Seagate(US:STX)2025-08-01 20:14Part I Business Seagate is a leading provider of data storage technology, primarily Hard Disk Drives (HDDs), serving markets driven by AI, cloud computing, and IoT - Seagate's primary business is providing data storage technology and solutions, with Hard Disk Drives (HDDs) as its main product, also offering Solid State Drives (SSDs), storage subsystems, and the Lyve™ edge-to-cloud platform15 - The company's product portfolio is divided into Mass Capacity Storage (for cloud, enterprise, video, and NAS) and Legacy Markets (consumer, client, and mission-critical applications)172125 - Seagate utilizes a vertically integrated model, designing and manufacturing key HDD components like read/write heads and media, including advanced Heat-Assisted Magnetic Recording (HAMR) technology in its Mozaic™ platform394478 - The company's main customers are OEMs (including large hyperscale data centers and CSPs), distributors, and retailers, with longer-term demand commitments now required from key OEM customers in fiscal year 2024 to improve supply predictability6768 - As of June 27, 2025, the company employed approximately 30,000 full-time employees, with about 25,000 located in Asia86 Risk Factors The company faces numerous risks including product innovation, intense competition, supply chain disruptions, macroeconomic volatility, significant debt, and regulatory compliance - Business risks include failure to introduce new products in a timely manner, intense price competition, and reliance on key customers like large hyperscale data center companies and CSPs110116129 - Supply chain risks include shortages of critical components, reliance on single-source suppliers, and potential costs from canceling purchase commitments if demand falls, which led to factory underutilization charges in fiscal years 2024 and 2023111133150 - The company is subject to export control laws and highlights the April 2023 Settlement Agreement with the U.S. Department of Commerce's Bureau of Industry and Security (BIS) regarding sales to Huawei179 - Tax-related risks are significant, with potential impacts from global tax law changes, such as the OECD's Pillar Two framework, which is expected to materially increase the level of income tax starting in fiscal year 2026189 - Cybersecurity is a major risk, with threats of cyber-attacks, ransomware, and other breaches that could disrupt operations and lead to significant liability, noting that threat actors are using increasingly advanced tools, including AI-augmented attacks200202 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments214 Cybersecurity Seagate has implemented a cybersecurity risk management program with Board oversight, employee training, and incident response exercises - The Board of Directors has delegated oversight of cybersecurity risk to the Audit and Finance Committee, which receives regular reports (at least quarterly) from the Chief Information Security Officer (CISO) and Chief Information Officer (CIO)221222 - The company's cybersecurity program includes mandatory annual awareness training for all employees, enterprise tabletop exercises, and periodic assessments by independent security firms216217 - As of the report date, Seagate has not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition220 Properties Seagate's principal executive offices are in Singapore, with approximately 9.7 million square feet of owned or leased space globally for manufacturing and product development Principal Facilities | Location | Primary Use | | :--- | :--- | | Northern Ireland | Manufacture of recording heads | | California | Product development, marketing, admin | | Colorado | Product development, admin | | Minnesota | Manufacture of recording heads, product development | | Wuxi, China | Manufacture of drives and subassemblies | | Johor, Malaysia | Manufacture of substrates | | Singapore | Manufacture of media, product development, admin | | Korat & Teparuk, Thailand | Manufacture of drives and subassemblies | - As of June 27, 2025, the company owned or leased a total of approximately 9.7 million square feet of space globally228 Legal Proceedings The company is involved in various legal proceedings, notably a $300 million settlement with BIS related to Huawei sales - The company is defending against multiple patent infringement and securities class action lawsuits460462463 - On April 18, 2023, Seagate entered into a Settlement Agreement with BIS to resolve allegations regarding HDD sales to Huawei, agreeing to pay a $300 million penalty in quarterly installments of $15 million over five years464 Mine Safety Disclosures This item is not applicable to the company - Not applicable229 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Seagate's ordinary shares trade on NASDAQ, with a share repurchase program paused through fiscal year 2025 but expected to resume in Q1 FY2026 - The company's ordinary shares are traded on the NASDAQ Global Select Market under the symbol "STX"232 - The Board of Directors increased the share repurchase authorization to $5 billion on May 21, 2025, with $5.0 billion remaining available for repurchase as of June 27, 2025240 - The share repurchase program was paused in the December 2022 quarter and remained paused through the end of fiscal year 2025, with an expectation to resume in Q1 FY2026213 Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2025, Seagate's revenue increased 39% to $9.1 billion, driven by strong demand for high-capacity drives and improved gross margin Financial Performance Summary | Fiscal Year | Revenue | Gross Margin | Net Income | Operating Cash Flow | | :--- | :--- | :--- | :--- | :--- | | 2025 | $9.1 billion | 35% | $1.5 billion | $1.1 billion | | 2024 | $6.6 billion | 23% | $0.3 billion | $0.9 billion | - Revenue growth in FY2025 was primarily due to a significant increase in demand for high-capacity nearline drives from cloud customers and favorable pricing actions245250 - Gross margin improvement was driven by favorable product mix, pricing, and the non-recurrence of $160 million in factory underutilization charges and a $96 million decrease in supply-related purchase order cancellation fees that impacted FY2024251 - As of June 27, 2025, the company had unconditional purchase obligations of approximately $1.3 billion, primarily for inventory components, with $1.2 billion expected to be paid within one year279 - Critical accounting policies involve significant estimates for Revenue (sales program accruals) and Income Taxes (deferred tax asset valuation allowances)289 Quantitative and Qualitative Disclosures About Market Risk Seagate manages market risks from interest rates, foreign currency exchange rates, and equity markets through hedging strategies - The company's primary market risks are related to interest rates on its investment portfolio and debt, foreign currency exchange rates, and equity market fluctuations296 - As of June 27, 2025, the company had foreign currency forward exchange contracts with a total notional value of $280 million to hedge against balance sheet exposures in currencies like the British Pound, Chinese Renminbi, Singapore Dollar, and Thai Baht300302 - The company uses a Total Return Swap (TRS) to manage equity market risks associated with its non-qualified deferred compensation plan liabilities304 Financial Statements and Supplementary Data The consolidated financial statements for FY2025 show total assets of $8.0 billion, total liabilities of $8.5 billion, and net income of $1.5 billion Consolidated Balance Sheet (in millions) | | June 27, 2025 | June 28, 2024 | | :--- | :--- | :--- | | Total Current Assets | $3,653 | $3,332 | | Total Assets | $8,023 | $7,739 | | Total Current Liabilities | $2,648 | $3,099 | | Total Liabilities | $8,476 | $9,230 | | Total Shareholders' Deficit | ($453) | ($1,491) | Consolidated Statement of Operations (in millions) | | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Revenue | $9,097 | $6,551 | $7,384 | | Income (loss) from operations | $1,890 | $452 | ($342) | | Net income (loss) | $1,469 | $335 | ($529) | | Diluted EPS | $6.77 | $1.58 | ($2.56) | - In FY2024, the company sold its System-on-Chip (SoC) operations to a subsidiary of Broadcom Inc. for $600 million, resulting in a pre-tax net gain of $313 million480482 - As of June 27, 2025, total debt was approximately $5.0 billion, with the company repaying its 2025 and 2027 notes and issuing new 2030 notes during the year379393394 - The independent auditor's report from Ernst & Young LLP identified two Critical Audit Matters: (1) Revenue recognition related to sales incentive program rebates and discounts, and (2) the realizability of deferred income taxes488489493 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable505 Controls and Procedures The company's disclosure controls and internal control over financial reporting were deemed effective as of June 27, 2025 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 27, 2025506 - Management concluded that internal control over financial reporting was effective as of June 27, 2025, based on the COSO framework, with this assessment audited and affirmed by Ernst & Young LLP508 Other Information An executive officer adopted a Rule 10b5-1 trading plan during the fiscal quarter - Dr. John C. Morris, SVP and CTO, adopted a Rule 10b5-1 trading plan on June 1, 2025, to sell an aggregate of 18,581 ordinary shares513 Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the forthcoming proxy statement - Detailed information for this item is incorporated by reference from the company's forthcoming Proxy Statement517 - The company has a Code of Ethics for senior financial officers available on its website and will post any amendments or waivers there518 Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement - Detailed information for this item is incorporated by reference from the company's forthcoming Proxy Statement519 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership and equity compensation plans is incorporated by reference from the company's definitive proxy statement - Detailed information for this item is incorporated by reference from the company's forthcoming Proxy Statement520 Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the company's definitive proxy statement - Detailed information for this item is incorporated by reference from the company's forthcoming Proxy Statement521 Principal Accountant Fees and Services Information regarding fees paid to the principal accountant, Ernst & Young LLP, is incorporated by reference from the company's definitive proxy statement - Detailed information for this item is incorporated by reference from the company's forthcoming Proxy Statement522 Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K, including governance documents and debt indentures - This section contains the list of all financial statements and exhibits filed with the Form 10-K524525 - Key exhibits include the company's Constitution, various debt indentures for its senior notes, the Credit Agreement, equity incentive plans, and CEO/CFO certifications528529530