Cirrus Logic Reports Q3 Revenue of $523 Million

AUSTIN, Texas--(BUSINESS WIRE)--

Cirrus Logic, Inc. 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," 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

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