10-QPeriod: Q1 FY2020

MICRON TECHNOLOGY INC Quarterly Report for Q1 Ended Nov 28, 2019

Filed December 20, 2019For Securities:MU

Summary

Micron Technology Inc. (MU) reported a significant year-over-year decline in revenue for the first quarter of fiscal year 2020, driven by a substantial decrease in DRAM average selling prices and a moderate decrease in NAND average selling prices. Revenue fell by 35% to $5.14 billion compared to $7.91 billion in the prior year's first quarter. Despite the revenue drop, the company demonstrated efforts to manage costs, with cost of goods sold increasing at a slower pace than revenue. However, gross margin significantly compressed from 58% to 27% year-over-year due to pricing pressures. Net income attributable to Micron also saw a sharp decline, from $3.29 billion to $491 million. The company is navigating a challenging market environment characterized by price volatility and supply-demand imbalances, particularly in the DRAM market.

Financial Highlights

51 data points
Beta

Revenue

$5.14B

26.6% Gross Margin

Net Income

$491.00M

9.5% Net Margin

EPS (Diluted)

$0.43

Total Assets

$49.65B

Cash & Equivalents

$7.09B

Free Cash Flow

$68.00M

Financial Statements
Beta
Revenue$5.14B
Cost of Revenue$3.78B
Gross Profit$1.37B
R&D Expenses$640.00M
SG&A Expenses$211.00M
Operating Income$518.00M
Interest Expense$47.00M
Net Income$491.00M
EPS (Basic)$0.44
EPS (Diluted)$0.43
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.13B

Key Highlights

  • 1Revenue for the first quarter of fiscal year 2020 decreased by 35% year-over-year to $5.14 billion, primarily due to significant declines in DRAM average selling prices.
  • 2Gross margin contracted significantly to 27% from 58% in the prior year's first quarter, reflecting the impact of lower average selling prices.
  • 3Net income attributable to Micron shareholders decreased to $491 million ($0.43 per diluted share) from $3.29 billion ($2.81 per diluted share) in the same period last year.
  • 4The Compute and Networking Business Unit (CNBU) experienced a substantial revenue decline of 45% year-over-year, indicating weakness in the PC and server memory markets.
  • 5Micron acquired Intel's noncontrolling interest in IMFT (now MTU) on October 31, 2019, for $1.25 billion, leading to its full ownership.
  • 6Capital expenditures for property, plant, and equipment are projected to be $7 billion to $8 billion for fiscal year 2020, signaling continued investment in technology and capacity.
  • 7The company has an active share repurchase program, with approximately $7.29 billion remaining under its $10 billion authorization as of November 28, 2019.

Frequently Asked Questions

The primary driver of the revenue decline was a significant decrease in average selling prices (ASPs), particularly in the DRAM market where ASPs fell in the low-50-percent range year-over-year. NAND ASPs also declined in the mid-30-percent range. While bit shipments increased in both DRAM and NAND segments, this growth was not enough to offset the price erosion.

Micron is focusing on cost management and operational efficiency. The company revised the estimated useful lives of equipment in its NAND fabrication and R&D facilities, which reduced non-cash depreciation expense. This change had a positive impact on cost of goods sold and inventories. Additionally, the company is implementing continuous improvement initiatives to reduce production costs. However, underutilization costs at MTU, which began in Q1 FY2020, are expected to impact gross margins.

The acquisition of Intel's noncontrolling interest in IMFT (now MTU) on October 31, 2019, for $1.25 billion makes MTU a wholly-owned subsidiary. This simplifies operations and control, though the company noted that MTU incurred underutilization costs in Q1 FY2020 which are expected to increase. This move indicates Micron's strategy to have full control over key manufacturing assets and technologies.

Micron plans significant capital expenditures of $7 billion to $8 billion for fiscal year 2020, primarily focused on technology transitions and product enablement. This indicates a commitment to investing in future growth and maintaining technological leadership despite the current market downturn.