CY
$16.69
Cypress Semiconductr
$.42
2.58%
Earnings Details
2nd Quarter June 2018
Thursday, July 26, 2018 4:05:00 PM
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Summary

Cypress Semiconductr Misses

Cypress Semiconductr (CY) reported 2nd Quarter June 2018 earnings of $0.31 per share on revenue of $624.1 million. The consensus earnings estimate was $0.29 per share on revenue of $619.6 million. The Earnings Whisper number was $0.33 per share. Revenue grew 5.1% on a year-over-year basis.

The company said it expects third quarter earnings of $0.36 to $0.40 per share on revenue of $655.0 million to $685.0 million. The current consensus earnings estimate is $0.34 per share on revenue of $652.9 million for the quarter ending September 30, 2018.

Cypress Semiconductor Corp with its subsidiaries, designs, develops, manufactures and markets high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and system value.

Results
Reported Earnings
$0.31
Earnings Whisper
$0.33
Consensus Estimate
$0.29
Reported Revenue
$624.1 Mil
Revenue Estimate
$619.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cypress Reports Second Quarter 2018 Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Cypress Semiconductor Corporation (NASDAQ: CY), a leader in embedded solutions, today announced its second quarter 2018 results with the following highlights:

  • Record revenue of $624.1 million, a 7.2% increase sequentially
  • GAAP and non-GAAP gross margins were 37.5% and 46.3%, respectively, and represent a 500 bps and 540 bps increase year over year
  • GAAP and non-GAAP diluted EPS were 7 and 33 cents respectively
  • MCD revenue increased 9.4% sequentially driven by strength in microcontrollers and wireless connectivity

“The team is executing well and has delivered record revenue this quarter as Cypress continues to gain share in our high-growth markets of Automotive, Industrial and Consumer,” said Hassane El-Khoury, Cypress’ president and chief executive officer. “Our platform of Connect, Compute and Store solutions gives developers everything they need to create winning IoT products quickly and easily.”

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

(In thousands, except per-share data)

    GAAP1     NON-GAAP2
Q2 2018     Q1 2018     Q2 2017 Q2 2018     Q1 2018     Q2 2017
Revenue $ 624,090 $ 582,241 $ 593,776 $ 624,090 $ 582,241 $ 593,776
Gross margin 37.5 % 36.5 % 32.5 % 46.3 % 45.9 % 40.9 %
Operating margin 8.1 % 6.1 % 1.5 % 22.3 % 19.5 % 15.4 %
Net income (loss) $ 27,706 $ 9,078 $ (16,920 ) $ 124,964 $ 100,296 $ 74,704
Diluted EPS (loss) $ 0.07 $ 0.02 $ (0.05 ) $ 0.33 $ 0.27 $ 0.21
 

Revenue and earnings are shown below:

(In thousands, except per-share data)

    GAAP1     NON-GAAP2
Six Months Six Months
Q2 2018     Q2 2017 Q2 2018     Q2 2017
Revenue $ 1,206,331 $ 1,125,650 $ 1,206,331 $ 1,125,650
Gross margin 37.0 % 31.1 % 46.1 % 40.1 %
Operating margin 7.2 % (0.4 )% 21.0 % 13.9 %
Net income (loss) $ 36,784 $ (59,919 ) $ 225,260 $ 120,591
Diluted EPS (loss) $ 0.10 $ (0.18 ) $ 0.60 $ 0.33
 

1. In 2018, certain expenses have been reclassified as part of cost of revenue. Historical results have been conformed with the 2018 presentation.

2. See the “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” tables (“Non-GAAP Reconciliation Tables”) included below.

BUSINESS REVIEW

+ Cypress announced key developments in its wireless connectivity solutions for the automotive and industrial markets during the quarter. Pioneer selected Cypress’ automotive-grade Wi-Fi® and Bluetooth® combo solution for its flagship in-dash infotainment receiver. The solution uses Cypress’ Real Simultaneous Dual Band (RSDB) technology to enable passengers to display and use their smartphone’s apps via Apple CarPlay™ or Android Auto™. Additionally, Cypress collaborated with Semtech on a two-chip LoRaWAN™-based module for smart city applications that uses Cypress’ PSoC® 6 microcontroller (MCU) with integrated Bluetooth Low Energy (BLE) and hardware-based security to deliver highly protected device-to-cloud connectivity.

+ Cypress continued to expand its high-performance, differentiated fail-safe storage offerings with the new Semper™ NOR Flash family — the world’s most advanced Flash solution for mission-critical automotive and industrial applications. The family has already won multiple major automotive platforms for next-generation instrument clusters and Advanced Driver Assistance Systems (ADAS).

+ Cypress also announced multiple key developments for its industry-leading USB-C solutions. The company’s EZ-PD™ USB-C controllers with Power Delivery (PD) have been selected for key reference designs for PCs and peripherals, with one qualified by Intel for use in Thunderbolt™ 3 host and peripheral designs, and one qualified by AMD for use with its “Raven Ridge” processors for notebook and desktop PCs. Cypress also continued to expand its portfolio with the industry’s first 7-port USB-C hub controller for notebook and tablet docking stations and monitor docks.

+ On July 19, 2018, Cypress paid a cash dividend of $39.4 million, or $0.11 per share, to holders of record of the Company’s common stock as of the close of business on June 28, 2018. The dividend was equivalent to a 2.8% annualized yield as of June 29, 2018.

 
REVENUE SUMMARY

(In thousands, except percentages)

(Unaudited)

 

    Three Months Ended
                Year-over-
Sequential year
July 1, 2018     April 1, 2018     July 2, 2017     Change     Change

Business Unit

         
MCD $ 368,526 $ 336,710 $ 360,533 9.4 % 2.2 %
MPD $ 255,564   $ 245,531   $ 233,243   4.1 % 9.6 %
Total $ 624,090   $ 582,241   $ 593,776   7.2 % 5.1 %
    Three Months Ended
July 1, 2018     April 1, 2018     July 2, 2017

End Market

             
Industrial 19.0 % 17.9 % 19.2 %
Automotive 30.8 % 34.3 % 30.8 %
Consumer 31.3 % 31.3 % 34.1 %
Enterprise 18.9 % 16.5 % 15.9 %
Total 100 % 100 % 100 %
1.     The Microcontroller and Connectivity Division ("MCD") includes microcontroller, wireless connectivity and USB products and the Memory Products Division ("MPD") includes RAM, Flash and AgigA Tech products.
 

THIRD QUARTER 2018 FINANCIAL OUTLOOK

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

 
      GAAP     Non-GAAP
Revenue     $655 million to $685 million
Gross Margin     38.0% - 39.0%     46.5% - 47.5%
Diluted EPS     $0.11 to $0.15     $0.36 to $0.40
       

A reconciliation of GAAP forward-looking estimates to non-GAAP forward-looking estimates may be found in the Non-GAAP Reconciliation 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.

CONFERENCE CALL AND WEBCAST INFORMATION

Cypress will host its quarterly conference call on July 26, 2018 at 1:30 p.m. Pacific Daylight Time to discuss its second quarter 2018 results and outlook for the third 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 www.cypress.com/investors. The archived presentation will be available for at least two weeks immediately following the event.

FOLLOW CYPRESS ONLINE

Join the Cypress Developer Community 3.0, read our blog, follow us on Twitter, Facebook and LinkedIn, and watch Cypress videos on our Video Library or YouTube.

ABOUT CYPRESS

Cypress is a leader in advanced embedded 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 www.cypress.com.

NON-GAAP FINANCIAL MEASURES

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.

  • Non-GAAP gross profit;
  • Non-GAAP gross margin;
  • Non-GAAP cost of revenues;
  • Non-GAAP interest and other expense, net;
  • Non-GAAP research and development expenses;
  • Non-GAAP selling, general and administrative expenses;
  • Adjusted EBITDA;
  • Non-GAAP income tax provision (benefit);
  • Non-GAAP pre-tax profit;
  • Non-GAAP pre-tax profit margin;
  • Non-GAAP operating income (loss);
  • Non-GAAP operating margin;
  • Non-GAAP net income (loss); and
  • Non-GAAP 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 Reconciliation 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.

Stock-based compensation expense: Stock-based compensation expense relates primarily to employee stock options, restricted stock units, performance stock units and the employee stock purchase plan. Stock-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 stock-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 stock-based compensation expense is that they do not reflect the full costs of compensating employees.

Other adjustments: Additional items are excluded from non-GAAP financial measures because management does not consider them to be 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 such non-GAAP measures may not be comparable to similarly titled non-GAAP financial measures used by other companies. These 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;
  • Debt issuance costs, including 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 stock-based compensation expense, and include the impact of the capped call options related to the outstanding convertible notes.

Adjusted EBITDA: Adjusted EBITDA is calculated by adjusting net income (loss) attributable to Cypress to exclude (without duplication): interest expense, income tax provision, depreciation, amortization, equity in net loss of equity method investees, and the non-GAAP adjustments described above (acquisition related charges, stock-based compensation expense, and other adjustments). Commencing in the second quarter of 2018, Cypress reconciles adjusted EBITDA to GAAP net income rather than operating income; prior period reconciliation tables have been revised to conform to the current presentation. Adjusted EBITDA may be useful to management, investors and other users of our financial information because the exclusion of certain gains, losses, and expenses facilitates comparisons of Cypress' operating performance on a period to period basis. Adjusted EBITDA should not be considered as a measure of discretionary cash available to invest in the growth of the business. In addition, adjusted EBITDA should not be considered as a substitute for, or superior to net income attributable to Cypress, operating income, or diluted earnings per share, or other financial measures prepared in accordance with GAAP.

FORWARD-LOOKING STATEMENTS

Statements in this press release that are not historical facts and that refer to Cypress or its subsidiaries’ plans and expectations for the future are forward-looking statements as such term is used in the Private Securities Litigation Reform Act of 1995. We may use words such as “may,” "will," “should,” “plan,” “anticipate,” “believe,” “expect,” “future,” “intend,” “estimate,” “predict,” “potential,” “continue” or similar expressions identify forward-looking statements. This press release includes, among others, forward-looking statements regarding our third quarter financial outlook (as well as the related GAAP to non-GAAP reconciling items). Our forward-looking statements are based on the expectations, beliefs, and intentions of, and the information available to, our executive management on the date of this press release. Forward-looking statements involve risks and uncertainties, and readers are cautioned not to place undue reliance on forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: potential tariffs and other disruptions in the international trade and investment environment; global economic and market conditions; our ability to execute on our Cypress 3.0 strategy and our margin improvement plan; risks related to paying down our indebtedness and meeting the covenants in our debt agreements; our efforts to retain and expand our customer base; business conditions and growth trends in the semiconductor market; competition; volatility in supply and demand 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; reliance on distributers, resellers, third-party manufacturers, and others; risks related to our “take or pay” agreements with certain vendors; the risk of defects, errors, or security vulnerabilities in our products; the impact of acquisitions; 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," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and “Quantitative and Qualitative Disclosures about Market Risk” sections in our most recent Annual Report on Form 10-K and in our subsequent quarterly filings with the Securities and Exchange Commission which are available on our investor relations website at http://investors.cypress.com/financial-information/sec-filings. We assume no responsibility to update our forward-looking statements.

Cypress, the Cypress logo and PSoC are registered trademarks and Semper and EZ-PD are trademarks of Cypress Semiconductor Corporation. All other trademarks are property of their owners.

 
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    July 1, 2018     December 31, 2017
 
ASSETS
Cash, cash equivalents and short-term investments $ 112,718 $ 151,596
Accounts receivable, net 404,524 295,991
Inventories 286,761 272,127
Property, plant and equipment, net 291,026 289,554
Goodwill and other intangible assets, net 2,046,609 2,154,592
Other assets 362,859   373,190
Total assets $ 3,504,497   $ 3,537,050
LIABILITIES AND EQUITY
Accounts payable $ 225,619 $ 213,101
Income tax liabilities 55,729 52,006
Revenue reserves, deferred margin and other liabilities 480,436 497,838
Revolving credit facility and long-term debt 883,741   956,513
Total liabilities 1,645,525   1,719,458
Total Cypress stockholders' equity 1,857,816 1,816,536
Non-controlling interest 1,156   1,056
Total equity 1,858,972   1,817,592
Total liabilities and equity $ 3,504,497   $ 3,537,050
 
 
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
ON A GAAP BASIS
(In thousands, except per-share data)
(Unaudited)
 
    Three Months Ended     Six Months Ended
July 1, 2018     April 1, 2018     July 2, 2017 July 1, 2018     July 2, 2017
Revenues $ 624,090 $ 582,241 $ 593,776 $ 1,206,331 $ 1,125,650

Cost of revenue1

389,952   369,849   401,031   759,801   775,797  
Gross profit 234,138   212,392   192,745   446,530   349,853  

Research and development1

96,693 93,233 88,595 189,926 177,943

Selling, general and administrative1

86,599   83,397   95,258   169,996   176,591  
Total operating expenses 183,292   176,630   183,853   359,922   354,534  
Operating income (loss) 50,846 35,762 8,892 86,608 (4,681 )
Interest and other expense, net (14,143 ) (18,154 ) (16,407 ) (32,297 ) (35,766 )
Income (loss) before income taxes and non-controlling interest 36,703 17,608 (7,515 ) 54,311 (40,447 )
Income tax provision (5,154 ) (5,057 ) (4,504 ) (10,211 ) (9,431 )
Equity in net loss of equity method investees (3,755 ) (3,461 ) (4,835 ) (7,216 ) (9,911 )
Net income (loss) 27,794 9,090 (16,854 ) 36,884 (59,789 )
Net gain attributable to non-controlling interests (88 ) (12 ) (66 ) (100 ) (130 )
Net income (loss) attributable to Cypress $ 27,706   $ 9,078   $ (16,920 ) $ 36,784   $ (59,919 )
Net income (loss) per share attributable to Cypress:
Basic $ 0.08 $ 0.03 $ (0.05 ) $ 0.10 $ (0.18 )
Diluted $ 0.07 $ 0.02 $ (0.05 ) $ 0.10 $ (0.18 )
Cash dividend declared per share $ 0.11 $ 0.11 $ 0.11 $ 0.22 $ 0.22
Shares used in net income (loss) per share calculation:
Basic 358,577 355,461 329,860 356,123 328,320
Diluted 371,967 370,592 329,860 370,402 328,320
1.     In 2018, certain expenses have been reclassified as part of cost of revenue and operating expenses. Historical results have been conformed with the 2018 presentation.
 
 
CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per-share data)
(Unaudited)
 

Table A: GAAP to non-GAAP reconciling items: Three Months Ended Q2 2018

           

Selling, general

   

Interest and

   

Income tax

Cost of

Research and

and

other

(provision)

revenues

development

administrative

expense, net

benefit

GAAP [i] $ 389,952 $ 96,693 $ 86,599 $ (17,898 ) $ (5,154 )
[1] Stock-based compensation 3,986 13,800 16,121
[2] Changes in value of deferred compensation plan 102 467 572 (1,123 )
[3] Equity in net loss of equity method investees 3,755
[4] Imputed interest on convertible debt, equity component amortization on convertible debt and others 4,415
[5] Amortization of acquisition-related intangible assets and other 49,438 4,355
[6] Gain on sale of cost method investment (1,521 )
[7] Restructuring charges 1,589 33 (383 )
[8] Tax impact of non-GAAP adjustments       (377 ) 2,029  
Non - GAAP [ii] $ 334,837   $ 82,393   $ 67,455   $ (11,228 ) $ (3,125 )
Impact of reconciling items [ii - i] $ (55,115 ) $ (14,300 ) $ (19,144 ) $ 6,670 $ 2,029
 
 

Table B: GAAP to non-GAAP reconciling items: Three Months Ended Q1 2018

               

Interest and

   

Income tax

Cost of

Research and

Selling, general

other expense,

(provision)

revenues

development

and administrative

net

benefit

GAAP [i] $ 369,849 $ 93,233 $ 83,397 $ (21,615 ) $ (5,057 )
[1] Stock-based compensation 3,584 6,713 8,161
[2] Changes in value of deferred compensation plan 61 272 350 (266 )
[3] Equity in net loss and impairment of equity method investees 3,461
[4] Imputed interest on convertible debt, equity component amortization on convertible debt and others 3,431
[5] Loss on extinguishment of Spansion convertible notes 3,258
[6] Amortization of debt issuance costs 1,073
[7] Amortization of acquisition-related intangible assets 49,438 5,150
[8] Restructuring charges 1,887 292 1,917
[9] Tax impact of non-GAAP adjustments       393   2,043  
Non - GAAP [ii] $ 314,879   $ 85,956   $ 67,819   $ (10,265 ) $ (3,014 )
Impact of reconciling items [ii - i] $ (54,970 ) $ (7,277 ) $ (15,578 ) $ 11,350 $ 2,043
 
 

Table C: GAAP to Non-GAAP reconciling items: Three Months Ended Q2 2017

       

Research

   

Selling,

   

Interest and

   

Income tax

and

general and

other

(provision)

Cost of revenues

development

administrative

expense, net

benefit

GAAP [i] $ 401,031 $ 88,595 $ 95,258 $ (21,242 ) $ (4,504 )
[1] Stock based compensation 4,000 9,776 10,574
[2] Changes in value of deferred compensation plan 137 563 896 (1,584 )
[3] Merger, integration, related costs and adjustments related to assets held for sale 1,336 (96 ) 1,193
[4] Inventory step-up related to acquisition accounting 167
[5] Equity in net loss and impairment of equity method investees 4,835
[6] Imputed interest on convertible debt, equity component amortization on convertible debt and others 3,507
[7] Amortization of debt issuance costs 920
[8] Amortization of acquisition-related intangible assets 44,270 5,084
[9] Restructuring charges 358 540
[10] Settlement charges 3,500
[11] Tax impact of non-GAAP adjustments       227   1,421  
Non - GAAP [ii] $ 351,121   $ 77,994   $ 73,471   $ (13,337 ) $ (3,083 )
Impact of reconciling items [ii - i] $ (49,910 ) $ (10,601 ) $ (21,787 ) $ 7,905 $ 1,421
 
 

Table D: GAAP to non-GAAP reconciling items: Six Months Ended Q2 2018

     

Research

   

SG&A and

       

Income tax

Cost of

and

Restructuring

Interest and other

(provision)

revenues

development

costs

expense, net

benefit

GAAP [i] $ 759,801   $ 189,926   $ 169,996   $ (39,513 ) $ (10,211 )
[1] Stock-based compensation 7,569 20,514 24,283
[2] Changes in value of deferred compensation plan 163 739 922 (1,389 )
[3] Equity in net loss and impairment of equity method investees

7,216
[4] Imputed interest on convertible debt, equity component amortization on convertible debt and others 7,846
 
[5] Loss on extinguishment of Spansion convertible notes and debt issuance cost write off due to refinancing 3,258
[6] Amortization of debt issuance costs 1,073
[7] Amortization of acquisition-related intangible assets and other 98,876 9,505
[8] Gain on sale of cost method investment (1,521 )
[9] Restructuring charges 3,476 325 1,533
[10] Tax impact of non-GAAP adjustments       16   4,072  
Non - GAAP [ii] $ 649,717     $ 168,348       $ 135,274       $ (21,493 ) $ (6,139 )
Impact of reconciling items [ii - i] $ (110,084 ) $ (21,578 ) $ (34,722 ) $ 18,020 $ 4,072
 
 

Table E: GAAP to non-GAAP reconciling items: Six Months Ended Q2 2017

       

Research

   

Selling,

   

Interest and

   

Income tax

Cost of

and

general and

other

(provision)

revenues

development

administrative

expense, net

benefit

GAAP [i] $ 775,797 $ 177,943 $ 176,591 $ (45,677 ) $ (9,431 )
[1] Stock-based compensation 7,885 20,062 19,557
[2] Changes in value of deferred compensation plan 304 1,160 1,904 (3,142 )
[3] Merger, integration, related costs and adjustments related to assets held for sale 2,686 (96 ) (286 )
[4] Inventory step-up related to acquisition accounting 3,031
[5] Equity in net loss and impairment of equity method investees 9,911
[6] Imputed interest on convertible debt, equity component amortization on convertible debt and others 6,996
[7] Amortization of debt issuance costs 1,778
[8] Amortization of acquisition-related intangible assets 87,437 10,167
[9] Restructuring charges 231 2,710 528
[10] Settlement charges 3,500
[11] Tax impact of non-GAAP adjustments       642   3,546  
Non - GAAP [ii] $ 674,223   $ 154,107   $ 141,221   $ (29,492 ) $ (5,885 )
Impact of reconciling items [ii - i] $ (101,574 ) $ (23,836 ) $ (35,370 ) $ 16,185 $ 3,546
 
 

Table F: Non-GAAP gross profit

    Three Months Ended     Six Months Ended
Q2'18     Q1'18     Q2'17 Q2'18     Q2'17
GAAP gross profit $ 234,138     $ 212,392     $ 192,745 $ 446,530     $ 349,853
Impact of reconciling items on cost of revenues (Table A, B, C, D and E) (55,115 ) (54,970 ) (49,910 ) (110,084 ) (101,574 )
Non-GAAP gross profit $ 289,253   $ 267,362   $ 242,655   $ 556,614   $ 451,427  
GAAP gross margin (GAAP gross profit/revenue) 37.5 % 36.5 % 32.5 % 37.0 % 31.1 %
Non-GAAP gross margin (Non-GAAP gross profit/revenue) 46.3 % 45.9 % 40.9 % 46.1 % 40.1 %
 
       

Table G: Non-GAAP operating income

Three Months Ended Six Months Ended
Q2'18     Q1'18     Q2'17 Q2'18     Q2'17
GAAP operating income (loss) [i] $ 50,846 $ 35,762 $ 8,892 $ 86,608 $ (4,681 )
Impact of reconciling items on cost of revenues (see Table A, B, C, D, E) 55,115 54,970 49,910 110,084 101,574
Impact of reconciling items on R&D (see Table A, B, C, D, E) 14,300 7,277 10,601 21,578 23,836
Impact of reconciling items on SG&A (see Table A, B, C, D, E) 19,144   15,578   21,787   34,722   35,370  
Non-GAAP operating income [ii] $ 139,405   $ 113,587   $ 91,190   $ 252,992   $ 156,099  
Impact of reconciling items on operating income [ii - i] $ 88,559 $ 77,825 $ 82,298 $ 166,384 $ 160,780
GAAP operating margin (GAAP operating income / revenue) 8.1 % 6.1 % 1.5 % 7.2 % (0.4 )%
Non-GAAP operating margin (Non-GAAP operating income / revenue) 22.3 % 19.5 % 15.4 % 21.0 % 13.9 %
 

Table H: Non-GAAP pre-tax profit

    Three Months Ended     Six Months Ended
Q2'18     Q1'18     Q2'17 Q2'18     Q2'17
GAAP income (loss) before income taxes and non-controlling interest ("Pre-tax income") $ 36,703 $ 17,608 $ (7,515 ) $ 54,311 $ (40,447 )
Equity in net loss and impairment of equity method investees (3,755 ) (3,461 ) (4,835 ) (7,216 ) (9,911 )
Impact of reconciling items on operating income (see Table G) 88,559 77,825 82,298 166,384 160,780
Impact of reconciling items on interest and other expense, net (see Table A, B, C, D, E) 6,670   11,350   7,905   18,020   16,185  
Non-GAAP pre-tax profit $ 128,177 $ 103,322 $ 77,853 $ 231,499 $ 126,607
GAAP pre-tax profit margin (GAAP pre-tax income/revenue) 5.9 % 3.0 % (1.3 )% 4.5 % (3.6 )%
Non-GAAP pre-tax profit margin (Non-GAAP pre-tax profit/revenue) 20.5 % 17.7 % 13.1 % 19.2 % 11.2 %
 

Table I: Non-GAAP net income (loss)

   
Three Months Ended     Six Months Ended
Q2'18     Q1'18     Q2'17 Q2'18     Q2'17
GAAP net income (loss) attributable to Cypress $ 27,706 $ 9,078 $ (16,920 ) $ 36,784 $ (59,919 )
Impact of reconciling items on operating income (see Table G) 88,559 77,825 82,298 166,384 160,780
Impact of reconciling items on interest and other expense, net (see Table A, B, C, D, E) 6,670 11,350 7,905 18,020 16,185
Impact of reconciling items on income tax (provision) benefit (see Table A, B, C, D, E) 2,029   2,043   1,421   4,072   3,546  
Non-GAAP net income $ 124,964   $ 100,296   $ 74,704   $ 225,260   $ 120,592  

Table J: Weighted-average shares, diluted

    Three Months Ended
Q2'18     Q1'18     Q2'17
GAAP     Non-GAAP GAAP     Non-GAAP GAAP     Non-GAAP
Weighted-average common shares outstanding, basic 358,577 358,577 355,461 355,461 329,860 329,860
Effect of dilutive securities:
Stock options, unvested restricted stock and other 7,837 14,391 7,897 12,515 15,822
Convertible notes 5,553   3,070   7,234   4,750     18,208
Weighted-average common shares outstanding, diluted 371,967   376,038   370,592   372,726   329,860   363,890
 
 

Table K: Weighted-average shares, diluted

    Six Months Ended
Q2'18     Q2'17
GAAP     Non-GAAP GAAP     Non-GAAP
Weighted-average common shares outstanding, basic 356,123 356,123 328,320 328,320
Effect of dilutive securities:
Stock options, unvested restricted stock and other 7,879 13,071 15,466
Convertible notes 6,400   3,916     17,791
Weighted-average common shares outstanding, diluted 370,402   373,110   328,320   361,577
 
 

Table L: Net income (loss) per share

    Three Months Ended
Q2'18     Q1'18     Q2'17
GAAP     Non-GAAP GAAP   Non-GAAP GAAP     Non-GAAP
Net income (loss) (see Table I) [i] $ 27,706 $ 124,964 $ 9,078 $ 100,296 $ (16,920 ) $ 74,704
Weighted-average common shares outstanding, diluted (see Table J) [ii] 371,967   376,038   370,592   372,726   329,860   363,890
Earnings per share - diluted [i/ii] $ 0.07   $ 0.33   $ 0.02   $ 0.27   $ (0.05 ) $ 0.21
 
 

Table M: Net income (loss) per share

    Six Months Ended
Q2'18     Q2'17
GAAP     Non-GAAP GAAP     Non-GAAP
Net income (loss) (see Table I) [i] $ 36,784 $ 225,260 $ (59,919 ) $ 120,592
Weighted-average common shares outstanding (see Table K) [ii] 370,402   373,110   328,320   361,577
Earnings per share - diluted [i/ii] $ 0.10   $ 0.60   $ (0.18 ) $ 0.33
 
 

Table N: Adjusted EBITDA

    Three Months Ended     Six Months Ended
Q2'18     Q1'18     Q2'17 Q2'18     Q2'17
GAAP net income (loss) attributable to Cypress $ 27,706 $ 9,078 $ (16,920 ) $ 36,784 $ (59,919 )
Interest and other expense, net (14,143 ) (18,154 ) (16,407 ) (32,297 ) (35,766 )
Income tax provision (5,154 ) (5,057 ) (4,504 ) (10,211 ) (9,431 )
Equity in net loss of and impairment of equity method investees (3,755 ) (3,461 ) (4,835 ) (7,216 ) (9,911 )
Net gain (loss) attributable to non-controlling interests (88 ) (12 ) (66 ) (100 ) (130 )
GAAP operating income $ 50,846 $ 35,762 $ 8,892 $ 86,608 $ (4,681 )
Impact of reconciling items on operating income (see Table G) 88,559   77,825   82,298   166,384   160,780  
Non-GAAP operating income $ 139,405 $ 113,587 $ 91,190 $ 252,992 $ 156,099
Depreciation 16,239   17,140   16,045   33,379   32,202  
Adjusted EBITDA $ 155,644   $ 130,727   $ 107,235   $ 286,371   $ 188,301  
 
 
CYPRESS SEMICONDUCTOR CORPORATION
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
 
    Three Months Ended     Six Months Ended
July 1, 2018     April 1, 2018     July 2, 2017 July 1, 2018     July 2, 2017

Selected Cash Flow Data (Preliminary):

Net cash provided by operating activities $ 110,734 $ 31,678 $ 32,447 $ 142,412 $ 58,168
Net cash (used in) provided by investing activities $ (7,213 ) $ (14,173 ) $ (14,992 ) $ (21,386 ) $ 6,658
Net cash used in financing activities $ (97,556 ) $ (62,348 ) $ (30,184 ) $ (159,904 ) $ (76,227 )

Other Supplemental Data (Preliminary):

Capital expenditures $ 25,593 $ 17,267 $ 15,577 $ 42,860 $ 29,349
Depreciation $ 16,239 $ 17,140 $ 16,045 $ 33,379 $ 32,202
Payment of dividend $ 39,404 $ 38,741 $ 36,217 $ 78,145 $ 71,754
Dividend paid per share $ 0.11 $ 0.11 $ 0.11 $

0.22

$

0.22

Total debt (principal amount) $ 955,553 $ 1,017,588 $ 1,280,390 $ 955,553 $ 1,280,390
Leverage ratio 1.71 2.00 3.42 1.71 3.42
 
 
CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP FORWARDING-LOOKING ESTIMATES TO NON-GAAP FORWARD-
LOOKING ESTIMATES
 
            Forward-looking
Forward-looking Non-GAAP
GAAP estimate estimate
(A) Adjustments (B) (C)=(A)+(B)
 

Stock-based

 

Amortization of

compensation

Other

intangibles

expense

items

Gross margin 38.0% - 39.0% 7.4 % 0.7 % 0.4 % 46.5% - 47.5%
Diluted earnings per share $0.11 to $0.15 $ 0.14 $ 0.07 $ 0.04 $0.36 to $0.40
 

Cypress Semiconductor Corporation
Thad Trent, 408-943-2925
EVP Finance & Administration and CFO
or
Ann Minooka, 408-456-1962
Vice President, Corporate Communications

Source: Cypress Semiconductor Corporation