Seagate Technology Holdings plc Q3 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview

  • Revenue was $2.72 billion, up 1% sequentially and 18% year-over-year, driven by record nearline product sales.
  • Non-GAAP EPS reached $1.38, above guidance midpoint and up 2% sequentially and 49% year-over-year.
  • Free cash flow was $260 million, with $195 million used for share repurchases and $170 million for dividends.
  • Mass capacity storage revenue grew 18% quarter-over-quarter and 68% year-over-year, now 57% of total revenue (up from 49% last quarter).
  • Nearline exabyte shipments hit a record 76 exabytes; shipments of 16TB drives more than doubled quarter-over-quarter.
  • COVID-19 disruption affected supply chain and logistics, creating approximately 100 basis points of gross margin headwind.

Operational and Market Highlights

  • Seagate managed supply chain disruptions beginning in late January, including component shortages, logistics slowdowns, and partner factory shutdowns.
  • Demand strengthened throughout the quarter from cloud and hyperscale customers due to increased remote work, education, and streaming activity.
  • Video and image applications saw below-seasonal performance due to early COVID-related market disruptions.
  • Legacy markets (PC, consumer electronics, mission-critical) declined more than expected due to weakened consumer demand and extended Chinese New Year shutdowns.

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Operator: Good afternoon and welcome to the Seagate Technology Fiscal Third Quarter 2020 Financial Results Conference Call. My name is Jason and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. At this time, I would like to turn the call over to Shanye Hudson, Vice President, Investor Relations. Please proceed, Shanye. Shanye Hudson: Thank you. Good afternoon, everyone and welcome to today’s call. Joining me are Dave Mosley, Seagate’s Chief Executive Officer and Gianluca Romano, our Chief Financial Officer. We posted our earnings press release and detailed supplemental information for our March 2020 quarter on the Investors section of our website. During today’s call, we will refer to GAAP and non-GAAP measures. Non-GAAP figures are reconciled to GAAP figures in the earnings press release posted on our website and Form 8-K that was filed with the SEC. We have not reconciled certain non-GAAP outlook measures, because material items that may impact these measures are out of our control and/or cannot be reasonably predicted. Therefore, reconciliation to the corresponding GAAP measures is not available without unreasonable efforts. As a reminder, this call contains forward-looking statements, including our June quarter financial outlook and expectations about our financial performance, mar

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