STX - Earnings call transcript Q2 2022 | Seagate Technology Holdings plc

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Operator

Good afternoon and welcome to the Seagate Technology Fiscal Second Quarter 2022 Financial Results Conference Call. My name is Brent 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 precede, Shanye.

Shanye Hudson

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

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

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

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

our open following remarks, questions. always, we'll call the for prepared As

the had Dave. I Now to call over

Dave Mosley

six Shanye. in we non-GAAP the And demonstrates ended operational execution, we the calendar expense cashflow on the calendar than by years. all consistent call. $XX demand. revenue $X.XX more of nearly year. you, we billion, the quarter EPS nearly over agility, capitalizing performance decade. an on XX% disruptions expanded calendar secular revenue that in delivering solid the more joining XX%. To of XXXX, have representing non-GAAP in of on chain are billion, and storage today's year, we level This Thank capacity our us sharp light and by on a compared grew December to high that EPS year today shows throughout another the And the discipline year of outstanding achieved prior in Truly nearly we highlighted in experiencing tailwinds by further are point focus up best free XX% long-term and is we mass inflationary $X.XX, that pressures driving of supply impressive Seagate hello with displayed year note the and a growth performance XXXX everyone highest

and beyond. our XX business terabytes the for and to common also our value Seagate’s to drives to financial platform capacity underpin we executed consistently pandemic, shareholders. profitability many flow We and two customers for our that XX our Since from we and drive top times investments Seagate’s and remained offer roadmap deliver now onset As higher priority on driving profile. customers the and focus of shared cost before, free cash proven value generation made product enhancing extended XX while enhancing efficient, have our family

needs through through dual-actuator share these performance customers’ billion quarterly programs. technology. our while We've shareholders repurchase $X returning dividend also our cloud to advancements more our We made industry than and notably leading address

Our growth. to execution consistent X% further positions a currently and momentum year our product topline We with year Seagate with revenue increase model XXXX calendar to expect X% calendar to growth range. third deliver consecutive beyond long-term of

me In customers. minutes mass discussing a We by the revenue again our with achieved Let growth generated from capacity spend December current few we cloud led quarter-over-quarter quarter environment. sales business the cloud for record the HDDs our critical plans. our nearline sphere. ever by XX supported data revenue increased products, which growing are of enabling customer terabyte consistent technology highest significantly with demand

and And results we ago at well-established data analyst decade expect or over do next the a have place year HDDs our in change our the longer. that not a shared demonstrate, we ecosystem. event As center to

For that XXXX. to Seagate Conference center volumes been has CES our beneficiary transformation another year data the years of and demand powerful capture from of increasing and of emerged to past place. forecast calendar analyze that growing and a continue Several need take cloud remote and this a digit support massive data. remote growth to outlook double the investments themes work, strong couple in trends cloud Analyst education, support business underscore access of longer-term CapEx digital year's

business the New as drive edge. demand storage, at vehicles capacity cloud can mass data-intensive highlight in such and or both the autonomous how social use value or cases smart for AI, applications improve cities and

meaningful emerging continue These analytics opportunities at Longer with VIA mid-teens, data AI how extract and are healthy term, edge historical of the to supported slower, the opportunities edge. by capture we sales products our to shared high in offer expect December video use VIA utilize cases the quarter applications exabyte previously driving we expanding and the In value. March at remained and the growth the be within definition, quarter, to have markets. We forecast trends. seasonally consistent

sequential the that that by industry dominated our December the legacy OEM in to other Moving revenue headlines. primarily was the somewhat supply challenges COVID-related quarter we to and counterbalanced from broader PC in markets, cloud lower the enterprise, growth markets, attribute

of customer shipment OEM and last disrupting impact our plans, shortages indicated both enterprise drives. As which mission legacy and capacity we near-line quarter, non-HDD are mass some component critical

further other quarter that mindful on are legacy supply typical seasonality end We the away the could in that these pressures March anticipate measures VIA markets. we COVID-related and

portion are the supply constraints over conditions customers remain demand we align on is of and ramp production and continue timelines. capital However, six long-term term mass quarters. revenue capacity remain our temporary ease under of drive align near-line with high exercising HDDs to engage long-term customers to aside, through ensure times even environment with Seasonality this to and next supply their with increasing or to longer, to the lead agreements expect expand environment, capacity longer on managing capacity future the with for months their that tight In couple requirements demand our plans demand strong. momentum With further. trends focused of discipline an

We compelling are a executing for also value is innovative that to our Seagate. offer for roadmap our mass financially customers capacity cost reduction proposition and plans attractive

XX-terabyte ramping are drives, common generation. We platform our extending to third a

XX% less ramp build-out. meaningful customers On now, For customers that given fronts, a both for XX and proposition the couple pull TCO record point inflationary cloud savings pressures potential data efficiencies, setting capacity today's same from a on then to quarters terabytes At production storage across strong shown be of these parts in represents these center first steep the to All XX require higher the the indications which storage products capacity. to to realized further is with for part shortages value networking other The ancillary cost translate data and surpassing the an gear very our very layer the center gains boost compelling. for system in support drives. drives. for ramp may have we market. capacity to Consider a XX-terabyte move our the of XX-terabyte drives transitioning and enhanced saw level,

to to result, a in factory are year support seasonal our March quarter the as the As strong unfold. the demand slowdown we stays XX-terabyte operation using

Our market. common approach to to ramp platform and the us enabling facilitate quickly this process by products helps new into transition

family, which to some our highly With overall strategy for SMR and manufacturing XX yield. CMR XX-terabyte XX media the using the terabytes improves capacities the of currently and and platform XX provides efficiencies production to This across our XX-terabyte family, power process also technology common head leveraged our that understood Our time hasten drives well stretching product products. flexibility sets. spans terabyte customers feature cost through breadth making

benefits the media We incorporating produce manufacturing same capacities cost and spanning by to head technology to are cost two terabyte down driving additional and optimized drives drives.

offset gradually to revenue contribution addition challenging optimized I improving December revenue. inflationary supply using from flexibility, these and total fewer increased Wrapping nearly In remain of higher can to density In which some aerial improve. amid March up, products disks, near-term the component of quarter require XX% however, environment; a for HDD the optimistic the we manufacturing conditions quarter, enter cost pressures. heads the drives drives to

to excellent terabytes. long-term and capacity underpinned strong product I'll XXXX call our Importantly, position cash beyond beyond, and to by the model deliver an hand financial results. operational on XX cover now Gianluca put portfolio storage for the our in growing over revenue mass strong execution flow free generate and growth demand Seagate to

Gianluca Romano

sequentially business, up we environment quarter, totaled XX% product EPS XX% adoption compared we sequentially of prior our exabyte, up aligned into XX% up cloud Near-line $X XX% mass year-over-year. X% year XXX remains the year-over-year. fastest supported margin execute Thank a and nearly solid our fifth achieve growing of basis demand mass the navigate capacity consecutive up XX%, capacity capacity the Achievements We period. for financial you, with up for points and X% to and year-over-year. drive revenue near-line In operating X% product market In year-over-year December we business. well to December with outpacing Dave. $X.XX a revenue up our billion, up quarter, capacity achievement segment deliver XX% non-GAAP sequentially complex with record capacity XXX XXX year-on-year. and grew non-GAAP deliver Supported of achievements, the and mass to disk product and $X.XX, enterprise year-on-year. broader the XX% continue from by X% quarter cloud hard customers. demand up exabyte, OEM exabytes, expectations. well drives performance business Seagate our as the up XXX as increase and sequentially In to totaling Ongoing mid ongoing healthy billion, XX-terabyte increased of revenue to

are support following on also remain into in customer a near VIA continuing in seasonal year-over-year quarter, product a March but growth Sales the in December remain strong slowdown terabytes the project XX-terabyte shipments coming expect quarters revenue to the quarter scale for healthy Our and growing we market September. And of while XX up quarter, preparing We two rapid VIA record the is to the ramp basis. interest. during market in revenue an XX-terabyte demand. anticipated family to

down million, weaker doing Seasonal sequentially $XXX Within at lower mission-critical consumer than drives PC shortages and anticipated XX% for X% PC partially year-over-year. component the ongoing revenue to sales. offset legacy market, came in demand and sales part

quarter, system As component also last shortages we are business. in sales our impacting discussed

customers deals increased supply record a As some delay SSD wholesale XX% $XXX and due Despite boosted strong of non-drive this to constrain components. XX% headwind, million by sequentially non-HDD demand. year-over-year revenue product to

to in our fiscal XXXX, challenges confident businesses, both we logos. to supply we customer demand and remain While and where of new face for in particularly capture system for SSD solution we business continue terms system see near-term ongoing continue the non-HDD

gross profit in our was quarter the $XXX Looking non-GAAP million. performance at December operational

capacity product, margin mix XX and higher record non-HDD optimized basis drives points The ongoing cost the points sequentially, a gross non-GAAP corresponding Our nearly XXX to but favorable higher down and freight logistic spending. upper flat sales. quarter. and XX% cost Notably, product HDD less We offset transition of prior up range mostly $XXX with XX% year-over-year. target basis the gross XX.X% relatively both million our non-GAAP of than our expense half to margin expected of management the flat certain timing operating of offsetting remaining discipline at expenses with and maintain a long-term lower was

the We higher in to somewhat an expect in to increase OpEx March be due quarter expenses the in business travel.

And year-on-year. of to million at in the prior share range results and XX% flat of XX% top sequentially the was outstanding days quarter million a XX% XXX remain on the non-GAAP end product XX at diluted of $X.XX $XXX X% long-term $X.XX, upcoming target Non-GAAP and XX.X%. We track. Based margin approximately our the XX% million above relatively of $XXX up count was operating with inventory support operating sequentially. revenue. Our XX were share, quarter is December $XX our guidance inventory approximately quarter non-GAAP Capital for EPS increased which days of expenditures with down by to terabytes midpoint. million for income

which range the Total increased Adjusted and roadmap the alignment quarter liquidity XX And in For we and sufficient March. maintaining with the $X.X while X.X in quarter-over-quarter $X.X up our profitability December increased near-term shares strong of demand. cash reported, $XXX repay years, cash to cash $XXX and with is plan our to X% cash million, fiscal us our we the while was summary, performance million year, forecast of cash our period previously navigating a financial to expect of X% and quarter Free on end to approximately billion the our year-over-year. level the dynamic we credit million December. through million seven $XXX of $X.X fiscal $XXX to the including In solid facility. coming in at target was of CapEx end to to future December $X.X authorization. and business approximately flow We billion, quarter, XX% delivered revenue, million continue product generation focus in quarterly months strong capital remaining generation, enabling XX% debt flow we and ending in XXXX, billion our December to supply ended program. balance continue In quarter between total and delivered free and debt for the ordinary fund was maintaining highest to due the as to free driving million and generation our quarter in billion environment. low performance, as repurchase in quarter, billion. We EBITDA equivalents the improve for XXX exiting we to $X.X revolving million used dividend shares, return the outstanding support $XXX

in expect anticipated with decline Looking continuation nearly the environment March ahead to quarter, market. a VIA legacy demand market we the seasonal the and of in healthy the

and and are manage we the inflationary dynamics we of pressures impact noted, we’ll other mindful through to at ongoing continue least supply expect the to fiscal to COVID year. Dave constraint As through that related chain persist

last be a or in $X.X expect of We plus billion quarter range million. revenue minus $XXX to

pressure discussed margins our as COVID-related I over operating expect We to by impacted be the near-term. just

the operating However, support in with structural the overtime. will execution Seagate we margin industry believe a discipline changes combined higher

expect mind, XX% non-GAAP our target operating we As XX% to long-term to revenue operating $X of revised revenue. be expect we with end at And of raising revenue. the the result, of be non-GAAP March to lower in quarter non-GAAP to our a compared range that our are long-term margin XX% of our range range XX% plus we EPS in XX% finally, to of to margin $X.XX. prior range of or minus XX% With

to XXXX ahead, Looking growth XX% back now between raise to from product low the further pipeline. fiscal our call ongoing year our outlook Dave mass double with prior storage capacity digit strong us final the further XX% Give demand confidence comments. revenue be and our will combined I in up to range. for for turn

Dave Mosley

we’ve and outlined the growth on over our decades. well know-how today, leader has a cash product innovation and transitory deliver and data driving strong consistent all, the it in longer tailwinds demand focus to been during technology deliver our lend period unique capital for results also the to capacity program. and of to to in as this very the issues. Seagate has in come. targets fund and ability Seagate will trends the Gianluca. Through push capture our Seagate right and performance quarter December these explosive in achieve four mass years for powerful, ability I’m company, operational growth storage proud posted XXXX confidence Thanks, term annual partnership opportunities as returns of remain robust growth profitability that portfolio, to generation

their now unlocking technology innovations their industry and are The era leading that capacity intense into with data. of customers of to and mass new positive of of to the power a has industry hammer undergone results of significant focus These a drives. transition value We the structural multi-actuator with by the are years investment markets. bring and the customers change

Seagate large. this the capacity deserve for We an credit employees continue and to which outstanding I return believe Seagate’s performance like our fueling at focused on capturing to past year. the industry who healthy our would is innovation for are thank we appropriate closing, In engine, mass for

support as We ways annual positive our in progress a for director increased business efforts increase better workforce. a inclusion These published are many are driven more company global, many which want the workforce, executive the inclusive measures percentage the we areas well I to focus of I customers overall roles, positive equity last Seagate. the of leads their value our continued captures build to important also their in we week, diverse put in minorities as I to our shareholders report inclusion are believe to trust would third report, and And reflect take our for happy of and an thank in women to and highlight and in in sustainability. in an suppliers for we and company. U.S. like values our and the questions. the diversity, and that our Among Gianluca action. now into

Operator

[Operator comes of Instructions] Your Mohan Bank first question with America. Wamsi from

Your open. line is

Wamsi Mohan

everyone great but think trajectory down think be inflationary that job in to Dave, when you. talk strong cost you quarter, Thank in a just we of should a have quarter-on-quarter there, seems XX next through how for on Can the price not slightly [Indiscernible] about absorbing look year-on-year pieces terms the guys gross at gross very basis, points. basis quarters? but few you pressures both moving margins the and that Gianluca, margin as Yes. you done you the this came about

Operator

Bank with Mohan Wamsi of of line the from comes America. question first Your

Your line is open.

Wamsi Mohan

Hi. hear hear you me? Hello. me? can you Can Hi,

Operator

Please stand by.

you. operator. afternoon. Brent, the host host just for reconnected. Good the you. I’ll reconnect. This is Thank waiting reconnect are The We to

with from Mohan of question America. Bank first Wamsi comes Your

line Your is open.

Wamsi Mohan

can hear Dave, Yes. Hi. you me?

Dave Mosley

can I you, Wamsi. hear Yes,

Wamsi Mohan

talk we’ve investors Okay, in the few job there, pressures think through at basis. seen of have great. slightly great over the margins just down year-on-year these Dave, pieces quarter-on-quarter, quarters? on last that you a over moving You a should when done coming guys gross the quarters? But how next moving you terms versus in can few the pieces inflationary look the about price

Dave Mosley

prepared anything remain predictable don’t question. We range we time. near-term over like the in are hard I’ll to a all becoming heads, There more remarks. ceiling as be of our some know I as means mass what’s which drives illustrate industry margin are course, just can of as a going headwinds prescriptive We we inside disks headwinds near-term in our that. still view lot and Gianluca can. the more that a But to picture time. ask second. that few numbers there’s Big We’ve our appreciate being as there and on in and you the with drive kind capacity, the tried are as we more is of focused is or on described current here more

last I also. it few of again, quarter grew will it the and years for yet So, for probably course next the think

that, are this go Those heads allows so more long a supply we to is – for as investment. bomb entire predictable those drive constituents investments And the and challenging and media. do control and obviously more it period. in around a I us under long-term little But on bit think our of the return chain become investments factories

some the want of you Gianluca, So challenges? highlight to

Gianluca Romano

mixed. mainly Yes. all, from the coming say quarter-over-quarter would is I change first of

look at to hard gross the disk drive prior you flat quarter. margin is If completely the

don’t have change the So in disk. we for profitability any

the level gross part also cash overall is revenue, and lot reduction at and was revenue But hard We our business, the course, SSD flow some increased of a margin. the that disk free level. of driving very the have helpful the in mainly known in

gross and disk as inside critical. a September segment a in Now the a good down fairly expecting X% know in as lower capacity margin record we close high a margin were was Legacy is But high. you that look mission about mass but gross high was you was consumer still actually when segment. at is hard actually sequentially higher record to higher,

into December. across But hard slight in is there lot And driving of was disk disk compared the was increase now part a company So going September. non-hard the finally, is decline level. to mix in at flat reality the the margin total on the

quarter, different a is Now, still when go impact. mixed when you March it the mixed is kind seasonality no more impact, into of business,

lower be of fairly say high Some low of revenue. consumer. mission segments like are like expect SSD actually but gross let’s like we seasonally And decline the at critical. in the surveillance, that margin, fairly; some the point, gross this will Other margin, also are segments part not low,

not from when quarter, you margin mix the all is the So the but it’s slightly – in the again, from is business March probably the quarter, December put together coming the driving down from mix. gross mainly coming

to start the that with our coming from increases we now now strong course in cost, in impact the As now to high Dave business also be mainly in logistics the mixed cost we with This as before, next impacting months. the capacity total. control two leaving have of that was We freight saying mass again to spending the but December. ago have and the and the offset continued have, we thought few But a of course, news level some costs. of increase mainly quarters cost in bad September freight we already expect declining as

Wamsi Mohan

a That’s colour. the lot great. all Thanks Okay. for

Operator

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

line is open. Your

Karl Ackerman

I a Wamsi’s most Thank question. But have recent is you. I follow One Yes. are to Two to of up. a If enterprise about mission follow weighted you Gianluca, shipment non-HDD toward I plans. some referring customer shortages up questions disrupting may, critical is if mass capacity? or spoke component this your here And you may.

Gianluca Romano

say would system is one the and solution. parts the is shortages of a have in One business. experienced we a I two PC No.

Karl Ackerman

Understood. That’s clear.

Dave Mosley

that there down there some So critical I Karl, makes to sense. mission near-line some bit, that, little if and to breaking a think is is components

Karl Ackerman

long-term moderate you it near-line end was for the capacity discuss markets the I sounds you I hard of March your may Thank Great. of some customers drives, of an perspective, for your XXXX. visibility business guess, that high the for agreements. calendar which the trajectory end you in the these you demand could X% then you. contemplate just like signing have as And second, drives, these most remaining center are visibility today areas are hoping to customers in data growth X% across some but to except for me, – from have

Dave Mosley

Right. Good.

So as marks, the in we demand said prepared quite terabyte strong. XX the is

whatever flowing aren’t quarter And the growth very so period, XXs staged we’re this many good that XXs. are get and very using through to is for on components that transition to products. this because between leveraged are those There for platform XX visibility specific. a high And really it’s the the

has provide the confidence and all level have been also I think markets receptive that. to customers some other demand forecast TCO have and very cases customer of They of On can with continue as in there the relationships some we benefit. the quite see deep customers that the watch a well. to are – we

and temporary a to of on wrong that supply, And more going it. So demand paying chain year for we’re revenue. are is attention that that that are it we’ll into because in it’s are aggregate, affecting some affecting everyone. I issues of think There mindful well. be now as going right our translate to It’s problems supply than but very exabytes our

I mass capacity data particularly remained for think the picture demand strong.

Karl Ackerman

you. Thank Helpful.

Operator

UBS. with Your next of Tim from question comes line Arcuri the

open. is line Your

Jason Park

Jason Tim on for lot. Arcuri. This is a Thanks Park

the low half second season, year of strongest can the is quarter? the can is which is the close second usually If about Our have of how of which first to June XX% up the calendar we seen. of June on implied year, think the be half we little, question or flat to a has strong then – year normal about how calendar pretty like degree is

confidence. the just a what there gives So quick what are got wanted the ask you follow-up. Then I’ve and drivers to

Dave Mosley

Right.

on said, talking right of or if at when lows digits for you we about high-single calendar is we think were – tail the low-double I so revenue. year, entered digits. this then we tape, you’re And go look back the low we the to sorry, which maybe point,

Now in fiscal said and through remarks, halfway we more than we’re to XX% the XX% these already year.

at we So can QX see exactly and to that start right now forecasting strength. you look are

Some of the the the on to that talked of XX just that’s on coming to terabytes I’ve about response Karl. back

Some to the the cost terabytes, actually drives that as with predict transition that terabytes, pretty customers of it’s X great there from to can we all XX We also X as terabytes, optimized way we that the well reference have we transition market made conversations platform. and well.

that as well on fairly we the calendar with about part we year is of calendar So feel of then guide. the And top talked entire growing comfortable last that, year.

all it’s So baked forecast. into our

Jason Park

Got it. China. my demand is in on follow-up the And question

of weakness are lot due of some just the to a the most China rather we concerns of there there want restrictions. you about as level of government So a to gauge think is near-line your but in demand business direct concerns – than through channel. And

is question in from seeing you the what Thank particular my you. So hyperscalers are China? in

Dave Mosley

necessarily supply of There mass of largely out other have that’s pockets build pushed chain because not been been out capacity issues, issues.

investments still those are planned. think I

there’s I a may out be budgets think are really applications, new Asia, China, lot coming these providers, I say service for online, going continued then to that we’re about a think customers I actually prioritization also relationships we all have that it. Now It applications because of or of in they shortages. of it just outs of measures happening of come. of would I that some the but smart push long-term, with Not city because OEMs happening lot but other are COVID worried into that and component in think prioritizing, great of excited end we’re the maybe about not things cloud build quite long-term,

baked see our revenue so we just gave. And we that’s forecast into that we all – –

Gianluca Romano

Yes.

be on I seasonality confusing demand. with need careful think we lower not to

the be mass part, quarter, usually part will in September we a demand of high not capacity lower So new when get December. – But in the a our the impacted this or because business. our quarter, quarter. seasonality. segment into June But in seasonality, of strong and that by we normal is especially that March is in last improve to the level inventory and capacity a very expect in start level And go mass surveillance of then the for

Jason Park

much. so Thanks

Operator

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

is line Your open.

Tom O’Malley

related and question. the question business. taking My good for Hey, thanks VIA afternoon, was to my

bit You’re goal but a business to be what that year-over-year. XXXX did a a exabytes in you low hard posts March exabytes, it's March seasonality little made two basis, into there? when from to in on how those into what the of like? was quarter, dial the When Can call try at March engaged revenue was? you the seasonality traditional terms extremely weak Obviously would some for of look you that March at is look comment VIA. you between because it describing shipments up that get us Just look just field given and

Dave Mosley

That's year a to online pandemic challenged. little could back behaviors – little think applications in have could been that, even kind anybody trying but the I I be There’s been better. a bit better. clearly of have a City year-over-year, a would bit that ago to are going But, Smart in great things point. QX, to The when, their it investment coming off strength forecast say even better compare of is

reasons And talked are this quarter. us being some still should market getting in sorry, growth mid-double-digit I are COVID there those the unfortunately think markets. is over that pandemic of build-outs out. VIA – some of strengthen. priorities question, we earlier do the the about and We to that still made forecast with the believe mid-single-digit to are time And those pushed

supply the the markets. products and across I breadth our the quite chain. perspective, investment that then think From data component of the be these for demand of applications all it depends is the strong on to in have economics made

see so and And that we should even goes time maybe more still growth as on.

Tom O’Malley

Okay. And follow-up on then there's obviously the my inventory an just uptick. was side,

there you just dive in of You remarks be of to can parts of think it to not because due related inventory be et that climbing your was other XXT. I market, prepared you're That'd into or Are where you the are could inventory that in demand-related to shipping in number? also but increase that was understand. of is that XXT componentry, mostly dynamics well? there product? mentioned Is the that actually as some that other there of all just some mentioned and the pieces helpful that that because buildup supply cetera,

Dave Mosley

the – XXT. used parts we a it's to way, very similar of course, just are we use than like down against all of the further. broader very, able those XX, are portfolio Largely even We're can about the XX compliments some talked go to XXT,

end So optimized at drive. of cost the the

some there's think So build way going is now. right about that's some there's the it that, up yeah, inventory on – we

in Some this subsequent staging multiple quarters after across for families. the of that's growth are bigger quarter. components usable very But

not growth we're worried about So really the

Gianluca Romano

have few this quarters, protected situation, chain by last we much little of December some supply inventory to built strategic but bit not a the the In quarter. course, be in

by say I'll So have you increase in the related XX three the is trends. we seen last the done have what terabyte to months mainly it before

Tom O’Malley

Thank you.

Dave Mosley

Welcome.

Operator

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

open. is line Your

Katy Huberty

you to is you. in you down Thank that, Thank And seasonal be these could of to sure looks March quarter X%, guidance, which resolve connected that to the revenue something go you to downside you. pressure. sort mid-to-high guidance. as remarks, up with digits, some is could that the or because headwinds revenue whether additional just mention a I baked then incremental would implied revenue June? And to quarter? supply the then better X% afternoon. June single follow-up. that had of expect In to themselves for perfectly supply into did than have And that's aligns if be Yes. wasn't your pressures prepared put that your Good some you March typical

Dave Mosley

number of Katie. the a I There and are dynamics in question of different free part There break yes. few think components latter the your weeks. that Yeah. next we feel will Thanks first, are

some for as so we've into tried and to for we're guide time. yes, that to some customers, the for getting as also our staging broader know generally complete maybe smaller customers our sure quarter. make these that And quite plans that we kits. trying had speaking, that And look but against can well you components have trouble – those are some you're bake won't they're build much this because we builds, they've break There that the there of your to tech goes but are do at ecosystem,

tough get to going so the right periods. are little things that for stay a the this through are customers and just some to of now, for we're get some will mainly are is help longer. things And all there trying them There better that near-term bit other

Katy Huberty

on have And is about in your the extend if margin March should we which expand of you Gianluca, you with margin, in on hit revenue discussion then you the see into the line, think EPS gross back sequentially improvement. thinking margins really can could you and the helpful. it's HDDs shift but line March? you mix was, Do would guide consensus Wamsi gross consensus, quarter, with maybe how gross That's towards Okay. helping be north an XX%,

Gianluca Romano

very from the March and the now surveillance, and is VIA segment. will be general impact in high Well, market the coming main a in mix gross margin

from we some have mission and also critical. So declining business impact will that

and we fairly segments impacted when look are So really are the at seasonality margin. gross are that that high look, segments

September the business, less go into see you to in Of increase And our when of airline go stronger March is the all the, after and our capacity quarter cloud, course improvement in the of part of think now course even gross positive. seasonal and December. into the in that airline OEM when in margin continuing we’ll now part the continue the we I the and mass

and is is seasonality for this there normal is that an So impact to industry. due

I not as Now, will look that unexpected.

Katy Huberty

off March So and margins seasonally sort flattened that improvement of then of base? in gross down

Dave Mosley

how we guided This yes. Yes. is

Katy Huberty

Okay.

Gianluca Romano

capacity heads we more to best mass are and drive [ph] way into more of that products drives and can And to to margins that the is constituents the the the gross transition get bomb continue media.

Katy Huberty

Right. you Perfect. Thank much. so

Operator

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

line open. Your is

Mark Miller

the for question. you Thank

some of up? you Just that holding chips? near-line that supply your about were of What was mentioned facing constraints. supply own Is people some your wondering,

Dave Mosley

have suppliers time. partnerships think our deep long with we Yes, I been with them for a

that. with. predictable over some are with that becoming dynamics there before, said I amount customers try perspective, think I not is want. volatility them stuff we that time. might be lot a But customers then there’s more Even have from of help those with a like And my the of of certain if level to it smaller

getting visibility better time we’re I as So think progresses.

Mark Miller

you anything been mentioned has SSD enterprise there in Is growth terms the else sales, over of strong very year? anything last driving your other sales

Dave Mosley

do there prem. I data on for demand there out think is

some supply as be could serviced. Mark. there of well the constraints being mean not I there if weren’t that’s And some probably of as

may getting So some but as next other think of over compute I the I entire they going out there’s they to shake so think there the do probably have this networks, yes, be may outs underserved And build demand, getting don’t well. or part have problem It may build few out. problem is months.

Mark Miller

you. Thank

Operator

from comes SIG. Mehdi Hosseini question Next with

is line open. Your

Mehdi Hosseini

for I follow Thanks XX should my a to XXXX on And get thoughts from think migration especially up. I XX, that your we have and Yes. taking for question. near-line terabyte? commentary on given XX, to to mix then the your expectation focused about want XX was and

Dave Mosley

if wanted that Yes, actually or back or we maybe to, we to we’re if transitioned XXs XXs platform to. to can XXs wanted largely the give

demand what is. mixed according theoretical customer to really a we don’t mix. build We So, the

transitions to for customers, aren’t we’re XXs. people ready to So talking some

these would a little tweaks aggressive we’ve to to in will better The or very to whatever position. XX, in so very, there actually here this The stay aggressive made our bit want them. want people to referenced remarks. ramp. Some fact – to going that the platforms ramp I ramp people say is XX we that were a relative put on we’re serve XX; stay on changes new some platform prepared cost terabyte And be to us common we have

quarter. this quarter – staging of last higher in and calendar this that’s – and transitioning course what we’re next for over higher year to But that’ll the be and the bond. quarter over So this

Mehdi Hosseini

you to Got want topic, also the it. are costs to I to understand you be unusual just gone say the in on that be able there to and pricing going context customers? up pass that that how then would mix to to has And incremental that products pass that and fair customer. you cost for Would it understand incremental material back dynamic on highlighted better to really margin able your increase cost gross I impact, that isn’t different

Dave Mosley

But of to will experts and – as becomes get that’ll when very the again, And wants at the don’t To the don’t first of the but cost ultimately up And right who There places be We there’s those place saw kits the world everybody don’t to where supply most and or get a that our are the to most that everybody’s course, have long. to spirit perspective as my that right have right on logistics increases the the that deep we then mitigate time we That And it’s supply because specific, understand of look especially them themselves run some in ways chain problematic. and massive the freight a we on. that that’s supply quickly plays there be the exactly are really fees not we possible. partnership in customers hard, freight from costs costs, they pass what’s in that the with our down may Yes. those find all, we to that this, of to perfectly. related cases run with they lag customers predict We difficult have you understand work with They associated chain. trying. stuff themselves. time logistics pay have. to along. customers going we chains discussions necessarily as demand pass

we So together on. them work with

Gianluca Romano

supply to the much is favorable environment the cost between from demand. Yes, a I transferring say related on the of to mainly good would customer and price Not too the alignment supplier

Dave Mosley

mass and By for [indiscernible] into capacity. media go heads most important,

that. really are long cycles and like there Now things lead investment

focused on. we're how that's So

Mehdi Hosseini

it. you. Got Thank

Operator

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

Your open. is line

Jeff Randall

trajectory Sid. costs. safety but year Jeff COVID should through would How in about Randall a I an think and for a XXXX? some decline perhaps the calendar expenses is will travel as uptick go this we of assume in you see operating labor we costs, Hi,

Gianluca Romano

what December little the the we not quarter, are than the you COVID lower say would a the in expecting. is good of question. what reason is were came it up Part expecting OpEx bit of research I We Yes, saying. a situation. exactly were

quarter. the again quarter the limited was possibly in be or December March and to So, situation now kind the this in may following We think our travel quarters. will start in of improve

we a probably and million little OpEx discussed million glass per bit still increase we expect. right know quarter. $XXX that This year, now is $XXX will what in range So our between the the quarter through calendar

Jeff Randall

on of XX-terabyte then have capacity? a your margins you the think near-line side, fully the to you Should And the about XX Great. terabytes when gross margin similar to profile drive increase gross higher capacity ramped? as how continue do your

Dave Mosley

that, scrap opportunities down new bills introduce course, there's yield comes I Yes, terabytes the that there of to to after we where up our A of generations think any head firmly get come are node or, curves, can fast increase where media and we as like lot it. things that and our control. there's under technology how XX and the but

internal we So, our all can, according as what transition on of well. we to how customers transition according fast based metrics need. to We

build is to time. over opportunity there So, that I think,

Jeff Randall

Thank Great. you.

Operator

from with Ananda Baruah comes question next Loop Your Capital.

is open. line Your

Ananda Baruah

gave days context of afternoon, just up? two I any I quick love guys. if the last you and just you follow a one sort either ones, the growth of, Yes, and any in outlook, guess but of you. demand XX taking Appreciate in could, either on guess your near-line question. length of just good change for cycle, each terms terms guys I of cycle of a perspective there, Hi, in then Dave, punch quick like gave, or would over

Dave Mosley

to pandemic getting lot I because that that push, of knew had people big thought home it's we do. to there's the about work and people in well. bunch and just other gets better. is we there's a the think, just backdrop just into pushed predictable the like really of a what, meant storage because we think, work will from all the come those fairly there's just businesses that think IT ups of compute, that what I of on course, parts stressing the with data there's solutions, of as only, the we value professionals our opportunities all and are that the that better not kind no, storage, And growing and of customers conversations so than think But start we been cloud challenges build network the that, of the cloud more it's and Ananda faster the want

there's even real hasn't, significant people capacity there So think there, out supply temporary the demand. though there a problems of for shift lot are I chain don't change mass in

Ananda Baruah

do the few Okay. Gianluca, is how sort just the some of, ASPs months that's capacity And me? your need that demand. ASPs on to a meet you, Thanks. just mentioned you Like, sneak helpful. about of to and the then, Gianluca. through That's briefly just and for go us you capacity sort super of also put more describe aligned to it follow-up of and in supply can demand ago. for year pretty you situation you Could of had made context mention and you view you you

Gianluca Romano

Yes, Ananda.

of relevant we know, are spending you every As amount quarter. CapEx

because are it's to than investing we more not is And is demand So is demand and now put needed, very not place the because we are the that strong. what put fact and is that well aligned not try supply in capacity the requested.

is And several mass value significant we that capacity making. where two are year And ago, support and capacity is are the return exactly to for seen, better we That driving our industry is that than match demand estimate quarter, also seasonality that has much appropriate is the is what Of environment to general And no that the that for. our main making, is our in the we to no needed. customer and some putting driver deliver And industry but CapEx without demand is growth. define not this pricing last matching quarters deserve the course an not in part because have what pricing. the ago. the now been investment with we we is through of for and satisfy demand where there year general, the that a job a the, are needed the demand years think we capacity in

Ananda Baruah

Thanks you great. guys, a That's Okay. lot appreciate it. I

Dave Mosley

Thanks.

Operator

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

is open. line Your

Patrick Ho

adoption seems platform us much. HAMR you drives, adoption delay good common first acceptance could drives customer very on you Thank the is really still generation how's whether like few off and that on you're maybe of over the getting XX-terabyte your the the Can the it potentially track traction or HAMR, thoughts HAMR drives? next of next for and Dave, quarters. give

Dave Mosley

Thanks. Yes.

to will been to So into the plan some have to point. evals. continue to be HAMR do We that be, platform. go the common always exactly customer has to for There changes planned your specifically

behaviors now. they'll happening we the think ultimately when the couple be So come get. actually with capacity know kind this They'll progress HAMR drives with said higher Very too. of I customers exactly what a happy on HAMR they, so, quarters ago, is, right

we're intense have partnering with engaging with We on in they're us development, customers, product it.

middle to in of opportunity discussions right as with that and you work now. come as have your exactly the As there well lot stuff we'll point, have replace know goes with customers offline know And They people the it all up to stuff. far profiles, the is do adoption and, the a transition to, of that, there as see to some we're their those we, other yields take to fab. but

Patrick Ho

are business, more invested into platform stuff out and big over a lot invest HAMR some kind follow-up company; maybe investments, time? platform, that question as Great. and Gianluca it investments in a of to much you. for come the And that was into much to picture that'll to on you of up your relates need of like Lyve? you've platform. Can additional solutions the basis my Lyve needed common how of the discuss build maybe it offerings you the terms do obviously for Thank investments How

Gianluca Romano

we hard it's our of is a what It between, We on its and very normal is production part lot know really good move storage that not customer question. based an a disk we use is that demand. need. The from context, the on mainly internal is disk, requiring depending cloud for additional of business Lyve hard a based location so

Dave Mosley

can the that, ways. Yes, these making ways that, look investments, would we that into go-to-market aren't is particular chains I constantly we for big that Patrick, what we're products use develop, in different in can say but

that think and outlets a to, think in we're product, and but monopoly this going of to parts help Lyve product we us inside systems not economic, and manage lot given also So are our to scale. opportunities for only have construct channels that of having our about ultimately the of see great benefit circularity recycling also, And we in the world, help as that different platform. customers, a way business the there's us issues

Patrick Ho

Thank you.

Operator

Your comes from question the Suva Jim Citigroup. with final line of

line Your open. is

Jim Suva

much components are has products. precedence of My for mentioned fitting on you freed Thank for your historical of be than because have next you the It but like, mentioned some your seems is then, you question in. others it some two Do much me to How pricing must to going elongated. foresee longer, up that past, going the in is been years happening? pricing. you been few are be here weeks stronger

think more wondering just be Thank than of you. we'll pricing, So this is? stronger long how normal do I'm you much in environment for what historically

Dave Mosley

five lead Jim, have things than or when environments different point with really drives we very back right ago, XX many years our capacity think to were times that look had so I and you when that you it's Right, client mass if in factories, server long it's, out like that.

but some couple we're actually working related. the of the These more these ours, where can, the we COVID you, customers little also drives, If then more last the control. are our can mass agreements on speaking, mass over get heads a years then, more, to get media and external get get more making. of as to transitioned we're under more investments things because I say, starts quite piece if we perspective, this bit that, have suppliers parts that, more we to there we've capacity things a In volatile. heads on go investment. then as markets. are the the that's are as than, more can disruption they're the long-term and, the my predictable But bit generally markets of in just course, within So think to drives of that doing. a we from there is return always little be of predictability, And capacity, extent media and and have like That's affected, and number

Jim Suva

Thank much. greatly you appreciated. so It's

Operator

back further no this are now questions for time. call over I management remarks. There at the to closing will turn

Dave Mosley

Brent. Thanks,

As customers and all for to you position, is calendar believe strong Seagate see capture ongoing with combined technology can roadmap an as and XXXX solid product our outstanding year well that we for secular execution for opportunities us growth infrastructure their suppliers our again, once thank joining efforts for for years come? our today. their I data just Seagate. outstanding Thanks to employees continued our support of for mass investors and to like and and

Operator

your This participation. gentlemen, call. and for conference thank you today's Ladies concludes

disconnect. You may now

Seagate Technology (STX) 27 Jan 222022 Q2 Earnings call transcript