Micron Technology, Inc. — Fiscal 2024 First-Quarter Form 10-Q
Business context and reporting period
Micron designs and manufactures DRAM, NAND, NOR, SSD, managed NAND, MCP, and other memory and storage solutions. The filing covers the three months ended November 30, 2023, compared primarily with the three months ended December 1, 2022 and the quarter ended August 31, 2023. The financial statements are unaudited and prepared under U.S. GAAP.
Key financial metrics
| Metric | Q1 FY2024 | Q4 FY2023 | Q1 FY2023 |
|---|---|---|---|
| Revenue | $4.726 billion | $4.010 billion | $4.085 billion |
| Gross margin | $(35) million; (1)% | $(435) million; (11)% | $893 million; 22% |
| Operating income (loss) | $(1.128) billion | $(1.472) billion | $(209) million |
| Net income (loss) | $(1.234) billion | $(1.430) billion | $(195) million |
| Diluted EPS | $(1.12) | Not clearly provided in the filing text | $(0.18) |
| Cash flow from operations | $1.401 billion | Not clearly provided in the filing text | $943 million |
| Capital expenditures | $1.796 billion | Not clearly provided in the filing text | $2.449 billion |
Revenue by technology was $3.427 billion from DRAM, $1.230 billion from NAND, and $69 million from other products. DRAM revenue increased 21% year over year, while NAND revenue increased 12%, reflecting substantially higher bit shipments but lower average selling prices.
Operating expenses included $845 million of research and development and $263 million of selling, general, and administrative expense. The company recorded $165 million of fabrication-facility underutilization costs. It also recognized $605 million of lower costs from selling inventory previously written down to net realizable value, which benefited gross margin.
At November 30, 2023, cash and equivalents were $8.075 billion, short-term investments were $973 million, and long-term marketable investments were $720 million, for total cash and marketable investments of $9.768 billion. Total debt had a carrying value of $13.505 billion, including $908 million of current debt and $12.597 billion of long-term debt. The $2.5 billion revolving credit facility was undrawn and fully available.
Total assets were $63.776 billion and shareholders’ equity was $42.885 billion. Inventories were $8.276 billion, and customer contract liabilities from prepayments were approximately $600 million.
Material changes versus comparable periods
- Revenue increased 18% sequentially and 16% year over year, driven by improving demand, higher DRAM bit shipments, and improved NAND pricing.
- Gross margin improved sequentially from negative 11% to negative 1%, primarily because of higher average selling prices, better DRAM and NAND margins, and a greater DRAM revenue mix. Gross margin remained materially below the prior-year 22% due to lower selling prices and underutilization costs.
- Net loss narrowed sequentially but widened substantially year over year. The year-over-year deterioration primarily reflected lower average selling prices and manufacturing underutilization.
- Cash flow from operations increased to $1.401 billion from $943 million, helped by customer prepayments, accounts payable changes, and lower inventory levels.
- Capital expenditures declined to $1.796 billion from $2.449 billion in the prior-year quarter as Micron reduced spending in response to weak industry conditions.
- Segment revenue increased year over year in Mobile, Embedded, and other businesses, while Compute and Networking revenue was broadly flat and Storage revenue declined. All major business units remained unprofitable except Embedded, which generated $10 million of operating income.
- No shares were repurchased under the authorization during the quarter. Approximately $3.11 billion remained available under the $10 billion authorization. The company paid $129 million in dividends, or $0.115 per share.
Guidance, outlook, commentary, and risks
Management reported that industry supply and demand conditions improved in the quarter, supported by artificial-intelligence deployment, customer inventory normalization, and industry-wide supply discipline. Micron reported improvements in pricing and margins but remains focused on reducing inventories and controlling supply.
Wafer starts are expected to remain below peak capacity in the second quarter of fiscal 2024, with reduced fabrication-facility underutilization charges expected. The filing does not provide a clear second-quarter revenue or earnings forecast.
Micron estimates fiscal 2024 capital expenditures, net of government incentives, of $7.5 billion to $8.0 billion. The company expects cash and investments, operating cash flow, and available financing to be sufficient for at least the next 12 months and the foreseeable future.
Construction began in October 2023 on the company’s leading-edge DRAM fab in Boise, Idaho; production is targeted to begin in calendar 2025, with first output expected in early calendar 2026. Micron expects construction of a second U.S. DRAM fab in Clay, New York, to begin in calendar 2024. The projects are contingent in part on CHIPS Act support and other government incentives.
China’s Cyberspace Administration determined that Micron products presented a cybersecurity risk and that critical information infrastructure operators in China may not purchase them. The decision has particularly affected Micron’s China data-center and networking business and could further affect revenue, product mix, pricing, margins, or operations.
Principal risks include substantial volatility in DRAM and NAND average selling prices, industry oversupply, underutilized manufacturing capacity, inventory write-downs, intense competition, dependence on major customers, geopolitical and Taiwan-related risks, China and U.S. trade restrictions, supply-chain and equipment constraints, execution risks on new fabs, government-incentive requirements, foreign-exchange exposure, debt-service obligations, cybersecurity threats, and intellectual-property litigation.
Micron disclosed multiple patent matters involving products that account for substantially all of its revenue, including claims by Netlist, Sonrai Memory, Besang, and Yangtze Memory Technologies. Micron stated that it cannot predict the outcomes or reasonably estimate potential losses. A December 2023 settlement with Fujian Jinhua is expected to lead to withdrawal of specified Chinese patent complaints and a related injunction.
Most important facts for investors to verify
- Whether improving DRAM and NAND pricing persists and supports a return to positive gross margins.
- The pace of inventory reduction, wafer-start controls, and the amount of future underutilization charges.
- Actual fiscal 2024 capital expenditures versus the $7.5 billion–$8.0 billion estimate and the availability of CHIPS Act incentives.
- The continuing revenue and margin impact of China’s cybersecurity restrictions and any additional trade or export controls.
- Liquidity relative to $13.505 billion of debt, scheduled maturities, capital spending, dividends, and potential future financing needs.
- Whether customer prepayments and operating cash flow remain sufficient while the company is reporting losses.
- Outcomes and potential financial or operational effects of the disclosed patent and antitrust matters.
- Progress and costs associated with the Boise, New York, Xi’an, and India manufacturing and assembly projects.