STX - Earnings call transcript Q2 2021 | Seagate Technology Holdings plc

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Operator

Good afternoon. And welcome to the Seagate Technology Fiscal Second Quarter 2021 Financial Results Conference Call. My name is David 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.

conference recorded this replay reminder, a is for being purposes. As Treasury. to time, Vice call and I this turn President, would Relations Senior At Hudson, like the Shanye over Investor to Please proceed, Shanye.

Shanye Hudson

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

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

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

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

us of resulting and statements, product and call pandemic information on of X-K filed conditions. the outlook trends, most market of this in planned section from SEC, reminder, our and XX-Q a 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 As 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 March 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

I will With following over call now call to prepared for open turn you, that, we remarks, the will our Dave. the always, As questions.

Dave Mosley

exited to transformation end market At pandemic, our IT calendar our target today, note, quarter and we on the with revenue Strong revenue enterprise comments the Shanye. strong thanks remainder well our Thanks, trends. digital $XXX million. of cloud remote a market technology offer of operating Compared $X.X combination quarter. everyone XXXX, diverging non-GAAP some and update product insight growth end mass achieving data to range. these achieving trends, disruptions began XX% authorization on and growth flat the point our strong significant countered to X% the of the significantly way relatively and into were transit. performance provide roadmaps, expanded to advancements returned inside XXXX, puts or us have Seagate on position our economy financial Welcome of secular global we of the of an fiscal the we will halfway our on backdrop XXXX Despite share of December how our in free increase year long-term us by to XX today. and cash our I and In made my deliver the investments spending. by XX%, objective Seagate the shares year. executing repurchases support was progress that Against objective. for profits share dividend, exceeded of headlined grew prior XXXX to and quarter, We performance beginning a Seagate over shares challenges revenue grew outstanding recently the revenue in million very for approximately of Seagate the repurchase flow calendar of retired quarterly the billion our joining increased the quarter. stock X% year a share total a Through annual pandemic, delivering

However, well pandemic. strong on-prem investments in trajectory healthy, tech. We the and and for double-digit led most for to data of analysts’ and overall mission cloud improvement is growth first with the cloud our anticipate expectation aligns Cloud critical significant since which up time for growth through pronounced the to this was in enterprise drives. drive the for sequential remains and the CapEx December balance consistent expectations strong revenue nearline year onset which fiscal HDD the demand storage of recover the OEM long-term. pick continue, with demand hardware in during calendar The projected to the customers, to both growth drivers to began amongst year markets quarter, IT which center large XXXX. Analysts XXXX, with data bodes demand increase enterprise positive for Seagate

the Video For pandemic. pent in in VIA a these early applications we are mass demand stronger experienced than consecutive due or growth parts key within and of up expected video the economic the applications and in shutdowns during storage. quarter, second growth markets markets, significant in impacts image markets image incurred capacity following

edge, explodes are of the to at generating As devices vital mass that to work. HDDs number data preserving capacity the data and putting

factory of a major rollout as a and key data Proliferation the much rise number of of outdoor current and coming about day image safe will week. and opportunities. enabled Gartner and video from exceed driver XX evolution of increase expected and data years role XG play security edge X is and will industry. six-fold levels. million each smart the to computing storage every data mass to at and initiatives, XXXX, exabyte that’s well of city the by drives other growth as of in be IoT translate in example, XG creation edge That devices growth in projects, the generated million surveillance sensors as X as of supports the For further cameras smart the video fill to to a

slowdown cloud for March growth capacity in double-digit across legacy VIA our during decline we quarter. revenue the in markets our expected the demand consumer the seasonal space. sequential expect consumer improve for seasonal contributed typical and strong and drives in the the December Finally, to desktop PC More business enterprise and mass demand to offsetting quarter. the than an storage markets in Overall,

the the environment market to enabling is and a drive customer’s gaining is rates With executing as higher milestones, over first on firm, capacity our technology persist November. with of of could delivery. Seagate higher infrastructure broader growth XX% our in by storage With support or committed well continuing base, roadmap shipments expected XX the compound maintain HAMR who investments actuator highlighted broader interest advantage hitting SSDs. for to require late That our such content of HAMR to to is significant the dual economic its customer enterprise we drive technology market and for areal certain among scale applications, density capacity to future. Seagate’s Seagate first to relative a applications performance mass mass foreseeable terabyte

We are higher shipments increasing today capacities and see actuator drives of expect dual to drive volumes increase. as

also new in to roadmap quarter, continuing our industry We the PMR based our globally. We by our XX-terabyte drives adoption on leading product gaining December anchored cloud common of customers drives XX-terabyte strengthen are platform. broadened the scalable

of the of We continue ramp, customer to calendar progress readiness our XX-terabyte will the the qualifications pace have strong increase product year and timing. through started consistent with the which

product adds As process often qualification increase, takes capacities the longer complexity. and

simplify qual customers helping process. is approach platform the common Our

commented ever. terabytes been of the In that qualification of smoothest the number leading customers XX has fact, cloud a

timing Additionally, and flexibility PMR is we this mass to extendable Seagate of meet this expect scalability platform, storage through and leverage to on continue strength The to the the of quality customers XX-terabyte needs. which offers technology. platform

technologies For production common learning efficiencies then and strategy new that use more manufacturing ramp the quickly, and Seagate, our business the accelerate systems pace us of platform to to market adoption. drives and allow

roadmap, technology by position Seagate and leadership wins the our product deal solid December burgeoning ever, representing billion quarter, securing multiple our of in multi-quarter mass for we scalable close the demand in customer storage. maintaining opportunity execution to excellent is are forecast HDD a including biggest in which XXXX, in the with $XX driven We Overall, is capacity capture for X-exabytes deal systems, momentum storage data. to on our our

from data of the enterprise. created, scale capture must cost, challenges moving, associated to CIOs with data avalanche across However and complexity distributed analyzing more storing the value being overcome and

proportionately competitive to result, which Seagate’s dynamic of a agenda. innovation threatens are This and enterprises foundation As being the advantage. created, business that’s performance less data keep forcing is of economics at the

enabling word CIOs to complexity and challenges address are the of more they of are We the data cost, scale put key preserve valuable and already creating. the to

Storage and Platform volumes and open-source successful way data Lyve enterprises the cost secure a participated Our massive enterprise. manage many data distributed objective endpoints, enterprise Platform of to growing and enables of by with petabyte. CORTX is mass Lyve provides maintained per experts, Lyve at software Israel. Lyve Rack highly cost scientists event foundation data the a month across the our core, and in Mobile and powered lowest edge transfer by first the Lyve of Storage between last ever Labs simple, held storage CORTX software has efficient offers whom Hackathon community

unfolding Lyve join the strategy and event. through Driving We the the and our having the February growth multiple share look vehicle that, and receive mandate that have XXth, the will and long-term to the help a hosting to growing span when forward a of challenges more over innovation continue enterprise plan it feedback turn engagements to Storage our I faced entertainment, portfolio media be growing on technologies. Analyst will us. to on will including platform We by to With customer verticals, a for walk December autonomous I interest rest Lyve positive addressing quarter. is our now Gianluca and distributed on we level Platform existing that define and Investor Virtual details you strategy.

Gianluca Romano

you, changing above for the of video GAAP the to reflecting as midpoint, range, EPS XX% $XXX record and by up market, business We December product. guidance our recovery supported achieved ongoing our and sequentially, revenue the XX% million, up demand non- nearly high environment to Thank of which end in exceeding and rapidly by the well efficiency. XX% of continue cash quarter and billion, our execute revenue $X.XX, application strong consumer PC image on for our our $X.XX guidance up operational enterprise David. desktop flow and free shown seasonal of sequentially anticipated focus sequentially, performance, in Seagate was adapt

Seagate stock. of repurchased shares we XX.X million Additionally,

year environment exabytes invest in current quarter, cash three decision disk In into calendar VIA December total XX of shipped drives exabytes in XXX total market, the the up shipped December record year-over-year, Roughly quarters increase generation a well products. long-term in XXX capacity market and sequentially for mass exabytes in outlook the of mass Our which long-term our the and the up were XX% record a nearline, in shipped to We our CAGR confidence XX% of exabytes the XX% we XXXX, include hard business shipments ahead year-on-year. a our and this the capacity to Mass quarter. XX% is of about of future abilities. underscores segment. shares forecast which of capacity,

increased shipment for revenue. calendar driven drives, mass by stronger at Our for shipments XX.X XX% support reflecting relatively capacity total current quarter This capacity the enterprise setting exabytes, revenue year XXXX. XX% our for HDD sequentially resulted sequentially, as capacity ongoing and of market for customers. every demand well $X.X revenue storage the dynamic per up representing from outlook XX continuing revenue drives at basis, terabyte. HDD and recovers. product XX% increased XX% terabytes flat year-on-year, terms mass and Nearline billion, growth accounted Nearline XX for up and nearline of year-over-year. in XX% enterprise sequentially capacity March as December OEM was Revenue a from in quarter staying storage exabyte mid-capacity high nearline XX% as than demand On demand expected were

XX the continuing the the of remain adoption XX highest over product company’s quarters. expect for size are revenue We and expand next terabyte couple to to terabytes

make their volume We also with timing. market, at with drives the our our progress ramp above increase cloud positive of revenue In shipments was continue on XX-terabyte multiple customers to expectation VIA aligned plans from and demand to strong led in up December in half pent calendar COVID year the as and quarter related cost quarter revenue in the of September the consecutive record the second the recovery for qualification quarter. first

for ago the increased anticipate and we to both demand, December legacy represented XX% period. drives March We in sequentially consumer market, uptick XX% in and quarter HDD shipped be The typical demand sequentially, by the recovery enterprise exabyte also we for currently expect market improving The XX% into of in trend. ongoing seasonal in lower quarter mission revenue, see strong was in of typically and the mission down PCs the our recovery demand the period legacy and for year market. sales compared critical critical to seasonal this moderate total from prior drives driven drives. market and XX with impacts a quarter a March resulting of which decline enterprise XX%, the growth Revenue below to the desktop exabyte seasonal consistent quarter. Following shipment the

business a made December prior flat X% revenue, with on non-HDD basis up quarter a percentage Our of quarter. relatively

COVID-related with As benefits compared In along quarter. million earlier, from December million, both to Within we costs. signs our of wins, increased plan, quarter, customer large the chosen profit $XX expansion non-HDD supported to at non-GAAP and our the double-digit should early Dave mentioned in which primarily strong sequential recovery Seagate demand, with due to Xbox customers, calendar in partner September in growth saw cost business elevated a Microsoft product for million, XXXX. gross for business, increased revenue. slightly improvement benefit $XXX holiday SSD our $XXX shipping system system which OEM

are incur We to derive which the planning lower great. similar quarter, higher opportunities currently demand as timing increasing and balanced cost, with we cost to March freight customer in sounds levels

overall quarter-over-quarter, home impact same at margin non-SDD non-GAAP benefit was margin $XXX period favorable mix. $XX reflecting came the XX.X%, cost, slightly COVID-related down operating ongoing including from less of Non-GAAP from resulting million, working about as expenses in this efficiency. year, the by million XXX-basis-point product a Our last from from and expanded operational gross offset

bit March the quarter. higher operating expect Looking in a ahead, to be expenses we

non-GAAP operating share up target approximately long-term and and I of despite the diluted the operating revenue, income of XX.X% million XX%, $XXX of resulting to COVID margin account XXX share of midpoint quarter driven earlier. half XX% expenditures million revenue. in by activity basis Capital non-GAAP Based points Our $XXX headwind, December relative was by the quarter, sequentially was million represented $X.XX, XXX upper mainly on mentioned at were December our for was revenue of approximately leverage, our X% EPS repurchase $X.XX non-GAAP guidance and enhanced the operational EPS to higher outperformance shares, was our while the in $X.XX. range which

the X% fiscal X% is will base by reduced capacity to storage. need chain flat to below the considering of protect X% relatively demand of against and days and freight to the which for existing of prior expect $X.X and as of sequentially. We manage at eight CapEx growth logistics when in well inventory was for outstanding believe level anticipation Inventory represent future strong CapEx X% value level align revenue year, risk. our installed continued carry capacity billion potential inventory revenue. continuous of mass near-term, storage to the Days supply with strategic demand this between capacity We target higher supply as better demand in mass

on December level fund XX% We in million strong up the this we improvement $XXX in ordinary the up quarter shares approximately year-on-year, December return quarter demand focus XXX our quarter, we billion normalized the a inventory as flow million million dividend shares, decline $X million with the of outstanding. cost consume and use $XXX expect quarter, September linearity. in our efficiency free supported XX exiting to retire utilized and to In and to by million trend and operational level and freight critical gradually We to $XXX generated component. cash more from

will We and Seagate continue retire our to return to stock shareholders. capital opportunistically

gross $X debt of new issuing $X.X billion two debt $X.X billion. average rate a and the of total any a the of bond. capital, net raised Including of was we interest our was Additionally, at billion lowest debt tranches in notes,

new billion. the expense be including million, March remained $X.X for equivalents cash We $XX on approximately at Cash and two quarter stable million relatively expect interest $X.X tranches. to the

strong enterprise than As center continue decline calendar markets. more seasonal begins, the recovery the in the year we other March in of some new expect cloud data our demand to and end offset quarter

I to the is multiple Seagate to will range In decrease or final gradually minus quarter shareholders. now non-GAAP $XXX plus While $X.XX facing delivering for our the to our outlook revenue XX% Dave our return $X.XX on headwinds XX% plus into well expect is our comments. minus back of and will margin be call next commitment of to our the expected EPS this the to expected business levels, or $X.XX. still Taking revenue the be in we demand for mid expected of to address executing follows, commitments, turn be demonstrating our account, across closing, is of financial quarters. maintaining as model COVID-related is to cost, all million, billion to agility is and few these cash customer over operating March we are target non-GAAP factors from

Dave Mosley

Gianluca. to was have we and a face continued hardships. XXXX Thanks, very and year challenging

efforts We are our are with all data year signs capture encouraged and extended team, growth calendar beyond. Through well-positioned to by the Seagate we in on the XXXX vaccines of recovery. progress and opportunities exited of mass and firing cylinders

lowest to executing delivering our cost data mass technology storage. are innovation roadmap the We continue

portfolio building of family We our are data for the Lyve which gaining platform and XX-terabyte interest growth. our strengthening way for market our by XX-terabyte the positive common future Seagate drives opportunities and mass Storage paving infrastructure we expands momentum scalable of on Platform, are

the our walls ongoing and diversity, track report. reputation month, to recognizing strong a on and both of employees all the able promoting and proud and outside and to our the culture record I strengthening workplace, ensure focused thrive. our from employees and success. we customers on lifeblood company Earlier support safe company dedication latest key is diversity and of this remain the the an Seagate our see ongoing to for and and respectful suppliers, success of Our am a shareholders. provide maintaining founded is are to released are inclusion within our its and open, Employees equity inclusion

ability the the reflects take growth customers. are our highest that, higher across reliable quarter We I which questions. December about and cash our Gianluca We data indicators on were providing our lead contributing will and collect happy our we quarterly care focused value we satisfaction ever, customer breadth all am value take shareholder greater our generate for equally revenue quality of over in success, In The for opportunities, With summary, which the Seagate’s excited high base. among long-term. to for to enhance shareholders. products are your customer I to to overall and Seagate measure believe to of

Operator

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

Your is open. line

Karl Ackerman

everyone. Hi. have is I I expectations terabyte Thanks timing bit helpful. are just then afternoon, for achieve you suggesting think, of, because a XX a attractive to also Good term in elongated? you while able year exabyte a facilitate still think, I XX% on-prem you. your And indicated are on drive my fiscal well? a for your got more touch past, longer adoption remarks that nearline you Dave, customers I would and you offers to as taking could very upgrade or I growth your exabyte for very growth question. in could your XXXX? that ask noted be Thank maybe terabyte growth XX recovering, you second, XX% exabyte business That prepared start. question With think still

Dave Mosley

and question is Karl. Yeah. is still a lower to to your then on-prem for about be tends -- the a astute question between capacities Thanks, is answer the directly. is, there nearline. highest the There the your Thanks mix in XX% capacity little question. what’s cards

through point. COVID. said the have of capacity think reverberations X think cloud a wait fiscal exactly is fiscal even The see end bigger year. for and I of is in still further good the XX than your markets a we the have but mass we still a consistent. some than the that’s But that, term, number bit growth grow year number good fairly to XX% may I be actually after But the XX% could Longer or just the it terabytes. we So terabytes think,

Karl Ackerman

then, Does capacity able hoping may volume center I even commitments Thank and the drives components if shortages, could shortages particularly you just shortages across semiconductor it. you are supply drive? you upon even -- think, from chain? If ramping XX that extend diodes. hard of second, preclude your you. your data with given your I touch within terabyte And to providers the Got

Dave Mosley

interesting Two Yeah. questions.

is you reasons thing first The really the asked. we exactly flexible like common are like on we one is of platform questions just to scalable

way relative in to of but what we of more So I across are we capacity flexibility. be think, little that showing I of and some a chains, visibility, if might over are, and its and are with where the out relative forcing kind think all chase I do bit of them witnessing point, those But long platforms over components platforms supply are that were that think things and people to hard are be to fact have silicon. those of on these to more your over and to the and some have discussions the needs lot the front changing constraints us then of we a mature gives capacity what needs people managing mass again

I what example, the made times you reference calendar for growth of in of making on the customers, the and enough might to components has they later sure our recovery other especially need everybody than year. during some For think, and

Shanye Hudson

Karl. Thanks

Operator

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

open. is line Your

Katy Huberty

thanks Good the for question. and afternoon

versus in terms a the demand have either price or talk Just just with all to get seen Can qualitatively are some end the we hyperscalers increases where you the they a ago the a of And about have ago? number improvement manufacturing markets. that I in product ask, channel. we some want, because hear quarter of that year utilization in in you seen you started can have

the might things and tight what of next December strong quarter mean got that couple the for how wondering seasonally Just in quarters?

Dave Mosley

Yeah. Katy, thanks.

are that legacy tremendously disrupted, the some the of markets some markets. in So of we

fairly The QX, of disruptives ample the cloud QX and for period and strong been we supply example, a had For has chains lot of impact, impact COVID well. capacity and us. as predictable throughout demand the were pandemic

we are predicted. building what We had

and way aggressively will, chase some things, the full. that constraints, some markets think and time capacity staging we the manufacturing I it in of were of the for still there, and really more future. At things, so about on kind stuff to bullet you have how just VIA like like our time capital constraints, supply I there stuff able level is process of the particular the if that a long we wafer things but impacted drive we our lead wafer we felled pent that’s was chain. some quarter That’s had demand think of those of seasonality up the impacted last that ahead are based did were some racing -- the pandemic all flexibility

we The helpful. capacity longer some that’s up flexibility have building manufacturing time to them. your which if saw lead drive is point, to So upfront

Katy Huberty

follow-up thinking can about bridge then the just relative to Okay. just you gross are margin Gianluca, March you And quarter how to December.

your the of which on guidance? up seems slightly it’s some like gross based plus margin, on Just and sequentially minuses

Gianluca Romano

Yeah.

into said when and December, still segments part The both we direction, segment, cloud the right already improve in the the of as now hard sequentially. have sequentially, March script, very impact go starting as quarter in the we in we OEM December some and was the quarter, to healthy on had enterprise said of actually continue mix going hard improve we strong the margin to is solution was negative disk in disk system December the quarter. all, especially to but First the already business, improved the in SSD maybe

in quarter. mission the than bit lose in legacy less a margin bit the segment, We of maybe then seen We the seasonal little the will quarter and be of the critical have little past what we will and think I gross think surveillance.

in So we go the think continue I will direction. same to

of be have be a probably what we we little some high It similar. fairly and higher COVID were March we bit expecting in to than there. the was the continue think will Of cost quarter, December from course, will that fairly will

Katy Huberty

congrats Great. quarter. Thank that the you for and on

Gianluca Romano

you. Thank

Operator

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

open. line is Your

Sidney Ho

of kind of on my couple side, question. parts one first taking had for nearline them, Thanks here. maybe I the two maybe

seen some more about On seen a think recovery or what the few last center is the customers But the delays you cloud below about mission you but question some months ago? line? on talk side, your think on-prem of trend any we of large cloud far side, enterprise on in the How do have have still compared talked and QX are you you to The kind nearline drive, you pull-forwards capacity you critical? transitions data quarter.

Dave Mosley

Yeah.

Okay. Sidney, I think, parts. of the two kind

So days first is you impacted. most the that enterprise, be early pandemic during recovering the somewhat. on-prem is will probably That if the just of the we said

the well to slowly I it’s about because to some But exactly goes IDC are think X% long. I it’s that resolved still recovering slowly, numbers have in think why the that that’s as market. of so going on-prem is be traditional and prepared themselves the now, understand line IT we dynamics the more it not we recovering -- feel This probably and is kind remarks with quoted of point. fully in not predictable is and up we like

capacity because on. On all providers building world, -- prioritize on applications dynamics I fits of prioritize cases they cloud fairly there we around there grow have, cases size and bigger in into cloud cloud they long-term lot opinion would going they other general, it’s and billion market the now. were from the is a react to on and what away in just are one so so pushed people right they say over budgets to with complicated a of too And infrastructure the we have, even so dynamics the than storage of they be is going is there is and platforms But technology lot have we the and whatever to in with the seen My some that bigger $XX no they the the projecting XXXX. with in have that obviously. forecast, that cloud service the they because mass

the of it the that we talked coming about. growth strong dynamics secular choppy So still is cloud, there in some but on is just think we based

Sidney Ho

I current quarter addressable think the given Maybe on shipment drives? Okay. asked about total restrictions Huawei, Does but to you know quick follow for I the way question last a on that change the the market this nearline for up, year calendar Huawei. this

Dave Mosley

Yeah.

said So time, customers. specific comment I on don’t last like we these

that think will it’s not how globally I ultimately on market change serviced. the demand

So question. if that answers your

supply data it very, are demand net is products these another, serviced chain chains. the and complex or So get one another by customer storage there for by one or very supply out will and

Sidney Ho

Okay. Thank you.

Operator

with Your next question O’Malley line Thomas of Barclays. comes from the

is Your open. line

Thomas O’Malley

taking one Thanks guys. is questions. My really afternoon, around for capital my returns. Good first

it You that couple what take the quarters about the obviously model and down cons next shares of rolled which decent the amount also of the on Can over buying from to talk How you you pros the quarter more and obviously is a view take debt thought shares. was we spend your that and strategic back have well? buying into as with back viewed then shares? the new and can some in

Dave Mosley

I generation two the company. is in really looking and bigger believe just went the is, obviously, the Yeah. market. the part looking that were through we of the forward there’s what way at Tom, the capabilities parts the of long-term cash of pandemic kind question in we But

opportunities we, outlook So invest of data inflection growing things have on current in transitions the of long-term our like businesses, is of the from weighing with seeing is so because in Seagate’s shares we demand server lot just data now had do I are business our point this and that environment mass think cash factory edge growing helpful client perspective, into finished generation do an capabilities. mass mean the and if from and we we growth. kind is we that, capacity, and decision so. that to to kind are I for and transition simply that capacity a

think so a and we in to fairly had thesis can to generation it good trade-offs. this I to at that investments look the time opportunistic, So the -- make this is all, to capabilities have at capital. interesting stock, to cash that all relative all it’s strong an we We the ability we return we underpin have we make look retire the ourselves, on

Thomas O’Malley

The flash this a very but a question market just there environment a flooding Really well, with concerns answer in will and the next level that is How you in see lot decreasing, mentioned capacity clearly, react. high particularly market what in can will if that the weakens? first talk one may about expected flash through totally of think you legacy markets think your if greater the cost on environment you big see you NAND Obviously, the do from helpful. and side a quarter. But some there. is year the throughout which you happening year. pros high-level cons it Or you do as declines just seasonality is you fair this of than

Dave Mosley

hadn’t very transitioned have narrative the NAND. A Sure. ago, largely notebooks and to years over when few different they was Yeah. now over transitioned

us, on tens new number, bit this that of look really that as I is a a with two talk But interface really things mission drives out than places service So value that for mission little baseball few People in doesn’t anymore. proposition. for head critical that platform good There’s done more of at where like competing there. where of market there and inside critical technologies we SaaS haven’t large and to exist are quite slots continuous drives that’s and are the out here. millions have head maybe example about a years, even a

those we are Because to the NVMe and that’s you market, to them I some don’t So fairly continue not architectures need NAND small speaking, price change new that where dynamic. think products are or and a so. that designing architectures the will of is service architectures change be large generally changes or SaaS but even

and relevant. difference capacity you super in day between small going X decisions its in not markets, make the is in the cost, architecture large data is people the overlap, markets a the And mass to in two difference will, change if mass of are not that So thinking change cost a infrastructure, making.

Gianluca Romano

like this growing I don’t expect to really the the in are really NAND structure. and OEM point point important and segment even overlap cloud think enterprise we that, few hard years is this next disk and and between that at surveillance, happen but that in which

Dave Mosley

come big lots and age cloud look in and definitely of of at there it’s right customers a to growth we same for lot mass our problem, social got Yeah. is solutions components. the and be and dynamics, exact for keep I opportunities the design have roadmap for perspective, be NAND edge the driving architectural The so is -- way just there’s different a and of capacity the has we data to that going we are fine.

Operator

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

open. is Your line

Steven Fox

not a can as I everything of new to previously. to X% having of advice X% decision what’s just were and with follow-up. might had into just am I the going as X% thinking But trouble about I you of said CapEx talk be that sort know then you X% high it sales. you footing

Dave Mosley

I Yeah. take Gianluca this one. let will

Gianluca Romano

Yeah. what was couple more of happened Seagate, in industry general than I think what the capacity years, Basically in installed needed. and the last

Seagate demand growing good utilized. being of not additional that fact still absorbing see obviously and news capacity fully we capacity can is industry the is in for So that the for the now particular, but some

So to need in we least and order don’t demand. serve the short-term invest their their demand in more absorb at to

big So two think is now quarters. and we to three is X% us say, number amount the still supply X% small the not or investing align a but is is of revenue high number, fairly in our would next, for right or that a that demand level that I

Steven Fox

bit later may in of said later uptick, can et or terms drive customers when there on more cetera. have Dave, rollout. of what you on, if upon color kind rather it know I it sooner expect based little some is you a other but than tb And give is your you that can consistently dependent color then provide maybe XX you the want just any

Dave Mosley

terabyte in in in from We qualifications to the and mass just the are something script don’t like ship industry or well. try then we a perspective, point, Yeah. the say earlier of that. them in roll the that think XX the capacity not of did the have bunch, era gone anymore quarter To the very I at end the

real have exactly good to customers, have know they the want. what with You relationships

So with the asking a where who we the you rent that us we know customers, to we begun be terabytes that over communicating going been so theme this XX clear going with to few were though. be fairly for are have last in and we the has on was quarters,

and levels, it starting so, it. back the the good then the months sure transition and by are parts, are all ago to platform. ramp, making many, the product levels, the feel the starts we it’s And about to and we now going right feel to yield wafer, is ability which We about really that right making because that we we common quality good need, components a many

comment I of That’s have just doing this I look rest think plans. well. been I because but at or signaling is on don’t I industry really way we can’t the the the isn’t that’s know, pretty relative. what our

Operator

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

line Your with open. Rakers Wells is Aaron Fargo.

line open. Your is

Aaron Rakers

into your of loss to kind about growing I imply I a I in look at kind capacity guys this mass at next regard that, question of really discussion. healthy uptick to with last When it shipment on Sorry wanted was seems of couple mute. visibility build very on to growth quarters. these very, the a year, XX% capacity

the up dialogue profile, ship have year? that think of the business, And kind quick into of do characterize of up. into about in as would in of I pickup visibility back the your change customers, with capacity visibility a So you you the we kind how half follow demand had the key have that that

Dave Mosley

Yeah.

-- I capacity are the point about think it’s exactly what just pointing highest not in out. you

what good have and visibility on We customers XX’s needed. our

about X out well, on XX and terabytes we those so there’s to and something they XX’s talked We exactly also at have but need terabytes what in good on. visibility customers because multi-quarters as going on

see can on kind of cost market as at capacity the more you to the platform capacity, if based we capacity that tends if things we a actually that growth by that are where few than that And serve confidence. accounts. isolated to of lower and mass we and us products significant the as So out that’s you some start like will points global take increased be transition that we disks well. the the see have But platform or there. heads transitions that and making, do that we way, gives And the

confident are increases. that the ability we in out So, to better solution mix go our

So go ahead your follow-up. with

Aaron Rakers

quick And Yeah. is this follow-up. a Okay.

margin variables, you or think I of what you plus, that normalized of drivers gets that have range? and XX% of year XX%, business just last the the plus to into kind Given the How I what’s kind that am as mix the transpired the characterized gross curious. about back over do you a think

Dave Mosley

Yeah.

businesses. coming As have dynamics other HDDs point, costs your there. Gianluca I almost we will platforms out. mentioned other to that before, some But necessarily these is of mean, exactly take there new

times allow and and It the like But have in market very of their keep competitive well full but factories do there sure will into what back a things growth us more also -- with demand equilibrate growth we I that. that the need. We is to trying that everything the to get ranges. are to they markets, people recovery COVID was some make again actually in XXXX getting are as and customers expect some

lot asked a are recovery. and and growth Karl is of we into stabilize. -- those of are to of period we at have sure supply supply that making the expect with a earlier, time availability, about Now, discussions well you right Like we there into kinds and the as this questions right

Aaron Rakers

quarter. That’s in the

Gianluca Romano

you, Thank Aaron.

I items, of quarter. think for after the on cost think is focus quarter of different of level and achieving the combination I us cost are we course, always reduction that

of environment then then, the alignment that demand and are more very go are and And item incurring right pricing situation those COVID now will between the think industry. cost costs we part little few additional the continue hopefully, should that there that we we a don’t this because second is of forever, bring quarters to bit for important of away. for course, supply The expect a healthier

Operator

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

open. is line Your

Kevin Cassidy

was there density been And to going going Thank and you and results. that now? just delay question customers a expectations the on my what Or back, for taking first, coming higher the congratulations qualifying are Maybe the enterprise start have strong drives? is forward? with they

Dave Mosley

the exceptions rule, lag. that highest do. they for as qualifications product Yeah. enterprise There any lag. They branded but fast customers as really other any Typically, capacity in people There some been slowdown Kevin, of point do are to the through some reason. do the not qualify has don’t

think, the there. well have through do need challenges they people COVID, what kept gains on the as of are because logistical I to efficiency they people even challenges, seeing focused

the -- starting enterprise So us grow think of some again. right the to I we demand as but that is answer helps enterprise make the transitions, those as demand way

Kevin Cassidy

Okay. as just Thanks. And follow-up. a

more in talked to event? the a visibility and do the anytime about, of is year you With over crossover you of shipments Or that moving the calendar XXXX? and a see XX-terabyte XX-terabyte XXXX

Dave Mosley

at Yeah. the it’s It’s because happen and point, it volume not going of do or going to platform. sheer hard this I just XX’s. the see we are some quarter of yeah. And to next the But ramp same quarter really

driving that the efficiencies to us by for also So ramp There per XX se. it’s get platforms. not other hard is to we

why that’s So excited we pretty about are it.

Operator

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

is open. line Your

Patrick Ho

a terabyte. about been to XX-terabyte to as the last easy question mentioned XX big transition. XX-terabyte a Obviously, the Seagate congrats on platform you quarter. Kevin’s much and Dave, a share follow-up has and gainer you nice XX-terabyte for transition Thank to very the maybe

versus secondly, that do get how terabyteS? share to are, more see you at, look gains wins above peers? guess question, incremental top XX differentiation guess, I HAMR your XX-terabyte new -- the move on when significant you maybe, platform customer with First, do and there you on And I guess, where when of I you

Dave Mosley

think Thanks, Patrick. se. per share really Yeah. I market about don’t

talking to about what about think exactly need. I they customers the

there point, I example, for XX, XX Now XX. am going on and said, who are to or were people to your

the waiting have they been so transition a bit. little And

them work them. those have And transitions make that with so for sure on we an supply we will ample and

to have there. get market discussions capabilities I higher, even speak comments go script in to I only We the can -- can’t are in about I really peer we to As ramps. speak having. made confidence that we the XX-terabyte

the have We to there. capabilities get HAMR

control carefully. I levers think those very we

There have them can service we architecture architectures and customer, So or is who there whatever, still is architecture, legacy whatever will to specific even performance do they that. wise we go old a and lot because for get replacement of out a want, architecture. we their new

think gains, making I us customers about we not being are think are but I sure and share don’t flippant, these do what just from need aligned. rather So, to talking about we exactly just

Patrick Ho

Gianluca. Right. And as my follow-up for question

in want lot to of an out it but them related with R&D I done there given the job at HAMR? embedded? don’t of In especially terms products? to costs a you the OpEx way, now to lot How R&D maybe during, ability guys Is times and release near-term OpEx out lifting flatten you have OpEx, especially heavy look the a flexing really of HAMR-based challenging are of initial good and do in a leaves XXXX. that starting these the ramp they start-up

Gianluca Romano

Yeah. done that have already. Actually, we

think partially And at quarter. we a in probably much quarter. results try the least, $XXX model So, already, we are to And said, you will now good result for below million stay our possible. now is per around as of last bit I quarter below. And as long-term, we the see little the

look at in we know technology opportunities for the cost have space we online we especially always HAMR. reduction, Of course, now where developed

we past. have all don’t the we maybe So, need the had that the in for spending

Dave Mosley

get some to of out being learning proud that where again. don’t able lot really and everything to there else. the We ship to are a through where we volume the building have get down and laser smallest Yeah. There point. it And something or It’s really it the This technologies, difficult is. whatever size good Yeah. dialling these shipped. is is really spot a point. technology, It’s really to waveguide go and invested start we investment, units ever smallest XX-nanometer a are HAMR really, a to good shipped have we and ever

And so from here, lot so that your we I of appreciate question. scale get a

Operator

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

line open. Your is

Ananda Baruah

is of Dave, the Still, actually up. on March some implies could, then it quarter implies capacity really June had the the then remarks. guide I June Happy and year, Year to first where And growth made that congrats the of XX% mass solid for that sort results kicks quarter kind exabyte New here. guess and you I if the quarter

year. I the in remarks calendar clarification, through sort you about would prepared really the for ‘XX. of don’t to looking want act think I said -- continues I

are I all, then get. sort a And follow well. thoughts a the love. then what Well, comment way on And And up to quarter. love does first in kick of from quarter so, if just have December March I for as your quarter you of with could Gianluca. up September and June I’d the meaningful

Dave Mosley

Year New Happy to and Ananda too. you Thanks, Yeah.

forecast and normal the have It’s do continue looking to -- mass capacity. like the now. last still the markets that was downtick, -- from so very will recovery grew yeah, we underpins here to but feel had VIA was where through in seen Chinese year, things New So, There we But haven’t right their COVID. different last grow forward, cloud early they disruption that obviously Year. quarter did a see than exabytes that they seasonal during and due of there lot and

to getting say I think off go with And people mass investments, to allows really to the investments. were now markets are say, need it’s the of those time the over capacity I volumes. make okay, same -- the to for everything, high who address platform who frankly to our flexibility some and pivot us put

confidence. our underpins what that’s So

Ananda Baruah

Okay. Great. And then Gianluca.

higher points COVID upper couple margins half of drives you couple a op like as I more the nearline go year are are doing on the to you then sounds pricing, XX%, also to get had of But basis you of you of about that normalized like the doing, range. cost, cause XXX have basis up et feels points. through now you a -- now so point et talking to pricing XXX guys And little am can go bit to gross things right on cetera. in continue think the I that. putting those get XXX of numbers on sort basis mix, margins a it You right cetera, the or upper of you the are end the handful sort range

you -- would if op range it fashion you or margin that should the range, you it, the to you go are debts mean, margin. -- a -- I capture are And gross margin on the that’s about Would I to I guess we on asking. guess does show normalized XXX, and card there think in XX% op already if what the going really what sort you areas the am XXX normalized how invest. So get of on upper

Gianluca Romano

to Happy and you. Ananda you, New Year Thank

a If bit the already higher. in already even you look result. at operating impacting are we it’s now our XX%. it’s And But happening, we our performance COVID, before still at still right of our happened, then margin was top COVID and the XX% at the were range, it’s

are back to COVID the level that we So going situation. with even

discussed opportunity, situation the now the impact fairly And So, from of of are quickly mix. we the at that COVID cost the always in expect it the the term going additional based internally course, even better. we we on at of were before, and direction right level in we go with to course are looking we before gross and pandemic margin

ago. pricing We better in are industry example going year to for direction now the a compared a seeing is also

discuss and all margin, to margin, elements am Analyst of those better Day. operating we pointing So at gross better more are course I will sure, with our

Ananda Baruah

to sounds to XX% like XX% by operating that make, way. Gianluca, margins the

Gianluca Romano

I that. didn’t say

Ananda Baruah

day. appreciate guys, Thanks, it. Good saying. Just

Operator

comes with question Mehdi line SIG. the from of Hosseini next Your

is line open. Your

Mehdi Hosseini

and a want with operating some actually when idea cost you materialize Just subcomponents seems see. it procuring those I to and changes a to and margin I me will I have and made an you follow-up as question, the to to prior that follow-up. get have help savings would gross

Gianluca Romano

We got think the biggest margins, And on drivers and COVID world thanks. largely on is challenges those the the me, the I freight that’s with on Mehdi and lot logistics-related. Yeah. a those, still impact was discussed gross fronts. of

are think that. components, I a people company, chain. solid feel so our Relative feeling we think And supply I lot fairly about of to

open for there making early get they how We suppliers, right had grow, investments sure you you So especially of the all that. to we of make are that it and to that are know, had the factories and days that, positioned products with lean, the of times are was are our know, ones about we that confident the but that work people to, COVID. tough we the pretty in in are had did some right continuing in

had, constraints, your don’t really, don’t is implied to we your that I question, foresee any a to it really dialogue I supply maybe but forcing be So comments. earlier the in maybe different

Mehdi Hosseini

highlighted looking service increased way opportunities diversification the then a of moving nearline, a surveillance, nearline as be into providers capacity, composition cloud drivers? there give especially And this like well as demand of surveillance surveillance nearline and some into end diversification you and with and at of as you could adverse both higher and market video

Gianluca Romano

expect edge. the It’s generating of data a interesting because factory. all script if smart read be to that point this you smart to you these all about we And, cities, the bellwether at for cameras kind the know,

of in lot there’s other edge. the of of data actually some of that being there’s at It edge. a today A data know back-up the dies make data cloud. the kinds doesn’t data, with lot You a created but video

to the the say, of beginnings to just able all I of the has data, cloud do applications because some -- how get that back way there. to people have you You to see process do get -- the be where the up the core core physically great to cloud, from models data start the the it for nascent the micro edge,

again. we said, to The have like to micro being that the you you data probably get never product to either to Things vehicles, you go I decision edge data amount once point And, make a never created you or what to I at thinking ever know, learning know, and, overwritten decision for are that’s strategy and decision autonomous process again on. it’s or get question the that being our You want make -- there. you not of that’s like live today exactly small.

And cloud right of So, and service different same are you of forcing micro it there’s the is very a symbiosis to of right that’s that some now. kind time, very, word data between I quite level, kind drives need for yeah. guess lot the us the and edge resonant interesting to for models a

Operator

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

is line Your open.

Jim Suva

question. operating It should higher seems indicator better, both and costs to costs continue are XXXX gross gross actually headwinds some trend both shipping just one ahead looks Am right just innovations negatives are new just as that on through or mindful Thank out be I pricing peaking, you. margins, rolling are And to or there’s we margins it whether be every forward? I get have lower, operating like that COVID and we of helping. simply should likely go

Dave Mosley

fairly course communities The volatile through place that is No headwinds, Jim. and quite impacting of still world still a everyone’s bit. COVID

why data talk product are to The to So products, like from we positioned sure you in and the the we are right will economics coming to there’s made we have our realities are of today. we have ahead, want factories, comments the That’s our to our customers that and portfolio do. the chains we perspective, our down but narrowed well, story normally things supply like out already mindful our think that. that sure guide do we we quarter-over-quarter is we growth but really make believe

Operator

comes from of line question final Nikolay Your Longbow the with Todorov Research.

Your open. line is

Nikolay Todorov

much your the profitability on right guess, can wanted gross from now to margin you Thanks back from you for see whether try want more a under but and now a maybe quantify get perspective? try squeezing demand you little line? how of headwind where I have hear a bit to utilization your CapEx and that to me fully bit us tell in. supply a to go maybe to Can do just and you is color. I the that little question I balanced to more

Dave Mosley

about if impacted the think It’s a year of in was? Yeah. because legacy XXXX were tough that Nikolay, how what’s the we have little some You of quite were it thanks. bit. environment demand that bit a you calendar disruptive and products

And be drives that of we going of technology that Some capacity, can have itself requires, them repurposed capacity bit, the actually what capacity well. them mass to transition growth then XX-terabyte of the are dollars capacity little as into that call back some back but a spend. mass we

through So And from that world modelling demand disruption, will that got period last supply we be our range we we on blending at X% we the for early what all these what think can the together, and this here is, year. things based is manage out through disruption are ample there. that X% to supply be will the bringing online demand is saying

Nikolay Todorov

do the quantify meaningful from headwind, see way a the And that utilization? under to you Okay. headwind

Dave Mosley

that fill Once up, think Kathy’s Sorry, two. not that maybe headwind to gone, here once drive, in maybe will the so quarter will be way back and I question, really. the -- happen heads factories that

Nikolay Todorov

or Just what a per last row year-over-year declining quick follow quarters double that? a just to the single digit, I color five want for more you up, over second mid digit legacy a benign, the a us lot four price -- in terabyte in quarter any on I drove can think the give

Dave Mosley

mix. like And last a quarter. a segments, about all bit, consumer grew quite that’s actually think I

question. next but that part gaming, So obviously is previously, still and to things from so the home home, been the play still that. compared critical was think light what that’s Mission that recovering, work it of like I from had of some

Operator

and management. That the back concludes will I session. call over answer to turn the question

Dave Mosley

of Gianluca look like upcoming Seagate. us I’d in to thank on forward their join you to once again us as ongoing XX with you And on partners said business employees and speaking please Analysts for joining February all David. you to Day Thanks for thank of today support all our supplier’s, our we our again there. and customers,

to We will next quarter. you talk

Operator

and participating. Ladies today’s Thank call. for gentlemen, conference this concludes you

You may disconnect. now

Seagate Technology (STX) 22 Jan 212021 Q2 Earnings call transcript