STX - Earnings call transcript Q1 2021 | Seagate Technology Holdings plc

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Operator

Good afternoon, and welcome to the Seagate Technology Fiscal First Quarter 2021 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 Senior turn and Vice I to call Treasury. time, Hudson, Shanye President, this like the to over At Investor Relations Please proceed, Shanye.

Shanye Hudson

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

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

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

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

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

Dave Mosley

We Thanks, Shanye objectives, year and our welcome, XXXX, executing everyone. And keeping today. across full pace year key thanks well us on for joining began fiscal us outlook. revenue for several

on First, achieve financial $X.XX, $X.XX guidance midpoint challenging non-GAAP of of quarter and billion both to market September range. of revenue conditions EPS exceeding delivered we navigating our the commitments, our

we market. These our capture comments on business created environment. impacted that share the highlights exemplify In Second, how potential unlock quarter macro to results of their data roadmaps, longer to to our increase good enterprise key commitment Seagate and The growth reflect several the we The term to volumes a quarterly value. data our against data continued cash our repurchase and approved position and introduction for company disruptions backdrop X% significant These pronounced opportunities, of by to which future simple end trends. opportunities of share were a the for existing execution Seagate’s third, markets. most our advanced solution in the turn, cash disruptions have will data demonstrate And and the and CORTX, authorization. Rack, and in including long-term massive future the capabilities. confidence some a few the innovative $X dividend a object-storage open-source, product shareholders. been Then technology I’ll cost which in today, actions an I of and from effective to manage for Lyve offers quarter enterprises positioning software, of perspectives increase returning Board market summarize current our outline billion the September generation my

in nearline and the by mission-critical revenue digital accelerating reacted workforce drives. plans. solid to As our although transformation and to the impacted the below their anticipated of spending pandemic enterprises driving year new is the the center remote was of support IT slowdown spending. quarter, in and cloud virtual sales The levels enterprise cloud funding Accordingly, surpasses infrastructure digital investments. nearline prioritizing intelligent IT data economy, June. in cloud record their hardware in Many which spending remote cloud rise enterprise be XXXX of ongoing first may the traditional hardware adoption and According infrastructure services of to IDC,

customers, also the spending among expansion enterprise project plans with end However, on-prem and gradual and cloud is they investments market data respective vary Data readiness calendar internet more December to already transition demand will needs. these enterprise trends, the outlook seen a improve underway. of markets, we fiscal pick capacity demand in in cloud to aligns Taking well HDD factors timing. in mass storage In the other provider up and quarter into elongated which upon throughout account, depend the supports and we’ve center in these market. than for recovery installed our center well depending base IT cycle year, content on XXXX, replacement architectural couple years. expect Responding outlooks, service recovery last investments which currently the

revenue For strength brand that and on-prem patterns impacted smart place. drives, We in Seagate’s example, COVID-related from to the image or first by of precluded year the applications doubled measures among the installations double-digit quarter-over-quarter, restrictive taking VIA call for consumer projects. resurgence and of the seasonal solid heavily and we these in prosumers revenue in growth return security video markets calendar both and realized markets, video following half our were And reflecting gamers.

deliver of extend of data the new and secular this of the We edge we gradual data the bottom smart including demand massive continues COVID-related believe a Over even VIA factories, expect September at to capacity strong our effective data the and products, mass the point of of momentum and future. innovative continue cost AI now healthcare, recovery the and smart storage. generate disruptions. the in exposed and address other the for XX-terabyte relevance marks secure along and were What’s cities, underpin are retail, revenue XX-terabyte and our the leader customers in drives solutions cases from And analytics is trends both edge to qualifying with needs flattish technologies long-term, the in mass that in to today quarter and that forward. multiple use with use well-beyond storage Building we amounts our over security, drive all effective outlook well. which cloud on frictionless XXXX reinforce data and Seagate customers’ cost edge. need for very progressing year the the fiscal the existing we

We production customer’s transition are our and HDD volume ramp timings to readiness. capacity aligning

XX-terabyte drives remain be which We to track we a path important scaling basis. an the consumed on XX-terabyte more December, so replacing securely milestone, drives by in our an per XX-terabyte starting footprint, efficiently. in only areal capacities. first lower a technology to ship in enable XX-terabyte means and density the HAMR drive be with more in industry’s will Higher so is this latest on not deliver path is increasing The also and centers to to to Seagate XXXX. XXX-terabyte power bit store believe also as That cost but forecast more sustainable product, than XX-terabyte do data ship drive crucial to with technology will capacity data the by HDD a can HAMR HAMR drives an store same XX% effectively customers do environmentally way. data Seagate drive actually

sprawl attacking and storage challenged beyond capacity which strategies data. impact data Seagate data to our for by ability leaders thought their team sustainability. its Increasingly, harness the of challenges. extend mass data data However, the posed are customers, businesses datasphere discuss by for cost joined which inaugural security, Last value and to during management and partners their challenges growth these month, hosted event, other industry data

you designed data of to effectively you with of had edge and CORTX a Mobile complexity enterprises CORTX If data a and securely storage to data growing Lyve and distributed architectures object-storage deep is of edge the integrated seamlessly still and community enterprise. efficiently help address the a software enterprises to resources arrays haven’t our the manage storage move of cost can Seagate’s videos securely opportunity distributed Lyve between endpoints, website. cloud catch their our environments. easily knowledge into data pools leverages enables massive an of platform open-source, series shuttles managing across core developers. yet, across on enterprise. is of

less clouds of than and is with X.X-petabytes range storage cost easy-to-deploy with ever up a see vertical Lyve solution edge-centric rack. mass have management. of multiple a XU and Rack before. Lyve all a across for simple We data capacity complexity optimized pre-configured private to use CORTX mass storage that helps diverse a common need own markets their software and cases in Finally, Rack build enterprises

fleets their Raytheon to autonomous evaluating is scale and For to top the efficiently storage world’s commercial secure customers. to are And large for federal platform develop vehicles. this clouds data Technologies move CORTX across automakers example, their using of

by tremendously with still mass storage quarter customer that, and turn Seagate. future While reception the outlook our I’ll infancy, him me Gianluca With Lyve has together have is results. to the in been excited walk prospects September now which the for for over its call capacity encouraging, through makes

Gianluca Romano

anticipated cloud strength along weakness our was we VIA demand in drive in financial This period, the healthy environment. achieved VIA year-over-year above shipments data about expectation and guidance image consistent X% with the or customers, XXX-exabytes reflected in set quarter, strong do growth. to were year and The and and performance billion, enterprise the in application nearline, September with were in face September shipments representing in capacity with the capacity Revenue midpoint recovery market, sales. Thank results sequentially. quarter, partially down ago mission-critical X% and out what market We dynamic $X.XX XX-exabyte prior impacted of our offset XX challenging quarter, you, in strong sequentially. market, Mass the system Dave. video compared delivering in our XX-exabytes from the the Total hard market. which a center the down

of market. CAGR Our XX% is year outlook exabyte of forecasted XX% mass this revenue storage quarter long-term XX% September XX% XXXX change year hard basis, to revenue up represented growth in a XX% drive period. the shipment no for ahead the respectively, capacity percentage calendar prior demand June well support On quarter from December and a disk for of basis, quarter the the and revenue, that XX% of from and with

June, highest but XX% healthy range, around centered record sales. levels about capacity high which XX% revenue As reliable the its XX.X-terabytes, drives, up revenue by We our supported nearline product in stream, sales reflecting nearline We it XX% are company with consider grow nearline and nearline over remain drive from about the XX-terabyte sequentially replace for of shipments successful quarter. capacity equates product this historical consecutive growth the sequentially down our in within four Average capacity XX-exabytes, time, three drives. XX-exabytes mass of of massive for drives, installed but quarter. to but highest was Nearline year-on-year, to have shipment along quarters for anticipated, demand per estimated revenue base. a X% September and should existing been increased declined capacity which the nearline to highly consecutive

camera revenue through year anticipate capacity gradually smart for shipments ship compound the Increased resumed of indication terabyte following forecast volume We as We as down a at critical improvement supported enterprise as storage increased partially revenue, increased XX-terabyte growth progress cases the stable COVID the by our edge. the on in related camera by legacy security cost view for XXXX, half products, to enterprise use from to strong sales consumer new in growing qualification decline XX% analytical December ramp healthy the consumer nearly to in remain for near-term video mission exabyte the application we timing. the total aligned and for multiple recovery market currently with with a this the continue in described system in and and sub-seasonal We year. VIA sharply September average the Revenue is over Exabyte consumer X% of smart of capacity mass make driver VIA, XX% have market XX% plans customers, and represented rate new this of prior XX period. calendar at increasing September which from the quarter drives a for Dave emerge. security described. at sales particularly a uptick their a demand drive markets PCs. critical installation X.X in and cloud quarter mission with needs quarter market drive. offset The the quarter which first a consumer positive expect software IDC with for video is storage, into the of consistent the sequentially some the XX% in and ago long-term demand

of are revenue environment, that recover. Our slight SSD with a Accordingly, system of system gross prior customers fully revenue I’ll Non-HDD non-enterprise In quarter due in remaining many levels. Sales which which are a impacted products will we is related COVID business made of X% expect saw our before quarters of still our the million it basis profit we million, pre-COVID still lower while pandemic. quarter. enterprises, quarter, below September more up on being September to business. pricing the the $XX non-GAAP percentage out, includes to trended flat by mid-size challenging the the demand was improvement take $XXX point a small costs. couple our

using more cost steps ocean taking freight. to are We partially offset with freight air associated by

mix this COVID $XXX from with from product restructuring cost and of gross our announced expectation, non-GAAP benefits ongoing XX.X% our reflecting resulting million, along operating with well Consistent saving expenses factories. margin favorable came basis including in non-GAAP working underutilization from activities. Our in the impact at of as related as previously XXX home points was

Looking to ahead, to expect position expense we assess investment. to normalize we within at the one next $XXX market million two now continue as quarters approximately and operating

the several Based operating near-term believe September $X.XX. approximately over slightly quarters, the income target non-GAAP was revenue, XXX quarter represented growth. long-term Based of at non-GAAP September count of $XXX to is the past sufficient close shares, lower investment around a million our was on margin on resulting million and XX% share we of demand which was X% in address the industry made the end $XXX market Capital to EBS non-GAAP range. expenditures of in the capacity has Our were revenue. quarter for which operating place million, low

more we result, mentioned the been rather ocean I expansion. to a profit. transitioning investment shipments to capacity freight, of cost as successful than are earlier, in further our As focusing We’ve gross support COVID-related our impact which technology on decreased transition

some critical protect built against future also potential have for supply strategic We chain risk. inventory components to

plan. As result, our $X.X which sequentially with a was inventory increased billion, to in line

as the costs. flow includes the of September $XXX one-time inventory which generated about We few free level over expect we in to decline restructuring impact quarters. million the these consume quarter, We next components cash of

by efficiency we approximately the In shares While healthy, demand flow expect focus these levels relatively million then the outstanding. on our improving shares, return million exiting over with to cash $XX quarter to ordinary still levels are operational historical X.X we free few and retire supported quarter, the utilized environment. next quarter to million September XXX

We fund also dividend. used $XXX to our million

the repurchase our our brings the authorization $X.X earlier, cash expiration long-term billion. financial The mentioned share a and the approved stable organization Deduction payout including cash increase share. had available which Dave equivalent specific raising capital confidence increase approved X% generation abilities. As amount on $X to Board share also no $X.XX execution and Timing cash, $X.X of distributable an in reserves, our to billion, The per We requirements. relatively our dividend, date. Board repurchase illustrates our authorization to cash quarterly several has to total quarterly strategy at billion. business factors, on position, of is dependent and available the

of approach demand. year larger market improvement are recovery we the by As in XXXX, emerging and signs encouraged VIA in end calendar the we of enterprise

a more quarter demand to elongated for of view our We expect center data continue December in supportive solid the cloud cycle.

from billion million, period follows: expected improve of uncertainty. sequentially will of December still While gradually expected this Seagate up is next to or to minus to target of we half increase of the range related at decrease is of is to our the And for Taking in facing well $X.XX, our all these this execute quarter XX% or non-GAAP Non-GAAP EPS margin of XX% account, we’re at be minus In outlook into Revenue midpoint. during closing, plus plus the $XXX costs, sequentially headwinds XX% prolonged revenue. the $X.XX lower COVID quarters. is expected sequentially is XX% over midpoint. be factors an as operating $X.XX couple expect the to continued

strategy and massive to call for Dave then to cloud of edge capture for I data need the storage, a back market the to volume demand from the endpoint now capacity navigating opportunities significant associated managing to and executing with manage will growth turn are core. the mass secular We final comments. current to the

Dave Mosley

Thanks, Gianluca.

the As to uncertainty we XXXX, still conclude we’re the are recovery end markets, expect key near-term. persist but seeing first quarter we fiscal in of encouraged macro year by trends

the resilient through I current manage stronger remain demonstrated this will emerge situation. to the with the confident our execution have challenges past model, from strong We that team in financial ability we and

we’re Our attacking innovation, the and again. improving I’m of on needs and customer do how suggests December proud data it our outlook of data data pace growth, posed track security. sprawl to critical quarter by we’re

technology We the growth effective for have our confident I due momentum year including management. position are business, believe successful outlook addressed built platform, even cost and delivering am opportunities the mass in of and for our developing we our and roadmap I on highly with the for XXXX solutions that parts fiscal greater capacity in secular business data us tremendous new our live future. storage, initiatives demand our HDD

As ever ability growth long-term. result, to enhance I’m Seagate’s cash value generate more and shareholder a about over opportunities, than the excited

and tremendous your our Thanks customers, Our efforts performance support of questions. I With partners happy are take possible would you. ongoing not all of be Gianluca and shareholders. our and the to to the without employees, of that,

Operator

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

open. Your line is

Karl Ackerman

you my question. thank taking for Hey,

during XX-terabyte revenue prepared spoke quarter. this HAMR drives about shipping you Gianluca, comments First, your

for comments XX-terabyte date HAMR, it’s terabyte And $X to wins guess your you CMR it growth of won’t we HAMR? versus plan basis about that? because you exabyte offerings. calendar earlier could leapfrog think the existing the number achieve XX-terabyte on prohibitive XXXX Thank drives, HAMR perhaps to suggest per how your want ramp and cost is seem First, for XX% associate to quantify XX% I the is do if to materially with design mix you to possible you. to margin second,

Gianluca Romano

Hi Karl, like out there you said, world. new the it’s platform in

And so with, is the to And we’ll it highly be customers we this introduce pretty are going that qualified quarter. we’re watching competitive. which

not get have don’t until will course that, that that watch I accordingly. but that working that and your so compelling to So and XX-terabyte to a we’ll year. there’s continue talk knob dial transition calendar to the next and we we we keep the would drive say about until performance over work point really of the we

Dave Mosley

I say, with we we quarter important not units what’s are important HAMR. achieving is milestone would ship. Yes. the for of in now current the us how shipment first the many technology that Its right

The that said are of start year calendar working technology we shipping what before and and the important we the doing XXXX. exactly HAMR end is is XX-terabyte the

Karl Ackerman

you. thank color, Great

Operator

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

Your line is open.

Katy Huberty

the you Gianluca, you. the average authorization? follow-up recovering do we Why then the gross how year? Thank Dave, materially the margins given improved than repurchases repurchase why video fiscal aggressive back margins more in markets business? half be And higher Good for to reconcile enterprise the the the the stock just billion wouldn’t in given September relative your of signs share a afternoon. of share buying in are recovery in and see $X second new not that markets, modest

Gianluca Romano

last and do first. gross then points a obviously, I’ll Katy. perspective. factories margin what Yes. still profit, compared quarter, were to do the some can demand relatively empty we COVID take have from Thanks, We overhang gross

legacy that point. the some and of exactly over pivoting the challenged your markets capacity we’re some still into from are mass So, the of capacity to

it. gross supply supply. of course that you It’s – existing the confident see matter helps if re-equilibrating in think and the just have. again our product very we we the will about I’m demand many of over that the that margins, portfolio So, a quarters, recovery all against

Gianluca Romano

impacted Yes. last gross to margin. operating that and COVID buyback. calendar in quarter, that the cost be before even capital the additional and by quarter And We of answering maybe margin going before share terms allocation of I’m XXXX to the was said

We we and our of of mix know our with the that gross the think improved. reduction because the will cost when COVID COVID margin, So, improve. of situation because that’s

the So, some we in year. fiscal the improvement part second of expect

buybacks share of during you terms the discussed release. earnings as quarter, this that In even last we know,

be and term long board it to bit very want for authorization we the more in authorization, short-term. conservative a is strategic the preservation. is not COVID, During of little more cash long-term something a But

this in neutralization We about to decide how we will maximize and months. and of to and with Dave, next use how think weeks the the will impact

Katy Huberty

Thank you.

Operator

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

open. is line Your

Aaron Rakers

taking question. Back Yes. remarks, some the on on inventory. margin, the gross Thanks taking alluded prepared maybe, know for supply strategic to had I the you in

dynamics maybe, a a of I little think there on that or at out guys substrate motors seeing, maybe be have been questions component some spindle there’s bit been also of the you around, the pricing side.

what pressure help you chain and you’re inflationary us you’re understand seeing you not can So, supply you. that? seeing or some are whether Thank component managing and exactly in the how

Dave Mosley

factories were Certainly that people help. needed were Aaron, where COVID Yes. true, so strained, thanks. there

we addressing in buys continuity that’s And prepared make to sure that had remarks that strategic comments done. about the made that so we’ve supply. we the inventory we out of aggressively the And were

management, supply stuff happy our in recall sure way where chain, right think I at and And right to that not again, think got make planning from we the they’re it. with capacity of inventory line I’m here. I off, the I That’s the placement. I and COVID-related of suppliers Relative fairly our that’s the are. now. to manageable really we think it’s starting some with Just We’ve getting the have because very turned that’s look

Gianluca Romano

guided full year. we strong quarter we seen And current next couple and of expect now, to I quarter. the a in the fiscal quarters this know in be guidance you’ve quarter the how our from

want we components. component by or be to one two don’t So, limited

inventory, three to but decided we a will quarters. little two of or So, strategic the use bit next bid we in

Aaron Rakers

Great.

have think going update just not increase big forward? whether capital or capacity or some you a on about Just Can how their we CapEx to move expenditure the as to any wafer on give as you’re just quick spending update us of plan you an follow-up.

Dave Mosley

Yes.

probably has against capacity quarters many, that. And legacy our of many mass well. to pivot continuing many watch carefully. to the as and we’ll years come So, such capital now We’ll allocation strong be markets for very growth more

markets reaching may Some, normal still a as or fairly in be we’re down others new those. strong, they to consumer like we’ve continue investing ramp mentioned, not

And script the capacity I that make the way we so suppliers for whether We we that sure We’ll aggregate supply suppliers wafer capacity, needing capacity all the against or that. upstream or enough industry or also. do specifically the those with technology be you comments pivots. over the supply to has believe we What that that said we transition or invest still in what in as And by capacity can we chain comments, we capacity. to pivot it’s well. capacity, that. is pivot in can the the capacity, whatever, media drive made the mean way, that goes making work or call

investments the XX-terabyte, drives that’s new So, and things you that’s capacity, that not if the the technology ability just to make will, But and that. transitions. adding and HAMR like

Aaron Rakers

you. Thank Perfect.

Operator

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

is line Your open.

Ananda Baruah

still and demand. year was had quick Yes, talked year? nearline And some last just exabyte dirty the calculation. ever, the I you’re the chips reaffirming is Dave, of related growth with just was appreciate it the the around and of capacity, good same don’t stuff, context and talking any back afternoon, quarter. at I’d Is because the case of mass you if supply revenue love less something two, of quarter plus talking chips years, largest that think, on difference But super guides there’s substantive about nearline But I December guys. guys XXXX, I fiscal I year of about Delta of know, pent-up growth, this said, strong? through taking you on I’ll going just coming on congestion sort ask and potentially quarters, could. that of chain and largest for growth at sort believe and the overall that mass largest also market? mass to believe and context sort least can year XX% count. we’re between stuff, anecdotally, Obviously, sort then flattish meaningful then I the then get with ties XX% exabyte you’re about growth Hi, ever capacity and challenge And kind I what’s for – him pretty there’s contacts, it this, XXXX, fiscal exabyte. than this question. kind capacity and the like that it the nearline clearly is came time.

Dave Mosley

Yes, yes. Ananda. Thanks,

to of your that came surveillance the and So, that’s XX% strong track first about answer second as part struggling your – was earlier XX%. been markets back were mass thing this the you on this VIA These even still on year, We we’re because to of the market We’ve believe talking and that year. was capacity so really question. the outstrip to on.

We and applications the strong coming were bit a are of disruption well there, was that persist some can I it’s maybe, things the representation, little traditional logical on. whether going applications that definitely it’s So on, say, VIA quarter. expect or recovery as markets last new It’s like that going in would greater, even that. to hospital smart the city all applications, normal back quite its given that’s

fairly a the for remainder year demand that as of see of we healthy well. capacity mass profile throughout So, the fiscal segment

capacity being so those we lot in So of high. mass confidence have why a that’s numbers

Ananda Baruah

going but addition greater clarify, related, video mass – growth coming be quickly fiscal nearline it’s just then year, is and of it that. capacity the I’m that’s XX% to to it sorry, capacity sort so And not is whenever than back, will something mass in be

much mass nearline capacity significant we the XX% addition more see to growth? So, in to growth XX% could

Dave Mosley

Yes.

Sorry.

that on-prem not right had discussions So, on-prem is of it’s nearline the remember the so say still quarter. and I recovering, just but wouldn’t we because – now, last strong.

So XX% to point. yes, your to the XX% is capacity mass all-in

Ananda Baruah

Got Thanks. it. it. Got

Operator

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

open. Your line is

Steven Fox

afternoon. Good Thanks.

why your into And to obviously, of the the full-year a is of Can shape think back, pre-COVID? questions, get different of Just like, few they doing business you’re video – compare a would spending quarters you to on-premise talk you your enterprise, at that about quick. it real over in in Thanks. you of those that prepared about back versus similar outlook? that And say bottom manner, you then? remarks? what’s versus a How next follow now sort then can strong strongly to now terms you mix talked in comes on go came post-COVID markets just sort the we’re how

Dave Mosley

Yes. Thanks, Steven.

think, with on-prem, later we a hindsight I on-prem. by reality came the say a than get caused COVID pull-ins. demand couldn’t really the on reactions supply So good then when visibility, customers that people which of is, I early now, happened back what lot And would have

bullwhipping, So that that’s a little much will, inventory too if the the bit caused you and change.

I from those in expect on-prem the frankly. anyway. to recover some some to decline of actually because We’re markets, we’re recovering that critical, prior it of levels, don’t still like those mission markets,

when upgrading the in to and applications, Relative when think, still your some declining up has the new people VIA lot how come it, to of and – come helps that installs recovered to because I So, the you get have as that’s well on-prem have will piece those you nearline the may nearline exabytes and of that room, so hard those back, the moving with think do you on-prem about in and and value speaking, in could monitoring, – maybe, things facial strongly, there’s the of that’ll upgrade them when back they run markets some that, install, if could that’s a rate, back if some drives may will storage. actually don’t of prior people monitoring, we looking them think the associated they have for been you’re entire temperature box on-prem, been we’re upgrades, it. you typically but brain network, back like to generally

so I very as So why global, we strong, that’s that think was well.

The back year-over-year, applications we’ll were Such time. at be of to quarter, probably again, perfectly significantly backend will, calendar I get muted if think the will these So, well. we that of last VIA forward we expect it good where demand. don’t we about stronger investment of happened than did theme. this all we’ll be City the the building going smart be definitely but know to look year, kind back frontend year, year-over-year, that the Smart that, as And and markets muted same we a to we continuing

Steven Fox

Great. That’s very Thank helpful. you.

Operator

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

line Your is open.

Patrick Ho

I much. you transitioning time know, following about and drive comments CapEx expansion Thank maybe earlier typically, your period capacity the longer going. that’s very nearline – of out how is you looking the a on made to demand are where capacity Dave, of at there. up where products some you’re you’re just you’re demand,

the how few drive HAMR generations? XX-terabyte over And then place meet feel do need years, the to the about to you As released? gets HAMR HAMR transitioning begin secondly, believe you you’ll over to expansion X, demand capacity next two three the as for in capacity do next the you

Dave Mosley

Thanks, Yes. Patrick.

that make capacity transition, they base, of and are bit to a been installed the quite have we’ve that needed those too those thinking of we tools years things, our incremental many HAMR of not many as tools. part couple tools, about they for a So,

like of is forecast need we how bigger feel bit mass we we what’s manage the To technology a really issue legacy question, and transition what we of pivot do little capacity. how So, transition capacity We to the that. first in to much on going call do your markets quite well. we can the part

the do what they’ll going and wafer, the watching to it relatively next lead time. we’re in long be is started also So, and legacy course markets which year those over

this ramp. we’ll think capacity will need time, to technology over I So, do transition continues judiciously. as we more HAMR approach

then a goes capacity market and think if I can we to that’s goes limiter, big. quickly, fundamental or than market react very on you will, back the think especially capacity the bigger in I if test media and react So, CapEx with

Patrick Ho

Great. Thank you.

Operator

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

open. Your line is

Kevin Cassidy

you Thank questions. taking my for

area which On the that’s back say is coming world strong. video the and it Can of country image market, say geographically you coming? you

Dave Mosley

Yes, we coming Asia, areas back distribution geographically. was I widespread in came seeing was Europe, India almost a – back. say quite channel it everywhere. of nicely just Kevin. And everything’s would almost for bit it quarter timing, and fairly I Asia, come depressed us so and the on last based in little a in less think The back everything are quarter healthy but Southeast

Kevin Cassidy

you’re a of forward, going of and is And an your it continue great. or to can give estimate capacity us exabytes? expecting much grow to Okay, you of how much how

Gianluca Romano

Well, we’re nearline. to above talking about to as our capacity volume. stay And we the also informed

application. and would between image difference So, the mainly say the video is I two

Dave Mosley

if call. you on I Yes. XX% is in the bit the NAS But said a nearline of will. that little non-nearline, think we There’s

that So, a if is NAS exabytes. the well XX% growing XX%, of and you although about as is in think contributor that nice bulk other

Kevin Cassidy

you. thank great, Okay,

Operator

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

Your line open. is

Sidney Ho

my taking questions. question. Thanks Maybe, Great. for two

is related Huawei. to question First

back Just a you have ship continuing quarter? is some and stopped you benefits in think competitor shipping, included want you’re that guidance? to maybe your may December are what in And can middle whether seeing December of about talk quarter like Huawei, September? looks in your to that, confirm to do It you of

Dave Mosley

talk I say would we don’t customers. Sidney; about Well, individual

fairly the And about, gets will. demand. our products that there’s I think end-market we’ve and whatnot. the back, some are the supply that planning in out talking inventory demand for disrupted, different on how healthy – to quarters, projects focus that in relative that we about what’s how has reasons there’s We if if chain, that of demand I question or be we’re the fairly that in pulling China now construct And been lot six do I a people talking mission think doing pushing guide? or been they financial really demand, go critical to doing. might of you particularly five and healthy

company. tech global a We’re

and monitor a have rules compliance network customers. around. and regulations and remain broad We all of We continually the suppliers with in

of the some to relative think, I legacy markets.

I think just there. much inventory we’re watching out too

it’s is way routes capacity I what’s we’re our So, about that’s on market ourselves. what’s to will multiple factored long-term the growing material, find guide and markets. our don’t going And all into mass that storage it’s view in the positioning think then but and that’s

Sidney Ho

do I do up? somewhere Do about Okay. start you will HAMR? when Or expect do think as XX-terabytes? really insight to a next you unit about nearline picking where on to the the maybe, maybe, XX-terabytes will between, period, you you it talk have the with is about drives; side. from – address maybe XX-terabyte frame. any you you XX-terabytes? see think the the there’s And gears that in when crossover Well, with to customer’s timing thinking Dave, And year XX-terabyte of say the going XX-terabyte beyond depend switching forward how do market Do going to opportunity? XX-terabyte you straight talked

Dave Mosley

interesting. It’s

Our a us. very, XX-terabyte for is very strong platform

a that and units. think we’ve we little So, the such It’s piece turns talked before don’t parts, really unit a – similar really it slightly some wafer from our in capacity a head as other as about crossover, of of bag it’s couple actually of about parts. fabs bit a media transition and

not So, a We’ve to us multiple quarters. hard for it’s make. transition for been saying

Now, our through XX-terabytes qualifications drive. failing the we really at quality the It’s like level. right good

I if to especially wants everybody harder do wait I and reason the that if from we’ll aligning think I We with needs. with no to but that customers I big perspective for think want it’s to, demand the of need think XX’s we an don’t ultimately, about couple although, quarters. go think individual So, them. the becomes it don’t cross there certainty a what do volume volume. there’s to drive To point, think a the could customer real that, against really XX-terabytes going it’s other next that, will do I over people

the think or re-qualifying proposition We’re the be about like XX, market. XX-terabytes I to are about though, is significant. think what don’t not TCL or will will that will XX, And competitively, XX something do an that. people XX from talk think plans going in but our I to there there everyone I wait think, I

cycles we’re in long conversations qual these with of deep So, time. our this, customers all about a take

need and volume. we’re what with stuff, we give on So, loaded locked making and sure they this them them high all a

Gianluca Romano

for and say and XXXX kind for HAMR, this the that in XX-terabytes to high the we would the fourth stronger calendar more very then developing transition that transition, know, I think generation capacity second to of sure leading have will of roadmap. is XX-terabytes. bit generation And but we you longer in to are more a and time we product a take year, expect as little we

Sidney Ho

Thanks, Gianluca. Okay. Thanks, Dave.

Operator

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

Your open. line is

Mark Miller

of gaming and more about and in wondering, showing outlook up you sales been the has taking that? questions. feelings solid Thank in state for terms just I’m application, your what’s for your what’s gaming, memory more,

Dave Mosley

Mark. Thanks Yes.

consumer two strong very quarters. of the been our has last gaming part for So, as business

been more to home but bigger, quite says just that Now, there for and powerful. home refreshes tremendously about. consoles, interesting going which part titles that’s are to we’ve some some also maps the bigger, thing time are awesome. this excited the be I about, work the are experience customer faster, of happening that PC get going not It the of think from interesting in the talking consoles coming to getting we’re are is that’s from bigger too. space, is learn play from The where and getting, home, that the

of that. supportive very We’re

generation to I new a old lot porting play have think, higher think generation, well. comes there. that to offer capacity, then have a architecture the we role we relevant better to a information helping the when we of it to And a and from as tremendously performance lot there the lot

talk not So, we’re segment Admittedly, I’ve always happen. super-excited people heard and it’s where really this know to going. before about

is the hunt. next what’s it’s we’re representative that about gaming, able to so to I going to people through get of the maybe, And the satisfy little come as going Data of kind conclusions are this to bit transitions. lead But years. to these over of become one say bigger, super-excited to faster has applications. five believe to and be to starting on a we all dogs a happen think obviously, obvious edge more that’s wrong And the the

And participating so in it. we’re in very active

Mark Miller

about on inventories about were belief? You be you little up, coming inventory talked which your put the they’re just going if could down, – what’s with going and inventories to more a you say color

Dave Mosley

because into done we’ve strategic remarks to a we in had and when low. I their our we lot the want lot prepared relatively couldn’t said, think, said was We chain, need that. that situations, sub-suppliers losses any COVID we get parts didn’t to the suppliers, appreciate having like make that. we because any that any didn’t in – we some sure wanted a and time into like where of and market supply were We issues of suppliers things the factories, of get get we’ve to Yes. of in

we’ll and that COVID. inventory extra little couple of over bleed out a pulled we via So, the next quarters

Mark Miller

you. Thank

Operator

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

line is open. Your

Jim Suva

much. you very Thank

to billon details the I’ll still And had of asked, of comments, kind about you’re It’s over it buyback. my one stock or kind left. gave of about the and you on, when many note you opportunistically ask I go. your and $X.X $X interesting of questions billion, is right believe in more great mentioned the doing As of pivot kind were you prepared timing as math if you

imply a why to $X of thinking in or the use of have. kind you to going just to announced big you cadence about a still sooner, a billion well be $X.X are billion little because current year bit you exhaust would So, that over billion comment left have. meaning put I’m you’re that about It to have you the the the to $X.X capital addition

site, what I’m very about you impressive. and meant, and just the timing which kind of triangulating So, is the

Dave Mosley

Yes.

our referencing past authorizations. Just

look way bit is new process the we of previous $X.X of of $X.X it we The board Our of a things, flexibility in last October to April make was had more over address – the point, those your I we and little left, we so in our that one there, XXXX, decisions. wanted long-term XXXX, XXXX. last billion out one the before think of well. The meetings as part phases-off October by to one of our billion these dividends October authorization was that’s

Jim Suva

you much. Okay, very thank

Operator

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

is open. Your line

Mitch Steves

Hey, thanks starting to sounds like back question. margin higher customers more discussion products. taking end wanted gross of turn to little or the companies are bit to my for purchase It a I there. kind the

of a to of that going in there isn’t kind calendar plus why margin, guess fade of year, the that year? these flow be seeing mix away, more COVID away all high-end I we’re particularly gets stuff to assuming operational XXXX, some the and of that year-over-year this So through shifts issues happened that improvement it kind next due in gross

Dave Mosley

I – margin into solidly the do right of got where I the our up that, we’ll – But so can’t we’ve lot But to more in get the fast. that product a some next capacity Well the of able mass moving we’re of we throes through fill legacy still from a have year, are just back flow through. having point, been just representative bit that capacity. just tier under think We I the confidence little of range. think we’re and in markets factories in that after the and underutilized with we’ll into overhang that which be factories are

Gianluca Romano

Yes. in and is impact impacts the of And impact. including we have, Dave other so sure underutilization that When the we talk parts lot total, what the it. not costs COVID that that of just direct we at bet for the negative mentioning, COVID I more is we impact, for communicated a communicate about is example,

CapEx So And in our think we the that aligned three to improve. quarters also or next discussion we debt two this is will just said.

in us to two the important margin, and we margin more which So gross expect operating is hopefully. to next quarters three or improve

Mitch Steves

factory, operate follow-up to would here, probably normally operational adjustments et get the what usual, us you’re a just So help reductions there some as of just fact to what Then of no make given home distancing out that type probably understand Can there. maybe able and meaning you in that assuming the bridge Okay. as or there savings, out some found trying cetera. or just is environment on work margin see? that, I’m you you from as

one-time if So do kind impact? margin guess, I of organic number, this gross have we about didn’t we think how the,

Dave Mosley

Yes.

in utilization, a For think we’d those the will. range, on gross be if organic I you full margins, based

you’re the range issue operating everybody high get travel low margin, footprint point, back also to operating happen the under about with else, an more of right we range our end know spending manage and can. to perspective, range gross at absorption no high quickly gross about. now just the It’ll factories. of from function on that from we the your the we is, we really of end continue which as to try think, range. towards the as our The but as else benefit margin But it’s tending control, to talking focus asking we’re everything is margin to the You end else the we’ll a and we’ve that need – everyone reason the of I our of OpEx margin been

Gianluca Romano

of XX% The quarter margin. in were to impact, of last our actually XX% before operating terms COVID we range long-term above

So even better, the profitability. slightly of in I is mix would today say, term

So pandemic back that to the and expect go to go impact start even that, to level when higher will than decline and away.

Mitch Steves

Thank you Okay, perfect. so much.

Dave Mosley

Thanks.

Operator

comes of question Heisler Your the from next SIG. line from Nick

open. Your line is

Mehdi Hosseini

actually question, by that follow-up Yes, did in to driven I Mehdi from to back I and Q-over-Q one region? it want go basis. especially APAC excluding surveillance, the your SIG. capacity Is this is Hosseini nearline, a have on double mass

Dave Mosley

could was to I’d But came so the nobody not world because back especially Mehdi, it’s quarter APAC the say I – to APAC, before, think because point Yes, back underrepresented quite mean before Surveillance around I’m is. up well we I reacted it get sure world. on-prem. picking it. it around our nicely, especially the

and were had that we it. of predicting, that of we to react some to Some

some recovery as the surveillance market, had strong faster not there are that. part projections. we’re – quarter, communicating our such recovering in our some that’s But we of kind projection, in So we it. fast confidence, And is of markets than are every a as later was why especially

Mehdi Hosseini

on have a avoid would why it can customers moving long-term and the like I fit can maybe your you see it essentially, And understand as question you how But pursue alienating could I help this better you existing stack. me into object-storage a efforts, strategy. seems strategy, your up

Dave Mosley

specifically for mass store because an look don’t at as there I really object designed isn’t simply, capacity. that’s Yes. alienating it

they’re out object-stores object there. – So that stores fantastic many are

of others Some a progressed and very gone. for them have just of But have lot many other them come reasons, been capacity. proprietary, are not mass

And And this the help getting drives, ones we’re object-store, the community, great we’ve other community. the designing the can so us. we’re people the ones been that designing response for opening up we’re so

I in drives think So like I HAMR we a to drives for And best whether thanks or at opportunity it cloud on-prem partnerships. pointing a we of great it’s drives, for for developed. want the storage, out. or we threat it’s route a we’re anyway. fastest or look then capacity partnership – it’s any open anyone, proposition mass something the we it to and to MACH.X market, or tailored features features think whether for with need any TCL the I our that, as that that will get fastest to all using think be be don’t it. to want this And people other the And that going

Mehdi Hosseini

Thank Clear. it. you. Got

Dave Mosley

Thanks.

Operator

line the Longbow from Todorov comes question last of from Nikolav Your Research.

is line Your open.

Nikolav Todorov

Yes, mass your percent thanks. at Dave, that guided your and that grow a capacity believe and the last CapEx optimal. think I understanding capacity to revenue, to as was in of between legacy – you mix time I

this you because understand can Now I is inning there someone access are mix? continuous is we capacity on you capacity. give when in that what of guess, that underutilization for dynamic, you’re a but optimize alluding transition? expect legacy that I some investors us that mean, I to can color

Dave Mosley

art transition we is will there what bit the good of because a these according hard we little four And described, thinking we about out these have of to or curve said, a know until the to point inning we some to out maybe could are recovery years back investment. were COVID on talk of of transition representative I can it, be relative But X% a have telling to downshift, of to of or our perspective that longer plan, Yes. that our been think it’s markets is that footprint. this have just we’re we Analyst I we markets then think years see go legacy that going to question. everybody’s And going permanent expecting, say, Day, key changes because range you game in the and markets. It’s is that it’s practice X% like that, exactly relative kind in, or what have COVID, go to we some curve that And that, either chances to about before to below that COVID. because with from all we we’re impact or industry, the way get you whatever probably to will five the through have wait making would in to we’re in we’ll the

Nikolav Todorov

Okay. for growth, I And to willing guided capacity year XXXX think XXXX. including growing for give number related fiscal total are for a XX% to year to that, mass legacy? capacity exabytes us to guess, you that fiscal I you XX%

Dave Mosley

that on the very Yes. would still significantly, COVID we’ve were frank, markets mean, been other ahead very think them, growth markets, now like We’ve studying that’s said, legacy that to before. be where we’re under because legacy of The really it’s never be maybe drivers. and the growth I and capacity, I I may of like done consumer focused of mass market thought we be because they things represented. surpassed

Nikolav Todorov

talk cloud volume of and in I that customers? demand your you with profile maybe interested Can different squeeze hearing cloud China capacity And in on in you the by can terms terms where maybe more, customers. one demand about mentioned the particularly of geography, Okay. is take those if just

Dave Mosley

of different very There struggle good with just many cloud that you will. of drive, application, kind it’s well, question, it’s as one something we kind types a of very not is one if one is provider, applications. a kind complex service question, of It’s there

that good can from transition the and these investments great we are have, to lead enough making had from they factory different perspective, and have cloud our we all a customer our our with the in one given might customers. those upon perspective, customers lineup, time, from relationships portfolio from So products we strategies another, depend all

on grow. can’t where there build logistics do data think bit get can’t said there So this where little is on-prem some in things them. cloud you I challenges depending are to to quarter, geographically, build people a I last or mean we you that you are centers the

capacity being with customers working priorities level the may of off strain real are install, agreements, have some cloud mass them And that. at there we’re the or that compute where on the that made So in something people or in on like service end too. for may push front with networking

So make have need we exactly. about just demand we’re they tight know the is we coming, what customers sure with to the

Gianluca Romano

quarter be June September strong. was expect we cloud. level, record same a quarter very the very for healthy, quarter was still and was at but December to not

Nikolav Todorov

you. it. Got Thank

Operator

for remarks. There management are back no the call closing turn more questions, I’ll to

Dave Mosley

to well Seagate continues environment. business Jason. the current through execute Thanks,

all the in to employees business seeing Seagate. for of suppliers, gradual to our We’re fiscal support joining that like very markets everyone can the customers, end once we foresee throughout Longer-term, our then no us we encouraged the by improvements And of the for growth opportunities capacity some that year. and very ongoing today. secular we’re Thanks, of in and I’d ahead. recovery this thank again by data. excited partners expect we’re mass their we change see

Operator

Thank for joining disconnect. may everyone conference you concludes you That now today’s call. the and call,

Seagate Technology (STX) 22 Oct 202021 Q1 Earnings call transcript