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Micron Technology, Inc. reports 178% Net Income growth in 2018 and 49.5% Revenue growth

09/20/2018 • About Micron Technology, Inc. ($MU) • By InTwits

Micron Technology, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
  • Micron Technology, Inc. is a fast growth stock: FY2018 revenue growth was 49.5%, 5 year revenue CAGR was 27.3% at FY2018 ROIC 42.9%
  • EBITDA Margin is quite volatile: 65.0% in FY2018, 47.9% in FY2017, 25.4% in FY2016, 35.0% in FY2015, 31.7% in FY2014
  • Micron Technology, Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 28.7%. At the same time it's a lot of higher than industry average of 7.6%.
  • CAPEX is quite volatile: $8,879m in FY2018, $4,734m in FY2017, $5,817m in FY2016, $4,021m in FY2015, $3,107m in FY2014
  • The company has highly profitable business model: ROIC is 42.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Micron Technology, Inc.'s Revenue jumped on 49.5%. Revenue growth showed slowdown in FY18Q4 - it was 37.5% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.3 pp from 14.9% to 12.5% in FY2018.

Gross Margin surged on 17.4 pp from 41.5% to 58.9% in FY2018. During FY2014-FY2018 Gross Margin bottomed in FY2016 at 20.2% and was growing since that time. SG&A as a % of Revenue decreased slightly on 0.98 pp from 3.7% to 2.7% in FY2018. During the last 5 years SG&A as a % of Revenue topped in FY2016 at 5.3% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During the last 5 years SBC as a % of Revenue topped in FY2016 at 1.5% and was declining since that time.

Net Income margin surged on 21.5 pp from 25.0% to 46.5% in FY2018. During the last 5 years Net Income margin bottomed in FY2016 at -2.2% and was growing since that time. The efficient tax rate was 1.2% in FY2018.

Investments (CAPEX, working capital and M&A)

In FY2018 Micron Technology, Inc. had CAPEX/Revenue of 29.2%. The company's CAPEX/Revenue increased on 4.4 pp from 24.8% in FY2015 to 29.2% in FY2018. Average CAPEX/Revenue for the last three years was 33.1%.

Inventories as a % of Revenue decreased on 3.5 pp from 15.4% to 11.8% in FY2018.

Return on investment

The company operates at high and attractive ROIC (42.9%) and ROE (55.5%). ROIC jumped on 21.4 pp from 21.5% to 42.9% in FY2018. ROE jumped on 22.4 pp from 33.1% to 55.5% in FY2018. During FY2014-FY2018 ROIC bottomed in FY2016 at 0.79% and was growing since that time. During FY2014-FY2018 ROE bottomed in FY2016 at -2.3% and was growing since that time.

Leverage (Debt)

Debt level is -0.1x Net Debt / EBITDA and 0.2x Debt / EBITDA. Debt dropped on 58.4% while cash jumped on 27.3%.

Micron Technology, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 43.8x. Micron Technology, Inc. has no short term refinancing risk: cash is higher than short term debt (757.4%).

Average interest expence charged on company's debt was 7.4% in FY2018.

Valuation and dividends

The company's trades at EV/EBITDA 2.5x and P/E 3.7x.

Management team

Micron Technology, Inc.'s CEO is Sanjay Mehrotra. Sanjay Mehrotra is a founder and has 2 years tenure with the company. CEO total compensation was $14,241,583 in FY2018 which included $1,200,000 salary. David A Zinsner is a the company's CFO. David A Zinsner has spent 1 year at the company.

Insider ownership is 0.16%. Insider ownership didn't change in 2018.

At the end of financial year the company had 36,000 employees. The number of employees increased on 5.6%. Average revenue per employee in FY2018 was $844,194 and it surged on 41.7%.

Financial and operational results

FY ended 08/30/2018

Micron Technology, Inc. ($MU) key annual financial indicators

mln. $201420152016201720182018/2017
Gross Profit5,4375,2152,5058,43617,891112.1%
Interest expence352371437601342-43.1%
Net Income3,0452,899-2765,08914,135177.8%
Stock Based Compensation115168191215198-7.9%
Balance Sheet
Short Term Debt1,6181,0897561,262859-31.9%
Long Term Debt4,8936,2529,1549,8723,777-61.7%
Cash flow
Revenue growth80.3%-1.0%-23.4%63.9%49.5%
EBITDA growth154.4%9.2%-44.4%209.1%103.0%

Gross Margin33.2%32.2%20.2%41.5%58.9%17.4%
EBITDA Margin31.7%35.0%25.4%47.9%65.0%17.1%
EBIT Margin18.9%18.5%1.4%28.9%49.3%20.5%
SG&A, % of revenue4.3%4.4%5.3%3.7%2.7%-1.0%
SBC, % of revenue0.7%1.0%1.5%1.1%0.7%-0.4%
Net Income Margin18.6%17.9%-2.2%25.0%46.5%21.5%
CAPEX, % of revenue19.0%24.8%46.9%23.3%29.2%5.9%

Net Debt/EBITDA0.5x0.9x1.8x0.6x-0.1x-0.7x
Interest expence / Average debt5.4%5.4%5.1%5.7%7.4%1.7%
Insider ownership0.2%0.2%0.2%0.2%0.2%0.0%
Revenue/Employee, th. $53850939559684441.7%

Micron Technology, Inc. ($MU) key quoterly financial indicators

mln. $FY18Q1FY18Q2FY18Q3FY18Q4 YoY change
Revenue6,8037,3517,7978,440 71.4%58.2%40.1%37.5%
EBITDA4,1874,7185,1865,662 270.5%130.5%73.8%58.7%
Net Income2,6783,3093,8234,325 1,387.8%270.1%132.1%82.6%
Balance Sheet
Cash6,0087,8286,8086,506 45.2%115.5%68.2%27.3%
Short Term Debt1,4011,5141,454859 21.3%35.5%25.2%-31.9%
Long Term Debt7,6447,8025,8903,777 -10.0%-31.0%-43.8%-61.7%
Gross Margin55.1%58.1%60.6%61.0% 29.6%21.4%13.7%10.3%
EBITDA Margin 61.5% 64.2% 66.5% 67.1% 33.1%20.1%12.9%9.0%
Net Income Margin 39.4% 45.0% 49.0% 51.2% 34.8%25.8%19.4%12.7%

Peers in Semiconductors

Below we provide Micron Technology, Inc. benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
NanoFlex Power Corp ($OPVS)72.5%354.8%
MoSys, Inc. ($MOSY)-18.4%37.2%46.8%87.7%
SMART Global Holdings, Inc. ($SGH)-16.9%42.5%69.3%
Adesto Technologies Corporation ($IOTS)4.3%1.6%27.6%48.8%
NVIDIA Corporation ($NVDA)13.4%7.0%37.9%40.6%
Median (67 companies)54.6%9.7%5.2%10.9%4.7%
Micron Technology, Inc. ($MU)-1.0%-23.4%63.9%49.5%

Top companies by Gross margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
CEVA, Inc. ($CEVA)90.2%90.9%91.6%92.1%89.8%
NVE Corporation ($NVEC)77.9%80.3%76.1%78.5%79.0%
Rambus, Inc. ($RMBS)85.9%84.7%80.1%79.9%76.8%
Universal Display Corporation ($OLED)76.0%64.2%83.9%80.8%75.5%
Intermolecular, Inc. ($IMI)48.3%57.4%66.5%67.5%70.3%
Median (65 companies)46.4%47.7%48.0%49.1%50.4%
Micron Technology, Inc. ($MU)33.2%32.2%20.2%41.5%58.9%

Top companies by EBITDA margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
NVE Corporation ($NVEC)58.8%66.0%61.8%65.6%65.1%
NXP Semiconductors N.V. ($NXPI)25.7%41.5%21.6%46.2%49.9%
Texas Instruments Incorporated ($TXN)39.7%42.0%43.5%46.7%48.6%
Intel Corp ($INTC)42.8%41.0%35.2%41.7%45.7%
Broadcom Inc. ($AVGO)24.9%38.0%19.9%40.4%44.2%
Median (66 companies)9.6%11.3%9.2%10.7%9.8%
Micron Technology, Inc. ($MU)31.7%35.0%25.4%47.9%65.0%

Top companies by CAPEX/Revenue, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Alpha and Omega Semiconductor Limited ($AOSL)3.0%6.6%6.5%12.2%42.2%
Renesola Ltd. ($SOL)3.5%0.0%0.0%78.0%41.7%
First Solar, Inc. ($FSLR)7.6%4.0%7.9%17.5%33.0%
Sigma Designs Inc ($SIGM)11.0%6.5%6.2%14.1%29.3%
Sequans Communications S.A. ($SQNS)0.0%16.9%11.8%13.3%22.9%
Median (66 companies)3.6%4.0%3.6%4.7%4.4%
Micron Technology, Inc. ($MU)19.0%24.8%46.9%23.3%29.2%

Top companies by ROIC, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
SMART Global Holdings, Inc. ($SGH)2.5%21.5%51.7%
Texas Instruments Incorporated ($TXN)25.1%29.8%34.9%43.1%47.5%
Applied Materials Inc ($AMAT)15.8%15.2%19.0%31.2%36.4%
NVIDIA Corporation ($NVDA)9.2%13.3%13.1%27.3%35.3%
Skyworks Solutions, Inc. ($SWKS)24.8%36.4%33.7%33.1%32.3%
Median (73 companies)5.0%3.8%1.7%3.2%3.0%
Micron Technology, Inc. ($MU)18.8%15.8%0.8%21.5%42.9%

Top companies by Net Debt / EBITDA

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
MACOM Technology Solutions Holdings, Inc. ($MTSI)25.4x3.3x3.0x7.2x98.6x
Inphi Corporation ($IPHI)-6.4x4.5x33.7x32.2x
JinkoSolar Holding Company Limited ($JKS)4.2x3.3x4.1x11.0x8.2x
Lattice Semiconductor Corporation ($LSCC)-1.8x6.5x19.0x3.9x
Renesola Ltd. ($SOL)7.0x35.0x123.6x2.3x3.3x
Median (45 companies)-0.6x-0.3x-0.0x0.4x0.3x
Micron Technology, Inc. ($MU)0.5x0.9x1.8x0.6x-0.1x