Update: 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  
                                  ---------    ---------    ---------    -----------    ------------  
PSD(1)                      $    69,347    $    67,746    $    65,505                        2%                        6%
MPD(1)                      $    81,323    $    79,890          82,229                        2%                      -1%
DCD(1)                      $    15,590    $    16,482          22,747                      -5%                    -31%
ETD(1,  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.  
                                                                                                                                                        
 

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