Seagate Technology Reports Fourth Quarter and Fiscal Year 2022 Financial Results

Fiscal Q4 2022 Highlights
- Revenue of $2.63 billion
- GAAP gross margin of 28.9%; non-GAAP gross margin of 29.3%
- GAAP diluted earnings per share (EPS) of $1.27; non-GAAP diluted EPS of $1.59

Fiscal Year 2022 Highlights
- Revenue of $11.66 billion
- GAAP gross margin of 29.7%; non-GAAP gross margin of 30.1%
- GAAP operating margin of 16.8%; non-GAAP operating margin of 18.4%
- GAAP diluted EPS of $7.36; non-GAAP diluted EPS of $8.18
- Cash flow from operations of $1.7 billion and free cash flow of $1.3 billion
- Returned $2.4 billion to shareholders through dividends and share repurchases
- Revenue from mass capacity storage markets increased 24% year-over-year and represented 74% of annual HDD revenue

Seagate Technology Holdings plc STX (the "Company" or "Seagate") today reported financial results for its fourth quarter and fiscal year ended July 1, 2022.

"Our June quarter results reflect stable mass capacity storage demand, offset by the impacts of Covid restrictive measures in Asia and weakening global economic conditions on our other end markets. These impacts were most pronounced in our consumer facing Legacy markets," said Dave Mosley, Seagate's chief executive officer.

"The confluence of macro-related challenges is continuing into the September quarter. In this environment, we are reducing our production plans to maintain supply discipline as our customers manage through macro uncertainty and on-going non-HDD component shortages, and we are diligently managing expenses to protect profitability. Looking further ahead, I remain confident that the multiple secular growth trends fueling demand for data and mass capacity storage solutions remain intact. Seagate is well positioned for macro recovery with a strong product roadmap, deep customer relationships and proven track record for disciplined execution."

Quarterly Financial Results

 

GAAP

 

Non-GAAP

 

FQ4 2022

 

FQ4 2021

 

FQ4 2022

 

FQ4 2021

Revenue ($M)

$

2,628

 

 

$

3,013

 

 

$

2,628

 

 

$

3,013

 

Gross Margin

28.9

%

 

29.4

%

 

 

29.3

%

 

29.6

%

Operating Margin

13.7

%

 

16.8

%

 

 

16.1

%

 

18.1

%

Net Income ($M)

$

276

 

 

$

482

 

 

$

 

345

 

 

$

466

 

Diluted Earnings Per Share

$

1.27

 

 

$

2.07

 

 

$

 

1.59

 

 

$

2.00

 

Annual Financial Results

 

GAAP

 

Non-GAAP

 

FY 2022

 

FY 2021

 

FY 2022

 

FY 2021

Revenue ($M)

$

11,661

 

 

$

10,681

 

 

$

11,661

 

 

$

10,681

 

Gross Margin

29.7

%

 

27.3

%

 

 

30.1

%

 

27.7

%

Operating Margin

16.8

%

 

14.0

%

 

 

18.4

%

 

15.4

%

Net Income ($M)

$

1,649

 

 

$

1,314

 

 

$

 

1,833

 

 

$

1,381

 

Diluted Earnings Per Share

$

7.36

 

 

$

5.36

 

 

$

 

8.18

 

 

$

5.64

 

The Company generated $180 million in cash flow from operations and $108 million in free cash flow during the fiscal fourth quarter 2022. For fiscal year 2022, the Company generated $1.7 billion in cash flow from operations and $1.3 billion in free cash flow. During the fiscal fourth quarter, the Company paid cash dividends of $152 million and repurchased 6 million ordinary shares for $486 million. For the full year, the Company paid cash dividends of $610 million and used $1.8 billion to repurchase 20 million ordinary shares, or 9% of the outstanding shares. Cash and cash equivalents totaled $615 million. There were 210 million ordinary shares issued and outstanding as of the end of the fiscal year.

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 October 5, 2022 to shareholders of record as of the close of business on September 21, 2022. 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 first quarter 2023 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 first quarter 2023:

  • Revenue of $2.5 billion, plus or minus $150 million
  • Non-GAAP diluted EPS of $1.40, plus or minus $0.20

Guidance regarding non-GAAP diluted EPS excludes known charges related to amortization of acquired intangible assets of $0.01 per share and estimated share-based compensation expenses of $0.19 per share.

We have not reconciled our non-GAAP diluted EPS guidance for fiscal first quarter 2023 to the most directly comparable GAAP measure 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, restructuring charges and other, net, losses and costs recognized on the modification or early redemption and repurchase of debt, strategic investment losses (gains) or impairment recognized, 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 first quarter 2023 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 p.m. Pacific / 5:00 p.m. Eastern 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 crafts the datasphere, helping to maximize humanity's potential by innovating world-class, precision-engineered data storage and management solutions with a focus on sustainable partnerships. A global technology leader for more than 40 years, the company has shipped over three billion terabytes of data capacity. Learn more about Seagate by visiting www.seagate.com or following us on Twitter, Facebook, LinkedIn, YouTube, and subscribing to our blog.

© 2022 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 and prospects, financial outlook for future periods, including the fiscal first quarter 2023, expectations regarding the Company's products, our ability to ramp production, storage industry trends and market demand, shifts in technology, the Company's ability to meet market and industry expectations and the effects of these future trends, the possible effects of the economic conditions worldwide resulting from the COVID-19 pandemic or other macro disruptions, including the likelihood or significance of continuing supply chain disruptions, and expectations on the Company's business as well as dividend issuance plans for the fiscal quarter ending September 30, 2022 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 Annual Report on Form 10-K for the year ended July 2, 2021 filed with the U.S. Securities and Exchange Commission on August 6, 2021, and in our Quarterly Reports on Form 10-Q filed with the SEC on October 28, 2021, January 27, 2022 and April 28, 2022. Additional information will also be set forth in the Company's Annual Report on Form 10-K for the year ended July 1, 2022. 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)

 

July 1,
2022

 

July 2,
2021

 

(unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

615

 

$

1,209

Accounts receivable, net

 

1,532

 

 

1,158

Inventories

 

1,565

 

 

1,204

Other current assets

 

321

 

 

208

Total current assets

 

4,033

 

 

3,779

Property, equipment and leasehold improvements, net

 

2,239

 

 

2,181

Goodwill

 

1,237

 

 

1,237

Other intangible assets, net

 

9

 

 

29

Deferred income taxes

 

1,132

 

 

1,117

Other assets, net

 

294

 

 

332

Total Assets

$

8,944

 

$

8,675

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

2,058

 

$

1,725

Accrued employee compensation

 

252

 

 

282

Accrued warranty

 

65

 

 

61

Current portion of long-term debt

 

584

 

 

245

Accrued expenses

 

596

 

 

608

Total current liabilities

 

3,555

 

 

2,921

Long-term accrued warranty

 

83

 

 

75

Other non-current liabilities

 

135

 

 

154

Long-term debt, less current portion

 

5,062

 

 

4,894

Total Liabilities

 

8,835

 

 

8,044

 

 

 

 

Total Equity

 

109

 

 

631

Total Liabilities and Equity

$

8,944

 

$

8,675

SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

 

For the Three Months Ended

 

For the Fiscal Years Ended

 

July 1,
2022

 

July 2,
2021

 

July 1,
2022

 

July 2,
2021

 

(unaudited)

 

(unaudited)

 

 

Revenue

$

2,628

 

 

$

3,013

 

 

$

11,661

 

 

$

10,681

 

 

 

 

 

 

 

 

 

Cost of revenue

 

1,869

 

 

 

2,128

 

 

 

8,192

 

 

 

7,764

 

Product development

 

247

 

 

 

232

 

 

 

941

 

 

 

903

 

Marketing and administrative

 

149

 

 

 

136

 

 

 

559

 

 

 

502

 

Amortization of intangibles

 

2

 

 

 

3

 

 

 

11

 

 

 

12

 

Restructuring and other, net

 

1

 

 

 

7

 

 

 

3

 

 

 

8

 

Total operating expenses

 

2,268

 

 

 

2,506

 

 

 

9,706

 

 

 

9,189

 

 

 

 

 

 

 

 

 

Income from operations

 

360

 

 

 

507

 

 

 

1,955

 

 

 

1,492

 

 

 

 

 

 

 

 

 

Interest income

 

1

 

 

 

 

 

 

2

 

 

 

2

 

Interest expense

 

(65

)

 

 

(59

)

 

 

(249

)

 

 

(220

)

Other, net

 

(15

)

 

 

49

 

 

 

(29

)

 

 

74

 

Other expense, net

 

(79

)

 

 

(10

)

 

 

(276

)

 

 

(144

)

 

 

 

 

 

 

 

 

Income before income taxes

 

281

 

 

 

497

 

 

 

1,679

 

 

 

1,348

 

Provision for income taxes

 

5

 

 

 

15

 

 

 

30

 

 

 

34

 

Net income

$

276

 

 

$

482

 

 

$

1,649

 

 

$

1,314

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

1.30

 

 

$

2.11

 

 

$

7.50

 

 

$

5.43

 

Diluted

$

1.27

 

 

$

2.07

 

 

$

7.36

 

 

$

5.36

 

Number of shares used in per share calculations:

 

 

 

 

 

 

 

Basic

 

213

 

 

 

228

 

 

 

220

 

 

 

242

 

Diluted

 

217

 

 

 

233

 

 

 

224

 

 

 

245

 

 

 

 

 

 

 

 

 

Cash dividends declared per ordinary share

$

0.70

 

 

$

0.67

 

 

$

2.77

 

 

$

2.66

 

SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

For the Fiscal Years Ended

 

July 1,
2022

 

July 2,
2021

 

(unaudited)

 

 

OPERATING ACTIVITIES

 

 

 

Net income

$

1,649

 

 

$

1,314

 

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

 

 

 

Depreciation and amortization

 

451

 

 

 

397

 

Share-based compensation

 

145

 

 

 

112

 

Loss on redemption and repurchase of debt

 

 

 

 

1

 

Deferred income taxes

 

(9

)

 

 

(4

)

Other non-cash operating activities, net

 

64

 

 

 

(50

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

(374

)

 

 

(42

)

Inventories

 

(361

)

 

 

(64

)

Accounts payable

 

228

 

 

 

(14

)

Accrued employee compensation

 

(30

)

 

 

58

 

Accrued expenses, income taxes and warranty

 

(26

)

 

 

(38

)

Other assets and liabilities

 

(80

)

 

 

(44

)

Net cash provided by operating activities

 

1,657

 

 

 

1,626

 

INVESTING ACTIVITIES

 

 

 

Acquisition of property, equipment and leasehold improvements

 

(381

)

 

 

(498

)

Proceeds from sale of investments

 

47

 

 

 

29

 

Proceeds from the sale of assets

 

 

 

 

4

 

Purchases of investments

 

(18

)

 

 

(4

)

Maturities of short-term investments

 

 

 

 

3

 

Net cash used in investing activities

 

(352

)

 

 

(466

)

FINANCING ACTIVITIES

 

 

 

Redemption and repurchase of debt

 

(701

)

 

 

(33

)

Dividends to shareholders

 

(610

)

 

 

(649

)

Repurchases of ordinary shares

 

(1,799

)

 

 

(2,047

)

Taxes paid related to net share settlement of equity awards

 

(51

)

 

 

(33

)

Proceeds from issuance of long-term debt

 

1,200

 

 

 

1,000

 

Proceeds from issuance of ordinary shares under employee stock plans

 

68

 

 

 

108

 

Other financing activities, net

 

(6

)

 

 

(19

)

Net cash used in financing activities

 

(1,899

)

 

 

(1,673

)

Decrease in cash, cash equivalents and restricted cash

 

(594

)

 

 

(513

)

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

 

1,211

 

 

 

1,724

 

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

$

617

 

 

$

1,211

 

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, and free cash flow, 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 Twelve Months Ended

 

July 1,
2022

 

July 2,
2021

 

July 1,
2022

 

July 2,
2021

GAAP Gross Profit

$

759

 

 

$

885

 

 

$

3,469

 

 

$

2,917

 

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

 

 

 

 

 

 

 

1

 

 

 

2

 

Amortization of acquired intangible assets

 

1

 

 

 

1

 

 

 

4

 

 

 

12

 

Share-based compensation

 

11

 

 

 

6

 

 

 

38

 

 

 

28

 

Non-GAAP Gross Profit

$

771

 

 

$

892

 

 

$

3,512

 

 

$

2,959

 

 

 

 

 

 

 

 

 

GAAP Gross Margin

 

28.9

%

 

 

29.4

%

 

 

29.7

%

 

 

27.3

%

Non-GAAP Gross Margin

 

29.3

%

 

 

29.6

%

 

 

30.1

%

 

 

27.7

%

 

 

 

 

 

 

 

 

GAAP Operating Expenses

$

399

 

 

$

378

 

 

$

1,514

 

 

$

1,425

 

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

 

(13

)

 

 

 

 

 

(13

)

 

 

 

Amortization of acquired intangible assets

 

(2

)

 

 

(3

)

 

 

(11

)

 

 

(12

)

Restructuring and other, net

 

(1

)

 

 

(7

)

 

 

(3

)

 

 

(8

)

Share-based compensation

 

(28

)

 

 

(19

)

 

 

(107

)

 

 

(84

)

Other charges

 

(6

)

 

 

(3

)

 

 

(10

)

 

 

(7

)

Non-GAAP Operating Expenses

$

349

 

 

$

346

 

 

$

1,370

 

 

$

1,314

 

 

 

 

 

 

 

 

 

GAAP Income From Operations

$

360

 

 

$

507

 

 

$

1,955

 

 

$

1,492

 

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

 

13

 

 

 

 

 

 

14

 

 

 

2

 

Amortization of acquired intangible assets

 

3

 

 

 

4

 

 

 

15

 

 

 

24

 

Restructuring and other, net

 

1

 

 

 

7

 

 

 

3

 

 

 

8

 

Share-based compensation

 

39

 

 

 

25

 

 

 

145

 

 

 

112

 

Other charges

 

6

 

 

 

3

 

 

 

10

 

 

 

7

 

Non-GAAP Income From Operations

$

422

 

 

$

546

 

 

$

2,142

 

 

$

1,645

 

 

 

 

 

 

 

 

 

GAAP Operating Margin

 

13.7

%

 

 

16.8

%

 

 

16.8

%

 

 

14.0

%

Non-GAAP Operating Margin

 

16.1

%

 

 

18.1

%

 

 

18.4

%

 

 

15.4

%

 

 

 

 

 

 

 

 

GAAP Net Income

$

276

 

 

$

482

 

 

$

1,649

 

 

$

1,314

 

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

 

13

 

 

 

 

 

 

14

 

 

 

2

 

Amortization of acquired intangible assets

 

3

 

 

 

4

 

 

 

15

 

 

 

24

 

Restructuring and other, net

 

1

 

 

 

7

 

 

 

3

 

 

 

8

 

Losses and costs recognized on the modification or early redemption and repurchase of debt

 

 

 

 

 

 

 

1

 

 

 

2

 

Strategic investment losses (gains) or impairment recognized

 

6

 

 

 

(50

)

 

 

12

 

 

 

(87

)

Share-based compensation

 

39

 

 

 

25

 

 

 

145

 

 

 

112

 

Other charges

 

6

 

 

 

3

 

 

 

10

 

 

 

21

 

Income tax adjustments

 

1

 

 

 

(5

)

 

 

(16

)

 

 

(15

)

Non-GAAP Net Income

$

345

 

 

$

466

 

 

$

1,833

 

 

$

1,381

 

Shares used in diluted net income per share calculation

 

217

 

 

 

233

 

 

 

224

 

 

 

245

 

GAAP Diluted Net Income Per Share

$

1.27

 

 

$

2.07

 

 

$

7.36

 

 

$

5.36

 

Non-GAAP Diluted Net Income Per Share

$

1.59

 

 

$

2.00

 

 

$

8.18

 

 

$

5.64

 

 

 

 

 

 

 

 

 

GAAP Net Cash Provided by Operating Activities

$

180

 

 

$

478

 

 

$

1,657

 

 

$

1,626

 

Acquisition of property, equipment and leasehold improvements

 

72

 

 

 

124

 

 

 

381

 

 

 

498

 

Free Cash Flow

$

108

 

 

$

354

 

 

$

1,276

 

 

$

1,128

 

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.

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.

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. These also exclude 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.

Other charges

The other charges primarily include write-offs related to an internal reorganization and 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.

Losses and costs recognized on the modification or early redemption and repurchase of debt

From time to time, the Company incurs losses and fees from the early redemption and repurchase of certain long-term debt instruments. The losses represent the difference between the reacquisition costs and the par value of the debt extinguished. Other fees include any new fees associated with a modification and the write-off of any unamortized debt issuance costs associated with an extinguishment of debt. The amount of these charges may be inconsistent in size and varies depending on the timing of the repurchase of debt 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.

Strategic investment losses (gains) or impairment recognized

From time to time, the Company incurs losses, gains or impairment 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.

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.

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