01—Abstract
Summary
Summary of the 10-Q filed April 26, 2024. Cited figures are marked; the original filing is the authoritative source.
Seagate Technology Holdings plc (STX) reported a net income of $25 milliona for the third quarter of fiscal year 2024, a significant improvement from a net loss of $433 million in the same quarter last year.
Revenue for the quarter was $1.655 billionb, a decrease from $1.860 billion in the prior year's comparable quarter, but showed a sequential increase from $1.555 billion in the second quarter of fiscal year 2024. The company highlighted an ongoing recovery in the cloud market and noted that customer inventory adjustments appear largely complete, suggesting an early stage of industry-wide demand recovery. Gross margin improved to 26% from 17% year-over-year, driven by favorable pricing actions and a decrease in depreciation expense due to extended useful lives of manufacturing equipment.
The company ended the quarter with $795 millionc in cash and cash equivalents. Despite revenue decline year-over-year, the improved profitability and sequential revenue growth are positive indicators for investors. Seagate also announced a significant subsequent event: the sale of certain System-on-Chip (SoC) products, equipment, and related assets for $600 million to Avago Technologies, which is expected to further bolster its financial position.
02—Key points
Key Highlights
- Net income turned positive at $25 million for the quarter, compared to a net loss of $433 million in the prior year's Q3.
- Revenue of $1.655 billion decreased year-over-year but increased sequentially from $1.555 billion in Q2 FY2024.
- Gross margin improved significantly to 26% from 17% in Q3 FY2023, driven by pricing actions and cost efficiencies.
- The company reported positive operating cash flow of $188 million for the quarter and $484 million year-to-date.
- A significant subsequent event is the sale of SoC assets for $600 million, announced after the quarter end.
- Customer inventory adjustments appear mostly complete, indicating potential for demand recovery in the cloud market.
- The company continued to pay a quarterly dividend of $0.70 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Seagate Technology Holdings plc kept $0.02.
- Revenue$1.66B100.0%
- Cost of revenue−$1.23B74.3%
- Gross profit$425.0M25.7%
- Operating costs−$282.0M17.0%
- Operating income$143.0M8.6%
- Interest, other & tax−$118.0M7.1%
- Net income$25.0M1.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed April 26, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $1.66B$1.86B | −11.0% |
| Cost of Revenue | $1.23B$1.54B | −20.2% |
| Gross Profit | $425.00M$319.00M | +33.2% |
| R&D Expenses | $164.00M$191.00M | −14.1% |
| SG&A Expenses | $116.00M$123.00M | −5.7% |
| Operating Expenses | $1.51B$2.17B | −30.5% |
| Operating Income | $143.00M-$315.00M | +145.4% |
| Interest Expense | $82.00M$81.00M | +1.2% |
| Net Income | $25.00M-$433.00M | +105.8% |
| EPS (Basic) | $0.12$-2.09 | +105.7% |
| EPS (Diluted) | $0.12$-2.09 | +105.7% |
| Shares Outstanding (Basic) | 210.00M207.00M | +1.4% |
| Shares Outstanding (Diluted) | 213.00M207.00M | +2.9% |
05—Questions
Frequently Asked Questions
What was the key driver for the improvement in profitability this quarter?
The improvement in profitability was primarily driven by favorable pricing actions undertaken by the company, a decrease in depreciation expense due to the extension of useful lives of certain manufacturing equipment, and the absence of significant charges like the BIS settlement penalty which impacted the prior year's results. Sequential revenue growth and cost management also contributed.
How does the revenue performance compare sequentially and year-over-year?
Revenue for the March 2024 quarter was $1.655 billion, which is an increase from $1.555 billion in the December 2023 quarter (sequential growth). However, it represents a decrease from $1.860 billion in the same quarter last year (year-over-year decline). The company noted an ongoing recovery in the cloud market as a positive sign for future demand.
What is the significance of the sale of SoC assets?
The sale of certain System-on-Chip (SoC) products, equipment, and related assets for $600 million to Avago Technologies, announced after the quarter end, is significant as it provides a substantial cash infusion that can strengthen the company's financial position, potentially allowing for debt reduction, investment, or returns to shareholders.
What is the outlook for demand in the storage market?
Seagate views the current period as the early stage of an industry-wide demand recovery. They observed an ongoing recovery within the cloud market and believe customer inventory adjustments are largely complete. However, they expect the macroeconomic environment to remain dynamic and continue to impact the business.
06—Continue