Cirrus Logic Reports Q3 Revenue of $347.9 Million

Company Continues to Expect Strong Year-Over-Year Growth in FY16 and FY17

AUSTIN, Texas - Jan. 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 third quarter fiscal year 2016, which ended Dec. 26, 2015, as well as the company’s current business outlook.

“While short term weakness for certain portable audio products drove our fiscal Q3 results and Q4 outlook lower than anticipated, we are on track to deliver 27 percent year over year growth for full FY16, based on the midpoint of Q4 guidance, and we remain confident in our ability to deliver strong growth in FY17,” said Jason Rhode, president and chief executive officer. “With a comprehensive roadmap of innovative audio and voice products targeting the mobile phone, smart accessory and digital headset markets, the company is focused on execution, diversification and sustained growth in the coming years.”

Reported Financial Results – Third Quarter FY16

  • Revenue of $347.9 million;
  • GAAP gross margin of 47.4 percent and non-GAAP gross margin of 47.5 percent;
  • GAAP operating expenses of $101 million; non-GAAP operating expenses of $84.7 million; and
  • GAAP diluted earnings per share of $0.63 and non-GAAP diluted earnings per share of $0.82.

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

Business Outlook – Fourth Quarter FY16

  • Revenue is expected to range between $210 million and $240 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 $100 million and $104 million, which includes approximately $8 million in share-based compensation and $9 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: 8524794).

Cirrus Logic, Inc.

Cirrus Logic develops high-precision, analog and mixed-signal integrated circuits for a broad range of innovative customers. Building on its diverse analog and signal-processing patent portfolio, Cirrus Logic delivers highly optimized products for a variety of audio, industrial and energy-related applications. The company operates from headquarters in Austin, Texas, with offices in the United States, United Kingdom, Australia, Japan and Asia. More information about Cirrus Logic is available 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 fourth quarter fiscal year 2016 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 2016, customer cancellations of orders, or the failure to place orders consistent with forecasts, along with the timing and success of future product ramps; and the risk factors listed in our Form 10-K for the year ended March 28, 2015, 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 Nine Months Ended
Dec. 26, Sep. 26, Dec. 27, Dec. 26, Dec. 27,
2015 2015 2014 2015 2014
Q3'16 Q2'16 Q3'15 Q3'16 Q3'15
Portable audio products $ 308,803 $ 257,152 $ 253,355 $ 801,821 $ 529,487
Non-portable audio and other products 39,060 49,604 45,251 135,431 131,898
Net sales 347,863 306,756 298,606 937,252 661,385
Cost of sales 182,952 164,535 167,775 497,666 354,612
Gross profit 164,911 142,221 130,831 439,586 306,773
Gross margin 47.4 % 46.4 % 43.8 % 46.9 % 46.4 %
Research and development 70,290 67,258 55,474 203,383 139,808
Selling, general and administrative 30,632 30,103 27,783 89,854 69,011
Acquisition related costs - - 3,200 - 18,137
Restructuring and other - - - - 1,455
Patent agreement and other 78 752 - (11,670 ) -
Total operating expenses 101,000 98,113 86,457 281,567 228,411
Income from operations 63,911 44,108 44,374 158,019 78,362
Interest expense, net (591 ) (601 ) (1,042 ) (1,830 ) (4,179 )
Other expense, net (925 ) (524 ) (1,071 ) (1,313 ) (12,564 )
Income before income taxes 62,395 42,983 42,261 154,876 61,619
Provision for income taxes 21,011 8,103 19,532 45,258 27,790
Net income $ 41,384 $ 34,880 $ 22,729 $ 109,618 $ 33,829
Basic earnings per share: $ 0.65 $ 0.55 $ 0.36 $ 1.73 $ 0.54
Diluted earnings per share: $ 0.63 $ 0.53 $ 0.35 $ 1.66 $ 0.52
Weighted average number of shares:
Basic 63,328 63,346 62,885 63,316 62,386
Diluted 65,761 66,329 65,214 66,184 65,024
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 Nine Months Ended
Dec. 26, Sep. 26, Dec. 27, Dec. 26, Dec. 27,
2015 2015 2014 2015 2014
Net Income Reconciliation Q3'16 Q2'16 Q3'15 Q3'16 Q3'15
GAAP Net Income $ 41,384 $ 34,880 $ 22,729 $ 109,618 $ 33,829
Amortization of acquisition intangibles 8,634 8,133 5,151 23,908 7,921
Stock based compensation expense 7,761 8,688 7,815 24,720 19,933
Patent agreement and other 78 752 - (11,670 ) -
Restructuring and other costs, net - - - - 1,455
Wolfson acquisition items - - 9,903 - 43,082
Adjustment to income taxes (3,737 ) (9,492 ) 17,714 (13,404 ) 24,704
Non-GAAP Net Income $ 54,120 $ 42,961 $ 63,312 $ 133,172 $ 130,924
Earnings Per Share Reconciliation
GAAP Diluted earnings per share $ 0.63 $ 0.53 $ 0.35 $ 1.66 $ 0.52
Effect of Amortization of acquisition intangibles 0.13 0.12 0.08 0.36 0.12
Effect of Stock based compensation expense 0.12 0.13 0.12 0.37 0.31
Effect of Patent agreement and other - 0.01 - (0.18 ) -
Effect of Restructuring and other costs, net - - - - 0.02
Effect of Wolfson acquisition items - - 0.15 - 0.66
Effect of Adjustment to income taxes (0.06 ) (0.14 ) 0.27 (0.20 ) 0.38
Non-GAAP Diluted earnings per share $ 0.82 $ 0.65 $ 0.97 $ 2.01 $ 2.01
Operating Income Reconciliation
GAAP Operating Income $ 63,911 $ 44,108 $ 44,374 $ 158,019 $ 78,362
GAAP Operating Profit 18 % 14 % 15 % 17 % 12 %
Amortization of acquisition intangibles 8,634 8,133 5,151 23,908 7,921
Stock compensation expense - COGS 213 380 273 918 757
Stock compensation expense - R&D 4,183 4,126 2,904 12,177 8,228
Stock compensation expense - SG&A 3,365 4,182 4,638 11,625 10,948
Patent agreement and other 78 752 - (11,670 ) -
Restructuring and other costs, net - - - - 1,455
Wolfson acquisition items - - 9,903 - 28,642
Non-GAAP Operating Income $ 80,384 $ 61,681 $ 67,243 $ 194,977 $ 136,313
Non-GAAP Operating Profit 23 % 20 % 23 % 21 % 21 %
Operating Expense Reconciliation
GAAP Operating Expenses $ 101,000 $ 98,113 $ 86,457 $ 281,567 $ 228,411
Amortization of acquisition intangibles (8,634 ) (8,133 ) (5,151 ) (23,908 ) (7,921 )
Stock compensation expense - R&D (4,183 ) (4,126 ) (2,904 ) (12,177 ) (8,228 )
Stock compensation expense - SG&A (3,365 ) (4,182 ) (4,638 ) (11,625 ) (10,948 )
Patent agreement and other (78 ) (752 ) - 11,670 -
Restructuring and other costs, net - - - - (1,455 )
Wolfson acquisition items - - (3,200 ) - (20,329 )
Non-GAAP Operating Expenses $ 84,740 $ 80,920 $ 70,564 $ 245,527 $ 179,530
Gross Margin/Profit Reconciliation
GAAP Gross Margin $ 164,911 $ 142,221 $ 130,831 $ 439,586 $ 306,773
GAAP Gross Profit 47.4 % 46.4 % 43.8 % 46.9 % 46.4 %
Wolfson acquisition items - - 6,703 - 8,313
Stock compensation expense - COGS 213 380 273 918 757
Non-GAAP Gross Margin $ 165,124 $ 142,601 $ 137,807 $ 440,504 $ 315,843
Non-GAAP Gross Profit 47.5 % 46.5 % 46.2 % 47.0 % 47.8 %
Effective Tax Rate Reconciliation
GAAP Tax Expense $ 21,011 $ 8,103 $ 19,532 $ 45,258 $ 27,790
GAAP Effective Tax Rate 33.7 % 18.9 % 46.2 % 29.2 % 45.1 %
Adjustments to income taxes 3,737 9,492 (17,714 ) 13,404 (24,704 )
Non-GAAP Tax Expense $ 24,748 $ 17,595 $ 1,818 $ 58,662 $ 3,086
Non-GAAP Effective Tax Rate 31.4 % 29.1 % 2.8 % 30.6 % 2.3 %
Tax Impact to EPS Reconciliation
GAAP Tax Expense $ 0.32 $ 0.12 $ 0.30 $ 0.68 $ 0.43
Adjustments to income taxes 0.06 0.14 (0.27 ) 0.20 (0.38 )
Non-GAAP Tax Expense $ 0.38 $ 0.26 $ 0.03 $ 0.88 $ 0.05
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands)
Dec. 26, Mar. 28, Dec. 27,
2015 2015 2014
ASSETS (unaudited) (unaudited)
Current assets
Cash and cash equivalents $ 159,572 $ 76,401 $ 66,607
Marketable securities 67,148 124,246 106,061
Accounts receivable, net 127,754 112,608 148,386
Inventories 137,723 84,196 73,896
Deferred tax asset 19,404 18,559 14,143
Other current assets 37,982 35,903 27,081
Total current Assets 549,583 451,913 436,174
Long-term marketable securities 22,327 60,072 3,404
Property and equipment, net 159,149 144,346 137,291
Intangibles, net 171,664 175,743 181,675
Goodwill 287,518 263,115 264,879
Deferred tax asset 27,581 25,593 24,991
Other assets 18,099 27,996 16,654
Total assets $ 1,235,921 $ 1,148,778 $ 1,065,068
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 114,483 $ 112,213 $ 77,195
Accrued salaries and benefits 22,438 24,132 20,164
Deferred income 4,162 6,105 5,417
Other accrued liabilities 36,301 34,128 27,402
Total current liabilities 177,384 176,578 130,178
Long-term debt 160,439 180,439 200,439
Other long-term liabilities 38,223 34,990 21,073
Stockholders' equity:
Capital stock 1,198,547 1,159,494 1,135,719
Accumulated deficit (336,653 ) (400,613 ) (421,514 )
Accumulated other comprehensive loss (2,019 ) (2,110 ) (827 )
Total stockholders' equity 859,875 756,771 713,378
Total liabilities and stockholders' equity $ 1,235,921 $ 1,148,778 $ 1,065,068
Prepared in accordance with Generally Accepted Accounting Principles

Media Contacts

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