Seagate: Fiscal 1Q23 Financial Results

Seagate Technology Holdings plc reported financial results for its fiscal first quarter ended September 30, 2022.

“Global economic uncertainties and broad-based customer inventory corrections worsened in the latter stages of the September quarter, and these dynamics are reflected in both near-term industry demand and Seagate’s financial performance. We have taken quick and decisive actions to respond to current market conditions and enhance long-term profitability, including adjusting our production output and annual capital expenditure plans, and announcing a restructuring plan that will deliver meaningful cost savings while maintaining investments in the mass capacity solutions driving our future growth,” said Dave Mosley, CEO. “We continue to meet our development milestones for the 30TB+ product family, which is based on industry leading HAMR technology. Our team is executing well on our innovation roadmap, and we are seeing strong engagement from cloud customers. Looking beyond the current macro uncertainties, we are confident in the secular demand for mass capacity storage driven by the underlying growth in data and believe Seagate is in a great position to capture growth opportunities over the long-term.”

During 1FQ23 the company generated $245 million in cash flow from operations and $112 million in free cash flow, paid cash dividends of $147 million and repurchased 5.4 million ordinary shares for $408 million. It raised $600 million in new capital through a new term loan facility, exiting 1FQ23 with cash and cash equivalents totaling $761 million. There were 206 million ordinary shares issued and outstanding as of the end of the quarter.

Quarterly Cash Dividend
The board of directors declared a quarterly cash dividend of $0.70 per share, which will be payable on January 5, 2023 to shareholders of record as of the close of business on December 21, 2022. The payment of any future quarterly dividends will be at the discretion of the board and will be dependent upon Seagate’s financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by the board.

Restructuring Plan
On October 24, 2022, the board approved and committed to a restructuring plan to reduce its cost structure to better align the company’s operational needs to current economic conditions while continuing to support the long-term business strategy. The plan includes reducing its worldwide headcount by approximately 3,000 employees, or 8% of the global workforce, along with other cost saving measures.

The plan, which the company expects to be substantially completed by the end of 2FQ23, is expected to result in total pre-tax charges between $60 million and $70 million. The charges are expected to be primarily cash-based and consist of employee severance and other one-time termination benefits.

The company expects to realize run-rate savings of approximately $110 million on an annualized basis starting in 4FQ23.

Guidance for 2FQ23:
• Revenue of $1.85 billion, ±$150 million
• Non-GAAP diluted EPS of $0.15, ±$0.20

Guidance regarding non-GAAP diluted EPS excludes known pre-tax charges related to amortization of acquired intangible assets of $0.01 per share, estimated share-based compensation expenses of $0.18 per share, and restructuring costs of $0.29 to $0.34 per share.