STX - Earnings call transcript Q2 2020 | Seagate Technology Holdings plc

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Operator

Good morning, and welcome to the Seagate Technology’s Fiscal Second Quarter 2020 Financial Results Conference Call. My name is Josh, 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.

Shanye Hudson

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

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

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

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

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

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

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

Dave Mosley

I the March call highlighting December trends to and elaborate Gianluca share to quarter their financial then us. accomplishments to market Afterwards, quarter turn few morning, our quarter on Seagate. outlook. our and call will I the performance a Good over everyone, will for for Shanye. relevance on and present the will begin perspectives I joining today's by Thanks, December some and key thanks

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

and quarter sequential both drove December EPS the billion a profit our to non-GAAP double-digit end $X.X coming and in with upper strong In operating ranges. margin guided non-GAAP growth we on grew the at of revenue basis

generated the months free consistent billion in have past execution. we nearly XX over operational underscoring flow cash Importantly, our $X.X

In for the we financial mass to quarter addition delivering results, of record the achieved ramp shipments solid and continued storage strong by XX-terabyte exabyte successful products. demand capacity our in supported December

support shipped we during customer expectations, XX-terabyte X to quarter demand. the our with Consistent strong drives million

Electronics Mobile Consumer a We the Drive efficient, integrated an also was January, which discuss we this cost data strengthened Drive System, our core cloud seamlessly the need one during way. effective products series and secure burgeoning storage edge Lyve solutions of to I'll between showcased product in Seagate address many environments past move portfolio announcing endpoints, and shortly. of Lyve to Show

First, let the seeing me comment market. on some in of the trends we're

growth reflects mass results capacity quarter storage applications and growth by across from storage, these demand December positive for each highlight nearline, network-attached the Revenue recovery and mass both increased Our storage NAS. secular mass increasing XX% as year-over-year, and This image which capacity capacity quarter-over-quarter ongoing markets. as storage. or video X% of for well includes trajectory driven demand

through the expect early at rest of the least these results of opportunity is this the trajectory very these December best while at Nearline fiscal In our been has We the a still will transition offering the the the cost In quarter, our exabyte nearline, XX-terabytes, shipments drives. available positive demand the today, of total represented industry and revenue we highest volume industry's of to stages transition. for in achieved we are which on products ownership continue capacity leading mass any customers. largest highest year. drive of that

as demand platform, growing qualification this production address to the based simplifying positioned the launch are processes. to manufacturing XX-terabyte we ramp continue on which and same drives, XX-terabyte our well and our are We

of launch in and year is half shipments XX-terabyte XXXX. calendar progressing The to plan the track to we on first the remain begin

our to We align meet customers' expect demand. production to

December we In surveillance applications, video demand achieved record and revenue image in by driven quarter, the drives. strong for

As now, for within disruption surveillance. quarters customer markets, multiple including in certain buying created has global we've typical shared uncertainty some patterns

factories high-definition of just drivers of and be smart data spawned to However, of levels flow, our being capacity the production emergence illustrate value demand massive endpoint cities demonstrated traffic to weeks mass use imaging used remain at and storage response we Security smart view other applications over deployed Two surveillance in times, the how improve sensors, the appear are data a X.X, at emergency underlying cloud. edge inventory collect amounts world lower by and cases how being number CES, hastened to the and video analyze in growing positive real healthy, worker supporting is demand These image devices. and intact costs safety. by require created video one which adopting relatively unlocking are ago from of sensors long-term. the of organizations are processing, the cameras, and and IT which and improve

city environments moved innovative which opportunities data for offer and cloud to compute to day. The applications. featured We generate time. The by also showcased project we the X-petabytes create architectures. to the in typical expertise per petabyte real fully drives can closer We CES, At multiple ideal solution, density and multi-cloud working data-rich enabling we for video Seagate's was configured unit at XXX IT systems’ in edge. high HAMR day HDDs, scalable how smart displayed of source and solutions solutions, our smart transition our closer each hybrid enterprise be the are cost-effective customers a storage of and XXX-petabytes create realized trend with including X.X could Seagate. The CES technologies and towards IT data X.X leveraging cloud must storage factory world a creation, that potential, meaningful

commercially to track first point. in industry's on available the calendar capacity are late HAMR drive the release at XXXX XX-terabyte We

loyal directly opportunity firsthand. customers, partners, very a I remains with consumer Consumer suppliers, for Electronics look Seagate The year, market feedback interact good for Each and to Seagate. and enthusiasts their forward products business Show of hear the to the

we in In The quarter the and Seagate fact, storage prosumers drives by alone, to portable external media data. XX simplicity. solutions in professionals, our and the exabytes gamers branded reliability trusted represents their shipped December and of the user community move quality, entertainment

Lyve our Solutions Drive same these mind. principles with We designed in Mobile

in second mentioned take days at endpoints, cloud. XX-gigabit to core cloud. to the X edge Drive petabyte As it least a data solution Lyve of between effectively enterprise Even connection, CIOs upload managing would I XX efficiently and a dedicated earlier, per cost offers and for data with sending ingest their for transporting centers order over magnitude more than data cost it a than simply physically options. data quickly can of can network other data of With The be more into and available it. transfer Lyve affordably and Drive, expensive large amounts securely customers

key unified Our experience. step is a towards integrated approach first data a

by need believe for well the our and mass the of of competitive capacity and momentum we we're the portfolio, for to XX-terabyte the our of Seagate strength the drives, breadth which growing address our all product position demand Overall, management excited solutions. of storage data technology roadmap

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

Gianluca Romano

per free flow. earnings X% period XX% another a revenue basis $X.X XX% The revenue quarter Thank and of share cash represented translating [XX%] to and December operating financial of solid Dave. On performance non-GAAP billion. margin sequential income to to nearly non-GAAP you, Non-GAAP $X.XX. operating increased strong increased of increased

NAS and discipline XX% demonstrate represented of quarter of mix strong prior ongoing total and mass which up richer results video year. the Our operating image supported XX% December expense and revenue, storage. capacity a include application Mass the in by and capacity prior XX% leverage nearline, quarter from in storage drives revenue

sequentially XX% Exabyte underpinned growth drives. shipment into strong our demand This sequential exabytes. by was this to capacity XX market mass for increased

during we will As event to shared expect over that the grow continue quickly we several analyst next capacity mass years. our revenue

drives to of these them fiscal as tripled product Revenue support and are the ramp demand. through broadening the aligned our quarter, nearly rest of portfolio product expect we persist a during revenue to making this the capture quarter-over-quarter highest roadmap customer we year to Our to opportunities. from product continue technology growth the trend XX-terabyte well

Increased and X-terabyte drives X our mid was build moved nearline drives out capacity prem storage Sales quarter. demand another to enterprise X, needs. for of highlight and own to support and for as higher the they private cloud their customers OEM

a continued gain to product customers generation offering prior TCO momentum mid products. relative cost to better Our reduced capacity

reflecting into expect half we nearline image revenue In demand, to second realized seasonal and for also addition moving growth fiscal above and video of the year. exabyte to the applications which we demand double-digit normalize LTE

thought of our capacity the and X.X a IT of and it advent meaningful the sensor number opportunity of with mass growth solutions earlier we image market. would growing for as across shared Dave this be in As adoption video storage applications,

from remained flat December quarter and legacy basis revenue, represented Revenue XX% sequential XX% the quarter. of on market the compared a in September with fairly

market the XX increased to sequentially X% legacy Exabyte shipment into exabytes.

demand support to per and drive expect decline We capacity capacity product, consumer sales grow. for storage expected notebook, for capacity mission-critical, to customer sequentially total average Overall, and higher XX% offset in for notebooks. garner combined drive demand our device. largely continue increased our mission-critical continue legacy with to and desktop, include DVR we as consumer consoles increase consumer average gaming external HDD drive further which Seasonal mass and the

We're shipment The our at non-HDD Enterprise from increasing data and seeking in in adoption SSD. solutions record supported exabyte customers driven demand was increased which higher by denser new private gain momentum system solution the both continuing business, driven a system dynamic quarter with for December revenue remaining our and December quarter. This by X% for content. to system storage driving are cloud. growth the of sequentially, the derived of in revenue edge, system XX%

drives. product XXX was contribution sequentially, below prior reflecting margin mix higher to Non-GAAP more gross million, down and with Non-GAAP sequentially from a due $XXX mainly XX.X%, capacity a our expenses favorable estimate, lower slightly X% basis mass were spending. up operating discretionary points

the to efficiencies million, revenue top drive future continuing quarter-over-quarter. are evaluating that With and to gross at growth. further up We spending, while operating of of controlled delivered margin This long-term approximately end XX% combination operating to of to areas of our financial model a opportunities support income non-GAAP higher in translates $XXX margin non-GAAP invest range. XX% of we operational

count for approximately quarter shares, the midpoint. expenditure guidance increased a surpassed capacity non-GAAP mass storage. to EPS growing Based our support capital expectation, which with was demand our Consistent million on $X.XX, XXX million for December $XXX share of to

return of X% in flow cash continue past of with the to We capital exiting million December longstanding We project our through range fiscal to X% utilized fund the shareholders be with $XXX million fairly year reward quarter program. to of we capital million strong used the revenue. X.X retire middle towards free quarters our and dividend. outstanding quarter, our shares, generated $XXX the ordinary deploy stable to CapEx to to million and long-term XXX shares several We we

approved also April quarterly per a share payable Board payment X, Our of on dividend XXXX. $X.XX

be flat times fairly few $XXX ratio below debt equivalents Adjusted cash a net debt Gross $X.X of we with $X.X quarter, an X As quarters. increased approximately to have our XX% next quarter. end the both within the through we sequentially and debt of was at expect and the of the and $X.X $X.X to our cash revolver. million access were additional billion, EBITDA gross with to prior at billion leverage billion billion or

March quarter. Looking the ahead to outlook our for

As priority employees and made and the partners. of outbreak our wellbeing continues, Coronavirus we health first our the have

working We and demand customer our to mitigate are meet with to production. suppliers also risk

$X.X or in we we in therefore impact of financial revenue expect we currently not in any minus March revenue X%. expect lot guidance uncertainty are the material there plus to and range With do of the this a EPS be and still widening quarter ranges. our mind, While billion

seeing typical shift to and driven data storage is of away the particularly has mass revenue continued legacy towards our of And non-GAAP XX% change or end EPS high operating $X.XX at margin a HDD guidance demand high capacity markets and to capacity we seasonality from as at drives. our midpoint long-term in minus in for the to X%. expected non-GAAP we're At the consumer-oriented revenue. growth to general, of XX% demand the improve steadily The In plus target be edge. expect nearline of by range cloud environment

expect to fiscal With profitability momentum for the higher customer for positive we both continue with XX-terabyte fiscal established this in have the half our the second XXXX we revenue to and revenue slightly year. first byproducts grow half than

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

Dave Mosley

ability our throughout demonstrates summary, deliver drive our In cycles. Gianluca. Thanks, generation and to cash solid performance financial results industry

profitability. continuing drive are to operational efficiencies optimize We ways further to identify to

also and architecture and enhancing is are expertise customer to that management demand on emerging product I’m solutions. portfolio, well value deep secular growth positioned to strong cost roadmap, these technology opportunities capitalize our customers broad address storage and data mass fully effective shareholders. for leveraging confident relationships We capacity our for systems provide while Seagate opportunities to

Before to contributions a suppliers, moment our hand partners for take opening to thank to for I and it call customers, lead would their through the success back the business Josh ongoing of business. our Q&A. I’ll the like questions, you to employees to

Operator

Instructions]. [Operator

question first with Deutsche bank. Please comes from ahead. Your Sidney Ho go

open. is line Your

Unidentified Analyst

to seeing talk margins in a on bit Sidney. Hi, were capacity pressure Can drives? you you related pricing were for little Jeff Gross any this quarter. is about good high the that

Dave Mosley

say expect the long we're a and over that would terabyte years in all that say to a look last couple that haul, space. over by call Jeff hi pretty I investments -- competitive growth reflecting to the that for back if I space, I make would dollars I answer basis, market on it’s of way, the per a to I have the the think going

some So we're we to I point have work which our down, continue to at think costs doing.

focus those have have I also -- we're share, making capital, we'll expect which through to product and but investments. on have are on to to point going focus than install going We we have some more to rather to at work chasing we're to doing more transitions

Unidentified Analyst

lead a less as demand reliance and as in own increased their storage just build enterprise needs. midline mentioned a this And this talk opportunity and on Can for you potentially out then cloud you the to drives the about future? follow-up, capacity Great. more OEMs a service little does providers

Dave Mosley

thereabout, and market of I a very peak if was the I the across to the a would cycle, the back portfolio. year strong say, No. go half last

think go the the different still in peak there customers, are small frankly, bigger think the to globally, kinds I but I many as representative the are all highest capacity which were fully as points capacity points. customers typically but of are of not cycle, last taking they

address And and it's them to important a product have the so, broad therefore portfolio with products. right

Operator

comes question with from Huberty Morgan ahead. Your Please next Katy Stanley. go

is open. line Your

Katy Huberty

Thank biggest gross quarter Can that is margins ramp in just there in you. do volumes ramping? about you In volume? which talk Good XX-terabyte linear you expect how the wouldn't then, reason afternoon. as you see the a improve sequential XX-terabyte fashion? And ramp any fairly

Dave Mosley

at that for I think we the heads can gross media. We've in both it we saying just take way it that's this Katy, point XX I'll if pass X were we've ramp of it but the indicative And this ramp. we've to beyond. will many portfolio platform million margin keep take we the over products us in strength the and do X said to ramp then over. It's to look done going biggest quarter that's and XX our going. is We're The the having ramps the before, and the of of is, ever one XX is done, going it that to not and of million, to from one is to at done Gianluca this middle biggest of the there’s not part. ever

a we that that transitioning in Our put that. of ability We technology the lot remarks. pieces we about is there, in the products, great to from don't and costs have leverage keep to now prepared talked we to that other leverage have get

my take from perspective, portfolio us we to strong have forward. So that

about speak can margins. Gianluca think gross I

Gianluca Romano

in but actually from volume also as is fiscal drives. we said, XX-terabyte, reduction an cost during the other the tripled partially on several quarter margin QX, the improvement Yes. say the overall coming I'd but gross in from

on QX, have we margin, our of quarter. looking into for of volume So, help the higher XX-terabytes at sure will we depends volume overall entire but the an in that the mix gross will move that course

Katy Huberty

comments in. going qualified you big -- have actually in talk and kind on to ramping for about that product purchasing XX-terabytes. that point? how are qualifications if Thank demand questions around back executed you. up, Dave, follow Can around just the can some versus you of And general there this are many about if your at and of difficulty of U.S. whether take you the just been media your side I There numbers any have China coming customers heads

Dave Mosley

take We're breadth if fairly the customers, XX. to mean, you may very happy with of ready qualification. the to get I be down specific they

people our on the Some think for we ramp Globally, get move there -- of example. with X there's here. plan continue for them reasons, qualifications In we're may going is going to I various on and The ramp in be they back well. ready general, architecture, our that. are quite from aren't that and to

I'm about So not worried all. at it

Katy, the I in quickly. customer we've base, I talked look think highest as was the point past the across about that adopting what everybody capacity

think that's past, happening because need the of different their may diverse even and think And customer each own we've I even one there's frankly, lot less set, there's customer within less, a lot as then in of needs. talked have customer. specific -- a I one with

a So not they the sure scale just needs I to It's bigger, cloud the growing to service. some stuff people think about of diversity build the as that of the we so certainly new make world. out that continue have grows and have it's

So, we and have quite against them need work exactly doing what they customers with get well all XX is those to to that.

Operator

from Loop Baruah Ananda Capital. with question ahead. go next comes Please Your

open. is line Your

Ananda Baruah

your yields Dave gross follow-up for see A as the to situation, Thanks transition but on should cost gross make wouldn't the quarter? Good may and just yield it, you from situation on to remarks could, why on I nicely March can then margin. couple about the we in transition once margin about I that, cost, get the taking normalize yields sticking you as question. And have gross what to there, you platform, the XX, margin have to as point up the handled? a XX just you platform once XX improve same philosophically, so expect to then missed did for and afternoon you the the if guys. from XX to me level

Dave Mosley

Well, driver I and the first the as the those -- continues think grow, as supply to so the demand probably is all market of discussions. portfolio

demand start in more the continues we -- the grow I those questions. asking and supply can to if So think, of supply, much demand not favor as picture

gives cloud gross the I'll thinks how about that let them specifically that And cyclicality. So Gianluca about say he margin.

Gianluca Romano

Hi Ananda.

know You but if were gross our at margin, aligned we really look don't fairly guide and quarter-over-quarter. you our EPS revenue are

your but would So I'll take no, major assumption have a not change see sequentially. to I

Dave Mosley

if big should think get XX-terabyte, able in I think XX-terabyte, is to high be I demand, it. the the in demand we there a we see once we manage

you what end I think little income well. we're bit really before, last happen, happy again, but as to closer we we've quite talked that And may now portfolio things bottom-line at and think that. I described the that from of the perspective, we’re like with our for top we're about the quarter broader this and operating a managing said our range

Ananda Baruah

well. in trajectory you things you your from Then case I know expect exabyte be positive an March for as but June to here, change for I just can mentioned perspective? up base Great. from mean hyperscale

Dave Mosley

year. that back down slow don't will yet this, But cycle end in the of comes. to next Out for whenever I of talk not say portfolio going really the calendar given the Yes. with cycle going happy year are that our ready about We’ve the end it very all we're the reason disruptions I'm fiscal the I the year, the on this market. any by the product that into to see to of fiscal talked end

Operator

with Fargo. Your Aaron Please next question Rakers comes from go ahead. Wells

is open. line Your

Aaron Rakers

in Thanks well. for two I'll try question. taking here the get and as

TB Just in know have call on up, of on during half shipping the final the first the you I that mentioned cycle the comment that product year. you XX set that

is first that, of Just say -- nuance you qualification? I'm competitor. volume that to that the calendar you when the half of or year relative the see the you But just shipments sorry trying your to in about just shipments expect to here. understand in do in timing the mean those

Dave Mosley

beds really volume. much you not is into I want The one. get yes, that, here, Well, say are don't too volume. my big would if that to fairly qualification it's I qualification in will, I opinion mean but test

And million that about, X the talked like the of quarter, up quarters so, hand per glove. yes, in it's goes just a ramp not into we of few But, XX. kind

Aaron Rakers

I'm talk it we Okay, mass fair as now as we going think the little business, enough. model capacity bit legacy, differently about between out And a you're think lot if nearline, curious out business forward, the how I'm that curious a just trajectory breaking stab or then, of to decline we versus we rate want the of a quarters next of the about over you you longer-term? move but couple in take about of the as legacy

Dave Mosley

we Very we're some interesting. that products thinking about customer see most and legacy those the upsides of but In markets them of much they need. whatever a in make is make foster they're have surprise those client going actually to to have based If we with from world how a up those their them say, new there's pivot see about them. react really broad customers I world going on. anymore, to the to downsides, needs X.X old across businesses, server portfolio other OpEx would IT way think support some very go to I what they're right? cases we're the the relationships into the legacy continue X.X, investing we and driving space, on mix We we to surprise cases, not

mix you it use Probably hundreds support know, is that's think out factors the are as of form millions the relatively. becomes more up relevant these world, are some, the the there tail, still just in and up, mixes cases the there way for cases for already a that as and are So it. long slots about stable in it business I of coming even is going units the are if down, of the --

not just it's continuing service away So in very either. not it to soon, but We're predictably. going we're investing it

Gianluca Romano

Yes.

point. I think a good raising very it’s

look at is CapEx area. our importance flow legacy cash in in flow, cash OpEx general. free considering contributor of should fairly the the to in still low free a the and terms where the You It's that business of good

still very us. it’s important So, to

Operator

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

line open. is Your

Steven Fox

year Hi. your wasn't I the is launch question disconnected at at and times. terms hope more couple above, largest of environment, But volume TB has share the but talked Good market suggesting products afternoon. answered. this market on time this share competitor XX that competitive down now, about a you're Got overperforming looking of same of maybe and in they about XX maybe as some TB regaining road right you're XX-terabyte ramping. talking the ramping

without curious what So, the just potential of your too just would I for I’m say throwing you relative guess about stones, many year? rest the share market

Dave Mosley

outcome. an a as not that’s not say is market -- need We Yes, an exactly our I outcome objective. share exactly would

if remember very decision, conscious quarters, the three we the would into ago, and about. some XXs from capacity platform the and a because we were like we made we've we knew the leverage XX about that, of you Steven pivoting sort points open just into So get of lower XXs four talked quarters

to seen share in drive will And I change of some a to for of may that what ramp-up takes that I you've I us again, the customers them of But our be to because demand. have they more need. and the like drive up think more we those customers we're already. think exactly the puts for happens, some bit. little get and trying as happen plans predictable

predictable. very it's So

Steven Fox

helpful. Okay. That's

on Just follow-ups. couple of a

I pivoting under just the that you But out guess in that from what was First to lower away rearview that of lot the had and then still we may impression you you're next I more do was quick XX over a of months, about a follow-up? months as the look capacity on XX I points, said saying mirror.

Dave Mosley

very products is that for right, their reasons, go been our those if what are of moving Well, No, platforms. like nine that these our no, various and heads and in focusing those we've said all customers to or were because what new I we sorry. But still to months, XXs things media have of platforms. about we're And there vocal particular on operational new back and you. architectures I need resources

Steven Fox

macro Okay. I without understand gross margins. mentioned would I now. could improve terms over margins considerably -- And about But your margins, what want the you or pressure little least outside getting guide to gross should quarters several we at to gross that worry the you've margins? in seem drags detail, understand are a several drivers next into few then bit, don't you've the the of that that be of on mentioned gross

Dave Mosley

you're but Gianluca theme, answer, the comes let and I'll hitting it right supply which down to demand.

and exactly should like demand as to we've if before, supply we balanced, be we've pretty manage So described, but go for ahead, cloud you well talked specific products or got cyclicality, about the for Gianluca. able

Gianluca Romano

We mass storage high say terabyte well. fairly declining Well, and think is capacity I general. drives expect our that we volume would XX the from cost our in

is and wait pricing margin that and now see at and to you margin, pricing variable the other the when about how we have will determine will course, gross the during the will Of quarter our talk end. gross be

Dave Mosley

think I is we're cash free in cycle that we're said flow operating we've and managing -- calendar were for in before early we the way especially like the focused. down 'XX that income

to our exactly go need the cyclicality of out cycle, going with the as But how we're we what As starts peak to them what more comes a and mindful achieve we're a balance always figure to their portfolio. making customers get they then business need it cloud of and can back objectives we well. demand the sure

Operator

comes Citigroup. Suva, question Jim ahead. next from go Please Your

open. Your line is

Jim Suva

Thank volume, XX. much. correctly, as is it more we you of things think of? about understand or be similar assume kind there it going be complexity would should And or you I your wouldn't we once and additional platform If and that, yield on why longer term? is risk about that I issues, talking just would if means that And the XX-platform like the be when same higher, aware lower so, think ramping lower of kind actually profitability be when there very that to is it's

Dave Mosley

more things and So, parts in the about industry, generations theory, our were it's I brought are think X-terabytes, for quite platforms changing to all there. parts frequently, technologies changes, in or be over so being this It's that we you're talking back highly will different changing. for the There ability and that. Exactly more if of new move more multiple way point, actually your the we mechanical ability if a heads to but years. bear media, our product right. our XX. and I we've yield think our that to changing helps we're a most to we subtle customers, a We most ability leverageable lot platform X-terabytes not been can say, would platform, many of look back the to of flexible be like the over and portfolio to ramp, scale with

demand So driver you to have something provide it the key opportunities, but do does supply is and add again, there? there. Gianluca,

Gianluca Romano

the point. made think I you No,

Dave Mosley

Okay. that make Does Jim? sense,

Jim Suva

It does.

aware on modeling of tax be we for Lastly, longer term of rate rate? for tax anything should kind

Gianluca Romano

No, our I change in any tax rate. don't expect

Operator

Patrick from question Stifel. go next comes Your Please Ho with ahead.

Your open. line is

Patrick Ho

XX-terabyte look some much. do at that win customer for is for customers How given do ease how you Dave, it the win very Does help customers? it transition success it transition probably new But from easy. to the the terms existing customer XX-terabytes standpoint? mentioned from off, a new at in or you of new the look to the validate of you we standpoint, share from XX-terabytes, Thank of a customers. maybe first

Dave Mosley

and because sets, globally it. center. feature being about the in different again, on In the on -- basis many make or into like every being to so to able like are new not eye. cases, especially the BIOSes things this many But applications, get is chipsets general, that, new to some that fits being do legacy of different it discerning so They there applications, to they have no, big firmware And customers some things used, one the leverage, centers want sure and like into data worry a data you it's plug right have most integrate all, architectures things and things size all going there's with different they that customers that. are many architectures or of qualification to used their

So there to same the some people of is some element the comfortable leverage you new know customer, now, of There for is then the with leverage, is sure, amount some family. there have go they're and family work. a through already

Patrick Ho

as Great. my And question to Gianluca. maybe follow-up

gross the color lot margin, so far. a of call given In the of you've on terms

it's could the the terms and place mix the change reduction reductions you cost more in already forward In that is going versus of product where more at issue it say in of mix a favorable? the now impact a just are mix, on basis, cost turning

Gianluca Romano

Probably, is cost this mix at reduction driver Yes. point. the a the major in

Operator

next Shah comes Please with Munjal from Your question UBS. ahead. go

line is Your open.

Munjal Shah

going is anything there you or in the have on there then for on, I customers One demand. you in Is two. one surveillance And quarter? for had another could the any Gianluca. the trend on thoughts large with all that think I comment

is comments improve your Your and suggest sequentially. gross there wondering margin should if flat just guidance sequentially offset in an here? I was is anything that that's EPS

Dave Mosley

seen seasonality city smart the the think that moves around seeing the end at we I'll And especially buying that relative towards cities. applications, cycles we're to calendar globally, now markets of bit Yes, quite government I have are investing as surveillance, market year. I are think for call over years some, some the people smart there a it,

see from the we're peaks been are bigger The is perspective, an one exabyte argue exabytes. that in obviously growth that I with in we have a growing. than this do cyclicality. market units’ record there one that perspective, it's would in from a are probably, a You period,

every I is bit way the little seasonality at a So stronger, look still year some cyclicality. there gets it but

Shanye Hudson

EPS then, second your And part, repeat your you Munjal, side to of on on saying part is you the question, flat. first just Could second guidance clarify got the I were question? the

Munjal Shah

I gross will should because in March. suggest mean, that that and probably your comments Right, margin XX-terabyte be suggest comments the then -- improve generally higher mix

margin offset the an is there So line? below gross

Gianluca Romano

fairly an a quarter-over-quarter. be and we pricing when assumption and quarter. on flat can I as course, No, of But we different through before, expect with said go the flat we fairly EPS have revenue, a

Operator

Chokshi Your Please with Maxim next Group. from go ahead. Nehal comes question

is Your line open.

Nehal Chokshi

I on said, relative -- in exabytes And mode peaks peak-to-peak hitting Recognizing digestion phase hyperscale thoughts the there? had is Xx. being as growth if prior That why around that much on was in be you're demand the currently the any calendar with still XH potential up you it's last wondering peaks, peak 'XX, some not growth peak-to-peak versus on the nearline potential growth. to going the prior only you're XX% that to thoughts into as a going

Dave Mosley

we Yes. say It's It's is the digestion phase it reason different I growing. think do that to then, I in there That before. a said, seen I dangerous cyclicality that the happen will been every again, but a exactly because think time quite that we've that demand hits. cyclicality say for didn't were interesting. has

And to higher that ability actually I and use think that the customers also higher capacity are bigger. points think I getting broadening. their is

upon X-terabytes of couldn't people once the more most capacity to use shifting as Xs see over time, a was well. bigger get than to points and on while So and you're starting market people

is growth of to do I yet. calling So peak think I'm don't still exabyte going XX% I top the continue. the at think

Operator

Your last with Karl Cowen. go Please question comes from Ackerman ahead.

Your line is open.

Karl Ackerman

But we that pretty that of guessing how the business shift sequentially, of revenue, for in well just should to just talk could bit segment But and up high systems selling think kind that quarter? something in SSDs been and the performed XX% gears on also asked a seeing capacity yet. performance. wanted good that was systems little traction some that I what the maybe discuss you hasn't I'm about you're about offerings. broad you're maybe March seeing segment, your from

Dave Mosley

this making don't Yes. products a happy we've say with any anymore. with we're I we're Seagate in the is, systems what them portfolio, perspective, boxes that have from done not would which on

full boxes. into of a drives, the XXX higher of -- boxes full of go capacity or vehicle the of drives And great drives chalk to making in move plus we're that's quickly. Now market Seagate products right, some with lots

the team made. pivot the has with happy I'm So

there's opportunity well. go think as to grow some I it

are side, year I'm seems and customers SSD with happy customers we be products, the not saying be the think service to -- one our very continue those market was I as the it ago. to to a I what first this, On think stabilizing vis-à-vis

continue in those we'll So a customers to meaningful way I service think.

Karl Ackerman

up are last the you about little this one are XX that bit quarter. maybe did trajectory, capacity one we adding XX-terabyte customers’ in spike to think forward for Thanks. come may. Just calendar and CapEx of are needed When I if a speaks you enterprise to SKUs? the range needs of what's suggesting breadth back the is bifurcating and half as a between high mid capacity year, or SKUs

Dave Mosley

Actually interesting.

it. I to transition We think it's important time and we also not and to make it the that in to heads long for the capital think we're it's the media the one that growth online HAMR. first we just the lead the and get cloud, that investing have stuff, is see that for

have demand media need like in XX, make our XX-terabyte heads confident ramps, market the about. we platform make there. same we've enough when to So to we in is the and investments out that the sure XX, talking are We been

Gianluca Romano

Yes.

in that go Day, between we range so in add on this the revenue. we don't me focusing We are any of X% range still quarter. at X% Analyst that above our CapEx keeping the and the Let gave to expect

Operator

questions. closing I'll management turn the There are to further remarks. for call no back

Dave Mosley

a our in mass generating our turn well roadmap, product and at growth and management portfolio. storage To Thanks, and business our just to future our creating secular to needs solutions summarize, in fund pace, growth we're deliver the data customers shareholders. cost-effective technology to Josh. which data value And drives capacity and Okay. optimizing profitability for the breakneck cash our continuing and for I is world manage believe

I to is on capitalize positioned Seagate these trends. think all very well

business So to contributions like you. I'd thank the once suppliers, our for like their their support. ongoing our to all customers, for also thank shareholders to Thank again performance partners, employees and

Operator

today's This joining. call. you concludes conference for Thank

You may disconnect. now

Seagate Technology (STX) 4 Feb 202020 Q2 Earnings call transcript