Micron Technology, Inc. Reports Results for the Second Quarter of Fiscal 2023

Micron Technology, Inc. Reports Results for the Second Quarter of Fiscal 2023

 

  Achieving technology milestones while cutting expenses and reducing supply  

 

Micron Technology, Inc. (Nasdaq: MU) today announced results for its second quarter of fiscal 2023, which ended March 2, 2023.

 

  Fiscal Q2   2023   highlights  

 
  • Revenue of $3.69 billion versus $4.09 billion for the prior quarter and $7.79 billion for the same period last year
  •  
  • GAAP net loss of $2.31 billion, or $2.12 per diluted share
  •  
  • Non-GAAP net loss of $2.08 billion, or $1.91 per diluted share
  •  
  • Inventory write-downs of $1.43 billion, impact of $1.34 per diluted share
  •  
  • Operating cash flow of $343 million versus $943 million for the prior quarter and $3.63 billion for the same period last year
  •  

"Micron delivered fiscal second quarter revenue within our guidance range in a challenging market environment," said Micron Technology President and CEO Sanjay Mehrotra. "Customer inventories are getting better, and we expect gradual improvements to the industry's supply-demand balance. We remain confident in long-term demand and are investing prudently to preserve our technology and product portfolio competitiveness."

 
                                                                                                                                                                                    
  Quarterly Financial Results  
  (in millions, except per share amounts)  
  GAAP   (   1)     Non-GAAP   (   2)  
  FQ2-23    FQ1-23    FQ2-22     FQ2-23    FQ1-23    FQ2-22  
        
Revenue $ 3,693   $ 4,085   $ 7,786    $ 3,693   $ 4,085   $ 7,786  
Gross margin   (1,206 )   893    3,676     (1,161 )   934    3,724  
  percent of revenue     (32.7    %)     21.9    %     47.2    %      (31.4    %)     22.9    %     47.8    %  
Operating expenses   1,097    1,102    1,130     916    999    974  
Operating income (loss)   (2,303 )   (209 )   2,546     (2,077 )   (65 )   2,750  
  percent of revenue     (62.4    %)     (5.1    %)     32.7    %      (56.2    %)     (1.6    %)     35.3    %  
Net income (loss)   (2,312 )   (195 )   2,263     (2,081 )   (39 )   2,444  
Diluted earnings (loss) per share   (2.12 )   (0.18 )   2.00     (1.91 )   (0.04 )   2.14  
 

 
Investments in capital expenditures, net ( 2) were $2.16 billion for the second quarter of 2023, which resulted in adjusted free cash flows (2) of negative $1.81 billion. Micron ended the second quarter of 2023 with cash, marketable investments, and restricted cash of $12.12 billion. Micron's Board of Directors has declared a quarterly dividend of $0.115 per share, payable in cash on April 25, 2023, to shareholders of record as of the close of business on April 10, 2023.

 

  Business Outlook  

 

The table below presents Micron's guidance for the third quarter of 2023. This guidance assumes a write down of approximately $500 million associated with inventory produced during the third quarter, impacting both GAAP and non-GAAP diluted earnings (loss) per share by approximately $0.45.

 
                  
  FQ3-23    GAAP   (   1)   Outlook    Non-GAAP   (   2)   Outlook  
   
Revenue $3.70 billion ± $200 million $3.70 billion ± $200 million
Gross margin (23.0%) ± 2.5% (21.0%) ± 2.5%
Operating expenses $1.07 billion ± $15 million $900 million ± $15 million
Diluted earnings (loss) per share ($1.79) ± $0.07 ($1.58) ± $0.07
 

 
Further information regarding Micron's business outlook is included in the prepared remarks and slides, which have been posted at investors.micron.com .

 

  Investor Webcast  

 

Micron will host a conference call on Tuesday, March 28, 2023 at 2:30 p.m. Mountain Time to discuss its second quarter financial results and provide forward-looking guidance for its third quarter. A live webcast of the call will be available online at investors.micron.com . A webcast replay will be available for one year after the call. For Investor Relations and other company updates, follow @MicronTech on Twitter at twitter.com/MicronTech .

 

  About Micron Technology, Inc.  

 

We are an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all . With a relentless focus on our customers, technology leadership, and manufacturing and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence and 5G applications that unleash opportunities — from the data center to the intelligent edge and across the client and mobile user experience. To learn more about Micron Technology, Inc. (Nasdaq: MU), visit micron.com .

 

  © 2023 Micron Technology, Inc. All rights reserved. Micron, the Micron logo, and all other Micron trademarks are the property of Micron Technology, Inc. All other trademarks are the property of their respective owners.  

 

  Forward-Looking Statements  

 

This press release contains forward-looking statements regarding our industry, our strategic position, and our financial and operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. Please refer to the documents we file with the Securities and Exchange Commission, including our most recent Form 10-K and Form 10-Q. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in these forward-looking statements. These certain factors can be found at micron.com/certainfactors . Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements to conform these statements to actual results.

 
      
(1)   GAAP represents U.S. Generally Accepted Accounting Principles.
(2)   Non-GAAP represents GAAP excluding the impact of certain activities, which management excludes in analyzing our operating results and understanding trends in our earnings, adjusted free cash flow, and business outlook. Further information regarding Micron's use of non-GAAP measures and reconciliations between GAAP and non-GAAP measures are included within this press release.
 

 

 

  Micron Technology, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In millions, except per share amounts)
(Unaudited)

 
                                                                                                                                                                                                                                                                                                                                                                           
   2nd Qtr.    1st Qtr.    2nd Qtr.    Six months ended  
   March 2,  
2023  
  December 1,  
2022  
  March 3,  
2022  
  March 2,  
2023  
  March 3,  
2022  
      
Revenue $ 3,693   $ 4,085   $ 7,786   $ 7,778   $ 15,473  
Cost of goods sold   4,899    3,192    4,110    8,091    8,232  
Gross margin   (1,206 )   893    3,676    (313 )   7,241  
      
Research and development   788    849    792    1,637    1,504  
Selling, general, and administrative   231    251    263    482    522  
Restructure and asset impairments   86    13    5    99    43  
Other operating (income) expense, net   (8 )   (11 )   70    (19 )   (5 )
Operating income (loss)   (2,303 )   (209 )   2,546    (2,512 )   5,177  
      
Interest income   119    88    12    207    22  
Interest expense   (89 )   (51 )   (55 )   (140 )   (100 )
Other non-operating income (expense), net   2    (4 )   6    (2 )   (69 )
   (2,271 )   (176 )   2,509    (2,447 )   5,030  
      
Income tax (provision) benefit   (54 )   (8 )   (255 )   (62 )   (474 )
Equity in net income (loss) of equity method investees   13    (11 )   9    2    13  
Net income (loss) $ (2,312 ) $ (195 ) $ 2,263   $ (2,507 ) $ 4,569  
      
Earnings (loss) per share      
Basic $ (2.12 ) $ (0.18 ) $ 2.02   $ (2.30 ) $ 4.08  
Diluted   (2.12 )   (0.18 )   2.00    (2.30 )   4.04  
      
Number of shares used in per share calculations      
Basic   1,091    1,090    1,119    1,091    1,119  
Diluted   1,091    1,090    1,130    1,091    1,130  
 

  
Micron Technology, INC.
  CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

 
                                                                                                                                                                                                                                                                                                                                                
  As of    March 2,  
2023  
  December 1,  
2022  
  September 1,  
2022  
    
  Assets     
Cash and equivalents $ 9,798   $ 9,574   $ 8,262  
Short-term investments   1,020    1,007    1,069  
Receivables   2,278    3,318    5,130  
Inventories   8,129    8,359    6,663  
Other current assets   673    663    657  
Total current assets   21,898    22,921    21,781  
Long-term marketable investments   1,212    1,426    1,647  
Property, plant, and equipment   39,085    39,335    38,549  
Operating lease right-of-use assets   673    693    678  
Intangible assets   410    428    421  
Deferred tax assets   697    672    702  
Goodwill   1,228    1,228    1,228  
Other noncurrent assets   1,317    1,171    1,277  
Total assets $ 66,520   $ 67,874   $ 66,283  
    
  Liabilities and equity     
Accounts payable and accrued expenses $ 4,310   $ 5,438   $ 6,090  
Current debt   237    171    103  
Other current liabilities   708    916    1,346  
Total current liabilities   5,255    6,525    7,539  
Long-term debt   12,037    10,094    6,803  
Noncurrent operating lease liabilities   610    625    610  
Noncurrent unearned government incentives   529    516    589  
Other noncurrent liabilities   832    808    835  
Total liabilities   19,263    18,568    16,376  
    
Commitments and contingencies    
    
Shareholders' equity    
Common stock   123    123    123  
Additional capital   10,633    10,335    10,197  
Retained earnings   44,426    46,873    47,274  
Treasury stock   (7,552 )   (7,552 )   (7,127 )
Accumulated other comprehensive income (loss)   (373 )   (473 )   (560 )
Total equity   47,257    49,306    49,907  
Total liabilities and equity $ 66,520   $ 67,874   $ 66,283  
 

  
Micron Technology, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

 
                                                                                                                                                                                                                                            
  Six months ended    March 2,  
2023  
  March 3,  
2022  
   
  Cash flows from operating activities    
Net income (loss) $ (2,507 ) $ 4,569  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation expense and amortization of intangible assets   3,863    3,413  
Provision to write-down inventories to net realizable value   1,430    
Stock-based compensation   303    247  
(Gain) loss on debt repurchases     83  
Change in operating assets and liabilities:   
Receivables   2,910    (44 )
Inventories   (2,896 )   (900 )
Accounts payable and accrued expenses   (1,795 )   107  
Other   (22 )   91  
Net cash provided by operating activities   1,286    7,566  
   
  Cash flows from investing activities    
Expenditures for property, plant, and equipment   (4,654 )   (5,876 )
Purchases of available-for-sale securities   (293 )   (922 )
Proceeds from maturities of available-for-sale securities   765    631  
Proceeds from government incentives   64    66  
Proceeds from sales of available-for-sale securities   8    172  
Proceeds from sale of Lehi, Utah fab     893  
Other   (71 )   (140 )
Net cash provided by (used for) investing activities   (4,181 )   (5,176 )
   
  Cash flows from financing activities    
Proceeds from issuance of debt   5,221    2,000  
Repurchases of common stock - repurchase program   (425 )   (667 )
Payments of dividends to shareholders   (252 )   (224 )
Payments on equipment purchase contracts   (76 )   (105 )
Repayments of debt   (53 )   (1,981 )
Other   19    (2 )
Net cash provided by (used for) financing activities   4,434    (979 )
   
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash   9    (16 )
   
Net increase (decrease) in cash, cash equivalents, and restricted cash   1,548    1,395  
Cash, cash equivalents, and restricted cash at beginning of period   8,339    7,829  
Cash, cash equivalents, and restricted cash at end of period $ 9,887   $ 9,224  
 

  
Micron Technology, INC.
  NOTES
(Unaudited)

 

  Inventories  

 

In the second quarter of 2023, we recorded a charge of $1.43 billion to cost of goods sold to write down the carrying value of work in process and finished goods inventories to their estimated net realizable values.

 

  Debt Activity  

 

   Term Loan Agreement:   On November 3, 2022, we entered into a Term Loan Agreement consisting of three tranches and borrowed $2.60 billion in aggregate principal amount, including $927 million due November 3, 2025, $746 million due November 3, 2026, and $927 million due November 3, 2027.

 

On January 5, 2023, we amended the Term Loan Agreement and borrowed an additional $600 million in aggregate principal amount, including $125 million due November 3, 2025, $250 million due November 3, 2026, and $225 million due November 3, 2027. Borrowings under the Term Loan Agreement will generally bear interest at adjusted term SOFR plus an applicable interest rate margin ranging from 1.00% to 2.00%, varying by tranche and depending on our corporate credit ratings.

 

   Senior Unsecured Notes:   On October 31, 2022, we issued $750 million principal amount of 6.750% senior unsecured notes due November 1, 2029 in a public offering and received proceeds of $744 million.

 

On February 9, 2023, we issued an additional $500 million principal amount of 6.750% senior unsecured notes due November 1, 2029 and received proceeds of $520 million. Additionally, we issued $750 million principal amount of 5.875% senior unsecured notes due February 9, 2033 and received proceeds of $745 million.

 

  Micron Technology, INC.  
RECONCILIATION OF GAAP TO NON-GAAP MEASURES  
(In millions, except per share amounts)

 
                                                                                                                                                                                                                                                                                                              
   2nd Qtr.    1st Qtr.    2nd Qtr.  
   March 2,  
2023  
  December 1,  
2022  
  March 3,  
2022  
    
  GAAP gross margin   $ (1,206 ) $ 893   $ 3,676  
Stock-based compensation   41    36    44  
Other   4    5    4  
  Non-GAAP gross margin   $ (1,161 ) $ 934   $ 3,724  
    
  GAAP operating expenses   $ 1,097   $ 1,102   $ 1,130  
Stock-based compensation   (95 )   (90 )   (75 )
Restructure and asset impairments   (86 )   (13 )   (5 )
Other       (76 )
  Non-GAAP operating expenses   $ 916   $ 999   $ 974  
    
  GAAP operating income (loss)   $ (2,303 ) $ (209 ) $ 2,546  
Stock-based compensation   136    126    119  
Restructure and asset impairments   86    13    5  
Other   4    5    80  
  Non-GAAP operating income (loss)   $ (2,077 ) $ (65 ) $ 2,750  
    
  GAAP net income (loss)   $ (2,312 ) $ (195 ) $ 2,263  
Stock-based compensation   136    126    119  
Restructure and asset impairments   86    13    5  
Amortization of debt discount and other costs   4    5    8  
Other   4    5    80  
Estimated tax effects of above and other tax adjustments   1    7    (31 )
  Non-GAAP net income (loss)   $ (2,081 ) $ (39 ) $ 2,444  
    
  GAAP weighted-average common shares outstanding - Diluted    1,091    1,090    1,130  
Adjustment for stock-based compensation       13  
  Non-GAAP weighted-average common shares outstanding - Diluted    1,091    1,090    1,143  
    
  GAAP diluted earnings (loss) per share   $ (2.12 ) $ (0.18 ) $ 2.00  
Effects of the above adjustments   0.21    0.14    0.14  
  Non-GAAP diluted earnings (loss) per share   $ (1.91 ) $ (0.04 ) $ 2.14  
 

  
RECONCILIATION OF GAAP TO NON-GAAP MEASURES, Continued
 

 
                                                                                      
   2nd Qtr.    1st Qtr.    2nd Qtr.  
   March 2,  
2023  
  December 1,  
2022  
  March 3,  
2022  
    
  GAAP net cash provided by operating activities   $ 343   $ 943   $ 3,628  
    
Expenditures for property, plant, and equipment   (2,205 )   (2,449 )   (2,611 )
Proceeds from sales of property, plant, and equipment   17    23    27  
Payments on equipment purchase contracts   (29 )   (47 )   (27 )
Amounts funded by partners   62    2    11  
  Investments in capital expenditures, net    (2,155 )   (2,471 )   (2,600 )
  Adjusted free cash flow   $ (1,812 ) $ (1,528 ) $ 1,028  
 

 
The tables above reconcile GAAP to non-GAAP measures of gross margin, operating expenses, operating income (loss), net income (loss), diluted shares, diluted earnings (loss) per share, and adjusted free cash flow. The non-GAAP adjustments above may or may not be infrequent or nonrecurring in nature, but are a result of periodic or non-core operating activities. We believe this non-GAAP information is helpful in understanding trends and in analyzing our operating results and earnings. We are providing this information to investors to assist in performing analysis of our operating results. When evaluating performance and making decisions on how to allocate our resources, management uses this non-GAAP information and believes investors should have access to similar data when making their investment decisions. We believe these non-GAAP financial measures increase transparency by providing investors with useful supplemental information about the financial performance of our business, enabling enhanced comparison of our operating results between periods and with peer companies. The presentation of these adjusted amounts varies from amounts presented in accordance with U.S. GAAP and therefore may not be comparable to amounts reported by other companies. Our management routinely excludes the following items in analyzing our operating results and understanding trends in our earnings:

 
  • Stock-based compensation;
  •  
  • Flow-through of business acquisition-related inventory adjustments;
  •  
  • Acquisition-related costs;
  •  
  • Employee severance;
  •  
  • Gains and losses from settlements;
  •  
  • Restructure and asset impairments;
  •  
  • Amortization of debt discount and other costs;
  •  
  • Gains and losses from debt repurchases and conversions;
  •  
  • Gains and losses from business acquisition activities; and
  •  
  • The estimated tax effects of above, non-cash changes in net deferred income taxes, assessments of tax exposures, certain tax matters related to prior fiscal periods, and significant changes in tax law.
  •  

Non-GAAP diluted shares are adjusted for the impact of additional shares resulting from the exclusion of stock-based compensation from non-GAAP income (loss).

 

  Micron Technology, INC.  
RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK  

 
                                             
  FQ3-23    GAAP Outlook     Adjustments     Non-GAAP Outlook  
       
Revenue $3.70 billion ± $200 million      $3.70 billion ± $200 million
Gross margin (23.0%) ± 2.5%   2.0%   A   (21.0%) ± 2.5%
Operating expenses $1.07 billion ± $15 million   $166 million   B   $900 million ± $15 million
Diluted earnings (loss) per share ( 1) ($1.79) ± $0.07   $0.21   A, B, C   ($1.58) ± $0.07
 

 

 
                                          
  Non-GAAP Adjustments  
(in millions)  
  
    
A Stock-based compensation – cost of goods sold   $ 55
A Other – cost of goods sold    5
B Stock-based compensation – research and development    62
B Stock-based compensation – selling, general, and administrative    44
B Restructure and asset impairments    60
C Tax effects of the above items and other tax adjustments    5
    $ 231
 

  (1) GAAP and non-GAAP earnings (loss) per share based on approximately 1.09 billion diluted shares.

The tables above reconcile our GAAP to non-GAAP guidance based on the current outlook. The guidance does not incorporate the impact of any potential business combinations, divestitures, additional restructuring activities, balance sheet valuation adjustments, strategic investments, financing transactions, and other significant transactions. The timing and impact of such items are dependent on future events that may be uncertain or outside of our control.

 
Contacts: Farhan Ahmad Investor Relations farhanahmad@micron.com (408) 834-1927 Erica Rodriguez Pompen Media Relations epompen@micron.com (408) 834-1873
 

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