Market Overview

Cirrus Logic Reports Q1 FY19 Revenue of $254.5 Million

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Revenue Exceeded Guidance Due to Stronger than Anticipated Demand for
Portable Audio

Cirrus Logic, Inc. (NASDAQ:CRUS), a leader in high performance,
low-power ICs for audio and voice signal processing applications, today
posted on its website at http://investor.cirrus.com
the quarterly Shareholder Letter that contains the complete financial
results for the first quarter fiscal year 2019, which ended June 30,
2018, as well as the company's current business outlook.

"We are pleased with our results in the June quarter as several
customers launched new smartphones and wireless headsets utilizing our
technology and customer engagements continued to be strong," said Jason
Rhode, president and chief executive officer. "With a diversified
product portfolio that addresses a wide range of performance and cost
requirements, the company expects to capitalize on increasing demand for
innovative audio and voice solutions, as well as adjacent opportunities
including haptics, all of which we believe will contribute to the
company's continued success."

Reported Financial Results – First Quarter FY19

  • Revenue of $254.5 million;
  • GAAP and non-GAAP gross margin of 48.9 percent and 49 percent,
    respectively;
  • GAAP operating expenses of $130.7 million and non-GAAP operating
    expenses of $104.8 million; and
  • GAAP loss per share of $0.07 and non-GAAP earnings per share of $0.28.

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

Business Outlook – Second Quarter FY19

  • Revenue is expected to range between $310 million and $350 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 $132
    million and $138 million, which includes approximately $15 million in
    share-based compensation and $13 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: 9589402).

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.

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.

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, diluted share count,
operating income, operating expenses, gross margin, tax expense 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 statements about our future growth opportunities and expectations
with respect to our ability to capitalize on increasing
demand
for innovative audio and voice solutions, as well as adjacent
opportunities including haptics, along with estimates for the second
quarter fiscal year 2019 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 2019, 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 extent to which
customers adopt our new technologies and devices in new markets such as
haptics; and the risk factors listed in our Form 10-K for the year ended
March 31, 2018 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.

 
 
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except per share data)
           
Three Months Ended
 
Jun. 30, Mar. 31, Jun. 24,
2018 2018 2017
Q1'19 Q4'18 Q1'18
Portable audio products $ 212,260 $ 262,777 $ 280,688
Non-portable audio and other products   42,223     40,396     40,047  
Net sales   254,483     303,173     320,735  
Cost of sales   129,924     150,543     159,019  
Gross profit 124,559 152,630 161,716
Gross margin 48.9 % 50.3 % 50.4 %
 
Research and development 97,932 95,556 83,557
Selling, general and administrative   32,784     36,307     30,859  
Total operating expenses   130,716     131,863     114,416  
 
Income (loss) from operations (6,157 ) 20,767 47,300
 
Interest income (expense), net 1,447 1,378 594
Other income (expense), net   210     (158 )   (19 )
Income (loss) before income taxes (4,500 ) 21,987 47,875
Provision (benefit) for income taxes   (228 )   9,983     4,963  
Net income (loss) $ (4,272 ) $ 12,004   $ 42,912  
 
Basic earnings (loss) per share: $ (0.07 ) $ 0.19 $ 0.67
Diluted earnings (loss) per share: $ (0.07 ) $ 0.19 $ 0.64
 
Weighted average number of shares:
Basic 61,462 62,654 64,097
Diluted 61,462 64,572 67,160
 
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. 30, Mar. 31, Jun. 24,
2018 2018 2017
Net Income Reconciliation Q1'19 Q4'18 Q1'18
GAAP Net Income (Loss) $ (4,272 ) $ 12,004 $ 42,912
Amortization of acquisition intangibles 13,266 13,266 11,600
Stock based compensation expense 12,794 12,533 11,403
Acquisition-related items - (279 ) (4,048 )
Adjustment to income taxes   (3,926 )   (4,502 )   (7,257 )
Non-GAAP Net Income $ 17,862   $ 33,022   $ 54,610  
 
Earnings Per Share Reconciliation
GAAP Diluted earnings (loss) per share $ (0.07 ) $ 0.19 $ 0.64
Effect of Amortization of acquisition intangibles 0.21 0.21 0.17
Effect of Stock based compensation expense 0.20 0.19 0.17
Effect of Acquisition-related items - - (0.06 )
Effect of Adjustment to income taxes   (0.06 )   (0.08 )   (0.11 )
Non-GAAP Diluted earnings per share $ 0.28   $ 0.51   $ 0.81  
 
Diluted Shares Reconciliation
GAAP Diluted shares 61,462 64,572 67,160
Effect of weighted dilutive shares   1,723     -     -  
Non-GAAP Diluted shares   63,185     64,572     67,160  
 
Operating Income Reconciliation
GAAP Operating Income (Loss) $ (6,157 ) $ 20,767 $ 47,300
GAAP Operating Profit (Loss) -2 % 7 % 15 %
Amortization of acquisition intangibles 13,266 13,266 11,600
Stock compensation expense - COGS 199 422 338
Stock compensation expense - R&D 7,250 6,847 6,260
Stock compensation expense - SG&A 5,345 5,264 4,805
Acquisition-related items   -     (279 )   (4,048 )
Non-GAAP Operating Income $ 19,903   $ 46,287   $ 66,255  
Non-GAAP Operating Profit 8 % 15 % 21 %
 
Operating Expense Reconciliation
GAAP Operating Expenses $ 130,716 $ 131,863 $ 114,416
Amortization of acquisition intangibles (13,266 ) (13,266 ) (11,600 )
Stock compensation expense - R&D (7,250 ) (6,847 ) (6,260 )
Stock compensation expense - SG&A (5,345 ) (5,264 ) (4,805 )
Acquisition-related items   -     279     4,048  
Non-GAAP Operating Expenses $ 104,855   $ 106,765   $ 95,799  
 
Gross Margin/Profit Reconciliation
GAAP Gross Profit $ 124,559 $ 152,630 $ 161,716
GAAP Gross Margin 48.9 % 50.3 % 50.4 %
Stock compensation expense - COGS   199     422     338  
Non-GAAP Gross Profit $ 124,758   $ 153,052   $ 162,054  
Non-GAAP Gross Margin 49.0 % 50.5 % 50.5 %
 
Effective Tax Rate Reconciliation
GAAP Tax Expense (Benefit) $ (228 ) $ 9,983 $ 4,963
GAAP Effective Tax Rate 5.1 % 45.4 % 10.4 %
Adjustments to income taxes   3,926     4,502     7,257  
Non-GAAP Tax Expense $ 3,698   $ 14,485   $ 12,220  
Non-GAAP Effective Tax Rate 17.2 % 30.5 % 18.3 %
 
Tax Impact to EPS Reconciliation
GAAP Tax Expense $ - $ 0.15 $ 0.07
Adjustments to income taxes   0.06     0.08     0.11  
Non-GAAP Tax Expense $ 0.06   $ 0.23   $ 0.18  
 

 
CONSOLIDATED CONDENSED BALANCE SHEET
unaudited; in thousands
           
Jun. 30, Mar. 31, Jun. 24,
2018 2018 2017
ASSETS
Current assets
Cash and cash equivalents $ 186,459 $ 235,604 $ 163,918
Marketable securities 39,877 26,397 11,380
Accounts receivable, net 126,604 100,801 162,437
Inventories 173,063 205,760 202,429
Other current assets   49,118     45,112     38,342  
Total current Assets 575,121 613,674 578,506
 
Long-term marketable securities 159,334 172,499 134,851
Property and equipment, net 195,804 191,154 170,829
Intangibles, net 99,366 111,547 143,107
Goodwill 287,042 288,718 287,049
Deferred tax asset 15,985 14,716 31,971
Other assets   34,151     37,809     20,337  
Total assets $ 1,366,803   $ 1,430,117   $ 1,366,650  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 53,655 $ 69,850 $ 85,995
Accrued salaries and benefits 22,924 35,721 31,113
Other accrued liabilities   42,065     34,638     28,767  
Total current liabilities 118,644 140,209 145,875
 
Non-current income taxes 94,612 92,753 50,415
Other long-term liabilities 26,451 35,427 9,655
 
Stockholders' equity:
Capital stock 1,325,287 1,312,434 1,272,570
Accumulated deficit (184,673 ) (139,345 ) (112,258 )
Accumulated other comprehensive income (loss)   (13,518 )   (11,361 )   393  
Total stockholders' equity   1,127,096     1,161,728     1,160,705  
Total liabilities and stockholders' equity $ 1,366,803   $ 1,430,117   $ 1,366,650  
 
Prepared in accordance with Generally Accepted Accounting
Principles
 

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