Cypress Reports Second-Quarter 2012 Results | Cypress Semiconductor
Cypress Reports Second-Quarter 2012 Results
CLICK HERE FOR Q212 FINANCIAL RESULTS
SAN JOSE, Calif., July 19, 2012 —Cypress Semiconductor Corp. (NASDAQ: CY) today announced the results of the second quarter of 2012, which included the following highlights and remarks from its president and CEO, T.J. Rodgers.
• Revenue increased 9% sequentially
• Non-GAAP EPS increased 50%, showing good leverage
• TrueTouch® revenue increased 21% sequentially
• $430 million revolving line of credit closed in June
Our revenue and earnings for the quarter are given below, compared with those of the prior quarter and year:
(In thousands, except per-share data)
We are proud of the fact that we maintained our gross margin at 57.0% in Q2’12, a quarter in which our revenue of $201 million was down more than 20% from the $255 million and 57.2% gross margin reported in the year-ago quarter. This result is attributable to our companywide cost-reduction effort.
Our revenue came in at the low end of our guidance, growing 9% sequentially. All divisions grew, led by our Programmable Systems (PSoC®) Division, or PSD. PSD revenue grew 18% – driven by TrueTouch, which grew 21% sequentially as our new TSG4 product began to gain share in the market, in part due to new customers and applications, such as eReaders. GAAP EPS grew 123% sequentially, and non-GAAP EPS grew 50% sequentially, driven by increased gross margins and tight operating expense control.
Increasing global macroeconomic concerns, combined with short lead times, put downward pressure on distributor and customer bookings across all geographies and divisions. Our book-to-bill was 0.87 in Q2, down from 1.33 in Q1, below our seasonal average. Nonetheless, we are still 77% booked for Q3, in line with historical averages, and we expect approximately flat revenue with increased earnings due to product mix and continuing cost controls.
Macroeconomic issues combined with some customer pushouts are limiting our growth prospects for Q3. We expect our revenue to be flat and our EPS to improve due to product mix and cost controls.
Our non-GAAP consolidated gross margin for the second quarter was 57.0%, up 1.3 percentage points from the previous quarter due to product and customer mix, solid manufacturing execution and our cost-reduction programs. On a GAAP basis, our second-quarter consolidated gross margin was 53.0%.
Net inventory dollars in Q2 decreased 7% sequentially; inventory days decreased to 96. Distributor weeks of inventory on hand decreased slightly to 6.2 weeks.
Cash and investments for the second quarter totaled $210.8 million, an increase of $102.1 million from the prior quarter. The balance includes proceeds of $103 million in incremental borrowings. During the quarter we used $19.9 million to repurchase 1.5 million shares. Since we announced our $400 million stock repurchase program in September 2011, we have repurchased 12.7 million shares through July 1, 2012 and have approximately $202.3 million remaining under the authorized repurchase program.
Our divisional revenue and gross margins are detailed below:
BUSINESS UNIT SUMMARY FINANCIALS (UNAUDITED)
SECOND-QUARTER 2012 HIGHLIGHTS
Cypress rolled out its Design Win Replication (DWR) program. The purpose of the program is to identify particular market segments where Cypress products (particularly PSoC) have been successful and to replicate those successes worldwide. Two examples of past DWR successes are Cypress’s CapSense® capacitive button technology and TrueTouch touchscreen technology, both of which are now successful standalone businesses. PSoC’s configurability allows us to enter new markets quickly. The DWR business process is designed to support “hot” new markets and provide them with ready-to-manufacture solutions and full engineering support.
A typical DWR solution starts with a PSoC chip for which special solution-specific “Components” have been created. A Component is a virtual chip inside PSoC, which uses a fraction of the chip’s resources to integrate a function that would typically be performed using a separate IC in a system design. In the design phase, Components reside in PSoC Creator™ design software, represented as icons that are dragged and dropped to design system-level solutions. When the PSoC Creator design is subsequently used to program a PSoC chip, all of the circuit blocks, interconnections and firmware required to implement virtual chips are automatically created and connected in a PSoC one-chip system. Examples of PSoC Components in the PSoC Creator library include a family of analog-to-digital converters, a family of serial communication interfaces (I2C, UART, SPI, etc.) and a complete ARM Cortex M3 microcontroller, including all of its memories. Designing with Components in PSoC Creator design software is very much like designing with ordinary ICs on a printed circuit board in the old paradigm.
The DWR solutions for PSoC take the PSoC Creator design environment to the next level. Special application-specific Components are created to solve a specialized system-level problem such as the Power Monitor required for all electronic systems. These systems may have 25 or more power supplies that each must be regulated to varying supply voltages with tight precision; for example, 1.200 ± 0.050 volts. In addition to precise supply voltage control, the power supplies must be monitored for brown outs and glitches. Finally, when large systems (such as routers, servers, etc.) are turned on and off, the power supplies must turn on not only in a specified sequence but also with a tightly controlled rate. The usual solution for the Power Monitor is a board full of discrete ICs. All of those ICs are available as Components in PSoC. The new, application-specific Component in the DWR paradigm is the Voltage Sequencer Component, which performs all of the Power Monitor functions described above on 16 separate power supplies. To design using the Voltage Sequencer Component, its icon is simply dragged and dropped into a design in PSoC Creator and the function is automatically programmed into a PSoC chip. The Voltage Sequencer Component then is further configured in Creator software by entering specific power supply requirements into a graphical user interface. The entire Power Monitor design process can be done by an expert designer in less than one hour, compared with the conventional design process, which takes weeks or months. We have found that our PSoC 3 chip has an overwhelming advantage in the Power Monitor market—hence we created the DWR program to take it to customers worldwide in a single campaign.
The second DWR solution released in the quarter was for a PSoC-based Fan Controller that manages up to 16 fans. Cooling is another critical function in large systems that require sophisticated fan control. Typically, the speed of a fan can be controlled precisely by an electronic circuit. The engineering state of the art is to measure the temperature that must be controlled and run the fan at the exact rpm required to control that temperature. The Fan Controller DWR solution allows for quick design of a precisely controlled 16-fan system, enough to support a relatively large electronic system.
Longcheer, a new Cypress TrueTouch customer and the market leader in China’s mobile phone design industry, selected Cypress’s TrueTouch single-layer capacitive touchscreen solution for a new smartphone customized for China Unicom, one of China’s major mobile telecom carriers. Cypress’s single-layer sensor provides high-performance touchscreen accuracy and responsiveness with the low cost of a true single-layer sensor panel, significantly reducing the cost of the most expensive component of the touchscreen.
IDS Imaging Development Systems, a global leader in medical- and machine-vision cameras, selected Cypress's EZ-USB® FX3™ controller as the high-speed USB 3.0 interface for its uEye® CP Camera series. The fast-growing USB 3.0 interface delivers 5-Gbps speed, 10 times greater than the preceding USB 2.0 standard.
Cypress, Nuvation Research Corp. and Arrow Electronics introduced a new SuperSpeed interface board for Altera FPGAs. This board enables users to prototype a simpler, uncompressed, cost-effective alternative to traditional slower interfaces such as USB 2.0 and Gigabit Ethernet. The board utilizes Cypress's EZ-USB FX3 controller to accelerate the development of high-quality streaming video, imaging and data acquisition applications.
Cypress announced that Traxxas, one of the leading providers of ready-to-run (RTR) radio-controlled hobby vehicles, selected Cypress’s WirelessUSB™-LP 2.4-GHz radio-on-chip for its new XO-1 radio controlled supercar. The XO-1 is capable of going from 0 to 100 mph in just 4.9 seconds. The WirelessUSB-LP device was selected for its long range, low latency and best-in-class interference immunity in noisy environments.
BORND, a leading PC peripheral manufacturer, selected Cypress’s 2.4-GHz WirelessUSB-NL radio-on-chip for its next-generation E220 wireless mouse. WirelessUSB-NL’s low power consumption enables two AA batteries to power the E220 mouse for up to three years.
Cypress announced that over 50,000 users have now registered for the Cypress Developer Community™, an online forum where customers interact to create content and answer questions along with Cypress engineers. The developer community (www.developer.cypress.com) includes a growing collection of more than 140 videos and 12 blogs written by technical experts.
Cypress announced that it has negotiated a highly flexible five-year senior secured revolving credit facility. The facility enables the company to borrow up to $430 million on a revolving basis for working capital, acquisitions, stock repurchases and other general corporate purposes.
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 at the close of business on June 28, 2012. The dividend will be paid today, July 19, 2012.
Cypress announced that it submitted a proposal to Ramtron International Corporation (NASDAQ:RMTR) to acquire all of its outstanding stock for $2.48 per share in cash. Cypress later commenced a tender offer to acquire all of the outstanding common stock of Ramtron for $2.68 per share in cash, a 48% premium over Ramtron’s closing price before Cypress’s first offer. The all-cash tender offer, which is not conditioned on due diligence or financing, provides Ramtron’s stockholders with immediate liquidity at a substantial premium in a very volatile market.
Cypress announced that it has defeated GSI’s attempt to invalidate one of the patents Cypress asserted against GSI Technology, Inc. in both the International Trade Commission’s patent infringement case and the Minnesota federal district court case filed by Cypress. The U.S. Patent and Trademark Office (PTO) has completed its re-examination of Cypress’s U.S. Patent No. 7,142,477 and confirmed its validity. In addition, the PTO also expanded the scope of the patent by allowing 64 new claims added by Cypress during the re-examination.
Cypress named semiconductor industry veteran Kazuyoshi Yamada Country Manager of its Cypress Japan subsidiary. Yamada has served in senior semiconductor leadership roles at NEC and Renesas, where he ran the embedded systems and memory design businesses. He replaces Hitoshi Yoshizawa, who retired after a distinguished career of 40 years. Cypress’s revenue from Japan grew over 80 percent under Dr. Yoshizawa’s leadership.
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, and PSoC 5 programmable system-on-chip families and derivatives, CapSense touch sensing and TrueTouch solutions for touchscreens. Cypress is the world leader in USB controllers, including the high-performance West Bridge solution that enhances connectivity and performance in multimedia handsets, PCs and tablets. Cypress is also the world leader in SRAM memories. Cypress serves numerous 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.
Statements herein that are not historical facts and that refer to Cypress or its subsidiaries’ plans and expectations for Q3 of fiscal year 2012 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 Q312 leadtimes, revenue growth, earnings, profit and cash flow; the results of our return on capital strategies, including our dividend and stock repurchase programs; our expectations regarding the demand for our products and how are products are expected to perform as well as the benefits we can bring to Ramtron’s customers. 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 a variety of uncertainties and risk factors, including but not limited to our ability to enter into and close on a transaction with Ramtron, our ability to use our operating leverage to increase cash flow and generate a high return on equity, the state of and future of the global economy, business conditions and growth trends in the semiconductor market, our ability to enter into new markets and penetrate existing markets with our portfolio of products, whether our products perform as expected, whether the demand for our proprietary and programmable products is fully realized, whether our product and design wins result in increased sales, our ability to manage our business to have strong earnings, restrained operating expenses and cash flow leverage, factory utilization, the strength or softness of the markets we serve, our ability to maintain and improve our gross margins and realize our bookings, 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, TrueTouch, PSoC, EZ-USB, CapSense and West Bridge are registered trademarks, and PSoC Creator, FX3 and WirelessUSB are trademarks of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.