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Seagate Technology Reports Fiscal Third Quarter 2024 Financial Results

FREMONT, Calif., April 23, 2024 /BUSINESS WIRE/ --

Seagate Technology Holdings plc (NASDAQ: STX) (the “Company” or “Seagate”), the leading innovator of mass-capacity storage solutions, today reported financial results for its fiscal third quarter ended March 29, 2024.

"Seagate’s March quarter revenue grew 6% and non-GAAP EPS more than doubled over the December quarter as we benefit from improving cloud demand, our strong operating discipline and price execution. This combination sets the foundation for a return to target margin performance as the markets recover," said Dave Mosley, Seagate’s chief executive officer.

"This constructive demand backdrop is well-timed as we prepare to ramp our Mozaic products, anchored by industry-leading HAMR technology. HAMR-based products offer compelling economic value for our customers and position Seagate to drive further financial performance gains, as well as capitalize on favorable long-term demand for mass capacity storage."

Quarterly Financial Results

 

GAAP

 

Non-GAAP

 

FQ3 2024

 

FQ3 2023

 

FQ3 2024

 

FQ3 2023

Revenue ($M)

$

1,655

 

$

1,860

 

$

1,655

 

$

1,860

 

Gross Margin

25.7

%

17.2

%

 

26.1

%

18.7

%

Operating Margin

8.6

%

(16.9

%)

 

11.1

%

3.5

%

Net Income (Loss) ($M)

$

25

 

$

(433

)

$

71

 

$

(58

)

Diluted Earnings (Loss) Per Share

$

0.12

 

$

(2.09

)

$

0.33

 

$

(0.28

)

During the fiscal third quarter the Company generated $188 million in cash flow from operations, $128 million in free cash flow, and returned $147 million of capital to shareholders through its quarterly dividend. As of the end of the quarter, cash and cash equivalents totaled $795 million, and there were 210 million ordinary shares issued and outstanding.

For a detailed reconciliation of GAAP to non-GAAP results, see accompanying financial tables.

Seagate has issued a Supplemental Financial Information document, which is available on Seagate’s Investor Relations website at investors.seagate.com.

Quarterly Cash Dividend

The Board of Directors of the Company (the “Board”) declared a quarterly cash dividend of $0.70 per share, which will be payable on July 5, 2024 to shareholders of record as of the close of business on June 20, 2024. The payment of any future quarterly dividends will be at the discretion of the Board and will be dependent upon Seagate’s financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by the Board.

Business Outlook

The business outlook for the fiscal fourth quarter 2024 is based on our current assumptions and expectations; actual results may differ materially as a result of, among other things, the important factors discussed in the Cautionary Note Regarding Forward-Looking Statements section of this release.

The Company is providing the following guidance for its fiscal fourth quarter 2024:

  • Revenue of $1.85 billion, plus or minus $150 million
  • Non-GAAP diluted EPS of $0.70, plus or minus $0.20

Guidance regarding non-GAAP diluted EPS excludes known pre-tax charges related to estimated share-based compensation expenses of $0.16 per share.

We have not reconciled our non-GAAP diluted EPS guidance for fiscal fourth quarter 2024 to the most directly comparable GAAP measure, other than estimated share-based compensation expenses, because material items that may impact these measures are out of our control and/or cannot be reasonably predicted, including, but not limited to, accelerated depreciation, impairment and other charges related to cost saving efforts, net (gain) loss recognized from early redemption of debt, purchase order cancellation fees, strategic investment losses (gains) or impairment charges, income tax adjustments on these measures, and other charges or benefits that may arise. The amounts of these measures are not currently available but may be material to future results. A reconciliation of the non-GAAP diluted EPS guidance for fiscal fourth quarter 2024 to the corresponding GAAP measures is not available without unreasonable effort. A reconciliation of our historical non-GAAP financial measures to their nearest GAAP equivalent is contained in this release.

Investor Communications

Seagate management will hold a public webcast today at 2:00 PM PT / 5:00 PM ET that can be accessed on its Investor Relations website at investors.seagate.com.

An archived audio webcast of this event will be available on Seagate’s Investor Relations website at investors.seagate.com shortly following the event conclusion.

About Seagate

Seagate Technology is the leading innovator of mass-capacity data storage solutions. We create breakthrough technology so you can confidently store your data and easily unlock its value. Founded over 45 years ago, Seagate has shipped over four billion terabytes of data capacity and offers a full portfolio of storage devices, systems, and services from edge to cloud. To learn more about how Seagate leads storage innovation, visit www.seagate.com and our blog, or follow us on X, Facebook, LinkedIn, and YouTube.

© 2024 Seagate Technology LLC. All rights reserved. Seagate, Seagate Technology, and the Spiral logo are registered trademarks of Seagate Technology LLC in the United States and/or other countries.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact. Forward-looking statements include, among other things, statements about the Company’s plans, programs, strategies, prospects, and opportunities; financial outlook for future periods, including the fiscal fourth quarter 2024; expectations regarding our ability to service debt and continue to generate free cash flow; expectations regarding our ability to make timely quarterly payments under the settlement agreement with the U.S. Department of Commerce’s Bureau of Industry and Security; expectations regarding logistical, macroeconomic, or other factors affecting the Company; expectations regarding market demand for the Company’s products and our ability to optimize our level of production and meet market and industry expectations and the effects of these future trends on Company’s performance; anticipated shifts in technology and storage industry trends, and anticipated demand and performance of new storage product introductions, including HAMR-based products; and expectations regarding the Company’s business strategy and performance, as well as dividend issuance plans for the fiscal quarter ending June 28, 2024 and beyond. Forward-looking statements generally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” “will continue,” “can,” “could” or the negative of these words, variations of these words and comparable terminology, in each case, intended to refer to future events or circumstances. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are subject to various uncertainties and risks that could cause our actual results to differ materially from historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s latest periodic report on Form 10-Q or Form 10-K filed with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on, and which speak only as of, the date hereof. The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, unless required by applicable law.

The inclusion of Seagate’s website addresses in this press release are provided for convenience only. The information contained in, or that can be accessed through, Seagate’s websites and social media channels are not part of this press release.

 

SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

 

 

 

 

 

March 29, 2024

 

June 30, 2023

 

(unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

795

 

 

$

786

 

Accounts receivable, net

 

332

 

 

 

621

 

Inventories, net

 

1,191

 

 

 

1,140

 

Other current assets

 

297

 

 

 

358

 

Total current assets

 

2,615

 

 

 

2,905

 

Property, equipment and leasehold improvements, net

 

1,639

 

 

 

1,706

 

Goodwill

 

1,237

 

 

 

1,237

 

Deferred income taxes

 

1,052

 

 

 

1,117

 

Other assets, net

 

553

 

 

 

591

 

Total Assets

$

7,096

 

 

$

7,556

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,672

 

 

$

1,603

 

Accrued employee compensation

 

75

 

 

 

100

 

Accrued warranty

 

78

 

 

 

78

 

Current portion of long-term debt

 

479

 

 

 

63

 

Accrued expenses

 

758

 

 

 

748

 

Total current liabilities

 

3,062

 

 

 

2,592

 

Long-term accrued warranty

 

78

 

 

 

90

 

Other non-current liabilities

 

653

 

 

 

685

 

Long-term debt, less current portion

 

5,192

 

 

 

5,388

 

Total Liabilities

 

8,985

 

 

 

8,755

 

 

 

 

 

Total Shareholders’ Deficit

 

(1,889

)

 

 

(1,199

)

Total Liabilities and Shareholders’ Deficit

$

7,096

 

 

$

7,556

 

 

SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

March 29,
2024

 

March 31,
2023

 

March 29,
2024

 

March 31,
2023

Revenue

$

1,655

 

 

$

1,860

 

 

$

4,664

 

 

$

5,782

 

 

 

 

 

 

 

 

 

Cost of revenue

 

1,230

 

 

 

1,541

 

 

 

3,728

 

 

 

4,735

 

Product development

 

164

 

 

 

191

 

 

 

496

 

 

 

625

 

Marketing and administrative

 

116

 

 

 

123

 

 

 

329

 

 

 

377

 

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

3

 

BIS settlement penalty

 

 

 

 

300

 

 

 

 

 

 

300

 

Restructuring and other, net

 

2

 

 

 

20

 

 

 

(27

)

 

 

110

 

Total operating expenses

 

1,512

 

 

 

2,175

 

 

 

4,526

 

 

 

6,150

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

143

 

 

 

(315

)

 

 

138

 

 

 

(368

)

 

 

 

 

 

 

 

 

Interest income

 

3

 

 

 

2

 

 

 

8

 

 

 

4

 

Interest expense

 

(82

)

 

 

(81

)

 

 

(250

)

 

 

(229

)

Net gain recognized from termination of interest rate swap

 

 

 

 

 

 

 

104

 

 

 

 

Net gain (loss) recognized from early redemption of debt

 

 

 

 

3

 

 

 

(29

)

 

 

207

 

Other, net

 

(6

)

 

 

(9

)

 

 

(64

)

 

 

(25

)

Other expense, net

 

(85

)

 

 

(85

)

 

 

(231

)

 

 

(43

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

58

 

 

 

(400

)

 

 

(93

)

 

 

(411

)

Provision for income taxes

 

33

 

 

 

33

 

 

 

85

 

 

 

26

 

Net income (loss)

$

25

 

 

$

(433

)

 

$

(178

)

 

$

(437

)

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

Basic

$

0.12

 

 

$

(2.09

)

 

$

(0.85

)

 

$

(2.11

)

Diluted

$

0.12

 

 

$

(2.09

)

 

$

(0.85

)

 

$

(2.11

)

Number of shares used in per share calculations:

 

 

 

 

 

 

 

Basic

 

210

 

 

 

207

 

 

 

209

 

 

 

207

 

Diluted

 

213

 

 

 

207

 

 

 

209

 

 

 

207

 

 

 

 

 

 

 

 

 

Cash dividends declared per ordinary share

$

0.70

 

 

$

0.70

 

 

$

2.10

 

 

$

2.10

 

 

SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

 

 

 

For the Nine Months Ended

 

 

March 29, 2024

 

March 31, 2023

OPERATING ACTIVITIES

 

 

 

Net loss

$

(178

)

 

$

(437

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

201

 

 

 

409

 

Share-based compensation

 

89

 

 

 

93

 

Deferred income taxes

 

64

 

 

 

4

 

Net loss (gain) on redemption and repurchase of debt

 

7

 

 

 

(207

)

Other non-cash operating activities, net

 

4

 

 

 

15

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

289

 

 

 

538

 

Inventories, net

 

(51

)

 

 

365

 

Accounts payable

 

108

 

 

 

(327

)

Accrued employee compensation

 

(25

)

 

 

(168

)

BIS settlement penalty

 

(30

)

 

 

 

Accrued expenses, income taxes and warranty

 

(20

)

 

 

69

 

Other assets and liabilities

 

26

 

 

 

370

 

Net cash provided by operating activities

 

484

 

 

 

724

 

INVESTING ACTIVITIES

 

 

 

Acquisition of property, equipment and leasehold improvements

 

(200

)

 

 

(266

)

Proceeds from the sale of assets

 

38

 

 

 

15

 

Purchases of investments

 

 

 

 

(1

)

Proceeds from sale of investments

 

5

 

 

 

 

Net cash used in investing activities

 

(157

)

 

 

(252

)

FINANCING ACTIVITIES

 

 

 

Redemption and repurchase of debt

 

(1,288

)

 

 

(71

)

Dividends to shareholders

 

(438

)

 

 

(437

)

Repurchases of ordinary shares

 

 

 

 

(408

)

Taxes paid related to net share settlement of equity awards

 

(31

)

 

 

(41

)

Proceeds from issuance of long-term debt

 

1,500

 

 

 

600

 

Proceeds from issuance of ordinary shares under employee stock plans

 

66

 

 

 

59

 

Other financing activities, net

 

(128

)

 

 

(23

)

Net cash used in financing activities

 

(319

)

 

 

(321

)

Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash

 

1

 

 

 

 

Increase in cash, cash equivalents and restricted cash

 

9

 

 

 

151

 

Cash, cash equivalents and restricted cash at the beginning of the period

 

788

 

 

 

617

 

Cash, cash equivalents and restricted cash at the end of the period

$

797

 

 

$

768

 

 

Use of non-GAAP financial information

The Company uses non-GAAP measures of gross profit, gross margin, operating expenses, income from operations, operating margin, net income, diluted EPS, free cash flow, EBITDA, adjusted EBITDA and last twelve months adjusted EBITDA, which are adjusted from results based on GAAP to exclude certain benefits, expenses, gains and losses. These non-GAAP financial measures are provided to enhance the user’s overall understanding of the Company’s current financial performance and its prospects for the future. Specifically, the Company believes non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain benefits, expenses, gains and losses that it believes are not indicative of its core operating results and because it is similar to the approach used in connection with the financial models and estimates published by financial analysts who follow the Company.

These non-GAAP results are some of the measurements management uses to assess the Company’s performance, allocate resources and plan for future periods. Reported non-GAAP results should only be considered as supplemental to results prepared in accordance with GAAP, and not considered as a substitute or replacement for, or superior to, GAAP results. These non-GAAP measures may differ from the non-GAAP measures reported by other companies in its industry.

SEAGATE TECHNOLOGY HOLDINGS PLC

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

(In millions, except per share amounts, gross margin and operating margin)

(Unaudited)

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

March 29,
2024

 

March 31,
2023

 

March 29,
2024

 

March 31,
2023

GAAP Gross Profit

$

425

 

$

319

 

$

936

 

$

1,047

 

Accelerated depreciation, impairment and other charges related to cost saving efforts

 

 

 

18

 

 

13

 

 

57

 

Amortization of acquired intangible assets

 

 

 

1

 

 

 

 

3

 

Pandemic-related lockdown charges

 

 

 

 

 

 

 

7

 

Purchase order cancellation fees

 

(1

)

 

 

 

113

 

 

108

 

Share-based compensation

 

8

 

 

8

 

 

23

 

 

24

 

Other charges

 

 

 

1

 

 

2

 

 

2

 

Non-GAAP Gross Profit

$

432

 

$

347

 

$

1,087

 

$

1,248

 

 

 

 

 

 

GAAP Gross Margin

 

25.7

%

 

17.2

%

 

20.1

%

 

18.1

%

Non-GAAP Gross Margin

 

26.1

%

 

18.7

%

 

23.3

%

 

21.6

%

 

 

 

 

 

GAAP Operating Expenses

$

282

 

$

634

 

$

798

 

$

1,415

 

Accelerated depreciation, impairment and other charges related to cost saving efforts

 

 

 

(3

)

 

 

 

(25

)

Amortization of acquired intangible assets

 

 

 

 

 

 

 

(3

)

BIS Settlement penalty

 

 

 

(300

)

 

 

 

(300

)

Restructuring and other, net

 

(2

)

 

(20

)

 

27

 

 

(110

)

Share-based compensation

 

(26

)

 

(23

)

 

(66

)

 

(69

)

Other charges

 

(5

)

 

(6

)

 

(22

)

 

(18

)

Non-GAAP Operating Expenses

$

249

 

$

282

 

$

737

 

$

890

 

 

 

 

 

 

GAAP Income (Loss) From Operations

$

143

 

$

(315

)

$

138

 

$

(368

)

Accelerated depreciation, impairment and other charges related to cost saving efforts

 

 

 

21

 

 

13

 

 

82

 

Amortization of acquired intangible assets

 

 

 

1

 

 

 

 

6

 

BIS Settlement penalty

 

 

 

300

 

 

 

 

300

 

Pandemic-related lockdown charges

 

 

 

 

 

 

 

7

 

Purchase order cancellation fees

 

(1

)

 

 

 

113

 

 

108

 

Restructuring and other, net

 

2

 

 

20

 

 

(27

)

 

110

 

Share-based compensation

 

34

 

 

31

 

 

89

 

 

93

 

Other charges

 

5

 

 

7

 

 

24

 

 

20

 

Non-GAAP Income From Operations

$

183

 

$

65

 

$

350

 

$

358

 

 

 

 

 

 

GAAP Operating Margin

 

8.6

%

 

(16.9

%)

 

3.0

%

 

(6.4

%)

Non-GAAP Operating Margin

 

11.1

%

 

3.5

%

 

7.5

%

 

6.2

%

 

GAAP Net Income (Loss)

$

25

 

$

(433

)

$

(178

)

$

(437

)

Accelerated depreciation, impairment and other charges related to cost saving efforts

 

 

 

21

 

 

13

 

 

82

 

Amortization of acquired intangible assets

 

 

 

1

 

 

 

 

6

 

BIS Settlement penalty

 

 

 

300

 

 

 

 

300

 

Net gain recognized from termination of interest rate swap

 

 

 

 

 

(104

)

 

 

Net (gain) loss recognized from early redemption of debt and debt modification costs

 

 

 

(3

)

 

29

 

 

(207

)

Pandemic-related lockdown charges

 

 

 

 

 

 

 

7

 

Purchase order cancellation fees

 

(1

)

 

 

 

113

 

 

108

 

Restructuring and other, net

 

2

 

 

20

 

 

(27

)

 

110

 

Share-based compensation

 

34

 

 

31

 

 

89

 

 

93

 

Strategic investment losses or impairment charges

 

 

 

1

 

 

43

 

 

1

 

Other charges

 

5

 

 

7

 

 

24

 

 

20

 

Income tax adjustments

 

6

 

 

(3

)

 

48

 

 

(6

)

Non-GAAP Net Income (Loss)

$

71

 

$

(58

)

$

50

 

$

77

 

 

 

 

 

 

GAAP Diluted Net Income (Loss) Per Share

$

0.12

 

$

(2.09

)

$

(0.85

)

$

(2.11

)

Accelerated depreciation, impairment and other charges related to cost saving efforts

 

 

 

0.10

 

 

0.06

 

 

0.39

 

Amortization of acquired intangible assets

 

 

 

 

 

 

 

0.03

 

BIS Settlement penalty

 

 

 

1.45

 

 

 

 

1.45

 

Net gain recognized from termination of interest rate swap

 

 

 

 

 

(0.49

)

 

 

Net (gain) loss recognized from early redemption of debt and debt modification costs

 

 

 

(0.01

)

 

0.14

 

 

(0.99

)

Pandemic-related lockdown charges

 

 

 

 

 

 

 

0.03

 

Purchase order cancellation fees

 

 

 

 

 

0.54

 

 

0.52

 

Restructuring and other, net

 

 

 

0.10

 

 

(0.13

)

 

0.53

 

Share-based compensation

 

0.16

 

 

0.15

 

 

0.42

 

 

0.45

 

Strategic investment losses or impairment charges

 

 

 

 

 

0.20

 

 

 

Other charges

 

0.02

 

 

0.03

 

 

0.12

 

 

0.10

 

Income tax adjustments

 

0.03

 

 

(0.01

)

 

0.23

 

 

(0.03

)

Non-GAAP Diluted Net Income (Loss) Per Share1

$

0.33

 

$

(0.28

)

$

0.24

 

$

0.37

 

 

 

 

 

 

Shares used in diluted net income (loss) per share calculation

 

 

 

 

GAAP

 

213

 

 

207

 

 

209

 

 

207

 

Non-GAAP2

 

212

 

 

207

 

 

211

 

 

209

 

1

As a result of the net loss reported during the period, GAAP diluted net loss per share for the nine months ended March 29, 2024 were computed using weighted average basic shares of 209 million; both GAAP and non-GAAP diluted net loss per share for the three months ended March 31, 2023 were computed using weighted average basic shares of 207 million; and GAAP diluted net loss per share for the nine months ended March 31, 2023 were computed using weighted average basic shares of 207 million.

2

For the three months ended March 29, 2024, non-GAAP shares used in diluted net income per share calculation excluded approximately 1 million shares that are issuable upon conversion of our 2028 exchangeable senior notes due to the expectation that the dilution from such shares will be offset by the related capped call transactions.

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

March 29,
2024

 

March 31,
2023

 

March 29,
2024

 

March 31,
2023

GAAP Net Cash Provided by Operating Activities

$

188

 

 

$

228

 

 

$

484

 

 

$

724

 

Acquisition of property, equipment and leasehold improvements

 

60

 

 

 

54

 

 

 

200

 

 

 

266

 

Free Cash Flow

$

128

 

 

$

174

 

 

$

284

 

 

$

458

 

 

For the Three Months Ended

 

 

March 29,
2024

 

December 29,
2023

 

September 29,
2023

 

June 30,
2023

 

Last Twelve Months

GAAP Net Income (Loss)

$

25

 

 

$

(19

)

 

$

(184

)

 

$

(92

)

 

$

(270

)

Depreciation and amortization

 

63

 

 

 

62

 

 

 

76

 

 

 

104

 

 

 

305

 

Interest expense

 

82

 

 

 

84

 

 

 

84

 

 

 

84

 

 

 

334

 

Interest income

 

(3

)

 

 

(3

)

 

 

(2

)

 

 

(6

)

 

 

(14

)

Income tax expense

 

33

 

 

 

15

 

 

 

37

 

 

 

7

 

 

 

92

 

Non-GAAP EBITDA

 

200

 

 

 

139

 

 

 

11

 

 

 

97

 

 

 

447

 

 

 

 

 

 

 

 

 

 

 

Net loss recognized from early redemption of debt

 

 

 

 

 

 

 

29

 

 

 

17

 

 

 

46

 

Net gain recognized from termination of interest rate swap

 

 

 

 

 

 

 

(104

)

 

 

 

 

 

(104

)

Purchase order cancellation fees

 

(1

)

 

 

(4

)

 

 

118

 

 

 

 

 

 

113

 

Restructuring and other, net

 

2

 

 

 

(31

)

 

 

2

 

 

 

(8

)

 

 

(35

)

Share-based compensation

 

34

 

 

 

30

 

 

 

25

 

 

 

22

 

 

 

111

 

Strategic investment losses or impairment charges

 

 

 

 

43

 

 

 

 

 

 

9

 

 

 

52

 

Underutilization charges, net of depreciation and amortization

 

38

 

 

 

31

 

 

 

51

 

 

 

29

 

 

 

149

 

Other charges

 

5

 

 

 

8

 

 

 

11

 

 

 

12

 

 

 

36

 

Non-GAAP Adjusted EBITDA

$

278

 

 

$

216

 

 

$

143

 

 

$

178

 

 

$

815

 

The Company’s Non-GAAP measures are adjusted for the following items:

Accelerated depreciation, impairment and other charges related to cost saving efforts
These expenses are excluded in the non-GAAP measures due to the inconsistency in amount and frequency and are excluded to facilitate a more meaningful evaluation of the Company’s current operating performance and comparison to its past periods' operating performance.

Amortization of acquired intangible assets
The Company records expense from amortization of intangible assets that were acquired in connection with its business combinations over their estimated useful lives. Such charges are inconsistent in size and are significantly impacted by the timing and magnitude of the Company’s acquisitions. Consequently, these expenses are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.

BIS settlement penalty
The Company accrued a settlement penalty of $300 million for the fiscal third quarter of 2023 related to the alleged violations of the U.S. Export Administration Regulations between August 17, 2020 and September 29, 2021 by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), which were subsequently resolved by a settlement agreement on April 18, 2023. This settlement penalty is excluded from the non-GAAP measures to facilitate a more meaningful evaluation of the Company's current operating performance and comparison to its past periods' operating performance.

Net loss (gain) recognized from early redemption of debt and termination of interest rate swap
From time to time, the Company incurs gains, losses and fees from the early redemption and repurchase of certain long-term debt instruments and termination of related interest rate swap agreements. The amount of these charges may be inconsistent in size and varies depending on the timing of the early redemption of debt and/or termination of interest rate swap and consequently is excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods' operating performance.

Pandemic-related lockdown charges
Pandemic-related lockdown charges are factory under-utilization costs incurred due to the pandemic-related lockdown measures at our factory in Wuxi, China. These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.

Purchase order cancellation fees
Purchase order cancellation fees are the costs incurred to cancel certain purchase commitments made with the Company's suppliers for component and equipment purchases that will not be received due to change in forecasted demand. These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.

Restructuring and other, net
Restructuring and other, net are costs associated with restructuring plans that are primarily related to costs associated with reduction in the Company’s workforce, exiting certain facilities and other related costs, as well as charges or gains from sale of properties. These costs or benefits do not reflect the Company’s ongoing operating performance and consequently are excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.

Share-based compensation
These expenses consist primarily of expenses for employee share-based compensation. Given the variety of equity awards used by companies, the varying methodologies for determining share-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the Company’s control, the Company believes excluding share-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time and compare it against the Company’s peers, a majority of whom also exclude share-based compensation expense from their non-GAAP results.

Strategic investment gains, losses and impairment charges
From time to time, the Company incurs gains, losses or impairment charges from strategic investments that are measured and accounted at fair value, under the equity method of accounting, as available-for-sale debt securities or adjust for downward or upward adjustments to the carrying value under the measurement alternative if an impairment or observable price adjustment is recognized in the current period that are not considered as part of its ongoing operating performance. The resulting expense, gain or impairment loss is inconsistent in amount and frequency and consequently is excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.

Other charges
The other charges primarily include IT transformation costs. These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.

Income tax adjustments
Provision or benefit for income taxes represents the tax effects of non-GAAP adjustments determined using a hybrid with and without method and effective tax rate for the applicable adjustment and jurisdiction.

Free cash flow
Free cash flow is a non-GAAP measure defined as net cash provided by operating activities less acquisition of property, equipment and leasehold improvements. Free cash flow does not reflect non-cash items, net cash used or provided by financing activities and net cash used or provided by investing activities, other than acquisition of property, equipment and leasehold improvements. This non-GAAP financial measure is used by management to assess the Company's sources of liquidity, capital structure and operating performance.

EBITDA, adjusted EBITDA and last twelve months (LTM) adjusted EBITDA
EBITDA is defined as net income (loss) before income tax expense, interest expense, interest income, depreciation and amortization. Adjusted EBITDA excludes certain expenses, gains and losses that the Company believes are not indicative of its core operating results. These adjustments primarily include impairment and other charges related to cost saving efforts, net loss (gain) recognized from early redemption of debt, net gain recognized from termination of interest rate swap, pandemic-related lockdown charges, purchase order cancellation fees, restructuring and other, net, share-based compensation, strategic investment losses or impairment charges, other extraordinary charges such as factory underutilization charges and BIS settlement penalty. LTM adjusted EBITDA is defined as the total of last twelve months adjusted EBITDA. These non-GAAP financial measures are used by management to evaluate the Company’s debt portfolio and structure to comply with its financial debt covenants.