Micron: Fiscal 4Q17 Financial Results

(in $ million)	4Q16	4Q17	FY16	FY17
Revenue	3,217	6,138	12,399	20,322
*Growth*		91%		*64%*
Net income (loss)	(170)	2,368	(276)	5,089

Micron Technology, Inc. announced results of operations for its fourth quarter and full year of 2017, which ended August 31, 2017.

Fiscal Q4 2017 highlights
• Revenues of $6.14 billion, 91% higher compared with the same period last year
• GAAP net income of $2.37 billion, or $1.99 per diluted share
• Non-GAAP net income of $2.39 billion, or $2.02 per diluted share

Fiscal 2017 highlights
• Revenues of $20.32 billion, 64% higher compared with the prior fiscal year
• GAAP net income of $5.09 billion, or $4.41 per diluted share
• Non-GAAP net income of $5.65 billion, or $4.96 per diluted share
• Cash flows from operations of $8.15 billion

“Micron delivered exceptional fourth quarter and fiscal year results, reflecting solid execution and robust demand for our memory and storage solutions,” said Micron president and CEO Sanjay Mehrotra. “We expect healthy industry fundamentals to continue into 2018, supported by increasingly diverse end markets and applications. We believe our focus on accelerating the deployment of advanced technologies and solutions will address our customers’ evolving requirements, further strengthen our financial foundation, and enhance shareholder value.”

Revenues for the fourth quarter of 2017 were 10% higher compared to the third quarter of 2017, with DRAM sales volumes 5% higher and NAND sales volumes 3% higher. DRAM and NAND ASPs for the quarter increased 8% and 5%, respectively. Our overall consolidated gross margin of 50.7% for the fourth quarter of 2017 was higher compared to 46.9% in the third quarter due to expansion of margins for DRAM products.

Investments in capital expenditures, net of amounts funded by partners, were $1.51 billion for the fourth quarter of 2017 and $5.13 billion for the full year of 2017. We ended the fourth quarter with cash, marketable investments, and restricted cash of $6.15 billion.

Comments

Fourth quarter revenue was $6.14 billion with record gross margin, operating income, and free cash flow. Full-year revenue, profitability, and free cash flow also set company records. Fourth quarter with cash, marketable investments and restricted cash is $6.2 billion. There are no wafer capacity additions planned for fiscal 2018.

The company is in DRAM and flash (storage) and here we concentrate below on flash business only.

For storage 4FQ revenue was up 71% Y/Y driven by strong demand for SSD solutions, with broad interest in SATA 5100 SSD from enterprise and cloud customers and positive demand trends in client SSDs supported by increasing attach rates. Global SSD revenue market share nearly doubled in FY17, according to the company.

NAND bit shipments increased sequentially by 3% during the company's most recent three-year period.

Trade NAND revenue increased 81% Y/Y. Sales were 8% higher quarterly, supported by demand from mobile and embedded segments and a 5% increase in ASPs.

Late in the quarter, Micron identified and corrected a flash component issue on select TLC 3D NAND products. It paused shipments of affected products as it worked to implement a solution to the issue, which appeared only under a narrow set of performance conditions. As a result, SSD revenue declined sequentially during 4FQ17. Shipments have now restarted, and the company expects to resume solid sequential SSD revenue growth next quarter.

The firm continued to garner positive momentum with its SSD products across a range of customers. Its flagship SATA 5100 SSD has been qualified at enterprise server OEMs, cloud service providers, and Fortune 500 companies.

In term of technology, 64L 3D NAND represented mid-teens percent of 4FQ17 trade NAND bit output and the company expects to achieve bit crossover in 2FH18. Third generation 3D NAND production is expected to begin later in FY18.

During the fourth quarter, the firm qualified its first 3D TLC eMCP and eMMC solutions at a major chipset vendor, and now have dozens of high-density products in qualification with several OEMs. It expects production shipments to start later in 2017. 64-layer 3D TLC UFS products will also start OEM qualifications later in 2017, enabling the firm to participate in the mobile market's highest-density designs.

Trade NAND revenue represented 30% of Micron total revenue in 4FQ17, SSDs were 20% and mobile was 20%. Automotive, industrial, and other embedded applications were approximately 20% and consumer represented approximately 40%.

Outlook

• $6.10 to $6.50 billion in revenue next quarter.

• NAND industry supply bit growth approaching around 50%, satisfying currently unfulfilled demand.

• Company sees healthy demand trends for SSDs moving forward. Client SSD attach rates continue to increase. And although storage density growth has slowed temporarily due to a tight pricing environment, it foresees longer-term demand for higher-density SSDs.

• It expects the industry to remain moderately undersupplied for the rest of 2017 for NAND.