Cirrus Logic Reports Q2 Revenue of $428.6 Million

Strong Demand for Portable Audio Products Expected to Fuel Continued Growth in Q3

AUSTIN, Texas - Oct. 27, 2016 - Cirrus Logic, Inc. (Nasdaq: 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 second quarter of fiscal year 2017, which ended Sept. 24, 2016, as well as the company’s current business outlook.

“Robust demand for portable audio products drove Cirrus Logic’s revenue above the high end of guidance,” said Jason Rhode, president and chief executive officer. “We are extremely pleased with our progress in the September quarter as we began volume shipments of our new digital headset solution, expanded our share with boosted amplifiers and ramped production in a mid-tier smartphone at another leading customer. With a broad portfolio of components that span the entire audio signal chain we believe we are well positioned to capitalize on a variety of growth vectors in the coming years.”

Reported Financial Results – Second Quarter FY17

  • Revenue of $428.6 million;
  • GAAP and non-GAAP gross margin of 49.4 percent;
  • GAAP operating expenses of $107.8 million and non-GAAP operating expenses of $93.3 million; and
  • GAAP diluted earnings per share of $1.19 and non-GAAP diluted earnings per share of $1.35.

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

Business Outlook – Third Quarter FY17

  • Revenue is expected to range between $475 million and $515 million;
  • GAAP gross margin is expected to be between 47 percent and 49 percent; and
  • Combined GAAP R&D and SG&A expenses are expected to range between $107 million and $113 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 5:30 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: 90417574).

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.

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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 growth opportunities and our estimates of third 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 third 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, 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:

CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
Sep. 24, Jun. 25, Sep. 26, Sep. 24, Sep. 26,
2016 2016 2015 2016 2015
Q2'17 Q1'17 Q2'16 Q2'17 Q2'16
Portable audio products $ 383,410 $ 216,068 $ 257,152 $ 599,478 $ 493,018
Non-portable audio and other products 45,209 43,360 49,604 88,569 96,371
Net sales 428,619 259,428 306,756 688,047 589,389
Cost of sales 216,920 132,743 164,535 349,663 314,714
Gross profit 211,699 126,685 142,221 338,384 274,675
Gross margin 49.4 % 48.8 % 46.4 % 49.2 % 46.6 %
Research and development 75,673 73,934 67,258 149,607 133,093
Selling, general and administrative 32,089 30,540 30,103 62,629 59,222
Patent agreement and other - - 752 - (11,748 )
Total operating expenses 107,762 104,474 98,113 212,236 180,567
Income from operations 103,937 22,211 44,108 126,148 94,108
Interest expense, net (1,003 ) (689 ) (709 ) (1,692 ) (1,454 )
Other income (expense), net (261 ) 147 (416 ) (114 ) (173 )
Income before income taxes 102,673 21,669 42,983 124,342 92,481
Provision for income taxes 24,608 5,805 8,103 30,413 24,247
Net income $ 78,065 $ 15,864 $ 34,880 $ 93,929 $ 68,234
Basic earnings per share: $ 1.24 $ 0.25 $ 0.55 $ 1.50 $ 1.08
Diluted earnings per share: $ 1.19 $ 0.24 $ 0.53 $ 1.43 $ 1.03
Weighted average number of shares:
Basic 62,787 62,450 63,346 62,618 63,310
Diluted 65,717 65,232 66,329 65,521 66,378

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. Certain modifications to prior year non-GAAP presentation has been made and had no material effect on the results of operations.

Three Months Ended Six Months Ended
Sep. 24, Jun. 25, Sep. 26, Sep. 24, Sep. 26,
2016 2016 2015 2016 2015
Net Income Reconciliation Q2'17 Q1'17 Q2'16 Q2'17 Q2'16
GAAP Net Income $ 78,065 $ 15,864 $ 34,880 $ 93,929 $ 68,234
Amortization of acquisition intangibles 8,326 8,363 8,133 16,689 15,274
Stock based compensation expense 9,925 9,310 8,688 19,235 16,959
Patent agreement and other - - 752 - (11,748 )
Acquisition-related items (3,566 ) - - (3,566 ) -
Adjustment to income taxes (4,277 ) (4,639 ) (9,492 ) (8,916 ) (9,667 )
Non-GAAP Net Income $ 88,473 $ 28,898 $ 42,961 $ 117,371 $ 79,052
Earnings Per Share Reconciliation
GAAP Diluted earnings per share $ 1.19 $ 0.24 $ 0.53 $ 1.43 $ 1.03
Effect of Amortization of acquisition intangibles 0.13 0.13 0.12 0.26 0.23
Effect of Stock based compensation expense 0.15 0.14 0.13 0.29 0.26
Effect of Patent agreement and other - - 0.01 - (0.18 )
Effect of Acquisition-related items (0.05 ) - - (0.05 ) -
Effect of Adjustment to income taxes (0.07 ) (0.07 ) (0.14 ) (0.14 ) (0.15 )
Non-GAAP Diluted earnings per share $ 1.35 $ 0.44 $ 0.65 $ 1.79 $ 1.19
Operating Income Reconciliation
GAAP Operating Income $ 103,937 $ 22,211 $ 44,108 $ 126,148 $ 94,108
GAAP Operating Profit 24 % 9 % 14 % 18 % 16 %
Amortization of acquisition intangibles 8,326 8,363 8,133 16,689 15,274
Stock compensation expense - COGS 235 230 380 465 705
Stock compensation expense - R&D 4,905 5,216 4,126 10,121 7,994
Stock compensation expense - SG&A 4,785 3,864 4,182 8,649 8,260
Patent agreement and other - - 752 - (11,748 )
Acquisition-related items (3,566 ) - - (3,566 ) -
Non-GAAP Operating Income $ 118,622 $ 39,884 $ 61,681 $ 158,506 $ 114,593
Non-GAAP Operating Profit 28 % 15 % 20 % 23 % 19 %
Operating Expense Reconciliation
GAAP Operating Expenses $ 107,762 $ 104,474 $ 98,113 $ 212,236 $ 180,567
Amortization of acquisition intangibles (8,326 ) (8,363 ) (8,133 ) (16,689 ) (15,274 )
Stock compensation expense - R&D (4,905 ) (5,216 ) (4,126 ) (10,121 ) (7,994 )
Stock compensation expense - SG&A (4,785 ) (3,864 ) (4,182 ) (8,649 ) (8,260 )
Patent agreement and other - - (752 ) - 11,748
Acquisition-related items 3,566 - - 3,566 -
Non-GAAP Operating Expenses $ 93,312 $ 87,031 $ 80,920 $ 180,343 $ 160,787
Gross Margin/Profit Reconciliation
GAAP Gross Margin $ 211,699 $ 126,685 $ 142,221 $ 338,384 $ 274,675
GAAP Gross Profit 49.4 % 48.8 % 46.4 % 49.2 % 46.6 %
Stock compensation expense - COGS 235 230 380 465 705
Non-GAAP Gross Margin $ 211,934 $ 126,915 $ 142,601 $ 338,849 $ 275,380
Non-GAAP Gross Profit 49.4 % 48.9 % 46.5 % 49.2 % 46.7 %
Effective Tax Rate Reconciliation
GAAP Tax Expense $ 24,608 $ 5,805 $ 8,103 $ 30,413 $ 24,247
GAAP Effective Tax Rate 24.0 % 26.8 % 18.9 % 24.5 % 26.2 %
Adjustments to income taxes 4,277 4,639 9,492 8,916 9,667
Non-GAAP Tax Expense $ 28,885 $ 10,444 $ 17,595 $ 39,329 $ 33,914
Non-GAAP Effective Tax Rate 24.6 % 26.5 % 29.1 % 25.1 % 30.0 %
Tax Impact to EPS Reconciliation
GAAP Tax Expense $ 0.37 $ 0.09 $ 0.12 $ 0.46 $ 0.37
Adjustments to income taxes 0.07 0.07 0.14 0.14 0.15
Non-GAAP Tax Expense $ 0.44 $ 0.16 $ 0.26 $ 0.60 $ 0.52
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEET

(in thousands)

Sep. 24, Mar. 26, Sep. 26,
2016 2016 2015
ASSETS (unaudited) (unaudited)
Current assets
Cash and cash equivalents $ 113,264 $ 168,793 $ 56,333
Marketable securities 116,087 60,582 86,460
Accounts receivable, net 269,559 88,532 169,423
Inventories 161,254 142,015 143,867
Deferred tax asset - - 8,502

Other current assets

35,788 46,207 51,329

Total current assets

695,952 506,129 515,914
Long-term marketable securities 2,004 20,631 22,393
Property and equipment, net 164,029 162,656 158,529
Intangibles, net 150,108 162,832 179,816
Goodwill 287,518 287,518 289,565
Deferred tax asset 28,009 25,772 25,603
Other assets 17,914 16,345 20,474
Total assets $ 1,345,534 $ 1,181,883 $ 1,212,294
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 130,458 $ 71,619 $ 111,023
Accrued salaries and benefits 30,257 21,239 29,156
Deferred income - - 5,582
Other accrued liabilities 29,394 35,266 42,181
Total current liabilities 190,109 128,124 187,942
Long-term debt 140,000 160,439 160,439
Other long-term liabilities 46,277 33,837 34,990
Stockholders' equity:
Capital stock 1,236,492 1,203,496 1,183,262
Accumulated deficit (267,887 ) (344,345 ) (352,374 )
Accumulated other comprehensive income (loss) 543 332 (1,965 )
Total stockholders' equity 969,148 859,483 828,923
Total liabilities and stockholders' equity $ 1,345,534 $ 1,181,883 $ 1,212,294
Prepared in accordance with Generally Accepted Accounting Principles

Media Contacts

Thurman Case
Chief Financial Officer
(512) 841-4125
investor.relations@cirrus.com