Cirrus Logic Reports Q2 Revenue of $306.8 Million

Company Expects Significant Year Over Year Growth in Q3 and Announces Additional $200 Million Share Repurchase Authorization

AUSTIN, Texas--()--Cirrus Logic, Inc. (Nasdaq: CRUS), a leader in high-precision analog and digital signal processing products, today posted on its investor relations website at http://investor.cirrus.com the quarterly Shareholder Letter that contains the complete financial results for the second quarter fiscal year 2016, which ended Sept. 26, 2015, as well as the company’s current business outlook.

“We are pleased with our results for the September quarter as strong demand for our smart codecs and amplifiers fueled sequential and year-over-year growth”

“We are pleased with our results for the September quarter as strong demand for our smart codecs and amplifiers fueled sequential and year-over-year growth,” said Jason Rhode, president and chief executive officer. “FY16 has been a great year for Cirrus Logic as share gains and content increases have driven strong growth. We are excited by the progress we made this past quarter toward the strategic initiatives that are expected to drive continued growth in FY17.”

Reported Financial Results – Second Quarter FY16

  • Revenue of $306.8 million;
  • GAAP gross margin of 46.4 percent and non-GAAP gross margin of 46.5 percent;
  • GAAP operating expenses of $98.1 million; non-GAAP operating expenses of $80.9 million; and
  • GAAP diluted earnings per share of $0.53 and non-GAAP diluted earnings per share of $0.65.

A reconciliation of the non-GAAP charges is included in the tables accompanying this press release.

Business Outlook – Third Quarter FY16

  • Revenue is expected to range between $370 million and $400 million;
  • GAAP gross margin is expected to be between 46 percent and 48 percent; and
  • Combined GAAP R&D and SG&A expenses are expected to range between $100 million and $104 million, which includes approximately $8 million in share-based compensation and $8 million in amortization of acquired intangibles.

Share Repurchase Authorization

The company also announced that its Board of Directors has authorized the repurchase of up to an additional $200 million of the company's common stock, in addition to the $32.5 million remaining from the Board’s previous share repurchase authorization in November 2012. The repurchases will be funded from working capital and anticipated cash from operations and may occur from time to time depending on a variety of factors, including the market price of the company's shares, general market and economic conditions and other corporate considerations. The share repurchase program is designed to comply with all applicable securities laws, and may be suspended or discontinued at any time without notice.

Cirrus Logic will host a live Q&A session at 5 p.m. EDT today to answer questions related to its financial results and business outlook. Participants may listen to the conference call on the Cirrus Logic website. Participants who would like to submit a question to be addressed during the call are requested to email investor.relations@cirrus.com. A replay of the webcast can be accessed on the Cirrus Logic website approximately two hours following its completion, or by calling (404) 537-3406, or toll-free at (855) 859-2056 (Access Code: 75505782).

Cirrus Logic, Inc.

Cirrus Logic develops high-precision, analog and mixed-signal integrated circuits for a broad range of innovative customers. Building on its diverse analog and signal-processing patent portfolio, Cirrus Logic delivers highly optimized products for a variety of audio, industrial and energy-related applications. The company operates from headquarters in Austin, Texas, with offices in the United States, United Kingdom, Australia, Japan and Asia. More information about Cirrus Logic is available at www.cirrus.com.

Use of non-GAAP Financial Information

To supplement Cirrus Logic's financial statements presented on a GAAP basis, Cirrus has provided non-GAAP financial information, including gross margins, operating expenses, net income, operating profit and income, tax expenses, effective tax rate and diluted earnings per share. A reconciliation of the adjustments to GAAP results is included in the tables below. Non-GAAP financial information is not meant as a substitute for GAAP results, but is included because management believes such information is useful to our investors for informational and comparative purposes. In addition, certain non-GAAP financial information is used internally by management to evaluate and manage the company. The non-GAAP financial information used by Cirrus Logic may differ from that used by other companies. These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP.

Safe Harbor Statement

Except for historical information contained herein, the matters set forth in this news release contain forward-looking statements, including future growth opportunities and our estimates of third quarter fiscal year 2016 revenue, gross margin, combined research and development and selling, general and administrative expense levels, share-based compensation expense and amortization of acquired intangibles. In some cases, forward-looking statements are identified by words such as “expect,” “anticipate,” “target,” “project,” “believe,” “goals,” “opportunity,” “estimates,” “intend,” and variations of these types of words and similar expressions. In addition, any statements that refer to our plans, expectations, strategies or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to, the following: the level of orders and shipments during the third quarter of fiscal year 2016, as well as customer cancellations of orders, or the failure to place orders consistent with forecasts; and the risk factors listed in our Form 10-K for the year ended March 28, 2015, and in our other filings with the Securities and Exchange Commission, which are available at www.sec.gov. The foregoing information concerning our business outlook represents our outlook as of the date of this news release, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

Cirrus Logic and Cirrus are registered trademarks of Cirrus Logic, Inc. All other company or product names noted herein may be trademarks of their respective holders.

Summary financial data follows:

             
 
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except per share data)
 
Three Months Ended Six Months Ended
Sep. 26, Jun. 27, Sep. 27, Sep. 26, Sep. 27,
2015 2015 2014 2015 2014
Q2'16 Q1'16 Q2'15 Q2'16 Q2'15
Portable audio products $ 257,152 $ 235,866 $ 163,563 $ 493,018 $ 276,133
Non-portable audio and other products   49,604     46,767     46,651     96,371     86,646  
Net sales   306,756     282,633     210,214     589,389     362,779  
Cost of sales   164,535     150,179     109,647     314,714     186,837  
Gross profit 142,221 132,454 100,567 274,675 175,942
Gross margin 46.4 % 46.9 % 47.8 % 46.6 % 48.5 %
 
Research and development 67,258 65,835 44,557 133,093 84,334
Selling, general and administrative 30,103 29,119 21,545 59,222 41,228
Acquisition related costs - - 14,937 - 14,937
Restructuring and other - - 1,455 - 1,455
Patent agreement and other   752     (12,500 )   -     (11,748 )   -  
Total operating expenses   98,113     82,454     82,494     180,567     141,954  
 
Income from operations 44,108 50,000 18,073 94,108 33,988
 
Interest expense, net (601 ) (638 ) (2,670 ) (1,239 ) (3,137 )
Other income (expense), net   (524 )   136     (11,994 )   (388 )   (11,493 )
Income before income taxes 42,983 49,498 3,409 92,481 19,358
Provision for income taxes   8,103     16,144     2,557     24,247     8,258  
Net income $ 34,880   $ 33,354   $ 852   $ 68,234   $ 11,100  
 
Basic earnings per share: $ 0.55 $ 0.53 $ 0.01 $ 1.08 $ 0.18
Diluted earnings per share: $ 0.53 $ 0.50 $ 0.01 $ 1.03 $ 0.17
 
Weighted average number of shares:
Basic 63,346 63,274 62,241 63,310 62,137
Diluted 66,329 66,410 65,085 66,378 64,892
 
Prepared in accordance with Generally Accepted Accounting Principles

 
 
CIRRUS LOGIC, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL INFORMATION
(unaudited, in thousands, except per share data)
(not prepared in accordance with GAAP)
 
Non-GAAP financial information is not meant as a substitute for GAAP results, but is included because management believes such information is useful to our investors for informational and comparative purposes. In addition, certain non-GAAP financial information is used internally by management to evaluate and manage the company. As a note, the non-GAAP financial information used by Cirrus Logic may differ from that used by other companies. These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. Certain modifications to prior year non-GAAP presentation has been made and had no material effect on the results of operations.
         
Three Months Ended Six Months Ended
Sep. 26,   Jun. 27, Sep. 27, Sep. 26, Sep. 27,
2015 2015 2014 2015 2014
Net Income Reconciliation Q2'16 Q1'16 Q2'15 Q2'16 Q2'15
GAAP Net Income $ 34,880 $ 33,354 $ 852 $ 68,234 $ 11,100
Amortization of acquisition intangibles 8,133 7,141 2,524 15,274 2,770
Stock based compensation expense 8,688 8,271 6,496 16,959 12,118
Patent agreement and other 752 (12,500 ) - (11,748 ) -
Restructuring and other costs, net - - 1,455 - 1,455
Wolfson acquisition items - - 30,875 - 33,179
Adjustments to income tax   (9,492 )   (175 )   1,764     (9,667 )   6,990  
Non-GAAP Net Income $ 42,961   $ 36,091   $ 43,966   $ 79,052   $ 67,612  
 
Earnings Per Share Reconciliation
GAAP Diluted earnings per share $ 0.53 $ 0.50 $ 0.01 $ 1.03 $ 0.17
Effect of Amortization of acquisition intangibles 0.12 0.11 0.04 0.23 0.04
Effect of Stock based compensation expense 0.13 0.12 0.10 0.26 0.18
Effect of Patent agreement and other 0.01 (0.19 ) - (0.18 ) -
Effect of Restructuring and other costs, net - - 0.03 - 0.02
Effect of Wolfson acquisition items - - 0.47 - 0.50
Effect of Adjustments to income tax   (0.14 )   -     0.03     (0.15 )   0.11  
Non-GAAP Diluted earnings per share $ 0.65   $ 0.54   $ 0.68   $ 1.19   $ 1.02  
 
Operating Income Reconciliation
GAAP Operating Income $ 44,108 $ 50,000 $ 18,073 $ 94,108 $ 33,988
GAAP Operating Profit 14 % 18 % 9 % 16 % 9 %
Amortization of acquisition intangibles 8,133 7,141 2,524 15,274 2,770
Stock compensation expense - COGS 380 325 253 705 484
Stock compensation expense - R&D 4,126 3,868 2,781 7,994 5,324
Stock compensation expense - SG&A 4,182 4,078 3,462 8,260 6,310
Patent agreement and other 752 (12,500 ) - (11,748 ) -
Restructuring and other costs, net - - 1,455 - 1,455
Wolfson acquisition items   -     -     16,547     -     18,739  
Non-GAAP Operating Income $ 61,681   $ 52,912   $ 45,095   $ 114,593   $ 69,070  
Non-GAAP Operating Profit 20 % 19 % 21 % 19 % 19 %
 
Operating Expense Reconciliation
GAAP Operating Expenses $ 98,113 $ 82,454 $ 82,494 $ 180,567 $ 141,954
Amortization of acquisition intangibles (8,133 ) (7,141 ) (2,524 ) (15,274 ) (2,770 )
Stock compensation expense - R&D (4,126 ) (3,868 ) (2,781 ) (7,994 ) (5,324 )
Stock compensation expense - SG&A (4,182 ) (4,078 ) (3,462 ) (8,260 ) (6,310 )
Patent agreement and other (752 ) 12,500 - 11,748 -
Restructuring and other costs, net - - (1,455 ) - (1,455 )
Wolfson acquisition items   -     -     (14,937 )   -     (17,129 )
Non-GAAP Operating Expenses $ 80,920   $ 79,867   $ 57,335   $ 160,787   $ 108,966  
 
Gross Margin/Profit Reconciliation
GAAP Gross Margin $ 142,221 $ 132,454 $ 100,567 $ 274,675 $ 175,942
GAAP Gross Profit 46.4 % 46.9 % 47.8 % 46.6 % 48.5 %
Wolfson acquisition items - - 1,610 - 1,610
Stock compensation expense - COGS   380     325     253     705     484  
Non-GAAP Gross Margin $ 142,601   $ 132,779   $ 102,430   $ 275,380   $ 178,036  
Non-GAAP Gross Profit 46.5 % 47.0 % 48.7 % 46.7 % 49.1 %
 
Effective Tax Rate Reconciliation
GAAP Tax Expense $ 8,103 $ 16,144 $ 2,557 $ 24,247 $ 8,258
GAAP Effective Tax Rate 18.9 % 32.6 % 75.0 % 26.2 % 42.7 %
Adjustments to income tax   9,492     175     (1,764 )   9,667     (6,990 )
Non-GAAP Tax Expense $ 17,595   $ 16,319   $ 793   $ 33,914   $ 1,268  
Non-GAAP Effective Tax Rate 29.1 % 31.1 % 1.8 % 30.0 % 1.8 %
 
Tax Impact to EPS Reconciliation
GAAP Tax Expense $ 0.12 $ 0.24 $ 0.04 $ 0.37 $ 0.13
Adjustments to income tax   0.14     -     (0.03 )   0.15     (0.11 )
Non-GAAP Tax Expense $ 0.26   $ 0.24   $ 0.01   $ 0.52   $ 0.02  

       
 
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands)
 
Sep. 26, Mar. 28, Sep. 27,
2015 2015 2014
ASSETS (unaudited) (unaudited)
Current assets
Cash and cash equivalents $ 56,333 $ 76,401 $ 48,214
Marketable securities 86,460 124,246 85,796
Accounts receivable, net 169,423 112,608 126,161
Inventories 143,867 84,196 121,169
Deferred tax asset 8,502 18,559 16,435
Other current assets   51,329     35,903     29,089  
Total current Assets 515,914 451,913 426,864
 
Long-term marketable securities 22,393 60,072 9,228
Property and equipment, net 158,529 144,346 133,458
Intangibles, net 179,816 175,743 187,030
Goodwill 289,565 263,115 265,410
Deferred tax asset 25,603 25,593 24,998
Other assets   20,474     27,996     17,658  
Total assets $ 1,212,294   $ 1,148,778   $ 1,064,646  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 111,023 $ 112,213 $ 81,549
Accrued salaries and benefits 29,156 24,132 17,706
Deferred income 5,582 6,105 5,218
Other accrued liabilities   42,181     34,128     34,946  
Total current liabilities 187,942 176,578 139,419
 
Long-term debt 160,439 180,439 226,439
Other long-term liabilities 34,990 34,990 25,376
 
Stockholders' equity:
Capital stock 1,183,262 1,159,494 1,104,379
Accumulated deficit (352,374 ) (400,613 ) (430,144 )
Accumulated other comprehensive loss   (1,965 )   (2,110 )   (823 )
Total stockholders' equity   828,923     756,771     673,412  
Total liabilities and stockholders' equity $ 1,212,294   $ 1,148,778   $ 1,064,646  
 
Prepared in accordance with Generally Accepted Accounting Principles

Contacts

Cirrus Logic, Inc.
Thurman K. Case, 512-851-4125
Chief Financial Officer
Investor.Relations@cirrus.com

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