CRUS Cirrus Logic Inc

Progress on Strategic Initiatives in FY18 Positions the Company for Future Growth

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 fourth quarter and full fiscal year 2018, which ended Mar. 31, 2018, as well as the company’s current business outlook.

“While revenue for Q4 and FY18 was below expectations due to lower than anticipated smartphone unit volumes, Cirrus Logic made meaningful progress this past year on numerous strategic initiatives that we expect to position the company for a return to year-over-year growth in FY20,” said Jason Rhode, president and chief executive officer. “We have expanded our portfolio of products to address a wide range of solutions for flagship and mid-tier devices and are moving into new markets such as haptics and voice biometrics. As customers’ interest in enhancing the audio and voice user experience grows, we believe the breadth of Cirrus Logic’s portfolio and our cutting-edge technology will contribute to our continued success.”

Reported Financial Results – Fourth Quarter FY18

• Revenue of $303.2 million;
• GAAP and non-GAAP gross margin of 50.3 percent and 50.5 percent, respectively;
• GAAP operating expenses of $131.9 million and non-GAAP operating expenses of $106.8 million; and
• GAAP diluted earnings per share of $0.19 and non-GAAP diluted earnings per share of $0.51.

Reported Financial Results – Full Year FY18

• Revenue of $1.5 billion;
• GAAP and non-GAAP gross margin of 49.6 percent and 49.7 percent, respectively;
• GAAP operating expenses of $498.2 million and non-GAAP operating expenses of $407.3 million; and
• GAAP diluted earnings per share of $2.46 and non-GAAP diluted earnings per share of $4.27.

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

Business Outlook – First Quarter FY19

• Revenue is expected to range between $210 million and $250 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 $133 million and $139 million, which includes approximately $13 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: 9676759).

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, 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 for a return to year-over-year growth in fiscal year 2020, along with estimates for the first 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 first 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 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.

Summary financial data follows:

  CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (unaudited) (in thousands, except per share data)         Three Months Ended     Twelve Months Ended             Mar. 31, Dec. 30, Mar. 25, Mar. 31, Mar. 25, 2018 2017 2017 2018 2017 Q4'18 Q3'18 Q4'17 Q4'18 Q4'17 Portable audio products $ 262,777 $ 438,650 $ 290,658 $ 1,363,876 $ 1,373,848 Non-portable audio and other products   40,396     44,091     37,206     168,310     165,092   Net sales   303,173     482,741     327,864     1,532,186     1,538,940   Cost of sales   150,543     247,653     163,585     771,470     781,125   Gross profit 152,630 235,088 164,279 760,716 757,815 Gross margin 50.3 % 48.7 % 50.1 % 49.6 % 49.2 %   Research and development 95,556 96,978 77,972 366,444 303,658 Selling, general and administrative 36,307 34,604 31,752 131,811 127,265 Asset impairment   -     -     9,842     -     9,842   Total operating expenses   131,863     131,582     119,566     498,255     440,765     Income from operations 20,767 103,506 44,713 262,461 317,050   Interest income (expense), net 1,378 912 118 3,609 (1,924 ) Other income (expense), net   (158 )   322     82     (971 )   (79 ) Income before income taxes 21,987 104,740 44,913 265,099 315,047 Provision for income taxes   9,983     70,961     9,855     103,104     53,838   Net income $ 12,004   $ 33,779   $ 35,058   $ 161,995   $ 261,209     Basic earnings per share: $ 0.19 $ 0.53 $ 0.55 $ 2.55 $ 4.12 Diluted earnings per share: $ 0.19 $ 0.52 $ 0.52 $ 2.46 $ 3.92   Weighted average number of shares: Basic 62,654 63,453 64,232 63,407 63,329 Diluted 64,572 65,557 67,062 65,951 66,561   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 Twelve Months Ended             Mar. 31, Dec. 30, Mar. 25, Mar. 31, Mar. 25, 2018 2017 2017 2018 2017 Net Income Reconciliation Q4'18 Q3'18 Q4'17 Q4'18 Q4'17 GAAP Net Income $ 12,004 $ 33,779 $ 35,058 $ 161,995 $ 261,209 Amortization of acquisition intangibles 13,266 11,600 8,255 48,066 33,252 Stock based compensation expense 12,533 12,512 10,888 48,740 39,594 Acquisition-related items (279 ) - - (4,327 ) (3,566 ) Asset impairment - - 9,842 - 9,842 Adjustment to income taxes   (4,502 )   46,273     (7,289 )   27,254     (41,480 ) Non-GAAP Net Income $ 33,022   $ 104,164   $ 56,754   $ 281,728   $ 298,851     Earnings Per Share Reconciliation GAAP Diluted earnings per share $ 0.19 $ 0.52 $ 0.52 $ 2.46 $ 3.92 Effect of Amortization of acquisition intangibles 0.21 0.18 0.13 0.73 0.50 Effect of Stock based compensation expense 0.19 0.19 0.16 0.74 0.59 Effect of Acquisition-related items - - - (0.07 ) (0.05 ) Effect of Asset impairment - - 0.15 - 0.15 Effect of Adjustment to income taxes   (0.08 )   0.70     (0.11 )   0.41     (0.62 ) Non-GAAP Diluted earnings per share $ 0.51   $ 1.59   $ 0.85   $ 4.27   $ 4.49     Operating Income Reconciliation GAAP Operating Income $ 20,767 $ 103,506 $ 44,713 $ 262,461 $ 317,050 GAAP Operating Profit 7 % 21 % 14 % 17 % 21 % Amortization of acquisition intangibles 13,266 11,600 8,255 48,066 33,252 Stock compensation expense - COGS 422 386 324 1,474 1,071 Stock compensation expense - R&D 6,847 6,995 5,987 26,136 21,186 Stock compensation expense - SG&A 5,264 5,131 4,577 21,130 17,337 Acquisition-related items (279 ) - - (4,327 ) (3,566 ) Asset impairment   -     -     9,842     -     9,842   Non-GAAP Operating Income $ 46,287   $ 127,618   $ 73,698   $ 354,940   $ 396,172   Non-GAAP Operating Profit 15 % 26 % 22 % 23 % 26 %   Operating Expense Reconciliation GAAP Operating Expenses $ 131,863 $ 131,582 $ 119,566 $ 498,255 $ 440,765 Amortization of acquisition intangibles (13,266 ) (11,600 ) (8,255 ) (48,066 ) (33,252 ) Stock compensation expense - R&D (6,847 ) (6,995 ) (5,987 ) (26,136 ) (21,186 ) Stock compensation expense - SG&A (5,264 ) (5,131 ) (4,577 ) (21,130 ) (17,337 ) Acquisition-related items 279 - - 4,327 3,566 Asset impairment   -     -     (9,842 )   -     (9,842 ) Non-GAAP Operating Expenses $ 106,765   $ 107,856   $ 90,905   $ 407,250   $ 362,714     Gross Margin/Profit Reconciliation GAAP Gross Profit $ 152,630 $ 235,088 $ 164,279 $ 760,716 $ 757,815 GAAP Gross Margin 50.3 % 48.7 % 50.1 % 49.6 % 49.2 % Stock compensation expense - COGS   422     386     324     1,474     1,071   Non-GAAP Gross Profit $ 153,052   $ 235,474   $ 164,603   $ 762,190   $ 758,886   Non-GAAP Gross Margin 50.5 % 48.8 % 50.2 % 49.7 % 49.3 %   Effective Tax Rate Reconciliation GAAP Tax Expense $ 9,983 $ 70,961 $ 9,855 $ 103,104 $ 53,838 GAAP Effective Tax Rate 45.4 % 67.7 % 21.9 % 38.9 % 17.1 % Adjustments to income taxes   4,502     (46,273 )   7,289     (27,254 )   41,480   Non-GAAP Tax Expense $ 14,485   $ 24,688   $ 17,144   $ 75,850   $ 95,318   Non-GAAP Effective Tax Rate 30.5 % 19.2 % 23.2 % 21.2 % 24.2 %   Tax Impact to EPS Reconciliation GAAP Tax Expense $ 0.15 $ 1.08 $ 0.15 $ 1.56 $ 0.81 Adjustments to income taxes   0.08     (0.70 )   0.11     (0.41 )   0.62   Non-GAAP Tax Expense $ 0.23   $ 0.38   $ 0.26   $ 1.15   $ 1.43       CONSOLIDATED CONDENSED BALANCE SHEET unaudited; in thousands         Mar. 31,     Dec. 30,     Mar. 25, 2018 2017 2017 ASSETS Current assets Cash and cash equivalents $ 235,604 $ 226,640 $ 351,166 Marketable securities 26,397 12,822 99,813 Accounts receivable, net 100,801 217,619 119,974 Inventories 205,760 192,967 167,895 Other current assets   45,112     29,445     37,080   Total current Assets 613,674 679,493 775,928   Long-term marketable securities 172,499 173,717 -

Property and equipment, net

191,154 187,143 168,139 Intangibles, net 111,547 126,183 135,188 Goodwill 288,718 288,481 286,767 Deferred tax asset 14,716 16,467 32,841 Other assets   37,809     21,841     14,607   Total assets $ 1,430,117   $ 1,493,325   $ 1,413,470     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 69,850 $ 116,274 $ 73,811 Accrued salaries and benefits 35,721 29,543 40,190 Other accrued liabilities   34,638     29,903     30,074   Total current liabilities 140,209 175,720 144,075   Long-term debt - - 60,000 Other long-term liabilities 128,180 106,239 57,703   Stockholders' equity: Capital stock 1,312,434 1,301,800 1,259,279 Accumulated deficit (139,345 ) (92,402 ) (107,014 ) Accumulated other comprehensive income (loss)   (11,361 )   1,968     (573 ) Total stockholders' equity   1,161,728     1,211,366     1,151,692   Total liabilities and stockholders' equity $ 1,430,117   $ 1,493,325   $ 1,413,470    

Prepared in accordance with Generally Accepted Accounting Principles

 

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Cirrus Logic, Inc.Investor Contact:Thurman K. Case, 512-851-4125Chief Financial OfficerInvestor.Relations@cirrus.com