Seagate Technology Reports Fourth Quarter And Fiscal Year 2020 Financial Results

Fiscal Q4 2020 Highlights

– Revenue of $2.52 billion

– GAAP operating margin of 10.6%; non-GAAP operating margin of 14.8%

– GAAP diluted earnings per share (EPS) of $0.64; non-GAAP diluted EPS of $1.20

– Cash flow from operations of $388 million and free cash flow of $274 million

– Revenue from mass capacity storage markets increased 35% year-over-year and represented 63% of FQ4 HDD revenue

Fiscal Year 2020 Highlights

– Revenue of $10.51 billion

– GAAP operating margin of 12.4%; non-GAAP operating margin of 14.7%

– GAAP diluted EPS of $3.79; non-GAAP diluted EPS of $4.95

– Cash flow from operations of $1.7 billion and free cash flow of $1.1 billion

– Returned $1.5 billion to shareholders through dividends and share repurchases

– Revenue from mass capacity storage markets increased 25% year-over-year and represented 57% of annual HDD revenue

FREMONT, CA - July 28, 2020 - Seagate Technology plc (NASDAQ: STX) (the “Company” or “Seagate”) today reported financial results for its fourth quarter and fiscal year ended July 3, 2020.

“The June quarter was led by robust cloud and data center demand, which drove record exabyte shipments for our nearline mass capacity drives and strongly contributed to the Company’s overall revenue and solid free cash flow generation. However, continued economic uncertainty and COVID-19 related disruptions impacted demand in other key end markets including video and image applications, mission critical and consumer markets and also impacted profitability as we incurred higher logistics and labor costs which together weighed on our fourth quarter results,” said Dave Mosley, Seagate’s chief executive officer.

“We are focused on managing the business well and executing on what we can control. Fiscal 2020 marked a strong year of progress as we grew mass capacity storage revenue by 25% and increased our overall revenue. We executed our technology roadmap, strengthened our balance sheet and delivered on our capital return program. Entering fiscal year 2021, the level of macro uncertainty remains high and we will continue to carefully manage our cash and expenses. However, we anticipate demand across our end markets to improve within the next six months and currently model revenue to be fairly flat in fiscal year 2021, supported by the strength of our mass capacity product portfolio. Longer-term, the unabated growth in data at the edge and in the cloud is driving secular demand for mass capacity storage and we believe Seagate’s financial strength and innovative product portfolio position us well for these trends.”

Quarterly Financial Results

Annual Financial Results

The Company generated $388 million in cash flow from operations and $274 million in free cash flow during the fiscal fourth quarter 2020. For fiscal year 2020, the Company generated $1.7 billion in cash flow from operations and $1.1 billion in free cash flow. Seagate maintained a healthy balance sheet and during the fiscal fourth quarter 2020, the Company paid cash dividends of $168 million and repurchased 1.1 million ordinary shares for $55 million. The Company restructured debt, increasing average debt maturity to nearly 7 years and reduced the amount payable in the next two fiscal years to approximately 6% of principal debt balance. The Company ended the fiscal year with cash and cash equivalents of  $1.7 billion. There were 257 million ordinary shares issued and outstanding as of the end of the fiscal year.

All periods presented exclude share-based compensation from non-GAAP results. For a detailed reconciliation of GAAP to non-GAAP results, see accompanying financial tables.

In the fiscal fourth quarter of 2019, results reflect a tax benefit of $702 million primarily due to a one-time deferred tax benefit resulting from a release of a valuation allowance related primarily to our U.S. deferred tax assets, which is reflected in GAAP Net Income, but excluded from Non-GAAP Net Income. This was driven by improvements in the Company’s profitability outlook in the U.S. including our efforts to structurally and operationally align our enterprise data solutions business with the rest of the Company.

Seagate has issued a Supplemental Financial Information document, which is available on Seagate’s Investor Relations website at investors.seagate.com.

Quarterly Cash Dividend

The Board of Directors of the Company (the “Board”) declared a quarterly cash dividend of $0.65 per share, which will be payable on October 7, 2020 to shareholders of record as of the close of business on September 23, 2020. The payment of any future quarterly dividends will be at the discretion of the Board and will be dependent upon Seagate’s financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by the Board.

Business Outlook

The business outlook for the fiscal first quarter 2021 is based on our current assumptions and expectations; actual results may differ materially, as a result of, among other things, the important factors discussed in the Cautionary Note Regarding Forward-Looking Statements section of this release.

The Company is providing the following guidance for its fiscal first quarter 2021:

• Revenue of $2.3 billion, plus or minus $200 million
• Non-GAAP diluted EPS of $0.85, plus or minus $0.15

Guidance regarding non-GAAP diluted EPS excludes known charges related to amortization of acquired intangible assets of $0.05 per share, estimated share-based compensation expenses of $0.11 per share and restructuring costs of $0.01 per share.

We have not reconciled our non-GAAP diluted EPS guidance for fiscal first quarter 2021 to the most directly comparable GAAP measure because material items that may impact these measures are out of our control and/or cannot be reasonably predicted, including, but not limited to, accelerated depreciation, impairment and other charges related to cost saving efforts, restructuring charges, strategic investment losses or impairment recognized, income tax adjustments on these measures, and other charges or benefits that may arise. The amounts of these measures are not currently available, but may be material to future results. A reconciliation of the non-GAAP diluted EPS guidance for fiscal first quarter 2021 to the corresponding GAAP measures is not available without unreasonable effort. A reconciliation of our historical non-GAAP financial measures to their nearest GAAP equivalent is contained in this release.

Investor Communications

Seagate management will hold a public webcast today at 2:00 p.m. Pacific / 5:00 p.m. Eastern that can be accessed on its Investor Relations website at investors.seagate.com.

An archived audio webcast of this event will be available on Seagate’s Investor Relations website at investors.seagate.com shortly following the event conclusion.

About Seagate

Seagate crafts the datasphere, helping to maximize humanity’s potential by innovating world-class, precision-engineered data management solutions with a focus on sustainable partnerships. Learn more about Seagate by visiting www.seagate.com or following us on Twitter, Facebook, LinkedIn, YouTube, and subscribing to our blog.

© 2020 Seagate Technology LLC. All rights reserved. Seagate, Seagate Technology, and the Spiral logo are registered trademarks of Seagate Technology LLC in the United States and/or other countries.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact. Forward-looking statements include, among other things, statements about the Company’s plans, strategies and prospects, financial outlook for future periods, including the fiscal first quarter 2021, expectations regarding the Company’s products, our ability to ramp production, storage industry trends and market demand, shifts in technology, the Company’s ability to meet market and industry expectations and the effects of these future trends, the possible effects of the economic conditions worldwide resulting from the COVID-19 pandemic, and expectations on the Company’s business as well as dividend issuance plans for the fiscal quarter ending October 2, 2020 and beyond. Forward-looking statements generally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” "will continue," "can," "could" or the negative of these words, variations of these words and comparable terminology. Information concerning risks, uncertainties and other factors that could cause results to differ materially from the expectations described in this press release include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended June 28, 2019 filed with the U.S. Securities and Exchange Commission (“SEC”) on August 2, 2019, and in our Quarterly Reports on Form 10-Q filed with the SEC on November 1, 2019, February 5, 2020 and April 30, 2020. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended July 3, 2020. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on, and which speak only as of, the date hereof. The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, unless required by applicable law.

The inclusion of Seagate’s website addresses in this press release are provided for convenience only. The information contained in, or that can be accessed through, Seagate’s websites and social media channels are not part of this press release.

Please click here to view the financial statements Q4 FY2020 Financial Statements.