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Cirrus Logic Reports Q2 FY18 Revenue of $425.5 Million

AUSTIN, Texas--(BUSINESS WIRE)--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 second quarter fiscal year 2018, which ended Sep. 23, 2017, as well as the company’s current business outlook.

“Cirrus Logic delivered outstanding revenue, operating profit and earnings per share in the September quarter,” said Jason Rhode, president and chief executive officer. “Q2 was a great quarter; in addition to shipping production volumes in a variety of recently launched smartphones and digital headsets we also made progress on longer term initiatives, including demonstrating and sampling many of our new innovative products with target customers. With a robust portfolio of products that enable a wide range of innovative audio and voice features, we are excited about our opportunities to drive growth in the coming years.”

Reported Financial Results – Second Quarter FY18

  • Revenue of $425.5 million;
  • GAAP and non-GAAP gross margin of 49.7 percent;
  • GAAP operating expenses of $120.4 million and non-GAAP operating expenses of $96.8 million; and
  • GAAP diluted earnings per share of $1.10 and non-GAAP diluted earnings per share of $1.36.

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

Business Outlook – Third Quarter FY18

  • Revenue is expected to range between $510 million and $550 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 $131 million and $137 million, which includes approximately $13 million in share-based compensation and $12 million in amortization of acquired intangibles.
  • Guidance includes an additional week as approximately every 6 years our financial results are comprised of 53 weeks versus the typical 52 weeks.

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: 94754983).

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 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 opportunities to drive growth in the coming years along with estimates of third 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 third 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 Six Months Ended
Sep. 23, Jun. 24, Sep. 24, Sep. 23, Sep. 24,
2017 2017 2016 2017 2016
Q2'18 Q1'18 Q2'17 Q2'18 Q2'17
Portable audio products $ 381,761 $ 280,688 $ 383,410 $ 662,449 $ 599,478
Non-portable audio and other products 43,776 40,047 45,209 83,823 88,569
Net sales 425,537 320,735 428,619 746,272 688,047
Cost of sales 214,255 159,019 216,920 373,274 349,663
Gross margin 49.7 % 50.4 % 49.4 % 50.0 % 49.2 %
Research and development 90,353 83,557 75,673 173,910 149,607
Selling, general and administrative 30,041 30,859 32,089 60,900 62,629
Total operating expenses 120,394 114,416 107,762 234,810 212,236
Income from operations 90,888 47,300 103,937 138,188 126,148
Interest income (expense), net 725 594 (1,003 ) 1,319 (1,692 )
Other income (expense), net (1,116 ) (19 ) (261 ) (1,135 ) (114 )
Income before income taxes 90,497 47,875 102,673 138,372 124,342
Provision for income taxes* 17,197 4,963 16,634 22,160 20,232
Net income* $ 73,300 $ 42,912 $ 86,039 $ 116,212 $ 104,110
Basic earnings per share*: $ 1.16 $ 0.67 $ 1.37 $ 1.82 $ 1.66
Diluted earnings per share*: $ 1.10 $ 0.64 $ 1.30 $ 1.74 $ 1.58
Weighted average number of shares:
Basic 63,431 64,097 62,787 63,764 62,618
Diluted* 66,360 67,160 66,410 66,761 66,101
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. 23, Jun. 24, Sep. 24, Sep. 23, Sep. 24,
2017 2017 2016 2017 2016
Net Income Reconciliation Q2'18 Q1'18 Q2'17 Q2'18 Q2'17
GAAP Net Income* $ 73,300 $ 42,912 $ 86,039 $ 116,212 $ 104,110
Amortization of acquisition intangibles 11,600 11,600 8,326 23,200 16,689
Stock based compensation expense 12,292 11,403 9,925 23,695 19,235
Acquisition-related items - (4,048 ) (3,566 ) (4,048 ) (3,566 )
Adjustment to income taxes (7,260 ) (7,257 ) (12,251 ) (14,517 ) (19,097 )
Non-GAAP Net Income* $ 89,932 $ 54,610 $ 88,473 $ 144,542 $ 117,371
Earnings Per Share Reconciliation
GAAP Diluted earnings per share* $ 1.10 $ 0.64 $ 1.30 $ 1.74 $ 1.58
Effect of Amortization of acquisition intangibles 0.18 0.17 0.12 0.35 0.25
Effect of Stock based compensation expense 0.19 0.17 0.15 0.36 0.29
Effect of Acquisition-related items - (0.06 ) (0.05 ) (0.06 ) (0.05 )
Effect of Adjustment to income taxes (0.11 ) (0.11 ) (0.19 ) (0.22 ) (0.29 )
Non-GAAP Diluted earnings per share* $ 1.36 $ 0.81 $ 1.33 $ 2.17 $ 1.78
Operating Income Reconciliation
GAAP Operating Income $ 90,888 $ 47,300 $ 103,937 $ 138,188 $ 126,148
GAAP Operating Profit 21 % 15 % 24 % 19 % 18 %
Amortization of acquisition intangibles 11,600 11,600 8,326 23,200 16,689
Stock compensation expense - COGS 328 338 235 666 465
Stock compensation expense - R&D 6,034 6,260 4,905 12,294 10,121
Stock compensation expense - SG&A 5,930 4,805 4,785 10,735 8,649
Acquisition-related items - (4,048 ) (3,566 ) (4,048 ) (3,566 )
Non-GAAP Operating Income $ 114,780 $ 66,255 $ 118,622 $ 181,035 $ 158,506
Non-GAAP Operating Profit 27 % 21 % 28 % 24 % 23 %
Operating Expense Reconciliation
GAAP Operating Expenses $ 120,394 $ 114,416 $ 107,762 $ 234,810 $ 212,236
Amortization of acquisition intangibles (11,600 ) (11,600 ) (8,326 ) (23,200 ) (16,689 )
Stock compensation expense - R&D (6,034 ) (6,260 ) (4,905 ) (12,294 ) (10,121 )
Stock compensation expense - SG&A (5,930 ) (4,805 ) (4,785 ) (10,735 ) (8,649 )
Acquisition-related items - 4,048 3,566 4,048 3,566
Non-GAAP Operating Expenses $ 96,830 $ 95,799 $ 93,312 $ 192,629 $ 180,343
Gross Margin/Profit Reconciliation
GAAP Gross Profit $ 211,282 $ 161,716 $ 211,699 $ 372,998 $ 338,384
GAAP Gross Margin 49.7 % 50.4 % 49.4 % 50.0 % 49.2 %
Stock compensation expense - COGS 328 338 235 666 465
Non-GAAP Gross Profit $ 211,610 $ 162,054 $ 211,934 $ 373,664 $ 338,849
Non-GAAP Gross Margin 49.7 % 50.5 % 49.4 % 50.1 % 49.2 %
Effective Tax Rate Reconciliation
GAAP Tax Expense* $ 17,197 $ 4,963 $ 16,634 $ 22,160 $ 20,232
GAAP Effective Tax Rate 19.0 % 10.4 % 16.2 % 16.0 % 16.3 %
Adjustments to income taxes 7,260 7,257 12,251 14,517 19,097
Non-GAAP Tax Expense $ 24,457 $ 12,220 $ 28,885 $ 36,677 $ 39,329
Non-GAAP Effective Tax Rate 21.4 % 18.3 % 24.6 % 20.2 % 25.1 %
Tax Impact to EPS Reconciliation
GAAP Tax Expense* $ 0.26 $ 0.07 $ 0.25 $ 0.33 $ 0.31
Adjustments to income taxes 0.11 0.11 0.19 0.22 0.29
Non-GAAP Tax Expense $ 0.37 $ 0.18 $ 0.44 $ 0.55 $ 0.60
CONSOLIDATED CONDENSED BALANCE SHEET
in thousands
Sep. 23, Mar. 25, Sep. 24,
2017 2017 2016
ASSETS (unaudited) (unaudited)
Current assets
Cash and cash equivalents $ 180,198 $ 351,166 $ 113,264
Marketable securities 15,446 99,813 116,087
Accounts receivable, net 232,380 119,974 269,559
Inventories 210,791 167,895 161,254
Other current assets 31,185 37,080 35,788
Total current Assets 670,000 775,928 695,952
Long-term marketable securities 133,547 - 2,004
Property and equipment, net 177,523 168,139 164,029
Intangibles, net 131,235 135,188 150,108
Goodwill 289,248 286,767 287,518
Deferred tax asset* 30,511 32,841 38,114
Other assets 23,703 14,607 17,914
Total assets $ 1,455,767 $ 1,413,470 $ 1,355,639
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 131,125 $ 73,811 $ 130,458
Accrued salaries and benefits 35,651 40,190 30,257
Other accrued liabilities 24,414 30,074 29,394
Total current liabilities 191,190 144,075 190,109
Long-term debt - 60,000 140,000
Other long-term liabilities* 64,661 57,703 45,301
Stockholders' equity:
Capital stock* 1,288,669 1,259,279 1,231,743
Accumulated deficit* (92,180 ) (107,014 ) (252,057 )
Accumulated other comprehensive income (loss) 3,427 (573 ) 543
Total stockholders' equity 1,199,916 1,151,692 980,229
Total liabilities and stockholders' equity $ 1,455,767 $ 1,413,470 $ 1,355,639

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