Seagate Technology Holdings plc (STX) Bundle
Understanding Seagate Technology Holdings plc (STX) Revenue Streams
Understanding Seagate Technology Holdings plc’s Revenue Streams
Seagate Technology Holdings plc generates revenue primarily through its hard disk drives (HDDs) and solid-state drives (SSDs), along with related services. The following sections provide a detailed breakdown of its revenue sources, year-over-year growth, and significant changes in its revenue streams.
Breakdown of Primary Revenue Sources
The revenue for the three months ended September 27, 2024, was approximately $2.168 billion, compared to $1.454 billion for the same period in 2023, indicating a significant increase in revenue year-over-year.
| Revenue Source | September 27, 2024 ($ millions) | September 29, 2023 ($ millions) |
|---|---|---|
| OEMs | 1,749 | 1,032 |
| Distributors | 248 | 266 |
| Retailers | 171 | 156 |
| Total Revenue | 2,168 | 1,454 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the quarter ending September 27, 2024, reflects a 49% increase from the previous year. This growth is attributed to improved demand for mass capacity HDDs and favorable pricing actions.
Contribution of Different Business Segments to Overall Revenue
As of September 27, 2024, the breakdown of revenue contributions by channel was as follows:
| Channel | Percentage Contribution |
|---|---|
| OEMs | 81% |
| Distributors | 11% |
| Retailers | 8% |
Revenue by Geography
The geographical distribution of revenue for the quarter ended September 27, 2024, was as follows:
| Geography | Percentage Contribution |
|---|---|
| Asia Pacific | 40% |
| Americas | 50% |
| EMEA | 10% |
Analysis of Any Significant Changes in Revenue Streams
In the September 2024 quarter, revenue increased by $281 million compared to the June 2024 quarter and by $714 million compared to the September 2023 quarter. The increase was primarily driven by:
- Increased shipments of mass capacity HDDs, totaling 128 exabytes in the September 2024 quarter, up from 79 exabytes in the September 2023 quarter.
- Stable pricing for HDDs at $15 per terabyte, unchanged from the previous quarter.
Overall, the revenue growth reflects a robust demand environment, particularly in the cloud and enterprise sectors, highlighting the company's strategic focus on high-capacity storage solutions.
A Deep Dive into Seagate Technology Holdings plc (STX) Profitability
A Deep Dive into Seagate Technology Holdings plc's Profitability
Gross Profit, Operating Profit, and Net Profit Margins
| Metric | September 27, 2024 | June 28, 2024 | September 29, 2023 |
|---|---|---|---|
| Revenue (in millions) | $2,168 | $1,887 | $1,454 |
| Cost of Revenue (in millions) | $1,454 | $1,287 | $1,305 |
| Gross Profit (in millions) | $714 | $600 | $149 |
| Gross Margin | 33% | 32% | 10% |
| Operating Income (in millions) | $403 | $314 | ($129) |
| Operating Margin | 19% | 17% | (9%) |
| Net Income (in millions) | $305 | $513 | ($184) |
| Net Profit Margin | 14% | 28% | (13%) |
Trends in Profitability Over Time
In the September 2024 quarter, the company reported a gross profit of $714 million, which marked a significant increase compared to $149 million in the same quarter of the previous year. The gross margin improved to 33% from 10% in September 2023. Operating income also rebounded to $403 million from a loss of $129 million a year prior, while net income returned to profitability at $305 million compared to a loss of $184 million in the prior year.
Comparison of Profitability Ratios with Industry Averages
- Gross Margin: 33% vs. Industry Average of 25%
- Operating Margin: 19% vs. Industry Average of 15%
- Net Profit Margin: 14% vs. Industry Average of 10%
Analysis of Operational Efficiency
The company's ability to improve operating efficiency is evident in the reduction of its cost of revenue as a percentage of total revenue, decreasing from 90% in September 2023 to 67% in September 2024. This reflects effective cost management strategies and a favorable product mix that has led to enhanced gross margins.
Operating Expenses Breakdown
| Expense Category | September 27, 2024 (in millions) | June 28, 2024 (in millions) | September 29, 2023 (in millions) |
|---|---|---|---|
| Product Development | $181 | $158 | $171 |
| Marketing and Administrative | $129 | $131 | $105 |
| Restructuring and Other | $1 | ($3) | $2 |
| Total Operating Expenses | $311 | $286 | $278 |
Overall, the company has displayed a strong recovery in profitability metrics as of September 2024, with significant improvements across all key financial indicators compared to previous periods and industry averages.
Debt vs. Equity: How Seagate Technology Holdings plc (STX) Finances Its Growth
Debt vs. Equity: How Seagate Technology Holdings plc Finances Its Growth
As of September 27, 2024, the total debt for Seagate Technology Holdings plc stood at $5.7 billion. This figure comprises both short-term and long-term obligations, with long-term debt amounting to $5.2 billion and the current portion of long-term debt at $479 million.
Debt Levels
The company’s debt structure includes various unsecured senior notes and exchangeable senior notes issued over the years. The details of these debts are as follows:
| Debt Instrument | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| 2025 Notes | $479 | 4.75% | January 1, 2025 |
| 2027 Notes | $505 | 4.875% | June 1, 2027 |
| June 2029 Notes | $472 | 4.091% | June 1, 2029 |
| July 2029 Notes | $163 | 3.125% | July 15, 2029 |
| December 2029 Notes | $500 | 8.25% | December 15, 2029 |
| Exchangeable Senior Notes | $1,500 | 3.50% | June 1, 2028 |
Debt-to-Equity Ratio
The debt-to-equity ratio is a critical measure of financial leverage. As of September 27, 2024, the debt-to-equity ratio for Seagate Technology was approximately 4.38, significantly higher than the industry average of around 1.5. This indicates a heavier reliance on debt financing compared to equity financing.
Recent Debt Issuances and Credit Ratings
In September 2023, the company issued $1.5 billion in exchangeable senior notes at an interest rate of 3.50%, due in June 2028. The issuance was aimed at refinancing existing debts. As of the latest report, the company maintains a credit rating of Baa3 from Moody's, reflecting moderate credit risk.
Balance Between Debt Financing and Equity Funding
Seagate Technology's strategy balances debt and equity funding to optimize its capital structure. The company has $1.2 billion in cash and cash equivalents as of September 27, 2024, which provides a cushion for its debt obligations. The management has also indicated a commitment to maintaining sufficient liquidity, with $1.5 billion available under its revolving credit facility.
In terms of equity, the company reported an accumulated deficit of $8.83 billion as of September 27, 2024, with total shareholders’ equity at -$1.3 billion, reflecting the impact of cumulative losses over the years.
Assessing Seagate Technology Holdings plc (STX) Liquidity
Assessing Seagate Technology Holdings plc's Liquidity
Current Ratio: As of September 27, 2024, the current ratio is calculated at 0.39, which reflects current assets of $1,228 million and current liabilities of $3,161 million.
Quick Ratio: The quick ratio is approximately 0.23, considering cash and cash equivalents of $1,239 million and excluding inventories from current assets.
Working Capital Trends
Working Capital: The working capital as of September 27, 2024, is ($1,933 million), indicating a shortage in current assets to cover current liabilities.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 27, 2024 | $1,228 | $3,161 | ($1,933) |
| June 28, 2024 | $1,376 | $3,099 | ($1,723) |
| September 29, 2023 | $1,305 | $3,058 | ($1,753) |
Cash Flow Statements Overview
Operating Cash Flow: For the three months ended September 27, 2024, net cash provided by operating activities was $95 million, influenced by an increase in accrued employee compensation and adjustments for non-cash items.
Investing Cash Flow: Net cash used in investing activities was ($68 million), primarily for capital expenditures.
Financing Cash Flow: Net cash used in financing activities totaled ($146 million), which included $147 million in dividends paid and $28 million for taxes related to share settlements.
| Cash Flow Type | Amount (in millions) | Details |
|---|---|---|
| Operating Activities | $95 | Net income adjusted for non-cash items |
| Investing Activities | ($68) | Capital expenditures |
| Financing Activities | ($146) | Dividends and taxes paid |
Potential Liquidity Concerns or Strengths
Liquidity Sources: As of September 27, 2024, liquidity sources include approximately $1.2 billion in cash and cash equivalents and $1.5 billion available under the revolving credit facility, with no outstanding borrowings.
Debt Obligations: Future principal payments on long-term debt are projected at $5.7 billion, with $479 million due within the next year.
Compliance: The company remains compliant with financial covenants, including an interest coverage ratio of 2.25 to 1.00 for fiscal quarters until June 27, 2025.
| Debt Obligation Type | Amount (in millions) | Due Within 1 Year (in millions) |
|---|---|---|
| Total Long-term Debt | $5,729 | $479 |
| Future Interest Payments | $1,900 | $312 |
Is Seagate Technology Holdings plc (STX) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we analyze key financial ratios and metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Key Financial Ratios
- P/E Ratio: As of September 27, 2024, the P/E ratio is approximately 11.0.
- P/B Ratio: The P/B ratio stands at 1.7.
- EV/EBITDA Ratio: The EV/EBITDA ratio is approximately 5.5.
Stock Price Trends
The stock price has shown significant fluctuations over the past 12 months:
| Date | Stock Price (Close) |
|---|---|
| September 2023 | $49.12 |
| December 2023 | $55.34 |
| March 2024 | $45.67 |
| June 2024 | $61.85 |
| September 2024 | $58.90 |
Dividend Yield and Payout Ratios
The company has maintained a steady dividend yield:
- Dividend Yield: 4.5%
- Payout Ratio: The dividend payout ratio is approximately 38%.
Analyst Consensus on Stock Valuation
As of the latest reports, the analyst consensus rating for the stock is:
- Buy: 5 analysts
- Hold: 8 analysts
- Sell: 2 analysts
This consensus suggests a generally positive outlook, with a majority recommending to hold or buy the stock based on its current valuation metrics and market conditions.
Key Risks Facing Seagate Technology Holdings plc (STX)
Key Risks Facing Seagate Technology Holdings plc
The financial health of Seagate Technology Holdings plc is impacted by various internal and external risk factors that investors should carefully consider. Below is a breakdown of these risks.
Overview of Internal and External Risks
- Industry Competition: The company faces intense competition from other manufacturers in the hard disk drive (HDD) market. This includes pricing pressures and technological advancements that may render existing products obsolete.
- Regulatory Changes: Changes in regulations, particularly regarding data protection and environmental standards, could impose additional compliance costs.
- Market Conditions: Economic downturns can lead to reduced consumer spending on electronics, adversely affecting demand for storage solutions.
Operational Risks
Operational risks highlighted in recent earnings reports include:
- Supply Chain Disruptions: The company relies on a limited number of suppliers for key components, which can lead to vulnerabilities in its supply chain. As of September 27, 2024, the company had approximately $862 million in unconditional purchase obligations related to inventory components.
- Manufacturing Challenges: Manufacturing interruptions, particularly in facilities located in China, Malaysia, and other regions, can affect production capacity and timelines.
Financial Risks
Financial risks are also a concern, particularly in relation to the company's debt obligations. As of September 27, 2024, the total long-term debt was approximately $5.7 billion. Future principal payments on this debt are structured as follows:
| Fiscal Year | Amount (in millions) |
|---|---|
| Remainder of 2025 | $479 |
| 2026 | $0 |
| 2027 | $505 |
| 2028 | $1,500 |
| 2029 | $495 |
| Thereafter | $2,750 |
| Total | $5,729 |
Strategic Risks
Strategic risks include challenges in aligning product offerings with market demands:
- Technological Changes: Rapid advancements in technology could lead to shifts in customer preferences, particularly with the growing demand for SSDs and other storage solutions.
- Dependency on Key Customers: A significant portion of revenue is derived from a small number of large customers, making the company susceptible to changes in their purchasing behavior.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks:
- Cost Discipline: The company is exercising cost discipline and implementing pricing actions to improve operational efficiency.
- Diversification: Expanding into new markets and product lines to reduce dependency on legacy products and markets.
Overall, understanding these risk factors is crucial for investors considering the financial health and future potential of the company.
Future Growth Prospects for Seagate Technology Holdings plc (STX)
Future Growth Prospects for Seagate Technology Holdings plc
Analysis of Key Growth Drivers
Seagate Technology Holdings plc is poised for significant growth driven by several key factors, including product innovations, market expansions, and strategic partnerships.
Product Innovations
Recent advancements in storage technology have positioned the company to capitalize on increasing data storage demands. The company shipped 138 exabytes of HDD storage capacity in the September 2024 quarter, a significant increase from 90 exabytes shipped in the September 2023 quarter.
Market Expansions
The company's revenue for the three months ended September 27, 2024, was approximately $2.168 billion, up from $1.454 billion in the same period of the previous year, reflecting a year-over-year growth of 49%. This growth is attributed to improved demand for nearline products and favorable pricing actions.
Future Revenue Growth Projections
Analysts project continued revenue growth, estimating an increase in mass capacity exabytes shipped due to ongoing demand from cloud and enterprise customers. The company expects to maintain its gross margin around 33%. The anticipated revenue growth for the next fiscal year is projected to be around 15% to 20% based on current trends and market conditions.
Strategic Initiatives and Partnerships
Seagate has engaged in various strategic initiatives, including partnerships with cloud service providers and OEMs. The company derives approximately 81% of its revenue from OEM channels, highlighting its strong relationships in the market. These partnerships are expected to enhance product offerings and expand market reach.
Competitive Advantages
The company's competitive advantages stem from its extensive R&D investments, which amounted to $181 million in the September 2024 quarter. This focus on innovation allows Seagate to stay ahead in technology and product offerings, positioning it well for future growth.
Financial Overview and Projections
| Metric | September 2024 | September 2023 |
|---|---|---|
| Revenue | $2.168 billion | $1.454 billion |
| Gross Margin | 33% | 10% |
| HDD Exabytes Shipped | 138 | 90 |
| Product Development Expenses | $181 million | $171 million |
| Net Income | $305 million | ($184 million) |
Conclusion
With its strong financial performance and strategic positioning, Seagate Technology Holdings plc is well-equipped to harness growth opportunities in the evolving data storage landscape.
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Article updated on 8 Nov 2024
Resources:
- Seagate Technology Holdings plc (STX) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Seagate Technology Holdings plc (STX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Seagate Technology Holdings plc (STX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.