Seagate Technology Holdings PLC

Good afternoon and welcome to the Seagate Technology Fiscal First Quarter 2021 Results Conference Call. My name is Jason 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 would like to turn the call over to Shani Hudson, Senior Vice President, Investor Relations in the Treasury. Please proceed, Shani.

Thank you. Good afternoon, everyone, and welcome to today's call. Joining me 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 quarter on the Investors section of our website. During today's call, we'll 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, possible effects of the economic conditions worldwide resulting from the COVID-19 pandemic and general market conditions. These statements are based on management's current views and assumptions and information available to us as of today and should not be relied upon as of any subsequent date. Actual results may vary materially from today's statements, and 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 and 10-Q filed with the SEC, our Form 8K filed with the SEC today, and the supplemental information posted on the Investors section of our website. As always, following our prepared remarks, we'll open the call for questions. With that, I'll turn it over to you, Dave.

Thanks, Jamie. Welcome, everyone, and thanks for joining us today. We began fiscal year 21 executing well across several key objectives, keeping us on pace for our full-year revenue outlook. First, we delivered on our financial commitments, navigating challenging market conditions to achieve September quarter revenue of $2.31 billion and non-GAAP EPS of $0.93, both exceeding the midpoint of our guidance range. Second, we advanced our innovative product and technology roadmaps, which position the company for future data growth opportunities. including the introduction of Cortex, an open-source object storage software, and Live Rack, which offers a simple and cost-effective solution for enterprises to manage their massive volumes of data and, in turn, unlock data value. And third, to demonstrate Seagate's long-term commitment of returning cash to our shareholders, the Board approved a 3% increase to our quarterly dividend and a $3 billion increase to our existing share repurchase authorization. These actions exemplify our confidence in the business potential and future cash generation capabilities. In my comments today, I will summarize a few highlights from the September quarter and share some perspectives on the current market environment. Then I'll outline how we have been positioning Seagate to capture the significant opportunities created by longer-term data trends. The results for the quarter reflect good execution against the backdrop of continued macro disruptions that impacted several of our key end markets. These disruptions were most pronounced in the enterprise market, as the anticipated slowdown in enterprise IT spending impacted sales of our enterprise near line and mission critical drives. Many enterprises reacted to the pandemic by prioritizing funding to support their remote workforce and accelerating their digital transformation plans accordingly nearline revenue in cloud was solid in the quarter although below the record levels of june the adoption of cloud services and the rise of new virtual economy digital remote and intelligent is driving ongoing cloud data center investments according to idc 2020 may be the first year in which cloud infrastructure hardware spending surpasses traditional IT infrastructure hardware spending. However, they also project enterprise IT spending will pick up in calendar 2021, which aligns well with our outlook for gradual recovery in the enterprise on-prem market. Data center investments vary among cloud service provider and internet content customers. Depending on their respective end market demand outlooks, expansion plans, and architectural needs. Responding to these trends, HDD storage investments depend upon mass capacity transition readiness and install base replacement timing. Taking these factors into account, we currently expect cloud data center demand to improve in the December quarter and throughout the fiscal year, which supports a more elongated cycle than we've seen in the last couple of years. In other markets, recovery is already well underway. For example, we realized solid double-digit revenue growth for our consumer drives, reflecting both the return to seasonal patterns and strength of the Seagate's brand among prosumers and gamers. And in the video and image applications or via markets, revenue doubled quarter over quarter, following a resurgence in on-prem security and smart video projects. Recall these markets were heavily impacted in the first half of the calendar year, by COVID-related restrictive measures that precluded installations from taking place. Over the long term, the use of AI and other data analytics continues to drive new via edge use cases that extend well beyond security, including smart cities, smart factories, healthcare, and even frictionless retail, all of which generate massive amounts of data and the need for cost-effective edge storage. We now believe the September quarter marks the bottom of the COVID-related demand disruptions, and we expect a gradual recovery from this point forward, which, along with the existing secular trends we're exposed to, underpin our outlook for flattish revenue in fiscal year 21 and reinforce the relevance of mass capacity storage in both the cloud and at the edge. Seagate is a leader in mass data, and we continue to deliver innovative technologies and secure, cost-effective data solutions that address our customers' needs today and in the future. Building on the strong momentum of our 16TB products, we are qualifying our 18TB drives with multiple customers and progressing very well. We are aligning our volume production ramp to customers' timings and HDD capacity transition readiness. We also remain on track to ship 20 terabyte hammer drives starting in December, which is an important milestone as we believe hammer technology will be the industry's path to scaling aerial density and increasing drive capacities. Seagate will be the first to ship this crucial technology with a path to deliver 50 terabyte hammer drives forecast in 2026. Higher capacity drives not only enable data centers to cost effectively store more data in the same footprint, but also to do so in an environmentally sustainable way. The power consumed by an 18 terabyte Seagate drive is actually lower than a 10 terabyte HDD on a per bit basis. That means by replacing one 10 terabyte drive with our latest 18 terabyte product, customers can securely store 80% more data and do so more efficiently. However, the challenges for mass data storage posed by data growth extend beyond capacity, cost, and sustainability. Increasingly, businesses are challenged by data sprawl and data security, which impact their ability to harness the value of their data. Last month, Seagate hosted its inaugural Data Sphere event, during which customers, partners, and other industry thought leaders joined our team to discuss strategies for attacking these data management challenges. If you haven't had the opportunity yet, you can still catch the videos on our website. Seagate's Live platform leverages our deep knowledge of data storage and architectures to help enterprises address the complexity of securely managing data across a distributed enterprise. Live Mobile is a series of seamlessly integrated edge arrays and data shuttles designed to cost-effectively and securely move data between endpoints, edge, and into core cloud environments. Cortex is an open-source object-source software with a growing community of developers. Cortex enables enterprises to easily and efficiently manage massive pools of storage resources across their distributed enterprise. Finally, Live Rack is a simple and easy to deploy solution, pre-configured with Cortex software and up to 1.5 petabytes of storage in a 4U rack. Live Rack helps enterprises build their own mass capacity optimized private storage clouds with less cost and complexity than ever before. We see multiple use cases across a diverse range of edge-centric vertical markets that all have a common need for mass data management. For example, Raytheon Technologies is using Cortex to develop large-scale secure storage clouds for their federal and commercial customers. And two of the world's top automakers are evaluating this platform to efficiently move data across their fleets of autonomous vehicles. While live is still in its infancy, customer reception has been tremendously encouraging, which together with our outlook for mass capacity storage makes me excited by the future prospects for Seagate. With that, I'll now turn the call over to Gianluca and have him walk through the September quarter results. Thank you, Dave.