10-QPeriod: Q3 FY2016

Seagate Technology Holdings plc Quarterly Report for Q3 Ended Jan 1, 2016

Filed January 29, 2016For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported its fiscal second quarter 2016 results for the period ending January 1, 2016. Revenue for the quarter was $2.99 billion, a decrease from $3.70 billion in the same period last year, reflecting lower unit shipments and price erosion, primarily due to decreased demand in personal computing devices. Net income also saw a significant decline, falling to $165 million ($0.55 per diluted share) from $933 million ($2.78 per diluted share) year-over-year. Despite the revenue and profit decline, the company completed the acquisition of Dot Hill Systems Corp. for $674 million, which is expected to expand its cloud storage systems business. Operationally, the company experienced a decrease in gross margin percentage due to price erosion, although product mix improvements partially offset this. Operating expenses were reduced year-over-year, driven by workforce restructuring and increased operational efficiencies. Seagate also continued its capital return program, repurchasing $1.06 billion in ordinary shares and paying $351 million in dividends during the six-month period. The company maintains a strong liquidity position with approximately $1.3 billion in cash, cash equivalents, and short-term investments, along with a $700 million revolving credit facility.

Financial Highlights

55 data points
Beta

Revenue

$2.99B

24.8% Gross Margin

Net Income

$165.00M

5.5% Net Margin

EPS (Diluted)

$0.55

Total Assets

$8.80B

Cash & Equivalents

$1.26B

Free Cash Flow

$245.00M

Financial Statements
Beta
Revenue$2.99B
Cost of Revenue$2.25B
Gross Profit$741.00M
R&D Expenses$304.00M
SG&A Expenses$160.00M
Operating Expenses$2.76B
Operating Income$229.00M
Interest Expense$48.00M
Net Income$165.00M
EPS (Basic)$0.55
EPS (Diluted)$0.55
Shares Outstanding (Basic)299.00M
Shares Outstanding (Diluted)301.00M

Key Highlights

  • 1Revenue for the quarter ended January 1, 2016, was $2.99 billion, down from $3.70 billion in the prior year's comparable quarter.
  • 2Net income for the quarter was $165 million, a substantial decrease from $933 million in the same period last year.
  • 3Diluted earnings per share were $0.55, down from $2.78 year-over-year.
  • 4The company acquired Dot Hill Systems Corp. for $674 million, aiming to enhance its cloud storage solutions.
  • 5Gross margin percentage decreased to 25% from 28% year-over-year, impacted by price erosion.
  • 6Operating expenses were reduced, particularly in product development and marketing/administrative areas, due to workforce restructuring and efficiency initiatives.
  • 7Seagate returned significant capital to shareholders through $1.06 billion in share repurchases and $351 million in dividends during the six months ended January 1, 2016.

Frequently Asked Questions

The revenue decline was primarily driven by a decrease in unit shipments and price erosion, largely attributed to reduced demand for personal computing devices. Despite this, the acquisition of Dot Hill Systems Corp. partially offset the decrease.

Profitability has been significantly impacted, with net income and diluted EPS showing substantial decreases compared to the prior year. This is due to lower revenue, increased price erosion affecting gross margins, and ongoing investments in product development, although cost-saving measures in operating expenses have been implemented.

The acquisition of Dot Hill Systems Corp. is strategic, aiming to expand Seagate's OEM-focused cloud storage systems business and advance its efforts in providing comprehensive storage solutions.

Seagate continues to focus on returning capital to shareholders through significant share repurchases and dividend payments. They also maintain a robust liquidity position with substantial cash reserves and an undrawn revolving credit facility.