Cypress Reports Second-Quarter 2014 Results

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

  • Revenue met guidance
  • Net income beat guidance and more than doubled sequentially
  • Consumer electronics revenue slowed, but the industrial and automotive sector remained strong at 43% of revenue
  • Gross margin was 54%, up 3.7 percentage points sequentially
  • Free cash flow was $39.5 million (21.5% of revenue)

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             
                 ----------------------------  ---------------------------- 
                  Q2 2014   Q1 2014   Q2 2013   Q2 2014   Q1 2014   Q2 2013 
                 --------  --------  --------  --------  --------  -------- 
Revenue          $183,601  $170,283  $193,466  $183,601  $170,283  $193,466 
                                                                            
Gross margin         54.0%     50.3%     53.1%     51.9%     45.6%     47.3%
                                                                            
Pretax margin        14.9%      7.3%     11.5%      5.2%     -7.5%     -3.1%
                                                                            
Net income                                                                  
 (loss)          $ 26,723  $ 11,974  $ 21,635  $  9,527  $ (7,934) $  3,766 
                                                                            
Diluted EPS                                                                 
(loss per share) $   0.16  $   0.07  $   0.14  $   0.06  $  (0.05) $   0.02 

Second-quarter revenue increased 8% sequentially, and gross margin increased to 54%, due to a favorable product and end-customer mix. Higher revenue and gross margin produced $0.16 earnings per share in the quarter, up significantly from the $0.07 in the prior quarter.

Our book-to-bill ratio was 0.99, due to a mild, but broad, softening in the consumer electronics sector. However, based on the strength of the automotive and industrial sectors, we remain on track to attain our 2014 revenue forecast, which I communicated to shareholders in our 2013 Annual Report. Those two sectors account for 43% of revenue, more than double our TrueTouch® touchscreen revenue.

Our pretax profit of $27.4 million and our free cash flow of $39.5 million were up quarter-on-quarter by 120% and 102%, respectively, reflecting the fall-through leverage in our current model.

BUSINESS REVIEW

+ Our non-GAAP consolidated gross margin for the second quarter was 54.0%, up 3.7 percentage points from the previous quarter, primarily due to product and end-customer mix. Excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 55.8%, the highest level since 2012. ETD revenue nearly doubled year-on-year (see Net Revenue Summary table) and will continue to grow rapidly throughout 2014.

+ Net inventory at the end of the second quarter was flat at $89.0 million.

                                                                            
                             NET REVENUE SUMMARY                            
                     (In thousands, except percentages)                     
                                 (Unaudited)                                
                                                                            
                        THREE MONTHS ENDED                                           
                                  -------------------------------                                                        
                                                                                                                                                        
                                    Jun.  29,      Mar.  30,      Jun.  30,      Sequential      Year-over-    
Business  Unit              2014              2014              2013              Change          Year  Change  
                                  ---------    ---------    ---------    -----------    ------------  
PSD(1)                      $    74,676    $    69,347    $    81,320                        8%                      -8%
MPD(1)                      $    85,582    $    81,323    $    88,127                        5%                      -3%
DCD(1)                      $    17,989    $    15,590    $    21,296                      15%                    -16%
ETD(1,  2)                $      5,354    $      4,023    $      2,723                      33%                      97%
                                  ---------    ---------    ---------    -----------    ------------  
Total                        $  183,601    $  170,283    $  193,466                        8%                      -5%
                                  ---------    ---------    ---------    -----------    ------------  
                                                                                                                                                        
Geographic                                                                                                                                    
China  and  ROW                      62%                62%                69%                      0%                    -10%
Americas                                17%                15%                13%                    13%                      31%
Europe                                    13%                14%                10%                    -7%                      30%
Japan                                        8%                  9%                  8%                  -11%                        0%
                                  ---------    ---------    ---------    -----------    ------------  
Total                                    100%              100%              100%                      0%                        0%
                                  ---------    ---------    ---------    -----------    ------------  
                                                                                                                                                        
Channel                                                                                                                                          
Distribution                        68%                68%                75%                      0%                      -9%
Direct                                    32%                32%                25%                      0%                      28%
                                  ---------    ---------    ---------    -----------    ------------  
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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