Seagate(STX)2025-01-24 21:11Revenue and Gross Margin - Revenue for the December 2024 quarter was $2.3 billion, with a gross margin of 34.9% and operating cash flow of $221 million[122] - Revenue increased by $157 million compared to the September 2024 quarter, driven by higher demand for nearline products and favorable pricing actions[126] - Gross margin for the December 2024 quarter increased by 2 percentage points compared to the September 2024 quarter, primarily due to favorable product mix and cost efficiencies[129] - Gross margin for the December 2024 quarter increased by 12 percentage points compared to the December 2023 quarter, driven by favorable product mix, pricing actions, and the absence of $36 million in factory underutilization charges[130] - Revenue for the six months ended December 27, 2024, increased by $1.5 billion compared to the same period in 2023, primarily due to higher demand for nearline products and favorable pricing actions[127] Product Shipments and Demand - The company shipped 151 exabytes of HDD storage capacity in the December 2024 quarter, with mass capacity drives accounting for 140 exabytes[126] - The company anticipates temporary supply constraints in the March quarter due to resolved production challenges, but expects continued growth in HDD storage demand driven by Generative AI applications[123] Sales Incentives and Warranty Costs - Sales incentive programs accounted for 14% of gross revenue in the December 2024 quarter, compared to 13% in the September 2024 quarter and 18% in the December 2023 quarter[128] - Warranty costs related to new shipments were 0.7% of revenue in the December 2024 quarter, consistent with the September 2024 quarter and down from 0.9% in the December 2023 quarter[132] Expenses - Product development expenses increased by $3 million in the December 2024 quarter compared to the September 2024 quarter, primarily due to higher compensation and employee benefits[133] - Product development expenses increased by $23 million in the December 2024 quarter compared to the December 2023 quarter, primarily due to a $24 million increase in compensation and other employee benefits[134] - Marketing and administrative expenses increased by $31 million in the December 2024 quarter compared to the December 2023 quarter, primarily due to a $26 million increase in compensation and other employee benefits[137] - Other expense, net increased by $51 million in the December 2024 quarter compared to the September 2024 quarter, primarily due to a $50 million increase in net loss from certain investments[140] Cash and Financial Obligations - Cash and cash equivalents decreased by $120 million from June 28, 2024 to December 27, 2024, primarily due to $295 million in dividends paid to shareholders and $139 million in capital expenditures[146] - The company has $1.5 billion available for borrowing under its senior unsecured revolving credit facility as of December 27, 2024[148] - The company has unconditional purchase obligations of approximately $900 million as of December 27, 2024, with $810 million expected to be paid within one year[156] - Future principal payment obligation on long-term debt is $5.7 billion as of December 27, 2024, with $479 million due within one year[158] - The company accrued a settlement penalty of $300 million related to BIS' allegations of violations of the U.S. EAR, with $60 million expected to be paid within one year[159] - The company declared a quarterly cash dividend of $0.72 per share, payable on April 2, 2025[160] - The company expects capital expenditures to be higher in fiscal year 2025 compared to fiscal year 2024[162] Investments and Financial Instruments - The company has $531 million in floating rate money market funds, time deposits, and certificates of deposit with an average interest rate of 4.53%[169] - The company holds $5,729 million in fixed rate debt obligations with an average interest rate of 5.64%, maturing in various years up to 2029 and beyond[169] - The company has foreign currency forward exchange contracts with a total notional amount of $280 million, including $167 million in Singapore Dollars, $66 million in Thai Baht, $31 million in Chinese Renminbi, and $16 million in British Pound Sterling[173] - The company uses Total Return Swaps (TRS) to manage equity market risks associated with its non-qualified deferred compensation plan liabilities, paying a floating rate based on SOFR plus an interest rate spread[175]