Micron: Fiscal 4Q16 Financial Results

(in $ million)	4Q15	4Q16	FY15	FY16
Revenue	3,600	3,217	16,192	12,399
*Growth*		-11%		*-23%*
Net income (loss)	471	(170)	2,899	(276)

Micron Technology, Inc. announced results of operations for its fourth quarter and 2016 fiscal year, which ended September 1, 2016.

Revenues for the fourth quarter of fiscal 2016 were $3.22 billion and were 11% higher compared to the third quarter of fiscal 2016 and 11% lower compared to the fourth quarter of fiscal 2015.

Revenues for fiscal year 2016 were $12.40 billion and net loss attributable to Micron shareholders was $276 million, or ($0.27) per diluted share. On a non-GAAP basis, the fiscal year result was income of $0.06 per diluted share. Cash flows from operations were $3.17 billion for fiscal year 2016.

“We are seeing improving market conditions in terms of both slowing supply growth and improving demand across a number of key segments,” said CEO Mark Durcan. “In addition, we continue to execute on our key initiatives related to the deployment of advanced technologies and products to advantage our customers.”

GAAP Income and Per Share Data
On a GAAP basis, net loss attributable to shareholders for the fourth quarter of fiscal 2016 was $170 million, or ($0.16) per diluted share, compared to a net loss of $215 million, or ($0.21) per diluted share, for the third quarter of fiscal 2016 and net income of $471 million, or $0.42 per diluted share, for the fourth quarter of fiscal 2015.

Non-GAAP Income and Per Share Data
On a non-GAAP basis, net loss attributable to shareholders for the fourth quarter of fiscal 2016 was $56 million, or ($0.05) per diluted share, compared to a net loss of $79 million, or ($.08) per diluted share, for the third quarter of fiscal 2016 and net income of $399 million, or $0.37 per diluted share, for the fourth quarter of fiscal 2015. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.

Revenues for the fourth quarter of fiscal 2016 were 11% higher compared to the third quarter of fiscal 2016. DRAM sales volumes were up approximately 20%, while NAND sales volumes were up approximately 12%. DRAM average selling prices declined approximately 6%, while NAND average selling prices were relatively unchanged.

The company’s overall consolidated gross margin of 18% for the fourth quarter of fiscal 2016 was slightly higher compared to the third quarter due to increases in gross margin of DRAM products.

Investments in capital expenditures, net of amounts funded by partners, were $1.69 billion for the fourth quarter of fiscal 2016 and $5.40 billion for the full fiscal year. The company ended the fourth quarter of fiscal 2016 with cash and marketable investments of $4.81 billion.

Comments

If you consider the last known fiscal year revenue of all storage companies, Micron is now number 3 behind EMC and Western Digital, and in front of Seagate, as annual sales were down as much as 23%.

Micron's revenue for this fourth fiscal quarter was $3.2 billion at the top end of guided range.

The storage business delivered fiscal Q4 revenue of $758 million, up 5% sequentially. The non-GAAP operating loss was $69 million or 9% of revenue. During the quarter, Micron entered production and OEM qualification of TLC 3D NAND-based SSDs in the clients and consumer segments, providing customers with a refreshed 3D-based portfolio as storage products expand the demand spectrum in these markets.

In the enterprise SSD segment, consecutive quarter bits sold were up 45% based on higher sales of planar MLC based cloud drive. The vendor is deploying 3D TLC across the enterprise nanometer cloud portfolio with several product launches over the next two quarters.

Micron saw the benefits of the 3D NAND yield ramp, which generated stronger than expected NAND bit growth in the quarter.

In the non-volatile memory business, trade revenue represented 31% of total revenue with the following segmentation. Consumer, which includes memory cards, USB and components, represented about 50%, down slightly from the prior quarter; mobile was in the high teens percent range, up from 13% in the prior quarter. eMCPs are primarily in the mobile segment. SSDs represented 13% similar to last quarter and the automotive, industrial, multi market and other embedded applications were in the high-teens percent range similar to prior quarter.

The firm is finalizing qualification of 3D NAND with eight major OEMs on its 1,100 client drive and is engaging with cloud customers on future designs.

In the enterprise, it is seeing companies begin to retrofit HDD infrastructures with SAS SSDs as they modernize existing investments.

It expects to introduce its first TLC 3D SATA drive for these markets later this year followed by a server focused version early next year.

For NAND, the company estimates 2017 industry bit growth in the high 30% to low 40% range, which is in line with 2016. This compares to its long-term bit demand growth forecast in the low to mid 40% range. Despite investments in 3D conversions across the industry, the firm believes that 2017 supply growth will be relatively balanced with demand given the disruption in the fab output related to these conversions.

Micron is forecasting fiscal 2017 NAND cost per bit to decline 20% to 25% as a result of the 3D and TLC conversions.

Relative to 3D Xpoint technology, it is working with market enablers on adoption of its QuantX solutions and continues to believe this technology will be an important contributor with initial revenue later in 2017.

Guidance for next quarter
Consolidated revenue in the range increasing quarterly between $3.55 billion to $3.85 billion; gross margin in the range of 23% to 25.5%; operating expenses between $600 million and $650 million.