10-QPeriod: Q1 FY2019

Seagate Technology Holdings plc Quarterly Report for Q1 Ended Sep 28, 2018

Filed November 2, 2018For Securities:STX

Summary

Seagate Technology Holdings plc's (STX) Form 10-Q for the period ending September 27, 2018, indicates a strong operational quarter with revenue reaching approximately $3.0 billion, a 6% increase from the prior year's quarter. This growth was primarily driven by a significant increase in exabytes shipped across enterprise and client markets, demonstrating robust demand for their storage solutions. The company also reported a healthy gross margin of 31%, improved from the prior year's 28%, benefiting from a favorable product mix and better factory utilization, though partially offset by price erosion and NAND flash memory cost declines. Financially, Seagate generated substantial operating cash flow of $587 million, enabling significant returns to shareholders through $181 million in dividends and $150 million in share repurchases. The company maintained a strong liquidity position with $1.9 billion in cash and cash equivalents and an undrawn $700 million revolving credit facility, signaling financial stability. Management expressed confidence in meeting future cash needs and compliance with debt covenants, despite ongoing risks related to global economic conditions, technological shifts, and trade barriers.

Financial Highlights

54 data points
Beta

Revenue

$2.99B

30.5% Gross Margin

Net Income

$450.00M

15.0% Net Margin

EPS (Diluted)

$1.54

Total Assets

$9.58B

Cash & Equivalents

$1.94B

Free Cash Flow

$410.00M

Financial Statements
Beta
Revenue$2.99B
Cost of Revenue$2.08B
Gross Profit$913.00M
R&D Expenses$266.00M
SG&A Expenses$115.00M
Operating Expenses$2.49B
Operating Income$503.00M
Interest Expense$58.00M
Net Income$450.00M
EPS (Basic)$1.57
EPS (Diluted)$1.54
Shares Outstanding (Basic)287.00M
Shares Outstanding (Diluted)292.00M

Key Highlights

  • 1Revenue for the September 2018 quarter was $3.0 billion, up from $2.632 billion in the same quarter last year, driven by increased exabytes shipped.
  • 2Gross margin improved to 31% compared to 28% in the prior year's quarter, attributed to favorable product mix and factory utilization.
  • 3Operating cash flow was strong at $587 million for the quarter.
  • 4The company returned $181 million to shareholders via dividends and repurchased $150 million in ordinary shares.
  • 5Cash and cash equivalents stood at $1.942 billion as of September 28, 2018, providing ample liquidity.
  • 6Marketing and administrative expenses decreased year-over-year due to restructuring and operational efficiencies.
  • 7The company expects capital expenditures for fiscal year 2019 to remain below its long-term target range of 6-8% of revenue.

Frequently Asked Questions

Revenue increased primarily due to a significant rise in exabytes shipped, particularly driven by higher demand in the enterprise and client markets, and to a lesser extent, higher seasonal demand for client and consumer markets. This was partially offset by price erosion in the HDD market.

Gross margin improved to 31% in the September 2018 quarter from 28% in the September 2017 quarter. This improvement was mainly due to a favorable product mix and increased factory utilization, although it was partially offset by declining NAND flash memory prices and general price erosion.

Seagate maintained a strong liquidity position with $1.9 billion in cash and cash equivalents as of September 28, 2018. They also have access to a $700 million revolving credit facility, of which none was drawn. The company expects its cash flows to be sufficient to meet its needs for the next 12 months and anticipates remaining compliant with its debt covenants.

Seagate is actively returning capital to shareholders through dividends and share repurchases. In the September 2018 quarter, they paid $181 million in dividends and repurchased $150 million of ordinary shares. They also announced an additional $2.3 billion share repurchase authorization in October 2018. Additionally, the company plans to manage capital expenditures prudently, expecting them to remain below their long-term target range of 6% to 8% of revenue for fiscal year 2019.