Cirrus Logic Reports Q1 FY18 Revenue of $320.7 Million

Demand for Portable Audio Components Expected to Fuel Sequential Growth in Q2 FY18

AUSTIN, Texas--()--Cirrus Logic, Inc. (Nasdaq: CRUS), a leader in high performance, low-power ICs for audio and voice signal processing applications, today posted on its investor relations website at http://investor.cirrus.com the quarterly Shareholder Letter that contains the complete financial results for the first quarter fiscal year 2018, which ended June 24, 2017, as well as the company’s current business outlook.

Cirrus Logic delivered solid results in the June quarter as demand for portable audio products was in line with expectations,” said Jason Rhode, president and chief executive officer. “We are extremely pleased as design activity remained strong across our portfolio and we achieved several new product development milestones over the past several months. As demand for innovative audio and voice solutions continues to increase across a wide range of end markets we believe our diversified product portfolio and roadmap will continue to position us for success for many years to come.”

Reported Financial Results – First Quarter FY18

  • Revenue of $320.7 million;
  • GAAP gross margin of 50.4 percent and non-GAAP gross margin of 50.5 percent;
  • GAAP operating expenses of $114.4 million and non-GAAP operating expenses of $95.8 million; and
  • GAAP diluted earnings per share of $0.64 and non-GAAP diluted earnings per share of $0.81.

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

Business Outlook – Second Quarter FY18

  • Revenue is expected to range between $390 million and $430 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 $119 million and $125 million, which includes approximately $13 million in share-based compensation and $12 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 (416) 621-4642, or toll-free at (800) 585-8367 (Access Code: 47484323).

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 non-GAAP net income, diluted earnings per share, operating income, operating expenses, gross margins, tax expenses and tax expense impact on 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 second quarter fiscal year 2018 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 second quarter of fiscal year 2018, 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 25, 2017 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
 
Jun. 24, Mar. 25, Jun. 25,
2017 2017 2016
Q1'18 Q4'17 Q1'17
Portable audio products $ 280,688 $ 290,658 $ 216,068
Non-portable audio and other products   40,047     37,206     43,360  
Net sales   320,735     327,864     259,428  
Cost of sales   159,019     163,585     132,743  
Gross profit 161,716 164,279 126,685
Gross margin 50.4 % 50.1 % 48.8 %
 
Research and development 83,557 77,972 73,934
Selling, general and administrative 30,859 31,752 30,540
Asset impairment   -     9,842     -  
Total operating expenses   114,416     119,566     104,474  
 
Income from operations 47,300 44,713 22,211
 
Interest income (expense), net 594 118 (689 )
Other income (expense), net   (19 )   82     147  
Income before income taxes 47,875 44,913 21,669
Provision for income taxes*   4,963     9,855     3,598  
Net income* $ 42,912   $ 35,058   $ 18,071  
 
Basic earnings per share*: $ 0.67 $ 0.55 $ 0.29
Diluted earnings per share*: $ 0.64 $ 0.52 $ 0.27
 
Weighted average number of shares:
Basic 64,097 64,232 62,450
Diluted* 67,160 67,062 65,723
 

*Q1 FY17 results have been updated 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 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
       
Jun. 24, Mar. 25, Jun. 25,
2017 2017 2016
Net Income Reconciliation Q1'18 Q4'17 Q1'17
GAAP Net Income* $ 42,912 $ 35,058 $ 18,071
Amortization of acquisition intangibles 11,600 8,255 8,363
Stock based compensation expense 11,403 10,888 9,310
Acquisition-related items (4,048 ) - -
Asset impairment - 9,842 -
Adjustment to income taxes   (7,257 )   (7,289 )   (6,846 )
Non-GAAP Net Income* $ 54,610   $ 56,754   $ 28,898  
 
Earnings Per Share Reconciliation
GAAP Diluted earnings per share* $ 0.64 $ 0.52 $ 0.27
Effect of Amortization of acquisition intangibles 0.17 0.13 0.13
Effect of Stock based compensation expense 0.17 0.16 0.14
Effect of Acquisition-related items (0.06 ) - -
Effect of Asset impairment - 0.15 -
Effect of Adjustment to income taxes   (0.11 )   (0.11 )   (0.10 )
Non-GAAP Diluted earnings per share* $ 0.81   $ 0.85   $ 0.44  
 
Operating Income Reconciliation
GAAP Operating Income $ 47,300 $ 44,713 $ 22,211
GAAP Operating Profit 15 % 14 % 9 %
Amortization of acquisition intangibles 11,600 8,255 8,363
Stock compensation expense - COGS 338 324 230
Stock compensation expense - R&D 6,260 5,987 5,216
Stock compensation expense - SG&A 4,805 4,577 3,864
Acquisition-related items (4,048 ) - -
Asset impairment   -     9,842     -  
Non-GAAP Operating Income $ 66,255   $ 73,698   $ 39,884  
Non-GAAP Operating Profit 21 % 22 % 15 %
 
Operating Expense Reconciliation
GAAP Operating Expenses $ 114,416 $ 119,566 $ 104,474
Amortization of acquisition intangibles (11,600 ) (8,255 ) (8,363 )
Stock compensation expense - R&D (6,260 ) (5,987 ) (5,216 )
Stock compensation expense - SG&A (4,805 ) (4,577 ) (3,864 )
Acquisition-related items 4,048 - -
Asset impairment   -     (9,842 )   -  
Non-GAAP Operating Expenses $ 95,799   $ 90,905   $ 87,031  
 
Gross Margin/Profit Reconciliation
GAAP Gross Profit $ 161,716 $ 164,279 $ 126,685
GAAP Gross Margin 50.4 % 50.1 % 48.8 %
Stock compensation expense - COGS   338     324     230  
Non-GAAP Gross Profit $ 162,054   $ 164,603   $ 126,915  
Non-GAAP Gross Margin 50.5 % 50.2 % 48.9 %
 
Effective Tax Rate Reconciliation
GAAP Tax Expense* $ 4,963 $ 9,855 $ 3,598
GAAP Effective Tax Rate 10.4 % 21.9 % 16.6 %
Adjustments to income taxes   7,257     7,289     6,846  
Non-GAAP Tax Expense* $ 12,220   $ 17,144   $ 10,444  
Non-GAAP Effective Tax Rate 18.3 % 23.2 % 26.5 %
 
Tax Impact to EPS Reconciliation
GAAP Tax Expense* $ 0.07 $ 0.15 $ 0.05
Adjustments to income taxes   0.11     0.11     0.10  
Non-GAAP Tax Expense* $ 0.18   $ 0.26   $ 0.15  
 

*Q1 FY17 results have been updated 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 guidance impacted our previously reported quarterly results.

             

CONSOLIDATED CONDENSED BALANCE SHEET

unaudited; in thousands
 
Jun. 24, Mar. 25, Jun. 25,
2017 2017 2016
ASSETS
Current assets
Cash and cash equivalents $ 163,918 $ 351,166 $ 143,591
Marketable securities 11,380 99,813 91,090
Accounts receivable, net 162,437 119,974 140,893
Inventories 202,429 167,895 154,043
Other current assets   38,342     37,080     44,106  
Total current Assets 578,506 775,928 573,723
 
Long-term marketable securities 134,851 - 3,923
Property and equipment, net 170,829 168,139 160,875
Intangibles, net 143,107 135,188 156,949
Goodwill 287,049 286,767 287,518
Deferred tax asset* 31,971 32,841 34,085
Other assets   20,337     14,607     14,776  
Total assets $ 1,366,650   $ 1,413,470   $ 1,231,849  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 85,995 $ 73,811 $ 105,138
Accrued salaries and benefits 31,113 40,190 21,854
Other accrued liabilities   28,767     30,074     31,068  
Total current liabilities 145,875 144,075 158,060
 
Long-term debt - 60,000 160,439
Other long-term liabilities* 60,070 57,703 34,290
 
Stockholders' equity:
Capital stock* 1,272,570 1,259,279 1,215,209
Accumulated deficit* (112,258 ) (107,014 ) (336,708 )
Accumulated other comprehensive income (loss)   393     (573 )   559  
Total stockholders' equity   1,160,705     1,151,692     879,060  
Total liabilities and stockholders' equity $ 1,366,650   $ 1,413,470   $ 1,231,849  
 

*Q1 FY17 results have been updated 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 guidance impacted our previously reported quarterly results.

 

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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