Cypress Semiconductor : Reports Third-Quarter 2014 Results

SAN JOSE, CA--(Marketwired - Oct 16, 2014) - Cypress Semiconductor Corp. (NASDAQ: CY) today announced its third-quarter 2014 results, which included the remarks below from its president and CEO, T.J. Rodgers. Highlights for the quarter included:

• Revenue ($187.5 million), gross margin (53.5%), pretax margin (15.0%) and earnings per share ($0.16) all met non-GAAP guidance
• Emerging Technologies Division revenue increased 40% sequentially and 153% year-on-year
• Dividend yield was 4.4% with favorable tax treatment
• Industrial and Automotive segments remained strong and combined for 45% 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)

Third-quarter revenue increased 2.1% sequentially, led by growth in our Memory Products Division (MPD) and Emerging Technologies Division (ETD), which is now contributing significantly to Cypress's growth with 40% sequential growth to $7.5 million. All three of our ETD startup businesses grew sequentially and will contribute significantly to revenue growth in 2015. The revenue growth in MPD and ETD was partially offset by ongoing softness in the handset market.

Our non-GAAP pretax profit increased 18.7% year-on-year, partly driven by a 7.0% reduction in non-GAAP operating expenses.

Our cash, cash equivalents and short-term investments increased 5.8% sequentially, demonstrating the fall-through leverage of our current business model.

BUSINESS REVIEW

+ Our non-GAAP consolidated gross margin for the third quarter was 53.5%, down 0.5 percentage points from the previous quarter, primarily due to product mix. Excluding ETD, our core semiconductor gross margin was 55.3%.

+ Net inventory at the end of the third quarter was $88.8 million, flat from the second quarter.

+ 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 September 25, 2014. This dividend was paid on October 16, 2014.

THIRD-QUARTER 2014 HIGHLIGHTS

+ Huawei tablet. Huawei designed Cypress's TrueTouch^® Gen5 TMA568 capacitive touchscreen controller into its new MediaPad X1 tablet. The controller features industry-leading gloved-finger tracking and hover support.

+ Samsung Galaxy S5 Mini smartphone. A teardown by analytics firm TechInsights found Cypress's TrueTouch Gen5 TMA545 touchscreen controller in the new Samsung Galaxy S5 Mini smartphone. The smartphone employs Gen5's advanced features, including gloved-finger tracking and hover support. The teardown noted that the TrueTouch controller replaced competing touch controllers used in the previous-generation Galaxy S4 Mini and S3 Mini smartphones.

+ Low-cost touchscreen sensors and controllers. The TrueTouch Gen4X touchscreen controller family now supports Cypress's Single-Layer Independent Multi-touch (SLIM^®) sensor structures, which reduce multi-layer sensor costs by as much as 50%. The Gen4X TMA445 and TMA445A controllers also support gloved-finger tracking and a face-detection feature that prevents hang-ups.

+ CapSense buttons for 2.5 cents. Cypress announced that designers can now replace mechanical buttons for just 2.5 cents apiece using its CY8CMBR3110 CapSense^® controllers. The mechanical button replacement (MBR) family enables the quick implementation of sleek, reliable capacitive touch-sensing user interfaces with advanced features such as water tolerance and proximity sensing.

+ A $49 kit to implement USB 3.0. Cypress introduced a new, low-cost, easy-to-use USB 3.0 SuperSpeed Explorer Kit based on its programmable EZ-USB^® FX3™ peripheral controller, the undisputed leader for USB 3.0-compatible devices. The development platform enables designers to add 5-Gbps USB 3.0 data throughput to virtually any system quickly and cheaply.

+ Cypress-Lattice kit. Cypress collaborated with Lattice Semiconductor to bring 5-Gbps data throughput to the Lattice USB 3.0 Video Bridge Development Kit. The kit uses the Cypress EZ-USB FX3 controller to simplify the integration of USB 3.0 audio and high-definition (HD) video.

+ Raytrix camera. Raytrix GmbH selected Cypress's EZ-USB CX3™ USB 3.0 camera controller for its next-generation 3-D camera. The CX3's 5-Gbps USB 3.0 throughput enables the innovative R42 3-D Light Field Camera to create images with extended depth-of-field, allowing for precise focusing later in software.

+ Nonvolatile DDR4 DIMMs. Cypress subsidiary AgigA Tech began sampling the industry's first DDR4 Nonvolatile DIMM (NVDIMM) to key OEMs and development partners. The NVDIMM preserves data during power outages, while still operating as a full-performance DIMM. The device targets next-generation, Intel-based server platforms.

+ Ultra-high-reliability SRAM. Cypress expanded its family of asynchronous SRAMs with a new 16 Mb MoBL^® (More Battery Life™) low-power SRAM that includes embedded, on-chip Error-Correcting Code (ECC). On-chip ECC makes these SRAMs 1,000 times more reliable than standard SRAMs and eliminates the need for additional error correction chips.

+ Foundry technology deal. Cypress and Chinese wafer foundry licensee Shanghai Huali Microelectronics Corp. (HLMC) developed functioning memory cells using Cypress's SONOS (Silicon Oxide Nitride Oxide Silicon) embedded flash memory intellectual property (IP) at the 55-nanometer process technology node. The nonvolatile memory cells are designed for use in smartcards and embedded-flash microcontrollers.

+ Access to 60,000 technical documents. Cypress introduced a document management tool that helps customers quickly search Cypress online technical content. The Cypress Document Manager tool allows users to search and locate more than 60,000 Cypress technical documents.

FOLLOW CYPRESS ONLINE

• Join the Cypress Developer Community.
• Follow @CypressSemi on Twitter.
• Visit us on Facebook and LinkedIn.
• View Cypress videos on our Video Library or YouTube.

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 Q4 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. 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 Technologies 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, SLIM, EZ-USB, MoBL and CapSense are registered trademarks and FX3, CX3 and More Battery Life are trademarks of Cypress Semiconductor Corp. AGIGA is a registered trademark of AgigA Tech, Inc. All other trademarks or registered trademarks are the property of their respective owners.

NOTES TO NON-GAAP FINANCIAL MEASURES

To supplement its consolidated financial results presented in accordance with GAAP, Cypress uses the following non-GAAP financial measures which are adjusted from the most directly comparable GAAP financial measures:

• Gross margin
• Research and development expenses
• Selling, general and administrative expenses
• Operating income (loss)
• Net income (loss)
• Diluted net income (loss) per share

The non-GAAP measures set forth above exclude charges primarily related to stock-based compensation, which represent approximately 60% to 85% of total adjustments for the four most recent quarters, as well as restructuring charges, acquisition-related expenses and other adjustments. Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of Cypress's operations that, when viewed in conjunction with Cypress's GAAP results, provide a more comprehensive understanding of the various factors and trends affecting Cypress's business and operations. Management uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting and resource allocation processes. In addition, these non-GAAP financial measures facilitate management's internal comparisons to Cypress's historical operating results and comparisons to competitors' operating results. Pursuant to the requirements of Regulation G and to make clear to our investors the adjustments we make to GAAP measures, we have provided a reconciliation of the non-GAAP measures to the most directly comparable GAAP financial measures.