- First-quarter revenue and earnings are at the high end of guidance
- Non-GAAP operating income increased 116% year-on-year
- Inventory decreased 11% sequentially
- Free cash flow increased 60% sequentially
- Book-to-bill was 1.08
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)
NON-GAAP GAAP
---------------------------- ----------------------------
Q1 2014 Q4 2013 Q1 2013 Q1 2014 Q4 2013 Q1 2013
-------- -------- -------- -------- -------- --------
Revenue $170,283 $167,776 $172,728 $170,283 $167,776 $172,728
Gross margin 50.3% 51.0% 50.7% 45.6% 45.6% 45.8%
Pretax margin 7.3% 9.4% 2.5% -7.5% -7.0% -16.6%
Net income
(loss) $ 11,974 $ 14,992 $ 4,579 $ (7,934) $(13,577) $(28,195)
Diluted EPS
(loss per
share) $ 0.07 $ 0.09 $ 0.03 $ (0.05) $ (0.09) $ (0.19)
Cypress's first-quarter revenue increased 1.5% sequentially, outpacing normal seasonality and exceeding the upper range of our initial guidance with broad revenue increases. Our continued focus on operating expense management showed up in a comparison of the first quarter of 2013 ($173 million in revenue, $0.03 EPS) to the first quarter of 2014 ($170 million in revenue, $0.07 EPS).
We exited the first quarter with a book-to-bill ratio of 1.08 and expect solid sequential revenue growth in the second quarter. Our Q2 earnings will grow much faster than revenue, reflecting the inherent leverage created by our efficiency improvements.
The design win pipeline for our TrueTouch® touchscreen products was evident at both the Consumer Electronics Show in Las Vegas and the Mobile World Congress show in Barcelona, Spain last quarter; we saw multiple new products with Cypress touchscreen solutions, such as the YotaPhone 2 and the ZTE nubia Z5S, cited in this release, and the Huawei MediaPad X1. The Yota Devices and Huawei products use our latest Gen5 touchscreen product, the TMA568, which has begun to generate revenue just six months after we brought it to market.
BUSINESS REVIEW
+ Our non-GAAP consolidated gross margin for the first quarter was 50.3%, down 0.7 percentage points from the previous quarter, primarily due to product mix. Excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 51.8%. ETD revenue is growing rapidly (see Net Sales Summary table) and will contribute significantly to revenue growth in 2014.
+ Net inventory at the end of the first quarter was $89.2 million, down 11% from the fourth quarter.
NET SALES SUMMARY
(In thousands, except percentages)
(Unaudited)
THREE MONTHS ENDED
Mar. 30, Dec. 29, Mar. 31, Sequential Year-over-
Business Unit 2014 2013 2013 Change Year Change
--------- --------- --------- ----------- ------------
PSD(1) $ 69,347 $ 67,746 $ 65,505 2% 6%
MPD(1) $ 81,323 $ 79,890 82,229 2% -1%
DCD(1) $ 15,590 $ 16,482 22,747 -5% -31%
ETD(1, 2) $ 4,023 $ 3,658 2,247 10% 79%
--------- --------- --------- ----------- ------------
Total $ 170,283 $ 167,776 $ 172,728 1% -1%
--------- --------- --------- ----------- ------------
Geographic
China and ROW 62% 64% 64% -3% -3%
Americas 15% 14% 17% 7% -12%
Europe 14% 12% 11% 17% 27%
Japan 9% 10% 8% -10% 13%
--------- --------- --------- ----------- ------------
Total 100% 100% 100% 0% 0%
--------- --------- --------- ----------- ------------
Channel
Distribution 68% 69% 74% -1% -8%
Direct 32% 31% 26% 3% 23%
--------- --------- --------- ----------- ------------
Total 100% 100% 100% 0% 0%
--------- --------- --------- ----------- ------------
1. PSD, Programmable Systems Division; DCD, Data Communications Division;
MPD, Memory Products Division: ETD, Emerging Technologies Division.
2. "Emerging Technologies" includes businesses outside our core
semiconductor businesses outlined in Footnote 1. Includes subsidiaries
AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit.
