Cirrus Logic Reports Revenue of $210.2 Million

Strong Demand for Portable Audio Drives September Quarter Revenue Growth

AUSTIN, Texas--()--Cirrus Logic, Inc. (Nasdaq: CRUS), a leader in high-precision analog and digital signal processing components, 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 2015, which ended Sept. 27, 2014, as well as the company’s current business outlook.

“The acquisition further strengthens Cirrus Logic’s position as a market leader and helps accelerate critical R&D programs we believe will fuel revenue growth in the future.”

“Q2 was an outstanding quarter for Cirrus Logic, as strong demand for portable audio products drove revenue above expectations. In addition, we were pleased to have closed the acquisition of Wolfson Microelectronics on Aug. 21,” said Jason Rhode, president and chief executive officer. “The acquisition further strengthens Cirrus Logic’s position as a market leader and helps accelerate critical R&D programs we believe will fuel revenue growth in the future.”

Reported Financial Results – Second Quarter FY15

  • Revenue of $210.2 million, including $197.2 million from Cirrus Logic and $13 million from five weeks of Wolfson Microelectronics;
  • GAAP gross margin of 47.8 percent and non-GAAP gross margin of 48.7 percent;
  • GAAP operating expenses of $82.5 million and non-GAAP operating expenses of $57.3 million. GAAP operating expense includes $18.7 million in acquisition costs and $6.5 million of share-based compensation and amortization of acquired intangibles; and
  • GAAP diluted earnings per share of $0.01 and non-GAAP diluted earnings per share of $0.68.

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

Business Outlook – Third Quarter FY15

  • Revenue is expected to range between $265 million and $285 million;
  • GAAP gross margin is expected to be between 42 percent and 44 percent, which includes roughly 200 basis points of costs associated with the fair value write up of acquired inventory; and
  • Combined R&D and SG&A expenses are expected to range between $86 million and $90 million, which includes approximately $9 million in share-based compensation and $7 million in amortization of acquired intangibles.

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: 13896797).

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, Europe, 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 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 our estimates of third quarter fiscal year 2015 revenue, gross margin, combined research and development and selling, general and administrative expense levels, share-based compensation expense, amortization of acquired intangibles and acquisition related costs associated with the fair value write up of acquired inventory. 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 2015, 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 29, 2014, 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, Cirrus and Wolfson are registered trademarks of Cirrus Logic, Inc. or its subsidiaries. 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. 27, Jun. 28, Sep. 28, Sep. 27, Sep. 28,
2014 2014 2013 2014 2013
Q2'15 Q1'15 Q2'14 Q2'15 Q2'14
Portable audio products $ 163,563 $ 112,570 $ 150,949 $ 276,132 $ 267,556
Non-portable audio and other products   46,651     39,995     39,722     86,647     78,240  
Net sales   210,214     152,565     190,671     362,779     345,796  
Cost of sales   109,647     77,190     91,223     186,837     166,850  
Gross profit 100,567 75,375 99,448 175,942 178,946
Gross margin 47.8 % 49.4 % 52.2 % 48.5 % 51.7 %
 
Research and development 44,557 39,777 29,722 84,334 58,252
Selling, general and administrative 21,545 19,683 19,215 41,228 38,413
Restructuring and other 1,455 - (154 ) 1,455 (584 )
Acquisition related costs 14,937 - - 14,937 -
Patent infringement settlements, net   -     -     -     -     695  
Total operating expenses   82,494     59,460     48,783     141,954     96,776  
 
Operating income 18,073 15,915 50,665 33,988 82,170
 
Interest income (expense), net (2,670 ) (467 ) 201 (3,137 ) 359
Other income (expense), net   (11,994 )   501     (38 )   (11,493 )   (55 )
Income before income taxes 3,409 15,949 50,828 19,358 82,474
Provision for income taxes   2,557     5,701     17,461     8,258     28,465  
Net income $ 852   $ 10,248   $ 33,367   $ 11,100   $ 54,009  
 
Basic earnings per share: $ 0.01 $ 0.17 $ 0.53 $ 0.18 $ 0.85
Diluted earnings per share: $ 0.01 $ 0.16 $ 0.50 $ 0.17 $ 0.82
 
Weighted average common shares outstanding:
Basic 62,241 62,032 63,217 62,137 63,329
Diluted 65,085 64,688 66,125 64,892 66,203
 
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.
 
 
 
Three Months Ended Six Months Ended
 
Sep. 27, Jun. 28, Sep. 28, Sep. 27, Sep. 28,
2014 2014 2013 2014 2013
Net Income Reconciliation Q2'15 Q1'15 Q2'14 Q2'15 Q2'14
GAAP Net Income $ 852 $ 10,248 $ 33,367 $ 11,100 $ 54,009
Amortization of acquisition intangibles 2,524 246 - 2,770 -
Stock based compensation expense 6,496 5,622 5,739 12,118 11,513
Provision for litigation expenses and settlements - - - - 695
Restructuring and other costs, net 1,455 - (154 ) 1,455 (584 )
Wolfson acquisition items 30,875 2,304 - 33,179 -
Provision for income taxes   1,764     5,226     16,378     6,990     26,539  
Non-GAAP Net Income $ 43,966   $ 23,646   $ 55,330   $ 67,612   $ 92,172  
 
Earnings Per Share Reconciliation
GAAP Diluted earnings per share $ 0.01 $ 0.16 $ 0.50 $ 0.17 $ 0.82
Effect of Amortization of acquisition intangibles 0.04 - - 0.04 -
Effect of Stock based compensation expense 0.10 0.09 0.09 0.19 0.17
Effect of Provision for litigation expenses and settlements - - - - 0.01
Effect of Restructuring and other costs, net 0.03 - - 0.02 (0.01 )
Effect of Wolfson acquisition items 0.47 0.04 - 0.51 -
Effect of Provision for income taxes 0.03 0.08 0.25 0.11 0.40
         
Non-GAAP Diluted earnings per share $ 0.68   $ 0.37   $ 0.84   $ 1.04   $ 1.39  
 
Operating Income Reconciliation
GAAP Operating Income $ 18,073 $ 15,915 $ 50,665 $ 33,988 $ 82,170
GAAP Operating Profit 9 % 10 % 27 % 9 % 24 %
Amortization of acquisition intangibles 2,524 246 - 2,770 -
Stock compensation expense - COGS 253 231 239 484 245
Stock compensation expense - R&D 2,781 2,543 2,158 5,324 5,012
Stock compensation expense - SG&A 3,462 2,848 3,342 6,310 6,256
Provision for litigation expenses and settlements - - - - 695
Restructuring and other costs, net 1,455 - (154 ) 1,455 (584 )
Wolfson acquisition items   16,547     2,192     -     18,739     -  
Non-GAAP Operating Income $ 45,095   $ 23,975   $ 56,250   $ 69,070   $ 93,794  
Non-GAAP Operating Profit 21 % 16 % 30 % 19 % 27 %
 
Operating Expense Reconciliation
GAAP Operating Expenses $ 82,494 $ 59,460 $ 48,783 $ 141,954 $ 96,776
Amortization of acquisition intangibles (2,524 ) (246 ) - (2,770 ) -
Stock compensation expense - R&D (2,781 ) (2,543 ) (2,158 ) (5,324 ) (5,012 )
Stock compensation expense - SG&A (3,462 ) (2,848 ) (3,342 ) (6,310 ) (6,256 )
Provision for litigation expenses and settlements - - - - (695 )
Restructuring and other costs, net (1,455 ) - 154 (1,455 ) 584
Wolfson acquisition items   (14,937 )   (2,192 )   -     (17,129 )   -  
Non-GAAP Operating Expenses $ 57,335   $ 51,631   $ 43,437   $ 108,966   $ 85,397  
 
Gross Margin/Profit Reconciliation
GAAP Gross Margin $ 100,567 $ 75,375 $ 99,448 $ 175,942 $ 178,946
GAAP Gross Profit 47.8 % 49.4 % 52.2 % 48.5 % 51.7 %
Wolfson acquisition items 1,610 - - 1,610 -
Stock compensation expense - COGS   253     231     239     484     245  
Non-GAAP Gross Margin $ 102,430   $ 75,606   $ 99,687   $ 178,036   $ 179,191  
Non-GAAP Gross Profit 48.7 % 49.6 % 52.3 % 49.1 % 51.8 %

       
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands)
Sep. 27, Mar. 29, Sep. 28,
2014 2014 2013
(unaudited) (unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 48,214 $ 31,850 $ 68,886
Marketable securities 85,796 263,417 199,423
Accounts receivable, net 126,161 63,220 97,640
Inventories 121,169 69,743 91,247
Deferred tax assets 16,435 22,024 38,398
Other current assets   29,089     25,079     23,978  
Total current assets 426,864 475,333 519,572
 
Long-term marketable securities 9,228 89,243 40,254
Property and equipment, net 133,458 103,650 101,885
Intangibles, net 187,030 11,999 4,734
Goodwill 265,410 16,367 6,027
Deferred tax assets 24,998 25,065 16,638
Other assets   17,658     3,087     10,051  
Total assets $ 1,064,646   $ 724,744   $ 699,161  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 81,549 $ 51,932 $ 56,868
Accrued salaries and benefits 17,706 13,388 16,894
Other accrued liabilities 34,946 11,572 6,313
Deferred income   5,218     5,631     4,858  
Total current liabilities 139,419 82,523 84,933
 
Other long-term liabilities 25,376 4,863 11,231
Long-term debt 226,439 - -
 
Stockholders' equity:
Capital stock 1,104,379 1,078,878 1,055,256
Accumulated deficit (430,144 ) (440,634 ) (451,532 )
Accumulated other comprehensive loss   (823 )   (886 )   (727 )
Total stockholders' equity   673,412     637,358     602,997  
Total liabilities and stockholders' equity $ 1,064,646   $ 724,744   $ 699,161  
 
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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