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Micron Technology, Inc. reports 55.3% Net Income decline in 2019 and 23.0% Revenue decline

09/26/2019 • About Micron Technology, Inc. ($MU) • By InTwits

Micron Technology, Inc. reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:
  • EBITDA Margin is quite volatile: 54.7% in FY2019, 65.0% in FY2018, 47.9% in FY2017, 25.4% in FY2016, 35.0% in FY2015
  • Micron Technology, Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 33.2%. At the same time it's a lot of higher than industry average of 7.8%.
  • CAPEX is quite volatile: $9,780m in FY2019, $8,879m in FY2018, $4,734m in FY2017, $5,817m in FY2016, $4,021m in FY2015
  • The company has highly profitable business model: ROIC is 18.5%
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 dropped on 23.0%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 10.3 pp from 65.0% to 54.7% in FY2019.

Gross Margin dropped on 13.1 pp from 58.9% to 45.7% in FY2019. SG&A as a % of Revenue increased slightly on 0.90 pp from 2.7% to 3.6% in FY2019.

Net Income margin dropped on 19.5 pp from 46.5% to 27.0% in FY2019.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 41.8% in FY2019. CAPEX/Revenue decreased on 5.1 pp from 46.9% in FY2016 to 41.8% in FY2019. For the last three years the average CAPEX/Revenue was 31.4%. Battling declining revenue the company invested a large share of EBITDA (76.4%) to CAPEX but that didn't help at least in this year.

Return on investment

The company operates at good ROIC (18.5%) and ROE (18.5%). ROIC dropped on 24.4 pp from 42.9% to 18.5% in FY2019. ROE dropped on 37.0 pp from 55.5% to 18.5% in FY2019.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.1x and Debt / EBITDA is 0.5x. Debt surged on 26.2% while cash increased on 9.9%.

Micron Technology, Inc. has no short term refinancing risk: cash is higher than short term debt (546.0%).

Valuation and dividends

Micron Technology, Inc.'s trades at EV/EBITDA 3.6x and P/E 7.6x.

Management team

The company's CEO Sanjay Mehrotra is a founder and has spent 3 years with the company. The company's CFO David A Zinsner has spent 2 years with the company.

Financial and operational results

FY ended 08/29/2019

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

mln. $201520162017201820192019/2018
Gross Profit5,2152,5058,43617,89110,702-40.2%
Interest expence371437601342
Net Income2,899-2765,08914,1356,313-55.3%
Stock Based Compensation168191215198
Balance Sheet
Short Term Debt1,0897561,2628591,31052.5%
Long Term Debt6,2529,1549,8723,7774,54120.2%
Cash flow
Revenue growth-1.0%-23.4%63.9%49.5%-23.0%
EBITDA growth9.2%-44.4%209.1%103.0%-35.2%

Gross Margin32.2%20.2%41.5%58.9%45.7%-13.1%
EBITDA Margin35.0%25.4%47.9%65.0%54.7%-10.3%
EBIT Margin18.5%1.4%28.9%49.3%
SG&A, % of revenue4.4%5.3%3.7%2.7%3.6%0.9%
SBC, % of revenue1.0%1.5%1.1%0.7%
Net Income Margin17.9%-2.2%25.0%46.5%27.0%-19.5%
CAPEX, % of revenue24.8%46.9%23.3%29.2%41.8%12.6%

Net Debt/EBITDA0.9x1.8x0.6x-0.1x-0.1x-0.0x
Interest expence / Average debt5.1%5.1%5.7%4.3%
Insider ownership0.2%0.2%0.2%0.2%
Revenue/Employee, th. $509395596844

Peers in Semiconductors

Below you can find Micron Technology, Inc. benchmarking vs. other companies in Semiconductors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
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 ($NVDA)13.4%7.0%37.9%40.6%
Median (68 companies)10.6%5.2%10.9%4.4%-7.2%
Micron Technology, Inc. ($MU)63.9%49.5%-23.0%

Top companies by Gross margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
CEVA, Inc. ($CEVA)90.9%91.6%92.1%89.8%
NVE Corporation ($NVEC)80.3%76.1%78.5%79.0%
Rambus, Inc. ($RMBS)84.7%80.1%79.9%76.8%
Universal Display Corporation ($OLED)64.2%83.9%80.8%75.5%
Intermolecular, Inc. ($IMI)57.4%66.5%67.5%70.3%
Median (67 companies)47.7%48.0%49.1%50.2%47.5%
Micron Technology, Inc. ($MU)20.2%41.5%58.9%45.7%

Top companies by EBITDA margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
NVE Corporation ($NVEC)66.0%61.8%65.6%65.1%
NXP Semiconductors N.V. ($NXPI)41.5%21.6%46.2%49.9%
Texas Instruments Incorporated ($TXN)42.0%43.5%46.7%48.6%
Intel Corp ($INTC)41.0%35.2%41.7%45.7%
Broadcom Inc. ($AVGO)38.0%19.9%40.4%44.2%
Median (68 companies)11.3%9.2%10.7%9.3%0.9%
Micron Technology, Inc. ($MU)25.4%47.9%65.0%54.7%

Top companies by CAPEX/Revenue, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Alpha and Omega Semiconductor Limited ($AOSL)6.6%6.5%12.2%42.2%
Renesola Ltd. ($SOL)0.0%0.0%78.0%41.7%
First Solar, Inc. ($FSLR)4.0%7.9%17.5%33.0%
Sigma Designs Inc ($SIGM)6.5%6.2%14.1%29.3%
Sequans Communications S.A. ($SQNS)16.9%11.8%13.3%22.9%29.6%
Median (68 companies)4.0%3.6%4.7%4.2%11.8%
Micron Technology, Inc. ($MU)46.9%23.3%29.2%41.8%

Top companies by ROIC, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
SMART Global Holdings, Inc. ($SGH)2.5%21.5%51.7%
Texas Instruments Incorporated ($TXN)29.8%34.9%43.1%47.5%
Applied Materials Inc ($AMAT)15.2%19.0%31.2%36.4%
NVIDIA Corporation ($NVDA)13.3%13.1%27.3%35.3%
Skyworks Solutions, Inc. ($SWKS)36.4%33.7%33.1%32.3%23.2%
Median (76 companies)3.8%1.7%3.2%2.2%-2.9%
Micron Technology, Inc. ($MU)0.8%21.5%42.9%18.5%

Top companies by Net Debt / EBITDA

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
MACOM Technology Solutions Holdings, Inc. ($MTSI)3.3x3.0x7.2x98.6x
Inphi Corporation ($IPHI)-6.4x4.5x33.7x32.2x
JinkoSolar Holding Company Limited ($JKS)3.3x4.1x11.0x8.2x
Lattice Semiconductor Corporation ($LSCC)6.5x19.0x3.9x
Renesola Ltd. ($SOL)35.0x123.6x2.3x3.3x
Median (45 companies)-0.3x-0.0x0.4x0.3x0.5x
Micron Technology, Inc. ($MU)1.8x0.6x-0.1x-0.1x