10-QPeriod: Q2 FY2021

Seagate Technology Holdings plc Quarterly Report for Q2 Ended Oct 2, 2020

Filed October 29, 2020For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported its fiscal second quarter results for the period ending October 2, 2020. The company generated $2.314 billion in revenue, a decrease from the prior year's $2.578 billion, attributed to price erosion, lower demand influenced by the COVID-19 pandemic, and a slight dip in exabytes shipped. Despite the revenue decline, the company maintained a stable gross margin of 26% and demonstrated strong operational cash flow of $297 million. Financially, Seagate has a solid liquidity position with $1.664 billion in cash and cash equivalents and an undrawn $1.5 billion revolving credit facility. The company returned capital to shareholders through $167 million in dividends and repurchased $68 million of its ordinary shares. Management expects to remain compliant with its financial covenants and maintains a positive outlook on managing its cash needs for the next twelve months, while also noting the ongoing uncertainties posed by the COVID-19 pandemic.

Financial Highlights

55 data points
Beta

Revenue

$2.31B

25.8% Gross Margin

Net Income

$223.00M

9.6% Net Margin

EPS (Diluted)

$0.86

Total Assets

$8.86B

Cash & Equivalents

$1.67B

Free Cash Flow

$186.00M

Financial Statements
Beta
Revenue$2.31B
Cost of Revenue$1.72B
Gross Profit$596.00M
R&D Expenses$223.00M
SG&A Expenses$118.00M
Operating Expenses$2.06B
Operating Income$251.00M
Interest Expense$50.00M
Net Income$223.00M
EPS (Basic)$0.87
EPS (Diluted)$0.86
Shares Outstanding (Basic)257.00M
Shares Outstanding (Diluted)259.00M

Key Highlights

  • 1Revenue for the quarter was $2.314 billion, a decrease of 10.2% year-over-year, impacted by price erosion and reduced demand due to COVID-19.
  • 2Gross margin remained stable at 26% compared to the prior year's quarter.
  • 3Operating cash flow was strong at $297 million, indicating efficient cash generation from operations.
  • 4The company maintained a healthy cash and cash equivalents balance of $1.664 billion as of October 2, 2020.
  • 5Seagate returned $167 million to shareholders via dividends and repurchased $68 million of its own stock during the quarter.
  • 6Product development expenses decreased year-over-year due to restructuring efforts and cost-saving measures related to COVID-19.
  • 7The company continues to manage its debt obligations and has $1.5 billion available under its revolving credit facility, with compliance expected for financial covenants.

Frequently Asked Questions

The primary drivers for the revenue decline were price erosion in the market, lower demand attributed to the impact of the COVID-19 pandemic, and a slight decrease in the total exabytes of HDD storage shipped compared to the prior year.

Seagate maintains a strong liquidity position with $1.664 billion in cash and cash equivalents and an undrawn $1.5 billion revolving credit facility. The company generated robust operating cash flow of $297 million and expects to remain compliant with its financial covenants, indicating confidence in meeting its cash needs for the next twelve months.

During the quarter, Seagate paid $167 million in dividends to shareholders and repurchased $68 million of its ordinary shares. The company also announced an increase in its share repurchase authorization by $3.0 billion in October 2020.

The COVID-19 pandemic has caused supply chain and demand disruptions, factory under-utilization, higher logistics costs, and softer demand across various markets. Management expects these impacts to continue into fiscal year 2021 and is actively monitoring the situation, implementing cost-saving measures, and driving operational efficiencies.