Cypress Semiconductor Corporation (NASDAQ:CY) Q3 2015 Earnings Conference Call - Final Transcript

Oct 22, 2015 • 11:30 am ET

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Cypress Semiconductor Corporation (NASDAQ:CY) Q3 2015 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good morning and welcome to Cypress Semiconductor's Third Quarter 2015 Earnings Release Conference Call. Today's conference is being recorded. If you have any objections you may disconnect at this time. I'd now like to turn the call over to Mr. Rahul Mathur, VP of Finance at Cypress Semiconductor. Sir, you may begin.

Executive
Rahul Mathur

Thank you, Oliver. Good morning and thank for attending our Q3 conference call.

(Forward Looking Cautionary Statements)

The order of our call today will be as follows. CFO, Thad Trent will provide a financial overview, EVP of Sales and Applications Mike Balow will provide some data on sales and end markets. And President and CEO, T.J. Rodgers will provide an additional overview before we end with Q&A with our executive staff. One note before we start. Cypress has traditionally conducted an Analyst Day in Q4, we are currently in the midst of our inaugural strategic planning process as a merged company, which we will include in Q1. For this reason, we expect to conduct an Analyst Day in Q1 of 2016.

I'll now turn the call over to Thad Trent.

Executive
Thad Trent

Thanks, Rahul. So before I jump into the results for the quarter, I want to highlight our press release from this morning. Our Board has authorized the $450 million share buyback that will be funded through a combination of debt and our earnings going forward. This demonstrates our confidence in the strength of our business, our ability to execute and our commitment to delivering shareholder value. Additionally, Credit Suisse is providing a $400 million financing commitment to fund the buyback and for general corporate purposes.

So turning to the results for the quarter, our non-GAAP revenue was $470.1 million at the low-end of our revised guidance for the quarter. We saw general softness in the market soon after we reported our Q2 results. This softness was not specific to any one region, customer, or application but rather a broader slowdown related to macroeconomic concerns initiated by uncertainty in China. As you know, we have made significant efforts to reduce our manufacturing cycle times and lead times and we have reduced our inventory balances.

These reductions allow us to quickly respond to customer needs and scale quickly as the environment changes but also limits our visibility. There was approximately seven weeks of inventory in the distribution channel, it's in line with our historical ranges of 6 to 8 weeks and we continue to monitor our customers and disti's very closely. So revenue by division. MPD was $260.9 million driven by strength in our SRAM products offsetting slightly lower flash revenue for the quarter. This also includes a quarterly payment of $6.25 million from a pre-merger license arrangement that cannot be recognized as GAAP revenue due to purchase accounting treatments.

We expect to report this revenue through Q3 of 2016. PSD was $178.5 million which included $5 million of touch revenue prior to divestiture. And this compares to $21 million of touch revenue in Q2. This decline was partially offset by