10-QPeriod: Q3 FY2022

Seagate Technology Holdings plc Quarterly Report for Q3 Ended Apr 1, 2022

Filed April 28, 2022For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported its financial results for the fiscal quarter ended March 31, 2022. The company demonstrated revenue growth driven by an increase in mass capacity storage exabytes shipped, though this was partially offset by declines in legacy markets. Gross margins saw improvement due to a better product mix, despite increased component and logistics costs related to global inflationary pressures and supply chain disruptions. The company also repaid a significant portion of its debt, reinforcing its focus on financial stability. Operationally, Seagate generated substantial cash flow from operations, which was utilized for debt repayment, share repurchases, and dividend payments to shareholders. The company continues to navigate ongoing impacts from the COVID-19 pandemic, including supply chain challenges and component shortages, which are affecting its non-HDD business. Despite these headwinds, Seagate remains focused on cost management and operational efficiencies, and has a strong liquidity position with significant availability under its revolving credit facility.

Key Highlights

  • 1Revenue increased by $71 million to $2.8 billion for the three months ended April 1, 2022, compared to the prior year, primarily due to higher mass capacity storage exabytes shipped.
  • 2Gross margin improved to 29% for the quarter ended April 1, 2022, from 27% in the prior year, driven by a favorable product mix, partially offset by higher component and logistics costs.
  • 3The company repaid $220 million of its 2022 Notes and utilized proceeds from new term loans to manage its debt obligations.
  • 4Operating cash flow for the nine months ended April 1, 2022, was $1.5 billion, demonstrating strong operational cash generation.
  • 5Cash used in financing activities for the nine months was $1.3 billion, mainly due to share repurchases ($1.3 billion), debt repayments ($701 million), and dividends ($458 million), offset by new debt issuance ($1.2 billion).
  • 6Seagate continues to experience supply chain disruptions and component shortages impacting its non-HDD business and overall production capabilities.
  • 7The company ended the quarter with $1.14 billion in cash and cash equivalents, with $1.75 billion available under its senior unsecured revolving credit facility.

Frequently Asked Questions

Seagate reported revenue of $2.802 billion for the three months ended April 1, 2022, an increase of $71 million compared to $2.731 billion in the same period last year. This growth was primarily driven by an increase in mass capacity storage exabytes shipped, although this was partially offset by a decrease in legacy market exabytes shipped.

During the nine months ended April 1, 2022, Seagate repaid $701 million of long-term debt, including fully repaying the $220 million principal amount of its 2022 Notes on February 1, 2022. The company also issued $1.2 billion in new term loans in October 2021 to fund general corporate purposes and debt repayment.

Seagate is experiencing ongoing impacts from supply chain disruptions, higher logistics, materials, and operational costs globally, as well as inflationary pressures. Specifically, constraints from certain component shortages have impacted its ability to fulfill demand primarily for its non-HDD business.

In the nine months ended April 1, 2022, Seagate repurchased approximately $1.3 billion of its ordinary shares and paid $458 million in dividends to shareholders. The company also declared a quarterly cash dividend of $0.70 per share in April 2022.