STX - Earnings call transcript Q3 2020 | Seagate Technology Holdings plc

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Operator

Good afternoon and welcome to the Seagate Technology Fiscal Third Quarter 2020 Financial Results Conference Call. My name is Jason 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. would Vice turn President, I to call time, Hudson, Shanye Investor this like the to over At Relations. Please proceed, Shanye.

Shanye Hudson

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

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

earnings we with GAAP that measures. call, today’s the release Non-GAAP figures will to are reconciled was GAAP our non-GAAP During on refer and figures X-K in website the press posted Form to and SEC. filed

have corresponding measures measures, because are GAAP available without measures We Therefore, cannot material these our non-GAAP of predicted. impact and/or is control not may reconciled not efforts. out be unreasonable certain the items to outlook reasonably that reconciliation

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

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

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

over turn Dave. that, call the will to With you, I

Dave Mosley

afternoon, joining call would and everyone start from highlights us. Good the I the for quarter. Shanye. Thanks, by sharing typically thanks

take recognize crisis. healthcare by an to other shaped professionals virus time and workers who send moment would Therefore, outbreak. I supporting in the the our like the are thoughts those this we by affected through coronavirus are a selflessly living to to However, extraordinary our and communities

and always the been the our very For of decisive customers of unprecedented performed to maintain and customers. have In continuity to the this our of workforce taken and support health actions employees, the global Seagate, business well-being safeguard top Throughout uncertainty, we Seagate our well. this crisis, priority. period suppliers have teams

the effective also in protocols We and and to delivered has enabled we team put our our guided best before January, above global last March with In footprint earnings across identifying generate sales supported team and them cost flow. our has Seagate and EPS cross-organizational our our revenue we deploy by strong developing ranges midpoint measures quarter been mobilized site-specific crisis suppliers. immediately strong mitigating nearline risks continued products cash very healthy in non-GAAP and global practices call, of and partners and our record This rapidly of entire discipline free protective share learnings which place. to issues, and enterprise

our manufacturing safety our situation in of rapid customers adapt to and chain this partners caused has and dynamic health disruptions to and also in addition In our supply they concerns, as those demand. very shifts

support to finished Our goods of logistics quarter. the range securing our March order wide customer from to parts and teams speed in addressing challenges obtaining drives, to shift to tackle acted demand challenges with operational agility materials produce them a in package to and

including measures evolved, of instituting movement the governments operations. more the and restricting spread, the business began to As virus’ situation people prevent limiting

guidelines of with rules comply government our sites. and to We across continue all

All regulations. of are manufacturing our government in operating compliance facilities with local

Korea in including and parts our through in of our other and support conditions world, recovered, to of and almost indications in combination staff a we to improving skeleton telework regions Our see are are certain the the South world. supply able begin fully R&D efforts organizations Today, continue labs. for their of China, chain Taiwan

a the and assumptions, inventory supply as current engaging and levels was markets At out consumer-facing supply quarter. the supply mass by expected sources components, growing partners supplementing demand are external offset some mitigate slowdown on do workforce data demand for we external suppliers with critical manufacturing growth. support played capacity utilizing and in building surface, storage, expect on action continue our with our resources on related our the environment quarter center basis cloud largely The daily we the will dynamic. own June including the take seasonal our impact to equally in risks, where supporting needs. and with Based We to possible, labor legacy to

more drivers underlying than by shaped outbreak onset buying the rather customer the coronavirus the and historical were any patterns trend. of However,

quarter This the the of X.X, revenue we moves XX% phones customers capacity data living at nearline office part are to what delivered in third from remote markets, pandemic. and mobile work the people supported Looking record sales of the simultaneously changes, education of overwhelming of end the driven of the rooms. to edge. real-time these entertainment endpoint overnight rise With the by shifts our referred from and move edge increased by homes, brought storage consumption the Seagate’s on to this the to Demand by onsite network. have economy a online is at strong data towards high quarter-over-quarter example our mass digitally to adopting quarter millions in as laptops year-over-year model and bandwidth from from cloud is accelerated to such devices our of remote the as IT due hyperscale the XX% was and products. and In

which their believe to infrastructure drove broadening nearline in of towards address requirements at quarter. demand, post order regional below to cloud at continued demand trends customers encouraging needs bandwidth the to than image the and demand the the video by nearline sales more edge. of in has quarter, into further end is their our A to required strength while solutions June customer seasonal applications leading closer offset We for sales plans hyperscale in in products The to smart increase for and deploy edge. latency terabytes X as address the quarter. of speaking address safety this as a applications, impacted the rapidly recent at new issues company More also March per cities, seek disruptions the and early to within and positively global these the quarter. increased over such To level capacity specific related surveillance these compute storage a view COVID-XX capacity drive average U.S. supports in the

to video the is advent last surfaced and employed the X.X average associated months advent adoption to against of edge, couple definition for and of expectations of longer protective our total over video have applications. biometrics increase maintain with drivers workers as high the Consistent time both capacity with demand with of data measure and the also of for such of long-term desire the and more we example support municipalities the spoken image at exabytes sensors and the sensors virus. IT to One healthcare new screening periods a

solutions market growth our to long-term. this As applications used protect capacity same create to storage opportunities higher meaningful our own for technology the over capacity the transition These a the in of mass Seagate with matter employees. drives fact, combined help

quarter markets March space, Finally, and desktop the consumer these is performance let touch slower legacy holiday applications. demand a notebook on which mission-critical Chinese PCs and typically for rush me markets encompass electronic New following and Year. the

desktop consumer consumer impacted revenue and than greater the declines the get of markets our expected onset With to coronavirus, for among first PC the the by we saw drives.

and measures. across While and likely to we healthy in business of and full timing operations market yet supply COVID-XX see Recovery duration of broader of dictated the related associated impact see and are improvements impacts economy unknown. markets certain starting pockets extent restrictive our outbreak, of the to duration demand by to of the the our be will the chain, are containment

Given we the for are not at to situation, this going detailed provide the time. of calendar a view the half of year the second fluidity

tied we demand financial stand solutions. to with secular mass Seagate, footing balance data growth liquidity ample insatiable capacity are world’s data the and solid need exposure for for the and management a on trends to storage strong and For that sheet,

need. roadmap that execute We product technology continue address our and to advance our to

the systems providing a ramp doubling to Our because XX-terabyte unit seamlessly can terabyte remain meet the very XX employ and solution, the began storage plans with volume system drives shipping We than to select of continued XXth, in petabytes quantities building customers our terabyte exabyte customer quarter-over-quarter. and shipments with our attractive limited at up be our more part the in block to demand successfully of price to same quickly architectures high per industry. deployed on they X.X-petabytes in as drives XX and capacity track the with customers

edge data a Drive Lyve cost Seagate of environments. and core integrated spoke cloud solutions move of I endpoints, to effectively storage quarter, Last series seamlessly between

systems an solution integral move to their particularly for workloads. Our approach a play for cloud will customers platform, management of data part enterprise as Seagate’s hybrid they

workload Lyve data develop tailored quarter introduced management help their solutions This a and partners platform intended collaborative enterprise which is our we requirements. Labs, to customers to Seagate future

has feedback early incredibly its engagements. our excited While in still by customers garnered infancy, this tremendous program from I’m and

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

Gianluca Romano

Seagate to to a changing you, adapt market ability quickly has Thank demonstrated its conditions. Dave.

maintain challenges quarter we managed successfully The these toward performance environment uncertainty. the digestion and and past represented expenses, geopolitical the the All March flow. we of challenging the deliver discipline cash profitability year, we’ve financial most our free focus hyperscale generating strong and to the and Over objectives. so managing on business consistent continue one with optimizing operating while, macroeconomic period,

billion, revenue and operating year-over-year have $X.XX, XX.X%, and and non-GAAP relatively share of XXX sequentially non-GAAP of XX% per We earnings up year-over-year. points X% XX% quarter-over-quarter, basis up flat X% achieved up up and sequentially $X.XX margin year-over-year, of

and sheet We of maintain will to liquidity financial business and dividend solid our also meet need shares. and the flexibility flow, cash continue strong believe balance opportunistically generated the retire our a and free

operational solid increase HDD Our we equally was an XX% of XXX-exabyte shipped quarter-over-quarter. as of capacity, execution

from capacity XX% reflecting capacity shift the nearly toward the from X-terabytes, edge. mass drive topped per ongoing a prior-year and Additionally, period, in quarter at jump storage the and average last XX% cloud the

the the customers. by increased March quarter, These figures of we the XX was drive are hyperscale revenue. into to another from primarily nearline drive In underpinned doubled and a in mass quarter-over-quarter, exabyte. new record quarter. demand market capacity XX% reflecting momentum total top XX%, respectively Exabyte increased per and to nearline growth drives, cloud with average for capacity strong Total for of see record. nearline attributed these products. and Revenue XX-exabyte from shipments an the to XX-terabyte total XX-terabytes sequential increased shipments than mass XX% of XX% nearly more With HDD storage level storage represented revenue sequentially of XX% December strong up capacity

to Looking ramps trends see customers ahead demand the each global level believe quarter, cloud remain generally among hyperscale aligned will and and similar customer June we investments with cycle.

was slowdown strong double-digit from Asia We’ve quarter. abates still a basis. anticipated COVID-XX December when in markets and already a year-over-year the down video quarter certain expect very Following image on demand to normalize see March revenue up related revenue global sequentially, impact on improvement started disruption the in a exacerbated application basis. the while seasonal some and to pandemic

contribution to down market for March extending market XX% initial the exabytes. electronics. declined impacting and into shipments XX% Year revenue, Revenue the sequentially in from XX% as to legacy demand from decreased XX Chinese this virus New December Exabyte consumer outbreak quarter quarter of

PC pronounced in drive exposure. most impact consumer our For desktop where we was greatest have in Seagate, the the

Conversely in mission were expectation. with sales our line critical

patterns the quarter-over-quarter. for revenue quarter, shipments exabyte and declined seasonal mission-critical typical the Following

supply revenue our tail. sequentially. both is to derived our majority remaining non-HDD business, demand our impacted long for were were was a of labor partners supporting of decline However, the view down as attributed which COVID-XX from business related manufacturing and shutdowns basis was quarter XX% up The March factory X% shortages. year-over-year and system by our a on The constraints,

among quarter, OEM we to Looking the an partners. seeing ahead are supply the our particularly June improvement condition, in

higher demand system and solution, of of we declined edge a couple the growth resulting recover. the fully by basis opportunities contribution mass Longer increasing data from COVID-XX points flat HDD XX%, with it operational impact adoption cost a cloud. costs at associated drives basis, On underutilization with which approximate point sequential capacity and offset relatively to the XX for driven Non-GAAP quarters take our meaningful includes an term, from However, basis these higher increased margin. private will gross in to XXX disruption. a margin anticipate logistic,

weighed However, also our corporate by business COVID-XX non-HDD margin challenges gross at were impacted level. related down and a the

and other below slightly were estimates, reflecting lower Non-GAAP outbreak. and expenses following sequentially $XXX down COVID-XX business X% operating our expenses million, travel prior the

delivered of combination on and operational This million efficiencies. income cost the the controlled share We above operating and was of revenue, EPS gross of are which guidance is million million. margin and end to on March count range. further approximately $X.XX non-GAAP at a above our operating to our the of drive for non-GAAP XXX the spending, Through Based long-term a shares, opportunities we EBITDA financial our adjusted actively XX.X% working stable lower midpoint. approximately $XXX upper $XXX margin structure quarter of model non-GAAP translates of

between million range expenditures million free outstanding to the Capital at cash flow outlook, We flexibility long-standing our $XXX on generation. quarter million or continue year have needs and were our Based to deploy ordinary of generated program, $XXX the utilized March capital cash in we $XXX reward slightly and return and be million our our We X% revenue. with of revenue. of the to invested confidence to XXX with fiscal the approximately shares target expect approximately end dividend. X our our sustainable current and condition. and capital the shareholders CapEx to March below X% market low through demonstrating free shares confidence $XXX we our fund capital million X% of Yesterday, in to reflecting retire quarter, million exiting align quarter of would business use in flow in we

capital on strategy per approved our We strength. July as foundation investing opportunistically payment finding also our shares, committed of retiring first our business of the sheet share dividend balance then liquidity remain in board to of Our dividend our and XXXX. robust our X, quarterly payable financial $X.XX a and

debt revolver. and to the $X.X quarter. to billion we billion, were end our additional the $X.X was of flat with up Gross both billion cash through $X.X an debt $X.X of cash with of As net have and quarter, equivalents prior fairly billion the access

$X.X with less of for proactively has better the for products, coming inventory Our to balance years. portfolio to maturity as support fiscal due we the billion a Total next some manage current nearline demand debt inventory within critical the building components staggered than market strong to likely XX% while two declined environment.

cloud China, in recovery outlook including our see nearline demand hyperscale and the for by image started quarter, investment. June to our Looking we ahead and to the June into to products In expect continue for video we quarter markets, supported demand application. ongoing certain

from expect focus minimize considerable $X.X Based still However, uncertainty micro the customer control risk quarter, there what visibility. in the highly meet June to in which on X%. financial the our we minus With dynamic our COVID-XX expect quarter. limits to while the our will to for we operational following cost we demand. plus impact higher level mind, or somewhat that assessment, the current be to challenges this this be revenue at June is impact In environment, on the address billion business, to we can will continuing

to long-term of point revenue at expect EPS of be expected non-GAAP XX% our end of target plus revenue XX%. guidance, the margin $X.XX the made our non-GAAP I to upper operating and be we or to XX% As range of minus is

opportunities navigate our generation In results well the to our demonstrate quarter I storage. portfolio, in secular flow profoundly challenges execute position with ability for long-term sustainable closing, business and well to associated strength challenging am the mass capture our cash financial confident us demand business and innovative March product condition. capacity near-term with

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

Dave Mosley

the Despite model business model, resilience are quarter summary, performance Thanks, Gianluca. the Seagate’s on last the outlined environment, the and our business we financial our current dedication September. tracking we focus March employees. our execution In to of of demonstrates

operating at delivering the of of range high-end target XX% of are to XX% our margins We revenue.

range. forecasting of are flow based committed midpoint XX% guidance free We And X% to annual of our remained at returning we revenue our to on growth least shareholders. our have June of cash

for suggest need for We shared on an year economy growth we fiscal a compound the I be the and pandemic shipments XXXX calendar above range XX%. of remote mass of The that fueling long-term examples exceed Increasing to our the as an still for rate this brought and greater the demand as expectation edge. shared expect XX% year annual the capacity for growth long-term compute fiscal for secular new year capacity that greater storage at data XXXX. even reliance on data mass well well is start storage. likewise by in and in storage to today to cloud

these extraordinary for Seagate for With our I like challenging like my their the customers during well and am our I this appreciation strong business emerge to thank sincere and and would for collaboration this that their also trust product from broad through technology positioned to to efforts opportunities. our period roadmap and express portfolio, would in quarter. ongoing confident environment, close suppliers their Seagate. partners employees I for our will

Gianluca to that, and are With take your questions. I happy

Operator

Instructions] the [Operator Karl today line Ackerman of from question Cowen. comes from first Your

open. is line Your

Karl Ackerman

thank everyone. safe healthy if during hope environment. may. the I you you And questions Hey, I and are Two current

is a any March expect of one on a And these or how across Asia-Pacific guess margin in and is I manufacturing first manufacturing if the countries shutdowns standpoint have if quarter more of I any disruptions from may, clarification you how I standpoint, kind – curious I just follow-up. June was in a The the disruptive expect quarter? you were

Dave Mosley

would number the lot supply I and started after in upstream Year. as also specific downstream disrupted. it’s Chinese then a also January were affected right well, and press us were that disruptive, And that our I in think us us that’s a of New ODMs late of really gotten the fairly shutdowns not but in Karl. run, say, facilities Yes, just we for there chain, of

to right strategies getting parts going in can around, of So multiple as lot through we you it making flex but we the but the quantitatively, time the because run the biggest had then a sure are to the and at issue. checkpoints did out, logistics we imagine sourcing – break logistics really stuff are disruptions able right inventory not right was positions of are well, that an have in but and just we and kinds place the issues, we

Karl Ackerman

mean, guess just follow-up may, that And if I I ahead. I go to on sorry

Gianluca Romano

and... of You were guess asking the I margin, the impact about gross

Karl Ackerman

correct. Yes,

Gianluca Romano

X%. I And about script in is described the

Karl Ackerman

exabyte That’s in helpful. think perhaps Thank quarter the you. calendar To about the year. we June of and the for the can, trajectory do you how extent balance the

investment Given extension current the order nearline with do associated given these visibility what or you sort of the an nearline lead production? cycle backlog longer for for your have of you. drives Thank nearline times drives,

Dave Mosley

as We that we to again see the us is out through that relatively to of about. it think don’t lot – of even location how going Yes, disruption. quarter demand in the exactly there this that be monetized actually do people build through or of are think to as is a of and out changes be can it what we people parts would is there all the flat. required given work that I But reason the need. know the and demand demand, the push build downstream they Still, demand but and you is able because get talked

So, if you. that helps

Operator

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

Your open. line is

Jake Sweaney

the competitive was landscape for drive? quarter. Congrats Aaron. deeper delve wondering terabyte could into the little a XX the for I great you on Jake is this Hi, if on bit

Dave Mosley

for much it’s don’t speak say really disruptive much know the environment competitor, that that – I customers I fairly I now. would all can’t right how a the about really about

is we on supply on. focused something very of certainty that So XXs are

disk so to and you same if now like other understand needs changes. we for XX, are heads, changed up minor changed has what that leverage chain we We good few XX platform the a the as way remember the that. pretty curve we get the we Our our the supply look

to fairly So confident we are going XXs.

go year, can integrate. on X bashful bit are towards get, going people it. just more over the will or certainty transitions. about next that how can months I to They more a what That’s probably with think be product a they they think what I little

Jake Sweaney

just little along Okay. of the talk the XX for adoption breadth TB adoption, the And profile you customer then is about on to that, those anything can are like lines? follow-up a bit you seeing

Dave Mosley

has last we ramp and growth Yes, I we as good, about the fastest think heads this well. that done that’s have been and disks the talked is quarter ever in

are those and So, through continues they make well the lot period. getting what partners ramp we are we go working of to a to with sure transition them that need

So, driving all geographies. drives got our with clearly X is from under good there across customers we good have multiple significantly now north plus belts us adoption and in million being adoption

Jake Sweaney

Okay, great. Thank much. so you

Operator

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

Your line is open.

Ananda Baruah

guys. allowed you full you there to Is margin you category fall I sure exabytes I my Hi, too there And it’s there could questions. for to COVID just related if taking us? I us bridge then I a have something some sorry XXX that line? points quantify business to Luca well. way good if have shipments from then through you of to else follow-up as I strong quantify sort Is would a had not given gross could afternoon drive other impact? for want understand gross of Gianluca, – Q-over-Q. cost Thanks is – margin such also nearline like the for you have maybe bottom the I mentioned that make basis logistics Thanks. that hunch non-hard the sounds could. And is etcetera? Could couple that any it

Gianluca Romano

the with Yes. our and mix very Well, a EPS. say, out strong actually has bottom came impacted I we line would

disk, in points. of and disk more capacity just business, for basis with non-hard corporation the did between In got gross part mass increases actually margin. hard hard we the disk of for actually hard XXX margin and terms gross the the in is disk COVID-XX, in but less sequentially total terms drive or the about The mix from margin separate of gross has impact the we those not and helped flat

some of on disk, course, On impact of also terms the impact chain. we COVID in had we supply of cost, the the had, non-hard

were lower than we impacted part our And So business in gross margin. of bit non-hard part what system that the disk the terms business is solution the negatively expecting. of little of were

was basis overall, margin XX So down points. the gross

look out of disk if you part again just COVID-XX, impact bit take were you business basically the If we actually hard of was and at the the higher sequentially. flat little

Ananda Baruah

that’s strong Gianluca, of, XX% would that to Q-over-Q seemingly XXX here? with been basis helpful. nearline I sort just well, not just why the points. have growth want such into implied. guess growth as sure of the why in wouldn’t with backing ASP and the missing make than kind more apples-to-apples margins up anything I we’re of,

Gianluca Romano

quarter increase No, good and in know think anything, quarter, think pricing, you’re think had – has impact on very also in average I I volume, missing big decline think I I some I we the the course, of a the don’t is near it and business positioned moved want it, capacity the the – as a mass the we The mix part we now next are strongly. for really future. well level and has growing of that we

Ananda Baruah

really then. could. – take Okay is one – quick Dave, follow-up, okay I if one Yes,

the that could the could you the on of just September into solid what I any helpful? quarter, early, demand quarter move demand context or hyperscale September You an expectation but for hyperscale quarter the in that Do know have had you’re September Thanks. remain it’s super mentioned into based seeing? would some be there general, potentially

Dave Mosley

that also – as by going is fact answered well. edge installs have the of the change in think some by to get to that to reference actually the made I cloud we locality Ananda, customers data and Yes,

when, change will from can I and that cloud for of there perspective, the global if what to it’s affect So happen what early seen the to going of sure. happens, this growth cycle listen exactly that’s that. you prepared my all we’ve know quarter. comments on is disruptions relative data logistics happen, specific is in do We to remarks the because the to still next or what going the about think of locality this think when what’s the is But

Ananda Baruah

a Thanks really guys. helpful. lot That’s

Operator

next of line Your Morgan Huberty question from the Stanley. Katy from comes

Your line is open.

Katy Huberty

execution have on the for this Good seen pulled you. companies guidance. Thank of and question you’ve I’m as afternoon Dave guess I first great lot congrats a really sure quarter.

can demand then the you to visibility into you guidance the so context you a you ranges end you have in at June then end normal lower supply of quarter And upper the the that what or put And would follow-up. think relative and do biggest the you put have a period? provided? potential around feel variables some are And I

Dave Mosley

Yes, thanks, Katy.

think fact that reflecting our in that opened I up. are the ranges

to We’re normally time are everyone then to. a more it’s volatile still signaling accustomed we that

our upstream normal effect, question, there shutdowns just as point, our but your has not supply facilities, first facilities. side, demand side a exactly to I anyone. of that point to why? closures risks for these number also On been demand the that, different So would has and not border and answered just like things for are the the times risk Supply and has to I

of So we’re cognizant that.

X.X that. everybody team given is a come so think but already, into upon not our quarter the I tell do out it’s visibility, normal that to weeks have doing we’re we’re that quarter that it’s what So visibility incumbent we management today the relative to and

Katy Huberty

margin That’s gross March. And be bigger in you Thank you. great. COVID that said impact think the than Gianluca, will on in it I from June was

does in falling sequentially, we So should headwind or strength of offset the because nearline that about in think gross bigger context, COVID? that margins

Gianluca Romano

on long COVID-XX, those guide Katy, restrictions possibly the depends to margin. it gross course, place. you bit how will cost know, little we in higher cost, And, higher related yes, Yes, be expect of we don’t

little quarter another In capacity terms – of and course, expect impact we also no, quarter-over-quarter, lower be margin, our mass storage cost additional very will to with gross is volume. similar our so guided sequentially. EPS And, good we a mix fairly revenue of bit

Dave Mosley

the guide, in existing Yes, – could is factor Katy. into much so we as that as we

Katy Huberty

couple that Okay, case quick OpEx, thanks. still quarters? of constant Is gave or COVID And holding opportunity on million. next remove just follow-up just costs the you Gianluca, talked to you’ve to about in I some that relatively think $XXX one the the it with

Gianluca Romano

only don’t short-term, Well, mainly get we reduce very cost. think In now reduce our more not always look to the our efficient, we opportunities will I at to cost.

in a was of fiscal cost. low Our QX terms very OpEx

but to So similar fairly in we I be and now QX, always Dave looking fiscal expect at are opportunities.

we few look opportunity, the we to quarters. decide in will we have – if any So next take and want but anything

Dave Mosley

Yes, redeploy the as opportunities are may – we well there there that are to to want point against.

world well. as may of have as them those has the some and opportunities slightly we changed So, considerably missed see we against

Katy Huberty

thank so Okay, much. you

Operator

the from Your next comes Fox line Advisors. Steven question of Fox from

Your line open. is

Steven Fox

couple interim issues prior just Dave, into trouble But on downturns, have there supply chain, component getting follow-up. so down right there bomb X% the some filled health like them of could the relative run the been has of your of smaller talk you’ve helped now? afternoon. where those a of been questions you but suppliers good out, And periods out Thanks, of had last I then sort has this. about just in

Dave Mosley

need those mindful have have be Thanks. XX,XXX issues as people getting otherwise, it. sure supply streaming need, At And – million I’m that my people economically go very our estimate chain, it’s own we Seagate because companies of we they’re they well. to would they away of our if then X.X some make something we that’s have roughly what

they’re is healthy other. to understand we I that issues, large in So supply to to working of we’re chain suppliers make chain, feel our getting appreciates with for the together through for think supply how respects, and who it’s sure but sure are our we that we in and are all closely that each understands those since it care So have – possibly it’s some We right? that sure, can participates this issues, a make make that in take everyone There complexities and under important very sure us responsibility. be. as

Steven Fox

understand That’s the helpful. in case And then base the thinking just so I of sort here guidance.

logistically? about You you’re of the improvement time better there mentioned materially in month the things we by of about thinking a about chain? sort supply China, think obviously, sort of like in Thanks. broadly but can improvements some you manufacturing How of level and to June kind of same or here get of are that what the thinking terms is operating

Dave Mosley

it was very predicted just been I through supply operations call XXXX, I from the a Very, – there’s – wish, times pretty say the was a been lot could chain for running big, disruptions. just it and I perspective multi-week now when disruption to well, but of different period I we’ve XXXX. back global compare

we I will up like supply bit that sure right this the really still that that hope do becoming everybody because out being the And demand predictable got to appreciate everybody that very to predictable a be they they and is think customers making of more be They’re there this some chain. So, well. to manage, can a I what I way can as is help why we’ve tell need. our as exactly now, and communicative although that’s we and whole appreciate little down as that surprises, that’s

Steven Fox

That’s helpful. you. Thank

Operator

next of Investment comes the Your question line Suva Research. from Jim Citigroup from

is open. Your line

Jim Suva

this correctly. heard basis said are near-term Thank much. talked When learned are kind system? those points, about long maybe or of if you. out we I a a those Thank believe that and expenses, you you build of time the back you should cost you quickly of COVID a think the for very way XXX quarter through permanent in you have that Do that to quite just kind you approximately additional find I get

Dave Mosley

couple was particular, logistics, look in of air be weren’t March at to a at buckets A temporary, needed us impacting we’re are was or absorption Thanks, there Jim. different full that you just lot largely because shuttered slow, there and the capacity think, running not under was I of are from of factories at had. that actually airplanes Yes, lot ones or busy. if look is so freight more so a you February

other And have add kinds costs point to lanes a that believe are temporary, lot we of things we’ll inventory the went at in period. up is out logistics of reverberations and we of are there take that. of do like those all or that. bit we Those figure a advantage of �� So that us some there’s – still things affect individual back make helped watch throughout There and with some doesn’t are maybe more so suppliers Steven I in still demand. sure to the chain that think, some working as chain have we’re asked, base, to we supply well the to entire permanent, supply all things that questions – upper the in to that that little supply

Jim Suva

for much additional so details. the you thank Great,

Dave Mosley

Jim. Thanks, Okay.

Operator

of Baird. from the line Gerra from Tristan comes question next Your

Your line is open.

Dustin Scaringe

coming mentioned segments for wondering Thanks. and of maybe is back. revenues speaking tracking the you know actually the little on the consumer China impact guys. Hey Tristan. rest This I’m coming just I more and potential could, give Dustin that, quarter for demand for in year? if you probably this color on

Dave Mosley

side, later. we would New turned thanks. can on after large but pockets Europe East Sure. that Chinese later, move imagine Yes, went as around. kind – things and off as Middle because people are same also behavior people were in distribution to then pops, channel well. places off saw disk especially from bicycles basically consumer working the and I the And of It home, went on, buying to say large were data drives well you there as like of the Year There turn that

the to watch signals in the tactical So intriguing quarter. very

that Some little there’s this of it’s mode. but it’s massive or to people, what still more becoming more QX for matter, impacted a and fairly disruption, point forecast buying not back of patterns week-to-week the a but QX and particular in fiscal QX, where by in not is and it’s we bit reactionary consumer the just our for in we’re markets not predictable

Dustin Scaringe

you. Thank great. That’s

Operator

line Your next Patrick of question from Stifel. the comes Ho from

open. is line Your

Patrick Ho

segments, though segment, actual some now? out positive building to thoughts give there center given I you just do demand, be continue of, and well. data a hear cloud from potentially and and even see you level, versus what you right by building to inventory kind strong much, about on stuff demand and inventory that actual as we glad very can you the you Dave, guess even center? for on capacity hearing that’s the mass that are what’s that think Thank Where maybe demand between qualitative data could drives everyone demarcation

Dave Mosley

there a lot I was thanks, demand inventory of think don’t Patrick. Yes, building.

I think understand my people my of discussions are they very cautious that. with their investments customers right from now, most with that’s

online. how providers putting the going Some of fast be it’s that the capacity they actually can cloud before they’re to larger service monetize know

mass I’m are they say what this in capacity that’s than do. time, lead thinking I further in out those also the our the they quite on demand but I would actually times, now, that talked mindful was about market So drives is of prepared surveillance also some see about of remarks. We soft.

points year Xs could the time and Although two. terabytes Xs moved first things the above moved up the and for next go per capacity there or to over X drive so

so back, the if I come mass think you early that the this And was so of will, capacity demand because it by will days impacted pandemic.

Patrick Ho

Great, thank much. very you

Operator

Benchmark. of from Your next the line question Miller from Mark comes

line is Your open.

Mark Miller

which Thank the great handling everyone. you on question and is situation, for the for job difficult

give of HAMR, year. goes just still the profile update an out And look wondering in on other wondering door was like Just that your to the us it compared I’m drives, about does the drives? HAMR margin late

Dave Mosley

well. the Mark, think going ramped the where before I we’re XX’s is HAMR the Yes, talked as that about we’ve to platform HAMR platform we’ve that with introduce

a already way, you complementary, look curve the at is from that the it the So down other quite bit. cost if impact all we’re cost

we’re the at doing to a clip HAMR, Yes is your think of favorable. the So same experiments them to but lead we still it’s economics ago, with HAMR the times. also months target answer very the hard question, long be experiments were will do on we few that still have

times some proud is of and change making. and I’m we the the the team have lead still of much we don’t that that have good so progress really things now, pretty on So visibility wafer

Mark Miller

of So wanted end you’ll you to by clarify, just I terabyte the do be XX think of the year HAMR? shipping

Dave Mosley

right. That’s

Mark Miller

Okay, thank you.

Operator

of comes from line question Research. Cross Shannon next from Your Cross the

line Your is open.

Shannon Cross

XX some office drives challenges curious, delays I much. the in the you follow-up. employees Thanks. given any seen And to Thank with the a I related for of and you very that was and have COVID. just terabyte customer have qualifications

Dave Mosley

would is cycles I that as I example deep a were that programs, this that qualification when plug you answer are of big a say no. people beds scale, Shannon, lot reliability there do to already pretty the done hit. ramp beds. test were those running think sometimes the for question thing We into first

so in even they already yes our the early of Sometimes stage so and are because it of don’t builders, the generation late you deep because the impacted weren’t XX. the office, couldn’t next qualification that reference really I to to but plans, in made get earlier, were the of the impacts attention there stage I maybe some we

Shannon Cross

you are you. questionable it’s about – as I repurchase there mean, the you to of those either curious companies this how been at half just a am point? you discussions, when But be sort flow. and as of question strong others, sort I at board, cash long-term you discussions share in look of And curious a to going and then Thank of on talked what obviously second framework, am are great. Okay, guess the maintaining just a talk a to or some return, I capital are puts takes halted number have sheet I a or just has balance unknown

Gianluca Romano

are billion billion. at of very we level our a still have and $X.X said, you good a as Well, Shannon. $X.X cash and Yes, liquidity our generating flow free revolver we very strong cash between

know more I normal of – of or as allocation think term term way is operate usual of focus at of sourced buyback, and our supporting share will in we course look we less so a we capital business, can it internally dividend. our in attractive course, paying opportunity. always how a In

price will from So depending more attractive. consider do we we less share or to the be how

Shannon Cross

you. Thank

Operator

Our question the line from Mehdi next of Hosseini comes from SIG.

open. is line Your

Mehdi Hosseini

XXXX, taken expectation nearline exabyte me not follow-up if your one COVID-XX Yes. good had be asked. have Thanks would What for calendar Dave ones been for squeezing all in. place? shipment in the just year question

Dave Mosley

question. tough Gosh, maybe that’s a

I that think about well. as being and to were XX% we talking above XX% range

go bigger that has. there the so maybe bigger. data, lot all disrupted is typical see our from and just of to But – a Before everybody because a speaking, disrupted of ability lot has has and of that this invest that and as it think supply surveillance to know, demand working frankly build demand cloud course than fundamental there’s and seeing of if of through. helps? data just on my way final I the chain COVID demand more perspective still then and the thinking the your we for there been the that And is time, the that the data locality yet, of reliance don’t pieces because home, a that used other well that this cycle businesses that to are the of into is is of have be that from some next can change been hard, which there know locality I tools and I lot has actually dynamics, me a because through AI cyclicality pretty suggests that changed. might lot

Mehdi Hosseini

answer. Yes, that’s your Thank you for right.

shift than could offset one so see to the the total could follow-up, cloud of that? revenue, drive, were extent nearline to game new the And for just much to were would be even – account the exabyte disk shipment, console to we if your hard that if a this disruptive more total quick nearline strength is scenario to bigger exabyte a permanent, where mix

Dave Mosley

going an question, of you relatively your I is mean, quarters, Yes, it’s fan perspective a in now, consoles to market. been gaming I’m big It’s two years for exabyte less exabyte almost we last to shipped involved plus exabytes gaming know, immaterial. than XXX we only consoles. XX from and the and the in one have the one

we it when be depending continue that think can know, very discs customers call. but easily heads over, need that we’ll I on to comes market, our support answer to there and will do you and to So the pivoting what

Mehdi Hosseini

you. thank Okay,

Operator

next line RBC from Mitch Your Capital question from Steves Markets. comes of the

open. Your line is

Mitch Steves

one. the side, demand on that, with kind the on start the of, Yes. One OpEx the had two I I’ll and side OpEx questions. so one

to lot to start off from it, they’re heard outbreak, generally long-term So and Silicon working companies savings however you employees in get or this costs travel reduce going phrase allow virus actually going these is that from home, of of to to certain Valley OpEx. we’ve because reducing something they’re want a

wouldn’t guess I So and path why you I’m path guys that potentially OpEx? go why down reduce to go down going you to or are if that wondering

Dave Mosley

and you I I’ll so let think SG&A, of probably that’s OpEx that’s I less is not which technology think will, probably as Most Gianluca but ahead. our us. go our – I – much core around for development if answer, relevant

Gianluca Romano

in reduction. Well term cost I OpEx OpEx QX, total general, our In by of as a $XX value of in reduced also a percentage our about is think as we so million, a and fairly we did lot revenue fiscal small.

with been So and our prudent always we OpEx have spending. conservative very

the will will course, for or I working if benefit improve before, travel we said now it Of or the as company. from lower is something continue our look costs to home, that these from even efficiency. to And other opportunity the benefit

course, at Of that. we will take a look

Dave Mosley

somethings, but at some very we we’re income operating from advantage our of yet changes that of or because go we’re sales rather streams we OpEx for again, technology happy than of an pointed, managing with most may the revenue really of range where differently, that changing, the think our most look companies, that at after new and at Yes, look in things to I it take of lot world if I time, then top there’s something the our investments is core investment and a very marketing.

Mitch Steves

one, then of. get about lot big be to but And it, it. it’s one hate got of we’re this I the the Okay, a second blunt that to going kind ones of

PCs some be what can than what this So substantially guys there? guys numbers you commercial the we’ve kind maybe least saw general since was if you you little share on bit And actually in from happened down PC So heard any understand what have PCs legacy you could channel pretty of out Q-over-Q. shift? mean, and Because us from peers, shift? think would of conviction share I help better do being guys you think at surprising, a potentially check?

Dave Mosley

day, every less less Yes, see. certainly, notebook relevant and becoming to to PC us for the point

Q-on-Q, long disrupted world. out those which we point there the just There’s the out electronics there forecast, continuing on A the more right? dramatically our slots a in mission little and relevant. before We’re a lot support parts the of few are critical to the consumer that or legacy really then which quarter even legacy aren’t market being as of it’s has was than inside given customers. bit Legacy to tail preponderance going a in legacy. fairly But

or temporary it’s that, thought, is us than either. PC not really So going because like small a bump cyclicality more and not anything PC bit help little fake we but head a tremendously of pronounced to

We as exposed are just not it. to

Mitch Steves

Got Thank you. it.

Operator

from question Nik comes Todorov next of Longbow from the Your line Research.

open. is Your line

Nik Todorov

historical and we in Gianluca, can Dave please higher to about I at thanks. exabyte the terabyte have to at range. the June others high-end the and of COVID to work for due few looking environment time the capacity? declines heard the of pass-through talk dollar cost flattish that pricing and in by you quarter mean the and And per you efforts for industry same implies in mass Yes, customers. our comment nearline

you any color give now? right can if the us environment pricing there anything So, is changing in

Dave Mosley

I pricing would associated the is say relatively logistics. higher costs benign. largely The are with

can but the those routes cost especially or imagine there are same it at we you get don’t that As temporary. that From get ago are the the have problems my X hardest overnight, as were positively perspective, just to have that we ago. months operationally are months X has they

of for especially point, the are sharing at them some and people will hardest are but have through who the are us. get we some burden problems We those expediting that we downstream,

if but meaningful nearline look different years, at don’t you trajectory – time super I don’t last over trajectory it’s I over that think per a shift. dollar that’s think a to meaningful go routes, in I obviously think couple of that, the could the we of terabyte,

Nik Todorov

follow-up the I If you disruption think can ask to do I Okay. June nearline And mean think to us potential I but question, COVID-XX, would no the the was quarter? exabytes you the if maybe I give quarter. for have understand to can June range just what trying there just am I been impact a

Dave Mosley

too is too disrupted at too whether think of all and out Yes, times service to data invest – June to think we cloud that puts it online. thought continuing to of it in against not not see takes many I some I I there. the get underutilized more are disruptions, that’s the there. hard growth be and we or do they in, hard that to all actually and say or whether just really than mean, to find or would is gets they costs. the in think I will it’s cloud just and There affecting capacity our because is that go that a that still baseline. pulled I full we say put are secular versus – bit can that’s ways providers little our they people prior are have

So, we but on done lead may depending see time capital, clearly on very, that. those we may on we that how pullback – very could we that short more, have

the massive investing, because lead still long against time growth. it’s this On capital we secular are

Nik Todorov

Okay, got it. guys, luck. good Thanks

Operator

line from comes question the C.J. final Muse Your ISI. of Evercore from

Your line is open.

Kevin Prior

on Kevin is for this C.J. Hi,

they inventory built last to kind of maybe surveillance from want maybe just So COVID in of the to to how weakness Q. impact think contribution potentially think versus quarter-over-quarter the

so still you this higher rate do like shipped you I And think than guess is quarter? normalized what

Dave Mosley

Interesting. COVID-related, month it’s the Yes, more channels think the because all February basically turned I off. were of

for more world then on those it these today’s are a out edge I that customers see home relevant the ability think it world, solutions the companies I that, I mean, still like get of think integrate what’s with talked of to about some solutions and of in more us that’s selling product get primary we can So, the and for market in QX. but are and around their rise their end at users, and going everybody driver to to we the to and becoming

Kevin Prior

terabyte mentioned you. XX XX. And I the you platform thank Okay, similar then think on versus

see maybe many qualifying how like times could sort potentially? you there months pipe that you So curious and if if of so, will shorten potential

Dave Mosley

we Yes, believe so.

They these I think long drive. on something the been it’s in parts qualifications, and a to your not long switch the all are a we just through we point, have the turn that different going take like – Kevin, all technology time. a light transitions

first tests up being all generations. really going a It’s platform the in XX translate been quantify to is given the we overall that. from how it right leverage think is like think don’t that try want the has parts perspective, do confidence multiple I I have adds time into to someone confidence for things it with because happy the able long earlier, but have don’t to was the the cycles really that to ramp. time those to sure. for we these now, our really asked run completion. it timeline everyone I it and are disruptive yet, in our I to to Shannon about And think we in confidence quantify long, So want I

Kevin Prior

you. Thank

Operator

Q&A. concludes That I management for And call would to to back turn remarks. the closing like now

Dave Mosley

Okay. Seagate Thanks, outstanding strong an of to is generate through weather sheet to Jason. continue the have we liquidity uncertain balance To summarize, job storm. managing and times and a these cash doing and

to execute strategy incredible no see we continue quarter employees Seagate. partners again for demand. to their mass like and for during efforts would thank us ongoing their the today. investors long-term, joining to our our capacity to for our and March our customers, everyone once support in secular suppliers, growth the and Thanks storage I meet we the will Over strong change that of business

Operator

call. Thank That joining. concludes today’s conference you for everyone

disconnect. may now You

Seagate Technology (STX) 22 Apr 202020 Q3 Earnings call transcript