Deutsche Bank 22nd Annual Leveraged Finance Conference Dave Morton SVP, Finance Treasurer and PAO September 30, 2014
Forward Looking Statement This presentation contains information about Seagate Technology plc ( Seagate ). Any "forward-looking statement" is made only as of the date such information was originally prepared by Seagate and is intended to fall within the safe harbor for forward-looking information provided in the Private Securities Litigation Reform Act of 1995. These forward-looking statements identify prospective information and include words such as "expects," "plans," "anticipates," "believes," "estimates," "predicts," "projects" and similar expressions. These forward-looking statements are based on management s expectations, forecasts and assumptions as of the date they were made. These forward-looking statements are also conditioned upon and involve a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks uncertainties and other factors may be beyond Seagate s control and may pose a risk to Seagate s operating results and financial condition. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our ordinary shares include: the actions of securities analysts who initiate or maintain coverage of us; changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; actions by institutional investors; announcements by Seagate or others and developments affecting Seagate or speculation or reports by the press or investment community with respect to Seagate or the technology industry in general; our ability to meet investment grade benchmarks; changes in operating performance and stock market valuations of technology companies in our industry; and price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole. Factors that can cause results to differ materially include those described in Seagate s most recent Form 10-K and Form 10-Qs filed with the SEC and contained in this presentation. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and we are not obliging ourselves to revise or publicly release the results of any revision to these forward-looking statements. Historical share price performance is not indicative of future performance. No one can guarantee short-term or long-term performance. 2
Use of Non-GAAP Financial Information To supplement the condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), the Company provides non GAAP measures, including EBITDA, net income, and gross margin as a percentage of revenue, which are adjusted from results based on GAAP to exclude certain 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 our 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 expenses, gains and losses that we believe are not indicative of our core operating results and because it is consistent with the financial models and estimates published by financial analysts who follow the Company. These non GAAP results are some of the primary 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 for, or superior to, GAAP results. These non GAAP measures may differ from the non GAAP measures reported by other companies in our industry. A reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measures has been included in Annex A. 3
Seagate Overview
Seagate: Storage Leader Seagate is a leading provider of data storage solutions Provide storage for enterprise, desktop, mobile computing, consumer electronics and retail markets Vertically integrated storage technology ~6200 Patents Global manufacturing footprint ~53,000 employees worldwide 5
The Digital Universe in 2020 44ZB Amount of data will be created 13ZB Amount of data that will need to be stored 6.5ZB Amount of data that installed capacity will be able to hold 60% in the cloud Sources: Reinsel, David. Where in the World Is Storage: A Look at Byte Density Across the Globe IDC October 2013, IDC/EMC Digital Universe, April 2014 + Seagate Estimates 6
Converging Architectures Cloud Content/Tech Mobile IoT Consumerization of IT 7
Application Workloads Are Changing Consumer Enterprise Workloads Mobile & Video Content Repository Transaction Processing Big Data High Performance Computing 8
Financial Overview
Long Term Financial Results FY09 FY14 5-Year CAGR Exabytes Shipped 50.4 201.2 32% Average Capacity Per Drive 307 GB 915 GB 24% Units Shipped 164 M 220 M 6% Revenue $9.8 B $13.7 B 7% Non-GAAP Gross Margin % 13.9% 28.5% 1500 bps Non-GAAP Net Income ($0.2 B) $1.8 B Non-GAAP Earnings Per Share ($0.37) $5.04 Operating Cash Flow $823 M $2.6 B 25% Capital Expenditures $633 M $559 M (2%) 10
Capital Management Track Record of Prudent Capital Structure Management Seagate has Maintained Investment Grade Benchmarks Debt has a Pro Forma Weighted Average Maturity of over 7 Years Execute Within an Investment Grade Framework Maintaining a Debt-to-LTM Adjusted EBITDA Ratio Below 1.5x Ensures Disciplined Leverage Seagate has Access to an Undrawn $500MM Revolver with no Current Plans to Draw on it Latest Tranches of Debt have Staggered Maturities at Lower Interest Rates Ability to Flex-Down Flexible Capital Expenditures, Operating Expenses, and Share Redemptions allow the Company to Maintain Free Cash Flow and Cash Position if Needed 11
Capital Structure Overview as of 6/27/2014 Liquidity Cash, Cash Equivalents, & Marketable Securities $ 2,654 Available Revolver ($500MM) due April 2018 500 Total Liquidity 3,154 Debt Senior Sec. Revolver ($500MM) due April 2018 $ 6.8% Senior Notes due October 2016 335 3.75% Senior Notes due November 2018 800 6.875% Senior Notes due May 2020 534 7.00% Senior Notes due November 2021 251 4.75% Senior Notes due June 2023 1,000 4.75% Senior Notes due June 2025 1,000 Total Debt $ 3,920 Shareholders' Equity $ 2,832 Total Book Capitalization $ 6,752 Operating Statistics * LTM 6/27/2014 Adj. EBITDA 2,724 LTM Cash Interest Expense 198 Key Ratios: Total Debt / LTM EBITDA LTM EBITDA / LTM Cash Interest Expense 1.44 x 13.8 x $MM $2,800 $2,600 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $2,654 $335 Characteristics of Maturity Profile: No term debt cliff No Maturities for more than two calendar years Manageable tranche levels ensure ample liquidity at maturity $500 $800 $534 $251 $1,000 $1,000 Cash CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY23 CY25 Revolver Term Debt 12
Seagate s Core Business - High Velocity Core Revenue Customer Value Technology Supply Chain Expertise Innovation Deep technical expertise Extensive go-to-market capabilities Resilient financial model Optimized to Promote Flexible Growth Opportunities Enabling Seagate to capture new adjacencies in an efficient manner 13
Growth From Market Adjacencies $2 Billion dollar revenue run rate for cloud and flash platform businesses ~24 months Accretive to Corporate Non GAAP Gross Margins in FY16 Accretive to Corporate Non GAAP Operating Margin in FY17 14
Seagate Technology Platform Systems Converged Infrastructure Arrays Hybrid Data Systems Software-defined Storage Flash Arrays Devices Kinetic Traditional Enterprise Hyperscale NAND SAS Hybrid Desktop Notebook / Tablet Branded NAND SATA NAND PCIe 15
FY 17 Model Summary Financial Model Assumptions Revenue Growth 6 8% Non GAAP Gross Margin 27 32% Non GAAP Operating Expenses 12 14% Non-GAAP Operating Margin 13 15% Capital Expenditures 6 8% 16
The Seagate Value Proposition Resilient Financial Model Deep Storage Technology Expertise Expanding Opportunities Into Market Adjacencies 17
Q&A http://www.seagate.com/investors/creditor-relations/overview
Annex A
GAAP to Non-GAAP Reconciliation ($ Millions) FY 2014 Revenue $ 13,724 Cost of Revenue 9,878 Gross margin $ 3,846 Income Before Income Taxes $ 1,556 EBITDA adjustments: Depreciation 748 Amortization 131 Interest Income (8) Interest Expense 195 EBITDA $ 2,622 Non GAAP Adjustments A. Costs of Revenue $29 A. Product Development 6 B. Marketing and administrative (2) C. Restructuring and other, net 24 D. Other expense, net 45 Adjusted EBITDA $ 2,724 A. These non-gaap adjustments include acquisition and integration related costs associated with the December 2011 acquisition of Samsung Electronics Co., Ltd. s hard disk drive business (the Samsung HDD business ), the August 2012 acquisition of LaCie S.A. ( LaCie ) and the March 31, 2014 acquisition of Xyratex Ltd. ( Xyratex ). B. Marketing and administrative expense has been adjusted on a non-gaap basis to exclude the impact of a legal cost reimbursement partially offset by the impact of acquisition and integration costs associated with the acquisition of the Samsung HDD business, LaCie and Xyratex. C. Restructuring and other, net, has been adjusted on a non-gaap basis primarily to exclude the impact from our existing restructuring plans. D. Other expense, net, has been adjusted on a non-gaap basis primarily to exclude the net impact of losses recognized on the early redemption and repurchase of debt, partially offset by gains recognized upon sales of certain strategic investments. 20