STX
#Thanks, Dave
For the September quarter, we achieved $2.6 billion in revenue and shipped a record 70.3 exabytes of storage, with an average capacity per drive of 1.9 terabytes, also a record
For the enterprise HDD market, we shipped 27.2 exabytes, with a record average capacity of 3.9 terabytes per drive
Our average capacity per drive for our nearline products reached over 5.4 terabytes per drive, up 17% over last year's strong ATB demand and up 75% from the September quarter two years ago
The growth in hyperscale and cloud storage deployments continues to represent an important opportunity for Seagate, and we are confident in our nearline HDD portfolio designed to serve these environments
Over the next 12 months to 18 months, we expect a diverse and strong market with multiple capacity points for different application workloads
Use cases will cause capacity points to span from two terabytes to four terabytes for certain applications and up to 16 terabytes for other customer needs
At Seagate, we believe we are well poised to help our cloud customers with our stringent and varied requirements
Our 10-terabyte helium nearline product was our leading enterprise revenue SKU in the September quarter, and we shipped over 1 million 10 terabyte units, up threefold from the June quarter
We also achieved sequential volume and revenue growth in our 12-terabyte helium nearline product in the September quarter
Customer feedback has been excellent and we are confident in our competitiveness across our key customer qualification processes
For the December quarter, we are planning for significant sequential volume and revenue growth for our 10-terabyte and our 12-terabyte helium products as the market adoption grows
In the edge and consumer verticals, our 1-terabyte per platter, 2.5-inch platform continues to perform well
Using our areal density advantage, our 2-terabyte per platter, 3.5-inch platform continues to ramp for desktop markets, providing a great value for customers needing 2-terabyte, 4-terabyte and 8-terabyte capacity points
Customer feedback indicates we are well ahead of the competition in these important verticals
Within this, notebook compute revenue was up 37% year-over-year, with exabytes up 75% year-over-year
Average capacity per notebook compute drive ---+ year-over-year
Our gaming business revenue grew sequentially 13% and average capacity per drive was up 27% over last year
We continue to be selective in our participation in this market, and we are focused on the highest capacity areas for the gaming customers that are demanding more local mass storage for their rich gaming experiences
Our non-HDD revenue, primarily from our cloud systems and silicon group, in the September quarter was 242 million, up 30% quarter-over-quarter and up 17% year-over-year
Our operating expenses for the September quarter were 481 million on a GAAP basis and 408 million on a non-GAAP basis, down 14% year-over-year
Total operating expenses were slightly lower than forecast, primarily due to restructuring and other cost-containment measures
We continue to identify areas for cost improvements, and during the September quarter, we divested the majority of our high-performance computing assets, which will result in a cost savings of approximately 20 million a year and impact revenues by approximately 50 million per year in our non-HDD revenue
We remain on track to exit the calendar year with non-GAAP operating expenses of approximately 400 million per quarter
Capital expenditures were 124 million for the September quarter for maintenance capital and manufacturing footprint redeployment, supporting the continued ramp of our new HDD products in our portfolio, which utilize new tooling and equipment
For December quarter, we expect capital expenditures to decrease sequentially and remain less than 5% of our total consolidated revenue for FY 2018. Cash flow from operations in the September quarter was 237 million, and free cash flow was 113 million
These results include approximately 46 million in cash payments related to previously announced restructuring charges and some inventory staging related to a strong October demand signals
For the December quarter, we anticipate cash flow from operations to be at least two times more than the September quarter due to working capital improvements in our business outlook
Our balance sheet remains heavy – healthy, and we ended the September quarter with 2.3 billion in cash and cash equivalents, with 289 million ordinary shares outstanding
Our board has approved our quarterly dividend payment of $0.63 for the September quarter, which will be payable on January 3, 2018. Interest expense for the September quarter was 61 million
Our debt structure and level of interest expense continues to be well within our financial capabilities, given our staggered maturities and low interest rates
In the September quarter, we deployed 166 million to redeem 5 million shares and 22 million towards redeeming our 2018 senior notes
As Dave <UNK> noted, at the end of September, we announced our participation in the consortium led by Bain Capital Private Equity that has entered into an agreement with Toshiba Corporation to acquire Toshiba Memory Corporation
We committed to provide up to $1.25 billion in financing to support the acquisition
Upon closing, we would expect to fund the transaction with existing cash balances and some short-term financing mechanisms, including the long-term NAND supply agreements we expect to enter with Toshiba Memory, we anticipate this transaction to be accretive to our earnings
Overall, our operational and financial performance in the September quarter reflects execution of our business model and profitability improvement objectives
Looking ahead, we will continue to optimize our business and focus on aligning our go-to-market and product portfolio advancements towards the future growth opportunity markets
I would now like to turn the call back to Dave <UNK>
Yes, I would classify any pricing you may see as more of a normal mix shift versus a like-for-like across consistent customers within that same channel
Pricing has been relatively benign
And so, to your point, as the exabytes continue to expand in this data rich area, pricing has not been a major factor across all of our nearline portfolio
Yes, the share count, it's back within overall capital allocation, the system that we've been working at over returning over 30% to 50% of our cash flow back to shareholders
And so, obviously, we've been fairly muted on our buybacks, which has been more a reflection of a NII dilution perspective
But we're still very convicted in and around the 30% to 50%
And as we continue to see strength in our cash flows, obviously, we'll continue to be in the open-market
In the OpEx, it's been too hard
We still have, I'll call it, some curtailing specifically in the portfolio when you look at some of our adjacent businesses
But then we also have just common items that we've been still trying to drive towards the lowest common denominator
So, we're still very much convicted on achieving the $375 million by the end of FY 2018, and I believe we're on a very good glide path to enable that
