Seagate Technology Holdings PLC

Seagate Technology Fiscal First Quarter 2020 Financial Results Conference Call. My name is Denise, 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'd like to turn the call over to Shani Hudson, Vice President, Investor Relations. Please proceed, Shani.

Thank you. Good morning, everyone, and welcome to today's call. Joining me today 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 September 2019 quarter on the investor 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 8K that was filed with the SEC. We've 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 effort. As a reminder, this call contains forward-looking statements, including our December quarter financial outlook and expectations about our financial performance market demand, industry growth trends, planned product introductions, ability to ramp production, future growth opportunities, and general market conditions. These statements are based on management's current views and assumptions and should not be relied upon as of any subsequent date. Actual results may vary materially from today's statements. Information concerning our risks, uncertainties, and other factors that could cause results to differ from these forward-looking statements are contained in our most recent Form 10-K filed with the SEC, and the supplemental information is posted on the Investors section of our website. Following today's prepared remarks, we'll open the call for questions. And with that, I'll now turn the call over to Dave.

Thanks, Shani. Good morning, everyone. And for those of you here in Europe, good afternoon. Thanks for joining us. I will start today's call by summarizing key highlights from the September quarter, sharing our views on the market and their relevance to Seagate, and outlining the progress we've made on our key priorities. Afterwards, John Luther will provide further details on our financial results and our outlook for the December quarter. Following the prepared remarks, we will open the call for questions. We've had a solid start to the fiscal year, increasing revenue, non-GAAP operating profit, earnings per share, cash flow quarter over quarter. Our focus on optimizing profit dollars is driving strong and sustainable operating cash flow to fund our future growth, extend our technology leadership, and sustain our strong capital return program. Over the past 12 months, we have returned a total of $2 billion to our shareholders through a combination of dividends and share repurchase, reflecting our ongoing commitment to enhancing shareholder value. Our board approved an increase to our quarterly dividend demonstrated their confidence in our future growth and cash generation capabilities. This marks the first time in four years that we've raised our dividend. Moving forward, we plan to review the dividend payment consistently over time. Let me now share some perspectives on the near-term market environment, starting with mass capacity storage. This market is growing, both in terms of dollars and exabytes, and is comprised of nearline, video and image applications, including surveillance, and NASDAQs. The mass capacity storage market supports cloud and edge applications that are data-centric and require reliable, cost-effective, high-capacity storage best suited to HDDs. In the September quarter, we delivered strong double-digit revenue growth in Nearline, supported by improving demand across cloud and hyperscale customers. We are aggressively ramping our 16-terabyte Nearline drives to fulfill strong customer demand for these products. more than a dozen cloud and OEM customers qualified and several others underway, we are executing very well and are tracking to plan against our product maturity and customer qualification timelines. Based on our current outlook, we expect to ship more than 1 million drives in the December quarter, which would make 16 terabytes the fastest near-line product ramp in Seagate's history. Revenue from video and image applications declined in the September quarter following an unusually strong June period. Geopolitical tensions and regulatory hurdles continue to disrupt customers' typical buying patterns across multiple markets, including surveillance. We expect some demand volatility to persist over the near term. With the transition to IT 4.0, we see the emergence of edge storage applications, which, like surveillance, utilize high-definition video and image processing. For example, smart factories, smart cities, and IoT all require large, amounts of data which can benefit from low-cost, high-reliability disk drives. We believe these video and image processing applications continue to represent meaningful growth opportunities for Seagate over the long term. In our legacy markets, which include mission-critical, desktop, notebook, DVR, gaming, and consumer applications, we saw a seasonal uptick in revenue in the September quarter. As we've shared in the past, these markets contribute to Seagate's cash flow while requiring little additional investment. Importantly, many of the enterprise customers and OEM partners that we are supporting in the legacy markets are the same ones we expect to create new storage growth opportunities at the edge and in private clouds, along with other new customers. With the trend toward the multi-cloud world and the build-out of the private cloud, customers are seeking to follow the same economical disk-centric storage architectures as the large public cloud providers. Low cost, High-density storage platforms are an integral part of the solution to address data-rich workload requirements, and Seagate's high-density, scalable system solutions are ideally suited to these big data applications. We believe Seagate's strong technology roadmap, broad product portfolio, and deep customer relationships make us well-positioned to capitalize on the significant opportunities we foresee ahead. We forecast the mass capacity storage revenue TAM will more than double from current levels by 2025 supported by ongoing demand from the public cloud, the build-out of the private cloud, and emerging edge storage applications. To capture this growing demand, we are executing our strategy to be first to introduce new product solutions to the market and consistently deliver cost and performance benefits to our customers. Today, Seagate is the only company mass producing 16 terabyte drives, which are the capacity benchmark for the industry. We are preparing to ship 18 terabyte drives in the first half of calendar year 2020 to maintain our industry capacity leadership. We are also driving aerial density leadership with our revolutionary hammer technology, which enables Seagate to achieve at least 20% aerial density over the next decade. We remain on track to ship 20 terabyte hammer drives in late calendar year 2020. As drive densities increase, Multi-actuator technology is required to maintain fast access to data and scale drive capacity without compromising performance. We generated revenue from our Mach 2 dual actuator solutions for the first time in the September quarter. We are working with multiple customers to qualify these drives, including a leading U.S. hyperscale customer who is qualifying the technology to meet their rigorous service level agreements without having to employ costly hardware upgrades. We expect to see demand for dual actuator technology to increase as customers With that, I'll turn the call over to Gianluca to go into more depth on our September quarter results and share our outlook for the December quarter.