Cypress Reports First-Quarter 2012 Results | Cypress Semiconductor
Cypress Reports First-Quarter 2012 Results
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SAN JOSE, Calif., April 19, 2012 —Cypress Semiconductor Corp. (NASDAQ: CY) today announced the results of the first quarter of 2012, which included the following highlights and remarks from its CEO, T.J. Rodgers.
- Earnings exceeded revised guidance
- Book-to-bill ratio of 1.33 was the highest in two years
- Repurchased 6.1 million shares
- Dividend increased to $0.11 per share, currently yielding 3.1% per year
Our revenue and earnings (loss) for the quarter are given below, compared with the prior-quarter and prior-year results:
(In thousands, except per-share data)
Our first-quarter revenue decreased 24% sequentially and 21% year-on-year, consistent with our revised guidance. The sequential revenue decrease was mainly due to a one-quarter hole in our TrueTouch® revenue stream which, in turn, was due to the late introduction of our newest Gen4 product, which has been in the market gathering design wins since the last week of December 2011. Our backlog has been growing rapidly since then, and we expect that backlog to deliver significant revenue growth in Q2 and beyond.
The revenue of our DCD division increased 6% versus that of Q4 2011. All other divisions decreased sequentially as expected. Our distributors’ inventory decreased by 16% sequentially, marking the third consecutive quarterly decrease. Inventories in the supply chain remain very low, and we continue to believe our shipments have been less than the true end-demand of our customers.
After four consecutive quarters of a declining book-to-bill ratio, we have finally seen a significant increase across all major product lines and in all geographies. Our book-to-bill ratio for Q1 was 1.33, well above the normal level in the traditionally slow first quarter. We thus expect Q2 revenue to increase significantly, and earnings to grow at a faster rate than sales, due to our continued restraint of operating expenses.
Our outlook is positive. We have the strongest product portfolio in our history, with numerous new revenue drivers across multiple product lines. We have not only a growing backlog, but a strong design pipeline, which combined with strong operating leverage from increasing revenue will allow us to drive earnings and cash flow.
Our non-GAAP1 consolidated gross margin for the first quarter was 55.7% (57.3% core semiconductor), down only 0.4% from the previous quarter, despite the revenue decline and down-market pricing pressures.
Our net inventory at the end of the first quarter was up slightly (6.1%) versus that of Q4 2011 as we built WIP to support the increased backlog. Our distributor inventory, which is much larger than our net inventory, decreased 16% sequentially, the third consecutive quarterly decrease.
Cash and equivalents for the first quarter totaled $108.7 million, a decrease of $57.6 million from the prior quarter due to stock repurchases. During the quarter, we bought back 6.1 million shares of common stock (3.9% of total outstanding shares) for $98.0 million. Since we announced our new $400-million stock repurchase program in September 2011, we have repurchased 11.1 million shares through April 1, 2012 and have approximately $222.2 million left for additional repurchases.
Operating Segments - We have realigned our operating segments as outlined below.
Beginning with the three months ended April 1, 2012, we have reported our financial results under the four business segments described above. Furthermore, all historical financial information in this press release, as well as the financial information on our website, has been updated to reflect those changes.
Our revenue and gross margins under the new business segment structure are detailed below:
- Refer to “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” and “Notes to Non-GAAP Financial Measures” following this press release for a detailed discussion of management’s use of non-GAAP financial measures, as well as reconciliations of all non-GAAP financial measures presented in this press release to the most directly comparable GAAP financial measures.
- PSD – Programmable Systems Division; DCD—Data Communications Division; MPD—Memory Products Division.
- “Emerging Technologies” – Businesses outside our core semiconductor businesses outlined in footnote 4. Includes majority-owned subsidiaries Cypress Envirosystems, AgigA Tech, Deca Technologies, Inc. and our foundry-support business.
- “Core Semiconductor” – Includes PSD, DCD and MPD and excludes “Emerging Technology.”
- Consistent with the current period presentation, prior period’s financial results have been recast to conform to the new business segment presentation.
- The dramatic decline in ETD gross margin is due to the reclassification of the factory expenses of Deca Technologies from the R&D line to the manufacturing line as its revenue ramp commences.
FIRST-QUARTER 2012 HIGHLIGHTS
Cypress announced that its TrueTouch controllers power the new “floating touch™” navigation feature on the new Xperia™ sola smartphone from Sony Mobile Communications. The sola is the world’s first smartphone with “hover” technology, which anticipates the touch of a finger before it makes contact with the screen. Hovering enables new applications and navigation options, such as 3D interfaces, magnification of an area of the screen as a finger approaches, and the ability to use the touch interface with gloves – ideal for users in cold climates.
Cypress unveiled the industry’s first single-layer touchscreen sensor with multitouch capability. The breakthrough SLIM® (Single-Layer Independent Multitouch) sensor delivers high-performance touchscreen accuracy and responsiveness with a true single-layer sensor panel, significantly reducing the cost of the most expensive component of the touchscreen. Today’s touchscreens use two separate layers of conductors to form the rows and columns of the sensor. By creating a TrueTouch sensing solution with a unique pattern on a single-layer conductor, Cypress allows its customers to save more on the sensor cost than the entire cost of our TrueTouch chip. Thus, the new SLIM sensor will bring capacitive touchscreen technology and multifinger gesture capabilities beyond expensive “smartphones” into the higher-volume market for “feature phones.”
Cypress announced that its single-chip Gen4 TrueTouch controllers have been certified for the new Windows® 8 operating system from Microsoft® Corp.
Cypress introduced the TMA140 family of TrueTouch controllers for low-cost mobile phones. The new family offers high-performance touchscreen control with multifinger support and best-in-class signal-to-noise ratio (SNR) for screens as large as 5 inches. It supports Cypress’s patent-pending Charger Armor™ feature, which prevents false touches due to excessive charger noise and is compatible with Cypress’s new low-cost SLIM sensors.
Cypress released two new “components” in its PSoC Creator™ 2.0 design environment for the PSoC 3 and PSoC 5 programmable system-on-chip families. Components are virtual chips with programmable analog and programmable digital functions that accelerate design and enable customers to create feature-rich end products in software, without the need to integrate the hardware of multiple companies. One component released in the recent component packs lets designers customize digital filters with performance superior to that of any conventional MCU solution.
Cypress’s USB 3.0 controller, dubbed EZ-USB® FX3™, has been chosen as the standard hardware for the SuperSpeed Microsoft reference USB Test Tool (SuperMUTT). SuperMUTT can be used with virtually any USB 3.0-enabled host driver to test USB compliance and compatibility with Microsoft’s upcoming Windows 8 operating system. The FX3 solution was selected because its programmability allows for unprecedented flexibility and “future-proofing.” USB 3.0 chips are 10 times faster than the USB 2.0 chips they replace.
Cypress introduced its General Programmable Interface II (GPIF™ II) Designer Software for its FX3 USB 3.0 controllers. The software gives designers a powerful, easy-to-use graphical interface to configure FX3 to communicate with any microcontroller, ASIC, FPGA, image sensor, or similar devices that need USB connectivity. This is part of the “programmability” that led to the Microsoft reference design win outlined above. The software shortens development time and accelerates time to market for USB 3.0 applications.
Cypress and Tokyo Electron Device (TED) have jointly developed a USB 3.0 device interface card for FPGA designs. The TB-FMCL-USB30, available from TED, uses Cypress’s FX3 controller to implement USB 3.0. The card lets users easily incorporate a USB 3.0 interface into Xilinx FPGA designs.
Cypress appointed Badri Kothandaraman Executive Vice President of its Data Communications Division (DCD) in addition to his current position as the Executive Director of Cypress Semiconductor India. Kothandaraman, who has been with Cypress for more than 16 years, will manage Cypress’s DCD (USB) business from our Bangalore subsidiary.
Cypress’s Board of Directors approved a quarterly dividend of $0.11 per share, payable to holders of record of the company’s common stock at the close of business on March 29, 2012. The Q1 dividend, which will be paid on April 19, 2012, represents a 22% increase from the $0.09 Q4 dividend.
Cypress filed a joint motion to release global telecommunications provider Ericsson from Cypress’s complaint to the United States International Trade Commission (ITC) regarding the alleged infringement of Cypress’s SRAM patents by GSI Technology Inc. Cypress seeks an exclusion order from the ITC that will prevent the importation of all infringing GSI SRAMs. Ericsson is the fifth customer that has been released from the case, in support of Cypress’s aggressive defense of its intellectual property rights.
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 https://www.cypress.com.
Statements herein that are not historical facts and that refer to Cypress or its subsidiaries’ plans and expectations for Q2 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 Q212 bookings, revenue growth, earnings, profit, cash flow and return on equity, our expectations regarding the demand for our products, and how are 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 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, 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, customer acceptance of Cypress products, our ability to restrain our operating expenses and maintain a solid balance sheet, the behavior of our supply chain, our ability to manage our business to have strong earnings 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, our ability to outgrow the market in revenue once the economy recovers 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, CapSense, West Bridge, SLIM and EZ-USB are registered trademarks of Cypress Semiconductor Corp. Programmable System-on-Chip, WirelessUSB, Ovation, Charger Armor, PSoC Creator, FX3 and, and GPIF are trademarks of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.