Micron: Fiscal 2Q16 Financial Results

(in $ million)	2Q15	2Q16	6 mo. 15	6 mo. 16
Revenue	4,166	2,934	8,739	6,284
*Growth*		-30%		*-28%*
Net income (loss)	(97)	934	1,937	109

Micron Technology, Inc. announced results of operations for its second quarter of fiscal 2016, which ended March 3, 2016.

Revenues for the second quarter of fiscal 2016 were $2.93 billion and were 12% lower compared to the first quarter of fiscal 2016 and 30% lower compared to the second quarter of fiscal 2015.

Cash flows from operations were $763 million for the second quarter of fiscal 2016.

GAAP income and per share data – On a GAAP basis, net loss attributable to Micron shareholders for the second quarter of fiscal 2016 was $97 million, or ($0.09) per diluted share, compared to net income of $206 million, or $0.19 per diluted share, for the first quarter of fiscal 2016.

Non-GAAP income and per share data – On a non-GAAP basis, net loss attributable to Micron shareholders for the second quarter of fiscal 2016 was $48 million, or ($0.05) per diluted share, compared to net income of $249 million, or $0.24 per diluted share, for the first quarter of fiscal 2016. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.

“Although we continue to navigate challenging market conditions, we are on track with deploying our advanced DRAM and NAND technologies and improving our cost structure,” said CEO Mark Durcan. “As a result, we expect to improve our competitive position as we move through the second half of 2016 and beyond.”

Revenues for the second quarter of fiscal 2016 were lower compared to the first quarter of fiscal 2016 primarily due to approximate 10% declines in both DRAM ASPs and sales volume. Non-volatile trade revenues for the second quarter of fiscal 2016 declined 6% compared to the first quarter primarily as a result of an approximate 15% decline in ASPs partially offset by an increase in sales volume. The company’s overall consolidated gross margin of 20% for the second quarter of fiscal 2016 was 5% lower compared to the first quarter of fiscal 2016 primarily due to lower ASPs partially offset by manufacturing cost reductions for non-volatile products.

Investments in capital expenditures for the second quarter of fiscal 2016 were $1.23 billion.

The company ended the second quarter of fiscal 2016 with cash and marketable investments of $5.14 billion.

Comments

Mark Durcan, CEO:
"Our results were impacted by continued weakness in the PC market, seasonality and timing of product launches in certain market segments.
" (...) our storage business unit has been positioning us product portfolio to take advantage of our high-performance 3D NAND technology. We are currently sampling Tier-1 OEMs with early versions of our 3D NAND enabled PCIe NVMe client SSDs.
"Over the next two quarters, we will be shipping crucial branded low-cost 3D NAND client SSDs, high-performance drives targeting gaming enthusiasts, and a 2TB client OEM drive.
"For NAND, we estimate 2016 industry bit supply growth in the mid to high 30% range as early 3D conversions create some temporary supply constraints. We continue to expect the cost and performance advantages of 3D NAND will drive enhanced adoption rates and densities across key storage markets and we’re confident in Micron’s roadmap in 3D NAND in terms of timing, performance, and relative cost position.
"For NAND, we're ramping Gen 1 3D NAND in Singapore and expect to have more than 50% of our NAND bit fab bit output on 3D by the fall of 2016. We are also enabling Gen 2 3D in manufacturing and expect to be in early production starting this summer.
"We are forecasting Micron’s fiscal year 2016 and 2017 NAND bit growth CAGR in the 30% to 40% range. We expect to be below the market in 2016, but well above the market in 2017.
"Most of this growth will be related to 3D and TLC conversions which will begin to deliver more substantial bit growth and cost reductions starting late in fiscal year 2016."

Ernie Maddock, CFO:
"And our non-volatile memory business, trade revenue represented 37% of total revenue with the following segmentation. Consumer, which includes our memory cards, USB, and components, represented more than 50%. Mobile, including MCP was in the low teen percent range, while SSDs were in the mid teens percent range. Automotive and industrial multi-market segment and other embedded applications were in the mid teens percent range.
"Micron storage business unit posted fiscal Q2 revenue of $901 million, up 2% from the previous quarter with a non-GAAP operating loss of $80 million which represents 2% of revenue. We continue to optimize our product mix to address market challenges, particularly in the client and datacenter SSD segments.
"Our trade NAND component bit growth was up 16% quarter-over-quarter and we see demand increasing driven by OEM enterprise solution providers and webscale customers who want to leverage the energy savings and performance gain enabled by Micron flash.
"In our client and consumer SSD segment, consecutive quarter bit growth was up 13% reflecting accelerated SSD adoption in OEM Ultrabook and Ultrathin PCs. In our Enterprise SSD segment, we’re starting to ship our S600 Series SaaS drive Micron’s first product produced through our strategic partnership with Seagate. We expect to realize revenue from this new product line in Q3 as we move into volume production.
"Moving now to our third fiscal quarter guidance on a non-GAAP basis we expect the following. Consolidated revenue in the range of $2.8 billion to $3.1 billion, gross margin in the range of 16.5% to 19%, operating expenses between $560 million and $610 million, operating income ranging between a loss of $70 million and income of 10 million, and an EPS range between a loss of $0.12 per share and a loss of $0.05 per share based on 1.36 billion diluted shares."