STX - Earnings call transcript Q4 2019 | Seagate Technology Holdings plc

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Operator

Good morning, and welcome to the Seagate Technology Fourth Quarter and Fiscal Year 2019 Financial Results Conference Call. My name is Kelly, and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

Following the prepared remarks, there will be a question-and-answer session.

As a reminder, this conference is being recorded for replay purposes.

like President, the Investor I’d Shanye over time, Vice Hudson, Relations. this to call turn to At Please proceed, Shanye.

Shanye Hudson

Thank you. to today’s Good morning, everyone, and welcome call.

and quarter press release are Chief detailed website. supplemental Financial today Mosley, our and Investors We Gianluca June section for Officer; our XXXX Officer. earnings me Chief the Romano, our Joining posted information our on Dave Executive Seagate’s of

the press will Non-GAAP figures the call, we was refer posted earnings figures in reconciled measures reconciled GAAP today’s available not and unreasonable because are that measures or measures material measures. to website efforts. these our During without non-GAAP SEC. our of GAAP are to the may to control X-K and and release impact predicted. on certain corresponding GAAP non-GAAP We’ve out reasonably Form not with cannot filed is items outlook be that reconciliation Therefore,

XX-K forward-looking forward-looking of outlook these industry statements. statements as our our this should materially future to of are reminder, including that with our factors Investors posted section date. in are and September general risks, statements, SEC growth filed may uncertainties on a planned other the supplemental from from information website. opportunities results trends, relied contained current growth performance, Information be financial quarter most to vary subsequent any Actual today’s and upon financial our These management’s and and introductions, and results Form the recent concerning could views product differ call the our cause ramp As based statements conditions. not ability assumptions production, about expectations market contains market and on demand,

best remarks, we’ll your do today’s accommodate to prepared Following our question.

over I’ll that, you, And turn call with Dave. the to

Dave Mosley

on off discuss the Gianluca morning, Good provide perspectives our highlights summarizing September quarter. details key and market June start quarter progress on priorities. the by outlook call. Thanks, and Afterwards, before will financial our key we’ll our for sharing our welcome June earnings some quarter the results outlining everyone, from to And quarterly Shanye. and on our

open for questions. Following prepared remarks, we will the the call

of deliver billion to were results both These the continues EPS against guidance patterns, $X.XX with the solidly uncertainty buying disrupted a macro causing recorded of customers’ of to and commitments, backdrop including our June demand, upper regulatory quarter customers. trepidation our others some Seagate amongst end geopolitical OEM achieving $X.XX, increasing our and non-GAAP its and hurdles. few expectations. in our revenue enterprise toward range of of while surveillance broader prompting accelerate that on We line partners, conditions financial

Our ability quarter-over-quarter, to drives from adapt supported shipments volatility increase and and cloud revenue customers. business intelligently to us to demand for our our improving exabyte hyperscale market by nearline and manage enabled

optimize solid Additionally, free profitability flow. to our year cash fiscal performance priorities on our execution demonstrates and

require reliable, pivoting been towards to and have surveillance portfolio billion, In markets, delivered business These was NAS, cost-effective annual fiscal enterprise and XXXX, successfully solutions. these of edge half We well applications which of storage, markets. $XX.X cloud them from revenue we for growing include stores the suited nearline which products. system derived making our mass approximately drives, our

part Importantly, a providing margins they profit, for of to they higher contributed revenue. platform a become expand our even an solid percentage greater as our gross of overall

income. to These needs. compute, into time, to overall applications include mature support same customers’ our contributing operating while products markets, investment HDDs supply our edge are consumer DVR, gaming nicely continuing to minimal further require and the At which we mission-critical,

density and our technologies year for increasing X%, non-GAAP we in investments while areal Seagate. tightly generation In XXXX, manage prioritizing cost We by investments strong reduced continuing full the deliver that towards to lower our expenses, per customers and next while areas greatest operating to our fiscal year are value expenses terabyte. to improve returns

our flow standing XXXX, cash our billion fiscal confidence cash in returned we cash leveraging capital as returns $X.X to free $X.X delivered free commitment to We’re sustainable to well billion In demonstrating and generation and long buybacks, value. our as flow shareholder flow shareholders in enhance significant generation. through dividends

to continue first margin Seagate. advance strategy product cost benefits an technology new We our us solutions. market to roadmap with on our and This performance focus and and for provide with enables to being attractive customers

highest As in capacity shipping have are progressing introduced track both remain calendar in to our we high XXXX. and year enterprise and XX drives we well the deliver we to last terabyte quarter, March already volume products storage Customer storage we and began for shared late ramp on qualifications solutions edge leader applications. world’s shipments

and In of operations servicing to large machine introduce data storage, high-capacity effectively dual-actuator same edge the the we capacity addition making first for and driving it performance technology to This ideal factories, such cloud at smart sequential AI are the points, video technology. learning. the workloads streaming, next as doubles generation flows

is Our interest. technology dual-actuator strong MACH.X garnering

XX qualify shipping which these expect to later to started industry the across have this increasingly begin point. capacity starting drives, becoming and terabyte year around calendar Customers the we critical

that to the end terabytes the we capacity target. would we and technology. which terabyte be years ahead, scalable be capture drives, of HDDs hit calendar by to another Looking will track of expect on Six based highly that on HAMR XXXX introduction industry first XX with ago I remain our XX stated

making transition on customers. to We focused HAMR technology seamless are our the for

the XX drives, maturity are drives helping a is accelerate platform current to terabyte built in HAMR adoption which Our on and to market. common

some near-term fiscal expect the XXXX, to dynamics. on As we we enter that earlier, described uncertainties macro-related industry I have continue year will influence

drives. expect precision technology well expertise will this with demand together improve, all flexibility, supply to manufacturing and we growing which high-capacity continue customers Seagate cost portfolio, advantages. demand a analytics, positioned for enable and chain particularly is However, relationships, customer and strong address robotics, hyperscale manufacturing to assembly the global deep cloud from and

CAGR of above to XX% in XXXX. long-term our into fiscal will the We exabytes be shipments expect enterprise year market nearline the XX% well

growth Additionally, we healthy year-over-year. expect to deliver revenue

Gianluca turn the the our share the more to I’ll to quarter on and With depth go September into over call June for our results quarter. outlook that,

Gianluca Romano

managing on market basis, range. midpoint strong conditions. $X.XX X% grew efficiency of our operational by the to the focus guidance Dave. billion, we sequential effectively dynamic revenue and driving you, I’m above and June a On quarter through going Thank business to

We increased XX% exabyte shipments total by to to operating and exabytes non-GAAP million. X% XX.X by income expended we $XXX

drives. uncertain, and among While capacity the we seeing for remain particularly higher hyperscale will geopolitical situation demand improving condition cloud nearline are customers

were XX% quarter-over-quarter enterprise in for nearline exabyte. XX market of due average drives. Revenue total than June to stronger at enterprise in nearline that XX% quarter, nearline March represented accounted with hard mission-critical from for Nearline drives, per drive includes of nearly and which Exabyte revenue, the up disk market, up the the mainly terabytes. XX% in demand XX% capacity shipment X drive more into total, quarter

than nearline Revenue from quarter. revenue in XX% compared of more XX total terabytes represent with the higher now XX% capacity drives and prior

quarter. have to fiscal our increased quarter with noncompute surveillance, XX% prior shipment Revenue which total We XX% in expect the year. through for the NAS, volume and of application, increase drive the to qualified XX successfully edge June customer compared and the DVR, terabyte to revenue the number of consumer we market gaming, includes

and led the market. in edge XX shipped from saw in calendar the during market compared surveillance a exabyte for edge in revenue exabytes We shipments. demand of acceleration a a some customers, to period. the period noncompute few sequential year noncompute June XX and Forecast total weaker increase into exabytes is We which a for prior typically gaming quarter the to the

drives. reliable relative require majority nearline Moving desktop notebook edge the application, we’re of a the contributed in from Revenue compute is which and storage, platforms revenue, high-capacity edge drives, of revenue XX% now disk market, and hard to March noncompute total to quarter. disk the of mass data to secure XX% including aligned

down shipment exabyte X% This XX reflecting to typical exabyte, approximately seasonality.

from solutions of our the drive cloud disk systems driven the SSD June revenue, prior revenue enterprise from by SSD The was period. up X% in quarter-over-quarter and demand including non-hard down quarter Our customers. mainly year made business, lower decline X% remaining

business down for our system Revenue cloud slightly was quarter-over-quarter.

to higher revenue reflect products. transition improved we our to ability operating profit, our However, which portfolio

new will announced and powered cloud Seagate platform, product for cost-effective opportunity, which entertainment. density XX Cloudian a jointly new deliver and our we drives a high-capacity with terabyte quarter, the healthcare across partnership solution be and During media high by Decline solution a Cloudian and research large-scale market private The deployment.

Non-GAAP gross sequentially March improve points we’re XX.X%, basis favorable up thus, June Consistent with was and quarter XX underutilization margin June a mix. the cost, for trying during only expectations, quarter, gross margin. negatively we to on the more from product the quarter our which impacting incurred

outlook capabilities are future the closely We I’m in which expanding higher address capacity to environment, while manage production for profitably is our demand opportunities. growth continue to that drives. Therefore, we manufacturing control our with

high-end combination reflecting will operating $X.XX, efficiency the June cost for in headwind of underutilization We from margin for GAAP as period. the production $XX in later operating demand the calendar the out million fully result As $XXX higher gross guidance and expenses slightly activity. this income of our year-ago and and dynamic, expense a non- at EPS operational gross margin of range of of managed efficiently a on nearly year. The expenses non-GAAP million, resulting quarter-over-quarter down quarter, our flat our remain capacity flat a the ongoing until

below for June Cash the the Capital in $XXX year, expenditures, about were was was June quarter, year just $XXX in quarter. X% of flow revenue. full the operations $XXX million million million which fiscal from and

XXXX, growing Looking of manufacturing fiscal midpoint near our our and CapEx address be target increase to demand. plan of of expect support range to between to capacity X% to our ahead we Exabyte revenue to the X%

was for healthy flow cash a year. the and the for $X.X $XXX full Free quarter million billion June

received outstanding Company, of we company. for Holding payment early billion $X.XX the Memory redemption had we from quarter, the of During cash the Toshiba shares with a

reminder, investment our investment preferred income. represent as a proceeds interest over ago, year a original $X.XX just a a shares. billion Seagate in good made The well As TMC

debt credit X.X retired two the the repurchased in repayment non-GAAP shares million the ratio or our from to including Seagate in million We with with $X.XX billion, investment. debt, ordinary quarter, revolving attractive in a the million view quarter $XXX was June gross XXX million, the During X% down of year. an ordinary shares outstanding, represent debt times. facility. company We stating prior quarter, we just June last the our share At $XXX the end below exit of EBITA months balance XX of

end on of At had $X.X we our the the remaining authorization. billion quarter,

of reflect flow, which will or our value. Our and billion shareholder fiscal focus Seagate X, the October XXX% Through in returned a quarterly Board share, XXXX year share of approved per on cash free payable $X.X shareholder dividends XXXX. which combination enhancing of dividend to has again about approximately payment on be $X.XX buyback,

additional an end equivalents $XXX with up our and June, the $X.X of million available billion, of through cash billion from $X.X cash As prior the revolver. at were quarter,

As capacity demand on our fiscal is XXXX, improving, and address year the remain for we we manufacturing industry storage. to capacity mass expand landscape enter plans growing focused executing to

margin, as a Seagate capitalize growth reductions believe on near-term impact from gross we well opportunities. they to While future position

to as per in and which industry more is approximately would as reporting. Starting factors financial Prior share-based well to from operating sharing a change million is of in quarter, methodologies the begin, $XX utilize expense, our we majority quarterly our with outline This included results will compensation spend, our consistent peers. companies the to expenses. calculate I excluding like because outlook, expense our their quarter, to non-GAAP of different to majority September be

operating we point compensation weak the I additional higher out that expect quarter. the would period, and quarter to due variable incur and also give XX-week in expenses September to

net the million to to in additional September be an operating $XX expense expect quarter. impact We the

quarter these September the factors account, outlook as our is for into follows. Taking

range of relatively $X.XX We expect total to minus to non-GAAP X%. margin $X.XX, be the plus minus or sequentially; X%. Non-GAAP plus in EPS of or billion, gross revenue be flat

volumes While to grow. be near-term Exabyte the we the macro expect environment demand, continues meaningfully to

our term, on future a will strength focus and storage enhance to value. long financial cash the capitalize the solid provide generation growth balance the Over and on shareholder sheet us opportunities

comments. call turn back final for now Dave the will to I

Dave Mosley

cash flow. Thanks, is executing Seagate to profit priorities and optimize its To free on Gianluca. well strategic summarize,

intelligently We industry dynamics. and market through to the manage the current continuing related are business cycles

customers believe longer for exponential demand help we and securely, to Over term, the cost-effectively. the Seagate data need manage creating for mass efficiently the storage of data is driving fundamental volumes capacity. the is solutions

capitalize have foundation, to XXXX, growth opportunities. the that expertise As technology confident manufacturing we I future portfolio fiscal we enter and financial on these am

City, York will to September hosting We analyst more where New an on be in event outline detail. strategy in plan we XX our

business. contributions a all call of would their to business opening Before the to our questions, employees for for customers, thank I partners like and moment success take the our suppliers, to

will I take your and questions. now Gianluca

Operator

[Operator Instructions] Your line go from first Please Morgan question comes of Katy Huberty from ahead. the Stanley.

open. is line Your

Katy Huberty

terabyte sounds given exabytes and recover Good the XX% more that surprised gross I’m entirely nearline tie to XX about underutilization Or in areas It the the improvement as June terabyte margins and couple quarter you. underutilization? investments? over is business didn’t other margin how the of then increase just are where And the in seeing in Does the we Thank issue. of the gross XX an in think next progression ramps? like you. morning. there quarters Thank shipped of surveillance. still you’re should

Dave Mosley

not lot Thanks, very the I you tie let describe customers doesn’t helpful. on see of perspective bit us. build XX walk the I’ll part a Katy. market, I pushed it Gianluca tie a the played if absolutely those things because, revenue saw of And those in actually quarter to ramifications but that’s things the that do I be have disruptions quarter we the more supply have those that don’t are together may anticipation didn’t into And high dynamics the that just in necessarily the a little that’s of QX to buying we know, should continue were need supply that market as the to think only well At think channels and specific compare, a underestimate tied of and think demand partly from disruptions impacted happen. as a underutilization level, There’s of no, the terabyte, maybe because ramp and to people to factors back in what to like then even of and was impacts we quickly. into QX. as into we disruptions try market

the I step terabyte, to going bit. revenue and I see think terabyte is at down revenue a you in high can look per very industry per if the quite level the

on, well. capacity and when that’s see still not progress can is do as per coming there. XX to we of when that we product competitive well. transition fully out of but in that’s, that to And be it the some walk get there we as is going as as your Now, But some question, impactful go turned higher cloud that’s the cost of have the I’ll drives, fact, to Gianluca drive do the biggest How terabyte. you can let

Gianluca Romano

Katy. Hi, Yes.

points are cost, you basis add overall that underutilization even of The QX due EPS margin terms fairly F to we guidance. higher of margin our lost to than in So well still was know, gross underutilization. XXX in we the we about our of midpoint actually gross guidance. aligned as And in

know, to expectation much for a F have I So don’t gross higher QX. was our margin

points. cost F F in QX, In the still you’ll gross but less impacting XX, have still than underutilization some QX, basis XX probably margin,

few related our as because the capacity coming to So of said, adding not capabilities we Dave really specifically, the quarters. in much terabyte it’s next volume XX higher our expectation but manufacturing are of to

some pressure the fulfill the expecting. and than bit production our Dave margin in all as pricing factories, keeping underutilization that ramp also we said, And gross there’s a is lower you maybe we what some were until costs. So market will add

let opportunity me to talk also maybe, F the about EPS And for QX. take

we guided impact in So items in there X%. or plus But are that minus different $X.XX QX will direction. several EPS

guided. positive of as have the revenue, a all, we it’s similar first we gross So impact of will higher

be the then the will impact F is because competitors a compensation have variable and due aligned OpEx And is from in quarter, the positive of F million higher order $XX a practice our OpEx compensation. also starting have the quarter, also QX OpEx One $XX we better we a about higher We excluding to have in normal add industry. to share-based couple impact. we million, XX-week and to QX in negative

So that $XX is probably another million.

Finally, we because interest our also income investment redeemed have we lower in Toshiba.

in of investment QX. that interest of in QX, was you which we you the not probably is $XX consolidate know, about will F kind have income how $X.XX million to $X.XX As F in generating QX so F that

Katy Huberty

Thank That’s you. really helpful.

Dave Mosley

Thanks.

Operator

Your Steven Research. Cross from Please question comes from go next Fox ahead.

open. is line Your

Steven Fox

Good morning. Hi.

Sorry for the background noise.

question. one Just

meaningful at As a terabytes you. sort quarters? for should give cloud plays is loss interim, consider? that can few of in that ramp you sense the us a of XX so And there out the Thank over sort share the you next we how

Dave Mosley

think been it for customers working Steven. this years. The on our to platform thanks, communicating we’re and last Yes, and just what XXs way want about is didn’t I we we’ve to do That’s month, the platform ramping stage on we XXs.

out on. so been platform our to getting the aligned to, customers, and ramps the them that’s them we’ve So to selling on align getting

down, pick software see don’t So about, it’s relatively hot. we versus can to speed where were to actually drives full we nearline, make you been not want things point, up that is but were – talked push the ago when not we’ve really out it’s we still market wrong say your when as We a don’t to to especially backup year – there. and we sure the starting

let’s to example temporarily from customers, proposition want that. push is so going for slots XXs be want perspective, don’t long-term proposition, be up data on drives So overbuild to those for XXs into or the our going their say TCO running five, after putting years, huge. the they’re these for We not ultimately maybe the and they the that XX TCO don’t for centers seven and

a So managing that’s that, really or call fine, onto we’re that if share your you not that’s loss like metric something point.

Steven Fox

Thank you.

Dave Mosley

Yes.

Operator

from Please Aaron line go ahead. the Rakers of Your Fargo. Wells question comes from next

Your open. line is

Aaron Rakers

real Two Yes, can. quick thanks. questions if I

quarterly a basis that margin trying kind kind appreciate of the shipments understand understand of build of what fully trajectory kind or that XXX us help of to fabs? all, we you from you can of frame at here, that on of your as is exabytes a you gross So first just trying mean, capacity just the north of have level I’m the And to underutilization do follow-up. model. again, I or absorb I think

Dave Mosley

Aaron. it’s I it. a think way Yes, good, And good that’s think about to

time quarters last in we in down the year last when have this dipped the soft. couple XXs north of and XXX exabytes, we’ve So were been then of in things

on, to I some low that. XX installing we’re right? X XXX moving to think some the portion, we for stuff surveillance not and And that so got targets it’s utilization the X come, and we’re a storage up get markets terabytes, cap and exactly going – your It’s the we to over terabytes and we’ve so of are markets, point, that’s to the largely think of those just moving capacity edge now X it. but set and staging terabytes to need for it’s

Aaron Rakers

to capacity too just Okay. fiscal to XX. shipments XX think may nearline but said between XXXX read not lines, that the And much exceed the quarter, I then last you for

saying range, above “well you’re that long-term Now that margin”.

So help well means? what us maybe can you define or understand above

Dave Mosley

deep for all capability be may to think we their They goes which when work to to be data I talking enough sure goes that exactly and they’re and new the It back there, without old XX meaningful their flexible be improves TCO as terabytes that it get XX plans, terabytes saying Yes, centers their collaborative ramps gear need XX they ones accommodate going enough long a when our time. cycling that out of equipment, our big they we are are – with depending and that able get to the improvements needs. they about need be customers and for they running of making but that above, part on what very and building when may terabytes there, customers.

big fairly, So this up a time against we we��re exabytes. think fairly in bubble

Aaron Rakers

you. Thank Yes.

Operator

Please comes of the Evercore. ahead. question Your Christopher Muse next go line from from

Your line open. is

Dave Mosley

Hello?

Operator

you there? C.J., are

Dave Mosley

C.J.?

Christopher Muse

Yes. Can hear me? you

Dave Mosley

can. I Now

Christopher Muse

guess, I’m that. difficulty about I hitting the sorry Yes, September having numbers. the model, for

provide margins could guess for comp? I So OpEx guide including gross and stock-based you

Gianluca Romano

but No, $XX that, I you million, just think we we so cut will buybacks early… do [indiscernible] can

Christopher Muse

OpEx stock-based thinking on million plus be comp? should I Q including Q plus million, $XX so $XX So million, $XX higher $XX million,

Gianluca Romano

No.

is compensation stock-based OpEx So $XX about million.

a quarter, in you week the $XX into what The new compensation not entering the compensation. amount, in million we��re in the similar guidance, there that is a quarter. an we is is $XX year so the stock-based prior guidance of for because So variable then our XX-week, included because fiscal is And have than had extra the that so million. higher assumption in

those you and need items up. add all So come to

Christopher Muse

that about on Okay, can as thank follow-up, having I terabyte but speak transition you’re what there? as any a margins is focusing gross you. impact you And the mitigated? should be and And think know underutilization, at to, XX you point

Gianluca Romano

are we the ramping terabyte. So XX

the when it’s expectation strong, is like we capacity really the you when the ramp we production. but between can demand start As a know, for and really time

why will to is quarters, be this But have be additional underutilization next few add we how fully fairly much we quick, couple So – still we expect probably the capacity quarters. capacity cost. some from a of in close at depending but to

Christopher Muse

Thank you.

Dave Mosley

Yes.

bit, think FY why XXXX revenue can growth the that. the you to that to in and look able CapEx that. believe expectation numbers our we start are staging for be advantageous C.J. that because we’re year-over-year little I to is so if getting TCO where to get you will those That’s that right reasons for we stretch propositions one see people well the the as point to technology of a as we’re reinforced

Christopher Muse

Thank you.

Operator

line Ananda Please ahead. of go comes Capital. Your next the Baruah Loop from from question

line is Your open.

Ananda Baruah

Hi. and I two, could. I Good just Dave question. Gianluca, the for morning, guys. have – Thanks if taking

terabytes, is you’re first are really margin, that XXX XXX, believe the with margins when utilization, close to just is, cycle that XX.X%. for going, in how helpful. the hit My I The get that’s seeing sticking metrics the to Dave, around the question what last you gross gross regard margins

I guess a ceiling And could so terabytes. And time? follow-up. scale you us think ceiling have this XXX I the around and a context more be then it’s is what the we how could on, sliding give should just And the again? ultimate quick little that about

Dave Mosley

the If a business gross but don’t that. you on long-term asked gross day planning margin perspective glad it’s item. for we a to I’m think manage percent, I about percent, day margin

cycles say year It the going was ago. feels cycle, a very gosh, we when it just – very, like last only quickly. it are So

We’re peaks better the your revenue competition We cycles to able realize then, cost per is hit investing need – revenue terabyte per to to well, is down but down, terabyte. to to be I have my terabyte which fairly get move. as coming commentary we comments per think the of as there’s And aggressively those to also about point. we

So all in. factor these things

Over if of point, a We peak the range guide you your over saw think exactly as for another period margin fiscal as we we serves entire going invest, a and much look you the you there’s – longer we where if peak to to think time, a we’re a year, want your I valley, how think how to to go. point. will. coming well, And

if if go – the dollars, percentage, the margin that it, think to always quarter I earned have ask opportunity if sense? if we top we the Does in would gross we’ll range even also, end So I again, get grab it we we make though, would of dilutive take they’re also the kind we and to of to team tactically.

Ananda Baruah

ago Yes, the of as and quarter? days let’s days XX terabytes, sort it progression, were – the of the the expectations in XX then expecting in quarter. with appreciate sounds XX helpful. like December ago expecting still quarter and believe kind we quarter sort that context regard is Appreciate the you’re the the some really see Dave. very guys September kick to up it. relative And I to things second volume It does. say, to It through it. you September least of, then prior to progression terabytes, I at XX That’s December and follow-up is how just get on and or quality does, of then

Dave Mosley

to aggressive a that Yes, a but – There’s terabyte heads that out. driving able reasons, we’re ready point, longer, we’re XX be as qualifications where that and not still pretty technical like lot want that because some have fairly ramp. a weeks at And materials. remember and hitches their far lead have want because are to as this take significant concerned, and of really timed I’m especially on – things drives, drives about or few don’t various customers tools to pushed with big for it. staging go. a any is have happy ready for to to, these few capacity are times we’re a The on they’re they But definitely weren’t intercept the getting we’re where they discs and

Ananda Baruah

it. appreciate I

Gianluca Romano

are Ananda, you And, correct.

You will the a big see ramp in December quarter.

very already quarter, So will you we more are this much but see starting active quarter. next volume in

Ananda Baruah

you. Thank

Operator

next Your go line Please from Delaney comes question of Goldman Mark Sachs. ahead. from

open. line Your is

Mark Delaney

for and thanks Yes. Good taking morning, questions. the

to to think translates on hoping performance. bid. that, margin would some was additional costs, kind the What relates improve improved I premium sort more what pricing? that you sort and First, around of there’s follow-up as gross as the price you commentary to can for spoke ability the get implications into How revenue well? of you per dual-actuators type about Dave, of And be And technology? do your that of

Dave Mosley

think interesting it’s near-term. I an Mark. space, don’t It’s

this are cloud all service really because have some service technology. be – cloud some of who And very to quite smaller not are have just created So frank, think equal for providers everything divisions there pushing are high are smaller workloads. performance there and workloads, customers I providers of different many who

So immediately is where is applicable a this technology subset.

at terabyte about would technology to think relative They’re bigger over IOPS drives more per as time behind one the have a XX I less, speed can’t that’s actuator continue that – you above important. think streaming multiple makes just becomes sense. all if And it much terabytes. I

to need we go So to this technology.

if much But for hard I it being so driven I we’re for providing think it. more it’ll provides also good be outcompete, competitive think should I think be us. very to happen since we – we’re it value and and

we’re it’s thing back the terabyte getting lower also. I the everything centers, edge which the is streams rest we starved I then and of said talk applicable perspective, into now cloud right drives. I about If from data very are a also driven edge other or in about cost per that for a think the just but the something, is technology surveillance from performance perspective, interesting the value multiple about surveillance for drives think

So I relevant but going instantiation very awhile. are the want products to technology there to that going and early be niche more upfront first say adopters the to is if the will, probably be is be, for just too, we’re that shipping you these now

Mark Delaney

guys. Seagate changes how market that quarter It’s be contemplating, question, later about And my the Thank announced how going to plans past Can position? leading you’re fill helpful, going in you making company year. the you to EVP will of this are follow-up you. forward? during sales the And talk sales

Dave Mosley

any Yes, interesting for I on customers will changing staffing won’t we that very or customer this talk how The versus It’s years the types about just ago. two that even three question. the market. we’re say call really on I changing, are planning but are interesting talked quickly. we’ll do, It’s individual to go the though. markets about thanks changing

there’s point, lot your changes to a of exactly on. So going

The team Seagate is pretty deep.

help. as rest made and team. think knows, in Jim’s of a been transitions in for of we’ve the have last time. I three I faith years I great really everybody long ton a the And some together with think the

growth of going team. think rely we’re have forward to on going the I the Seagate to

how we’re going perspective, my – and do customers, we focused on there’s probably new them, how to going who are from to very then are have I some to so to the And they am make. what adapt investments buy,

Operator

of Ackerman Karl Please question ahead. from Cowen. from the next line go comes Your

is Your line open.

Karl Ackerman

in of economical Gianluca, last Hey, drives exposed little Dave following presumably NAND may morning. have quarters, environments. for get your ASPs few clearly PC decelerated SSDs a think that, I more those or bit the normalization good

per think using kind leverage you from only we density drive, while Now But should cost stabilize I can on guess, of platter. by headwind the the about the that raising pull past, the here, business? you’ve side how one to acted that

Dave Mosley

Karl, it’s interesting.

operating the investment, over quite still these minimal with for think term, not term, business right? As that the quite still long the minimal is some are free – But of short some without the we doing how good, markets over said I cash these cash good. flow the margins we still, are And in important investments managing free talked we what’s script about flow we’re is spaces. of

you competitor, I matter something if that will, are would as that you the As not good. fact, about like drives argue flash being a of today, talked just that or

– So reality there of is marketplace. the but

continue So we time. talk and as, over over places, we’re of flow. because it. long-haul about do a free I in well. cash is not lot think spaces, actually in think run tail a will we to to be on as that pick a really for them them the generate the just because those how investing of we’ll lot There those But quite long some like about second, to be careful we have people PCs I forecast disruptions

service a already I From mind tail. full from – there’s our And we’re as longer is, perspective, my drive make end, HDDs we of so in it per drives it the perspective, of really a our them, one that off the PCs keep our way. other demand, the drives a kind ASPs their to in of for have think reason customers to the don’t the And demand customers dictate strategy, it’s by don’t and hard thing think why either/or. don’t interesting we se end, hard so in at actually in their then

helps that you. hope So

Gianluca Romano

And can something flow. cash free if I on add

I keep million cash think in that able mind that last was down $XXX was generate similar free flow, to even a in quarter, very Seagate and is to during very quarter. quarter it’s important cycle

compared to past. So what I was think in either the change

flow free down So cycle results. the good giving on very is cash time, even during focus

Karl Ackerman

color. Thank you. the Appreciate

Operator

Your ahead. next SIG. from line Mehdi go Hosseini of question comes from the Please

open. line Your is

Mehdi Hosseini

taking that give and context picture, can you enterprise it’s support in some for of framework question. FYXXXX your would have to very overall And how follow-up. confidence in for put a exabyte versus a Yes. big interesting FYXXXX, FYXXXX? I you David, as Yes. and having Thanks the from exabyte my grow

Dave Mosley

repeat didn’t the it. I Can the you sentence? catch last very very of part last Sorry, just

Mehdi Hosseini

that overall just how impact XX% was enterprise your with are exabyte shipment the I context to when exabyte to put How sure. the your growth you XX% Sure, segment? going does exabyte back overall comfortable for given in the well shipment enterprise of over FYXXXX. you

Dave Mosley

Oh, I I see, see.

a talked already Okay. XX%. in the we being portion, Yes. I about bigger bigger think Becoming script, it and

before, part that’s versus that the driver bigger many I drive points, peak driving than going that large primary my the are last the the about there fact to perspective, sites bigger, hard it’s XXXX fewer I think but portion we think payout. drivers, that we’re If in leverage for getting higher us I the a be that XXXX the And I am thing So drive we’ll capacity we’re of and last biggest think types term. near get cycle. the of is it’s the exabyte because doing not get from the I think driver better growth, relatively saying

will footprint to I Longer term, as enterprise, think point, cycle of if continue cloud and their to cloud the grow. well, your cloud. data is existing grow The to through upgrade I going about but continue to think will some still in the

on-prem market we’re what that’s that is the prime will, that have there’s for going fine, the on and storage is but think compute. on And of people other cost if on-prem. the there, between have we high-performance needs that and now, on the seeing cloud data to I difference centers, to focus going of we’re to it’s memory, high-performance interesting compute data being a in topic be or right the and very you going is repatriated lot in be storage, high-performance to a need lot close because where the

going going the order on, to enterprise put vis-a-vis in have places, to is cost-effective growth data growth order those cloud. need in extreme solutions in you’re the But to

to a script, an that’s to and bit that get faster technology, see also great in little will we’d the bit and there. for opportunity think So We I us same drive the growth. opportunity market it about with exabyte talked a little

Mehdi Hosseini

my growing surveillance your consumer double-digit If rate, two your I XX%, may growth? refine exabyte XX%, if faster you over growing exabyte total help enterprise is question, a at with would those exabyte electronic

Dave Mosley

question, from some the exactly perspective, more take edge of has. choppy an over, some take and systems will the sometimes that it. don’t phase a storage Karl’s your been of up, over it’s surveillance, they’ll like like Exabyte cloud maybe back eventually, they to from And see you Eventually, about they legacy to unfortunately, little point. What seen we’ve

years, on pretty three-quarter trends to if the basis last two-, draw trend So story. easy edge start again, are over four one-, cloud the I certainly, it’s trends. storage presents any rolling know three it good you that a But then drawing the don’t or around surveillance

Mehdi Hosseini

Got it. Thank you.

Operator

from Citi. line question next comes of Jim Suva ahead. Please Your the go from

open. line is Your

Jim Suva

I a understand answers much make and gross on margin your far, I Thank correctly and you heard The wanted the just useful. very been going very underutilization. volume. to quarter, adding then the sure have June thus and you’re outlook, was it September more more with to about and XXX XX in basis be filling the capacity to about points points basis XX but

normalizing past the the to be September way So forward? and think should pretty after that the is quarter, quick about impact

Gianluca Romano

Yes.

the way. I that’s right think

Of the course, quarters. from end are depends much standpoint, you But quarter a how and will capacity the in moderate following we I think December correct.

Jim Suva

my more full the coming rate like revenues the probably the of the last of it production, Or your probably quarter of kind March is, materiality because I your right simply run be cycle the increased you in turn out quarter throughput the the you fabs And the then question December quarter? then after on December come comes of as to away, quarter the think capacity? assume the will December with just revenues do and time don’t opposed knowing would out of perfect

Gianluca Romano

I it’s think to difficult note that.

later terabyte. December XX for said it’s we how of intend as before, we different now course, much right think that. And and ramp but, in after or into to will December we quarter quarters I from

in quarters. the So you few will have more probably next impact

Dave Mosley

on But think good materials what about perspective, that we – aggressive to staging sense? right because that it’s a those parts being are we’re make times, against will lead know happen staging and going that a now pull. when what’s being to relative don’t with It’s Does to we go way from we’re exactly very people ramp, will that.

Jim Suva

you Thank of appreciating. details It’s greatly your so much question. for

Operator

Sidney Bank. Please go the next question ahead. Ho of from Your Deutsche comes line from

line Your is open.

Sidney Ho

taking for Thank my Great. question.

numbers your color the – about do you right, exabyte if given my are about for broad-based especially to strengthens – and year-over-year think to customers. the back demand as still talked to basis below some that improving Can add XX% Exabyte nearline drives growth? than numbers year how that you hyperscale is you ago, condition, You the given more just are get when on a that

Dave Mosley

FYXXXX. certainly, Year-over-year coming, in growth, I think is

capture I the ramp to depends is get any want Exabyte to definitely it year, specifics – we don’t the say as about QX. This full I the last as that peak is point, next But of drives, you’re go talk now, would of to be to factories the right year, the of staging if XXXX, ahead were to than which some we an Some ramping we’re on just through able of we’re QX right on what the cycle the at depends further quarter. growth, it and again.

what we valleys, thrown and peaks certainly another have – cycles. but a really just if make can coming you predictable, you guide is to we of we’ve been show the it’s the cloud fairly if websites eye, on with And our consistent those will, cloud Investor having that for I that And think will, the to with things one off discussions Relations seen bit, little available over in the we’re and and the there’s climb customers. get always our believe time

Gianluca Romano

Yes.

very exabyte a good expect for QX we in increase or readiness nearline. So, the

Sidney Ho

Okay, great. Thanks.

Operator

from of next go Shah Please comes from Your Munjal question the UBS. line ahead.

open. is line Your

Munjal Shah

Hi. Last think stronger? be mentioned much nearline to back coming Do still wider it’s Yes. that going taking you and Thanks you question. or expect ramp quarter Thanks. would that my be for higher. you do

Dave Mosley

and their heard center they think, Yes, specifically, of people to There gets of say you plans can this last and they of to we’ve are invest, been a application that data let data Gap] that continue want for they’ve the wait postponed September decisions. it typically the who, way, and August architectural reasons. and I me some other build-outs places [Audio the for in growing right but various just just tell to lot

Sometimes it’s going drive do sometimes has other that on. hard capacity with it to are points, the architectures

that’s applications different is referring so data hard many cloud on. very that uniform to. consistent it’s that and brush the do paint overall there’s the we’re drives But because a think, group are strategies period – to is data with what I I and point that So going the to

certainly to for six wouldn’t places year and it I have to a overall A that think, time. data think as driving like deep. said the the what that little wider growth, in starting that half and we’re the and months. see disturbed last in maybe felt this with the the trend. a But been I markets demand the has that and Maybe, last geographically still six diversity put I ago is months, Clearly think there be enough deeper fairly I data that

Munjal Shah

Just to follow-up.

applications the next do build-outs from that when see or you seeing data? happen are the existing from ramp, we we out those are So think starting to push

Dave Mosley

true. any Yes, new Yes, new about I specific but there customers that’s there certainly talk of online. applications. wouldn’t are are course, coming applications

Munjal Shah

All right, great. Thanks a lot.

Operator

ahead. Your next Steven from Mitch Markets. RBC of question line Please go comes from Capital

open. is line Your

Mitch Steven

guys to or FYXXXX, sort even just at the two in calendar a being terms you just for in a weaker when half seasonality been gave you bit we know is talk for that little terms of sounds the exact year. should seasonally any question. of looking had more strong, be be aware of? look bit thanks strange year I first the typical terms my should It guys, it’s that taking of we guys we year going like comments else year, level of XXXX, a for a Hey for has this there I little of assume just one but year to more though about anything of guidance, maybe seasonal high next in the

Stephen Luczo

Yes, interesting.

there’s for of like still consumer’s seasonal. think seasonality Mitch, very at parts I example, some still

they seasonal points be, PC, –surveillance may the surveillance to to of have we earlier, are as cloud that they seasonality traditional exposure spikes much very have less in market that changing the changing. predictable not design see are this, there little bit – a little talked of seasonality. would less about of some changed used we be be like things some and The and are or the we As bit, PC, a as may may

I think disrupted. been little a it’s

through and different the seasonal I would and we seasonal the say about. it’s that cloud patterns certainly a So, because and a talk spikes go

to all total to exactly they’re these growth, that’s growth conservative years, have point, looking considered data go in we data been going confidence have and have the why very revenue the data think over people we the FYXXXX, things your invest FYXXXX few at and though, With in to just last in growth.

Mitch Steven

what then Perfect. NetApp enterprise side, and And posted follow-up sorry, we preannounced. just saw on just one the what last – the during year

in Anything is So comments so I do of why or you’d specific? in of to would anything more guess give talking to of of much there there you you guys is surprising terms company their terms terms was what there guys be that think their kind worse mess in demand? that you’re versus

Dave Mosley

it’s specific enterprise. what’s on-prem a about would going super I to person. in on say talk me, interesting wouldn’t I

have on-prem grow last data also own want we application we performance a the that’s see people whether data over themselves, lot control. We to the it’s look to control, very in centers to our years, rigs important. their own XX But see high it their that I build. for own of if think – the on there’ve and focused people five I been

as great about it. the value are don’t way grow cloud to a talk well. think people good Some think will in repatriation, think the substantially about I and cloud Because it’s I a have the applications proposition

the the think do data. been just on that’s very to But some cycle but think life to of Not companies the be of their model I compute, And is the focused focused storage very efficient, super have on-prem low business data high and I life important. cycle entire performance. cover cost, that

the script, I bit more and five for we And to next everybody space to think think a and there’s in on-prem this of us, little all that stuff. for economical opportunity our I pointed years. it’s a watch an in – in I

Mitch Steven

Very you. helpful. Thank

Dave Mosley

Thanks.

Operator

from question the ahead. Vijay next Rakesh of line Mizuho. comes from go Please Your

open. Your is line

Vijay Rakesh

Yes. Hi guys.

terms U.S. of in the and Chinese difference color if terms there’s up in you’re side, of hyperscale, hyperscale half, Appreciate what geographically look the a enterprise or it picking customers? you on in a there’s between been back seeing demand, some and demand there? between between as confusion Just at any demand nearline pickup

Dave Mosley

been a little year, choppy sure. for this has that’s it Yes,

various but reasons there’s involved. for our customers overall I are a think, with there’s that, lot – having the planning we’re more of most discussions

last even data to there’ve do a or going some of the new to we’ll feel demand. which new business is in hold, we to on of this coming I’m We there So are come point. then be gear the or still a some you there back are of say, online models think this. built by the transitioning be place. are But that some ones nine to that been just geographically, months that And choppiness of into desired new six gear may going coming lot be I months or next center nearline causes people old your in applications see up,

Vijay Rakesh

but in Got this Thanks. really terms recent, know some time. month’s it. of a And thoughts? I in I know Gap]. in this is very is going of again these Any status [Audio back place

Gianluca Romano

impact from the new… an expect don’t We

Dave Mosley

ones. the new From

do time. We our the the on working I react with everyone does. – we think, from there’s stuff to focus to tend perspective, of obviously the in right that right these our a at like customers we things have right we’re place through just things else lot

can robust supply that pretty quickly. I react think we chain have we

things through the new same is side, impact. the from and there’s in I everybody same minimal going the analyzing things. tariff the think So And world,

it’s – with dealing We’re bit their think you I tell I’ve Seagate’s other can more, everyone heard people we’re it. to a earnings with it but markedly struggling similar little and are else calls,

Operator

at turn this now I And there time. for call the remarks. are will no closing further Dave Mosley questions to back

Dave Mosley

interest Okay. Thanks of our for quarter for to the for to I all and in performance. in Seagate. support. And Dublin. seeing thank an would partners Event Kelly, employees look you your you contributions their Analyst at and ongoing XXth. like forward We shareholders September our on like hosting thank to Also fourth New everyone and your all call. also business York our for again our thanks customers joining suppliers to thank once And our us in today

Operator

conference today’s call. concludes This

disconnect. now may You

Seagate Technology (STX) 2 Aug 192019 Q4 Earnings call transcript