Micron Technology, Inc.
Fiscal Q4 2019 Earnings Call Prepared Remarks

Farhan Ahmad, Senior Director, Investor Relations
Thank you, and welcome to Micron Technology's fourth fiscal quarter 2019 financial conference call. On thecall with me today are Sanjay Mehrotra, President and CEO, and Dave Zinsner, Chief Financial Officer.
Today’s call will be approximately 60 minutes in length. This call, including the audio and slides, is also being
webcast from our Investor Relations website at investors.micron.com. In addition, our website contains theearnings press release and the prepared remarks filed a short while ago.
Today’s discussion of financial results will be presented on a non-GAAP financial basis unless otherwise
specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website, alongwith a convertible debt and capped call dilution table. As a reminder, a webcast replay will be available on
our website later today.
We encourage you to monitor our website at Micron.com throughout the quarter for the most current
information on the Company, including information on the various financial conferences that we will beattending. You can follow us on Twitter at MicronTech.
As a reminder, the matters we will be discussing today include forward-looking statements. These forwardlooking statements are subject to risks and uncertainties that may cause actual results to differ materiallyfrom statements made today. We refer you to the documents we file with the SEC, specifically our mostrecent Form 10-K and 10-Q, for a discussion of risks that may affect our future results. Although we believethat the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance, or achievements. We are under no duty to update any of theforward-looking statements after today’s date to conform these statements to actual results.
I'll now turn the call over to Sanjay.
Sanjay Mehrotra, President and Chief Executive Officer
Thank you, Farhan.
Good afternoon!
OVERVIEW
Fiscal 2019 was another solid year of execution as we continue to transform the New Micron. Despite thechallenging industry environment, we achieved the second-best year in our history for revenue, free cash
flow and earnings, which underscores the strength of the New Micron. We improved structural profitability© 2019 Micron Technology, Inc.

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by further reducing the technology gap with competitors and by strengthening our product portfolio. We
also made progress on our $10 billion share repurchase program by returning $2.7 billion to ourshareholders.
In F4Q, the Micron team’s strong execution resulted in financial performance exceeding our guidance
ranges. Market trends were broadly consistent with our expectations discussed on the last earnings call.
DRAM demand bounced back as the factors that impacted calendar first half demand largely dissipated.
NAND elasticity is driving robust demand growth, causing industry inventories to improve rapidly. Whilethe demand recovery in DRAM and NAND is encouraging, we remain mindful of ongoing macroeconomic
and trade uncertainties.
I will provide more color on our view of the market after a review of progress on our key strategic objectives.
STRONG TECHNOLOGY AND ROADMAP EXECUTION
Since 2016, the actions we have taken to reduce our cost structure, increase our mix of high-value solutions,and enhance our customer engagement and go-to-market strategy have significantly improved our
profitability relative to our peers.
In FY2019, our DRAM cost per bit declines led the industry and exceeded our internal plans, despite theheadwinds from our announced reduction in wafer starts. In the F4Q, we began mass production andvolume shipments of the industry’s first 1Z products, giving Micron feature size leadership for DRAM. We
are also making good progress migrating more of our production to leading-edge nodes. While we entered
FY2019 with more than half of our bit production on 20nm or older nodes, we ended the fiscal year withapproximately three-quarters on 1X and beyond, with a meaningful portion on 1Y. As previously announced,
we are expanding cleanroom space in our Taichung, Taiwan, site to support future node transitions of ourexisting wafer capacity, and we expect output from this facility in calendar 2021.
In NAND, we continued to outpace industry cost declines during FY2019. Our 96-layer 3D NAND iscontinuing to increase as a portion of our mix. Meanwhile, we achieved our first yielding dies using
replacement gate or “RG” for short. This milestone further reduces the risk for our RG transition. As areminder, our first RG node will be 128 layers and will be used for a select set of products. We don’t expect
RG to deliver meaningful cost reductions until FY2021 when our second-generation RG node is broadly
deployed. Consequently, we are expecting minimal cost reductions in NAND in FY2020. Our RG production
deployment approach will optimize the ROI of our NAND capital investments. In addition, we announced
the grand opening of our Singapore cleanroom expansion in August, which will enable the transition of ourexisting NAND wafer capacity to future generations of 3D NAND technology.

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We are continuing to make solid progress with our 3DXP product development and remain on track tolaunch our initial products in calendar 2019.
END MARKET HIGHLIGHTS
Now turning to highlights by markets:
In SSDs, the industry transition from SATA to NVMe in FY2019 continued at a rapid rate. While we havebeen late to the NVMe market, our progress positions us to gain share starting in FY2020. For OEMs,building on strong growth last quarter, we more than tripled revenue shipments of our NVMe client SSD
sequentially with sales penetration in multiple tier 1 PC OEMs. Our QLC-based NVMe consumer SSD was abest-selling SSD on Amazon Prime Day in North America. Our consumer SSD segment achieved record
revenue and unit shipments with bits posting triple-digit percentage growth year-over-year, driven by ourstrategy to pursue channel expansion that extends our geographical and customer reach.
Price elasticity is driving an increase in attach rates and capacities, leading to solid demand growth acrossclient and consumer SSDs. We are also making solid progress on advancing our roadmap of NVMe SSDs
for the enterprise and cloud markets. In FY2019, we introduced the high-performance 9300 line of NVMe
products, targeting high-end data center applications, and we are looking forward to increasing adoptionof this product.
In mobile, our portfolio featuring the industry’s lowest-power and highest-density products is enabling ourcustomers to bring differentiated capabilities to the market and helping us deliver outstanding financial
performance in a challenging industry environment. In FY2019, we delivered mobile revenue that was down
only 3% from 2018’s record performance, despite a significant drop in market pricing and the impact fromthe addition of Huawei to the Entity List. Our mobile margins were resilient, and our managed NAND bit
shipments in FY2019 more than tripled year-on-year, driven by growth of MCP and discrete NAND eMMC
and UFS products. In the F4Q, we started volume shipments of a new leading-edge UFS-based MCP thatuses our 1Z LPDRAM. This new UFS MCP will bring flagship-like performance and densities to mid- andhigh-end smartphones. We are also leading the industry in power-efficient, high-bandwidth LP5 DRAM,
which positions us well as 5G begins to accelerate in 2020.
In data center, customer inventories for DRAM have reduced significantly, driving solid sequential demand
growth for server solutions in both cloud and enterprise markets. New processor platforms are also creating
an uptick in demand for higher-density and higher-performance DRAM modules.
In graphics, we saw strong sequential bit growth, with increases for graphics cards and gaming consoles, asnormal buying resumed following inventory reductions in DRAM.

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Fiscal Q4 2019 Earnings Call Prepared Remarks

In the PC market, DRAM module and SSD shipments continued the growth trend from last quarter, as CPU
shortages further subsided.
In automotive, we continued to increase revenue year-over-year, despite weak auto industry unit sales anda challenging DRAM industry environment. Our growth was supported by secular content increases, oursuperior quality, and well-established customer relationships. LP4 shipments in the F4Q were over five times
higher year-over-year, as lower-power DRAM becomes increasingly important for new Infotainment and
ADAS systems. We continue to have leading industry share in automotive.
HUAWEI UPDATE
Before talking about the market outlook, I want to provide an update on our business with Huawei and theongoing impact of trade uncertainties.
As we noted last quarter, we started shipping some products to Huawei that are not subject to Export
Administration Regulations and Entity List restrictions. In the F4Q, sales to Huawei declined sequentially andwere down meaningfully from the levels we anticipated prior to the addition of Huawei to the Entity List.
We have applied for licenses with the Department of Commerce that would allow us to ship additional
products, but there have been no decisions on licenses to date. We see ongoing uncertainty surrounding
U.S. China trade negotiations. If the Entity List restrictions against Huawei continue and we are unable toget licenses, we could see a worsening decline in our sales to Huawei over the coming quarters.
INDUSTRY OUTLOOKNow, turning to our market outlook, which assumes that the macroeconomic environment doesn’tmaterially deteriorate from current levels. I’ll begin with our industry outlook, and then turn to Micron’s
outlook for DRAM and NAND.
The DRAM and NAND industry demand growth in the second half of calendar 2019, compared to the first
half, is primarily being driven by a normalization of inventories at most customers, and secular growth trends
in various end markets. In recent months, we have seen increased demand from customers headquarteredin mainland China, some of whom could be making strategic decisions to build higher levels of inventory
in the face of increased trade tensions between the U.S. and China, as well as Japan and Korea.
Our view of calendar 2019 DRAM industry bit demand growth remains unchanged at mid-teens, with supply
exceeding demand due to previously discussed factors that impacted first half calendar 2019 demand.
Based on our early view of calendar 2020, we expect the industry to see bit demand growth of high teens
to 20%, above supply growth of only mid-teens, which should help normalize supplier inventories andenable a healthy industry environment. We expect the long-term DRAM bit demand growth CAGR to be
mid- to high teens.
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Fiscal Q4 2019 Earnings Call Prepared Remarks

Turning to NAND industry outlook, demand elasticity and industry supply reductions are resulting in
improving market conditions and declining industry inventory. On the supply side, capex and wafer startcuts across the industry are leading to supply reductions. A power outage at a competitor’s fab also reduced
industry supply and inventory. We now expect calendar 2019 industry bit demand growth in the low to mid40% range, which will exceed industry bit supply growth of approximately 30%. Based on our view ofcalendar 2020, we estimate industry bit demand growth of high 20s to low 30% range, with supply growing
somewhat below demand. We believe that NAND industry margins, which are at the lowest levels in thelast 10 years, should start increasing for the rest of the year. We expect the long-term NAND bit demand
growth CAGR to be in the low 30% range.
MICRON OUTLOOKSpecific to Micron’s DRAM outlook, we are seeing solid demand from customers across multiple segments.
This is improving our inventory, and we have started to see pockets of tight supply, particularly in leadingedge nodes. However, we still have elevated inventory levels on older nodes. As a result, we are continuingwith the previously disclosed DRAM wafer start reductions of 5%. We expect Micron’s calendar 2019 bit
supply growth to be slightly below industry demand growth of mid-teens, and expect our calendar 2020
DRAM bit supply growth to be close to the market demand growth. We also expect our DRAM cost
reductions to moderate in FY2020 to high single digits. As we have said before, the increasing complexityof more advanced DRAM nodes is resulting in a slower pace of cost declines for the industry.
As our DRAM inventory improves, we are committed to maintaining price discipline. While we are having
to respond to some aggressive market pricing, we have started walking away from some transactions, as
we look to optimize our profitability.
Turning to Micron’s NAND outlook, we expect our calendar 2019 bit growth to be slightly above industry
supply growth, and in calendar 2020, we expect Micron’s bit supply growth to be significantly below theindustry demand growth as we transition a limited portion of our wafer starts to our first-generation
replacement gate node and use inventory to support customer demand. Supply growth will also be
impacted by our previously announced wafer start reductions of approximately 10%. We are seeing some
capacity tightness in our back-end manufacturing operations due to significant increases in demand forhigh-capacity NAND products. This is another datapoint of elasticity kicking in on high-value NAND
solutions.
While NAND and DRAM market conditions are showing some promising signs, in order to bring our supply
in line with the market demand, we are targeting our FY2020 front-end equipment capex to be reduced bymore than 30% from FY2019. Our capex decision is also influenced by macroeconomic uncertainty and low
industry profitability. Our front-end capex outlook reflects our strategy for limited ramp of our first RG node.
While we are reducing front-end equipment capex, we are spending significantly more on shell space to© 2019 Micron Technology, Inc.

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Fiscal Q4 2019 Earnings Call Prepared Remarks

enable future node transition, and also investing in a new SSD packaging facility in Penang, Malaysia. As
always, we will maintain flexibility and discipline while investing appropriately for Micron’s long-term
success.
I want to emphasize that our goal is to manage our DRAM and NAND bit supply growth CAGR in line withindustry demand. As we catch up on the technology and cost gaps to best-in-class competitors in DRAM
and transition to RG technology in NAND, our supply growth may fluctuate – but we expect the mediumto-long-term growth rate of our supply to approximately equal the rate of demand growth across both
NAND and DRAM markets. We are also focused on maximizing the ROI of our capex investments – and forthis reason – we are not emphasizing wafer capacity growth but instead focusing on bit growth driven bytechnology transitions. In addition, some of our capex is dedicated to increasing our internal capacity forassembly, packaging and test, which helps drive cost reductions without adding any bit growth and has
good ROI.
I’ll now turn it over to Dave to provide our financial results and guidance.
Dave Zinsner, Senior Vice President and Chief Financial Officer
Thanks Sanjay.
As Sanjay mentioned, Micron delivered resilient performance throughout a challenging year for the industry,highlighted by FQ4 results that exceeded our guided ranges for revenue and earnings. As market conditions
evolved during the year, we curtailed our planned operating expenses and capital expenditures, allowing
us to preserve margins and generate healthy free cash flow. We achieved our first corporate investment
grade rating, strengthened our balance sheet, and meaningfully reduced our share count. All-in-all, FY2019
was a year of stellar progress that sets Micron up for attractive growth as industry conditions recover.
REVENUE
Turning to our recent financial results, total FQ4 revenue was approximately $4.9 billion. Revenue was up
2% sequentially and down 42% year-over-year. Revenue exceeded our guidance range largely due tobetter-than-expected demand. Full FY2019 revenue totaled $23.4 billion, down 23% year-over-year.
DRAM REVENUE
FQ4 DRAM revenue was $3.1 billion, representing 63% of total revenue. DRAM revenue increased 1%
sequentially and declined 48% year-on-year. Bit shipments grew approximately 30% sequentially and in the
mid-teens percent range year-on-year, as customer inventories improved significantly. ASP declined
approximately 20% sequentially. For full FY2019, DRAM revenue was $15.2 billion, down 28% from FY2018
as bits grew in the low-single-digit percent range and ASP declined approximately 30%.
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Fiscal Q4 2019 Earnings Call Prepared Remarks

NAND REVENUE
FQ4 NAND revenue was approximately $1.5 billion, or 31% of total revenue. Revenue was up 5%
sequentially but declined 32% year-on-year. Bit shipments grew in the low-to-mid-teens percent range
sequentially. ASP declined in the upper-single-digit percent range. We are starting to see supply tightness
in portions of the NAND market, and prices are beginning to increase.
Full FY2019 NAND revenue was $6.9 billion, down 12% from FY2018, as ASP declines of mid-40% range
more than offset strong bit shipment growth.
REVENUE BY BUSINESS UNIT
Now turning to our revenue trends by business unit.
Revenue for the Compute and Networking Business Unit was $1.9 billion in FQ4, a decline of 8% sequentiallyand down 56% year-over-year. ASP declines across most segments continued to be the leading cause oflower revenue. For the fiscal year, revenue was $10 billion, down 35% year-over-year.
Revenue for the Mobile Business Unit in FQ4 was $1.4 billion, up 20% sequentially and down 26% yearover-year. Both DRAM and NAND bits had strong growth driven by seasonality and continued content
growth in smartphones. Our mobile business gained share in the year, driven by a stronger productportfolio. For the fiscal year, MBU revenue was $6.4 billion, down only 3% from FY2018.
Revenue for the Storage Business Unit in FQ4 was $848 million, an increase of 4% from FQ3 and down 32%
year-over-year. For the fiscal year, SBU revenue was $3.8 billion, down 24% from FY2018.
Finally, revenue for the Embedded Business Unit was $705 million in FQ4, up 1% from FQ3 and down 24%
from the prior year. For the fiscal year, EBU revenue was $3.1 billion, down 10% from FY2018.
NON-GAAP OPERATING RESULTSGROSS MARGIN
The consolidated gross margin for FQ4 was 30.6%, above our guidance range due to our strong execution,
improving demand and slightly better pricing. FQ4 gross margins included approximately 200 basis point
negative impact or approximately $100 million due to underutilization charges at IMFT. Starting in FQ1 andcontinuing for the foreseeable future, we expect to incur an underutilization impact of approximately $150M
per quarter, with about half of the impact consisting of non-cash items. Over time, as our 3DXP businessramps, this underutilization impact will be mitigated, but as you can expect, it takes time to commercialize© 2019 Micron Technology, Inc.

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Micron Technology, Inc.
Fiscal Q4 2019 Earnings Call Prepared Remarksa new breakthrough technology. Meanwhile, we will continue to look for ways to optimize our costs andwill provide updates on material progress over time.
With respect to U.S. tariffs on imports from China, with continued mitigation, we were able to contain theirimpact on our consolidated gross margin in FQ4 to less than 20 basis points.
OPEX
Operating expenses were $797 million, and included some one-time expenses. We continue to control our
expenses tightly, and our SG&A as a percent of revenue is meaningfully lower than our competitors’.
OPERATING INCOME
FQ4 operating income was $694 million, representing 14% of revenue. Operating margin was down 38
percentage points year-over-year and down 9 percentage points from FQ3.
Our full FY2019 operating income was $7.8 billion or 33% of our fiscal year revenue.
TAXES
Our FQ4 effective tax rate was 8.8%. For the fiscal year, our effective tax rate was approximately 7.3%, which
included the tax benefit we recorded in FQ3. Going forward, we expect our tax rate to be mid-to-high single
digits.
EARNINGS PER SHARE
Non-GAAP earnings per share in FQ4 were $0.56, down from $1.05 in FQ3 and $3.53 in the year-ago quarter.
For full FY2019, our non-GAAP earnings per share were $6.35, down from $11.95 in FY2018.
OPERATING CASH FLOW
Turning to cash flows and capital spending, we generated $2.2 billion in cash from operations in FQ4,
representing 46% of revenue.
For full FY2019, cash from operations was $13.2 billion, representing 56% of revenue, down from $17.4
billion or 57% of revenue in FY2018. Cash flow margins remained almost flat due to effective working capitalmanagement.
CAPITAL ALLOCATION© 2019 Micron Technology, Inc.

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Fiscal Q4 2019 Earnings Call Prepared Remarks

CAPEX
During the quarter, net capital spending, was approximately $2.0 billion, down from $2.2 billion in the priorquarter.
For full FY2019, our net capex was $9.1 billion, up from $8.2 billion in FY2018, but down meaningfully fromthe $10 to $11 billion plan we originally had entering FY2019.
We expect our FY2020 net capex to be in the range of $7 to $8 billion, down meaningfully from FY2019. We
expect that capex for buildings and back-end manufacturing will increase significantly from last year, while
the front-end equipment capex will decline more than 30% year-on-year.
FREE CASH FLOW
Looking at cash generation, we generated adjusted free cash flow of approximately $260 million in FQ4compared to $500 million in FQ3 and $3.1 billion in the year-ago quarter. Adjusted free cash flow for FY2019
was $4.1 billion, down from $9.2 billion in FY2018.
SHARE REPURCHASE
We received notice for approximately $180M of convertible note redemptions in the quarter, which willremove approximately 4.0 million shares from our ongoing share count in FQ1. For full FY2019 we returned
approximately $2.7 billion to shareholders in the form of buybacks, representing 65% of free cash flow, at
an average purchase price of $40.
Including these share repurchases and our convertible note redemptions, we reduced our average diluted
share count by 80 million shares in FY2019, representing 7% of shares outstanding.
We remain committed to returning at least 50% of our annual free cash flow to shareholders in the form ofshare repurchases in the future.
INVENTORY
Days of inventory was 131, down from 143 days in FQ3. Inventory ended the quarter at $5.1 billion,
increasing from $4.9 billion at the end of FQ3. We will continue to focus on reducing our days of inventory
and expect to see further reduction in FQ1. As mentioned before, we are seeing pockets of tight supply incertain parts of our business. Our long-term normalized inventory target has increased over time to above
100 days as a result of greater process complexity and the broadening of our product portfolio to highvalue solutions, such as SSDs that require longer assembly and test cycle time.

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Fiscal Q4 2019 Earnings Call Prepared Remarks

TOTAL CASH/DEBT
Total cash ended the quarter at $9.2 billion, up quarter-over-quarter, largely as a result of our $1.75 billion
investment grade debt issuance. Our total debt increased to $5.9 billion. Total liquidity ended FQ4 at $13
billion. We are holding approximately $1.4 billion of liquidity for the acquisition of the IMFT joint venture,
expected in FQ1 2020. This acquisition will eliminate approximately $700 million of member debt financing
and will be funded by drawing down $1.25 billion from our term loan facility secured in FQ4.
OTHER EVENTS / SUBSEQUENT EVENTSBefore moving on to guidance, I want to share some expected changes to our upcoming reporting. We
continue to evaluate planned technology node transitions, capital spending, and re-use rates for NAND
equipment. Based on our preliminary assessment, we anticipate changing the depreciable life of our NAND
equipment from five to seven years beginning in FQ1 2020. This change will reduce our depreciation
expense included in cost of goods sold for FQ1 by approximately $80 million, and increasing toapproximately $100 to $150 million per quarter for the remainder of FY2020. As a reminder, depreciable life
for DRAM equipment is already seven years.
Also starting in FQ1, we expect to change how we report MCP revenue, which we currently include within
NAND revenue. We will begin disaggregating MCP revenue into DRAM and NAND, which will reduce ourreported NAND revenue and margins in FQ1 while increasing our DRAM revenue. We believe that thischange will help improve the transparency of our DRAM and NAND businesses.
OUTLOOK
Now turning to our financial outlook. As our portfolio strengthens and we improve our share in high-value
segments, we are seeing growing demand for both DRAM and NAND and this is creating pockets of supply
shortage, particularly in some leading-edge nodes and in back-end manufacturing. However, the market
remains competitive and industry inventories continue to adjust to economic and geopolitical uncertainties.
Notwithstanding these challenges, we expect bit shipments for both DRAM and NAND to grow in FQ1, with
NAND increasing more than DRAM.
NON-GAAP GUIDANCE
With that in mind, our non-GAAP guidance for FQ1 is as follows. We expect revenue to be in the range of$5 billion, plus or minus $200 million, gross margin to be in the range of 26.5% plus or minus 150 basis
points, and operating expenses to be approximately $780 million, plus or minus $25 million. Based on ashare count of approximately 1.13 billion fully diluted shares, we expect EPS to be $0.46, plus or minus$0.07.

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CLOSING
Despite a variety of industry and trade-related challenges in FY2019, Micron delivered strong financial
results. At our 2018 analyst day, we laid out how we believed Micron was structurally improved and able toweather the storm in even challenging periods for the industry. While we are not out of the woods, we areproud of our execution as we have moved through the current cycle. We are exiting the fiscal year with astronger product portfolio, deeper customer relationships, and our highest liquidity and net cash position
to date, and we have also made good progress on our share buyback program. We are well-positioned toemerge from the current cycle ready to capitalize on the secular growth trends driving our business.
I will now turn the call over to Sanjay for concluding remarks.
Sanjay Mehrotra, President and Chief Executive Officer
Thank you, Dave.
FY2019 has been a solid year of accomplishments for the New Micron, as we continue to focus on structural
improvements across a range of functions in the company, to take our performance to new heights. While
we have made dramatic progress over the last couple of years, there is significant opportunity ahead of us
to further improve our operations, drive product cost reductions, further improve engineering execution,build on our go-to-market strategy and initiatives, deepen customer engagements, and enhance the corecompetitiveness of the company to best-in-class levels.
As we look ahead, the long-term opportunities are exciting, and we are extremely enthusiastic about the
momentum we have established at the New Micron.
On October 24th, we’ll be hosting our second annual Micron Insight event, which will bring together leadersfrom across the industry to discuss how a world activated by data can transform the way we use information
to enrich life — and how memory and storage are vital to these efforts. We will be webcasting Micron
Insight live from San Francisco, and I encourage you all to tune in.
We will now open for questions.

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