
256
798
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.
BIS settlement penalty
The Company accrued a settlement penalty of $300 million U.S. Export Administration Regulations between August 17, 2020 and September 29, 2021 by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), which were subsequently resolved by a settlement agreement on April 18, 2023. This settlement penalty is excluded from the non-GAAP measures to facilitate a more meaningful evaluation of the Company's current operating performance and comparison to its past periods' operating performance.
Net loss (gain) recognized from early redemption of debt and termination of interest rate swap
From time to time, the Company incurs gains, losses and fees from the early redemption and repurchase of certain long-term debt instruments and termination of related interest rate swap agreements. The amount of these charges may be inconsistent in size and varies depending on the timing of the early redemption of debt and/or termination of interest rate swap and consequently is excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods' operating performance.
Pandemic-related lockdown charges
Pandemic-related lockdown charges are factory under-utilization costs incurred due to the pandemic-related lockdown measures at our factory in Wuxi, China . These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Purchase order cancellation fees
Purchase order cancellation fees are the costs incurred to cancel certain purchase commitments made with the Company's suppliers for component and equipment purchases that will not be received due to change in forecasted demand. These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Restructuring and other, net
Restructuring and other, net are costs associated with restructuring plans that are primarily related to costs associated with reduction in the Company’s workforce, exiting certain facilities and other related costs, as well as charges or gains from sale of properties. These costs or benefits do not reflect the Company’s ongoing operating performance and consequently are excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Share-based compensation
These expenses consist primarily of expenses for employee share-based compensation. Given the variety of equity awards used by companies, the varying methodologies for determining share-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the Company’s control, the Company believes excluding share-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time and compare it against the Company’s peers, a majority of whom also exclude share-based compensation expense from their non-GAAP results.
Strategic investment gains, losses and impairment charges
From time to time, the Company incurs gains, losses or impairment charges from strategic investments that are measured and accounted at fair value, under the equity method of accounting, as available-for-sale debt securities or adjust for downward or upward adjustments to the carrying value under the measurement alternative if an impairment or observable price adjustment is recognized in the current period that are not considered as part of its ongoing operating performance. The resulting expense, gain or impairment loss is inconsistent in amount and frequency and consequently is excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance
Other charges
The other charges primarily include IT transformation costs. These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Income tax adjustments
Provision or benefit for income taxes represents the tax effects of non-GAAP adjustments determined using a hybrid with and without method and effective tax rate for the applicable adjustment and jurisdiction.
Free cash flow
Free cash flow is a non-GAAP measure defined as net cash provided by operating activities less acquisition of property, equipment and leasehold improvements. Free cash flow does not reflect non-cash items, net cash used or provided by financing activities and net cash used or provided by investing activities, other than acquisition of property, equipment and leasehold improvements. This non-GAAP financial measure is used by management to assess the Company's sources of liquidity, capital structure and operating performance.
EBITDA, adjusted EBITDA and last twelve months (LTM) adjusted EBITDA
EBITDA is defined as net income (loss) before income tax expense, interest expense, interest income, depreciation and amortization. Adjusted EBITDA excludes certain expenses, gains and losses that the Company believes are not indicative of its core operating results. These adjustments primarily include impairment and other charges related to cost saving efforts, net loss (gain) recognized from early redemption of debt, net gain recognized from termination of interest rate swap, pandemic-related lockdown charges, purchase order cancellation fees, restructuring and other, net, share-based compensation, strategic investment losses or impairment charges, other extraordinary charges such as factory underutilization charges and BIS settlement penalty. LTM adjusted EBITDA is defined as the total of last twelve months adjusted EBITDA. These non-GAAP financial measures are used by management to evaluate the Company’s debt portfolio and structure to comply with its financial debt covenants.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231026307326/en/
Investor Relations Contact:
shanye.hudson@seagate.com
Media Contact:
gregory.belloni@seagate.com
Source: Seagate Technology Holdings plc
What were Seagate's revenue and earnings per share for fiscal Q1 2024?
Seagate reported revenue of $1.45 billion and a GAAP loss per share of $(0.88) for fiscal Q1 2024.
What was Seagate's cash flow from operations and free cash flow for fiscal Q1 2024?
Seagate generated $127 million in cash flow from operations and $57 million in free cash flow for fiscal Q1 2024.
Did Seagate declare a cash dividend for shareholders?
Yes, Seagate declared a cash dividend of $0.70 per share for fiscal Q1 2024.
What is Seagate's business outlook for the fiscal second quarter 2024?
Seagate expects revenue of $1.55 billion, plus or minus $150 million, and a non-GAAP loss per share of $(0.10), plus or minus $0.20 for the fiscal second quarter 2024.
What are the factors that may impact Seagate's non-GAAP loss per share guidance?
Factors that may impact Seagate's non-GAAP loss per share guidance include share-based compensation expenses, accelerated depreciation, impairment charges, net gain/loss from early redemption of debt, and other charges or benefits that may arise.
Where can I access Seagate's investor webcast?
Seagate's investor webcast can be accessed on its Investor Relations website at investors.seagate.com.
