STX - Earnings call transcript Q4 2020 | Seagate Technology Holdings plc

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Operator

Good afternoon and welcome to the Seagate Technology, Fourth Quarter and Fiscal Year 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 SVP, turn Investor I to call time, Hudson, Shanye Relations this like the to over At and Treasury. Shanye. proceed Please

Shanye Hudson

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

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

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

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

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

turn the I’ll following Dave. you, call up prepared for the over now we’ll remarks call open our to always, As questions.

Dave Mosley

summarizing Shanye. over quarter on us. thanks September given environment discuss turning for everyone Gianluca by context data the for June to our of perspectives Good June call share details quarter market term our the call and results the longer afternoon performance, quarter. before joining trends some then current our the Thanks to and and outlook I'll provide begin the for

$X.XX. [Technical deteriorating June call Following the with only been Results in the developed key June investing however, company predict moments how levels GDP on coinciding businesses near the quarter confident global effects months its the we to quarter. $X.XX non-GAAP our has wide pandemic; cash current remarks to delivered the declared stronger came capital global across and markets, program. reaching billion economic sharply several repurchases, a within open of contract for of XX% demonstrating in the planning We and macro this crisis. EPS flow not by discuss return will We was a why of a address prepared in for impact year society September impacts been profound. term. COVID-XX over the will we've I’ll million, revenue on to economy remain few quarter emerge seen from few in through are has Economists will It's continuing demand dividends and decades, see to we why which the which we and six end sequentially return we also that June that quarter I’ll share shareholders this the Difficulty]. guided range questions. increased since our environment related COVID-XX amidst commitment our free our $XXX X% in

team and communities business partners, restrictive and businesses. our customers adapted has on local to communities also financial quickly our one and while continue environment serving how people, and created our to emotional the hardships and tough supporting another. this of have closures measures I'm Additionally, proud

our through food open we've facilities. our resources pledge funding diagnose, ultimately the also science supplies DataXGood and team, and for have provided research a elderly volunteer schools aid access donated to program As support equipment in and free treat of and data granted banks, prevent portfolio We’ve patent health care leveraged to to our the to and care expertise COVID support virus. and efforts hospitals to workers,

are steeper expect measures uncertainty of our led September for these our these spurred restrictive projects ultimately anticipating in storage. extension trends demand environment, applications, certain manufacturing partners other had cloud operational remote These majority public gaming there our shift our to continuation and a I our enterprise The safety rapid data capacity macroeconomic out and to point suppliers the their markets that logistics spend center challenges playing customers Amidst vital and markets we're mass and midsized faced will as this products of implications delay to smaller of has IT legacy and is selectively. quarter work impact online transition a we municipalities factors began although our the economic the supply and and touch as to streaming Conversely, the of more remains of by are impact products. that investments early all this For of markets. scale across and increase investments sales on overall These to in work later. priority the drove the decline budgets, customer business. base Seagate demand legacy in varied The strong consumers progressed, back the causing ensuring our of we providers. trends to for on, seasonal to continuity impacted June been fully well image ultimately video customers, to and cloud as than our and in cost At highest and the chain exploration video, a and on facilities our protection employees, the ongoing service end of through for nearline and our quarter. more quarter, and content accelerate education, we

cost to We continue business navigate are guidance factored quarter. September also These absorbing into will to our disruptions operations. normal for the the meaningful

good while limited the disciplined capital, and approach to and cash is supply not that a in near We're underlying demand chains. the while our we're of health patterns for a will to excess adjust has carefully The our enterprises financial of to our flow need for to shareholders. the focused businesses remains to compute fueling expenses Seagate the track race or favorably data being taking maintaining true mass have foundation. rapid term, In maintain current there managing track growth strong value While that shift normal. believe visibility cautious as changed. and cash new to meantime, data and we staying data cash managing legacy of trends and continuing extract demand returning more storage. being record record Accordingly, our our on stewards from

While, demand revenue and exabyte the secular conditions data management tough we mass we've XXXX strides both from demand to near-term conditions, up I'll made business with capacity for for on examples: capacity on focused storage excellent data growth capacity business fiscal year-over-year solutions. markets that company to burgeoning important also in we despite in capitalize three place the is of in highlight Revenue position year world's exabyte the driving navigating been the mass fiscal mass tough shipments and XX% by increased grew key XXXX, storage. First, shipments strong supported XX%. year

continue roadmap. execute our Second, technology to we

March for select by nearline common drives system improve our the year quarter, partners XX-terabyte achieving and customers operational simplify We performance of These process allowing We our the with world's to the in of efficiency. platform. June and while scalable target common shipping in and This now cloud to success part XX-terabyte success with approach used qualification underscores hyperscale the shipments to fiscal solution are same platform drives. the leading quarter. XX-terabyte Our channel our drives our of customers, cloud launch starting helps began our names. as drives Seagate the

HAMR achieving calendar aligns in capacities. technology year, with XXXX which of We expect our part ramping to track market well higher. XX, to drives We available of will readiness. to XX to within on drives XX, and to shipping XX-terabyte XX-terabyte and solution XX-terabyte basis remain capacities We HAMR even offer commercially terabytes production drives path is HAMR limited system plan to and drive customers the data. begin be on first industry's begin our late collect on a the field

report, innovative data in respondents. address and refer outlook depth that on emerging concern how their leaders. networks. Lyve call system Seagate Seagate findings also mass Rethink world. and securely growing collecting, two and our that, to core, that in innovation share intended Earlier as the moving, evolving centers an believe broad the ever to our and data intended on grow Lyve The as organizations. data, Lyve this solutions sprawl. data We data September toward Data help With effectively move work is is in among global These with and top not announced a massive commissioned role partner drive, and to organizations data XX% which pointed IT over we on of opportunities DataOps the predicts of over the an sprawl, a surprise multiple Third, edge results, complex across to June for Seagate this challenges. accomplishments storing DataOps which growth is and to ideal distributed from data is of compound quarter study turn we management endpoints portfolio, CIO's but center we quarter. month data capturing for reinforce customers challenges the Labs, and widely that product market a being across platform, three roadmap demonstrate the cloud an through disparate technology will to Gianluca business only launched based go comes at I'll more are solution it of into massive data storage our environments. The curating the growth data enterprise management to years, integrated the IDC reveals emerging XXXX the is next data no are With Seagate’s with survey and firmly collaboratively report to solutions including we Through cost launched rate

Gianluca Romano

due in pandemic. June environment business highly the the effect The Dave. dynamic, quarter the you, remains to Thank of

the all are our business demand. customer to well of However, we safety meeting manage and while the continuing prioritizing employees continuous

compared revenue and as and other economic the key uncertainties EPS challenges, economy, points in of a Non-GAAP revenue ranges to up end basis, than and non-GAAP weaker points see June remote on up ago migration center in and XX% We year-over-year this quarter demand demand favorably operating X% our near year-over-year quarter-over-quarter. cloud our and year-over-year within with XX.X%, expected a Despite saw continue X% from and still the XXX performance COVID-XX. a $X.XX year-over-year basis customers business strength guided share we by on and by our were transition margin a cloud compared with billion, increase $X.XX of $X.XX down disruptions sequentially, driven down and per services. But of XX to and to basis data period, market, they address earnings year brought sequentially. term down XX%

exabyte disc quarter to sequentially our storage period and shipped represented financial the shipped June ago about drive of of in the representing our the revenue XX% and exabyte mass a generate strengthen on the total period. market revenue XX from and up ago HDD mass a focus XX% XXX in us On In operational revenue XX% enable capacity hard up we year resilience from the growth. basis, the the flow sheet. healthy very storage into capacity, cash year model increased of free June total XX balance quarter was exabytes annual efficiency, Additionally or HDD of strong revenue, of capacity of and

to mass a capacity a achieved per Additionally, record from increasing broadening capacity and terabytes highest quarter XX.X second XX of robust shipments demand Nearline nearline average exabytes high revenue we hyperscale to with base our customers. storage in by in capacity our increased cloud drive. drives, of June, driven

the was quarter. XX terabyte performance by for remains Our drives, the strong company’s which supported highest product in demand our revenue

products data expect Looking we for investment while outlined we quarter, tough ahead Accordingly from healthy. Dave nearline in cloud the relatively the and some enterprise moderation overall see as expect [ph]. demand to markets earlier, to September center demand, our remain OEM SAS

primarily declined as Over mass term situation. for believe revenue second drive quarter, the storage long capacity holding application we growth the health Revenue for video a consecutive cloud in nearline the the SDA’s demand strong image for the and product. for result and will of

while enforcing quarter, While video new condition COVID-XX we we restrictive from installation. saw indication seeing efforts, phase relief and early in the began diverting smart security of demand impacting a measures tighter municipalities improving, and the the

remain for strong total our total than XX% XX% the which Smart image We demand IT Exabyte represented from other this which solution. our are City However, spending, a and from applications, growth expected drives. growth small markets application secular revenue, The from to June these but and quarter particularly next security the PC projected and medium in worldwide. legacy among consumer non-HDD June into currently spending IT critical is exabyte. Smart customers the video third quarter March weaker of in will of during quarters, for expect down couple also recovery demand, Systems Nearly revenue, March to XX and in resulted sequentially driver. enterprise our over low soft The Global the relatively long remain quarter. as including anticipated, X% using in markets of devices sharper from up X% systems Factories remain shipments to to declined market IoT in generated including enterprise represented mission sensors data slowdown impacting is quarter a a Datasphere term, come business, of enterprise quarter. and X%

a sustained higher In the of flat nearline class quarter-over-quarter summarize, our terms enterprise non-HDD of for strong absolute revenue in product demand customers. offset with was broadening our systems. To dollars, for as we decline SSD demand

[ph] This to sequentially impacted June the led margin related application quarter, decline expenses, XX.X% the higher points just cost, product logistics, in lower mission temporarily as the but are include that COVID-XX image was in negatively Non-GAAP higher directing as June labor margin impacted points. and well due contribution the XXX critical by being gross I costs. from about of revenue gross to to the in XX pandemic However the June leader workers and each markets margin approximately by safety underutilization, quarter sequential basis down described, in related quarter. other basis

at fully couple remains our $XXX that sequentially monitor on which fluid, does industry to below impact our global which the incur today million of the factories pandemic the continue expenses current were is however, costs will least quarter. operational; the our the Non-GAAP As are even having situation to next previous of plan. and we X% major for elevated operating down

with and to previously I in expenditure million market line revenue higher Non-GAAP with million into $XXX the while by $X.XX consistent between June in lower our range XX.X% the the of from capital long for with revenue business, which savings lower share, the addition from the remain incurred impact benefits. relative was to we lower term was $X.XX, of COVID-XX of sequentially working to we count approximately In model million to operating cost our to drive most efficiency. outlined. June the our have the our this in a of well expenses impact estimate needs also $XX align additional level reflecting about $X.XX, quarter total half back quarter plan lowering $XXX saving Based current early of to $XXX a expenses announced expectation guidance per of as as XX% related by quarter Separately plan approximately of of income capital million. non-GAAP one-time invest reduced June a full from compensation and home, We quarter, to upper operational reflects million XX% share XXX was plan also we primarily to was on approximately margin our the of environment. to non-GAAP XX% and plan variable EPS pre-COVID recession we operating We in which revenue. operating financial

the fiscal of revenue. X% represented year, CapEx approximately For total

over the current market Looking ahead, keep to level the given we of believe couple it’s investments quarters. next this uncertainty around prudent our

shares to of process million utilized flow as $XXX through calendar customer our management focused quarter. and We with cash cash year. generated free monitor $XX to retire on and million will million also approved $XXX continue the business share June quarter used share, We exiting million to We dividend million quarterly closely $X.XX our Board the in in outstanding. ordinary per conditions X.X we We dividend and fund work payable approximately with remain payment our $XXX a October XXXX. X, of the

of undrawn revolver. at and billion the end and position billion equivalent liquidity cash strong, our remains through steps cash quarter, that the additional to $X.X with us Our an up $X.X totaling

the our our Additionally, about June restructuring we extend quarter level debt in and strength interest by seven lower of balance our average profile years our sheet found maturity expense. in average to

quarter, over the build supply fiscal of of We chain debt only condition action flat years. now to for elevated and debt the result of some to remains freight we supply two plan slightly to was inventory billion of in quarter-over-quarter will debt current also respond higher billion. components increase challenges. space around Inventory mitigate would X% the have of proactively level. future end electronic $X.X market some As of To gross billion. critical net $X.X principal better at potential continue to the to use This $X.X [ph] with in the relatively due risk offset next coming

predict remains shape As we or enter the XXXX of level timing high the and an year fiscal of cannot recovery. we the uncertainty economic

of March what a September in quarter. has four into the the now saw to low, similar the both weeks quarter June demand We face and we been are and pattern

demand now are mind, planning our With a to of but foresee management improve in cautious for center our cash reflects the our demand data and level cloud plan. focused healthy guidance our over conservatives continue in production quarter. market nice and this broader We to remain term, this long

We this unprecedented quarter: continuing closing, will uncertainty. now $XXX a on revenue; position back plus for $X.XX, generation, long our range secular or solid free the minus Seagate is or the balance navigate opportunities plus term In well $X.X cash of market, expect we final of Revenue non-GAAP or Seagate sheet at below year. slightly call current following robust to for million; to be non-GAAP is be is and period to $X.XX. September the our expected to minus attractive will during XX% while With margin, growth operating play to billion, XX% EPS believe executing out capitalize in comments. and during of I to Dave flow turn the the that healthy this

Dave Mosley

Gianluca. Thanks

Looking near term ahead, the unclear. outlook is

However, we will in is continue execute to control. our what on

strong business have sheet We believe environments. stressed business liquidity balance and operate we us intelligently that and to an through model, ample agile efficiently allows

We will commitment while of our carefully, manage cash our XX% shareholders. return our our to at least maintaining flow free cash to

the the As the been year resilient a Seagate’s year revenues of ago of of at years five course strong ago. intentional XX% leg one top represents of I XX% mass has capacity our the through bright crisis. this XX% This covered performance the powered has Mass performance first now and pivot through been portfolio. spot has Seagate’s and call, from the up this capacity of

calendar last year, revenue The the next at to outlook cash the demand approximately solutions Seagate that will and end mass continue stand free capacity Analyst flat our edge. supported provided strength across we long period by pipeline from our mass flow demand grow to to will drive improve of the currently the fiscal model believe within to right XX capacity roadmap on five our month environment positioned billion our remain event opportunities, nearly products, six data confident focus and we year cloud capture term and Reiterating product is around year well the to anticipate revenue last and of one, by to be our for the the strong fairly innovation in the months over we Going trends tied in XXXX, billion in We data forward, storage both $XX.X next drive markets growing and at double secular product $XX these strategic the mass over management that and years, storage capacity time. XXXX. these technology portfolio. makes growth

is of legacy drive term alone expect to markets edge, opportunity to this that capacity it's mass also growth data sufficient horizon, noting and solid meaningfully the worth as underway well. address flows opportunities to we While medium briefly cash for much movement to and racial Prior want I to questions, the the revenue the reforms. opening injustice call to needed finally important drive contribute

As all are our answers, of across core the vital have guided integrity opportunity a example leading set moment taking to this of look this committed but inward create innovation, not our that and global by positive a stakeholders. is for we and acknowledge us inclusion, the with we to We organization. a change company values to all do

to actions of We inclusion our raise confidence open take base, in extends reinforced the our and further Seagate forward based determination have of Seagate’s and My to this With support expand opportunity of that, happy questions. of are Inclusion to our is customers. lines with to and already supplier our the diverse success and training relationships strength stronger. I partners Gianluca your communication, the by people, even and efforts. taken potential and our our looking to employee foundational awareness, I'm is our beyond make

Operator

[Operator Instructions].

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

Your line open. is

Katy Huberty

afternoon. Good you. Thank

growth into as I we in point a say and this expect be nearline whether follow-on how there I September exabyte the quarter? drop that, that's at any in exabyte the moderating should would visibility heard going about there of shipments the you in think December think nearline quarter. If a shipments right, is to Gianluca that recovery into sequential

Dave Mosley

Katy. hey Yeah,

of I XX% in think we've talk been we year-over-year growth about exabytes. unfair, course

of and people going quite that’s what period digestion it been perspective It's and that but my really have can see. that's is from we period quantify here, about the things more see, continue see online from can get growth Gianluca on, large talking I we as different. far As race a this to

demand. a there's fairly So strong

More the rest We that temporary, just the smaller year. of up are at all the it least into believe nearline, is levels, on-prem inventory cloud affected any really strength the is disruptions that have in expected don't the call very going the nearline the, which throughout enterprise. service to providers. customer's but of continue thing visibility fiscal have portion of a I’ll We was

impact that's and slightly that in So of and or the that’s but expecting QX medium business know going we're small-medium to recover its registering that is the really enterprises are into very because start – QX just you recovery, small much. some businesses not was

data over necessarily the trends. utilization rates evidence capacity. the there's long right that So going buying of term, growth big Even in now, are on-prem aren't up where people is anecdotal the there

should growing to anything time. away or So but meet now get to on-prem some else. do cloud If our watch I you everything we racing over date that everywhere, you a softening recovery is comments cloud that is from parts know anything, don't think right expect level service online and is agreements. take their

Sorry, Gianluca.

Gianluca Romano

QX, but it with point FQX expect we're expect low level said that is which say all of and the continue very situation to we for there quarter be a for that doesn't so for high Exabyte see to same had we level mean of Yeah, same very and long but not is record to to starting the the support. secular What confident in of terms we will over very need maybe QX in QX, this term, it’s this a level term growth, even we in long level and FQX, I don’t sure we data a – in would in is, the volume. see first to not drive the no safety

Katy Huberty

Okay, thank you.

Operator

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

open. line Your is

Patrick Ho

lag that of Is demand and bit a those question to little drives say nearline timing memory much. regarding strong given versus remain products demand. time when you know follow-up spending purchases are data completed? buys cloud are server a now, the seeing know Maybe right you overall as are a there and does that Thank the very storage purchases and servers of made you just Dave, Katie's drive what's after center healthy trends, between

Dave Mosley

a very interesting It's question.

on digestion of I the period, that optimization think have my might about know and storage more software that. to the been past Patrick, back in topic you expand periods point things digestion like to around data center whole

I servers that meet to or fronts because responding your with are meet little bit, for have really now agreements, I you that agreements. providers think cloud, whether its you requirements, cloud in the all the the level service point, in And know gear to the order tough been challenges service a is to everything's the network think pushed does on right people into those very compute lag as know quickly aspect. compute using level data service storage well growing then but generally

seen It's into And cloud client’s is capacity. know there's models speaking, to good think typical to know on-prem and you demand to on-prem we're a now sure a server patient ultimately race you've we the the mass online. models, software. have I to so for quickly demand, as you answer generally really it's satisfying the get period, And are characterized that I from by everything that digestion back not you know know It's think push kind question, right you stagnating. quickly with we we make the Katie's this make sure have of the because that very is just to this growing then

Patrick Ho

achieved the past continue already share the gains move Great! follow-up, on terabyte drive with as platform, terabyte you've and over of you common to year and are release that of a terabyte very and is your lot that do XX about a the platform. XX for the the drive which customers wins” How XX Maybe quick to the you introduction talked customer “new as you the XX beneficial terabytes?

Dave Mosley

you and customers them still we continue serving the about for and ramping customers know need, XX’s. that renting XX’s Yeah, are thanks. think I mean buying what they we’ll yet, not so XX’s maybe on those

the transition ready I to think want go. and to make Some people we're

a of which lot have we because now, platform change can – that necessary allows you are platform us want, we confidence the XX fairly we to get we into know hard. of changes the this minor in deep So to That’s XX that go and make it we're drove platform, and terabytes. also but to to XX the so reasons things. other one down back And that same all remember the

think all those the products pipelines customer availability know I You quite are around good. qualification relative to and

dialogues great the pivot, we’ll to when have they and with We customers want pivot.

Gianluca Romano

I that. to add Yeah, would

market business always not We products short the managed we short know the profitability. business, how our of term Dave before manage free term like The an and you the it’s we’ve cash term. for not for is saying the market the flow it’s focused on good outcome but long focusing really was as focus Now and share. our on share top

Dave Mosley

said One prepared you in sure over the your time know take watch you cash that we you watch carefully other you production. know four I've to make a time is that or really this back and like quarters so you about watch means, is – in remarks learned we thing what

So build really anticipation build of don't in tight stay with and what need. those your things some that they customers exactly

to the us that’s I continue for think our watch what we’ll best to do. cash and that's way

Patrick Ho

you. Thank

Operator

line Your from of next open. the comes question line is Baruah, your Ananda

Ananda Baruah

do hyperscale, period be few know that flat know do you on ships of and get guidance. guess exabyte to them September of go thanks detail Gianluca as think on-prem growth hit quarters. context Dave, what in over we afternoon as to the able quarter you start has feels said, guys, back for we've you a peak maybe any quarter Good as of And rework follow-up. XX the back David, happen then Thanks. that next I we for also you're Hey reached you or nearline the little and how to or to that, that ’XX. you the given like it sort or along to a On sort digestion fiscal well just think quick could flat you're taking any demand June expecting sort the to in then just a a have expecting accounting wise bit of I maybe bounce with or more hold and outlook And the clarification question.

Dave Mosley

that's Yeah, good.

it I a is between think question on-prem.

XX% than I little down quarter-over-quarter, nearline, you break service a that on-prem. rest between said cloud which and and of changes was is which then you If more have nearline the bit providers,

term’s thing talked and the do come I to need utilization watch. my on-prem The uncertain fairly the know really we point back. that's is will we like about think It on-prem near to you levels. and about

stuff everywhere far take with all online. healthy going know stuff is and the cloud service for that that, to as data and autonomous exploding to provider of demand is growing the a to as you the and is advantage on, have going IOT of think vehicles and put very data the cities lot and I is smart all

also on-prem lot I think a of opportunities. there's

right of we've For long period. that priorities certain, small-medium it’s to if through you get other feel that even get they've can, term they or can't we but term now know near this got People period just more businesses. in got

Ananda Baruah

sorry – that hit ahead. Gianluca, to Dave, And go

Gianluca Romano

about You a in for another, seeing year were asking are prepared ’XX. that longer little term we fiscal and of outlook bit remarks the

’XX. year we is We this are have revenue right looking fairly flat, now the fiscal know at you which

months, long on so there impact course based few COVID the year impact we situation, that outlook is in now next Of and our Seagate’s are impact assumption still decline from but on start COVID very will ‘XX an from to term. confident in very, is the fiscal an over the

Ananda Baruah

overall And gets fiscal flat reaches, we XX. get as go do to you as – XX hit the above outlook? think nearline you it just need you do to revenue say think nearline, that above through it year it Does

Dave Mosley

they and the to NAS, think surveillance Yeah, higher and other points. capacity they start on higher markets I and like mass back moving come capacity

you'll think expert see growth. the I

type So growth. center I'll and again come exabytes say we back, applications, applications, when know in we you'll happen need to private we and more see that'll know capacity think those data need on-prem, you but Exabyte mass you of those grow on-prem

Ananda Baruah

Got it, it. got Great! Thanks guys.

Operator

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

Your line is open.

Shannon Cross

taking on you Thank much I curious question. flow. my cash very was for

for You flow capital insight think to the to working should some How you. maybe talked some about improvement? year. revenue we next about Thank opportunity cash flat drive

Dave Mosley

cash we exactly speaking, few have flow loosely should but a to now. need we’re what pull this, answer is perspective, driving quite we levers know Gianluca my you let to I’ll and right from Shannon, Thanks

of very you we As factories cover potential make we not where said inventory, much again. the do watching happen to we were metric we're sure quarter carefully. too bringing reality on last being may Like the that still know although it have That's down. I our before, cash and

did cash running Make I’ll portfolio. of talk inventory, but in to we're a bit bit a more the overbuild. bringing let about we're still in our carefully right we Gianluca going but have little things not So quarter, investments making that and we very last watch capital still quite the sure way. and We're as ourselves we’re

Gianluca Romano

expecting say revenue flow year agree. a expecting will said free Yeah, compatible. cash strong completely the cash in term. have investing we fiscal But and we’re flow comparable cash and in could the fairly be ‘XX we no, are we would long general are we year-over-year. also a is free No, be free gross that similar very flow that for I generated CapEx probably in the

flow you a at We of done know recover we free least this is to our form in and commitment terms to have dividend of XX% record, have in form cash of the buyback. shareholder of the shareholders share and

continue very and So cash terms flow. expect this we we with year in of another will free strong policy

Dave Mosley

more Yeah, and who It's either. tactically, more shareholder we a will the we but it look term, as return manage cash tactical long discussion the be. want it that's is don't to at

Shannon Cross

you. Thank

Operator

next from Cassidy Your the line from comes Kevin Securities. of Rosenblatt question

Your line open. is

Kevin Cassidy

question. for Thanks my taking

it business released deployments, going or and On they there some immunity, being deployed say all is know is a there the gradual? some, are expecting that can that video soon a or is you and in COVID is as surge build-up image anticipated to be more is so business COVID you are maybe it and of that as you a not applications, virus related

Dave Mosley

watch a is interesting I really think space It Kevin. to

if are you just get speaking, whatever there on-prem, on-prem even right. there and say applications and know you loosely So surveil people to would you couldn't these on-prem else could, or nobody to be was sometimes

starting strongly. back and markets start, products fairly to and strong, again, see term will smart you but factories believe these know that sputtering back So it's the that hospitals starting long smart because surprising actually on-prem up know these cities They so these quite back smart are you we you come applications and know of are were down. not up again. believe We

It'll timing know and everything there's to one is points, probably we the questions, portfolio of earlier product believe best go more grow You the way. have we so satisfy exabytes in that. capacity to coming this

in early to that saw up. ticking start We to it's back couple this think There's you So going dispersed. surveillance in not trend and know life with back quarters the that coming it's the is being quarter so it'll we particular indications very some continue. far down last of back geographically

improve quarter. to we’re are but spending, a there's course of the It term improve different should certainly that's will be but see. we what prove Of regions lots know this it it's going to you how fast where doing world of know into quarter-over-quarter that the watching. people market long Don't QX, start

Kevin Cassidy

Okay, And more little what's capacity for detail, just thanks. systems? the drive for those a

Dave Mosley

technology Typically now it's function of these you past and in X know as so terabytes and a to the it's been transitions. terabytes, happens up X going X that

edge. markets those the capacity points, up and are, in that in markets while what the are higher there's value all through So drives March there's going because more the higher a toward the

Kevin Cassidy

Okay, great. Thank you.

Operator

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

Your line open. is

Steven Fox

have questions could. if I Thanks, two good I afternoon.

the off the a could The and year, first be you was in when you about wondering, $XXX one pressures half year talk on still is, know this, you of getting you in flat I fiscal some about the back talked about but Dave the there. some you that start full touched hold million revenues for

the how you flattish? as map gross recovery, a so do the line for the quarter anything issues. to sort manufacturing So roughly prepared the second or related that question, the you going then is hurt back in missed Thanks. most that you to year COVID that costs underutilization surprised And out with just of the related full and what to top the weren’t that margins specific by do is bips, have XX

Dave Mosley

Steven, I’ll let the part take latter first. Gianluca

Gianluca Romano

revenue So basis and the It’s points by the which we in not COVID that actually is related only COVID. impacted impact related was in direct quarter, cost. for to not lower to the generated general of the XXX had

total of million about for points those in second when basis at you cost, then and direct between margin So course you impact script look EPS said and of the of a $XX XXX also second lower is the to the EPS, related revenue impact and the revenue XX the and the we we and impact of have $X.XX. $X.XX said, with

compared but, of fairly million. out and have impact. we of business, impact what we expecting, offsetting the legacy prior expecting, some were fiscal $XX were quarter from impact again had In a still level a cloud that didn’t probably estimate the now business We that the know probably but on was have revenue legacy We reduction the came on also were impact COVID. lower surveillance. had part the EPS about on level of had some the you huge but little both QX, In you costs we in additional at quarter So a to we nearline but as lot

the So of some revenue. EPS lower overall because we lost

Dave Mosley

longer some but to some make, us that you watch some and cash investment, minimal so good out are year-over-year come know you'll We are with been down know incremental of back very don't flow go legacy a your have are so mission previous. to there's shifted you we know slow the notebook decline good expect like anticipate. some year, temporarily going like by But already they'll to business you and the markets about legacy, natural things term Steven and some develop. And watching we come you back the It’s gaming free throughout like level to and we for to level. of nature you have because I’d them are There’s them them say questions fiscal know late. we and flash think them know I some and things critical they which investing the not that, have of of

centers and we part data as back, call on-prem and but via same that. that actually private been Satisfied we like nearline of things channels that well. fairly data slow on-prem edge other have, The it that before, talked some has at the will in growing the come is because I’ll of about

enormous expecting to client in between cloud hiatus you on going will some all and know doesn't just somewhat know guide. recover year this business if up, server is gone. fiscal there's on of you servers the locality It's shift It So where business. you make this client and we're that's to temporary mean

Steven Fox

you. Thank helpful. really That's Great.

Operator

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

open. line is Your

Unidentified Analyst

on Thank the Could pricing. guys. in hi Yeah, you had just you I the what one Aaron. for of Michael XX saw as mass going big guys one your about of how ramp for Thank thinking pricing curious year capacity into you're comment bit question. the you I'm start a quick is on terabyte? off the the against competitors half just the This that you. a on back little side on particularly taking environment, then and

Dave Mosley

saw rearview it as the getting to Yes, as think in what mirror, right the supplies the far I right we places. that

We have with this long about talked plan. We’ve our a XX terabytes.

mean do they supply-demand some picture unpredictable know so isn't by any You I fairly capacity means people. the mass channels, for you were think think prices big for that of where distribution volumes predictable. the the us. know most don’t I of I in clear. out were

supply were later there gaps, distribution demand promises, on-prem in enterprises, on some was smaller some there markets. demand especially – were there on early Now

know supply I think you is perspective a of stabilize dynamics. pretty lot see From you can there, that's should because where our so. quickly, that

Gianluca Romano

sure yeah, I is couple there, the say, pricing frequent of stable. to for quarter more environment ago a would

better a it’s right situation now. So

Unidentified Analyst

the one communicated of should in level you quarter. kind then OpEx, outperformed more I OpEx $XXX that to if think Thanks. thanks. How June could, had Perfect, on quarter relative during September current given guys just we And that you also about the million previously? the and the

Gianluca Romano

script COVID from longer million, will what a model so $XXX after not be you now people to and work when this is Probably the were saying want impact is probably to Yes, around term. home. obliged we in

we view. the probably between for and FQX reported long For this in what the mid September it be quarter, will term

Dave Mosley

us very now. you that I there's know other you there's thing on that think back for environment like is right are then money really tight work current there’s cash things two Obviously a the the management, investments some being elements. scaled save and in

think it And so term. I million Gianluca $XXX way like that’s level, that about said think we to should it longer about should reequilibrate the

Unidentified Analyst

Alright, thank you.

Operator

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

Your line open. is

C.J. Muse

Thank long short I and the my both term. Good question term gross is margins, question. taking guess first for afternoon. you on

This quarter. you guess you absorption can through related longer players. margin and walk there’s easy make, look under competitive And term, this September then three a is I you're know should seeing costs in So COVID term, of short and pressure perhaps to at what XX%-plus terms you stuff not as gross be business.

think higher assessment, that, know power you you it points as is the being it you agree next of price consistent with what is assuming the I’m So What that technology industry with earnings gets keeps that the Is about generation on volumes, technologies. you there. profited? level the to

Dave Mosley

know the you you quarter, about margin. we gross actually the point, walk Gianluca pretty details last our but quarter quarter, feel gross the impacts where ended through your to of let last good up margin I’ll Yeah,

then markets COVID online probably was Gross exabytes profit have capacity capacity. legacy putting growth gross we the that. answer for in some margins, excess which point, now, of we we some to have the it we I were, question. XX.X%. right we've is grow times of Gianluca what temporary actually your above would the the way had range operating know capacity you put a and supply margin this get Our and online you got that walk the balance so usually of the had range, for was the know role continue demand well. they like in Demand you we been midpoint in through know to exabytes can were impacts as about will not In have go To

that know So your managing add term to Go way But long term a short value. that trend, the that’s that’s not is Gianluca. properly demand you ahead a trend. point and supply you

Gianluca Romano

impact the XXX we percent gross COVID for related the was said margin in June point. quarter of basis terms Yeah,

closed XX.X%. where at XXX you the basis quarter have we add points, at we we if look XX.X%, the So

corporation. this but gross margin, little as add higher they full the know, you As part a a it’s of than business the

say, will said range the XX%. we you to of Dave before, normal or to I So are close know assume as XX%

flat quarter COVID have cost cost. said we For more the well of September so level be to same sequentially, the fairly the probably

C.J. Muse

one tax stock comp with If I you. follow-up, based and expense quick could interest you. you help Thank add modeling rate? can Thank

Gianluca Romano

can Sorry, question. the repeat you

C.J. Muse

expense, As comp look at rate? September, you model tax based can us the the you help stock interest and

Gianluca Romano

the and Yeah, $XX very million to little bit I the interest a FQX, is that are say would rate take so than a mid-single tax is can as comp the you based digit similar reference. stock just and lower

C.J. Muse

so Thanks much.

Dave Mosley

sure business deals perspective you this, cash we C.J., is really just that focus. it. able is cash so running read by or other like ultimately were take not which increase And that percentage point see gross through sorry Yeah free when the to make flow from one we're to we’ll X% last if we a our now, right margin quarter

even not Just you know great some of percentage, the legacy businesses cash. might faster, recover the take we’ll you gross know it's if margin

Operator

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

open. Your line is

Karl Ackerman

Thank you. afternoon everyone. Good

but just absolute enterprise, I of not non-enterprise, units your the hard of want between view get First all, for units the to longer drive your also the level term industry. mix on of

of was units XXXX to late have growth number issued near taken factor ask you in the a appears You next some the peers action restructuring resumption when your that I unit contemplated million In know quarters. expansion closer XXX. over analyzing last was several know XXX and exabytes the drive time, industry over the for QX units. I capital because cam by but hard plans

described. supply think it most the disrupted mix relates how and nearline. you do stable OpEx and towards has But the clearly longer drive majorly hard to I improving allocation capital guess Now or as in demand chain volumes COVID term likely as the you about

Dave Mosley

think line mean space the lot pretty footprints think first, small. and this disks, of you know that a are from our we a settled plenty space number manufacturing have if we I actually of so can space make nearline have. and we heads perspective, in underneath disk drives What's I is The the drives more – think full. there not we is relevant is the so and obviously have I I Yeah, space. heads

of fewer could could a if we the number – that many to really we up know of we're if that almost as know is drivers I of So course, if how pivot all in necessarily we perspective we don't cloud. fewer, at and in space on you depends lot It CapEx our fewer, from the drives. had but exactly growth expecting pointed point. of cut our exabyte had your been

way You we capacity disk are the what believe $XX billion got well. heads our we that filling for of TAM up XX.XX, as and capital that and thing to get online up, using looks that’s right and like the

and all actually with well other the as mass that’s test and The consuming a space the clear room. of of the and capacity as well. most is thing capital nearline associated I that’s most room. you old know in XX is big floor floors the Today think point one a you clear the test have days you and had and test – even drives a

Karl Ackerman

you. Very Thank helpful.

Operator

the from Toshiya Sachs. Hari comes of question from next Your line Goldman

Your line is open.

Toshiya Hari

Good thank back very afternoon taking question. margin. wanted go much I you Gianluca, gross just to and to for the

the of You up? COVID to in talked the to your abate September three when point point basis importantly, a some quick you started ago. XXX about impact think mentioned guess question on there thought in flattish was in that C.J.’s rate, got you the initially process Thank responses embedded level and your at curious I but gave what business you was I in quarter. being months you. what quarter, I a COVID of And from expect do you at I've underutilization least headwinds follow impact in guess relatively impact guidance

Gianluca Romano

the million. what is had and quarters, so prior Yeah say above in the we impact $XX between let’s included, $XX the million guidance in slightly COVID we

the so And not similar, So FQX and where fiscal or and ended what impact cost September, yes quarter is expect year, don’t we heavy we of in FQX more far to is we less what this happen. and model for no up. end the be but to when very COVID an course margin and internally exactly do will will this know have the same what in of the a part not continue exactly We either we second have to from amount. impact very modeled we full and expect

on maybe an cost. and So it at impact there of this in the the demand demand, the Well only not the is important is our is also on part more even mix. impact other point

look and the impact. the So overall you need and demand final to at the EPS cost

$X.XX. FQX huge would between the that That overall and results know For we for consider impact our when you the is impact estimated be you EPS have $X.XX a quarter.

Dave Mosley

points the have media the to mission these critical That the of And nearline It surveillance. kind products, products, on-prem well, the been that to especially has tough make gross margin and I fairly enterprise and point. rich. as the some mix is drives actually it of rich think to are accretive would is so

Gianluca Romano

hard very be pretend don’t tell we to It’s very in model hard to – you also what, our correct. estimate. I’ll It’s we but

Toshiya Hari

follow-up, Dave. probably it. No, for quick color. as helpful, that’s this Got super thanks a is then And for one

mass fiscal talked that terms your guys you exabytes a historically CAGR Obviously of grew in north have about you think for XXXX. XX% significantly capacity in I of business.

or What for today capacity for your fiscal flattish revenue and of conversations? be we should your ‘XX on prepared ‘XX, sort expecting provided mass XX% context the Within are you the you exabytes outlook slower that in given slightly customer fiscal based with consistent are thoughts rate. Thank performance a growth out the of be to you.

Dave Mosley

Toshiya. thanks Yeah,

be that to mass I front the that’s think capacity, you and be then be than year the of know XX%. that mean calendar the to and year. slow I in the – we certainly we the above we that XX% still that will with probably call expect part greater will ’XX said it it end even

think of pivot. as this accelerate of you know it think I come made will, so I the out will well, is the we back why this, exabytes this we as

of I be portfolio and we our will that the to right and is proves why it margins. you product the kind tight this really think our hit is want manufacturers flexible – of lines get very it know pivot right

your certainly up throughout you the we’ll XX% and point, start calendar in fiscal ’XX with think know year So to to year. the probably I XX%

Toshiya Hari

you. Thank

Operator

line Your comes Dustin the from last Baird. question Robert Scaringe from of

line open. Your is

Dustin Scaringe

Hi! for is Tristan. Dustin at end. for taking the the Thanks question This right speaking

know then? I you. to in you part at it market gain ramping XX does point about crossover terabytes. XX wondering of future the in talked But on I'm XX one Thank the and you quick expect until share year. then this later a Just guys do what the

Dave Mosley

are I’ll not high are ready cavalier with ready on crossover we that we we’ll fairly the people I’m such the the wrong demanding question we interesting transition to being to have product think wrong the say careful an don't it's Dustin. and when it, and volume know at and to XX’s XX’s again we're quickly. I the have people. make the think We Yes be when sure when XX’s, but can I customers time you for build

locked be you lot and like transitions them we media great that. like contributor said drive. I some but know in relationships on time, would demanding we to They are would it. the their have think ready lead of in quarters, think whenever those we I on do the revenue we and had two I don't that – know have need big next certainly the customers cue going we’ll with a significant be that’s because are but with can take the think start confidence before, it's customers what you the and transition step we're the whatnot, look I

Dustin Scaringe

that Okay, for thanks Dave.

Operator

turn call to I closing the remarks. will for back management now

Dave Mosley

Yeah, thanks just employees their our for take updating future look opportunity we to customers thank support calls. to you investors Jason. Thanks everyone. an and forward I'd and suppliers, on like Seagate of to and

Operator

confine That concludes call. today’s

may You disconnect. now

Seagate Technology (STX) 29 Jul 202020 Q4 Earnings call transcript