STX - Earnings call transcript Q4 2022 | Seagate Technology Holdings plc

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Operator

Good afternoon, everyone, and welcome to the Seagate Technology Fourth Quarter and Fiscal Year 2022 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded. And at this time, I'd like to turn the conference call over to Shanye Hudson, Senior Vice President; Investor Relations and Treasury. ahead. go please Ma'am,

Shanye Hudson

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

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

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

uncertainties issued remind statements on current section found on information, Investors today's our I'd not begin, business. of our with of that call you and we affect to please they're available XX-Q, well supplemental as most Actual the information to more as and in business implied Form forward-looking future contains all date. website. today, views and Form as contained and statements, on any press these be may subsequent as recent today XX-K may about including in differ our our us annual To quarterly like associated report that or report and which Before of the may on results, relied upon release learn forward-looking from to should other be our the management's reflect assumptions risks, SEC factors to our uncertainties materially refer filings, the and that based of – risks results by those subject

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

remarks. for hand Now to over the Dave call opening I'll

Dave Mosley

joining you those and you, Shanye, to us call. on Thank of welcome today's

a macro quarter contrasted results in markets. remain as of driving the a bit and end mass confluence the trends storage I other of near center secular data legacy impacts reflected financial in June infrastructure record demand data for headwinds capacity intact, growth consumer-facing demand, believe later. We particularly Our will from with discuss the long-term markets,

impacts the shortages the non-HDD However, in pressures global quarter. late COVID lockdowns from in component Asia, intensified and inflationary

Our non-GAAP June EPS $X.XX quarter-on-quarter and and quarter revenue declined to billion respectively. $X.XX, resulting

achieved non-GAAP our free billion margin and level X EPS flow, above our years in our in fueled were expanded and grew near-term While fiscal non-GAAP leading generated above macro our to shareholders, outstanding. XX%. financial fiscal in growth record XXXX year And faster cash In of non-GAAP operating We performance, funding achievements our we than on to in $X.X capacity by noteworthy. XX% $XXX products. repurchasing mass events to year-over-year, of revenue, XXXX, X% shares our XX% gross maintained dividends and X% margin by are for commitment fiscal even we We weighing cash $X.XX. Seagate's revenue million highest returning profitability

growing made We platform, nearline technology XX-plus data. demonstrating beating support are of to map attained projections handily We executing road and the fastest a the terabyte ramp the demand also that leadership with ever quarter. product the start we our our for at

drive the and common quickly, XX-terabyte just us family successful highly ramp volume based on terabyte The to shared. to achieve on is are and results design, crossover which XX-plus in quarter. the track evidenced product by yield the current as scale revenue has I We with the platform enabled our

for design, changes profile meet terabyte offers customers' capacity Seagate. readiness mid allows the customers with points attractive flexibility the our cost to and timing, an have and to to We into which XX minimal to us extend for upper both

and have the last chain, to financial the our customers' tirelessly of product We resilience needs years, X portfolio our over mass our improving capacity supply to aligning strengthening X our foundation. worked

the operational increased in Our support namely view transition supply mass capacity to the execution, positioned that have is for place that discipline, stronger and future. products and combined with changes taken industry, our fundamentally the the structural company better today

U.S. persistent revenue center the us adoption in mass remained lockdowns quarter-over-quarter, environment. Let of cloud strong demand buildup have precluding customer the spectrum supply along disruptions continued through with to nearline led non-HDD However, inventory end now impacts to data quarter. a of and These, turn due to from the of component across Despite completed. XX-plus current inventory the broad terabyte to imbalances, have levels challenges, customers, trend part ongoing being a market in of strong led shortages supply COVID cloud flat other drives. new data capacity center our was a build-outs that

the VIA revenue. many reaching that major projects the of end Asia-based are our will in market recall all same the As customers we demand driving of markets, the ability demand. expect At while with China, macro have in their inflationary uncertainties where levels, lockdowns serve time, and impacting end Asia [ph] focus our restrictive are in cloud particularly dealing intensify, the increasingly impacts maintaining region. that the of four across we had pressures region, COVID on are effects address which inventory to customers markets measures, reducing near-term the In the

will fluid, we While remains normalize. once levels are and confident ease the that inventory mass capacity situation resume lockdowns demand growth

HDD quarter, business end the markets, at surging legacy the represented historic drives. is the supply favorable spending environment. taking only to rapidly demand Seagate PCs consumer and deteriorated severely impacted as of legacy discipline and a which response conditions, pricing the external inflation the business lockdowns revenue, actions and to the for low. In current of quarter, strong maintain Within is a our XX% Exiting June

on and plans, supply focus factory in production efficiencies manufacturing our reducing across continuing while are the and We to chains. driving

to also TCO our the which controls product We are maintaining customers' prudent helps across support cost objectives. our and executing map business road

leading demand is not have cloud. according capacity storage XX% have fueling in cloud current the changed, moved corporate providers secular who to that challenging, mass fact, in for the transformation service is IT the and, Digital to environment expand. to of While only early the continue has long-term drivers multiple estimated innings, still

continue the that more amount training, emerge mass AI requiring These HDDs converge, infrastructure. to Seagate be enterprises the to twins technology of from dovetailed new and digital cloud a and multi-cloud benefit to business to into broad that captured is and applications analyzed, storage And strategies investment distributed remain product enhance systems must world, service edge need a employing a trends in the live massive data with overall begin capacity with AI enterprise for a and New across and poised mass are and for worlds to data-intensive businesses of decision-making mobile offerings. efficiencies. to engines as physical data a stored to network. digital and need data-driven our will competitive solutions cloud which capacity view portfolio infrastructure includes moved

Product are our technology the for Year support Seagate's product our leadership. enables the executing on data technology, recognition We're Award We terabyte based for our systems plans growth. innovation HDD innovative demand extends to XX, terabytes which future HAMR coveted XX development of our beyond TCO and has capacity and family and XX, capturing of of beyond the Infrastructure regeneration plus drive portfolio, garnering XX its also capabilities. device provide proposition. with systems unique protected, gained to system. offering a their that CIOs strong while at show attention value year's will for expertise autonomous combines for data enterprise customer enable Hardware peace our These NAB this systems our with technology, which CORVAULT CORVAULT self-healing be storage mind points

just our the and ears and it, or secure efforts role These with these critically Additionally, critical key technologies preserve in impact to thus pillar recycled a protection such products. helping of circularity [ph] to rates precious reused product important repaired, of data our discard technologies be play rather resources. distributed Seagate the as environmental and reducing can are self-healing, a strategy. than Drives

confidence also is intact, environment. well capacity to supply and a tailwinds endure positive Seagate will storage. which exposure fundamentally in area. market These global a from a resume In current secular the growth are trends this lockdown the COVID that on receiving Seagate has for exceptionally strong We remain driving closing, is work demand very stronger positioned to feedback lends and today broad impact ease. for mass constraints our basis as customers company

agility We discuss to have the optimize profits customer hand operational fuel right and Gianluca to the growth. product now I'll and results. relationships portfolio, to deep over the call financial

Gianluca Romano

Thank you, Dave.

intensifying for products discussed our demand economic pressures in June very capacity restrictive the our XX.X% to and and our level our gross to inventory legacy with comfortably on expanded that we Dave our margin the Despite pressures, range COVID results quarter, were of customers impact buildup anticipating, in significant than XX% quarter most earlier slightly at healthy margin While and measures revenue particularly the remain the non-GAAP of target business. the remaining in inside extraordinary HDD gross cost June XX%. lower-than-anticipated mass

Our quarter, increased June which market disk to the of and to of due total sequentially demand capacity capacity hard exabytes for up toward In made the our XXX of mix and mask total, with slightly exabytes, XX% in XX% products results a capacity steady shipments capacity are higher part the X% drive. drive shipments shift and XXX year-over-year. mass

richer our supported most albeit contributed drive June total mix lockdown. revenue higher U.S. family. by and cloud markets, per of XXX just a On XX-plus offset the sales prior market high a to record into lower-than-expected quarter, year very total terabyte in capacity the products than the X VA capacity improvement south strong a of the nearline year-on-year, of XX% Asia represented $X.X billion weak demand, affected which nearline for also compared by drives and been XX% demand COVID up product or sequentially Strong X.X% X% U.S. quarter period. Our year combined with With sequential terabyte with capacity mass exabytes, have basis, of the revenue customer compared levels, in less cloud HDD terabyte ago. X.X at HDD March prior slightly

the we prevailing end mass will return how capacity strong the we growth. mindful are While uncertainties, markets disruptions and are annual market other demand macro believe to influence which of temporary, quickly VA

Within revenue. than also $XXX percentage discretionary consumer now [ph] XX% and spending. rise the represent million, XX% a which overall anticipated, PC sequentially markets, mid-single-digit legacy more decline pronounced sharp the the in deteriorated revenue end impacting in client inflation our market, down was demand Consumer reflecting of The was most year-over-year.

in about sequentially component and our year-over-year. we saw which million, Finally, revenue was non-HDD the mitigate us business X% uptick as able shipping of of experiencing, the we $XXX shortages record We to a have been for down backlog. to begin some enabled business some sharp our system XX% order were

impacted a during unable all quarter, SSD and the customer However, remains challenge fulfill business us the to component the availability demand. leaving

support customer [ph] XX.X%, Moving profit as Non-GAAP to in suppliers continue margin gross to corresponding basis We our demand constrained June to operational points performance. million, XX with quarter work the non-GAAP to of quarter-over-quarter. our yield $XXX was up gross

mix mass offset transition expenses expectation, As costs. capacity $XXX were noted capacity as of Non-GAAP lower higher sales earlier, and our slightly products increased than in quarter-over-quarter the and and business million, line operating drivers volumes more marketing to with activity drives component resumed. and higher and business up in

was million, income revenue. operating XX.X% non-GAAP $XXX resulting of or Our

approximately diluted range will when later continue the resume, the share position to the fiscal EPS believe back was on with and begin $X.XX. million which quarter for we of XX balancing to year. Based to growth We June to line top managing on non-GAAP expand of company count in operating target the shares, focus costs margin demand could XXX supply into XX%

rapidly the higher balance environment. as increased Inventory business quarter flow. to changing finished goods billion, $X.XX the to with cash on consistent sheet we ended the with and Moving approximately

through inventory slightly maintain $XXX higher our on revenue, $XX supply future focus Capital to and expenditures components we use continue as aligning the year. move and expect year reduce the logistic just outlook, the freight ocean demand. decline of We current Based we a year level our the fiscal expecting cost for and million product X% demand. to critical support and on calendar to of [ph] or fiscal totaled for million were quarter over

for $XXX continue our manage due supply. carefully Given of including million was business will sequentially, flow cash we combination free pace generation year-over-year impact which in the and This $XXX XXXX, the billion. in million from weighted with of which factors, annual with We Free on economic million sales pleased the to a approximately $XXX exiting expect our to quarterly the our generation growth in dividend approximately increased June inventory cash in we X to down to XX% to million environment, fiscal flow and current depending end and investment shares the back higher to heavily quarter $X.X shareholders, in quarter. recovery. ordinary free million commitment timing the authorization. subsequent the [indiscernible] for was million Overall, of flow of the our shares, to cash with fiscal XXXX, are our continued quarters. and million reverse we remaining $XXX should used outstanding currently normalize $X.X levels, cash returning XXX quarter, Consistent

debt billion fiscal total reported with Over ratio the the the an the time. revolving cash of debt and period total past balance approximately we billion, than end year leverage Adjusted at relatively was share. was approximately average million, for of ended flat million. liquidity years, share $X.X XX% credit prior more fiscal price facility. Total $X.X resulting X.X $XXX We have at 'XX, per was our X of including in equivalents with at the of Seagate $XX of and quarter EBITDA cash outstanding $X.X

expect revenue the September $XXX to is plus be enter of profitability, As taking uncertainties margin quarter we in and billion, we fiscal is dynamic of to guidance, as expect At for continue the Drawing company of expected manage near non-GAAP cash minus our market healthy to revenue $X.X the restore midpoint and customer our follow, to safeguard operating macro be supply on data or $X.XX are inventory levels. to now EPS in carefully non-HDD will managing action turn we $X.XX. plus the our shortages million. or range [ph] we the And expect Dave non-GAAP to call that in outlook experience XX%. XXXX, including I above back in over we of through environment, the With comments. industry slightly range be our term. managing to final minus mind, our pressuring our end component for the

Dave Mosley

fueling long-term in capacity Thanks, positioned trajectory services live benefit. mass also secular Gianluca. catalyze Last The storage HDD our the business, our expressed Seagate demand and and today. confidence system multiple growth and to well view trends business firm quarter, that I of is holds for growth for solutions

strong drive Our and products our are continue on execute to product maps. we HDD road innovation, funded our

technology. are family nearline drives launching the we family the high We XX-plus path of drives HAMR are shipping XX-plus terabyte and on our towards volume, down terabyte well development of and based

the revenue demand. supply delivering pressures with market controls year. through HAMR-based returning partner best, navigate financial this begin products do time on and in these expect of our XX% predictable efficient to dynamics model put what to XX% place quickly align of long-term customer position focusing revenue, commitment X% by actions believe to the shipments return our these margins these We shareholders. namely run abate, to once we We will closely customers, by and that prudent to next Seagate and growth the of near-term maintaining spending X% operating operations, with macro all while to capital us of our

will environment even market higher demand to to for the remains now pace XXXX, results shareholders gratitude strong, disrupting slightly on year. and Gianluca our which the contributions ongoing or through data like efforts for support. in recovery. for also and for our take supports dynamic to the economic I'd incredible and underlying the I their to like our is depending by I'd patterns, questions. conclude fiscal flat the While revenue our suppliers, their employees of their timing customers expressing your fiscal and typical partners thank demand

Operator

Instructions] today your gentlemen, Our we'll Wells Aaron Ladies ahead the from Rakers go at this Please question session. begin comes [Operator time, question. and with question-and-answer Fargo. from first

Aaron Rakers

on business. the guess nearline taking the go down I for path question. Thanks Yeah. the want to I

As the of the I your Did through are you demand at the your out over relative look current this June expected? shipped, initial how your kind XXX considering you largely that of quarter, play coming about you back exabytes course as Thank question relative inventory you that expectations to guess of the that at comments first all of And thinking on down end demand past you. quarter? the currently profile slow quarter Any of changes did part kind to you the look into kind the you see of quarter? is, guidance? market, as

Dave Mosley

Hey, those were where look predictability I If thanks transition, for quarters cloud, kind at of of we question, referred ago, that the Aaron. XX-terabyte you two the tactics to.

the I think particular, the end CSPs, overages. it's We do been fairly through last and some predictable inventory of of in quarter. China in see, some

to building compensate is the the 'XXs hurting doing and what up and will, transitions to there. try sure not XXs 'XXs, don't it, that to we're many [ph] we into if not pack for too So to you make

of good with world, having mean everyone navigating where I but see U.S. forward do in especially like a it's in people supply things businesses. people and capacity market out COVID it some points there's the issues same through is that CSPs. the differently. or supply their chain think really think looking So getting not issues are a issues. are I given more some demand for were temporary there It's chain or I And the mass cloud that. lockdowns I

Aaron Rakers

that's into how the fiscal kind back that the profile of any And about to the how that rate that should on to half flat that I of past, slight of we in Did end 'XX, in fiscal of demand - think we've in about kind get of it? you that, nearline we for kind market of Yeah. into about to demand? you're longer-term thinking know think thoughts Is the that being year? XX%-plus revenue the how growth a growth about back kind range. talked kind think

Dave Mosley

Yeah.

back stuck before be they're make the inventory those well the right? here products exabytes So going have well. a going half to on customers higher actually but which wake as now points, XX-year pause in we and you back as of front to Ultimately, helps we're were of the year, said, that get up, coming do terabytes. little to fiscal that. the maybe they - demand will bit And flows sure demand out help know, XX-plus, through like drive we'll eventually XX we the of driving a on going as we're 'XX So capacity be plus this exabytes because year, the

now seeing is get think back we should growth. what So some exabytes I healthy tactical. But right very to we're

Aaron Rakers

you. Thank Okay.

Dave Mosley

Thanks.

Operator

comes question question. ahead from from next with Our go Wamsi Please of Bank America. your Mohan

Wamsi Mohan

you question. you in a year. growth mentioned of demand that Thanks sort fiscal to thank have made. mass a headwinds color for following the my is are hoping X-quarter recovery, you're going you taking both was Dave, Yes, us might how And to return margin inventory of I some be here the you. assuming down worked as around trajectory gross thinking about in later and capacity, a the similar give basically gets slowdown trajectory. you are

So you. margin bottom are to at we contract gross or Thank we expect of sort the from margins further of here? should gross

Dave Mosley

let the margin hard lot legacy as pretty gross Wamsi. we high. the of the - From inventory was about legacy I'll demand hit And is in products Gianluca too point. talked a there answer that's are - Thanks, a perspective, the that prepared are remarks.

us because On now portfolio at do they'll lockdowns will are more COVID that as little just going But is a it's that like the not legacy we're a some seasonality actually de products the They're PCs, VA through coming. we end gyrations. but so more normal their that probably think like that - after salient of impacted and now. that a come starts some on. we XX% we QX, whether things or But we for anything then through capacity. the on - things back minimis the There that's mass still it, to of don't of into because Now right market know pent-up think there's and of lot get QX pack quarter now period, [ph] demand of not going stuff this bit. it's part are so our suffer

again, the going And more changing so into our newer we're the doing the products reasons more talk when life stuff is to what some products that terabyte, margins? for from do that sure inventory you that those us. of want of - that's then strong we some the do the making and one best of like is might Gianluca, older out gross is customers the some [ph] poles have products be to current of are mid-cap the XX-plus over we of in nearline about ready the have we're front

Gianluca Romano

Yeah. for our on sequentially. are business control soon the positive and to recover Clearly, we expectation

think example. is capacity what I I for different year, the in strong be we than would seeing actually are seasonality will already. say last mass

segment And the record We legacy are quarters different near gross some gross in have you consecutive part done five very revenue the four capacity gross seen depending and is actually, last looking trend the a has decline margin, and in strong. has part record from or volume. mass non-HDD of been in margin part at. bit The The which margin quarters.

the total increase in for future go total But level, bring continued legacy mass should improvement the of a improvement mix into at decline in is disk. capacity mass the with because don't So in change mainly mass to [ph] gross plus the capacity and of and XX% nearline to margin. mix the the the hard that in capacity an we the offsetting see being continues a lot basically the

Wamsi Mohan

you Thank Okay. much. so

Operator

comes your with from question from go Cowen Please Company. Krish question. next and Our Sankar ahead

Krish Sankar

Yeah, for taking hi. Thanks my question.

The first is one Dave. for

you think the half demand about CSPs U.S. year? calendar do And question the you the shoe that strong. then for this the How to next do quick are is into Or drop? Gianluca. mentioned second pretty think You of

You said you billion come levels remaining buyback, the your have but $X.X like down. have in cash

buyback the you much. the of sustainability the next few about Thank very over quarters? think to how So

Dave Mosley

I think be to very drop clear. another to Krish. there's shoe don't Thanks,

their specific the build-out. that there CapEx I be challenges in their data investments they may in continue. customer, center they're general, think have depending on very continues storage growth and But cloud which demand

becoming very I think in it's some so with predictable them. And places,

established the have of reasons why but pivot that businesses interesting capacity. about talking terabytes right XX yet of some mass – with most still COVID we're like transitions we the and have we why that. actually markets now, the I in one most that and we are we've by our of the as beyond, transition people that's the things It's so the of shutdowns think the capacity kind are are to people impacted who are And

So about way that's then – the answer that can question. Gianluca, And I helps. if it, think the that's all

Gianluca Romano

Yeah.

our the the We are to committed share and and very to program, return dividend shareholder buyback. so both

we have buyback. As $X.X authorized for you share said, still billion of – as our amount

Our lower the free expecting I in what cash the flow the in fiscal than were for reason explained that we QX was in remarks.

Of expect to the us our few will free and increase return course, and next improve quarters flow we cash help cash shareholder that improve, our strongly also balance. to continue in

Krish Sankar

much. you. Thank you Thank very

Operator

Timothy question. from go question comes from Our Please with your Arcuri UBS. next ahead

Unidentified Analyst

a thanks lot. from for Tim This Jason UBS. Hi, is on

Just a couple of questions.

in of exabytes for your I second of the So legacy a I trajectory as Thank of in provide businesses than know around calendar as year? we still color my is you been consumer terms on terms portion market And well? demand. business DI first has one the shipment your you the could nearline you. lot of legacy a half exabytes market. of same consumer how about leaking much shipments Also, concerns of can this follow-up. think the is, a have there margin noted, smaller But

Dave Mosley

Thanks, Jason.

facing. consumer the the legacy on demand, So

money COVID consumers have and now, the world the through things. Right on a period. example, been the in work-from-home strong other like, for decided USB that market drives the they're So the spending

around of patterns I knows you think not different in to immune - can everyone see any these many, markets, spending consumer this that. and many we're

pull we inventory. right away, Those down, be which the going already that PC sure not position we of they are the in the but and notebook they're to stuff effectively slowly like not that are markets, particular, gone. think markets, or some have I make back going may

is declining where have they're those inventory. period. wouldn't So much Mission-critical bit COVID slowly a has divot a to markets gone. [ph] little as probably has anymore the another well, a bit but so place It too choppy long through been we little tail, effectively because that's there's it

markets, that now gone in talking So zero to to in we're effectively together have the tails those when that we're ones we already longer go legacy lump about going they will there. because

Gianluca… So

Gianluca Romano

a exabytes fairly low the quarter. have in For we June

We saying strong not be Dave was expect legacy. to September as for a quarter

usually, seasonality. We improvement in [indiscernible] is it of a quarter the where improvement. you see second see from December the should you year. this don't this quarter And year happening But north anywhere. is part Now see the then some [ph] where fiscal will some

Unidentified Analyst

Got my the second is road product on map. And it. Thank you. question

terabyte XX XX so was shared and color drives? Thank end where competitor on on of main year, the for XX some the any share Your could and this close their you wondering you. over XX and color brands by or product plans, expecting they're XXTB if going I lines time product your

Dave Mosley

our 'XX our relative if that quarter. remarks would prepared cross the will, to in 'XX, over this you said We Yeah.

now. So the right quarter in we're

this very a we've we the We We growth with couple the very of said So There target be that met a we're and There's CMR. that ramping out happy 'XX are are to never family. are that had hard. XX-plus variants the before. world that in there of ago, of the variants fastest continue met variants in various SMR. places. that quarters terabyte There's drives family. actually lot Those

the of As some of quarter I fact, XXs being that of XX I last most above are think said because variants. actually a these matter of used

can XX changes, that a volume. little conventional at So with how we're the small take don't channel and platform so world. any bit. happy on we'll heads and the high the we year, latching major recording technology we already that It's that's the fairly the transitions And continue To with with need and on change a to of media terabyte. end the by platform bigger to

using the there, in then you in to about XXXX, really because as are people on make we're think that technology right don't We driving with 'XX, platform that our don't all I in XX things our flexibility very of more out platform comes we we can. we product the So that just as we're setting that future confident today want sure with confident and know, we're the details - launching by portfolio. it hard it's we're talk the whatever all the and have narrative, share

Unidentified Analyst

Thank you very much.

Operator

Our Patrick your go next from question question. comes from with ahead Please Stifel. Ho

Patrick Ho

very on introducing next you big XX HAMR Dave, talked about at off, Thank year. much. Maybe, the terabytes basis, you picture technology first

cost-efficient common customers your about Given XXs, XX-terabyte to which have do drives from platform drive, that that the attractive be in to little the initial in HAMR mentioned these the more I how very the a say, demand assume terabytes correlate you supplying just mid-XXs upper costly you along and ramp? versus, you you are that the talked about, its XX trends going

Dave Mosley

for the question, Patrick. Thanks Yeah.

So margins. the number change, do then make HAMR, in transitions, critical going in to readiness you media where reader are get are component, it is heads of right a to And of to terabyte if different the not the has has or will, there so what and to There's our are the adders. there the cost XX change. technology volume, just they you a our ramp And and since disks scrap question many we and is yields? for high can the

to organic, of that XX terabit All of change. electronics everything sort things, gets has the platform to you the

of be. how do need we So it but the to in point turned, we're go and ability very where scrap yields to fast work that a the make lot confident we our A good to that's question. in cost the is that, to

drive it that's data willing to TCO it you hard. for on number able benefits be those those fairly more be technologies positive working a building that the We've for center when discussions a the other. a big of you'll and feedback years, product, And as when you're running perspective, you discussion benefit years initial to had have think been more the the see the X to on to X from I with entertain And from a these they'll open about to think customers jump well. us we think drives, they see customer I now. tremendous one then launched the very because and think I

focused these on. our things of the that's exactly and balancing we So do we're in all think have is operations, what to what I point

Patrick Ho

helpful. question And just as my That's Gianluca. for Great. follow-up

impact costs, from see those In costs, terms going-forward component pressure of you the basis COVID And on this quarter? past how guess, how a much an points do basis? it logistics cost additional elevated was I of pressures

Gianluca Romano

pressures, Yeah. In of also cost only from component have COVID, had quarter, but lot inflation, costs of a increased. some June we the our for not

we As we gross seen, have up keep were the lower able to revenue. despite quarter-over-quarter stable, a actually margin slightly

of is we cost very quickly, inflation now, are to of for also we is not majority is part impact date measure that coming next a to the us. the future, from are say increase. the couple course, to so So would those the same of quarters. I taking very going probably important for probably Mix offset has the our we'll

all the side, the improvement quarter compared I said was of COVID inflation. in prior the the not bit around basis on I gross think that, of June seen course was June costs little about extra past probably logistics side, including margin is to from of the points cost XXX, On have we in the this a But our the COVID XXX quarter. coming for it

Patrick Ho

much. you Thank Great. very

Operator

Hari from your Sachs. with go ahead comes Goldman Our Toshiya from Please question. next question

Toshiya Hari

I in. relative September guess, Hi. couple production well little talked hanging you're past what quarters. Thanks offsets the expect surprised are question. cuts some And so the and quarters Dave, your of the was the guess this, are expand you positively I to I'm much on in integrated, I be rates, that you gross could given quarter cutting I how coming vertically by a guidance? taking you're how given guess, over I do incorporating terms margins of of in where utilization to hoping you production. guess, for specifically about the

Dave Mosley

the Thanks Yeah. question. for

life cross so the that its don't of learned to because put problematic. bit more ship definition, see - quarter, you will, you you opportunity If Gianluca it's I'll some when go trying see a it. building poor last know, little F so to don't of is chain inventory the can markets a I've are quarter, much quarter and these down by into to planning freight, in an [indiscernible] of when that exacerbated claims the almost We're And little break is inventory gross back to and on ocean to the we much times, to the ask let too drives linearity therefore, and becomes in But get was And you of you we have bit if the again. use choked give don't want the my bridge, were linearity next costs. QX you on the that we very we perspective. X. little some on out one inventory, especially it you by in think back do a towards, lesson in Its I that. margins. Where me

build lines pivoting of by not have towards one doesn't What for, yes, wafer terabytes, so lead are down the slowing pivoting we And XX that on quite why or plan, product the just towards nearline so some it. It we're really lead some drive, over pivoting into quite times that's say, very we're it. does impact. is packing can financial lead are the Relative the to long, long reasons things doing since happen XX more terabytes more times times, do quickly. beyond new mid-cap intentionally

so exactly the that's help question. - that relatively factories And full of still are your

the don't into ought have our old not that to bit, a as move much able as be to You you're of intention and you right we chains, product down companies playing inflation help now. taking absorption CFOs but products the though new, to customers the saying everyone price see out role where around too really say to would a net-net, this much the that need is I hit customers into for not hey, do an even pushing And pushing is because eventually don't the that. little those slow there's stuff down having

So Gianluca, want… you

Gianluca Romano

margin. coming in from our the also pricing terabytes is have Yeah, still market volume the we for especially XX and positive the costs environment, also part some have will from say sequentially, is that in underutilization, I we increase the an have but to gross the very favorable.

So decline to revenue, a in see in impact we general. don't our see and a major gross - don't profitability the margin we despite

Toshiya Hari

Great.

As in the system, Generally softens typically a speaking, last demand there's inventory to at you've on industry your environment. if you've pressure on statement, just not the and excess several same has very follow-up, quick years, in a of disciplined downward the the overall guess, pricing when past, I the got time, got Gianluca, couple pricing. But quarters, I inflationary well. overall guess, been pressures as

those incentive pressures. So through of I some you've pass guess got to an potentially inflationary

the of should and markets capacity how legacy couple that pricing? quarters. the you. think about Is just raise the a pricing possibility Or over mass across net-net, difficult guys there So given backdrop? next you we Thank for to demand is

Gianluca Romano

in is have and need saying we are all, supply we the align we there before, Dave of first see and it inventory demand. reduce demand supply business, our environment to supply we need was course, to Well, what of better. gets now, extra alignment, And aligned. when pricing so were When that the that

we of that comes to during so rest situation supply, we we then, action of course, a on now, stronger the when look during inventory right a more our the situation. any possible to high in And we're pricing, let's And year. of are aligned the at the business from, take in transition but later will will say, healthy and demand year

Dave Mosley

the on inputs to some where and going all understand commodity people of of like from LTAs freight, the is macro do. on are of and us understand economic in that the procurement they what's the the this are us always served just table well time as have pricing I we well think sitting as – I over side that other pretty say

predictable all in capacity together what in, know coming. we'll things qualified I markets building, the us it we're at rebound exactly think outcome. what least to So to we work up that mass with to strong these what we've believe be a serves factoring apply. well going We come a there's And and everyone

that's we're the is so right towards pivot operations now change to And trying to supply. what – that do the future

Toshiya Hari

you. Thank Great.

Operator

from Our next with from comes Steven Please ahead Fox question. Fox Advisors. go question your

Steven Fox

afternoon. questions, Good thanks. Two please. Hi,

to Dave, help you're I'm First just trying understand basically biggest CapEx you of surprised negatively that this fiscal what given a that And couple you see secondly, to and spending all, say ago. then thinking of a recovery that you should quarters. factors Gianluca, out for any start come year? just in make the a weeks on few were

you're about holds a things, from You've us where worse touched confidence macro? could on a - even on the center and just when a into but is data that overbuilding up sense side not Thanks. like that demand at be give maybe two, few what going

Gianluca Romano

in for to 'XX side, On I already CapEx year QX, seen, we you spending the reduced change want as fiscal range. probably our have don't have the fiscal the

what is But be X% sure, for revenue a we'll in the the part X% we 'XX. fiscal I to have lower done think similar the in of range of range. good and to

Dave Mosley

need add longer-term discussions Yeah. that And the customers the bigger storage. there they're their the they are, our because convicted are manage capacity cloud think ultimate they're I with customers, ones to on more the

wrong CSPs smaller so transition products that them Some make this that issues, the that the few thing. are be that over tactical we mentioned build with having the day. to are to thing That's have of are working that thing sure why and we a we to a trends into is very the a having, going people every soon. the we that's all of cognizant all conviction closely I inventory macro right We're don't that it. watching customers pretty are of some And them

gloss think when as abate. So I issues don't data all want do these products, for to that. there coming as a I demand But there's I be will over – far think rebound

Steven Fox

helpful. you. That's Thank Great.

Operator

from from Stanley. question Morgan go Please your Erik Woodring question. ahead Our with comes next

Erik Woodring

help to on just comments how thoughts revenue then share And Maybe question. next I can us after out fiscal comments the parse that? taking maybe you similar XXXX? Gianluca, any follow-up. for have a as a this on we flow strong maybe quick Thanks Thanks. into think just growth we to your move cash Awesome. expect or year about Should

Gianluca Romano

revenue level We increased flow, Well, fiscal we million in $XXX you an same be what fiscal [ph] the cash 'XX, about continue good of said, through, improvement free We was cash expect gave in of over to it higher. would will as indication be fiscal maybe 'XX. for increase, could in 'XX. this the you now and flow even 'XX, bet fiscal free comes

Dave Mosley

projecting cash to times, also to manage flow. capacity that mass we at but rebound cash able continue should see what - these carefully, very be is we'll the Especially we're we grow to

Erik Woodring

along XXX about OpEx environment. Thanks then help. better would kind help But share is the as of quarterly the more same of can macro lines, thinking puts or that run Thanks. those can maybe just Okay. rate takes understand And kind there help you a how comments us great. any you Gianluca, obviously, still you're challenging be for Super. and any

Gianluca Romano

Yes.

range will I think the XXX be and in fiscal the through between year. XXX

the already. done strong the in or years control a have OpEx last three of two We

think demand we September start So salary increase. we'll have point. from is we [ph] a good our where annual

XXX little starting still XXX of for increase expect range, be right the So basically we range December but the us. to in the should bit quarter,

Erik Woodring

Awesome. Thanks, guys.

Operator

from Our go next question comes Bank. Deutsche Sidney with Please from Ho question. your ahead

Sidney Ho

a clarification. have quick I Thank you.

I fiscal but is which my can question is But kind resume whether the - PC look that necessarily the get you of the or I your adjustments guess the right. think customers, Gianluca year, they point expecting elsewhere, what that customers will that inventory your is you're And growth thinking I not in talk about about and your quivering revenue to quarter, what means - later drilling you the December confidence? stop when when in at gives inventory? meaning

Gianluca Romano

realign trying in no, to to this we are general, use say, quarter I'll inventory.

but to as and from realignment, increase would order - course, it are say doesn't are low So a quarter reducing us, expect Of in not fairly sequentially. production, I the do only we our revenue actually that, you in said, this to is revenue we taking depend after we

his to should in after December quarters September. be have all indicated achieve prepared Dave the and that than of three revenue the we a quarter better fairly September to level remarks, So need good revenue in

Sidney Ho

And on as does shortages. non-supply business of jump changes limited the were any the the I'm by business? question. mentioned that has But LTA I'll by Thanks. demand nearline of already. curious, you that customers? Last of on quarter, second my OEM covered Maybe your just in just cloud seeing you into are Great. There's as as I'm the business. you on side enterprise a cloud also Okay. the side curious lot questions the

Dave Mosley

of of some component issues. not we lot ago that. There a shortages six did - is some months components saw of constrained of But because about go clear your customers. be may bit supply-demand on your our think remarks how It's were the very the question, cloud components the the we it's and in not the yet. revenue for are things would the what answer after question complicated macro say, completely is I to systems more talked That's last picture rapidly, one Yes, constrained to than little I changing chase anymore prepared business, that because to we the a still are example, of we enterprise. all that that needed affecting

the the by world, reductions the right I nervous little - as spending again, bit us I impacting I always think, which also the that's, you well. know, CIOs a think be cloud, to going Look, well. talking are cloud of now long not CFOs, the hybrid also that in enterprise healthy see there's because private going public to clouds, just term, just on-prem not - in as be is to but I believe

start will over And are think I to those They so still next various be - and free some there they think challenges that six businesses. I strong will supply-related the months. still, of break

Sidney Ho

Okay. Thank you.

Operator

Muse next Please from ahead with ISI. from question. your comes C.J. go Our question Evercore

C.J. Muse

afternoon. taking you for I two the good guess questions. question. Thank Yeah,

your channel best curious of And First, where I for things data centers. need about correct. order various if rank excess call markets could you the talked works inventory we end on get so you the to by was I specifically end markets. perhaps U.S. then guess, for a flavor in the

color It when there. you? on remarks recover think your seeing for to you're you in there? players. a And will handful much. provide that around Could prepared what talked Thanks more of sounds You so correction you a start like it's perhaps

Dave Mosley

me picture, let C.J., got right. this I just Yeah, all

was the ranked one So order. first

consumer the China the and service working impact itself that's so macro those disti [ph] generally There's that, that only been Americas, There's we're down malaise of think is in some that market customers. providers. both year-over-year, the it but impact. The of significantly think, VM I biggest at, China each distribution talking Europe, and they're we've channels part also cloud the about. and has with I through steering challenges not place, inventory worldwide

is Some of macro. that

for they reopen. lockdowns, pull Some they just lockdowns kind the go of in then and reopening, trepidation and they the inventory it happen of can't because is COVID there's market some of in then

kind get I or part [ph] things, the question ask you we the through going to just answer it out. have but ask - to think again? of of second wait these the your Can world is

C.J. Muse

prepared your I to hyperscale you heard In select sure. that was inventory I spoke plans. thought what Yeah, remarks, correction

hear that I then could cleared expectations color provide your be if for that correctly out? And so I did and on guess, to you more maybe

Dave Mosley

don't there's much think I hyperscalers. problems too inventory as U.S.

they're would able a in of hard I to or it for get gets cylinders demand storage the And or we very is their world is everyone's that maybe years X each was supply challenges, way to or ago. chassis but like all got the power I I or are individual, back the challenges, - over whatever it having is necessarily - we're memory not is pent-up in reach drives data think challenges, not think to own world I that will People hard, the of one there markets. say on characterize we'll or equilibrium the think thing lot once whatever. and think whether There's kind this maybe be firing a time. working it that's through these a place. X for I be better compute all supply some supplies of And or everyone's just

C.J. Muse

you. Thank helpful. Very

Operator

from Our your Barclays. Thomas Please go comes from question. next ahead with question O’Malley

Thomas O’Malley

Thanks going about customers was little asked What numbers, kind and When on product. the worse were agreements at agreements customers gives talked half bit take agreements of away their the here. you my the guys to you're that or guys. looking the long-term confidence specifically this guys take taking question year, that the aren't than My a it does they really for question. fact long-term from Micron long-term those call looks you they those your when whether they that Hey, just force the were talked today? about if of down on can't took market back to pay, walk about

Dave Mosley

I Yeah. said. with Tom. Thanks, kind you of what agree

customers as units We we're think have quarter, starting about or you to think I exactly of these happened our with we need? our the our further how customers products are much many talked XX-plus on know I go and products the and making to how how be with of to even to If products, to work the through time. we'd something terabyte of take use - use customers I need factories. many willing factory to else it XX-plus then at have terabyte work inside just more. has What do it It's things. I last out said, to because co-planning qualified need kind

take or that, the from really And So my not have it's been great that. pay. perspective, working customers through

hold Just the us the It's pretty accountable working trying we sides other give on of well. and visibility there. right to each both table

Thomas O’Malley

obviously, that growth you do Great. And bit. the assume flow does become in cash challenged. even inventory then half, a bit if down is, back is just a follow-up the some my Free so accelerated working helps

cash free rank you less rationalize goes would of is? dividend? order talk you'd like If that would you of in be negative. if where of you Can there in returns? you cutting buy perspective terms quarterly you look back you just Or would the were first it you the do think stock Can that be you Do talk think just environment where which kind persist first? flow an about to or at capital about environment priorities -

Gianluca Romano

through. I go Tom, I free see any our don't coming flow see will negative. cash don't that quarter where

So strategy. we capital allocation have a

to focused return. As I said on stay want before, we shareholder

free - will are I in the here? be are strong don't situation 'XX. think cash you showing I fiscal flow see you year our

Dave Mosley

the over specific The cash talked flow. Gianluca in We that is I'd about to period things QX. very it, some Tom, go had going that way say Yeah. we're

I can over recover go of things think those we some time.

some we're right just making And building it before the inventory, too I like much is sure of thing. said,

from So once I be to an to I fine we're even we perspective get think that and a cash have just flow grow it think opportunity through going period, year-over-year.

can we of levers still We that lot continue control. to have a

Thomas O’Malley

guys. you, Thank Great.

Operator

your Securities. our question. question from comes Please ahead go Rosenblatt from next And Cassidy with Kay

Kay Cassidy

the that Thanks is, for quick place, you're lockdowns are what lead you Yeah, taking trends is the what your seeing the in two change all Or question. agreements China? long-term times? have getting you visibility the my customers? just in questions. Second of from in any With are

Dave Mosley

Yeah. depending Kevin. working kinds There's visibility depending market, and which different a together. months of six in typically the that appetite Thanks, customer year, their LTA on specific we're on the to

and recently. our So earlier, in need with even for think I so - I them the over to impacted point own comment longer, time we China, a on. they're right been have that's And to the last years, factories what good, that have it's with the making just few product predictable sure stage so at gotten economics going relative made

for the you're you and them is reopening, doing that much don't I challenge. we're is better, that working to city I into pulled the who actually so. these get have people people thing in that that sure against just we where about going whether like to is – think employees, customers do the your then places business be we're our not data I some that can It's times five on. improvements are lockdown and the any in I smart customers I'm of for you of get like what looking see ready do the that making to all other or it, things that inventory can things think the end go problem on a able small think the go focused of also and continue what some of going and at factory. free and And we're hospitals, break will. of That's a to in buildings, build the getting the already kind that that. QX, in front part some particularly you a centers bit really will all it most of things have going to a it's said throw builds three even need builds, where the aspect , the a to of a to So right your like things for and we people you but materials whether just point, things in four are The in of It's little also not COVID, talking loop. personally, of capable and are if matter smart

Operator

today And Mizuho. from from our with question Please Vijay question. final Rakesh go your comes ahead

Vijay Rakesh

and mentioned levels. Yeah, guys slightly know you I Gianluca, inventory Dave hi. Thanks. higher Hey,

think revenues inventory improve? normalizes about talked Just were, you inventory start could because wondering the maybe U.S.? levels set in Asia help the is that China in quarter quarter within let's I if us versus December say, to And versus level here what the you or your the expectation

Dave Mosley

it market share make done COVID to I sure we'll quarter. we with make faster. and taking sure point we this we buy the of that for make the the qualifications higher have improve want are made some can to us make our again, will customer that on these do that quarter. – Gianluca stuff margins it is towards that's people people all pace to actually important us Right. modern, more happen pivot the the will of get can action the some is product to what need disrupt go don't way, we it We're and And get think we And improves that for pressures of of the this lion we thing don't but feeling recoveries that the earlier like depending that anymore. that other

Vijay Rakesh

Got flat ramping, back. that it. should high at utilization the And XX-terabyte believe the thought way with Is levels. gross mean, I that I the is right? you indicated the look sequentially. stay be I it? on mentioned as Even you still that you Is supply that I utilization to guess, right, given think margins

Gianluca Romano

is not environment underutilization question. coming still guide from said but directly favorable. I also margin, because a of quarter was I to gross the I in did impact is positive we Well, cost, terabytes impact but answering negative also some pricing said December the higher and also the XX

major see don't we our overall, to So profitability. changes

Vijay Rakesh

Got lot. it. Great. Thanks a

Dave Mosley

you. Thank

Operator

I'd remarks. ladies to And and time, gentlemen, at like to this management over turn any back for the floor closing

Dave Mosley

I'd trust Seagate. ongoing across to our environment recognize incredible quarter. opportunity our community the Jamie. we partnerships. take again suppliers for for to all Likewise, this and ongoing customers and appreciate ecosystem, It's in shareholder current your their dynamics. and to through Thanks, your like efforts managed their the take will Seagate employees of support once I challenging a macro thank the our for continue appreciate actions

However, long mass term, confident the and opportunities capacity by that for value stakeholders. and demand to secular excited the Seagate's storage remains infrastructure I'm remain deliver high all for

joining us, everyone. thanks So for

Operator

call. for conclude we'll And with gentlemen, today's ladies conference you joining. thank We and do that,

now lines. may your disconnect You

Seagate Technology (STX) 22 Jul 222022 Q4 Earnings call transcript