Cirrus Logic Reports Q3 Revenue of $523 Million

Strong Demand for Portable Audio Products Drove Revenue Above Expectations

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 third quarter of fiscal year 2017, which ended Dec. 24, 2016, as well as the company’s current business outlook.

“Cirrus Logic delivered outstanding revenue, operating profit and earnings per share growth in the December quarter as demand for certain portable audio products accelerated”

“Cirrus Logic delivered outstanding revenue, operating profit and earnings per share growth in the December quarter as demand for certain portable audio products accelerated,” said Jason Rhode, president and chief executive officer. “The company is delighted to be on track to deliver our third consecutive year of more than 25 percent annual revenue growth. With a comprehensive portfolio of products and extensive roadmap we are well positioned for success in the coming years as demand for innovative audio and voice technology continues to increase.”

Reported Financial Results – Third Quarter FY17

  • Revenue of $523 million;
  • GAAP and non-GAAP gross margin of 48.8 percent;
  • GAAP operating expenses of $109 million and non-GAAP operating expenses of $91.5 million; and
  • GAAP diluted earnings per share of $1.83 and non-GAAP diluted earnings per share of $1.87.

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

Business Outlook – Fourth Quarter FY17

  • Revenue is expected to range between $300 million and $340 million;
  • GAAP gross margin is expected to be between 48 percent and 50 percent; and
  • Combined GAAP R&D and SG&A expenses are expected to range between $110 million and $116 million, which includes approximately $11 million in share-based compensation and $8 million in amortization of acquired intangibles.

Cirrus Logic will host a live Q&A session at 5 p.m. EST 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: 47722143).

Cirrus Logic, Inc.

Cirrus Logic is a leader in high performance, low-power ICs for audio and voice signal processing applications. Cirrus Logic’s products span the entire audio signal chain, from capture to playback, providing innovative products for the world’s top smartphones, tablets, digital headsets, wearables and emerging smart home applications. With headquarters in Austin, Texas, Cirrus Logic is recognized globally for its award-winning corporate culture. Check us out 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 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 revenue growth opportunities and our estimates of fourth quarter fiscal year 2017 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 fourth quarter of fiscal year 2017, customer cancellations of orders, or the failure to place orders consistent with forecasts, along with the timing and success of new product ramps; and the risk factors listed in our Form 10-K for the year ended March 26, 2016, as amended, 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:

                     
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except per share data)
 
Three Months Ended Nine Months Ended
Dec. 24, Sep. 24, Dec. 26, Dec. 24, Dec. 26,
2016 2016 2015 2016 2015
Q3'17 Q2'17 Q3'16 Q3'17 Q3'16
Portable audio products $ 483,712 $ 383,410 $ 308,803 $ 1,083,190 $ 801,821
Non-portable audio and other products   39,317     45,209     39,060     127,886     135,431  
Net sales   523,029     428,619     347,863     1,211,076     937,252  
Cost of sales   267,877     216,920     182,952     617,540     497,666  
Gross profit 255,152 211,699 164,911 593,536 439,586
Gross margin 48.8 % 49.4 % 47.4 % 49.0 % 46.9 %
 
Research and development 76,079 75,673 70,290 225,686 203,383
Selling, general and administrative 32,884 32,089 30,632 95,513 89,854
Patent agreement and other   -     -     78     -     (11,670 )
Total operating expenses   108,963     107,762     101,000     321,199     281,567  
 
Income from operations 146,189 103,937 63,911 272,337 158,019
 
Interest expense, net (350 ) (1,003 ) (698 ) (2,042 ) (2,152 )
Other income (expense), net   (47 )   (261 )   (818 )   (161 )   (991 )
Income before income taxes 145,792 102,673 62,395 270,134 154,876
Provision for income taxes*   23,751     16,634     21,011     43,983     45,258  
Net income* $ 122,041   $ 86,039   $ 41,384   $ 226,151   $ 109,618  
 
Basic earnings per share*: $ 1.91 $ 1.37 $ 0.65 $ 3.59 $ 1.73
Diluted earnings per share*: $ 1.83 $ 1.30 $ 0.63 $ 3.41 $ 1.66
 
Weighted average number of shares:
Basic 63,837 62,787 63,328 63,025 63,316
Diluted* 66,748 66,410 65,761 66,378 66,184

 

*Q2 FY17 results have been updated since our last quarterly report to reflect Cirrus Logic’s adoption of the Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The adoption of this new guidance impacted our previously reported quarterly results.
 

Prepared in accordance with Generally Accepted Accounting Principles

 
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.
      Three Months Ended       Nine Months Ended
Dec. 24,     Sep. 24,     Dec. 26, Dec. 24,     Dec. 26,
2016 2016 2015 2016 2015
Net Income Reconciliation Q3'17 Q2'17 Q3'16 Q3'17 Q3'16
GAAP Net Income* $ 122,041 $ 86,039 $ 41,384 $ 226,151 $ 109,618
Amortization of acquisition intangibles 8,308 8,326 8,634 24,997 23,908
Stock based compensation expense 9,471 9,925 7,761 28,706 24,720
Patent agreement and other - - 78 - (11,670 )
Acquisition-related items - (3,566 ) - (3,566 ) -
Adjustment to income taxes*   (15,094 )   (12,251 )   (3,737 )   (34,191 )   (13,404 )
Non-GAAP Net Income $ 124,726   $ 88,473   $ 54,120   $ 242,097   $ 133,172  
 
Earnings Per Share Reconciliation
GAAP Diluted earnings per share* $ 1.83 $ 1.30 $ 0.63 $ 3.41 $ 1.66
Effect of Amortization of acquisition intangibles 0.13 0.12 0.13 0.38 0.36
Effect of Stock based compensation expense 0.14 0.15 0.12 0.43 0.37
Effect of Patent agreement and other - - - - (0.18 )
Effect of Acquisition-related items - (0.05 ) - (0.05 ) -
Effect of Adjustment to income taxes*   (0.23 )   (0.19 )   (0.06 )   (0.52 )   (0.20 )
Non-GAAP Diluted earnings per share* $ 1.87   $ 1.33   $ 0.82   $ 3.65   $ 2.01  
 
Operating Income Reconciliation
GAAP Operating Income $ 146,189 $ 103,937 $ 63,911 $ 272,337 $ 158,019
GAAP Operating Profit 28 % 24 % 18 % 22 % 17 %
Amortization of acquisition intangibles 8,308 8,326 8,634 24,997 23,908
Stock compensation expense - COGS 282 235 213 747 918
Stock compensation expense - R&D 5,078 4,905 4,183 15,199 12,177
Stock compensation expense - SG&A 4,111 4,785 3,365 12,760 11,625
Patent agreement and other - - 78 - (11,670 )
Acquisition-related items   -     (3,566 )   -     (3,566 )   -  
Non-GAAP Operating Income $ 163,968   $ 118,622   $ 80,384   $ 322,474   $ 194,977  
Non-GAAP Operating Profit 31 % 28 % 23 % 27 % 21 %
 
Operating Expense Reconciliation
GAAP Operating Expenses $ 108,963 $ 107,762 $ 101,000 $ 321,199 $ 281,567
Amortization of acquisition intangibles (8,308 ) (8,326 ) (8,634 ) (24,997 ) (23,908 )
Stock compensation expense - R&D (5,078 ) (4,905 ) (4,183 ) (15,199 ) (12,177 )
Stock compensation expense - SG&A (4,111 ) (4,785 ) (3,365 ) (12,760 ) (11,625 )
Patent agreement and other - - (78 ) - 11,670
Acquisition-related items   -     3,566     -     3,566     -  
Non-GAAP Operating Expenses $ 91,466   $ 93,312   $ 84,740   $ 271,809   $ 245,527  
 
Gross Margin/Profit Reconciliation
GAAP Gross Margin $ 255,152 $ 211,699 $ 164,911 $ 593,536 $ 439,586
GAAP Gross Profit 48.8 % 49.4 % 47.4 % 49.0 % 46.9 %
Stock compensation expense - COGS   282     235     213     747     918  
Non-GAAP Gross Margin $ 255,434   $ 211,934   $ 165,124   $ 594,283   $ 440,504  
Non-GAAP Gross Profit 48.8 % 49.4 % 47.5 % 49.1 % 47.0 %
 
Effective Tax Rate Reconciliation
GAAP Tax Expense* $ 23,751 $ 16,634 $ 21,011 $ 43,983 $ 45,258
GAAP Effective Tax Rate 16.3 % 16.2 % 33.7 % 16.3 % 29.2 %
Adjustments to income taxes*   15,094     12,251     3,737     34,191     13,404  
Non-GAAP Tax Expense $ 38,845   $ 28,885   $ 24,748   $ 78,174   $ 58,662  
Non-GAAP Effective Tax Rate 23.7 % 24.6 % 31.4 % 24.4 % 30.6 %
 
Tax Impact to EPS Reconciliation
GAAP Tax Expense* $ 0.36 $ 0.25 $ 0.32 $ 0.66 $ 0.68
Adjustments to income taxes*   0.23     0.19     0.06     0.52     0.20  
Non-GAAP Tax Expense $ 0.59   $ 0.44   $ 0.38   $ 1.18   $ 0.88  
*Q2 FY17 results have been updated since our last quarterly report to reflect Cirrus Logic’s adoption of the Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The adoption of this new guidance impacted our previously reported quarterly results.
 

 
CONSOLIDATED CONDENSED BALANCE SHEET
unaudited; in thousands
 
      Dec. 24,     Mar. 26,     Dec. 26,
2016 2016 2015
ASSETS
Current assets
Cash and cash equivalents $ 310,375 $ 168,793 $ 159,572
Marketable securities 72,342 60,582 67,148
Accounts receivable, net 246,630 88,532 127,754
Inventories 154,128 142,015 137,723
Deferred tax asset - - 19,404
Other current assets   41,747     46,207     37,982  
Total current Assets 825,222 506,129 549,583
 
Long-term marketable securities - 20,631 22,327
Property and equipment, net 167,933 162,656 159,149
Intangibles, net 144,005 162,832 171,664
Goodwill 287,518 287,518 287,518
Deferred tax asset 34,737 25,772 27,581
Other assets   13,990     16,345     18,099  
Total assets $ 1,473,405   $ 1,181,883   $ 1,235,921  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 154,930 $ 71,619 $ 114,483
Accrued salaries and benefits 33,122 21,239 22,438
Other accrued liabilities   24,687     35,266     36,301  
Total current liabilities 212,739 128,124 177,384
 
Long-term debt 100,000 160,439 160,439
Other long-term liabilities 56,631 33,837 38,223
 
Stockholders' equity:
Capital stock 1,247,191 1,203,496 1,198,547
Accumulated deficit (141,027 ) (344,345 ) (336,653 )
Accumulated other comprehensive income (loss)   (2,129 )   332     (2,019 )
Total stockholders' equity   1,104,035     859,483     859,875  
Total liabilities and stockholders' equity $ 1,473,405   $ 1,181,883   $ 1,235,921  
Prepared in accordance with Generally Accepted Accounting Principles

Contacts

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

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