Seagate Analyst and Investor Event 2025 Thursday, May 22, 2025 Park Hyatt, NYC (153 W 57th) Safe Harbor Statement This document 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 pla ...

Seagate (STX) 2025 Investor Day May 22, 2025 09:00 AM ET Speaker0 Please welcome Seagate's Senior Vice President of Investor Relations, Shanee Hudson. Speaker1 Hello, everyone. As you just heard, I'm Shanee Hudson. I have the great honor of leading Seagate's Investor Relations program as well as the honor to be the first to welcome you to our twenty twenty five investor and analyst event. I had the opportunity before coming up here to speak with many familiar faces and really appreciate you and the weather ...

Company Overview - Seagate Technology (NASDAQ: STX) has been under observation for a significant period, with a previous strong buy recommendation made in January [1]. Analyst Background - The analyst has extensive experience in foreign policy research and investment analysis, focusing on deep-discount value plays for over 25 years [1]. Investment Philosophy - The investment approach emphasizes finding underappreciated companies that can return value to investors, influenced by contrarian investment philosophies [1].

Core Insights - Seagate is developing a 100-terabyte hard drive by 2030 to meet the increasing demand from data centers driven by the AI boom [1][2] - The new drive will have approximately three times the capacity of Seagate's current largest model, the 36-terabyte Exos M [2] - Seagate positions itself as a key player in the AI sector, highlighting the necessity of high-capacity storage solutions to support market growth [2] Company Developments - Seagate's chief commercial officer, BS Teh, emphasized the strong demand for high-capacity drives, indicating that the market requires such advancements [2] - The company has been adapting its strategy to align with the needs of the AI industry, which has primarily benefited hardware manufacturers like Nvidia [2] Industry Context - The AI boom is creating significant demand for data storage solutions, with Seagate aiming to be a critical enabler in this space [2] - The current landscape shows that no other technology can match the storage capacity that Seagate is targeting, underscoring the company's potential role in the evolving market [2]

Financial Performance - In the March 2025 quarter, the company shipped 144 exabytes of HDD storage capacity and generated revenue of approximately $2.2 billion with a gross margin of 35.2%[125]. - Revenue for the March 2025 quarter decreased by $165 million compared to the December 2024 quarter, primarily due to a decrease in mass capacity exabytes shipped[129]. - Revenue for the three and nine months ended March 28, 2025 increased by $505 million and $2 billion from the three and nine months ended March 29, 2024, respectively[130]. - The gross margin for the March 2025 quarter increased by 9 percentage points compared to the March 2024 quarter, driven by favorable product mix and pricing actions[133]. - The gross margin for the nine months ended March 28, 2025 increased by 14 percentage points compared to the nine months ended March 29, 2024[134]. Operating Expenses - Operating expenses for the quarter ended March 28, 2025, were $329 million, a slight increase from $324 million in the previous quarter, and $282 million in the same quarter last year[136]. - Product development expenses increased by $16 million in the March 2025 quarter compared to March 2024, primarily due to a $17 million increase in compensation and other employee benefits[137]. - Marketing and administrative expenses increased by $23 million in the March 2025 quarter compared to March 2024, mainly due to a $22 million increase in compensation and other employee benefits[139]. - Sales incentive programs were approximately 14% of gross revenue for the March 2025 quarter[131]. Cash Flow and Debt Management - Operating cash flow for the March 2025 quarter was $259 million, and the company paid $152 million in dividends[125]. - The company reduced its outstanding debt by $536 million through repayment of the 2025 Notes and partial repurchase of certain senior notes[125]. - Cash and cash equivalents decreased by $544 million from June 28, 2024, to $814 million as of March 28, 2025, primarily due to $531 million repayment of debt and $447 million in dividends paid[148]. - Cash provided by operating activities for the nine months ended March 28, 2025, was $575 million, reflecting net income adjusted for non-cash items[149]. - As of March 28, 2025, the future principal payment obligation on long-term debt was $5.2 billion, with estimated future interest payments of approximately $1.8 billion[160]. Shareholder Returns - The company declared a quarterly cash dividend of $0.72 per share, payable on July 8, 2025, to shareholders of record as of June 25, 2025[162]. - As of March 28, 2025, $1.8 billion remained available for share repurchase under the existing authorization limit[163]. Capital Expenditures and Investments - The company expects capital expenditures for fiscal year 2025 to be higher than in fiscal year 2024, requiring substantial cash to fund increased working capital and scheduled debt payments[164]. - As of March 28, 2025, the company has a cash investment portfolio with floating rate assets totaling $171 million at an average interest rate of 4.24%[170]. - The company has fixed rate debt obligations amounting to $5,193 million, with an average interest rate of 5.74%[170]. - The company has fixed rate debt obligations maturing in 2028 totaling $1,500 million at an average interest rate of 3.50%[170]. Risk Management - The company manages interest rate risk primarily through fixed rate debt obligations and has immaterial available-for-sale investments[169]. - The company hedges foreign currency exposure with contracts that mature within 12 months, aiming to reduce earnings volatility from currency fluctuations[172]. - The company has entered into foreign currency forward exchange contracts with a total notional amount of $247 million, including contracts in Singapore Dollar ($154 million) and Thai Baht ($47 million)[175]. - The company performs ongoing credit evaluations to manage counterparty credit risk related to foreign currency forward exchange contracts[176]. - Changes in corporate issuer credit ratings have minimal near-term financial impact but may affect future capital raising and transaction costs[176]. - The company utilizes a Total Return Swap to manage equity market risks associated with its non-qualified deferred compensation plan[177]. - The company has exposure to market risks including interest rates, foreign currency exchange rates, and credit rating changes, which could impact financial results[168].

Group 1 - The stock market has entered the Q1 earnings season with significant pessimism regarding tariffs, but the actual results from reporting companies suggest a different narrative [1] - Companies reporting earnings have shown that the reality may not align with the initial pessimistic expectations surrounding tariffs [1] Group 2 - Gary Alexander has extensive experience in covering technology companies and has worked in Silicon Valley, providing insights into current industry themes [1] - He has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications, indicating a strong presence in the investment community [1]

Core Viewpoint - Seagate Technology's stock has experienced an increase, with the company asserting that tariffs are not a significant issue for its operations [1] Group 1 - Seagate Technology reported a positive market response, indicating resilience against tariff impacts [1] - The company emphasized its ability to manage costs effectively despite external economic pressures [1] - Seagate's strategic positioning in the market allows it to navigate challenges without significant disruptions [1]

Core Insights - Seagate Technology Holdings plc (STX) reported third-quarter fiscal 2025 non-GAAP earnings of $1.90 per share, exceeding the Zacks Consensus Estimate by 7.95% and reflecting operational discipline and effective cost management [1] - Non-GAAP revenues reached $2.16 billion, beating estimates by 1.3% and showing a 31% year-over-year increase, although down 7% sequentially due to supply chain challenges [1][3] - The company continues to benefit from strong demand for mass capacity storage, particularly driven by nearline cloud demand, which surged 48% year over year [2][3] Financial Performance - Non-GAAP gross margin increased to 36.2% from 26.1% in the prior-year quarter, contributing to improved earnings and free cash flow [13] - Non-GAAP income from operations rose to $507 million from $183 million a year ago, with operating margin increasing to 23.5% from 11.1% [14] - Cash flow from operations was $259 million, with free cash flow amounting to $216 million, indicating a positive trend in cash generation [16] Product and Market Dynamics - Seagate shipped 143.6 exabytes of HDD storage, a 45% year-over-year increase, although down 5% sequentially [6] - Mass capacity storage shipments reached 132.9 exabytes, up 50% year over year, with average capacity per drive increasing to 16.2 TB [7] - The company is ramping up its HAMR technology to meet increasing cloud customer demand, with volume shipments expected to expand in the second half of calendar 2025 [4] Future Outlook - Management anticipates fourth-quarter fiscal 2025 revenues of $2.4 billion, reflecting an 11% sequential increase and a 27% year-over-year improvement [17] - Non-GAAP earnings are projected to be $2.4 per share, with operating expenses expected around $285 million [18] - The outlook indicates stability in demand and minimal impact from recent global tariff developments [17]

Financial Data and Key Metrics Changes - Seagate reported a 31% year-on-year increase in revenue and an 81% growth in non-GAAP gross profit dollars for Q3 2025 [5][13] - Non-GAAP EPS was $1.90, which is at the top end of the guidance range, despite a 7% sequential decline in revenue [13][20] - Non-GAAP gross margin expanded by 70 basis points sequentially to 36.2% and over 1,000 basis points year-on-year [16][20] Business Line Data and Key Metrics Changes - Nearline revenue represented approximately 90% of mass capacity volume, with shipments of 120 exabytes, down 5% sequentially but up 55% year-on-year [15] - Mass capacity revenue declined sequentially by $145 million to $1.7 billion, representing a 48% increase year-on-year [14] - Legacy product sales totaled $254 million, down 8% sequentially, reflecting expected seasonal trends [15] Market Data and Key Metrics Changes - Cloud nearline revenue and exabytes were up nearly 10% sequentially, almost doubling year-over-year amid a tight supply environment [8] - Demand for mass capacity storage aligns with the cloud CapEx investment cycle and ongoing data center infrastructure build-out to support AI transformations [8][10] - Nearline exabyte demand looks strong through calendar 2025, with visibility of demand extending into the first half of calendar 2026 [10] Company Strategy and Development Direction - The company is focusing on managing controllable factors while executing its aerial density-driven technology roadmap [7] - Seagate's HAMR-based Mosaic drives are positioned as the industry's only three terabyte per disk products, with shipments expected to ramp in the second half of calendar 2025 [7][12] - The company aims to transform its business model to prioritize profits and cash generation while capitalizing on the growth in data generation and value [23] Management's Comments on Operating Environment and Future Outlook - Management expects minimal impact from tariffs on fourth-quarter financial performance and is monitoring the situation closely [6][20] - The demand environment remains intact, particularly among global cloud customers, despite potential tariff measures affecting customer buying decisions [7][20] - The company anticipates free cash flow generation to improve sequentially through the rest of the calendar year [19][20] Other Important Information - The company returned $152 million to shareholders through dividends and ended the quarter with liquidity of $2.1 billion [19] - The debt balance was $5.1 billion at the end of March, with a net leverage ratio of 2.1 times [19] Q&A Session Summary Question: Understanding upside in revenue despite supply constraints - Management confirmed that the guidance for June would have remained the same a month ago, indicating predictability built through the build-to-order process [29][30] Question: Progress on HAMR qualifications and contributions - Management stated that HAMR is growing well, with one major CSP qualification almost complete and more in progress [35][36] Question: Visibility on customer demand and pricing - Management noted that build-to-order models provide visibility into demand, and they expect to negotiate higher prices as they transition to higher capacity products [42][43] Question: Impact of tariffs on financial model - Management indicated that passing through tariff-related costs would be a last resort, and they are focused on maintaining margins to reinvest in the business [50][52] Question: Expectations for revenue growth and gross margin in the back half of the year - Management expressed confidence in revenue growth and profitability, with no reason to change expectations based on current visibility [58][60]

Seagate | 2 Q2FY25 Financial Results SUPPLEMENTAL FINANCIAL INFORMATION Q2FY25 JANUARY 21, 2025 Safe Harbor Statement and Use of Non-GAAP Financial Information This document and our other communications regarding our quarterly financial results contain 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 relat ...