CRUS Cirrus Logic Inc

Company Continues to Expect a Return to Growth in FY20

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 2019, which ended Sep. 29, 2018, as well as the company’s current business outlook.

“Cirrus Logic delivered Q2 revenue significantly above guidance as we experienced solid demand for our portable audio components ahead of customer product launches,” said Jason Rhode, president and chief executive officer. “While we are pleased with our results, we remain focused on executing on our product roadmap and expanding share with new and existing customers. As we move into FY20, we believe the company is well positioned to capitalize on the increasing demand for compelling audio, voice and haptic products which we expect to contribute to our return to year-over-year revenue growth.”

Reported Financial Results – Second Quarter FY19

• Revenue of $366.3 million;
• GAAP and non-GAAP gross margin of 50.5 percent and 50.6 percent, respectively;
• GAAP operating expenses of $129.5 million and non-GAAP operating expenses of $103.7 million; and
• GAAP earnings per share of $0.93 and non-GAAP earnings per share of $1.08.

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

Business Outlook – Third Quarter FY19

• Revenue is expected to range between $360 million and $400 million;
• GAAP gross margin is expected to be between 49 percent and 51 percent; and
• Combined GAAP R&D and SG&A expenses are expected to range between $122 million and $128 million, which includes approximately $12 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 (416) 621-4642, or toll-free at (800) 585-8367 (Access Code: 9875228).

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 and profit, operating expenses, gross margin and profit, 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, our ability to expand share with new and existing customers, our expectations with respect to our ability to capitalize on increasing demand for compelling audio, voice and haptic products, our ability to return to year-over-year revenue growth, along with estimates for the third 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 third quarter and remainder 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

Six Months Ended

Sep. 29, Jun. 30, Sep. 23, Sep. 29, Sep. 23, 2018 2018 2017 2018 2017 Q2'19 Q1'19 Q2'18 Q2'19 Q2'18 Portable audio products $ 324,049 $ 212,260 $ 381,761 $ 536,309 $ 662,449 Non-portable audio and other products   42,256     42,223     43,776     84,479     83,823   Net sales   366,305     254,483     425,537     620,788     746,272   Cost of sales   181,186     129,924     214,255     311,110     373,274   Gross profit 185,119 124,559 211,282 309,678 372,998 Gross margin 50.5 % 48.9 % 49.7 % 49.9 % 50.0 %   Research and development 96,381 97,932 90,353 194,313 173,910 Selling, general and administrative   33,160     32,784     30,041     65,944     60,900   Total operating expenses   129,541     130,716     120,394     260,257     234,810     Income (loss) from operations 55,578 (6,157 ) 90,888 49,421 138,188   Interest income (expense), net 1,525 1,447 725 2,972 1,319 Other income (expense), net   (378 )   210     (1,116 )   (168 )   (1,135 ) Income (loss) before income taxes 56,725 (4,500 ) 90,497 52,225 138,372 Provision (benefit) for income taxes   (1,448 )   (228 )   17,197     (1,676 )   22,160   Net income (loss) $ 58,173   $ (4,272 ) $ 73,300   $ 53,901   $ 116,212     Basic earnings (loss) per share: $ 0.96 $ (0.07 ) $ 1.16 $ 0.88 $ 1.82 Diluted earnings (loss) per share: $ 0.93 $ (0.07 ) $ 1.10 $ 0.86 $ 1.74   Weighted average number of shares: Basic 60,472 61,462 63,431 60,967 63,764 Diluted 62,431 61,462 66,360 62,810 66,761  

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 Six Months Ended Sep. 29,     Jun. 30,     Sep. 23, Sep. 29,     Sep. 23, 2018 2018 2017 2018 2017 Net Income Reconciliation Q2'19 Q1'19 Q2'18 Q2'19 Q2'18 GAAP Net Income (Loss) $ 58,173 $ (4,272 ) $ 73,300 $ 53,901 $ 116,212 Amortization of acquisition intangibles 12,867 13,266 11,600 26,133 23,200 Stock based compensation expense 13,131 12,794 12,292 25,925 23,695 Acquisition-related items - - - - (4,048 ) Adjustment to income taxes   (17,054 )   (3,926 )   (7,260 )   (20,980 )   (14,517 ) Non-GAAP Net Income $ 67,117   $ 17,862   $ 89,932   $ 84,979   $ 144,542     Earnings Per Share Reconciliation GAAP Diluted earnings (loss) per share $ 0.93 $ (0.07 ) $ 1.10 $ 0.86 $ 1.74 Effect of Amortization of acquisition intangibles 0.21 0.21 0.18 0.42 0.35 Effect of Stock based compensation expense 0.21 0.20 0.19 0.41 0.36 Effect of Acquisition-related items - - - - (0.06 ) Effect of Adjustment to income taxes   (0.27 )   (0.06 )   (0.11 )   (0.34 )   (0.22 ) Non-GAAP Diluted earnings per share $ 1.08   $ 0.28   $ 1.36   $ 1.35   $ 2.17     Diluted Shares Reconciliation GAAP Diluted shares 62,431 61,462 66,360 62,810 66,761 Effect of weighted dilutive shares   -     1,723     -     -     -   Non-GAAP Diluted shares   62,431     63,185     66,360     62,810     66,761     Operating Income Reconciliation GAAP Operating Income (Loss) $ 55,578 $ (6,157 ) $ 90,888 $ 49,421 $ 138,188 GAAP Operating Profit (Loss) 15 % -2 % 21 % 8 % 19 % Amortization of acquisition intangibles 12,867 13,266 11,600 26,133 23,200 Stock compensation expense - COGS 170 199 328 369 666 Stock compensation expense - R&D 6,834 7,250 6,034 14,084 12,294 Stock compensation expense - SG&A 6,127 5,345 5,930 11,472 10,735 Acquisition-related items   -     -     -     -     (4,048 ) Non-GAAP Operating Income $ 81,576   $ 19,903   $ 114,780   $ 101,479   $ 181,035   Non-GAAP Operating Profit 22 % 8 % 27 % 16 % 24 %   Operating Expense Reconciliation GAAP Operating Expenses $ 129,541 $ 130,716 $ 120,394 $ 260,257 $ 234,810 Amortization of acquisition intangibles (12,867 ) (13,266 ) (11,600 ) (26,133 ) (23,200 ) Stock compensation expense - R&D (6,834 ) (7,250 ) (6,034 ) (14,084 ) (12,294 ) Stock compensation expense - SG&A (6,127 ) (5,345 ) (5,930 ) (11,472 ) (10,735 ) Acquisition-related items   -     -     -     -     4,048   Non-GAAP Operating Expenses $ 103,713   $ 104,855   $ 96,830   $ 208,568   $ 192,629     Gross Margin/Profit Reconciliation GAAP Gross Profit $ 185,119 $ 124,559 $ 211,282 $ 309,678 $ 372,998 GAAP Gross Margin 50.5 % 48.9 % 49.7 % 49.9 % 50.0 % Stock compensation expense - COGS   170     199     328     369     666   Non-GAAP Gross Profit $ 185,289   $ 124,758   $ 211,610   $ 310,047   $ 373,664   Non-GAAP Gross Margin 50.6 % 49.0 % 49.7 % 49.9 % 50.1 %   Effective Tax Rate Reconciliation GAAP Tax Expense (Benefit) $ (1,448 ) $ (228 ) $ 17,197 $ (1,676 ) $ 22,160 GAAP Effective Tax Rate -2.6 % 5.1 % 19.0 % -3.2 % 16.0 % Adjustments to income taxes   17,054     3,926     7,260     20,980     14,517   Non-GAAP Tax Expense $ 15,606   $ 3,698   $ 24,457   $ 19,304   $ 36,677   Non-GAAP Effective Tax Rate 18.9 % 17.2 % 21.4 % 18.5 % 20.2 %   Tax Impact to EPS Reconciliation GAAP Tax Expense (Benefit) $ (0.02 ) $ - $ 0.26 $ (0.03 ) $ 0.33 Adjustments to income taxes   0.27     0.06     0.11     0.34     0.22   Non-GAAP Tax Expense $ 0.25   $ 0.06   $ 0.37   $ 0.31   $ 0.55           CONSOLIDATED CONDENSED BALANCE SHEET unaudited; in thousands         Sep. 29, Mar. 31, Sep. 23, 2018 2018 2017 ASSETS Current assets Cash and cash equivalents $ 195,857 $ 235,604 $ 180,198 Marketable securities 48,701 26,397 15,446 Accounts receivable, net 206,789 100,801 232,380 Inventories 142,315 205,760 210,791 Other current assets   48,910     45,112     31,185   Total current Assets 642,572 613,674 670,000   Long-term marketable securities 151,207 172,499 133,547 Property and equipment, net 193,218 191,154 177,523 Intangibles, net 86,769 111,547 131,235 Goodwill 287,368 288,718 289,248 Deferred tax asset 13,733 14,716 30,511 Other assets   29,527     37,809     23,703   Total assets $ 1,404,394   $ 1,430,117   $ 1,455,767     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 88,473 $ 69,850 $ 131,125 Accrued salaries and benefits 30,154 35,721 35,651 Other accrued liabilities   37,275     34,638     24,414  

Total current liabilities

155,902 140,209 191,190   Non-current income taxes 79,127 92,753 51,830 Other long-term liabilities 26,390 35,427 12,831   Stockholders' equity: Capital stock 1,338,586 1,312,434 1,288,669 Accumulated deficit (182,453 ) (139,345 ) (92,180 ) Accumulated other comprehensive income (loss)   (13,158 )   (11,361 )   3,427   Total stockholders' equity   1,142,975     1,161,728     1,199,916   Total liabilities and stockholders' equity $ 1,404,394   $ 1,430,117   $ 1,455,767    

Prepared in accordance with Generally Accepted Accounting Principles

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