Seagate Technology Holdings plc

Previous wording

During the September 2024 quarter, we shipped 138 exabytes of HDD storage capacity. We generated revenue of approxima tely $2.2 billion with a gross margin of 33%. Our operating cash flow was $95 million and we paid $147 million in dividends.

Current wording

During the December 2024 quarter, we shipped 151 exabytes of HDD storage capacity. We generated revenue of approxima tely$2.3 billion with a gross margin of 34.9%. Our operating cash flow was$221 million and we paid$148 million in dividends.

Previous wording

During the September 2024 quarter, revenue growth was driven by continued improvement in cloud customer demand for our high capacity nearline drives along with an increase in demand from the enterprise and OEM markets. We continue to exercise cost discipline and implement pricing actions to improve operational efficiency and profitability. The macroeconomic environment remains dynamic, which may impact our business and results of operations. However, we expect our HDD storage business to benefit from further growth in data demand, including potential demand driven by the adoption of Generative AI applications.

Current wording

During the December 2024 quarter, revenue growth was driven by continued improvement in demand for our high capacity nearline drives from both cloud and enterprise/OEM customers along with seasonal uplift from certain other markets. We remain focused on improving operational efficiency and enhancing profitability, supported by expected increasing demand for our higher capacity nearline products alongside ongoing cost management and pricing actions. We have been increasing our factory production levels in light of higher demand. Temporary supply constraints are anticipated to impact our ability to fully respond to customer demand in the March quarter. These constraints are due to production related challenges that have now been resolved. We continue to operate in a dynamic macroeconomic environment, which may impact our business and results of operations. However, we expect our HDD storage business to benefit from further growth in data demand, including potential demand driven by the adoption of Generative AI applications.

Previous wording

Revenue in the September 2024 quarter increased by $281 million compared to the June 2024 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced improved demand for our nearline products, and favorable pricing actions undertaken by the Company.

Current wording

Revenue in the December 2024 quarter increased by $157 million compared to the September 2024 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced higher demand primarily for our nearline products and favorable pricing actions undertaken by the Company.

Previous wording

Revenue in the September 2024 quarter increased by $714 million compared to the September 2023 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced improved demand for our nearline products, and favorable pricing actions undertaken by the Company.

Current wording

Revenue for the three and six months ended December 27, 2024 increased by $770 million and $1.5 billion from the three and six months ended December 29, 2023, respectively, primarily due to an increase in mass capacity exabytes shipped as we experienced higher demand primarily for our nearline products and favorable pricing actions undertaken by the Company.

Previous wording

Wemaintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 13%of gross revenue for the September 2024 quarter, 12% for the June 2024 quarter and 20% for the September 2023 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented.

Current wording

Wemaintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 14% of gross revenue for the December 2024 quarter, 13% for the September 2024 quarter and 18% for the December 2023 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 2% of quarterly gross revenue in all periods presented.

Previous wording

Gross margin for the September 2024 quarter increased compared to the June 2024 quarter, primarily driven by favorable product mix and an improved pricing environment.

Current wording

Gross margin for the December 2024 quarter increased by 2 percentage points compared to the September 2024 quarter, primarily driven by favorable product mix, an improved pricing environment and ongoing cost efficiencies.

Previous wording

Gross margin for the September 2024 quarter increased compared to the September 2023 quarter, primarily driven by favorable product mix and pricing actions undertaken by the Company, as well as $118 million of order cancellation fees, $59 million of factory underutilization charges, and $13 million of accelerated depreciation expense for certain capital equipment in the September 2023 quarter that did not recur.

Current wording

Gross margin for thesix months ended December 27, 2024 increased by 17 percentage points compared to the six months ended December 29, 2023, primarily driven by favorable product mix and pricing actions undertaken by the Company, as well as $115 million of cancellation fees, $95 million of factory underutilization charges, and $13 million of accelerated depreciation expense for certain capital equipment in thesix months ended December 29, 2023 that did not recur.

Previous wording

Product Development Expense. Product development expenses increased by $23 million in the September 2024 quarter compared to the June 2024 quarter primarily due to a $19 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the September 2024 quarter, and a $3 million increase in materials expense.

Current wording

Product Development Expense. Product development expenses increased by $3 million in the December 2024 quarter compared to the September 2024 quarter primarily due to a $4 million increase in compensation and other employee benefits, partially offset by a $2 million decrease in materials expense.

Previous wording

Product development expenses increased by $10 million in the September 2024 quarter compared to the September 2023 quarter primarily due to an $11 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the September 2024 quarter and temporary salary reductions in the September 2023 quarter, a $1 million increase in equipment expense, a $1 million increase in travel expense and a $1 million increase in lease expense, partially offset by a $5 million decrease in materials expense.

Current wording

Product development expenses increased by $23 million in the December 2024 quarter compared to the December 2023 quarter primarily due to a $24 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the December 2024 quarter and temporary salary reductions in the December 2023 quarter, a $4 million increase in facilities costs, and a $2 million increase in equipment expense, partially offset by an $8 million decrease in materials expense.

Previous wording

Marketing and Administrative Expense. Marketing and administrative expenses decreased by $2 million in the September 2024 quarter compared to the June 2024 quarter primarily due to an $8 million decrease in outside services expense, partially offset by a $5 million net increase in compensation and other employee benefits due to the variable compensation expense recognized in the September 2024 quarter.

Current wording

Marketing and Administrative Expense. Marketing and administrative expenses increased by $10 million in the December 2024 quarter compared to the September 2024 quarter primarily due to a $7 million increase in compensation and other employee benefits anda $3 million increase in outside services expense.

Previous wording

Marketing and administrative expenses increased by $24 million in the September 2024 quarter compared to the September 2023 quarter primarily due to a $20 million increase in compensation and other employee benefits as a result of the variable compensation expense in the September 2024 quarter and temporary salary reductions in the September 2023 quarterand a $2 million increase in travel expense.

Current wording

Marketing and administrative expenses increased by $31 million in the December 2024 quarter compared to the December 2023 quarter primarily due to a $26 million increase in compensation and other employee benefits as a result of the variable compensation expense in the December 2024 quarter and temporary salary reductions in the December 2023 quarter, a $3 million increase in outside services expense and a $2 million increase in travel expense.

Previous wording

Other expense, net increased by $69 million in the September 2024 quarter compared to the September 2023 quarter primarily due to a $104 million net gain recognized from the termination of interest rate swaps associated with the repayment of term loans in the September 2023 quarter, partially offset by a $29 million net loss recognized from early redemption of debt in the September 2023 quarter and a $5 million increase in interest income in the September 2024 quarter.

Current wording

Other expense, net increased by $79 million in the six months ended December 27, 2024 compared to the six months ended December 29, 2023, primarily due to a $75 million net gain recognized from the early redemption of debt and the termination of interest rate swaps associated with the repayment of term loans that did not recur, a $10 million increase in net loss from certain investments, and a $6 million increase in net loss from foreign currency exchange transactions, partially offset by a $10 million increase in interest income and a $3 million decrease in factoring expense.

Previous wording

For the three months ended September 27, 2024 and September 29, 2023, we recorded income tax expense of $11 million and $37 million, respectively. For further discussion, refer to“Part I, Item 1. Financial Statements—Note 4. Income Taxes”.

Current wording

For thethree months ended December 27, 2024, September 27, 2024, and December 29, 2023, we recorded income tax expense of $14 million, $11 million and $15 million, respectively. For the six months ended December 27, 2024 and December 29, 2023, we recorded income tax expense of $25 million and $52 million, respectively. For further discussion, refer to“Part I, Item 1. Financial Statements—Note 4. Income Taxes”.

Previous wording

Our cash and cash equivalents as of September 27, 2024 decreased by $119 million from June 28, 2024 primarily as a result of $147 million dividends paid to our shareholders and $68 million payments for capital expenditures, partially offset by net cash of $95 million provided by operating activities.

Current wording

Our cash and cash equivalents as of December 27, 2024 decreased by $120 million from June 28, 2024 primarily as a result of $295 million dividends paid to our shareholders and $139 million payments for capital expenditures, partially offset by net cash of $316 million provided by operating activities.

Previous wording

Cash provided by operating activities for thethree months ended September 27, 2024 was $95 million and includes the effects of net income adjusted for non-cash items including depreciation, amortization, share-based compensation, and:

Current wording

Cash provided by operating activities for the six months ended December 27, 2024 was $316 million and includes the effects of net income adjusted for non-cash items including depreciation, amortization, share-based compensation, and the following major working capital related movements:

Previous wording

•an increase of $37 million in accrued employee compensation, primarily due to an increase in our variable compensation expense; partially offset by

Current wording

•an increase of $85 million in accrued employee compensation, primarily due to an increase in our variable compensation expense; partially offset by

Previous wording

•an increase of $144 million in inventories, primarily due to an increase in purchased materials.

Current wording

•an increase of $234 million in inventories, primarily due to an increase in purchased materials;

Previous wording

•an increase of $199 million in accounts receivable, primarily due to increased revenue; and

Current wording

•an increase of $158 million in accounts receivable, primarily due to increased revenue.

Previous wording

Net cash used in investing activities for thethree months ended September 27, 2024 was $68 million, attributable to payments for the purchase of property, equipment and leasehold improvements.

Current wording

Net cash used in investing activities for the six months ended December 27, 2024 was $138 million, which was primarily attributable to payments for the purchase of property, equipment and leasehold improvements.

Previous wording

Net cash used in financing activities of $146 million for thethree months ended September 27, 2024 was primarily attributable to the following activities:

Current wording

Net cash used in financing activities of $298 million for the six months ended December 27, 2024 was primarily attributable to the following activities:

Previous wording

•$147 million in dividends paid to our shareholders; and

Current wording

•$295 million in dividends paid to our shareholders; and

Previous wording

•$28 million taxes paid related to net share settlement of equity awards; partially offset by

Current wording

•$35 million taxes paid related to net share settlement of equity awards; partially offset by

Previous wording

•$29 million in proceeds from the issuance of ordinary shares under employee stock plans.

Current wording

•$32 million in proceeds from the issuance of ordinary shares under employee stock plans.

Previous wording

Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. As of September 27, 2024, we had unconditional purchase obligations of approximately $862 million, primarily related to purchases of inventory components with our suppliers. We expect $809 million of these commitments to be paid within one year. In addition, we also had certain long-term, market share-based, non-cancellable inventory purchase commitments as of September 27, 2024.

Current wording

Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. As of December 27, 2024, we had unconditional purchase obligations of approximately $900 million, primarily related to purchases of inventory components with our suppliers. We expect $810 million of these commitments to be paid within one year. In addition, we also had certain long-term, market share-based, non-cancellable inventory purchase commitments as of December 27, 2024.

Previous wording

We recorded order cancellation fees to terminate certain purchase commitments related to the purchase of inventory components and equi pment. As of September 27, 2024, the cumulative unpaid order cancellation fees on the Condensed Consolidated Balance Sheets were $58 million, with $32 million in Accounts payable and $26 million in Accrued expenses, all of which is expected to be paid within one year. In certain instances, our unpaid order cancellation fees may change based on the expected timing or ongoing negotiations with our suppliers.

Current wording

We recorded order cancellation fees to terminate certain purchase commitments related to the purchase of inventory components and equi pment. As of December 27, 2024, the cumulative unpaid order cancellation fees on the Condensed Consolidated Balance Sheets were $31 million, with $19 million in Accounts payable and $12 million in Accrued expenses, all of which is expected to be paid within one year. In certain instances, our unpaid order cancellation fees may change based on the expected timing or ongoing negotiations with our suppliers.

Previous wording

As of September 27, 2024, the future principal payment obligation on our long-term debt was $5.7 billion, of which $479 million will mature within one year. As of September 27, 2024, future interest payments on this outstanding debt is estimated to be approximately $1.9 billion, of which $312 million is expected to be paid within one year. From time to time, we may repurchase, redeem or otherwise extinguish any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase or redeem outstanding senior notes pursuant to the terms of the applicable indenture. Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.

Current wording

As of December 27, 2024, the future principal payment obligation on our long-term debt was $5.7 billion, of which $479 million had a maturity within one year and was fully repaid on January 2, 2025 at maturity. As of December 27, 2024, future interest payments on this outstanding debt is estimated to be approximately $1.8 billion, of which $312 million is expected to be paid within one year. From time to time, we may repurchase, redeem or otherwise extinguish any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase or redeem outstanding senior notes pursuant to the terms of the applicable indenture. Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.

Previous wording

We accrued a settlement penalty of $300 million for fiscal year 2023, related to BIS’ allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023. As part of the Settlement Agreement with BIS, quarterly payments of $15 million are made over the course of five years beginning October 31, 2023, of which $60 million is expected to be paid within one year and $180 million thereafter. Refer to “Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” for more details.

Current wording

We accrued a settlement penalty of $300 million for fiscal year 2023, related to BIS’ allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023. As part of the Settlement Agreement with BIS, quarterly payments of $15 million are made over the course of five years beginning October 31, 2023, of which $60 million is expected to be paid within one year and $165 million thereafter. Refer to “Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” for more details.

Previous wording

From time to time, at our discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker assisted purchases, tender offers, or other means, including through the use of derivative transactions. As of September 27, 2024, $1.9 billion remained available for repurchase under our existing repurchase authorization limit. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with our Constitution.

Current wording

From time to time, at our discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker assisted purchases, tender offers, or other means, including through the use of derivative transactions. As of December 27, 2024, $1.8 billion remained available for repurchase under our existing repurchase authorization limit. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with our Constitution.