Seagate Technology Holdings 10-Q 2024-09-27

Filed 2024-10-25. 8 sections, 263K characters. Original on sec.gov · Markdown · JSON

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: to

Commission File Number 001-31560

SEAGATE TECHNOLOGY HOLDINGS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

Ireland98-1597419
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

121 Woodlands Avenue 5,

Singapore

(Address of principal executive offices)

739009

(Zip Code)

Telephone: (65) 6018-2562

(Registrant’s telephone number, including area code)

_________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Ordinary Shares, par value $0.00001 per shareSTXThe NASDAQ Global Select Market

_________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 23, 2024, 211,529,509 of the registrant’s ordinary shares, par value $0.00001 per share, were issued and outstanding.

INDEX

SEAGATE TECHNOLOGY HOLDINGS PLC

Page
PART IFINANCIAL INFORMATION
Item 1.Financial Statements3
Condensed Consolidated Balance Sheets - September 27, 2024 (Unaudited) and June 28, 20241
Condensed Consolidated Statements of Operations - Three Months Ended September 27, 2024 and September 29, 2023 (Unaudited)2
Condensed Consolidated Statements of Comprehensive (Loss) Income - Three Months Ended September 27, 2024 and September 29, 2023 (Unaudited)3
Condensed Consolidated Statements of Cash Flows - Three Months Ended September 27, 2024 and September 29, 2023 (Unaudited)4
Condensed Consolidated Statements of Shareholders’ Deficit - Three Months Ended September 27, 2024 and September 29, 2023 (Unaudited)5
Notes to Condensed Consolidated Financial Statements (Unaudited)6
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations23
Item 3.Quantitative and Qualitative Disclosures About Market Risk30
Item 4.Controls and Procedures31
PART IIOTHER INFORMATION
Item 1.Legal Proceedings32
Item 1A.Risk Factors32
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds52
Item 3.Defaults Upon Senior Securities52
Item 4.Mine Safety Disclosures52
Item 5.Other Information53
Item 6.Exhibits54
SIGNATURES55

PART I

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Table of ContentsPage
Condensed Consolidated Balance Sheets1
Condensed Consolidated Statements of Operations2
Condensed Consolidated Statements of Comprehensive Income (Loss)3
Condensed Consolidated Statements of Cash Flows4
Condensed Consolidated Statements of Shareholders’ Deficit5
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation and Summary of Significant Accounting Policies6
Note 2. Balance Sheet Information7
Note 3. Debt10
Note 4. Income Taxes12
Note 5. Derivative Financial Instruments13
Note 6. Fair Value15
Note 7. Shareholders’ Deficit18
Note 8. Revenue18
Note 9. Guarantees18
Note 10. Net Income (Loss) Per Share19
Note 11. Legal, Environmental and Other Contingencies19
Note 12. Commitments22
Note 13. Subsequent Event22

SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

September 27, 2024June 28, 2024
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$1,239$1,358
Accounts receivable, net628429
Inventories, net1,3831,239
Other current assets358306
Total current assets3,6083,332
Property, equipment and leasehold improvements, net1,5991,614
Goodwill1,2191,219
Deferred income taxes1,0381,037
Other assets, net508537
Total Assets$7,972$7,739
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable$1,778$1,786
Accrued employee compensation148106
Accrued warranty7174
Current portion of long-term debt479479
Accrued expenses685654
Total current liabilities3,1613,099
Long-term accrued warranty7075
Other non-current liabilities844861
Long-term debt, less current portion5,1975,195
Total Liabilities9,2729,230
Commitments and contingencies (See Notes 9, 11 and 12)
Shareholders’ Deficit:
Ordinary shares and additional paid-in capital7,5337,471
Accumulated other comprehensive loss(2)(2)
Accumulated deficit(8,831)(8,960)
Total Shareholders’ Deficit(1,300)(1,491)
Total Liabilities and Shareholders’ Deficit$7,972$7,739

See Notes to Condensed Consolidated Financial Statements.

SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

For the Three Months Ended
September 27, 2024September 29, 2023
Revenue$2,168$1,454
Cost of revenue1,4541,305
Product development181171
Marketing and administrative129105
Restructuring and other, net12
Total operating expenses1,7651,583
Income (loss) from operations403(129)

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the Company’s financial condition, changes in financial condition and results of operations for the fiscal quarters ended September 27, 2024, June 28, 2024 and September 29, 2023, referred to herein as the “September 2024 quarter”, the “June 2024 quarter” and the “September 2023 quarter”, respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The September 2024 quarter, June 2024 quarter and September 2023 quarter were each 13 weeks.

You should read this discussion in conjunction with financial information and related notes included in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended June 28, 2024. Unless the context indicates otherwise, as used herein, the terms “we,” “us,” “Seagate,” the “Company” and “our” refer collectively to Seagate Technology Holdings plc, an Irish public limited company, and its subsidiaries. References to “$” or “dollars” are to United States dollars.

This Quarterly Report on Form 10-Q 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. These statements include, among other things, statements about our plans, programs, strategies and prospects; anticipated shifts in technology and storage industry trends, and anticipated demand for and performance of new storage product introductions; expectations regarding market demand for our products and technologies and our ability to optimize our level of production and meet market and industry expectations and the effects of these future trends on our performance; financial outlook for future periods; expectations regarding our ability to service debt, meet debt and credit agreement covenants and continue to generate free cash flow; expectations regarding our ability to make timely quarterly payments under the Settlement Agreement with BIS; the impact of macroeconomic headwinds and customer inventory adjustments on our business and operations; our cost saving plans, including our ability to execute such plans, the projected savings under such plans and the assumptions on which the plans and projected savings are based; expectations regarding our business strategy and performance; the sufficiency of our sources of cash to meet cash needs for the next 12 months; and our expectations regarding capital expenditures and dividend issuance plans. Forward-looking statements generally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” “will continue,” “can,” “could,” or negative of these words, variations of these words and comparable terminology, in each case, intended to refer to future events or circumstances. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are based on information available to the Company as of the date of this Quarterly Report on Form 10-Q and are subject to known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from historical experience and our present expectations or projections. Therefore, undue reliance should not be placed on forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q. We undertake no obligation to update forward-looking statements, except as required by law.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying Condensed Consolidated Financial Statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

*•*Overview of the September 2024 quarter. Highlights of events in the September 2024 quarter that impacted our financial position.

*•*Results of Operations. Analysis of our financial results comparing the September 2024 quarter to the June 2024 quarter and the September 2023 quarter.

  • Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows and discussion of our financial condition, including potential sources of liquidity, material cash requirements and their general purpose.

  • Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

For an overview of our business, see “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies—Organization.”

Overview of the September 2024 quarter

During the September 2024 quarter, we shipped 138 exabytes of HDD storage capacity. We generated revenue of approximately $2.2 billion with a gross margin of 33%. Our operating cash flow was $95 million and we paid $147 million in dividends.

Recent Developments, Economic Conditions and Challenges

During the September 2024 quarter, revenue growth was driven by continued improvement in cloud customer demand for our high capacity nearline drives along with an increase in demand from the enterprise and OEM markets. We continue to exercise cost discipline and implement pricing actions to improve operational efficiency and profitability. The macroeconomic environment remains dynamic, which may impact our business and results of operations. However, we expect our HDD storage business to benefit from further growth in data demand, including potential demand driven by the adoption of Generative AI applications.

For a further discussion of the uncertainties and business risks, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Results of Operations

We list in the tables below summarized information from our Condensed Consolidated Statements of Operations by dollar amounts and as a percentage of revenue:

For The Three Months Ended
(Dollars in millions)September 27, 2024June 28, 2024September 29, 2023
Revenue$2,168$1,887$1,454
Cost of revenue1,4541,2871,305
Gross profit714600149
Product development181158171
Marketing and administrative129131105
Restructuring and other, net1(3)2
Income (loss) from operations403314(129)
Other (expense) income, net(87)224(18)
Income (loss) before income taxes316538(147)
Provision for income taxes112537
Net Income (loss)$305$513$(184)
For The Three Months Ended
September 27, 2024June 28, 2024September 29, 2023
Revenue100%100%100%
Cost of revenue676890
Gross margin333210
Product development8812
Marketing and administrative677
Restructuring and other, net———
Operating margin1917(9)
Other (expense) income, net(4)12(1)
Income (loss) before income taxes1529(10)
Provision for income taxes113
Net Income (loss)14%28%(13)%

Revenue

The following table summarizes information regarding consolidated revenues by channel, geography, and market and HDD exabytes shipped by market and price per terabyte:

For The Three Months Ended
September 27, 2024June 28, 2024September 29, 2023
Revenues by Channel (%)
OEMs81%79%71%
Distributors11%12%18%
Retailers8%9%11%
Revenues by Geography (%) (1)
Asia Pacific40%54%56%
Americas50%36%31%
EMEA10%10%13%
Revenues by Market (%)
Mass capacity80%76%70%
Legacy12%15%19%
Other8%9%11%
HDD Exabytes Shipped by Market
Mass capacity12810479
Legacy101011
Total13811490
HDD Price per Terabyte$15$15$14

(1) Revenue is attributed to geography based on the bill from location.

Revenue in the September 2024 quarter increased by $281 million compared to the June 2024 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced improved demand for our nearline products, and favorable pricing actions undertaken by the Company.

Revenue in the September 2024 quarter increased by $714 million compared to the September 2023 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced improved demand for our nearline products, and favorable pricing actions undertaken by the Company.

We maintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 13% of gross revenue for the September 2024 quarter, 12% for the June 2024 quarter and 20% for the September 2023 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented.

Cost of Revenue and Gross Margin

For The Three Months Ended
(Dollars in millions)September 27, 2024June 28, 2024September 29, 2023
Cost of revenue$1,454$1,287$1,305
Gross profit714600149
Gross margin33%32%10%

Gross margin for the September 2024 quarter increased compared to the June 2024 quarter, primarily driven by favorable product mix and an improved pricing environment.

Gross margin for the September 2024 quarter increased compared to the September 2023 quarter, primarily driven by favorable product mix and pricing actions undertaken by the Company, as well as $118 million of order cancellation fees, $59 million of factory underutilization charges, and $13 million of accelerated depreciation expense for certain capital equipment in the September 2023 quarter that did not recur.

Warranty cost related to new shipments was 0.7%, 0.7% and 0.9% of revenue for the September 2024 quarter, June 2024 quarter and September 2023 quarter, respectively.

Operating Expenses

For The Three Months Ended
(Dollars in millions)September 27, 2024June 28, 2024September 29, 2023
Product development$181$158$171
Marketing and administrative129131105
Restructuring and other, net1(3)2
Operating expenses$311$286$278

Product Development Expense. Product development expenses increased by $23 million in the September 2024 quarter compared to the June 2024 quarter primarily due to a $19 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the September 2024 quarter, and a $3 million increase in materials expense.

Product development expenses increased by $10 million in the September 2024 quarter compared to the September 2023 quarter primarily due to an $11 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the September 2024 quarter and temporary salary reductions in the September 2023 quarter, a $1 million increase in equipment expense, a $1 million increase in travel expense and a $1 million increase in lease expense, partially offset by a $5 million decrease in materials expense.

Marketing and Administrative Expense. Marketing and administrative expenses decreased by $2 million in the September 2024 quarter compared to the June 2024 quarter primarily due to an $8 million decrease in outside services expense, partially offset by a $5 million net increase in compensation and other employee benefits due to the variable compensation expense recognized in the September 2024 quarter.

Marketing and administrative expenses increased by $24 million in the September 2024 quarter compared to the September 2023 quarter primarily due to a $20 million increase in compensation and other employee benefits as a result of the variable compensation expense in the September 2024 quarter and temporary salary reductions in the September 2023 quarter and a $2 million increase in travel expense.

Other (Expense) Income, net

For The Three Months Ended
(Dollars in millions)September 27, 2024June 28, 2024September 29, 2023
Other (expense) income, net$(87)$224$(18)

Other (expense) income, net. Other expense, net increased by $311 million in the September 2024 quarter compared to the June 2024 quarter primarily due to a $313 million gain from the sale of System-on-Chip operations in the June 2024 quarter, partially offset by a $7 million decrease in net loss from equity investments.

Other expense, net increased by $69 million in the September 2024 quarter compared to the September 2023 quarter primarily due to a $104 million net gain recognized from the termination of interest rate swaps associated with the repayment of term loans in the September 2023 quarter, partially offset by a $29 million net loss recognized from early redemption of debt in the September 2023 quarter and a $5 million increase in interest income in the September 2024 quarter.

Income Taxes

For the three months ended September 27, 2024 and September 29, 2023, we recorded income tax expense of $11 million and $37 million, respectively. For further discussion, refer to “Part I, Item 1. Financial Statements—Note 4. Income Taxes”.

Liquidity and Capital Resources

The following sections discuss our principal liquidity requirements, as well as our sources and uses of cash and our liquidity and capital resources. Our cash and cash equivalents are maintained in investments with remaining maturities of 90 days or less at the time of purchase. The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We believe our cash equivalents are liquid and accessible. We operate in some countries that have restrictive regulations over the movement of cash and/or foreign exchange across their borders. However, we believe our sources of cash will continue to be sufficient to fund our operations and meet our cash requirements for the next 12 months. Although there can be no assurance, we believe that our financial resources, along with controlling our costs and capital expenditures, will allow us to manage the ongoing impact of market demand disruptions on our business operations for the foreseeable future. However, some challenges to our industry and to our business continue to remain uncertain and cannot be predicted at this time. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to the global economic factors.

We are not aware of any downgrades, losses or other significant deterioration in the fair value of our cash equivalents from the values reported as of September 27, 2024. For additional information on risks and factors that could impact our ability to fund our operations and meet our cash requirements, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Cash and Cash Equivalents

As of
(Dollars in millions)September 27, 2024June 28, 2024Change
Cash and cash equivalents$1,239$1,358$(119)

Our cash and cash equivalents as of September 27, 2024 decreased by $119 million from June 28, 2024 primarily as a result of $147 million dividends paid to our shareholders and $68 million payments for capital expenditures, partially offset by net cash of $95 million provided by operating activities.

Cash Provided by Operating Activities

Cash provided by operating activities for the three months ended September 27, 2024 was $95 million and includes the effects of net income adjusted for non-cash items including depreciation, amortization, share-based compensation, and:

  • an increase of $37 million in accrued employee compensation, primarily due to an increase in our variable compensation expense; partially offset by

  • an increase of $199 million in accounts receivable, primarily due to increased revenue; and

  • an increase of $144 million in inventories, primarily due to an increase in purchased materials.

Cash Used in Investing Activities

Net cash used in investing activities for the three months ended September 27, 2024 was $68 million, attributable to payments for the purchase of property, equipment and leasehold improvements.

Cash Used in Financing Activities

Net cash used in financing activities of $146 million for the three months ended September 27, 2024 was primarily attributable to the following activities:

  • $147 million in dividends paid to our shareholders; and

  • $28 million taxes paid related to net share settlement of equity awards; partially offset by

  • $29 million in proceeds from the issuance of ordinary shares under employee stock plans.

Liquidity Sources

Our primary sources of liquidity as of September 27, 2024, consist of: (1) approximately $1.2 billion in cash and cash equivalents, (2) cash we expect to generate from operations and (3) $1.5 billion available for borrowing under our senior unsecured revolving credit facility (“Revolving Credit Facility”), which is part of our Credit Agreement (as defined below).

As of September 27, 2024, no borrowings (including swing line loans) were outstanding and no commitments were utilized for letters of credit issued under the Revolving Credit Facility. The Revolving Credit Facility is available for borrowings, subject to compliance with financial covenants and other customary conditions to borrowing.

As of September 27, 2024, the Credit Agreement includes two financial covenants: (1) interest coverage ratio and (2) net leverage ratio. We continue to evaluate our debt portfolio and structure to comply with our financial debt covenants. As of September 27, 2024, we were in compliance with all of the covenants under our debt agreements. Refer to “Part I, Item 1. Financial Statements—Note 3. Debt” for more details.

As of September 27, 2024, cash and cash equivalents held by our subsidiaries was $1.2 billion. This amount is potentially subject to taxation in Singapore upon repatriation by means of an intercompany dividend into our parent company, unless certain exemption is given, or a special approval is granted by the Ministry of Finance in Singapore. However, it is our intent to indefinitely reinvest earnings of subsidiaries in excess of the amount paid as dividends to shareholders. Our current plans do not demonstrate a need to repatriate such excess earnings. Should funds be needed in the parent company and should we be unable to fund parent company activities through means other than a taxable repatriation, we would be required to accrue and pay taxes on such dividend.

We believe that our sources of cash will be sufficient to fund our operations and meet our cash requirements for at least the next 12 months. Our ability to fund liquidity requirements beyond 12 months will depend on our future cash flows, which are determined by future operating performance, and therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

For additional information on risks and factors that could impact our ability to fund our operations and meet our cash requirements, among others, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Cash Requirements and Commitments

Our liquidity requirements are primarily to meet our working capital, product development and capital expenditure needs, to fund scheduled payments of principal and interest on our indebtedness, and to fund our quarterly dividend and any future strategic investments. As of September 27, 2024, our contractual cash requirements have not changed materially outside of the normal course of business since our fiscal year ended June 28, 2024.

Purchase obligations

Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. As of September 27, 2024, we had unconditional purchase obligations of approximately $862 million, primarily related to purchases of inventory components with our suppliers. We expect $809 million of these commitments to be paid within one year. In addition, we also had certain long-term, market share-based, non-cancellable inventory purchase commitments as of September 27, 2024.

We recorded order cancellation fees to terminate certain purchase commitments related to the purchase of inventory components and equipment. As of September 27, 2024, the cumulative unpaid order cancellation fees on the Condensed Consolidated Balance Sheets were $58 million, with $32 million in Accounts payable and $26 million in Accrued expenses, all of which is expected to be paid within one year. In certain instances, our unpaid order cancellation fees may change based on the expected timing or ongoing negotiations with our suppliers.

Long-term debt and interest payments on debt

As of September 27, 2024, the future principal payment obligation on our long-term debt was $5.7 billion, of which $479 million will mature within one year. As of September 27, 2024, future interest payments on this outstanding debt is estimated to be approximately $1.9 billion, of which $312 million is expected to be paid within one year. From time to time, we may repurchase, redeem or otherwise extinguish any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase or redeem outstanding senior notes pursuant to the terms of the applicable indenture. Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.

BIS settlement penalty

We accrued a settlement penalty of $300 million for fiscal year 2023, related to BIS’ allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023. As part of the Settlement Agreement with BIS, quarterly payments of $15 million are made over the course of five years beginning October 31, 2023, of which $60 million is expected to be paid within one year and $180 million thereafter. Refer to “Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” for more details.

Dividends

On October 22, 2024, our Board of Directors declared a quarterly cash dividend of $0.72 per share, which will be payable on January 6, 2025 to shareholders of record as of the close of business on December 15, 2024. Our ability to pay dividends in the future will be subject to, among other things, general business conditions within the data storage industry, our financial results, the impact of paying dividends on our credit ratings and legal and contractual restrictions on the payment of dividends by our subsidiaries to us or by us to our ordinary shareholders, including restrictions imposed by covenants on our debt instruments.

Share repurchases

From time to time, at our discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker assisted purchases, tender offers, or other means, including through the use of derivative transactions. As of September 27, 2024, $1.9 billion remained available for repurchase under our existing repurchase authorization limit. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with our Constitution.

Other

For fiscal year 2025, we expect capital expenditures to be higher than fiscal year 2024. We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.

Critical Accounting Estimates

Our discussion and analysis of financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and other assumptions that we consider to be appropriate in the circumstances. However, actual future results may vary from our estimates.

Other than as described in “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies”, there have been no other material changes in our critical accounting policies and estimates. Refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 28, 2024, as filed with the SEC on August 2, 2024, for a discussion of our critical accounting policies and estimates.

Recent Accounting Pronouncements

See “Item 8. Financial Statements and Supplementary Data—Note 1. Basis of Presentation and Summary of Significant Accounting Policies” for information regarding the effect of new accounting pronouncements on our financial statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have exposure to market risks due to the volatility of interest rates, foreign currency exchange rates, credit rating changes and equity and bond markets. A portion of these risks may be hedged, but fluctuations could impact our results of operations, financial position and cash flows.

Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our cash investment portfolio. As of September 27, 2024, we had no available-for-sale investments that had been in a continuous unrealized loss position for a period greater than 12 months. We had no impairments related to credit losses for available-for-sale investments as of September 27, 2024.

We have fixed rate debt obligations, which we enter into for general corporate purposes including capital expenditures and working capital needs.

The table below presents principal amounts and related fixed or weighted-average interest rates by year of maturity for our investment portfolio and debt obligations as of September 27, 2024.

(Dollars in millions, except percentages)Fiscal Years EndedFair Value at September 27, 2024
20252026202720282029ThereafterTotal
Assets
Money market funds, time deposits and certificates of deposit
Floating rate$460$—$—$—$—$—$460$460
Average interest rate5.05%—%—%—%—%—%5.05%
Other debt securities
Fixed rate$—$15$—$—$—$—$15$15
Debt
Fixed rate$479$—$505$1,500$495$2,750$5,729$6,517
Average interest rate4.75%—%4.88%3.50%4.09%7.38%5.64%

Foreign Currency Exchange Risk. From time to time, we may enter into foreign currency forward exchange contracts to manage exposure related to certain foreign currency commitments and anticipated foreign currency denominated expenditures. Our policy prohibits us from entering into derivative financial instruments for speculative or trading purposes.

We hedge portions of our foreign currency denominated balance sheet positions with foreign currency forward exchange contracts to reduce the risk that our earnings will be adversely affected by changes in currency exchange rates. The change in fair value of these contracts is recognized in earnings in the same period as the gains and losses from the remeasurement of the assets and liabilities. All foreign currency forward exchange contracts mature within 12 months.

For more information about our debt and use of derivative instruments, refer to “Item 1. Financial Statements—Note 5. Derivative Financial Instruments” for more details.

The table below provides information as of September 27, 2024 about our foreign currency forward exchange contracts. The table is provided in dollar equivalent amounts and presents the notional amounts (at the contract exchange rates) and the weighted-average contractual foreign currency exchange rates.

(Dollars in millions, except average contract rate)Notional AmountAverage Contract RateEstimated Fair Value**(1)**
Foreign currency forward exchange contracts:
Singapore Dollar$186$1.28$—
Thai Baht7132.27—
Chinese Renminbi256.96—
British Pound Sterling120.75—
Total$294$—

(1) Equivalent to the unrealized net gain (loss) on existing contracts.

Other Market Risks. We have exposure to counterparty credit downgrades in the form of credit risk related to our foreign currency forward exchange contracts and our fixed income portfolio. We monitor and limit our credit exposure for our foreign currency forward exchange contracts by performing ongoing credit evaluations. We also manage the notional amount of contracts entered into with any one counterparty and we maintain limits on maximum tenor of contracts based on the credit rating of the financial institution. Additionally, the investment portfolio is diversified and structured to minimize credit risk.

Changes in our corporate issuer credit ratings have minimal impact on our near-term financial results, but downgrades may negatively impact our future ability to raise capital, our ability to execute transactions with various counterparties, and may increase the cost of such capital.

We are subject to equity market risks due to changes in the fair value of the notional investments selected by our employees as part of our non-qualified deferred compensation plan—the SDCP.

We entered into a Total Return Swap (“TRS”) in order to manage the equity market risks associated with the SDCP liabilities. We pay a floating rate, based on SOFR plus an interest rate spread, on the notional amount of the TRS. The TRS is designed to substantially offset changes in the SDCP liabilities due to changes in the value of the investment options made by employees. See “Part I, Item 1. Financial Statements—Note 5. Derivative Financial Instruments” of this Quarterly Report on Form 10-Q.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by the Exchange Act Rule 13a-15, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on the evaluation, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of September 27, 2024.

Changes in Internal Control over Financial Reporting

During the quarter ended September 27, 2024, there were no changes in our internal control over financial reporting that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

**ITEM 1.**LEGAL PROCEEDINGS

For a discussion of legal proceedings, see “Part I, Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” of this Quarterly Report on Form 10-Q.

Item 1A. RISK FACTORS

Summary of Risk Factors

The following is a summary of the principal risks and uncertainties that could materially and adversely affect our business, results of operations, financial condition, cash flows, brand and/or the price of our outstanding ordinary shares, and make an investment in our ordinary shares speculative or risky. You should read this summary together with the more detailed description of each risk factor contained below. Additional risks beyond those summarized below or discussed elsewhere in this Quarterly Report on Form 10-Q may apply to our business and operations as currently conducted or as we may conduct them in the future or to the markets in which we currently, or may in the future, operate.

Risks Related to our Business, Operations and Industry

  • Our ability to increase our revenue and maintain our market share depends on our ability to successfully introduce and achieve market acceptance of new products on a timely basis. If our products do not keep pace with customer requirements, our results of operations will be adversely affected.

  • We operate in highly competitive markets and our failure to anticipate and respond to technological changes and other market developments, including price competition, could harm our ability to compete and risk the commoditization of our products.

  • We have been, and may in the future be, adversely affected by reduced, delayed, loss of or canceled purchases by one or more of our key customers, including large hyperscale data center companies and CSPs.

  • We are dependent on sales to distributors and retailers, which may increase price erosion and the volatility of our sales.

  • We must plan our investments in our products and incur costs before we have customer orders or know about the market conditions at the time the products are produced. If we fail to predict demand accurately for our products or if the markets for our products change, we may have insufficient demand or we may be unable to meet demand, which may materially and adversely affect our financial condition and results of operations.

  • Changes in demand for computer systems, data storage subsystems and consumer electronic devices has previously caused, and may in the future cause, a decline in demand for our products.

  • We have a long and unpredictable sales cycle for nearline storage solutions, which impairs our ability to accurately predict our financial and operating results in any period and may adversely affect our ability to manage inventory and forecast the need for investments and expenditures.

  • We experience seasonal declines in the sales of our consumer products during the second half of our fiscal year which may adversely affect our results of operations.

  • We may not be able to grow our systems, SSD and Lyve revenues, which would adversely affect our results of operations.

  • Our worldwide sales and manufacturing operations subject us to risks that may adversely affect our business related to disruptions in international markets, currency exchange fluctuations and increased costs.

  • If we do not control our costs, we will not be able to compete effectively and our financial condition may be adversely impacted.

  • We may not be able to execute acquisitions, divestitures and other significant transactions successfully and we may have difficulty or fail to successfully integrate acquired companies.

Risks Associated with Supply and Manufacturing

  • Shortages or delays in the receipt of, or cost increases in, critical components, equipment or raw materials necessary to manufacture our products, as well as reliance on single-source suppliers, may affect our production and development of products and may harm our operating results.

  • We have cancelled purchase commitments with suppliers and incurred costs associated with such cancellations, and if revenues fall or customer demand decreases significantly, we may seek to cancel or may otherwise not meet our purchase commitments to certain suppliers in the future, which could result in damages, penalties, disputes, litigation, increased manufacturing costs or excess inventory.

  • Due to the complexity of our products, some defects may only become detectable after deployment, which may lead to increased costs and adversely affect our operating results.

Risks Related to Human Capital and Corporate Responsibility

  • The loss of or inability to attract, retain and motivate key executive officers and employees could negatively impact our business prospects.

  • We are subject to risks related to corporate and social responsibility that could adversely affect our reputation and performance.

Risks Related to Financial Performance or General Economic Conditions

  • Changes in the macroeconomic environment have impacted and may continue to negatively impact our results of operations.

  • We may not be able to generate sufficient cash flows from operations and our investments to meet our liquidity requirements, including servicing our indebtedness and continuing to declare our quarterly dividend.

  • Our quarterly results of operations fluctuate, sometimes significantly, from period to period, and may cause our share price to decline.

  • Any cost reduction initiatives that we undertake may not deliver the results we expect and these actions may adversely affect our business.

  • The effect of geopolitical uncertainties, war, terrorism, natural disasters, public health issues and other circumstances, on national and/or international commerce and on the global economy, could materially and adversely affect our results of operations and financial condition.

  • We are subject to counterparty default risks.

Legal, Regulatory and Compliance Risks

  • Our business is subject to various laws, regulations and governmental policies that may cause us to incur significant expense or adversely impact our results of operations and financial condition.

  • Some of our products and services are subject to export control laws and other laws affecting the countries in which our products and services may be sold, distributed, or delivered, and any changes to or violation of these laws could have a material and adverse effect on our business, results of operations, financial condition and cash flows.

  • Our business is exposed to risks associated with litigation, investigations and regulatory proceedings that may cause us to incur significant expense or adversely impact our results of operations and financial condition.

  • Tax-related matters could have a material and adverse effect on our business, results of operations or financial condition.

  • Changes in U.S. trade policy, including the imposition of sanctions or tariffs and the resulting consequences, may have a material and adverse impact on our business and results of operations.

Risks Related to Intellectual Property and Other Proprietary Rights

  • We may be unable to protect our intellectual property rights, which could adversely affect our business, financial condition and results of operations.

  • We are at times subject to intellectual property proceedings and claims which could cause us to incur significant additional costs or prevent us from selling our products, and which could adversely affect our results of operations and financial condition.

  • Our business and certain products and services depend in part on intellectual property and technology licensed from third parties, as well as data centers and infrastructure operated by third parties.

Risks Related to Information Technology, Data and Information Security

  • We could suffer a loss of revenue and increased costs, exposure to significant liability including legal and regulatory consequences, reputational harm and other serious negative consequences in the event of cyber-attacks, ransomware or other cyber security breaches or incidents that disrupt our operations, cause widespread outages, and/or result in unauthorized access to, or the los

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Item 5. OTHER INFORMATION

Trading Plans or Rule 10b5-1 Trading Plans

The table below summarizes the material terms of trading arrangements adopted by any of our executive officers or directors during the September 2024 quarter. All of the trading arrangements listed below are intended to satisfy the affirmative defense of Rule 10b5-1(c).

NameTitleDate of AdoptionEnd Date¹Aggregate number of ordinary shares to be sold pursuant to the trading agreement
Gianluca RomanoExecutive Vice President and Chief Financial OfficerAugust 23, 2024March 31, 202568,954

¹ The plan will expire on the earlier of the end date or the completion of all transactions under the trading arrangement.

Item 6. EXHIBITS

Incorporated by Reference
Exhibit No.Exhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
3.1Certificate of Incorporation of Seagate Technology Holdings plc10-K001-315603.18/6/2021
3.2Constitution of Seagate Technology Holdings public limited company as of May 18, 2021 (as amended by special resolution dated May 14, 2021)S-8001-315604.110/20/2021
10.1Form of Indemnification Agreement between Seagate Technology LLC and the director or officer named thereinX
31.1Certification of the Chief Executive Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002X
31.2Certification of the Chief Financial Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002X
32.1†Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
104Inline XBRL Cover Page contained in Exhibit 101

† The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Seagate Technology Holdings plc under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SEAGATE TECHNOLOGY HOLDINGS PUBLIC LIMITED COMPANY
DATE:October 25, 2024BY:/s/ Gianluca Romano
Gianluca Romano
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)