Micron Technology, Inc. — Fiscal 2024 Third-Quarter Form 10-Q
Business Context and Reporting Period
Micron designs and manufactures DRAM, NAND, NOR, HBM, SSD, managed NAND, and other memory and storage solutions. The filing covers the quarter and nine months ended May 30, 2024, compared with the periods ended June 1, 2023. Fiscal 2024 uses a 52-week year. Industry conditions improved during 2024 as AI-related demand increased, customer inventories normalized, and industry supply discipline supported pricing.
Key Financial Metrics
| Metric | Q3 FY2024 | Q3 FY2023 | 9M FY2024 | 9M FY2023 |
|---|---|---|---|---|
| Revenue | $6.811 billion | $3.752 billion | $17.361 billion | $11.530 billion |
| Gross margin | $1.832 billion; 27% | $(668) million; (18%) | $2.876 billion; 17% | $(981) million; (9%) |
| Operating income (loss) | $719 million; 11% | $(1.761) billion; (47%) | $(218) million; (1%) | $(4.273) billion; (37%) |
| Net income (loss) | $332 million | $(1.896) billion | $(109) million | $(4.403) billion |
| Diluted EPS | $0.30 | $(1.73) | $(0.10) | $(4.03) |
| Operating cash flow | Not separately provided | Not separately provided | $5.102 billion | $1.310 billion |
- Q3 revenue increased 82% year over year and 17% sequentially. DRAM revenue was $4.692 billion and NAND revenue was $2.065 billion.
- Q3 DRAM sales rose 76% year over year, primarily from approximately mid-30% increases in average selling prices and bit shipments. NAND sales rose 104%, driven by a low-60% range increase in average selling prices and a high-20% range increase in bit shipments.
- Research and development expense was $850 million in Q3, up 12% year over year. Selling, general, and administrative expense was $291 million, up 33%, primarily due to employee compensation and legal fees.
- Cash, cash equivalents, and marketable investments totaled $9.154 billion at May 30, 2024, compared with $10.438 billion at August 31, 2023. Cash and equivalents were $7.594 billion.
- Total debt had a carrying value of $13.258 billion, including $398 million current debt and $12.860 billion long-term debt. The $2.5 billion revolving credit facility was undrawn and fully available.
- Capital expenditures were $5.266 billion during the first nine months, while estimated full-year 2024 capital expenditures, net of government incentives, were approximately $8.0 billion.
- Total assets were $66.255 billion and shareholders’ equity was $44.225 billion at May 30, 2024. Inventories were $8.512 billion and receivables were $5.131 billion.
Material Changes Versus Prior Comparable Periods
- Micron moved from a substantial loss to profitability in Q3, reflecting higher memory pricing, manufacturing cost reductions, stronger bit shipments, and the absence of 2023 inventory write-down charges.
- The company recorded no inventory NRV write-down in Q3 FY2024, compared with a $401 million charge in Q3 FY2023. For the first nine months, the 2023 period included $1.831 billion of write-downs, while 2024 included $987 million of lower costs from selling previously written-down inventory.
- Q3 revenue increased across CNBU, EBU, and SBU sequentially; MBU revenue declined 1%. SBU revenue increased 50% sequentially, while CNBU revenue increased 18%.
- Q3 segment operating income was $442 million for CNBU, $301 million for MBU, $124 million for EBU, and $76 million for SBU. All four principal segments improved from Q3 FY2023.
- Operating cash flow increased to $5.102 billion in the first nine months from $1.310 billion, partly due to improved results and higher accounts payable and customer prepayments. Capital expenditures declined from $6.215 billion to $5.266 billion.
- Debt carrying value decreased modestly from $13.330 billion at August 31, 2023 to $13.258 billion. Micron issued $1.0 billion of 2031 Notes and repaid the 2024 Term Loan A and 2025 Term Loan A.
Outlook, Commentary, Risks, and Unusual Items
- Management expects cash and investments, operating cash flow, government incentives, and available financing to meet requirements for at least the next 12 months and the foreseeable future.
- Micron expects approximately $8.0 billion of 2024 capital expenditures, net of government incentives. The company has approximately $1.31 billion of property, plant, and equipment purchase obligations, including approximately $1.20 billion payable within one year.
- Construction of the Boise, Idaho leading-edge DRAM fab began in October 2023, with production targeted to start in early calendar 2026 and first output targeted for mid-calendar 2026. Site preparation for the planned Clay, New York facility is expected to begin in calendar 2025.
- Micron signed a non-binding preliminary memorandum for up to $6.1 billion of CHIPS Act direct funding and is eligible for up to $7.5 billion of federal loans. These incentives and other government support remain subject to conditions, execution, and potential changes.
- The China Cyberspace Administration’s May 2023 determination that critical information infrastructure operators in China may not purchase Micron products continues to affect the company, particularly in China’s domestic data-center and networking markets.
- Unusual Q3 items included a $38 million gain on disposition of property, plant, and equipment and no restructuring or asset-impairment charge. The first nine months included a $200 million patent cross-license agreement gain.
- Netlist obtained a May 2024 jury verdict totaling $445 million against Micron for alleged patent infringement. Micron expects to appeal. The company cannot predict the outcome or estimate potential losses, and related proceedings could materially affect results.
- Other material risks include volatile DRAM and NAND pricing, industry oversupply, manufacturing underutilization, technology-transition execution, geopolitical and Taiwan exposure, export restrictions, customer concentration, supply-chain constraints, government-incentive clawbacks, litigation, cybersecurity, and debt-service requirements.
- Micron paid a quarterly dividend of $0.115 per share and declared another $0.115 dividend payable July 23, 2024. No shares were repurchased under the authorization during the quarter; $3.106 billion remained available under the $10 billion authorization.
Most Important Facts for Investors to Verify
- Whether DRAM and NAND pricing and bit-demand trends remain strong, particularly in AI and data-center markets.
- Whether the 27% gross margin is sustainable after the benefit from previously written-down inventory largely declines.
- Progress, timing, cost, and government funding conditions for the Boise and New York fab projects and the approximately $8.0 billion 2024 capital-spending plan.
- The continuing revenue and market-share impact of China’s CAC restrictions and any additional U.S. or foreign trade controls.
- The outcome and financial exposure from Netlist, MimirIP, YMTC, and other intellectual-property proceedings.
- Liquidity, debt maturities, variable-rate exposure, revolving-credit-facility covenant compliance, and the company’s ability to fund capital expenditures while maintaining dividends.
- Customer concentration and working-capital trends, including the 11% first-nine-month revenue contribution from one distributor and the increase in receivables and customer prepayments.