10-QPeriod: Q3 FY2024

Seagate Technology Holdings plc Quarterly Report for Q3 Ended Mar 29, 2024

Filed April 26, 2024For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported a net income of $25 million 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 billion, 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 million 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.

Financial Highlights

54 data points
Beta

Revenue

$1.66B

25.7% Gross Margin

Net Income

$25.00M

1.5% Net Margin

EPS (Diluted)

$0.12

Total Assets

$7.10B

Cash & Equivalents

$797.00M

Free Cash Flow

$128.00M

Financial Statements
Beta
Revenue$1.66B
Cost of Revenue$1.23B
Gross Profit$425.00M
R&D Expenses$164.00M
SG&A Expenses$116.00M
Operating Expenses$1.51B
Operating Income$143.00M
Interest Expense$82.00M
Net Income$25.00M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)210.00M
Shares Outstanding (Diluted)213.00M

Key Highlights

  • 1Net income turned positive at $25 million for the quarter, compared to a net loss of $433 million in the prior year's Q3.
  • 2Revenue of $1.655 billion decreased year-over-year but increased sequentially from $1.555 billion in Q2 FY2024.
  • 3Gross margin improved significantly to 26% from 17% in Q3 FY2023, driven by pricing actions and cost efficiencies.
  • 4The company reported positive operating cash flow of $188 million for the quarter and $484 million year-to-date.
  • 5A significant subsequent event is the sale of SoC assets for $600 million, announced after the quarter end.
  • 6Customer inventory adjustments appear mostly complete, indicating potential for demand recovery in the cloud market.
  • 7The company continued to pay a quarterly dividend of $0.70 per share.

Frequently Asked Questions

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.

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.

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.

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.