10-QPeriod: Q3 FY2021

Seagate Technology Holdings plc Quarterly Report for Q3 Ended Apr 2, 2021

Filed April 29, 2021For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported revenue of $2.731 billion for the third quarter of fiscal year 2021, a slight increase of $13 million compared to the same period last year. While revenue was relatively flat year-over-year, the company saw a shift in its revenue mix, with growth in mass capacity storage exabytes shipped offsetting a decline in legacy markets. For the nine-month period, revenue decreased by $324 million year-over-year, attributed to price erosion, reduced legacy market shipments, and the impact of the COVID-19 pandemic. The company maintained a gross margin of 27% for both the quarter and the nine-month period, indicating stable profitability despite revenue pressures. Net income for the quarter was $329 million, a slight increase from $320 million in the prior year's comparable quarter, with diluted EPS at $1.39. The balance sheet shows a decrease in cash and cash equivalents, largely due to significant share repurchases and dividend payments totaling $2.314 billion for the nine-month period, alongside capital expenditures of $374 million. Despite these outflows, Seagate maintains a strong liquidity position with approximately $1.2 billion in cash and cash equivalents and $1.725 billion available under its revolving credit facility, while remaining compliant with its debt covenants.

Key Highlights

  • 1Revenue for the third quarter of FY21 was $2.731 billion, a modest increase of $13 million year-over-year, driven by increased mass capacity storage exabytes shipped.
  • 2Gross margin remained stable at 27% for the quarter and the nine-month period, indicating consistent profitability.
  • 3Net income for the quarter was $329 million, with diluted EPS of $1.39, showing a slight improvement from the prior year's quarter.
  • 4The company repurchased approximately $1.819 billion of its ordinary shares and paid $495 million in dividends during the first nine months of FY21.
  • 5Cash and cash equivalents decreased by $510 million from July 3, 2020, to April 2, 2021, primarily due to substantial capital returns to shareholders and capital expenditures.
  • 6Seagate maintained compliance with its debt covenants and has $1.725 billion available under its revolving credit facility, ensuring adequate liquidity.
  • 7Product development expenses decreased by $19 million year-over-year for the quarter, partly due to headcount reductions from the June 2020 restructuring plan.

Frequently Asked Questions

The primary driver for the slight increase in revenue for the March 2021 quarter compared to the March 2020 quarter was an increase in mass capacity storage exabytes shipped, which was partially offset by price erosion and a decrease in legacy market exabytes shipped.

The company generated $1.148 billion in operating cash flow for the first nine months of FY21. Despite significant outflows for share repurchases ($1.819 billion) and dividends ($495 million), Seagate maintained a strong liquidity position with $1.212 billion in cash and cash equivalents and $1.725 billion available under its revolving credit facility, remaining compliant with its debt covenants.

The COVID-19 pandemic continued to cause supply chain and demand disruptions, leading to higher logistics and operational costs, and softer demand in certain markets. This contributed to a decrease in revenue for the nine-month period compared to the prior year, primarily due to price erosion, decreased legacy market shipments, and reduced overall demand.

Seagate demonstrated a strong commitment to returning capital to shareholders, repurchasing approximately $1.819 billion of ordinary shares and paying $495 million in dividends during the first nine months of FY21. The company's Board of Directors further increased its share repurchase authorization, indicating an ongoing strategy to return capital to investors.