SOURCE: Cypress Semiconductor Corp.

Cypress Semiconductor Corp.

April 17, 2014 08:00 ET

Cypress Reports First-Quarter 2014 Results

SAN JOSE, CA--(Marketwired - Apr 17, 2014) - Cypress Semiconductor Corp. (NASDAQ: CY) today announced its first-quarter 2014 results, which included the remarks below from its president and CEO, T.J. Rodgers. Highlights for the quarter included:

  • First-quarter revenue and earnings are at the high end of guidance
  • Non-GAAP operating income increased 116% year-on-year
  • Inventory decreased 11% sequentially
  • Free cash flow increased 60% sequentially
  • Book-to-bill was 1.08

Fellow shareholders:

Our revenue and earnings for the quarter are given below, compared with those of the prior quarter and prior year:

(In thousands, except per-share data)

             
    NON-GAAP     GAAP  
    Q1 2014     Q4 2013     Q1 2013     Q1 2014     Q4 2013     Q1 2013  
Revenue   $ 170,283     $ 167,776     $ 172,728     $ 170,283     $ 167,776     $ 172,728  
                                                 
Gross margin     50.3 %     51.0 %     50.7 %     45.6 %     45.6 %     45.8 %
                                                 
Pretax margin     7.3 %     9.4 %     2.5 %     -7.5 %     -7.0 %     -16.6 %
Net income (loss)   $ 11,974     $ 14,992     $ 4,579     $ (7,934 )   $ (13,577 )   $ (28,195 )
                                                 
Diluted EPS (loss per share)   $ 0.07     $ 0.09     $ 0.03     $ (0.05 )   $ (0.09 )   $ (0.19 )
                                                 

Cypress's first-quarter revenue increased 1.5% sequentially, outpacing normal seasonality and exceeding the upper range of our initial guidance with broad revenue increases. Our continued focus on operating expense management showed up in a comparison of the first quarter of 2013 ($173 million in revenue, $0.03 EPS) to the first quarter of 2014 ($170 million in revenue, $0.07 EPS).

We exited the first quarter with a book-to-bill ratio of 1.08 and expect solid sequential revenue growth in the second quarter. Our Q2 earnings will grow much faster than revenue, reflecting the inherent leverage created by our efficiency improvements.

The design win pipeline for our TrueTouch® touchscreen products was evident at both the Consumer Electronics Show in Las Vegas and the Mobile World Congress show in Barcelona, Spain last quarter; we saw multiple new products with Cypress touchscreen solutions, such as the YotaPhone 2 and the ZTE nubia Z5S, cited in this release, and the Huawei MediaPad X1. The Yota Devices and Huawei products use our latest Gen5 touchscreen product, the TMA568, which has begun to generate revenue just six months after we brought it to market.

BUSINESS REVIEW

+ Our non-GAAP consolidated gross margin for the first quarter was 50.3%, down 0.7 percentage points from the previous quarter, primarily due to product mix. Excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 51.8%. ETD revenue is growing rapidly (see Net Sales Summary table) and will contribute significantly to revenue growth in 2014.

+ Net inventory at the end of the first quarter was $89.2 million, down 11% from the fourth quarter.

   
NET SALES SUMMARY  
(In thousands, except percentages)  
(Unaudited)  
   
   
  THREE MONTHS ENDED        
 
Mar. 30,
   
 Dec. 29,
    Mar. 31,     Sequential     Year-over-  
Business Unit 2014     2013     2013     Change     Year Change  
PSD1 $ 69,347     $ 67,746     $ 65,505     2 %   6 %
MPD1 $ 81,323     $ 79,890       82,229     2 %   -1 %
DCD1 $ 15,590     $ 16,482       22,747     -5 %   -31 %
ETD1, 2 $ 4,023     $ 3,658       2,247     10 %   79 %
Total $ 170,283     $ 167,776     $ 172,728     1 %   -1 %
                                   
Geographic                                  
China and ROW   62 %     64 %     64 %   -3 %   -3 %
Americas   15 %     14 %     17 %   7 %   -12 %
Europe   14 %     12 %     11 %   17 %   27 %
Japan   9 %     10 %     8 %   -10 %   13 %
Total   100 %     100 %     100 %   0 %   0 %
                                   
Channel                                  
Distribution   68 %     69 %     74 %   -1 %   -8 %
Direct   32 %     31 %     26 %   3 %   23 %
Total   100 %     100 %     100 %   0 %   0 %
                                   
   
1. PSD, Programmable Systems Division; DCD, Data Communications Division; MPD, Memory Products Division: ETD, Emerging Technologies Division.
2. "Emerging Technologies" includes businesses outside our core semiconductor businesses outlined in Footnote 1. Includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit.
   

FIRST-QUARTER 2014 HIGHLIGHTS

+ Cypress broadly introduced a new family of CapSense® controllers that enables engineers of all levels to quickly implement sleek and robust capacitive buttons, sliders and proximity sensors without the need for coding or firmware development. The new CY8CMBR3x controllers provide industry-leading features, such as liquid tolerance, a high signal-to-noise ratio and proximity sensing, making them ideal replacements for mechanical buttons in industrial, medical, consumer and wearable electronics applications at a cost of $0.03 per button.

+ Cypress introduced a TrueTouch Gen4X capacitive touchscreen controller family that supports touchscreens with advanced features and larger screen sizes up to 8.3 inches. The Gen4X TMA448 controller delivers best-in-class gloved-finger tracking and noise immunity, enabling high-performance touchscreens for superphones, smartphones, tablets and e-readers in cost-sensitive markets such as China.

+ In a teardown of the Qualcomm Toq smartwatch, the electronics industry analysis firm TechInsights reported that a Cypress TrueTouch TMA140 controller drives the device's fast and accurate touchscreen navigation. This wearables design win follows Cypress's win in the Sony Smartwatch 2. Cypress touch controllers now can operate on just milliwatts of power, a necessity in the world of wearables.

+ ZTE selected Cypress's TrueTouch Gen4 touchscreen controller for its new, top-of-the-line nubia Z5S and nubia Z5S Mini smartphones. Gen4 enables the family's "easy-wake" functionality, which allows users to activate the phones from sleep mode with a convenient, customized gesture, such as tracing the letter "X."

+ Yota Devices selected Cypress's TrueTouch Gen5 touchscreen controllers to drive both of the displays in its next-generation YotaPhone. This premium Android phone uses the TMA568 controller for advanced multi-touch functionality in the standard display on the front of the phone and the TMA545 chip to control the "always-on" electronic paper display on the back of the phone.

 + Cypress continues to work with multiple touch-sensor suppliers to enable more accurate and responsive user interfaces for smartphones, tablets, wearables and other touchscreen applications. In Q1, Cypress announced that its TrueTouch touchscreen controllers can now drive the silver nanowire sensors from Carestream Advanced Materials and the SANTE® silver nanoparticle touch sensors from Cima NanoTech.

+ Cypress announced that it is offering its powerful, 32-bit ARM® Cortex™-M0-based PSoC® 4 programmable system-on-chip for just $1 and a new PSoC 4 prototyping board for only $4. The silicon and kit enable design engineers to upgrade their 8- and 16-bit designs to 32 bits for less than the cost of a pack of AA batteries.

+ Cypress introduced a USB 3.0 hub controller for the 5-Gbps SuperSpeed USB 3.0 standard. The EZ-USB® HX3 controller, which has been certified by the USB Implementers Forum (USB-IF), has been tested with hundreds of USB legacy devices to guarantee robust interoperability. HX3 has a unique feature called Shared Link™, which spits four of the hub's USB 3.0 ports into four SuperSpeed ports and four standard USB 2.0 ports, enabling eight ports in total. It also provides charging support for all important standards and full configurability, addressing applications such as docking stations, monitors, Ultrabook™ computers, digital TVs, set-top boxes, printers and servers.

+ Cypress announced production availability of the industry's first fourth-generation Quad Data Rate SRAM. Cypress's QDR®-IV SRAM, the market's highest-performance standard networking memory solution, offers a Random Transaction Rate (RTR) up to 2,132 million transactions per second (MT/s), which meets the demanding bandwidth requirements of 100-Gb to 400-Gb line cards in next-generation switches and routers. Cypress offers QDR-IV SRAMs in 72Mb and 144Mb densities.

+ Cypress subsidiary Deca Technologies, a provider of electronic interconnect solutions for the semiconductor industry, shipped its 100-millionth component. The company attributes its rapid growth to strong and sustained demand for wafer-level chip scale packages (WLCSP) -- which are three to six times smaller than conventional chip packages. Deca manufactures WLCSPs using its unique, integrated Autoline production platform, which automates chip packaging to achieve faster time-to-market at a lower cost.

+ An employee relations services and software company, Achievers, named Cypress to its annual list of the 50 Most Engaged Workplaces™ in the U.S. The award recognizes companies that display leadership and innovation in engaging their employees.

+ Cypress announced that its Board of Directors approved a quarterly cash dividend of $0.11 per share, payable to holders of record of the company's common stock as of the close of business on March 27, 2014. This dividend was paid on April 17, 2014.

FOLLOW CYPRESS ONLINE

ABOUT CYPRESS

Cypress delivers high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value. Cypress offerings include the flagship PSoC 1, PSoC 3, PSoC 4 and PSoC 5LP programmable system-on-chip families. Cypress is the world leader in capacitive user interface solutions including CapSense touch sensing, TrueTouch touchscreens, and trackpad solutions for notebook PCs and peripherals. Cypress is a world leader in USB controllers, which enhance connectivity and performance in a wide range of consumer and industrial products. Cypress is also the world leader in SRAM and nonvolatile RAM memories. Cypress serves numerous major markets, including consumer, mobile handsets, computation, data communications, automotive, industrial and military. Cypress trades on the NASDAQ Global Select Market under the ticker symbol CY. Visit Cypress online at www.cypress.com.

FORWARD-LOOKING STATEMENTS

Statements herein that are not historical facts and that refer to Cypress or its subsidiaries' plans and expectations for Q2 2014 and the remainder of fiscal year 2014 and beyond are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as "believe," "expect," "future," "plan," "intend" and similar expressions to identify such forward-looking statements that include, but are not limited to, statements related to the semiconductor market; the strength and growth of our proprietary and programmable products; our expectations regarding our revenue growth and earnings leverage; our expectation that our ETD division will significantly contribute to our 2014 revenue growth; our expectations regarding the demand for our products and how our products are expected to perform, as well as American Semiconductor's transfer of a specialized wafer process to our manufacturing facility. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this release. Our actual results may differ materially due to a variety of uncertainties and risk factors, including, but not limited to, the state of and future of the global economy, business conditions and growth trends in the semiconductor market, whether our products perform as expected, whether the demand for our proprietary and programmable products is fully realized, our ability to manage our business to have strong earnings and significant revenue growth, reduce operating expenses, our ability to effectively implement third party wafer processes, the strength or softness of the markets we serve, our ability to maintain and improve our gross margins and realize our bookings, the seasonality of the markets we serve, the financial performance of our subsidiaries and Emerging Technology Division, and other risks described in our filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Cypress, the Cypress logo, PSoC, TrueTouch, EZ-USB and CapSense are registered trademarks and Shared Link is a trademark of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.

   
   
   
CYPRESS SEMICONDUCTOR CORPORATION  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands)  
(Unaudited)  
             
    March 30,     December 29,  
    2014     2013  
                 
ASSETS                
                 
  Cash, cash equivalents and short-term investments   $ 111,525     $ 104,462  
  Accounts receivable, net     118,215       81,084  
  Inventories, net (a)     89,193       100,612  
  Property, plant and equipment, net     253,234       258,585  
  Goodwill and other intangible assets, net     104,678       106,524  
  Other assets     103,498       114,569  
    Total assets   $ 780,343     $ 765,836  
                 
LIABILITIES AND EQUITY                
                 
  Accounts payable   $ 49,940     $ 47,893  
  Deferred margin on sales to distributors     141,669       122,578  
  Income tax liabilities     24,051       29,865  
  Other liabilities     161,901       159,865  
  Long-term revolving credit facility     227,000       227,000  
    Total liabilities     604,561       587,201  
  Total Cypress stockholders' equity     180,591       183,109  
  Noncontrolling interest     (4,809 )     (4,474 )
    Total equity     175,782       178,635  
      Total liabilities and equity   $ 780,343     $ 765,836  
                 
(a) Net inventories include $6.1 million and $5.3 million of capitalized inventories related to stock compensation expense, as of March 30, 2014 and December 29, 2013, respectively.        
   
   
   
CYPRESS SEMICONDUCTOR CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
ON A GAAP BASIS  
(In thousands, except per-share data)  
(Unaudited)  
                   
    Three Months Ended  
    March 30,     December 29,     March 31,  
    2014     2013     2013  
                         
Revenues   $ 170,283     $ 167,776     $ 172,728  
Cost of revenues     92,561       91,328       93,682  
Gross margin     77,722       76,448       79,046  
Operating expenses:                        
Research and development     45,330       42,343       49,330  
Selling, general and administrative     42,609       43,623       45,442  
Amortization of acquisition-related intangibles     1,833       1,850       2,009  
Restructuring charges     (1,014 )     (469 )     11,440  
Total operating expenses, net     88,758       87,347       108,221  
Operating loss     (11,036 )     (10,899 )     (29,175 )
Interest and other income (loss), net     (1,750 )     (805 )     483  
Loss before income taxes     (12,786 )     (11,704 )     (28,692 )
Income tax provision (benefit)     (4,517 )     2,210       146  
Loss, net of taxes     (8,269 )     (13,914 )     (28,838 )
Adjust for net loss attributable to noncontrolling interest     335       337       643  
Net loss attributable to Cypress   $ (7,934 )   $ (13,577 )   $ (28,195 )
Net loss per share attributable to Cypress:                        
Basic   $ (0.05 )   $ (0.09 )   $ (0.19 )
Diluted   $ (0.05 )   $ (0.09 )   $ (0.19 )
Shares used in net loss per share calculation:                        
Basic     154,572       151,580       145,689  
Diluted     154,572       151,580       145,689  
         
         
         
CYPRESS SEMICONDUCTOR CORPORATION        
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)        
(In thousands, except per-share data)        
(Unaudited)        
                   
    Three Months Ended  
    March 30,     December 29,     March 31,  
    2014     2013     2013  
                         
GAAP gross margin   $ 77,722     $ 76,448     $ 79,046  
  Stock-based compensation expense     2,251       3,088       3,618  
  Acquisition-related expense     2,967       5,562       422  
  Changes in value of deferred compensation plan     218       136       122  
  Impairment of assets and other     2,564       269       4,307  
Non-GAAP gross margin   $ 85,722     $ 85,503     $ 87,515  
                         
GAAP research and development expenses   $ 45,330     $ 42,343     $ 49,330  
  Stock-based compensation expense     (7,183 )     (7,356 )     (4,967 )
  Acquisition-related expense     -       -       (815 )
  Changes in value of deferred compensation plan     (424 )     (282 )     (207 )
  Impairment of assets and other     -       1,368       (1,394 )
Non-GAAP research and development expenses   $ 37,723     $ 36,073     $ 41,947  
                         
GAAP selling, general and administrative expenses   $ 42,609     $ 43,623     $ 45,442  
  Stock-based compensation expense     (7,388 )     (10,432 )     (3,852 )
  Acquisition-related expense     (473 )     (148 )     (556 )
  Changes in value of deferred compensation plan     (964 )     (607 )     (1,861 )
  Impairment of assets and other     -       (244 )     (177 )
Non-GAAP selling, general and administrative expenses   $ 33,784     $ 32,192     $ 38,996  
                         
GAAP operating loss   $ (11,036 )   $ (10,899 )   $ (29,175 )
  Stock-based compensation expense     16,822       20,877       12,437  
  Acquisition-related expense     5,274       7,558       2,894  
  Changes in value of deferred compensation plan     1,606       1,026       3,098  
  Impairment of assets and other     2,564       (854 )     5,878  
  Restructuring charges     (1,014 )     (470 )     11,440  
Non-GAAP operating income   $ 14,216     $ 17,238     $ 6,572  
                         
GAAP net loss attributable to Cypress   $ (7,934 )   $ (13,577 )   $ (28,195 )
  Stock-based compensation expense     16,822       20,877       12,437  
  Acquisition-related expense     5,274       7,558       2,894  
  Changes in value of deferred compensation plan     747       (535 )     674  
  Impairment of assets and other     2,564       (854 )     5,525  
  Restructuring charges     (1,014 )     (470 )     11,440  
  Tax and tax-related items     (5,367 )     1,065       (196 )
  Investment-related gains/losses     883       930       -  
Non-GAAP net income attributable to Cypress   $ 11,975     $ 14,994     $ 4,579  
                         
GAAP net loss per share attributable to Cypress - diluted   $ (0.05 )   $ (0.09 )   $ (0.19 )
  Stock-based compensation expense     0.10       0.13       0.08  
  Acquisition-related expense     0.03       0.05       0.02  
  Changes in value of deferred compensation plan     -       -       0.01  
  Impairment of assets and other     0.02       (0.01 )     0.04  
  Restructuring charges     (0.01 )     -       0.07  
  Tax and tax-related items     (0.03 )     0.01       -  
  Investment-related gains/losses     0.01       0.01       -  
  Non-GAAP share count adjustment     -       (0.01 )     -  
Non-GAAP net income per share attributable to Cypress - diluted   $ 0.07     $ 0.09     $ 0.03  
                         
                         
(a) Refer to the accompanying "Notes to Non-GAAP Financial Measures" for a detailed discussion of management's use of non-GAAP financial measures.  
   
   
   
CYPRESS SEMICONDUCTOR CORPORATION  
SUPPLEMENTAL FINANCIAL DATA  
(In thousands)  
(Unaudited)  
                   
    Three Months Ended  
    March 30,     December 29,     March 31,  
    2014     2013     2013  
Selected Cash Flow Data (Preliminary):                        
Net cash provided by operating activities   $ 25,198     $ 21,029     $ 8,265  
Net cash provided (used) by investing activities   $ 2,063     $ 309     $ (895 )
Net cash used in financing activities   $ (9,619 )   $ (2,276 )   $ (13,354 )
                         
Other Supplemental Data (Preliminary):                        
Capital expenditures   $ 5,559     $ 8,750     $ 9,298  
Depreciation   $ 9,485     $ 9,436     $ 10,355  
Payment of dividend   $ 16,850     $ 16,578     $ 15,845  
Dividend paid per share   $ 0.11     $ 0.11     $ 0.11  
Dividend yield per share (a)     4.4 %     4.3 %     4.0 %
                         
(a) Dividend yield per share is calculated based on annualized dividend paid per share divided by the common stock share price at the end of the period.  
 
 
 
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED DILUTED EPS CALCULATION
(In thousands, except per-share data)
(Unaudited)
                             
  Three Months Ended
  March 30,   December 29,   March 31,
  2014   2013   2013
  GAAP     Non-GAAP   GAAP     Non-GAAP   GAAP     Non-GAAP
                                         
Net income (loss) attributable to Cypress $ (7,934 )   $ 11,974   $ (13,577 )   $ 14,992   $ (28,195 )   $ 4,579
                                         
Weighted-average common shares outstanding (basic)   154,572       154,572     151,580       151,580     145,689       145,689
Effect of dilutive securities:                                        
Stock options, unvested restricted stock and other   -       11,366     -       14,698     -       12,569
Weighted-average common shares outstanding for diluted computation   154,572       165,938     151,580       166,278     145,689       158,258
                                         
Net income (loss) per share attributable to Cypress - basic $ (0.05 )   $ 0.08   $ (0.09 )   $ 0.10   $ (0.19 )   $ 0.03
Net income (loss) per share attributable to Cypress - diluted $ (0.05 )   $ 0.07   $ (0.09 )   $ 0.09   $ (0.19 )   $ 0.03
                                         
             
             
    March 30,   December 29,   March 31,
    2014   2013   2013
                   
Average stock price for the period ended   $ 10.13   $ 9.45   $ 10.50
                   
Common stock outstanding at period end (in thousands)     156,971     153,214     146,866
                   
                   
                   

Contact Information

  • Contacts:
    Brad W. Buss
    EVP Finance & Administration and CFO
    (408) 943-2754

    Joseph L. McCarthy
    Director, Corporate Communications
    (408) 943-2902