Seagate: Fiscal 3Q23 Financial Results

• Revenue of $1.86 billion
• GAAP (loss) per share of $(2.09); non-GAAP (loss) per share of $(0.28)
• Cash flow from operations of $228 million and free cash flow of $174 million
• Declared cash dividend of $0.70 per share

Seagate Technology Holdings plc reported financial results for its fiscal third quarter ended March 31, 2023.

“We are seeing a more elongated customer inventory correction that led to weaker than expected nearline demand among a few large customers late in the quarter. Consequently, our March quarter revenue came in at the low-end of our guidance range, which along with underutilization charges and other factors had a severe impact on our reported margins and profitability,” said Dave Mosley, CEO. “Looking ahead, we now expect demand recovery to begin towards the end of the calendar year. In response to this dynamic environment, we are taking aggressive actions to lower our cost structure while still positioning Seagate to thrive over the long-term and sustain our technology leadership. To that end, we continue to execute on our product roadmap, including our strategically vital HAMR platform that we launched in April, as anticipated.”

GAAP operating expenses for 3FQ23 included a $300 million settlement penalty for alleged violations of U.S. Export Administration Regulations by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), that were subsequently resolved by a settlement agreement on April 18, 2023. Quarterly payments of $15 million will be made over the course of 5 years, starting in 1FQ24.

During 3FQ23, the company generated $228 million in cash flow from operations and $174 million in free cash flow, and paid cash dividends of $145 million. Cash and cash equivalents totaled $766 million. There were 207 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 July 5, 2023 to shareholders of record as of the close of business on June 21, 2023. 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 April 20, 2023, the company committed to a restructuring plan to reduce its cost structure in response to changes in macroeconomic and business conditions. The plan is intended to align the company’s operational needs with the near-term demand environment while continuing to support the long-term business strategy. The plan, which the company expects to be substantially completed by the end of 4FQ23, is expected to result in total pre-tax charges of approximately $150 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 $200 million on an annualized basis starting in 4FQ24.

Business Outlook
The company is providing the following guidance for its 4FQ23:
• Revenue of $1.7 billion, ±$150 million
• Non-GAAP (loss) per share of $(0.20), ±$0.20

Guidance regarding non-GAAP diluted EPS excludes known pre-tax charges related to estimated share-based compensation expenses of $0.16 per share and restructuring costs of approximately $0.72 per share.