01—Abstract
Summary
Summary of the 10-Q filed March 29, 2023. Cited figures are marked; the original filing is the authoritative source.
Micron Technology, Inc. reported significant revenue decline for the second quarter and first half of fiscal year 2023 compared to the prior year, driven by a sharp downturn in the memory and storage industry.
This downturn is characterized by reduced demand, inventory adjustments by customers, and challenging macroeconomic conditions, leading to substantial declines in average selling prices (ASPs) for both DRAM and NAND products. Consequently, the company recorded a substantial inventory write-down of $1.43 billiona to account for the decline in net realizable value. Despite the revenue and gross margin pressures, Micron is actively managing costs through a restructuring plan aiming for a 15% headcount reduction by the end of calendar 2023 and has reduced wafer starts and capital expenditures.
The company maintains a strong liquidity position with significant cash and investments, and has taken steps to amend its debt covenants to provide flexibility. Management anticipates industry profitability to remain challenged throughout calendar 2023 but is strategically investing in future growth, including new fab construction in the U.S. contingent on government support.
02—Key points
Key Highlights
- Revenue declined significantly year-over-year due to a sharp downturn in the memory market, with DRAM revenue down 52% and NAND down 55% in Q2 2023 compared to Q2 2022.
- The company recorded a substantial inventory write-down of $1.43 billion in Q2 2023 to adjust inventory to its net realizable value, reflecting challenging market conditions.
- Gross margin turned negative (-33% in Q2 2023) primarily due to the inventory write-down and falling average selling prices.
- Micron has initiated a restructuring plan targeting a 15% headcount reduction by year-end 2023 to reduce costs.
- Capital expenditures are being reduced, with planned 2023 CapEx around $7.0 billion, and wafer starts have been decreased, leading to factory underutilization costs.
- Liquidity remains strong, with $12.03 billion in cash and marketable investments as of March 2, 2023.
- The company is proceeding with plans for new leading-edge memory manufacturing fabs in the U.S., contingent on CHIPS Act support.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2023, Micron Technology Inc lost $0.51.
- Revenue$3.75B100.0%
- Cost of revenue−$4.42B117.8%
- Gross profit−$668.0M17.8%
- Operating costs−$1.09B29.1%
- Operating income−$1.76B46.9%
- Interest, other & tax−$135.0M3.6%
- Net income−$1.90B50.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2023filed March 29, 2023Financial Statements
Q3 FY2023 against Q3 FY2022
| Line item | Q3 FY2023Q3 FY2022 | Change |
|---|---|---|
| Revenue | $3.75B$8.64B | −56.6% |
| Cost of Revenue | $4.42B$4.61B | −4.1% |
| Gross Profit | -$668.00M$4.04B | −116.6% |
| R&D Expenses | $758.00M$773.00M | −1.9% |
| SG&A Expenses | $219.00M$264.00M | −17.0% |
| Operating Income | -$1.76B$3.00B | −158.6% |
| Interest Expense | $119.00M$44.00M | +170.5% |
| Net Income | -$1.90B$2.63B | −172.2% |
| EPS (Basic) | $-1.73$2.36 | −173.3% |
| EPS (Diluted) | $-1.73$2.34 | −173.9% |
| Shares Outstanding (Basic) | 1.09B1.11B | −1.6% |
| Shares Outstanding (Diluted) | 1.09B1.12B | −2.4% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant decline in Micron's revenue and profitability?
The primary reason is a severe downturn in the memory and storage industry, characterized by reduced demand, customers working through elevated inventory levels, and challenging macroeconomic conditions. This has led to significant decreases in average selling prices (ASPs) for both DRAM and NAND products.
What is the impact of the inventory write-down, and why was it necessary?
Micron recorded a $1.43 billion inventory write-down to bring the carrying value of its work-in-process and finished goods inventories down to their estimated net realizable values. This was necessary because the current market prices and expected future selling prices are below the cost of manufacturing these inventories, reflecting the challenging market conditions and declining ASPs.
What steps is Micron taking to address the current industry downturn and improve its financial performance?
Micron is implementing several cost-reduction measures. These include a restructuring plan targeting a 15% workforce reduction, reduced capital expenditures and wafer starts, implementing productivity programs, suspending the 2023 company-wide bonus, and cutting executive salaries. The company is also focused on managing its balance sheet and maintaining strong liquidity.
What is Micron's outlook for the remainder of the year and beyond?
Micron anticipates that industry profitability will remain challenged throughout calendar 2023 due to the ongoing difficult pricing environment and inventory imbalances. However, the company is strategically investing for future demand, including plans for new U.S. manufacturing facilities. Management expects that current cash, investments, and financing will be sufficient to meet its needs for at least the next 12 months and the foreseeable future.
06—Continue