Seagate Technology Holdings PLC

Good morning, and welcome to the Seagate Technology Fiscal First Quarter 2022 Financial Results Conference Call. My name is Julianne, 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 Shanie Hudson, Senior Vice President, Investor Relations and Treasury. Please proceed, Shanie.

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've posted our earnings press release and detailed supplemental information for our September quarter fiscal 2022 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 and included in our 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. Before we begin, I'd like to remind you that today's 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. 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. Let me turn the call over to Dave for opening remarks.

Thank you, Shanie, and hello to everyone joining us on today's call. Seagate had an outstanding start to fiscal 2022, underscored by our September quarter results. Revenue of $3.1 billion was spot on with our expectations and reflects robust growth of 35% year-over-year and 3% above a very strong June quarter. Non-GAAP gross margin expanded to 31%, well inside of our multi-year target range. And non-GAAP operating margin increased to 20.1%, the company's highest level in nearly a decade. Overall, our results reflect record demand for our industry-leading mass capacity products, and solid execution on cost reduction plans and our ongoing focus of balancing supply with demand. We are confident in our ability to deliver excellent results for the fiscal year. And based on our current view, we are raising our fiscal 2022 revenue growth outlook from the high single digit percentage range to the low double digit range. Further, reflecting on our long term confidence in the business, I'm delighted to announce that our board has once again approved an increase to the quarterly dividend by 4.5%. I've been very proud of our team's ability to post consistent financial results through an industry environment that remains very dynamic. We are seeing a confluence of factors creating inflationary pressures and acute supply chain disruption. These include semiconductor component shortages and freight logistics challenges that are creating cost pressures and impacting critical end product assemblies for certain customers. Notwithstanding these obstacles, underlying demand remains solid for Seagate's products, particularly in the mass capacity market, which is why we maintain a high level of confidence in our fiscal year growth outlook. Revenue from the mass capacity markets exceeded $2 billion for the first time, reflecting broad-based growth across each of the end markets. The cloud is the strongest contributor to the mass capacity markets and Seagate's revenue growth. Ongoing investments to build and equip new data centers have translated into stable, healthy demand for multiple quarters now, and we expect this trend to continue. Over the past five years, the number of hyperscale data centers has more than doubled to nearly 600 worldwide, with approximately 200 more on the way. Many of these planned data centers are being built by large cloud customers, but the timing of their investments and infrastructure build-out is not synchronized, which supports a more stable long-term growth outlook for hyperscale investment. CK's high-capacity drives are essential to the world's largest data centers. We have very close relationships with our cloud customers to ensure our manufacturing and technology roadmaps continue to enable their investment plans and performance requirements at a favorable total cost of ownership. In the enterprise and OEM markets, we achieved a fourth consecutive quarter of sales growth, supported by increasing IT hardware spending. Over the near term, the broader supply constraints that I've highlighted may delay some of our customers' new product builds due to non-HDD shortages. However, based on customer conversations, we believe any pause would be temporary until shortages are alleviated. Demand for video and image applications increased significantly during the quarter, supported in part by a broadening of use cases that extend beyond traditional security and surveillance applications. The combination of high-definition cameras and data analytics enabling productivity gains, cost savings, and revenue generation opportunities are actually driving adoption by a wide range of industries, including retail, manufacturing, and healthcare. High-capacity HDDs play a crucial role in helping businesses economically manage and extract value from an ever-increasing growth in data across a more distributed enterprise. Without question, the HDD industry is being driven by long-term secular demand for mass capacity storage, a market that we expect to more than double by calendar 2026 to $26 billion. And Seagate is well equipped to answer the call. We continue to leverage our strong arsenal of innovative technologies, manufacturing agility, and industry expertise to deliver attractive total cost of ownership solutions aligned with our customer's roadmap. Our common platform approach illustrates these points well. We have been able to seamlessly transition from 16 to 18 terabyte drives and are now offering multiple varieties of 20 terabyte drives to meet the breadth of customer demand. We began ramping 20 terabyte products in the September quarter, and I'm thrilled with the strong customer interest. I'm equally excited by customer reception for our Mach 2 dual actuator drives, which are now shipping at large scale. As we were anticipating a few months ago, we are seeing greater adoption of our Mach 2 drives for core and edge applications that benefit from the read and write performance gains that we deliver with these products. We expect dual actuator drives to become more mainstream as capacities increase beyond 30 terabytes to support both cost and performance requirements. I'm also confident in achieving 30 terabyte capacities and beyond. We continue to execute our research and development roadmaps and have recently achieved great hammer test results in staging aerial density growth that supports future product launches. Based on these demonstrations, our product development plans are on track. But our product introduction strategy has not changed. We will leverage Hammer's aerial density gains to offer customers step function capacity increases that deliver a strong TCO proposition and enhance value for both our customers and Seagate. Our focus on total customer experience is top of mind for the live cloud business. Our simple, secure, and cost-efficient mass data storage as a service platform is resonating well among customers, particularly for backup solutions. Today, Live Cloud is certified with the majority of the vendors identified by Gartner as magic quadrant leaders for enterprise backup and recovery software. This quarter, we announced a multi-year deal with a leading video communications provider. I am excited by this partnership and recognize the trust all of our live customers are placing in Seagate. We will continue to be deliberate in scaling infrastructure and developing an ecosystem to ensure that we delight our customers. Wrapping up, Seagate continues to deliver consistent financial results underpinned by strong operational discipline, focus on profitability, and growing demand for mass capacity storage. We believe these trends reflect the healthy structural changes that have taken place in the industry in recent years. Seagate is poised to benefit with our technology leadership position and strong track record of execution. I'll now hand the call to Gianluca to cover the financial results.