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Cypress Reports Fourth Quarter and Year End 2017 Results | Cypress Semiconductor

Cypress Reports Fourth Quarter and Year End 2017 Results

Last Updated: February 01, 2018




SAN JOSE, Calif., February 1, 2018—Cypress Semiconductor Corporation (NASDAQ: CY), a leader in embedded solutions, today announced its fourth quarter and fiscal 2017 results with the following highlights:

  • Record fiscal 2017 revenue of $2.33 billion driven by automotive and IoT wireless business performance
  • Fourth quarter revenue was $597.5 million, a 12.7% year-over-year increase
  • Fourth quarter GAAP and non-GAAP margin were 44.6% and 45.4%, respectively, and represent a 650bps and 530bps increase year over year
  • Fourth quarter GAAP EPS and non-GAAP diluted EPS improved by 55% and 87% year over year, respectively
  • Fiscal 2017 cash from operations of $403.5 million increased 86% year over year.

“We had a record fiscal 2017 with strong business performance,” said Hassane El-Khoury, Cypress president and chief executive officer. “The Cypress 3.0 strategy we set in 2016 of focusing on the fast-growing automotive, industrial and consumer markets, fueled by the proliferation of IoT, contributed to strong revenue growth and earnings growing more than four times revenue in 2017. We have established Cypress as an embedded solutions leader for the IoT. This success was built on the strength of our unmatched IoT connectivity solutions, along with our broad portfolio of microcontrollers and high-performance memory solutions, in our target end-markets.”

Revenue and earnings for the fourth quarter and fiscal 2017 are shown below with comparable periods:

(In thousands, except per-share data)





  1. See “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” tables (“Non-GAAP Results” tables) included below.
  2. 2016 includes results from the IoT business acquired from Broadcom on July 5, 2016.
  3. Revenue for the twelve months ended 2016 includes $18.75 million of legacy Spansion non-GAAP licensing revenue.



+ Cypress expanded its automotive infotainment solution portfolio with the introduction of two new products. The Company announced production availability of the industry’s first Real Simultaneous Dual Band (RSDB) automotive-grade Wi-Fi® and Bluetooth® combo solution, which enables multiple users to connect and stream unique content to their devices simultaneously. In parallel, Cypress introduced a new automotive capacitive touchscreen controller family that delivers the market’s most advanced feature set for next-generation infotainment systems, including the capability to detect a finger up to 35 mm above the screen and provide accurate measurement of the pressure applied by multiple fingers.

+ At the recent Consumer Electronics Show in Las Vegas, Cypress showed products based on its PSoC® 6 microcontroller (MCU), the industry's lowest power, most flexible dual-core MCU with built-in Bluetooth Low Energy (BLE) wireless connectivity. PSoC 6 is targeted for a variety of smart home, wearables, smart speakers, audio and other IoT applications.

+ Cypress’ single-chip wireless MCU and combo solutions for the IoT are the world’s first to deliver certified Bluetooth mesh connectivity to a consumer product—SYLVANIA SMART+ Bluetooth lighting products from LEDVANCE. Cypress announced three of its wireless combo chips and the latest version of its WICED® software development kit support state-of-the-art Bluetooth connectivity with mesh networking capability. Cypress’ solutions enable a low-cost, low-power mesh network of devices that can communicate with each other—and with smartphones, tablets and voice-controlled home assistants—via simple, secure and ubiquitous Bluetooth connectivity.

+ Cypress paid a cash dividend of $38.7 million, or $0.11 per share, to holders of record of the Company’s common stock as of the close of business on December 28, 2017. The dividend was equivalent to a 2.9% annualized yield as of December 28, 2017. This dividend was paid on January 18, 2018.



(In thousands, except percentages)








  1. The Microcontroller and Connectivity Division ("MCD") includes microcontroller, automotive and connectivity products and the Memory Products Division ("MPD") includes RAM, Flash and AgigA Tech products.
  2. See “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” tables (“Non-GAAP Results” tables) included below.
  3. 2016 includes results from the IoT business acquired from Broadcom on July 5, 2016.
  4. Revenue for the twelve months ended 2016 includes $18.75 million of legacy Spansion non-GAAP licensing revenue in MCD, APAC region and direct channel, respectively.
  5. Historical results of MCD through July 29, 2016 include Deca Technologies.



For the first quarter of 2018, Cypress estimates financial results as follows:


A reconciliation of GAAP forward-looking estimates to non-GAAP forward-looking estimates may be found in the tables at the end of this earnings report.

The timing and amount of certain material items, including restructuring charges, asset impairments, changes in value of deferred compensation assets and liabilities, impact of stock-based compensation from modification of equity awards, and the tax impact of non-GAAP adjustments, which are needed to estimate GAAP financial measures are either inherently unpredictable or outside the control of the Company, and may have a significant impact on the Company’s financial results. Accordingly, Cypress cannot provide a full quantitative reconciliation for such non-GAAP financial measures included as part of the first quarter 2018 financial outlook to the most directly comparable GAAP measure without unreasonable effort and additional adjustments may be reflected in our non-GAAP results for the first quarter of 2018. Cypress has qualitatively described below, under the section “Non-GAAP Financial Measures,” the anticipated differences between the non-GAAP financial measures and the most directly comparable GAAP measures.



Cypress will host its quarterly conference call on February 1, 2018 at 1:30 p.m. Pacific Standard Time to discuss its fourth quarter and fiscal year 2017 results and outlook for the first quarter of 2018.

All interested parties may dial 517-308-9119 and provide the passcode “Cypress” to listen to the call. The event will be broadcast over the Internet and may be accessed through Cypress’ website at The archived presentation will be available for two weeks immediately following the event.



Join the Cypress Developer Community, read our Core & Code blog, follow us on Twitter, Facebook and LinkedIn, and watch Cypress videos on our Video Library or YouTube.



Cypress is a leader in advanced embedded system solutions for the world’s most innovative automotive, industrial, smart home appliances, consumer electronics and medical products. Cypress’ microcontrollers, analog ICs, wireless and USB-based connectivity solutions and reliable, high-performance memories help engineers design differentiated products and get them to market first. Cypress is committed to providing customers with the best support and development resources on the planet enabling them to disrupt markets by creating new product categories. To learn more, go to



To supplement its condensed consolidated unaudited financial results presented in accordance with GAAP, Cypress uses the non-GAAP financial measures listed below, which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in more detail below.

• Revenue;

• Margin;

• Margin percent;

• Research and development expenses;

• Selling, general and administrative expenses;

• Earnings before interest, taxes, depreciation, and amortization ("EBITDA");

• Provision (benefit) for income taxes;

• Pretax profit margin percent;

• Operating income (loss);

• Net income (loss); and

• Diluted earnings (loss) per share.

Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company's operations which, when viewed in conjunction with Cypress' GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company's business and operations.

The Company presents non-GAAP financial measures because management uses these measures to analyze and assess the Company's financial results and to manage the business.

There are limitations in using non-GAAP financial measures including those discussed below. Moreover, the Company’s non-GAAP measures may be calculated differently than the non-GAAP financial measures used by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The non-GAAP financial measures supplement and should be viewed in conjunction with GAAP financial measures.

As presented in the "Non-GAAP Results" tables in this press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition-related charges: Acquisition-related charges are not factored into management's evaluation of Cypress' long-term performance after the completion of acquisitions. However, a limitation of non-GAAP measures that exclude acquisition-related charges is that these charges may represent payments that reduce the cash available to the Company for other purposes.  Acquisition-related expenses primarily include:

• Amortization of purchased intangibles, including purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements;

• Amortization of step-up in value of inventory recorded as part of purchase price accounting; and

• One-time charges associated with the completion of an acquisition including items such as contract termination costs, severance and other acquisition-related restructuring costs; costs incurred in connection with integration activities; and legal and accounting costs.

Share-based compensation expense: Share-based compensation expense relates primarily to employee stock options, restricted stock units, performance stock units and the employee stock purchase plan. Share-based compensation expense is a non-cash expense that is affected by changes in market factors including the price of Cypress’ common shares, which are not within the control of management. In addition, the valuation of share-based compensation is subjective, and the expense recognized by Cypress may be significantly different than the expense recognized by other companies for similar equity awards, which makes it difficult to assess Cypress’ results compared to its competitors. Accordingly, management excludes this item from its internal operating forecasts and models. However, a limitation of non-GAAP measures that exclude share-based compensation expense is that they do not reflect the full costs of compensating employees.

EBITDA: Consolidated EBITDA is calculated by adding back depreciation to the Non-GAAP operating income. EBITDA may be useful to management, investors, and other users of our financial information because it, during a given period, is an indicator of the amount of cash generated that is available to repay debt obligations, make investments, and for certain other activities. However, EBITDA should not be considered as a measure of discretionary cash available to invest in the growth of the business. In addition, EBITDA should not be considered as a substitute for, or superior to net income, operating income, diluted earnings, or net cash provided by operating activities, or other financial measures prepared in accordance with GAAP.

Other adjustments: These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and ongoing operating performance of Cypress. Excluding these items, which can vary significantly from quarter to quarter, allows management to better compare Cypress’ period-over-period performance. However, limitations of non-GAAP measures that exclude these items include that these adjustments are often subjective and may not be comparable to similarly titled non-GAAP financial measures used by other companies. Other adjustments primarily include:

• Revenue from an intellectual property license,

• Changes in value of deferred compensation plan assets and liabilities,

• Investment-related gains or losses, including equity method investments,

• Restructuring and related costs,

• Loss on extinguishment of debt,

• Amortization of debt issuance costs, discounts and imputed interest related to the equity component of convertible debt,

• Asset impairments,

• Tax effects of non-GAAP adjustments,

• Certain other expenses and benefits, and

• Diluted weighted average shares non-GAAP adjustment - for purposes of calculating non-GAAP diluted earnings per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits related to share-based compensation expense and includes the impact of the capped call transactions related to the convertible notes.



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,” “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 revenue, margin, operating expenses, EPS, net interest expense, tax expense, capital expenditures and depreciation for the first quarter of fiscal 2018 (on a GAAP or non-GAAP basis); the expected benefits of our acquisition of Broadcom’s wireless IoT business, including revenue growth and margin improvement; sources of revenue for the first quarter; the expected impact of our lean inventory initiative on fab utilization, inventory levels, cash flow, pricing and profitability; estimates of certain GAAP to non-GAAP reconciling items for the first quarter; the demand environment for semiconductors; the expected impact of our margin improvement plan; the impact of seasonality on revenue; cross-selling opportunities in the automotive business; our ability to meet our targeted range of inventory; expected or anticipated uses of cash flow, including to pay dividends, repurchase shares of common stock, or pay down our existing indebtedness; and plans to reduce excess inventory. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this press release. Our actual results may differ materially due to a variety of risks and uncertainties, including, but not limited to:  global economic and market conditions; business conditions and growth trends in the semiconductor market; our ability to compete effectively; the volatility in supply and demand conditions for our products, including but not limited to the impact of seasonality on supply and demand; our ability to develop, introduce and sell new products and technologies; potential problems relating to our manufacturing activities; the impact of acquisitions, including but not limited to the acquisition of Broadcom’s wireless IoT business; our ability to attract and retain key personnel; the unpredictability and expense of legal proceedings; and other risks and uncertainties described in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections 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, PSoC and WICED are registered trademarks of Cypress Semiconductor Corporation. All other trademarks are property of their owners.





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