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Cypress Reports Fourth Quarter and Year-End 2015 Results | Cypress Semiconductor

Cypress Reports Fourth Quarter and Year-End 2015 Results

Last Updated: March 15, 2018

CLICK HERE FOR Q415 FINANCIAL RESULTS

 

SAN JOSE, Calif., January 28, 2016—Cypress Semiconductor Corp. (NASDAQ: CY) today announced its fourth-quarter and fiscal-year 2015 results, which included the remarks below from its president and CEO, T.J. Rodgers. Highlights for the quarter included (all financial comments are based on non-GAAP results, unless otherwise noted):

  • Revenue of $456.4 million and earnings per share of $0.13, in line with guidance
  • $137.7 million in realized annualized synergies, remaining ahead of plan
  • $56.5 million common stock repurchase, part of a $450 million repurchase program
  • Dividend payment of $36.9 million ($0.11 per share, equal to a 4.5% annualized yield as of December 31, 2015)

Fellow shareholders:

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

 

(In thousands, except per-share data)

Q4 2015 Revenue and Earnings

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

 

(In thousands, except per-share data)

FY2015 Revenue and Earnings

  1. 2015 includes results of the merger with Spansion as of March 12, 2015.

Fourth-quarter revenue declined 2.9% sequentially in a seasonally soft semiconductor market. This performance was in line with the high end of our guidance. We remained ahead of our three-year merger synergy plan of $160 million in cost synergies, achieving $137.7 million in annualized synergies as of the end of the first year. Gross margin dropped to 39.8% due primarily to our lean inventory initiative, under which we are running our wafer fabs at a rate lower than actual demand capacity to burn off excess inventory.

Cypress remains committed to the task of building on our position as a leading provider of high-performance embedded solutions for the automotive and industrial markets and other promising markets such as Home Appliances and the Internet of Things (IoT). Our revenue in automotive and industrial continues to grow: Revenue from these segments increased to 55% of our total revenues in the fourth quarter, up from 52% in the fourth quarter of 2014. We continue to be a source of technology leadership in these markets. For example, our IoT wireless beacon solution, which is discussed in the new-product section below, was named one of the 10 best technologies at the CES tradeshow earlier this month.

We remain committed to the return of capital to our shareholders through quarterly dividends and stock repurchases. The return of capital this quarter was $93.4 million, with a dividend payout of $36.9 million and a $56.5 million buyback.

BUSINESS REVIEW

+ Our non-GAAP consolidated gross margin for the fourth quarter was 39.8%, consistent with the lower fab utilization inherent in our lean inventory initiative, which will run through the third quarter of 2016. In addition, excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 40.3%. Fab utilization was roughly 60% in the fourth quarter. It will drop to approximately 50% in the first quarter of 2016, reducing gross margin.

+ Net inventory at the end of the fourth quarter was $243.6 million, down 12.7% from the third quarter and down 37.4% from the first quarter. This steep inventory reduction is the intended benefit of our lean inventory initiative.

+ 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 December 31, 2015. This dividend was paid on January 21, 2016.

 

FIRST QUARTER 2016 FINANCIAL OUTLOOK

For the first quarter of 2016, Cypress estimates non-GAAP financial results as follows: net sales in the range of $410 million to $440 million, gross margin of 36%, and diluted EPS in the range of $0.04 to $0.08. 1

  1. These estimates exclude amortization of intangibles of approximately $36 million, equity compensation expense of approximately $27 million, and restructuring charges, depreciation or amortization related to accounting for the Spansion merger of approximately $28 million.

NET SALES SUMMARY

(In thousands, except percentages)

(Unaudited)

Q4 2015 Net Sales Summary

  1. PSD, Programmable Systems Division; DCD, Data Communications Division; MPD, Memory Products Division.
  2. ETD, Emerging Technologies Division includes businesses outside our core semiconductor businesses named in Footnote 1. ETD includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit.
  3. Our net sales for the third and fourth quarters of 2015 and our estimates for the first quarter of 2016 include $6.25 million of legacy Spansion non-GAAP licensing revenue in MPD, APAC region and direct channel.

FY2015 Net Sales Summary

  1. 2015 includes results of the merger with Spansion as of March 12, 2015
  2. PSD, Programmable Systems Division; DCD, Data Communications Division; MPD, Memory Products Division.
  3. ETD, Emerging Technologies Division includes businesses outside our core semiconductor businesses named in Footnote 1. ETD includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit.
  4. Our net sales for twelve months ended 2015 and our estimates for the first quarter of 2016 include $18.75 million and $6.25 million of legacy Spansion non-GAAP licensing revenue in MPD, APAC region and direct channel, respectively.

FOURTH-QUARTER 2015 HIGHLIGHTS

Cypress introduced 12 new products during the quarter, mostly in its targeted automotive and industrial markets:

+ The first Traveo™ automotive microcontrollers in an advanced 40-nm process, expanding Cypress’s market-share-leading portfolio of MCUs for automotive instrument cluster systems.

+ The industry’s most compact, highly integrated automotive power management ICs (PMICs), which regulate the power supply from a car battery, safely managing extreme voltage fluctuations in Advanced Driver Assistance Systems (ADAS), body-control modules and instrument cluster systems.

+ An automotive LED driver that is unique in its ability to drive a single LED at a high 2.1-MHz switching frequency in headlights and other front-lighting systems. High switching frequency reduces component size, enabling the industry’s smallest LED headlight driving solutions.

+ A transceiver for the Clock Extension Peripheral Interface (CXPI), a new standard backed by Toyota that is designed to succeed the ubiquitous Local Interconnect Network (LIN) protocol for internal automotive communications. Cypress is the only supplier to provide a complete CXPI solution, offering a transceiver and automotive CXPI-enabled MCUs.

+ Two new NOR Flash memories with Quad Serial Peripheral Interfaces. Cypress’s Quad SPI memories are used wherever a lot of data is required to boot up embedded automotive systems such as ADAS, instrument cluster and infotainment systems. The new 1.8-V, 64Mb FS-S NOR Flash device features the industry’s highest read bandwidth and fastest program time.

+ A high-performance FM4 (Flexible Microcontroller) based on the 200-MHz Arm® Cortex®-M4 core, targeting motor control, home appliance applications and solutions for Industry 4.0 smart factories.

+ Two new FM0+ energy-efficient MCUs based on the Arm Cortex-M0+ core. The MCUs provide the market’s best combination of power consumption, performance and peripheral integration for wearables and other Internet of Things (IoT) applications.

+ The PSoC® 4 L-Series programmable system-on-chip, the industry’s most flexible single-chip 32-bit Arm-Cortex-M0-based solution. This new PSoC adds a USB controller to the PSoC 4 architecture for robust digital audio, and it features Cypress’s industry-leading CapSense® capacitive sensing technology. The solution addresses a range of industrial and consumer applications.

+ The newest PSoC-based Bluetooth® Low Energy devices, the industry’s first to be qualified for the latest Bluetooth 4.2 security, privacy and data throughput standards.

+ The PSoC-based USB EZ-PD™ CCG4 controller to support the new Type-C USB standard in desktops and notebooks.

+ VentureBeat, a technology publication, named Cypress’s PSoC-based BLE solution for IoT beacons one of the 10 best technologies at the Consumer Electronics Show (CES). The solution is based on Cypress’s EZ-BLE™ PRoC™ Bluetooth Smart module and its Energy-Harvesting PMIC, which eliminate the need for batteries—instead using heat, vibration or light for power. Wireless beacons can be used to send information to smartphones over short ranges, for example, communicating product markdowns to shoppers in a department store every second.

+ Cypress also showcased three new BLE modules with a Bluetooth Smart Mesh demo at CES. Mesh networking, which is critical to many emerging IoT applications, extends Bluetooth’s limited transmission range, enabling transmissions to hop to their destinations on intermediate nodes. For example, a BLE-based on-off switch signal might hop over several BLE-enabled lights before turning on a burglar alarm.

+ Canadian-based Hexoskin selected Cypress’s EZ-BLE PRoC module for use in its “smart shirts,” which collect and transmit vital statistics such as heart and respiratory rates to a user’s smart device, where they can be analyzed and tracked over time. The low-power PRoC module enabled Hexoskin to more than double the battery life of its first-generation shirts.

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ABOUT CYPRESS

Cypress (NASDAQ: CY) delivers high-performance, high-quality solutions at the heart of today’s most advanced embedded systems, from automotive, industrial and networking platforms to highly interactive consumer and mobile devices. With a broad, differentiated product portfolio that includes NOR flash memories, F-RAM™ and SRAM, Traveo™ microcontrollers, the industry’s only PSoC® programmable system-on-chip solutions, analog and PMIC Power Management ICs, CapSense® capacitive touch-sensing controllers, and Wireless BLE Bluetooth Low-Energy and USB connectivity solutions, Cypress is committed to providing its customers worldwide with consistent innovation, best-in-class support and exceptional system value. To learn more, go to 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 the future are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “future,” “continue” or other wording indicating future results or expectations to identify such forward-looking statements that include, but are not limited to, statements related to our estimated non-GAAP revenue, non-GAAP gross margin and non-GAAP EPS in our financial outlook; the expected synergies related to our integration with Spansion Inc. (“Spansion”); our ability to execute on planned synergies related to our integration with Spansion; the semiconductor market; the expected benefits of our lean inventory initiative; the continued growth of our products in the automotive and industrial markets; our ability to penetrate the Home Appliance and Internet of Things markets; our expectations regarding our revenue growth and earnings leverage;  and 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 risk that that future revenues, margins and earnings may not be achieved as expected; the state of and future of the global economy, business conditions and growth trends in the semiconductor market; our ability to continue to realize synergies from our integration with Spansion; our ability to attract and retain key personnel; whether our products perform as expected; whether the demand for our products in the automotive and industrial markets is fully realized; our ability to manage our business to have strong earnings and significant revenue growth and reduce operating expenses; our cash flows from operations; 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 "Risk Factors" in our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Cypress, the Cypress logo, Spansion, the Spansion logo, and combinations thereof, PSoC and CapSense are registered trademarks and EZ-PD, EZ-BLE, PRoC, F-RAM and Traveo are trademarks of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.

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Financial

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