01—Abstract
Summary
Summary of the 10-Q filed June 26, 2019. Cited figures are marked; the original filing is the authoritative source.
Micron Technology Inc. reported a significant decrease in revenue and profitability for the fiscal third quarter ending May 30, 2019, compared to the same period in the prior year.
Revenue declined by 39% year-over-year to $4.79 billiona, primarily driven by widespread price declines in both DRAM and NAND markets due to an industry-wide supply and demand imbalance. This challenging market environment also led to a substantial reduction in gross margin to 38% from 61% in the prior year's quarter. Despite these headwinds, Micron continued to invest heavily in research and development and capital expenditures, signaling a commitment to future technological advancements.
The company also actively managed its balance sheet, undertaking significant share repurchases while also facing ongoing legal and regulatory scrutiny. Investors should monitor pricing trends in the memory market, the impact of ongoing trade tensions (particularly concerning Huawei), and the company's execution on its strategic investments in technology and capacity.
02—Key points
Key Highlights
- Revenue for the third quarter of fiscal 2019 decreased by 39% to $4.79 billion compared to the same period in fiscal 2018.
- Gross margin significantly declined to 38% in Q3 FY19 from 61% in Q3 FY18, driven by falling average selling prices.
- Operating income decreased by 74% to $1.01 billion in Q3 FY19 compared to $3.95 billion in Q3 FY18.
- The company repurchased approximately $157 million of its common stock during the third quarter of fiscal 2019.
- Capital expenditures for the nine months ended May 30, 2019, were $7.75 billion, reflecting significant investment in property, plant, and equipment.
- The company experienced an 18% sequential revenue decrease from Q2 FY19 to Q3 FY19, attributed to broad industry supply and demand imbalances impacting pricing.
- Sales to Huawei accounted for 13% of total revenue for the first nine months of 2019, and shipments were suspended in May 2019 due to US entity list restrictions, though certain products resumed shipment later.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2019, Micron Technology Inc kept $0.18.
- Revenue$4.79B100.0%
- Cost of revenue−$2.96B61.8%
- Gross profit$1.83B38.2%
- Operating costs−$818.0M17.1%
- Operating income$1.01B21.1%
- Interest, other & tax−$170.0M3.6%
- Net income$840.0M17.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed June 26, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $4.79B$7.80B | −38.6% |
| Cost of Revenue | $2.96B$3.07B | −3.7% |
| Gross Profit | $1.83B$4.72B | −61.3% |
| R&D Expenses | $606.00M$603.00M | +0.5% |
| SG&A Expenses | $206.00M$211.00M | −2.4% |
| Operating Income | $1.01B$3.95B | −74.4% |
| Interest Expense | $29.00M$80.00M | −63.7% |
| Net Income | $840.00M$3.82B | −78.0% |
| EPS (Basic) | $0.76$3.30 | −77.0% |
| EPS (Diluted) | $0.74$3.10 | −76.1% |
| Shares Outstanding (Basic) | 1.10B1.16B | −4.7% |
| Shares Outstanding (Diluted) | 1.13B1.24B | −8.6% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant decline in Micron's revenue and profitability?
The primary reason for the significant decline in Micron's revenue and profitability is the challenging memory market environment characterized by a broad industry supply and demand imbalance. This has led to substantial declines in average selling prices for both DRAM and NAND products, which directly impacted the company's revenue and gross margins.
How is Micron managing its capital expenditures and investments in light of the market downturn?
Despite the market downturn, Micron continues to make substantial investments. For the first nine months of fiscal 2019, capital expenditures for property, plant, and equipment were $7.75 billion. This indicates a continued focus on technological advancements and capacity, suggesting the company is positioning itself for a future market recovery.
What is the impact of the US government's restrictions on sales to Huawei?
Sales to Huawei represented 13% of Micron's revenue for the first nine months of fiscal 2019. The company suspended shipments to Huawei in May 2019 due to US entity list restrictions. While certain products resumed shipment later in the fiscal year, this restriction has had, and may continue to have, an adverse effect on Micron's business and financial results.
What is the company's approach to returning capital to shareholders?
Micron has an active share repurchase program. During the third quarter of fiscal 2019, the company repurchased approximately $157 million of its common stock, and for the first nine months of fiscal 2019, repurchased $2.66 billion worth of shares. This reflects a strategy of returning capital to shareholders through buybacks.
06—Continue