Seagate Reaches Settlement With Regulators Regarding Huawei Export, Will Pay $300M

• Seagate Technology Holdings PLC STX settled with the U.S. Department of Commerce's Bureau of Industry and Security (BIS) over allegations that the company's sales of hard disk drives to Huawei Technologies Co between Aug. 17, 2020, and Sept. 29, 2021, did not comply with the U.S. Export Administration Regulations.
• The U.S. stopped Huawei's access to cutting-edge semiconductor technology, citing national security threats in 2019.
• Seagate agreed to pay the U.S. Department of Commerce installments of $15 million per quarter for five years for a total of $300 million. The first installment is due in October.
• Seagate reported a third-quarter revenue decline of 33.6% year-on-year to $1.86 billion Thursday, missing the consensus of $1.98 billion.
• Adjusted EPS loss of $(0.28) missed the consensus of $0.21.
• The adjusted gross margin declined by 1,050 bps to 18.7%. 
• The adjusted operating margin decreased by 1,330 bps to 3.5%.
• Seagate generated $174 million in free cash flow and held $766 million in cash and equivalents.
• The board declared a quarterly cash dividend of $0.70 per share.
• Seagate disclosed a restructuring plan that could lead to run-rate savings of about $200 million annually starting in the first quarter of FY24. The restructuring, likely to be completed by the end of the fourth quarter of FY23, will result in total pre-tax charges of approximately $150 million.
• Seagate expects Q4 revenue of $1.7 billion, plus or minus $150 million. It expects a Q4 adjusted EPS loss of $(0.20), plus or minus $0.20.
• Price Action: STX shares traded lower by 2.26% at $62.82 premarket on the last check Thursday.

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