Exhibit 99.1

 

LOGO   

Investor Relations Contact:

Shanye Hudson, (408) 658-1863

shanye.hudson@seagate.com

 

Media Contact:

Andrew Larg, (408) 658-1059

andrew.larg@seagate.com

SEAGATE TECHNOLOGY REPORTS FISCAL THIRD QUARTER 2019 FINANCIAL RESULTS

 

   

Revenue of $2.31 billion

 

   

GAAP diluted earnings per share (EPS) of $0.69; non-GAAP diluted EPS of $0.83

 

   

Cash flow from operations of $438 million and free cash flow of $291 million

 

   

Returned $505 million to shareholders; declared cash dividend of $0.63 per share

CUPERTINO, CA – April 30, 2019 – Seagate Technology plc (NASDAQ: STX) (the “Company” or “Seagate”) today reported financial results for its fiscal third quarter ending March 29, 2019.

“Seagate executed very well in the third quarter while navigating near-term demand head-winds. Our focus on operational efficiency and expense discipline drove better-than-expected EPS and free cash flow generation,” said Dave Mosley, Seagate’s chief executive officer.

“We began shipping the industry’s first 16-terabyte high capacity drives in the fiscal third quarter and expect to ramp high volume production in the second half calendar 2019. The Data Age digital transformation has given rise to many new applications including machine learning, autonomous vehicles, and Smart Cities, which all rely on faster access to an increasing amount of data. These trends are creating significant opportunities for our mass data storage solutions and we are successfully executing our technology roadmap to address growing demand.”

Quarterly Financial Results

 

     GAAP     Non-GAAP  
     FQ3 2019     FQ3 2018     FQ3 2019     FQ3 2018  

Revenue ($M)

   $ 2,313     $ 2,803     $ 2,313     $ 2,803  

Gross Margin

     26.0     30.2     26.6     30.8

Net Income ($M)

   $ 195     $ 381     $ 235     $ 424  

Diluted Earnings Per Share

   $ 0.69     $ 1.31     $ 0.83     $ 1.46  

In the third quarter, the Company generated $438 million in cash flow from operations and $291 million in free cash flow. Year to date, the Company has generated $1.3 billion in cash flow from operations and $862 million in free cash flow. Seagate’s balance sheet is healthy and during the third quarter, the Company paid cash dividends of $178 million and repurchased 7.2 million ordinary shares for $327 million. Cash and cash equivalents totaled $1.4 billion at the end of the quarter. There were 277 million ordinary shares issued and outstanding as of the end of the quarter.

For a detailed reconciliation of GAAP to non-GAAP results, see accompanying financial tables.

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


Quarterly Cash Dividend

The Board of Directors of the Company (the “Board”) declared a quarterly cash dividend of $0.63 per share, which will be payable on July 3, 2019 to shareholders of record as of the close of business on June 19, 2019. 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

Our outlook for the fourth fiscal quarter 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 fourth quarter 2019:

 

   

Revenue of approximately $2.32 billion, plus or minus 5%

 

   

Non-GAAP diluted earnings per share of approximately $0.83, plus or minus 5%

Guidance regarding non-GAAP diluted earnings per share excludes known charges related to amortization of acquired intangible assets of $0.06 per share.

We have not reconciled our non-GAAP diluted earnings per share 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 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 earnings per share 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 6:00 a.m. Pacific Time that can be accessed on its Investor Relations website at www.seagate.com/investors.

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

About Seagate

To learn more about the Company’s products and services, visit www.seagate.com and follow us on Twitter, Facebook, LinkedIn, Spiceworks, YouTube and subscribe to our blog. The contents of our website and social media channels are not a part of this release.


Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended, including, in particular, statements about the Company’s plans, strategies and prospects, financial outlook for future periods, including the fourth quarter of fiscal 2019, expectations regarding the Company’s products, our ability to ramp production, market demand, shifts in technology, the Company’s ability to meet market and industry expectations and the effects of these future trends and expectations on the Company’s business as well as dividend issuance plans for the fiscal quarter ending June 28, 2019 and beyond. These statements identify prospective information and may include words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” or the negative of these words, variations of these words and comparable terminology. These forward-looking statements are based on information available to the Company as of the date of this report and are based on management’s current views and assumptions. These forward-looking statements are conditioned upon and also involve a number of known and unknown risks, uncertainties, and other factors that could cause actual results, performance or events to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties, and other factors may be beyond the Company’s control and may pose a risk to the Company’s operating and financial condition. Such risks and uncertainties include, but are not limited to: items that may be identified during its financial statement closing process that cause adjustments to the estimates included in this report; the uncertainty in global economic and political conditions; the impact of the variable demand and adverse pricing environment for storage products; the Company’s ability to successfully qualify, manufacture and sell its storage products in increasing volumes on a cost-effective basis and with acceptable quality; the impact of competitive product announcements; the Company’s ability to achieve projected cost savings in connection with restructuring plans and consolidation of manufacturing activities; possible excess industry supply with respect to particular storage products and competing alternative storage technology solutions; the impact of trade barriers, such as import/export duties and restrictions, tariffs and quotas, imposed by the U.S. or other countries in which the Company conducts business; disruptions to its supply chain or production capabilities; unexpected advances in competing technologies or changes in market trends; the development and introduction of products based on new technologies and expansion into new data storage markets; the Company’s ability to effectively manage its debt obligations and comply with certain covenants in its credit facilities with respect to financial ratios and financial condition tests; currency fluctuations that may impact the Company’s margins, international sales and results of operations; cyber-attacks or other data breaches that disrupt the Company’s operations or result in the dissemination of proprietary or confidential information and cause reputational harm; cybersecurity threats and vulnerabilities associated with the Company’s infrastructure updates to its information technology systems; and fluctuations in interest rates. Information concerning risks, uncertainties and other factors that could cause results to differ materially from the expectations described in this press release is contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on August 3, 2018, the “Risk Factors” section of which is incorporated into this press release by reference, and other documents filed with or furnished to the SEC. These forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date and the Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by applicable law.

The inclusion of Seagate’s website address in this press release is intended to be an inactive textual reference only and not an active hyperlink. The information contained in, or that can be accessed through, Seagate’s website and social media channels are not part of this press release.


SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

     March 29,
2019
       June 29,
2018 (a)
 

ASSETS

       

Current assets:

       

Cash and cash equivalents

   $       1,388        $       1,853  

Accounts receivable, net

     897          1,184  

Inventories

     1,001          1,053  

Other current assets

     201          220  
  

 

 

      

 

 

 

Total current assets

     3,487          4,310  

Property, equipment and leasehold improvements, net

     1,822          1,792  

Investment in debt security

     1,318          1,275  

Goodwill

     1,237          1,237  

Other intangible assets, net

     129          188  

Deferred income taxes

     416          417  

Other assets, net

     187          191  
  

 

 

      

 

 

 

Total Assets

   $ 8,596        $ 9,410  
  

 

 

      

 

 

 

LIABILITIES AND EQUITY

       

Current liabilities:

       

Accounts payable

   $ 1,310        $ 1,728  

Accrued employee compensation

     145          253  

Accrued warranty

     100          112  

Current portion of long-term debt

     —            499  

Accrued expenses

     591          598  
  

 

 

      

 

 

 

Total current liabilities

     2,146          3,190  

Long-term accrued warranty

     112          125  

Long-term accrued income taxes

     5          10  

Other non-current liabilities

     122          100  

Long-term debt, less current portion

     4,522          4,320  
  

 

 

      

 

 

 

Total Liabilities

     6,907          7,745  
       

Total Equity

     1,689          1,665  
  

 

 

      

 

 

 

Total Liabilities and Equity

   $ 8,596        $ 9,410  
  

 

 

      

 

 

 

 

(a)

The information in this column was derived from the Company’s audited Consolidated Balance Sheet as of June 29, 2018.


SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

 

     For the Three Months Ended     For the Nine Months Ended  
     March 29,
2019
    March 30,
2018
    March 29,
2019
    March 30,
2018
 

Revenue

   $ 2,313     $ 2,803     $ 8,019     $ 8,349  
        

Cost of revenue

     1,712       1,956       5,711       5,889  

Product development

     238       254       750       767  

Marketing and administrative

     110       135       345       422  

Amortization of intangibles

     6       6       17       47  

Restructuring and other, net

     11       11       41       95  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,077       2,362       6,864       7,220  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Income from operations

     236       441       1,155       1,129  
        

Interest income

     21       10       67       23  

Interest expense

     (55     (60     (169     (182

Other, net

     13       2       28       (18
  

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net

     (21     (48     (74     (177
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Income before income taxes

     215       393       1,081       952  

Provision for income taxes

     20       12       52       231  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 195     $ 381     $ 1,029     $ 721  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Net income per share:

        

Basic

   $ 0.69     $ 1.33     $ 3.62     $ 2.50  

Diluted

     0.69       1.31       3.57       2.48  

Number of shares used in per share calculations:

        

Basic

     281       286       284       288  

Diluted

     284       291       288       291  
        

Cash dividends declared per ordinary share

   $ 0.63     $ 0.63     $ 1.89     $ 1.89  


SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

     For the Nine Months Ended  
     March 29,
2019
    March 30,
2018
 

OPERATING ACTIVITIES

    

Net income

   $ 1,029     $ 721  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     407       461  

Share-based compensation

     73       85  

Deferred income taxes

     15       209  

Gain on sale of property and equipment

     (1     —    

Other non-cash operating activities, net

     (68     9  

Changes in operating assets and liabilities:

    

Accounts receivable, net

     296       124  

Inventories

     49       (20

Accounts payable

     (366     74  

Accrued employee compensation

     (108     (49

Accrued expenses, income taxes and warranty

     (32     (24

Other assets and liabilities

     19       55  
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,313       1,645  
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Acquisition of property, equipment and leasehold improvements

     (451     (270

Proceeds from settlement of foreign currency forward exchange contracts

     66       —    

Proceeds from sale of strategic investments

     10       —    

Proceeds from sale of properties previously classified as held for sale

     27       43  

Proceeds from sale of property and equipment

     3       2  

Purchases of strategic investments

     (14     (8

Other investing activities, net

     —         (6
  

 

 

   

 

 

 

Net cash used in investing activities

     (359     (239
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Redemption and repurchase of debt

     (499     (209

Dividends to shareholders

     (539     (545

Repurchases of ordinary shares

     (613     (361

Taxes paid related to net share settlement of equity awards

     (30     (22

Net proceeds from issuance of long-term debt

     196       —    

Proceeds from issuance of ordinary shares under employee stock plans

     68       110  
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,417     (1,027
  

 

 

   

 

 

 

Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash

     (3     8  
  

 

 

   

 

 

 

(Decrease) increase in cash, cash equivalents and restricted cash

     (466     387  

Cash, cash equivalents and restricted cash at the beginning of the period

     1,857       2,543  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at the end of the period

   $ 1,391     $ 2,930  
  

 

 

   

 

 

 


Use of non-GAAP financial information

The Company uses non-GAAP measures of adjusted revenue, gross margin, operating expenses, net income, diluted earnings per share and free cash flow which are adjusted from results based on GAAP to exclude certain gains, losses and expenditures. These non-GAAP financial measures may be provided to enhance the user’s overall understanding of the Company’s current financial performance and its prospects for the future. Specifically, the Company believes non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain gains, losses and expenditures that it believes are not indicative of its core operating results and because it is similar to the approach used in connection with the financial models and estimates published by financial analysts who follow the Company.

These non-GAAP results are some of the measurements management uses to assess the Company’s performance, allocate resources and plan for future periods. Reported non-GAAP results should only be considered as supplemental to results prepared in accordance with GAAP, and not considered as a substitute for, or superior to, GAAP results. These non-GAAP measures may differ from the non-GAAP measures reported by other companies in its industry.


SEAGATE TECHNOLOGY PLC

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

(In millions, except per share amounts and gross margin)

(Unaudited)

 

     For the Three Months Ended     For the Nine Months Ended  
     March 29,
2019
    March 30,
2018
    March 29,
2019
    March 30,
2018
 

GAAP Revenue

   $ 2,313     $ 2,803     $ 8,019     $ 8,349  

Adjustment to discontinued products

     —         —         1       (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Revenue

   $ 2,313     $ 2,803     $ 8,020     $ 8,343  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

GAAP Gross Margin

   $ 601     $ 847     $ 2,308     $ 2,460  

Adjustment to discontinued products

     —         —         1       (6

Accelerated depreciation, impairment and other charges related to cost saving efforts

     —         1       —         2  

Amortization of acquired intangible assets

     14       15       40       43  

Other charges

     —         —         (1     11  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Gross Margin

   $ 615     $ 863     $ 2,348     $ 2,510  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

GAAP Gross Margin

     26.0     30.2     28.8     29.5

Non-GAAP Gross Margin

     26.6     30.8     29.3     30.1
        

GAAP Operating Expenses

   $ 365     $ 406     $ 1,153     $ 1,331  

Accelerated depreciation, impairment and other charges related to cost saving efforts

     —         (4     (2     (6

Amortization of acquired intangible assets

     (5     (4     (14     (43

Restructuring and other, net

     (11     (11     (41     (95

Other charges

     —         (2     —         (4
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Operating Expenses

   $ 349     $ 385     $ 1,096     $ 1,183  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

GAAP Net Income

   $ 195     $ 381     $ 1,029     $ 721  

Adjustment to discontinued products

     —         —         1       (6

Accelerated depreciation, impairment and other charges related to cost saving efforts

     —         5       2       8  

Amortization of acquired intangible assets

     19       19       54       86  

Restructuring and other, net

     11       11       41       95  

Losses recognized on the early redemption and repurchase of debt

     —         1       —         4  

Strategic investment losses or impairment recognized

     —         3       2       3  

Other charges

     —         3       (1     15  

Income tax adjustments

     10       1       8       208  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Net Income

   $ 235     $ 424     $ 1,136     $ 1,134  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Shares used in diluted net income per share calculation

     284       291       288       291  

GAAP Diluted Net Income Per Share

   $ 0.69     $ 1.31     $ 3.57     $ 2.48  

Non-GAAP Diluted Net Income Per Share

   $ 0.83     $ 1.46     $ 3.94     $ 3.90  
        

GAAP Net Cash Provided by Operating Activities

   $ 438     $ 558     $ 1,313     $ 1,645  

Acquisition of property, equipment and leasehold improvements

     147       69       451       270  
  

 

 

   

 

 

   

 

 

   

 

 

 

Free Cash Flow

   $ 291     $ 489     $ 862     $ 1,375  
  

 

 

   

 

 

   

 

 

   

 

 

 


The Company’s Non-GAAP measures are adjusted for the following items:

Adjustment to discontinued products

These adjustments relate to sales of certain discontinued products or changes in sales provision for discontinued products. These adjustments are inconsistent in amount and frequency and are excluded in the non-GAAP measures as these adjustments are not indicative of the underlying ongoing operating performance.

Accelerated depreciation, impairment and other charges related to cost saving efforts

These expenses are excluded in the non-GAAP measure due to its inconsistency in amount and frequency and are excluded to facilitate a more meaningful evaluation of the Company’s current operating performance and comparison to its past periods operating performance.

Amortization of acquired intangible assets

The Company records expense from amortization of intangible assets that were acquired in connection with its business combinations over their estimated useful lives. Such charges are inconsistent in size and are significantly impacted by the timing and magnitude of the Company’s acquisitions. Consequently, these expenses are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods operating performance.

Other charges

The other charges primarily include write-off of certain discontinued inventory and expense related to disposed business. These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods operating performance.

Restructuring and other, net

Restructuring charges and other, net are costs associated with restructuring plans that are primarily related to costs associated with reduction in the Company’s workforce, exiting certain facilities and other related costs. These also exclude charges or gains from sale of properties classified as held-for-sale. These costs or benefits do not reflect the Company’s ongoing operating performance and consequently are excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods operating performance.

Losses Recognized on the early redemption and repurchase of debt

From time to time, the Company incurs losses from the early redemption and repurchase of certain long-term debt instruments. These losses represent the difference between the reacquisition costs and the par value of the debt extinguished and include the write off of any related unamortized debt issuance costs. The amount of these charges may be inconsistent in size and varies depending on the timing of the repurchase of debt.

Strategic investment losses, (gains) or impairment recognized

From time to time, the Company incurs losses or gains from strategic investment accounted under equity method of accounting or records impairments charges which are not considered as part of its ongoing operating performance. The resulting expense or gain is inconsistent in amount and frequency and consequently are excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods operating performance.

Income tax adjustments

Provision for income taxes represents the tax effects of non-GAAP adjustments determined using a hybrid with and without method and effective tax rate for the applicable adjustment and jurisdiction. It also includes a provisional tax benefit for the re-measurement of the Company’s U.S. deferred tax assets at the lower 21% tax rate resulting from the U.S. Tax Cuts and Jobs Act enacted on December 22, 2017.

Free cash flow

Free cash flow is a non-GAAP measure defined as net cash provided by operating activities less acquisition of property, equipment and leasehold improvements. This non-GAAP financial measure is used by management to assess the Company’s sources of liquidity, capital structure and operating performance.

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