Micron Technology, Inc.

Thank you, ladies and gentlemen, and thank you for standing by. Welcome to Micron Technologies first quarter 2020 financial conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your host, Head of Investor Relations, Farhan Ahmad. Sir, please go ahead.

Thank you, and welcome to Micron Technologies' first fiscal quarter 2020 financial conference call. On the call 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 the earnings 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 can be found on our website along with a convertible debt and GAAP 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 be attending. You can follow us on Twitter at Micron Tech. As a reminder, the matters we will be discussing today include forward-looking statements, These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we filed with the SEC, specifically our most recent Form 10-K and 10-Q, for a discussion of risks that may affect our future results. Although we believe that the expectations reflected in these forward-looking statements are reasonable, cannot guarantee future results, level of activity, performance, or achievement. We are under no duty to update any of the forward-looking statements after today's date to confirm these statements to actual results. I will now turn the call over to Sanjay.

Thank you, Farhan. Good afternoon. Micron is off to a solid start in our fiscal 2020. Despite a challenging industry environment, we delivered good profitability, maintained positive free cash flow, and strengthened our product portfolio. Industry supply-demand balance continues to improve in both DRAM and NAND. Recent trends in our business give us optimism that our fiscal second quarter will mark the bottom for our financial performance, which we expect to start improving in our fiscal third quarter, with continued recovery in the second half of calendar 2020. Our strategy to increase high-value solutions, enhance customer engagement, and improve our cost structure is producing results. We have materially improved our competitive position, structurally strengthened our profitability, and are poised to drive long-term shareholder value as industry conditions improve. High-value solutions in fiscal 2019 accounted for approximately 50% of NAND bits. We expect this figure to grow to over two-thirds of our NAND bits sold for fiscal 2020 and and we remain on track to drive 80% of our NAND bits into high-value solutions in fiscal 2021. This mixed improvement is an important tailwind for us as it improves our profitability and reduces the volatility in our margins. At our Micron Insight event in October, we articulated a vision for Micron's transformation through greater vertical integration and differentiated products for the new data economy. I will highlight two of these and encourage you to view Sumit Sadana's Insight Keynote, available on our website, for more detail. First, we announced the acquisition of a small company called ForwardNext. The ForwardNext deep learning accelerator hardware and software technology, when combined with advanced micron memory, makes it possible to deploy neural network models from any framework into edge devices for inference. ForwardNet's unique technology is an important capability in our portfolio that will help us learn and better address customers' needs in the evolving AI ecosystem. At Insight, we also launched our first 3D cross-point product, the X100, which is the world's fastest storage device. The Micron X100 SSD is dramatically faster than any other SSD and including those built with NAND or 3D cross-point technology, and we are proud that it was showcased at Microsoft's Ignite conference by their Azure team. In October, we closed our acquisition of Intel's stake in the IMFD joint venture. We plan on relocating equipment and certain manufacturing employees to other micron sites as we right-size the Lehigh FAB. Redeploying equipment will also help us optimize Micron's front-end equipment capex. As with any innovative technology, it will take time to scale up our 3D Crosspoint product portfolio, ramp revenues, and achieve healthy margins, and we are excited about the long-term potential of 3D Crosspoint for both memory and storage applications. As the only company in the world with a portfolio of DRAM, NAND, and 3D Crosspoint technologies, we are in a unique position to develop differentiated products for our customers. I will now turn to technology and manufacturing operations. In DRAM, our industry-leading 1Z LP4 DRAM-based UMCP has the fastest revenue ramp of any product in the history of our mobile business. Our production mix on 1Z will increase throughout 2020, and DRAM cost reductions will be skewed toward the second half of fiscal 2020. Our previously announced clean room expansion in Taiwan is on track, and we expect output in calendar 2021. This clean room expansion is EUV capable. While we continue to evaluate EUV technology for deployment in DRAM production, our current assessment shows superior economics through one gamma node utilizing advanced emergent technology along with Micron's proprietary multi-patterning technologies. We are encouraged by recent industry progress on EUV productivity and will be prepared to deploy EUV when it becomes cost-effective to do so. In NAND, we are continuing to make progress on our replacement gauge transition and expect to begin production on our 128-layer first generation RG node in the second half of fiscal 2020. As a reminder, this node will be deployed for a limited set of products, and we expect minimal NAND cost reduction in fiscal 2020. It will be followed by an introduction of a higher layer count second generation RG node in fiscal 2021, targeted for a broader implementation, which will begin to provide more robust cost reduction as it ramps. The second-generation RG node will leverage our NAND technology leadership in CMOS under the array as well as QLC. Now turning to highlights by products and markets. In SSDs, demand from data center customers was strong in fiscal first quarter. Attach rates and capacities for client and consumer SSDs have continued to increase across our customers. There are supply shortages for SSDs across the industry, and pricing trends are improving. We are making strong progress on our transition to NVMe. As of fiscal second quarter, we will have NVMe SSDs for all market segments, which positions us to gain share in fiscal 2020. NVMe client SSD bit shipments represented almost three-quarters of our client SSD bits in fiscal Q1, versus virtually none a year ago. In the data center market, sales of our previously announced high-performance NVMe SSD nearly tripled quarter over quarter, and we announced a 96-layer mainstream data center NVMe SSD. While growing our presence in NVMe, we continue to maximize our value propositions for the SATA market by ramping 96-layer NAND products. We achieved qualifications with multiple OEMs on our 96-layer SATA data center SSD. Our QLC technology continues to gain traction. We have QLC SSDs in volume production for SATA SSDs in the data center and consumer markets, as well as NVMe SSDs for the consumer market. We became the first company to ship a 96-layer second-generation QLC SATA consumer SSD. In mobile, fiscal first quarter MCP DRAM and NAND bits grew approximately 50% quarter over quarter, and our MCP market share increased approximately 50% year over year. In fiscal Q1, our leading-edge 1Z LP4 DRAM-based UMCP achieved qualification at multiple OEMs, driving the fastest mobile product revenue ramp I mentioned earlier. We are confident that 5G will be positive for both memory and storage content growth, as well as smartphone unit sales, and are encouraged to see the launch of affordable 5G phones with price points as low as $300 that feature a minimum of 6 GB of DRAM. The 5G phones launched to date average 8 GB of DRAM and 200 GB of NAND, significantly higher than the average content in smartphones today. Our leadership on DRAM power efficiency continues to drive customer preference for our products, and we remain well positioned in this market. We have the lowest power and the highest bandwidth LP5 product that begins volume production this quarter, which we expect will become more important in 2021 as 5G adoption accelerates. In data center, strong server DRAM demand in the second half of calendar 2019 is creating an industry-wide shortage of high-quality, high-density modules for which we are seeing incremental demand from our customers. New CPU architectures supporting higher-density chips and increased number of channels are driving strong DRAM content growth in servers. In fiscal Q1, we saw strong demand growth from enterprise and cloud customers. In graphics, bit shipments remained stable with GDDR6 PC graphics cards showing strong growth offset by seasonal weakness in gaming consoles. In fiscal Q1, we began shipments of our new 14 gigabit per second GDDR6 and are well positioned to benefit from the launch of next generation gaming consoles in calendar 2020. The launch of these new gaming consoles will drive robust multi-year demand in graphics memory, and these consoles will deploy SSDs in place of hard drives for the first time. This continues a trend of SSDs replacing hard drives across more high-volume applications. In the PC market, bid shipments in the fiscal first quarter continued the growth trend from last quarter. Nevertheless, we are cautious on our near-term outlook for the PC segment due to reported CPU shortages, which seem likely to continue at least into early calendar 2020. In automotive, despite sluggish worldwide auto sales, we saw quarter-over-quarter revenue growth driven by secular memory and storage content growth. Our leadership in low-power DRAM is also driving growth for us in this market. In the fiscal first quarter, we qualified and shipped the industry's first BGA NVME SSD for automotive applications, which offers industry-leading performance and capacity in a small form factor and is well-suited to service the storage needs of increasing autonomous features. Now turning to our market outlook, our base case assumption on which all our projections are based assumes that that there are no perturbations to the demand environment due to macroeconomic conditions or trade-related developments. In DRAM, there has been a strong recovery in the second half of calendar 2019, and our view of calendar 2019 industry bid demand growth has increased to approximately 20%. The stronger-than-expected demand has resulted in pockets of shortages for us. We continue to exercise price discipline and walk away from price requests that do not meet our objectives. While these actions may impact short-term revenue, improving our business mix will enhance our long-term profitability. We are encouraged by recent DRAM pricing trends and are optimistic about improving supply-demand balance throughout calendar 2020. As we discussed on our last call, A portion of the strength and demand in the second half of calendar 2019 may be attributable to inventory bills in China, and we expect some of this customer inventory to normalize sometime in calendar 2020. As a result, we expect calendar 2020 industry DRAM bid demand growth to be in the mid-teens percent range year-over-year, which is somewhat lower than our prior outlook. due to stronger demand in calendar 2019. We expect industry bid supply growth for calendar 2020 to be somewhat less than the demand, as industry bid supply growth decelerates due to industry capex reductions. We continue to target our long-term bid supply growth CAGR to be close to the industry's long-term bid demand growth CAGR of mid to high teens. In calendar 2019, our bid supply growth will be less than the industry supply growth of mid-teens, and in 2020, our bid supply growth is expected to be slightly above industry bid supply growth. Turning to NAND, our industry bid demand growth expectation is in the mid-40s percent range in calendar 2019 and high-20s to low-30s percent range in calendar 2020. We expect calendar 2020 industry bid supply to be lower than industry bid demand as a result of industry capex reductions, and consequently we expect the industry environment to improve through calendar 2020. Micron's NAND bid supply growth in calendar 2019 is likely to be slightly below industry bid demand growth, and in calendar 2020 will be meaningfully below that of the industry. However, we expect our NAND bid shipments growth in calendar 2020 to be close to industry bid demand growth as we ship our inventory during the first generation of our RG transition. As we go through the transition to replacement gate, we expect our multi-year supply growth CAGR to be in line with the industry's demand CAGR of approximately 30%. Before I turn it over to Dave, I wanted to provide an update on our business with Huawei. As previously disclosed, we are continuing to ship some products to Huawei that are not subject to export administration regulations and entity list restrictions. We applied for and recently received all requested licenses that enable us to provide support for these products, as well as qualify new products for Huawei's mobile and server businesses. Additionally, these licenses allow us to ship previously restricted products that we manufacture in the United States, which represent a very small portion of our sales. However, there are still some products outside of the mobile and server markets that we are unable to sell to Huawei. Receiving the licenses is a positive development, and we are thankful to the U.S. administration for approving these licenses. Prior to receiving these licenses, entity-less restrictions severely limited our ability to qualify new products at Huawei. Although we are now able to qualify new products with Huawei's mobile and server businesses, it will take some time before the qualifications are completed and contribute to revenue. Consequently, we do not expect these licenses to have a material impact on our revenue in the next couple of quarters. I'll now turn it over to Dave to provide our financial results and guidance.