STX - Earnings call transcript Q1 2020 | Seagate Technology Holdings plc

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Operator

Good morning, and welcome to the Seagate Technology Fiscal First Quarter 2020 Financial Results Conference Call. My name is Denise, and I'll 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.

Executive

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 September 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,

forward-looking and growth financial our this not growth reminder, including based date. should December-quarter market statements, opportunities a product and planned upon views trends, market relied of subsequent outlook financial ramp as performance, statements current assumptions ability general and introductions, call production, As on are These be to and future our about demand, contains conditions. any expectations management's industry

forward-looking Section Actual the these on of posted with other statements materially our the filed are factors most Investors results concerning in Form to from and and XX-K from may contained our vary risks, supplemental that results the uncertainties today's Information statements. differ could recent SEC cause website. information our

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

the turn now over I'll Dave. to that, with And call

Dave Mosley

the further for call and results for Seagate, we've our and on Gianluca us. provide outlook Europe, those on quarter, key for from by will priorities. I the to our progress the market on good the And December will on everyone. afternoon. made details our you of morning, our relevance today's key Good here views outlining Shanye. quarter. Afterwards the sharing highlights September summarizing start in joining financial Thanks Thanks,

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

solid non-GAAP per had cash the to year, fiscal earnings flow profit, in quarter-over-quarter. revenue, Seagate share, a start increase operating

focus driving and return fund our strong cash extend is future to our operating sustain flow our Our leadership program. growth, strong profit optimizing and technology on dollars sustainable capital

Over share shareholders returned total repurchase the commitment months, XX past dividends a of $X value. shareholder we and to our of reflecting to a have -- billion combination through our enhancing ongoing

quarterly that time Our capabilities. and Board future dividend, we've our years growth approved generation an in our in increase cash four dividend. raised first confidence the marks to our their demonstrating This

to Moving review consistently over forward, we plan time. the dividend payment

surveillance, capacity suited The on including growing, reliable, edge Let applications dollars that and NAS require me applications, market This nearline, best starting high-capacity both now video exabytes, storage share market comprised data-centric cloud mass is and some are cost-effective, with environment, image in mass storage capacity terms storage. near-term is HDD. perspectives of and the and drives. to supports market and and

double-digit In supported demand cloud customers. growth across hyperscale nearline, September delivered improving by we and strong quarter, the revenue in

drives dozen nearline well very are demand XX the history. products. than more product are Seagate's strong OEM in more nearline XX-terabyte With cloud to would customer outlook, and and ship against to our for million ramping We make to on X expect which product terabytes than plan December maturity tracking a qualification fastest quarter, the Based our we executing in are and fulfill current we timelines. qualified drives our aggressively underway, ramp others customers customer several and these

tensions typical video continued June including from and multiple surveillance. to in the strong across declined image Geopolitical customers patterns hurdles and disrupt an September Revenue applications markets, following unusually buying quarter regulatory period.

over demand term. to We volatility the near some persist expect

which applications, we X.X, IT edge storage high-definition video surveillance like And with to image transition the the utilize see processing. and of emergence

smart disk growth of amounts represent these low-cost term. We data, example, can which over Seagate video cities believe and benefit opportunities high-reliability factories, for long from to large applications For drives. meaningful continue the require all and IoT, smart image processing

legacy notebook, DVR, a we in quarter. include desktop, gaming September our in saw mission which and markets, critical, applications, In the revenue uptick consumer seasonal

past, we a contributed As additional shared flow the little in to these Seagate's investment. cash markets while requiring

opportunities we and OEM edge customers. in clouds, new the and expect the create of ones many storage we at same legacy Importantly, in supporting enterprise with markets private new along are customers partners other are that growth to the the

follow the applications. private cloud With solution the the providers. scalable solutions integral economical to disk-centric workload are of cost, to are as the storage cloud, to part storage towards trend build-out seeking these of architectures high-density data-rich the high-density address Low ideally system Seagate's a are same customers big requirement, and as data public the multi-cloud world platforms large suited

strong product cloud cost on and deliver XXXX, public the applications. in our technology to Seagate's to capture storage well the forecast by relationships, first the We double by demand our growing build To emerging solutions ahead. performance consistently we to out road from this and map, cloud than and be demand, supported capacity levels revenue current executing to positioned we strategy capitalize storage benefits believe the and opportunities of the We market significant TAM private to introduce portfolio customers. more deep us ongoing make mass from are broad will edge foresee product customer new

mass the only industry. which capacity the for Seagate benchmark is XX-terabyte Today, the drives, are producing company

ship to of calendar first leadership. preparing drives half the year in our maintain are We to XXXX capacity XX-terabyte industry

in which least our areal next decade. over revolutionary to CAGR the areal driving drives density density XX% We track to enables on ship late XX-terabyte remain Seagate HAMR We at achieve are with year XXXX. technology, HAMR also calendar leadership

scale our We multi-actuator actuator drive access capacity from first maintain the technology revenue increase without in compromising September quarter. for and the dual As to performance. drive densities is fast to generated MACH.X data solutions required time

technology rigorous service to drives, qualify without having customer, is agreements upgrades. these customers employ to including to a with qualifying their hyperscale US working We multiple costly hardware meet leading level are the who

to capacities drive above as expect actuator XX dual We to transition demand to terabytes. see technology for customers increase

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

Gianluca Romano

Thank income We the flow the of per revenue quarter, revenue, X% earnings $X.XX and operating well quarter, in $X.XX, our to guidance return range. our you, were above Dave. prior to the support operating at our high-end cash fourth Compared growing midpoint. strong to guidance share executed Non-GAAP for shareholders. increased billion,

performance XX by largely exabyte, by underpinned capacity quarter-over-quarter mass to Our increased our for XX% demand was driven products. improving shipments Further, exabyte storage. nearline

and vast market, total capacity of critical representing drives revenue, for increased to September XX XX% the shipments drives, volume. to nearline representing Average XX% increased nearline June quarter-over-quarter, XX% transition capacity exabyte, in majority enterprise total. with that mission Exabyte up enterprise the of Revenue ongoing market for sequentially the XX% higher into reflecting drive quarter which nearline from includes quarter. the the

in fiscal largest fiscal ahead XX-terabyte to Our be nearline in these partners, our in expectation products to exabyte. drives QX QX was product a the across for frame. time XX-terabyte revenue anticipate and expect our fiscal terms growing cloud, demand of company of and strong these both fastest We hyperscale contributor product, and revenue and OEM meet enterprise prior highest QX, milestones our revenue in

sequentially in and higher the September Revenue quarter. shipments exabyte drives critical for were our mission

XX gaming, consistent the at edge this quarter. for several for comprised Revenue market quarter serve shipments customer to remained performance exabyte over demand revenue, as non-compute applications. remained this of which DVR Exabyte drives, continue past has NAS, flat represented in quarters. total non-compute compared June surveillance, consumer with We XX% is XX% September fairly the the and of quarter-over-quarter,

noted the the quarter, our quarter. customers lower a As demand which accelerated in call, June in few resulted slightly revenue on prior surveillance into

contributed desktop edge as forward. image for revenue to compared earlier, compute processing, mentioned to total such high-definition desktop to seasonal surveillance, Dave notebook quarter. Exabyte and Seagate continue both utilize a demand from and XX% and XX% for meaningful market, price, the applications including Revenue June X% sequentially shipments in exabytes, reflecting moving notebook increased growth drives. XX of which As be opportunity video the

our revenue we exabyte in change we legacy December storage well two Day, low-cost This presented the mass Aligning we categories, primary Analyst nearline, with our present video recent market Starting and what is and capacity in NAS. HDD. growing market. quarter, high shipments during breakout Mass will HDD business. how will to of requiring image represents applications and and capacity, made applications, suited storage up that capacity support data-centric we

percentage with XX% Our market. sold quarter and just other into increasing has of our capacity products a of two as revenue total contributed storage years September compared HDD ago. revenue, legacy XX% been Mass are

expect over years. few growth continue trend next We to the this

September legacy revenue. markets up of The total quarter made XX%

adding By quarter-over-quarter. growth remaining X% the up Our both non-HDD SSD revenue, business of disk made system from and solutions. with revenue XX% drive out non-hard

has OEMs our quarters. gain We and challenging our business, other customers. pricing with continued in Within to environment for SSD been traction multiple business system the

Our Seagate main to a our on deliver focused to solution servicing those on focus capacity customers enterprise complete been SSDs, which of We can with areas market has HDD more portfolio. mass our remain our provide solution storage the complement where customers. value

cost to Accounting seven prior with a years, of these top the basis at As gross approximately September higher-than-expected gross three a depreciation approximately costs we for over flat for five use a majority million, by years of range This from reminder, the to of On by XX from lowered a which to years years period industry we're new challenging capital. quarters, extending initial was of margin sold. change few last of which our goods about our ramp the a conditions in efficient change, included of impacted points. margins September the approximately useful capital life[Phonetic] quarter of the the non-GAAP range more which products, associated equipment three quarter resulted we XX%. with was incurred of discussed $XX

and a meaningful expect total become we our scale revenues. XX-terabyte as to production ahead, of drives part margins Looking improve more

quarter Discretionary outlook. our for planned the the lower than extra Non-GAAP operating than million. costs lower both came $XXX were in costs XX-week and with week original associated at expenses

efficiently revenue. to operating $XXX profitability. the and We XX% expanded are manage million continuing we optimize expenses quarter, In of to approximately non-GAAP or September income

to expect to financial as execute we see our leverage road per map and revenue We cost terabyte. grow reduce

We our expenditures Capital September were quarter EPS high the was end of which delivered guidance X% revenue. about range. the $X.XX, of representing million $XXX non-GAAP for at quarter of

near prepare midpoint of range our be to of year for fiscal to support to the the expansion for plans of the capex revenue exabyte X% capacity target our X% HAMR our Technology. expect of ramp We and

free prior from opportunistic ordinary year. share quarter. sequentially. exiting $XXX X.X Through repurchase healthy a XXX shares X% shares, shareholders cash of million up in retire outstanding, to delivered down million X% $XXX the and million of returned $XXX We the dividends, combination million to million, flow We with a quarter utilized we the

a approved confidence payable This Board increase our sustainable Day, as to well on Analyst X, demand quarterly the January X% during positive announced[Phonetic] $X.XX long-term in to payment our cash our generation. reflect as share, our per we As dividend outlook, XXXX. increase

further on focused been improving our also balance We've sheet.

During maturity extended leverage $X.X billion. debt. a September term interest we portion loan Through by total to efforts, of these the we lowered million a restructure quarter, and $XXX million debt $XX marketed six-year successfully to expenses our debt profile, annual reduced

billion, the $X.X access through revolver. were of September, of billion As our available $X.X up end to cash to cash equivalents and with

by margin EPS of target Looking of improved our to for Non-GAAP the XX% the expect the is of above line long-term non-GAAP be to And driven range operating X%. XX% expected quarter, our range $X.XX plus-or-minus billion to to margin. we outlook plus-or-minus gross revenue, $X.XX of be growth ahead to be and total expected December midpoint in top revenues X%. is

Overall, our very of the we well, with we challenges, and foundation face in we geopolitical combined for to XX-terabyte and executing year improving while believe XXXX. profitability demand drives, growth the solid fiscal a ramp industry continue are revenue

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

Dave Mosley

and stakeholders. consistently business the is performance advancing generating our and key greatest Seagate summary, initiatives. return We're towards that all flow In Gianluca. areas of sustainable Thanks, solid cash directing our provide capital for delivering

Company's scaling ever fastest nearline and on the successfully are ramp XX a exabyte terabytes. at executing drive production We capacity

and HAMR total lower of deliver areal MACH.X scale over capacity We next technologies to density to are drive performance the decade. with on to our dual-actuator introduce to track and customers ownership cost

industry map technology executing recent cash optimizing for we focused flow. While the delivering on stakeholders road free of we our value of are and by remain mindful global uncertainties profitability, and our macro and all dynamics,

positioned be customer to continue and somewhat to profitability significant deep capitalize technology grow mass storage. second improving well the with is first XX in to Through terabyte storage half execution, XXXX, fiscal in We ramp mass expect Seagate relationships, to than and and on capacity by roadmap our our projected revenue capacity opportunities the ongoing stronger demand. leading supported the

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

take questions. now will I and your Gianluca

Operator

Ackerman first [Operator question Your Instructions] comes with from Karl Cowen.

open. line is Your

Karl Ackerman

Hey, whether peer in you ask the good morning, peers, for have letting if XX-terabyte[Phonetic]. are one debate attributes that there the call share enable positioned And is next we a much I Thanks just lead the I question. gain gaining investor would you like among other There XX-terabyte who on nearline, are follow-up, But has share one everyone. over in may. are me another please. should that quarters? have aside capacity be that you and Two been any to of out per today, as aware you'd drive better from few

Dave Mosley

Karl. Yes, Thanks,

increasing that good and we we in XX-terabyte have into getting and predictably last relationships, is I is think, nearline the with the simply customers demand see their architectures. fairly to also put, so

we I right exabyte point be feel pretty ramp. probably, that's might a points, significant other of portion can't of front the speak able we'll do their as in year to leading this capacity we strong. think next that through but pretty being to well, And comfortable us. feel that's people that, volume I calendar on really hit what

Karl Ackerman

fore aerial is margins gross levels before If Analyst message helpful. -- nearline. better? question haven't importantly your Day margins, of of gets seen the pressure you curve, ask Do margins leverage we this margins. you some a additional you. pricing maybe, competitors the of despite gross though, on your toward density on capital That's But operating to an been margins complexity main worse I that the one pricing pricing push around think disks it. and greater continue handle[Phonetic]? that pursue I know can't Got in get push inflection in in will today to has mix? is we high-capacity certainly Do and yet that Why as can this enterprise you could and the required more heads your And week that it points. alluded why, reason think you Thank to which higher pressure maybe

Dave Mosley

impact gross and three various supply we happening. certainly if specific demand also weak. business, the inventory, carefully. but function products just cash, of the They to across platforms. I ago, we costs are go start But this converting bills, portfolio. manage the platforms throttle back Gianluca let the way, products can. conscious demand is I'll script. me that And production other really the in just reductions sense you a to mean, for for made few ramp he XX-terabyte, relatively I our We new the the to By to ramp have elaborate not have. your quarters continued was a the was new first that the the in let on to point, margin mentioned the very that for of last say exabyte demand, quarters, And decision cost

up. definitely demand fiscal through strength reasons will of That's the I confident. The than even is further think this go of why -- one potentially picking the demand and why year, of that. back the So we're half

talked we'll that about. we'd be why we like products, stronger midpoint confident of And -- XXXX year feel that's long-term new with what range Gianluca range Quite I'm XXXX. it. QX drive opex[Phonetic] is we So in calendar mentioned than that calendar model we lot into the our is very get that operating quickly, a than above the

margins gross of you elaborate let dynamics, all him those point, To I'll think here. rise will Gianluca, with I and

Gianluca Romano

the thank question. Karl, you for Hey, Yes.

the that charges the discussed starting did last we was two ago production previous three call, quarters full say, the let's ramp at under-utilization not quarters. all in generating they're as So, three or we was capacity And reduce. to earnings release in higher, and that

from know, to demand. have During that. us take period are ready opportunity of this adding we we benefit capacity time, still I strong higher giving are capex, when even And we the for

It's XX-terabyte, capacities. on are ramping hard. product also we other our So on but lower basically

yield, we in bit little We additional happen expect F had you When little bit additional a again to in of sometimes little those have F that. QX and don't QX. scrap. lower ramp of fast, bit impacts after a a costs, so We that

general, expect margin to QX. gross in So operating improve we margins margin F so and starting

Dave Mosley

other I is we point make sure one investments. we'd we think, And your -- that make point, to make the to have

So stage for we've been exabyte investing heads the in growth. capex to and that we media need for the

those investments paid sure So we make get for Let's those and make investments.

we're So that term mindful over as of long well. the

Operator

comes from... Your next question

Karl Ackerman

Thank you very much.

Operator

Sorry. Oh

from question Research. Steven comes Your with Fox Cross next

Your line open. is

Steven Fox

had two morning. questions. I Thanks, good

the you're the the guidance capacity current issues on are you margin of incremental garner And that quarter, but to elaborate assume margins on, safe and follow-up. from than follow-up a I might new you would issues ramp the First less that know have like? you could the mentioned gross is that scrap providing you beyond sort path as it If a products? I question. not then yield look that on what just

Dave Mosley

Steven, way it's we refreshes And just to of cost about one capacity it. other Yes, the through portfolio. we which right exactly all talked on, point, the fixate to rest the about as there's think that's not tend

So year. going into that feel next pretty good we strength about

Gianluca Romano

the to expect fiscal in saying we this, the second mind, are that to half. bear the year stronger than in half And we be of first

confidence course, So, this in of result. is the our of part

Steven Fox

the those mix on points, some little lowering saw give helpful. drives. capacity Thanks. see you changes I though a just recent is more next quarters? do the view that? different drive What All etc? the the prospects what the Could just you right, remarks say, for of the a surveillance you bit in prepared that or surveillance And said Are few that's quarter. demand, for tougher in about of this then understand question you on comparisons you

Steven Fox

lowering said All tougher the about that just Are for in etc? right, little drives. bit you a on though surveillance give drive the I that's understand Thanks. quarter. more you And points, prepared prospects helpful. the say, What question quarters? you on the different demand, you the that? those for you comparisons of is Could surveillance see what next remarks changes just view then recent a saw in capacity of this few do the some mix or

Dave Mosley

year And demand in back it's and certainly really but people kind broadly it speculative, they grown the maybe think, quarters focus It's If are a of I have we I months, about actually to share of demand more the to the interesting with exabytes talking ago surveillance just a higher. much was the interesting, box capacity to that stuff three question. on local, like The have because that do about other XX in, really can about But want one go some markets. demand mass -- disruptions. and based that. something can or they be people could gain pulling started

been has demand for quite that disruptive a So while.

The and that satisfy Exactly that is they're, or about year. will what But fairly small really is exabyte, end question. There something white a market demand -- home how next markets. is global to is is decision we don't for at end final demand all. is box making it we call buy the actually it demand the end doing down some strongly like still integration the that. slowing interesting And or a strong in size. think there in We brand is markets a business continue what's a the grow it people out more -- demand of believe we is --

think of As it's a growing. fact, we matter

Steven Fox

helpful. That's you. Great. Thank

Operator

with Stanley. comes question next Your Morgan Katy Huberty from

Your is open. line

Katy Huberty

Thank questions. A of couple you.

sell much in mix First, you this history. more enterprise recent Can just is aggression price the in price exabyte or the market? talk quarter like-for-like about, than that per

Dave Mosley

think we're I much. mean think too fell don't -- think too don't I what still went ours analyzing just much. But fell I I up. ours

few would that. there therefore quarters and Katy, like ago was demand I some soft, think behaviors so that, is I a may what been have say

back the we as confident that's and -- about we feel that going gross are, very think I one range. think to we of we reasons margin forward, we can why get feel where

Katy Huberty

last in in in demand forward a around some market. to revenue Intel of some ahead attribution you as tariffs. then negotiations? of quarter, early quarter Any China trade And behavior different your dynamic talked to an pull it buying business about buying the this benefit relates gave from actual

Dave Mosley

There And not of that's -- say kind your disturbances discussed, Steven's the a present. only Those are last still before, quarter would still disturbed. to what quarter it's think I I that, but well. point, question. it's we as

said prepared well. we in think as something I remarks like the that

still strong. And I that were year January calendar I into end last XXXX we feel We better is the going We're the think than like year. that calendar quarter certainly XXXX. will not demand saw year be softness. signaling

still think, there, I it's the of So end matter demand. we end is do fulfill how and just demand that exactly a

Gianluca Romano

then... And

Katy Huberty

you. Thank

Gianluca Romano

as we Katy, have going increased also you know, And in little per back price price average terabyte you you bit segment. impact for a drive per question usually have decrease nearline, when this to your increase in capacity, of terabyte. the that in of average capacity our

Katy Huberty

Thank you. Understood. Okay.

Operator

comes Your with Fargo. Aaron next from question Wells Rakers

Your open. line is

Aaron Rakers

the and full kind as Obviously, HAMR about thanks But couple here I'm we then of utilization back of should curious margin think for of out going have well, on of where this relative level just how add of you over as last if we level the of gross the a look I of your we ramp stand forward, capacity, Yes, XX next I curious look as question. yield -- kind to exabytes. quarter into capacities at I kind kind XX to we shipped just TBs quarters? guess, year. the two as guess, I'm next the bit can. progression line. as the little I taking

Dave Mosley

some would think point capacity let margin portfolio well, is few the quarters. improvement. Gianluca strongly a well. think up a positioning next the I lot positioned of subtle that very will it in I'll But go the heads It's We things second. here a is actually talk exabyte There I but way terabytes the other the capital products the we've the XX that. media. of driving Yes, over Aaron, driver are in say and as of for across is

it's So than will. drive if different capacity you

So, and so the demand the we yields at have sure products to that good exabyte bigger. really gets responding we're and right growth, when -- and proactively making ramped everything

Gianluca Romano

full still are Yes, we we some and not still adding capacity, at are capex.

have for increase two a next, We huge expectation volume the say, three or would I demand quarters. in

demand. So we full from satisfy quarters CapE should that are in capacity, say, preparing we at would maybe few to want I we days. And to two be now. in But of course add

Dave Mosley

capital We constraints. the you over be -- earlier over we questions. sure long time capacity very well. do need one know very the have that's to there'll haul, And we I in because place, make lead of believe long think the that as But long to

Aaron Rakers

necessarily hyperscale the almost to your then the They characterize as talked we with alluded hyperscale all of a was, follow-up, a be confident guys. as notable past quarters? the real-time but you visibility moving of one think the -- recovery company just as as few quarters at drives? of in over changed to last of about nearline at that guys yours, over as next a for the couple -- competitor continuing kind How Has seems pause that engagement the also demand a And not this more far kind to you're cycle. a about hyperscale Okay. companies quick of there would more last night to basically procurement

Dave Mosley

are who -- are, engagement on strong, they're they our but their problems characterize their complex. as and very very depending would different, problems I

the you're the part that a you So might answer. architecture for one you it's of that speculate the much, be whatever architecture could issue size also an see part of too gets think but I on all impactful. won't not that it one issues other And might if companies and see reason, fits qualified I with delayed

fast. componentry although, move hard there think, doesn't I are example, for to tend broad-based, that be and point well, qualified have on as X-terabyte and one drives may drive we in fairly an as architectural some speaking, generally

And the fleet same only like customers So it's not transitions have sets as at problems These but I'm globally complex the entire supply time. well. speaking themselves. also chains, not

more transitions. bigger set. is of make them test they They to have the -- gets, some the As complex against to inherent there world inhibitions the sure these more that

exabytes you not from across you. demand that time of confidence. surprising me that time see drives think what I our architectures it's most is -- that broad that see But based across can we architecture So to to affecting one the --

Aaron Rakers

Okay. you. Thank

Operator

comes Muse next Evercore. Christopher from question Your with

Your line is open.

Christopher Muse

Yes, taking thanks for the question.

Your first you think over first seasonality accelerating as typically what your in XX-terabyte the XX% how into question, the March the about really year, is ramp down five at think the sequentially? of versus quarter about least we should half last years tracked

Dave Mosley

seasonally may I and legacy in one obviously, there question. capacity in will such that coming Thanks. quarter, There the after always quarter have That's there, we in why exabyte with strength. that is I seasonality the be the the dynamics confident we then Year in good that Yes, weakest numbers But but Chinese some referenced revenue earlier. our quarter is so that back-half think New here about. we're And of talk think markets strong. demand the mass markets is

There or -- happen XXs, between question, the year. is that transition will XXs, people way people who to were or to exactly also XXs sometime fairly Xs the on who would transition next large earlier a and or the made XXs

good. is the very go As all growth those exabytes transitions up,

so out top is substantially our And getting priority.

Christopher Muse

Very helpful.

as of $XXX considering of roughly XXXX. in week and kind how simply million removing As we that of just the December opex week, my calendar model opex, that the into you part trajectory follow-up, September the quarter that, should math extra so is quarter, the had beyond

Gianluca Romano

was you QX are But right. what Yes, better be actually will were OpEX F planning. than we

the would I week, one-extra -- or if So two. fairly model next, for maybe flat quarter

Dave Mosley

don't to, macro we we all can that always on opex depending -- customer now. need without conditions. think really support can we see we transitions right to if had trim But We we raising need the that

flat think is to model I So a way good it.

Christopher Muse

So to be clear.

flat So though the extra week you in September? even million[Phonetic] had $XXX at

Gianluca Romano

your compensation. providing share-based including is $XXX think, I million

take that there. out So you should of

yesterday. what at look we Just reported

Christopher Muse

good. Okay,

Operator

Capital. Loop Your Baruah next with question comes from Ananda

open. is line Your

Ananda Baruah

taking Yes, say Two, good going thanks I you good the for could. morning afternoon I guys. was for to but if question guys.

mentioned structural on be margin. The items that sense first margin. of a had gross is Gianluca, clarification could gross get a back two to adjusted you one or

You mentioned impact guess, mention of XX product XX separate Are I And it items? margin $XX if guess, question, then well. to accurate basis those point margin, each of my from impacting that. structural a headwind I points is and way gross basis as is ramp an they think new there gross of kind million of are, costs, from

be And basis would quick follow-up. XXX walk have higher for then the us not be a points through Thanks. And actually that's accurate. that a I it If So quarter.

Gianluca Romano

I'm we question. the sorry, you of couldn't second hear part Ananda,

So basis is we points the one? got a What it. XX second

Ananda Baruah

was, you mention points And cost that $XX impact. a ramps? there from a question is XX one -- from other basis of the the The separate million a product is, mention made the was new

Gianluca Romano

lower -- F Yes, that and XX the happen QX. that related to, yields And to so expect basis are higher in don't points we say, yes. let's that related ramp, -- scrap to

as an count improvement. So should you that

a the remarks million change I think $XX depreciation the were depreciation. in impact prepared I of mentioned the that the -- was

little a F will in impact. higher you have Now bit QX,

when also you the So this timing impact you change, of part one. in start should is consider The inventory. the

a QX little -- impact little [Indecipherable] million was bit P&L higher, not much a $XX was So higher. higher, bit

Ananda Baruah

the those still expectations you mentioned in would Got of thinking what it. bit Dave, a there? question this is be? it's -- of, just you guys second regards that Do accurate right Could guess is you growth. to little it prepared you what were comments you ahead are is you of about how cycle the that terms I it And be And valid? update then feel could now? remarks hyperscale the with regards made you of where thought then growth an us to for the cycle give How feel, potential? potential with in sort like, past think in you're Understood.

Dave Mosley

to where indication global demand we thought some back be. a the higher that of ticks the to but mean urge about things partners months would we to be. where it of that, it and it relative a from suggests ties but We suggest it be, XX qualify there It thought that it complexity when ago it's point bit I get perspective, to the There is little later, even about point obviously[Phonetic], that doesn't products the very to Yes, thought that thought and the -- around about it have where we some earlier like made that might that. it's was everywhere of is demand would be is would think there the new an high. demand

we about the cycle. So the that's comfortable one feel of reasons demand

terabytes on what of we I about think, slightly to XX plan plan. a was ahead talked

We with happy we more dozen start drives So April qualifications first than a now. -- remember. across those the OEMs ship in

The have has more there to bullish. very where here. run Customer is been well. work So and that's get of we get qualifications lot high demand a

Ananda Baruah

Thanks Okay, that's great. helpful. a That's lot.

Operator

Your next Markets. question with Mitch comes RBC Capital from Steves

Your line is open.

Mitch Steves

side. first Hey the is questions kind -- to guys. just Thanks center for of the bit out data my taking flesh a on one

piece of there next is to better help markets Are the center ways the what this of any March. directionaly or growing us out hear quarters guys of for the and right, December have in guys couple faster over end I seen of probably so? if one to data do you in be kind going terms markets So you

Dave Mosley

We like we point, different data of -- we're your but the it building it definitely get your data call centers people globally, all think I I nearline strength on are types are all strength. Yes, that seeing. different centers. call But there,

Mitch Steves

Yes.

the talked kind your of margins The competitors drive for second gross one December. in I disk had XX% hard is, about

kind long But investments guys hit think you cycle maybe you how transition? side? the do long the how wait? out So HDD we on kind product XX% we there. should of understand can a I of should And expect

Gianluca Romano

guide margin. we Well, don't gross

F I F and As probably QX improvement be we can we said, revenue to our EPS QX, expect said, we model on quarter-over-quarter. based expect an But higher than as guidance. you and

Dave Mosley

above Yes, will well. the of range the the as opex be midpoint

demand, look said, value like And the is strong. so we'll I And just customers' -- at provide. that continue to we

continue we work to So that.

Our cost good. reductions are

to are don't right guidance. direction. in get vectors specific the all on way So we But want pointed --

Mitch Steves

a ask me Is in margins Company, XX% let way. you attainable term? gross Yes, the different long for

Dave Mosley

we... demand picture demand the I Yes. the is enough, if Certainly, -- high mean

Mitch Steves

Okay.

Dave Mosley

right operations the for if sized capital -- the growth. products then the And exabyte Eventually driven we get to goes be it. have picture there demand the to Sure.

Mitch Steves

Perfect. Thank you so much.

Operator

with question next comes from Delaney Goldman Sachs. Your Mark

is line open. Your

Mark Delaney

well. two questions as have I them. morning. good Thanks taking for Yes,

fiscal outlook. First XX is on the revenue

I about think expecting to XXXX. and XXXX. increase in fiscal Company some today, having half I in revenue comments second the talked good strength the fiscal Day at for the talked Analyst potential the And on think, backlog we about

any today, XXXX that's be you think do provide Revenue. achievable? may to quantification more around sit And still you able fiscal you as So

Dave Mosley

is to transitions that's I on did thing, takeaway one whether us us kind right the cost, that there, better spite customers, the marquee have have. more was, get it's comes. some globally we some to the from think as a it's where to the the that's are platform -- I earlier The than point, whether XX-terabyte Yes, different of lower confidence drives product mentioned another of in a opportunity of and did or we mark, portfolio there in opportunities lower provides more for one that revenue going capacity

Mark Delaney

That's main they're competitor is question cost follow-up headwinds of look on questions And we been term the some Seagate when and gross near past understand margins. second where been there, to my doing around both cycle-to-cycle nearline and gross I Okay. if has well. in margins But compared for some yields. had and down prior a at on was they points there your helpful.

be more in past may maybe mix hyperscale. having balanced if gotten pricing, that Thanks. between temporal versus and OEM more in there an a know those bit anything structural margins? structural? that else the beyond I difficult. has Is pricing assuming But nearline be hyperscale more more anything effect don't more or is else nearline to that gross compared I'm increases towards

Dave Mosley

only us. can I to really speak Yes,

would is then. demand to I point. year not months your a peak say strong what quite So QX, that QX strong ago, the at The cycle, last was was ago, demand as it is as XX

the strength we not but what that having to against that's that, building, right think strong, it's market of and been what it's feel that's then us products confidence. in the volume the and and the comfortable So ramp a gives high we've about, we been talking

Mark Delaney

Thank you.

Operator

with Vijay comes question next Your Mizuho. from Rakesh

line Your is open.

Vijay Rakesh

you as cost the if time expect that next to at of of I on hi mid-XXXXph? mix XX could expect do look end be wondering Thanks. you Yes, when And profile transition, you just ramp? margin profile the you or do some would years, that? guys. What give us

Dave Mosley

be short. Yes, question. the qualification or opportunities even on that also think depending cycles which capacities shipping for out There's built them, Thanks platform. highest long in that's I for There -- where -- the -- capacities, is you're can lower same the

the And ramp to we So, sense will market. in your cost point to makes if that the makes yields as the sense. insert

As problems. we time keep engineering because gain we goes confidence on, the solving

So about happy that. we're pretty

is there XX-TB there's think I as well. XX-TB before,

I to come to market. that's is forward the going transition there. ultimately XXXX And to going the something that's continue XXXX. we'll So think and into to drive ramp But HAMR us

Vijay Rakesh

Got it. you a seeing nearline or And softness. then, mentioned I you're think overall little

As or you any you half of nearline Thanks. spending, middle you overall colour be center data year, back look can loaded XXXX, expect some the if do more give? through spending more to

Gianluca Romano

calendar fiscal about you Are year? year talking or

Vijay Rakesh

Calendar sorry. year,

Dave Mosley

was based broad -- to relatively quarters. as Oh XXXX the XXXX and especially calendar exactly more exabyte not be questions. demand Calendar year-over-year year year, only the two picture year on, well. in are muted, that stronger transitions it's the going Calendar That will Sorry, first so your yes, but

Vijay Rakesh

Thanks.

Operator

Citi. comes Jim question from last with Your Suva

is open. line Your

Jim Suva

you of will us fully and much. of mentioned that can or very time was be there you to Thanks loaded utilization impact in Earlier will be up, as that a year? rates, a remind you follow-up fiscal And or calendar then much a period, technology then we ramps to as higher I what's HAMR just be the Thank margins headwind short-term certain like meaningful impact it's that, material didn't company-wide changes. and longer-term to know operating or to your but gross I ramping margins? As you. know, positive, go if about Do HARM going margins? have you call,

Gianluca Romano

Yes, couple full in the said terms we next capacity of be will quarters. in to close capacity, I of

in HAMR first say taking let's the the year. maybe half question. of So Dave And calendar

Dave Mosley

thing. Yes, I on the we think HAMR do will right

expect the drive earlier and up hard drive it can, or I to continue flow too. to we high goes time to don't that's the we'll expect manage as want model we HAMR on, for free the to if model. But drive cost and income As I continue change we work it Obviously, as don't the the to end change great and question. to model can the model. the operating to cash

Jim Suva

your much greatly you so Its for Thank clarifications. appreciated.

Operator

Dave to closing to like for back call now over I'd Mosley turn the remarks.

Dave Mosley

for to our support. performance, again to Thank next and suppliers talk Once quarter their our employees, quarter. all partners you. and ongoing all We'll shareholders to thank third their contributions Thanks. business customers, thanks of our all you for

Operator

conference This concludes today’s call.

You may now disconnect.+

Seagate Technology (STX) 1 Nov 192020 Q1 Earnings call transcript