01—Abstract
Summary
Summary of the 10-Q filed October 27, 2023. Cited figures are marked; the original filing is the authoritative source.
Seagate Technology Holdings plc (STX) reported its financial results for the quarter ended September 28, 2023.
The company experienced a significant year-over-year revenue decline, reflecting broad-based demand slowdown due to weaker macroeconomic conditions and customer inventory adjustments. This resulted in a net loss for the quarter. Despite the revenue challenges, Seagate took steps to manage its cost structure, including order cancellation fees and factory underutilization charges.
The company also successfully refinanced a portion of its debt by issuing $1.5 billiona in convertible senior notes and repaying $1.3 billion in term loans. Seagate maintained its quarterly dividend payment to shareholders and has a substantial repurchase authorization available.
02—Key points
Key Highlights
- Revenue declined to $1.454 billion from $2.035 billion in the prior year's quarter, driven by broad-based demand slowdown due to macroeconomic conditions.
- The company reported a net loss of $184 million for the quarter, compared to a net income of $29 million in the prior year's quarter.
- Gross margin significantly decreased to 10% from 24% year-over-year, impacted by order cancellation fees and other charges.
- Seagate issued $1.5 billion in 3.50% Convertible Senior Notes due 2028 and used the proceeds to repay $1.3 billion of variable rate term loans.
- Operating cash flow was $127 million for the quarter.
- The company declared a quarterly cash dividend of $0.70 per share, payable in January 2024.
- Restructuring and exit costs were minimal at $2 million, reflecting substantial completion of prior plans.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2024, Seagate Technology Holdings plc lost $0.13.
- Revenue$1.45B100.0%
- Cost of revenue−$1.30B89.8%
- Gross profit$149.0M10.2%
- Operating costs−$278.0M19.1%
- Operating income−$129.0M8.9%
- Interest, other & tax−$55.0M3.8%
- Net income−$184.0M12.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed October 27, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.45B$2.04B | −28.6% |
| Cost of Revenue | $1.30B$1.55B | −16.0% |
| Gross Profit | $149.00M$482.00M | −69.1% |
| R&D Expenses | $171.00M$234.00M | −26.9% |
| SG&A Expenses | $105.00M$129.00M | −18.6% |
| Operating Expenses | $1.58B$1.93B | −17.9% |
| Operating Income | -$129.00M$107.00M | −220.6% |
| Interest Expense | $84.00M$71.00M | +18.3% |
| Net Income | -$184.00M$29.00M | −734.5% |
| EPS (Basic) | $-0.88$0.14 | −728.6% |
| EPS (Diluted) | $-0.88$0.14 | −728.6% |
| Shares Outstanding (Basic) | 208.00M208.00M | 0.0% |
| Shares Outstanding (Diluted) | 208.00M210.00M | −1.0% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Seagate's revenue decline in this quarter?
The primary drivers of the revenue decline were broad-based demand slowdown due to weaker macroeconomic conditions and ongoing customer inventory adjustments. This led to a decrease in exabytes shipped compared to the prior year.
How did the company manage its debt and financing during the quarter?
Seagate issued $1.5 billion of convertible senior notes due 2028 and used a significant portion of the proceeds to repay $1.3 billion of variable rate term loans. This strategic move helped to refinance debt and manage interest rate risk. The company also has $1.5 billion available under its revolving credit facility.
What is the company's outlook regarding the current market conditions?
Seagate expects that macroeconomic headwinds and customer inventory adjustments will continue to restrain near-term demand for its products. The company has reduced manufacturing production plans and incurred order cancellation fees in response to these conditions.
What is the status of the BIS settlement?
Seagate has accrued a $300 million settlement penalty related to past sales of hard disk drives. Payments of $15 million per quarter will be made over five years, beginning October 31, 2023. $60 million is expected to be paid within one year.
06—Continue