01—Abstract
Summary
Summary of the 10-Q filed January 26, 2024. Cited figures are marked; the original filing is the authoritative source.
Seagate Technology Holdings plc (STX) reported $1.555 billiona in revenue for the third quarter of fiscal year 2024, a decrease of 17.6% year-over-year.
The company's net loss widened to $19 millionb, or $0.09 per diluted share, compared to a net loss of $33 million in the prior year's quarter. Despite the revenue decline, the gross margin improved significantly to 23% from 13% in the prior year quarter, driven by the absence of prior-period order cancellation fees and reduced factory underutilization charges. Financially, Seagate ended the quarter with $787 million in cash and cash equivalents.
The company generated $296 millionc in operating cash flow for the first six months of the fiscal year, underscoring its ability to manage cash flow despite market challenges. Management highlighted a gradual recovery in the U.S. cloud market and continued cost discipline as key factors influencing performance. Looking ahead, the company anticipates continued macroeconomic headwinds but expects early signs of industry-wide demand recovery.
02—Key points
Key Highlights
- Revenue for the quarter was $1.555 billion, down 17.6% year-over-year, reflecting broad-based demand slowdown due to macroeconomic conditions.
- The company reported a net loss of $19 million ($0.09 per diluted share) for the quarter, compared to a net loss of $33 million in the same period last year.
- Gross margin improved substantially to 23% from 13% year-over-year, benefiting from the absence of prior-period order cancellation fees and reduced factory underutilization charges.
- Operating cash flow for the six months ended December 29, 2023, was $296 million, indicating healthy cash generation from operations.
- Cash and cash equivalents stood at $787 million as of December 29, 2023, providing a solid liquidity position.
- The company experienced a net gain of $30 million from the sale and leaseback of certain property, which contributed to the positive restructuring and other net results for the quarter.
- Seagate continues to manage debt, with $5.7 billion in long-term debt outstanding as of December 29, 2023, and has a $1.5 billion revolving credit facility available.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2024, Seagate Technology Holdings plc lost $0.01.
- Revenue$1.55B100.0%
- Cost of revenue−$1.19B76.7%
- Gross profit$362.0M23.3%
- Operating costs−$238.0M15.3%
- Operating income$124.0M8.0%
- Interest, other & tax−$143.0M9.2%
- Net income−$19.0M1.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed January 26, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $1.55B$1.89B | −17.6% |
| Cost of Revenue | $1.19B$1.64B | −27.3% |
| Gross Profit | $362.00M$246.00M | +47.2% |
| R&D Expenses | $161.00M$200.00M | −19.5% |
| SG&A Expenses | $108.00M$125.00M | −13.6% |
| Operating Expenses | $1.43B$2.05B | −30.1% |
| Operating Income | $124.00M-$160.00M | +177.5% |
| Interest Expense | $84.00M$77.00M | +9.1% |
| Net Income | -$19.00M-$33.00M | +42.4% |
| EPS (Basic) | $-0.09$-0.16 | +43.8% |
| EPS (Diluted) | $-0.09$-0.16 | +43.8% |
| Shares Outstanding (Basic) | 209.00M206.00M | +1.5% |
| Shares Outstanding (Diluted) | 209.00M206.00M | +1.5% |
05—Questions
Frequently Asked Questions
What was Seagate's revenue performance in the most recent quarter, and what drove the changes?
Seagate reported revenue of $1.555 billion for the quarter ended December 29, 2023, a decrease of 17.6% compared to $1.887 billion in the same period last year. This decline was primarily attributed to a broad-based demand slowdown resulting from weaker macroeconomic conditions and customer inventory adjustments, although the company noted a gradual recovery in the U.S. cloud market.
How did Seagate's profitability fare in this quarter, and what factors influenced it?
The company reported a net loss of $19 million ($0.09 per diluted share) for the quarter, an improvement from the net loss of $33 million ($0.16 per diluted share) in the prior year's quarter. While the net loss persisted, the gross margin saw a significant improvement, increasing to 23% from 13% year-over-year. This was driven by the absence of significant order cancellation fees recognized in the prior year's quarter, reduced factory underutilization charges, and favorable pricing actions.
What is Seagate's current financial health and liquidity position?
As of December 29, 2023, Seagate had $787 million in cash and cash equivalents, and $1.5 billion available under its revolving credit facility, indicating a strong liquidity position. The company also generated $296 million in cash from operating activities for the first six months of the fiscal year, demonstrating its ability to manage cash flow effectively amidst market challenges. The company's long-term debt stands at $5.7 billion.
Are there any significant non-recurring items or special events impacting the financial results?
Yes, the company recognized a net gain of $30 million from the sale and leaseback of certain property during the December 2023 quarter, which contributed to a benefit in the 'Restructuring and other, net' line item. Additionally, the company terminated interest rate swap agreements in connection with the repayment of term loans, resulting in a net gain of $104 million recognized in the prior quarter (September 2023) for the six-month period ended December 29, 2023.
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