10-QPeriod: Q3 FY2018

Seagate Technology Holdings plc Quarterly Report for Q3 Ended Mar 30, 2018

Filed May 1, 2018For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported its fiscal third quarter 2018 results ending March 29, 2018. The company generated $2.8 billion in revenue, with a gross margin of 30% and operating cash flow of $558 million. While revenue saw a slight year-over-year increase of $129 million, it was down $111 million sequentially from the prior quarter, attributed to lower seasonal demand in consumer markets and price erosion, partially offset by strong enterprise demand. The company demonstrated effective cost management, with product development and marketing/administrative expenses decreasing compared to the prior year, largely due to workforce restructuring. Seagate also continued its commitment to shareholder returns, paying $179 million in dividends and repurchasing debt. The company's liquidity position remains strong with $2.9 billion in cash and cash equivalents, supported by a $700 million senior revolving credit facility.

Financial Highlights

54 data points
Beta

Revenue

$2.80B

30.2% Gross Margin

Net Income

$381.00M

13.6% Net Margin

EPS (Diluted)

$1.31

Total Assets

$9.01B

Cash & Equivalents

$2.93B

Free Cash Flow

$489.00M

Financial Statements
Beta
Revenue$2.80B
Cost of Revenue$1.96B
Gross Profit$847.00M
R&D Expenses$254.00M
SG&A Expenses$135.00M
Operating Expenses$2.36B
Operating Income$441.00M
Interest Expense$60.00M
Net Income$381.00M
EPS (Basic)$1.33
EPS (Diluted)$1.31
Shares Outstanding (Basic)286.00M
Shares Outstanding (Diluted)291.00M

Key Highlights

  • 1Revenue for the March 2018 quarter was $2.8 billion, with a gross margin of 30%.
  • 2Operating cash flow was strong at $558 million for the quarter.
  • 3Sequential revenue decline of $111 million was driven by lower seasonal consumer demand and price erosion, though enterprise demand provided some offset.
  • 4Year-over-year revenue increased by $129 million, primarily due to increased exabytes shipped in the enterprise market.
  • 5Product development expenses decreased significantly year-over-year due to workforce restructuring and operational efficiencies.
  • 6The company maintained a healthy liquidity position with $2.9 billion in cash and cash equivalents as of March 30, 2018.
  • 7Seagate returned capital to shareholders through $179 million in dividends and $57 million in debt repurchases during the quarter.

Frequently Asked Questions

Revenue in the March 2018 quarter decreased by $111 million sequentially due to lower seasonal demand in consumer and client markets and price erosion. However, it increased by $129 million compared to the March 2017 quarter, primarily driven by higher exabytes shipped in the enterprise market, which helped offset price erosion.

Seagate effectively managed operating expenses. Product development costs decreased significantly year-over-year ($70 million) and marketing and administrative expenses also saw reductions. These decreases were largely attributed to workforce restructuring efforts in prior periods and ongoing operational efficiencies.

Seagate's liquidity remains robust, with $2.9 billion in cash and cash equivalents as of March 30, 2018. The company also has access to a $700 million senior revolving credit facility. Management believes its sources of cash will be sufficient to meet its needs for the next 12 months.

The U.S. Tax Cuts and Jobs Act enacted in late 2017 resulted in a provisional tax expense of approximately $195 million for the nine months ended March 30, 2018, primarily due to the revaluation of U.S. deferred tax assets at the new lower corporate tax rate of 21%. While the assessment is ongoing, the company does not expect a material impact from other international provisions of the Act in the short-term due to existing net operating loss and tax credit carryovers.