Seagate Technology Holdings PLC

Good afternoon and welcome to the Seagate Technology Fiscal Second Quarter 2021 Financial Results Conference Call. My name is David 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 Shaney Hudson, Senior Vice President, Investor Relations and Treasuries. Please proceed, Shaney.

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 December quarter on the investor 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 in 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 or cannot be reasonably predicted. Therefore, a reconciliation to the corresponding GAAP measures is not available without unreasonable effort. As a reminder, this call contains forward-looking statements, including our March 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. should not be relied upon as of any subsequent date. Actual results may vary materially from today's statement. 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 8-K 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. And with that, I'll now turn the call over to you, Dave.

Thank you, Shani. Welcome, everyone, and thanks for joining us today. Seagate exited calendar year 2020 on a very strong note, delivering December quarter performance that exceeded our objectives. Compared with the prior quarter, we grew revenue 13%, expanded non-GAAP operating profits 31%, and significantly increased free cash flow to $314 million. We began executing our recently increased share repurchase authorization and retired over 18 million shares of Seagate stock, or approximately 7% of the shares outstanding beginning of the quarter. Through the combination of share repurchases and our quarterly dividend, we returned a total of $1.2 billion in the quarter. Despite the challenges of a global pandemic, Seagate grew annual revenue 2% in calendar year 2020, achieving revenue growth inside of our long-term financial target range. At the halfway point of fiscal 2021, our performance puts us well on our way to achieving our objective to deliver relatively flat revenue for the year. In the remainder of my comments today, I'll provide an update on end market trends, share the progress we've made on our technology and product roadmaps, and offer some insight into how these advancements position Seagate for the strong secular mass data growth trends ahead. Against the backdrop of the pandemic, 2020 was headlined by diverging in-market trends. Strong cloud investments to support a remote economy and digital transformation were countered by significant disruptions to enterprise IT spending. However, during the December quarter, the enterprise markets began to recover for the first time since the onset of the pandemic. The improvement was most pronounced amongst large enterprise OEM customers, which led to strong sequential revenue growth for both nearline and mission-critical drives. We anticipate this positive trajectory to continue, which is consistent with analysts' expectations for on-prem IT hardware investments to pick up in calendar year 2021. Cloud data center demand remains healthy, with the overall data demand drivers intact. Analysts project strong double-digit growth in Cloud CapEx in 2021, which bodes well for Seagate and aligns with our expectation for Cloud HDD storage demand to increase through the balance of the fiscal year and drive significant growth longer term. For a second consecutive quarter, we experienced stronger than expected growth in video and image applications, or VIA markets, due in part to pent-up demand following the significant impacts incurred in these markets during the economic shutdowns early in the pandemic. Video and image applications are a key growth market within mass capacity storage. As the number of devices generating data explodes at the edge, mass capacity HDDs are vital to preserving and putting that data to work. For example, the rollout of 5G and rise of edge computing supports further growth in smart and safe city initiatives, as well as smart factory opportunities. Gartner projects the number of 5G-enabled outdoor video cameras to exceed 15 million by 2023, a six-fold increase from current levels. That would translate to as much as one exabyte of data generated each day, enough to fill about 2 million security surveillance drives every week. Proliferation of video and image sensors and other IoT devices is expected to be a major driver of data creation at the edge in the coming years and will play a key role in the growth and evolution of the mass data storage industry. Finally, strong seasonal demand for our desktop PC and consumer drives contributed to double-digit sequential revenue growth in our legacy business during the December quarter. Overall, We expect demand for mass capacity storage to improve across the cloud and enterprise markets in the March quarter, more than offsetting an expected decline in the VIA markets and the typical seasonal slowdown in the consumer space. With the broader market environment continuing to firm, Seagate is executing well on its technology roadmap and hitting our committed milestones, highlighted by the shipments of our first 20-terabyte hammer drives in late November. With Hammer, we can drive aerial density compound growth rates of 20% or higher of our customers' infrastructure investments and enabling Seagate to maintain a significant economic advantage for mass capacity applications relative to enterprise SSDs that is expected to persist over the foreseeable future. Seagate's first-to-market dual actuator technology is gaining interest among a broader customer base who require mass capacity storage with higher performance for certain applications such as content delivery. We are increasing shipments of dual actuator drives today and expect to see higher volumes as drive capacities increase. We are also continuing to strengthen our PMR product roadmap, anchored by our industry-leading 16TB drives based on our common scalable platform. We broadened the adoption of 16TB drives in the December quarter, gaining new cloud customers globally. We have started to increase the pace of the 18TB product ramp, which will continue through the calendar year and customer readiness timing. As drive capacities increase, the qualification process often takes longer and adds complexity. Our common platform approach is helping customers simplify the call process. In fact, a number of leading cloud customers commented that the qualification of 18 terabytes has been the smoothest ever. Additionally, we expect to continue to leverage the quality and scalability of this platform, which is extendable through 20 terabyte on PMR technology. The strength of this platform offers Seagate the flexibility to meet customers' timing and mass storage needs. For Seagate, the common platform strategy drives manufacturing efficiencies that allow us to ramp new technologies in production more quickly and then use our systems business to accelerate the pace of learning and market adoption. We are maintaining solid momentum in our systems business. securing multiple customer wins in the December quarter, including our biggest systems deal ever, a multi-quarter deal representing close to eight exabytes of scalable storage. Overall, with our leadership in HDD technology and execution on our product roadmap, Seagate is in an excellent position to capture the $24 billion mass capacity storage opportunity that we forecast for 2025, which is driven by the burgeoning demand for data. However, to capture value from the avalanche of data being created, CIOs must overcome cost, scale, and complexity challenges associated with moving, analyzing, and storing more data across the distributed enterprise. As a result, economics are forcing enterprises to keep proportionally less of the data that's being created, which threatens business performance and competitive advantage. This dynamic is at the foundation of Seagate's innovation agenda, we are enabling CIOs to address the key challenges of cost, scale, and complexity to preserve and put to work more of the valuable data they are already creating. Our live storage platform offers a simple, cost-efficient, and secure way to manage massive volumes of data across the distributed enterprise. Live mobile enables mass data transfer between endpoints, edge, and to enterprises with the lowest cost per petabyte. Cortex Software is the foundation of the live storage platform and is maintained by a growing community of data scientists and enterprise storage experts, many of whom participated in our first ever and highly successful hackathon event held last month at Live Labs Israel. We have a growing customer interest for the live portfolio and continue to receive positive feedback on our existing engagements that span multiple verticals, including media and entertainment, and autonomous vehicle technologies. Driving platform-level innovation and addressing the growing challenges faced by the distributed enterprise is a mandate that will help define our long-term growth strategy. We plan to share more details on the live storage platform and the rest of our unfolding strategy on February 24th, when we will be hosting a virtual analyst and investor event. I look forward to having you join us. With that, I'll now turn it over to John Luca to walk through the December quarter.