Cirrus Logic Reports Q3 FY20 Revenue of $374.7 Million

AUSTIN, Texas--(BUSINESS WIRE)--January 29, 2020--Cirrus Logic, Inc. (Nasdaq:CRUS) today posted on its website at http://investor.cirrus.com the quarterly Shareholder Letter that contains the complete financial results for the third quarter fiscal year 2020, which ended Dec. 28, 2019, as well as the company’s current business outlook.

“Cirrus Logic’s revenue for the December quarter exceeded guidance as we experienced higher-than-anticipated volumes for certain components shipping into smartphones,” said Jason Rhode, chief executive officer. “During the quarter, development activities across existing and new product categories progressed, and the company continued to execute on key strategic initiatives. With a compelling pipeline of products addressing audio, voice and other signal-processing applications, we believe Cirrus Logic is well positioned for long-term success.”

Reported Financial Results – Third Quarter FY20

• Revenue of $374.7 million;
• GAAP and non-GAAP gross margin are 52.7 percent and 52.8, respectively;
• GAAP operating expenses of $124.8 million and non-GAAP operating expenses of $103.2 million; and
• GAAP earnings per share of $1.13 and non-GAAP earnings per share of $1.41.

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

Business Outlook – Fourth Quarter FY20

• Revenue is expected to range between $250 million and $290 million;
• GAAP gross margin to be between 51 percent and 53 percent; and
• Combined GAAP R&D and SG&A expenses to range between $115 million and $121 million, including approximately $14 million in stock-based compensation expense and $3 million in amortization of acquired intangibles;
• GAAP operating expense is expected to include a restructuring charge of approximately $22 million.

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 (416) 621-4642, or toll-free at (800) 585-8367 (Access Code: 8287509).

Cirrus Logic, Inc.

Cirrus Logic is a leader in low-power, high-precision mixed-signal processing solutions that create innovative user experiences for the world’s top mobile and consumer 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, Cirrus and the Cirrus Logic logo 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 and profit, operating expenses, gross margin and profit, tax expense and effective tax rate impact on earnings per share, and effective tax rate. 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 belief that Cirrus Logic is well positioned for long-term success, along with estimates for the fourth quarter fiscal year 2020 revenue, gross margin, combined research and development and selling, general and administrative expense levels, stock compensation expense, amortization of acquired intangibles and restructuring charges. 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 2020, customer cancellations of orders, or the failure to place orders consistent with forecasts, along with the risk factors listed in our Form 10-K for the year ended March 30, 2019 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												Nine Months Ended
	Dec. 28,				Sep. 28,				Dec. 29,				Dec. 28,				Dec. 29,
	2019				2019				2018				2019				2018
	Q3'20				Q2'20				Q3'19				Q3'20				Q3'19
Portable products	$	344,870			$	349,379			$	288,640			$	897,187			$	824,950
Non-portable and other products		29,798				39,533				35,655				104,646				120,133
Net sales		374,668				388,912				324,295				1,001,833				945,083
Cost of sales		177,163				180,979				161,115				473,901				472,225
Gross profit		197,505				207,933				163,180				527,932				472,858
Gross margin		52.7	%			53.5	%			50.3	%			52.7	%			50.0	%
Research and development		88,713				88,239				88,575				265,782				282,888
Selling, general and administrative		36,113				33,018				30,364				98,651				96,308
Total operating expenses		124,826				121,257				118,939				364,433				379,196
Income from operations		72,679				86,676				44,241				163,499				93,662
Interest income		2,392				2,250				1,740				6,927				4,712
U.K. pension settlement		-				-				(13,768	)			-				(13,768	)
Other (expense) income		(563	)			(568	)			101				(1,509	)			(67	)
Income before income taxes		74,508				88,358				32,314				168,917				84,539
Provision for income taxes		5,996				12,148				2,381				19,577				705
Net income	$	68,512			$	76,210			$	29,933			$	149,340			$	83,834
Basic earnings per share:	$	1.18			$	1.31			$	0.50			$	2.56			$	1.39
Diluted earnings per share:	$	1.13			$	1.27			$	0.49			$	2.47			$	1.35
Weighted average number of shares:
Basic		58,188				58,011				59,511				58,247				60,482
Diluted		60,492				60,213				60,783				60,395				62,076
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												Nine Months Ended
	Dec. 28,				Sep. 28,				Dec. 29,				Dec. 28,				Dec. 29,
	2019				2019				2018				2019				2018
Net Income Reconciliation	Q3'20				Q2'20				Q3'19				Q3'20				Q3'19
GAAP Net Income	$	68,512			$	76,210			$	29,933			$	149,340			$	83,834
Amortization of acquisition intangibles		6,470				6,722				7,630				20,420				33,763
Stock-based compensation expense		14,160				13,759				11,181				39,705				37,106
Restructuring costs		1,323				-				-				1,323				-
U.K. pension settlement		-				-				13,768				-				13,768
Adjustment to income taxes		(4,871	)			(3,417	)			(7,003	)			(11,091	)			(27,983	)
Non-GAAP Net Income	$	85,594			$	93,274			$	55,509			$	199,697			$	140,488
Earnings Per Share Reconciliation
GAAP Diluted earnings per share	$	1.13			$	1.27			$	0.49			$	2.47			$	1.35
Effect of Amortization of acquisition intangibles		0.11				0.11				0.13				0.34				0.54
Effect of Stock-based compensation expense		0.23				0.23				0.18				0.66				0.60
Effect of Restructuring costs		0.02				-				-				0.02				-
Effect of U.K. pension settlement		-				-				0.23				-				0.22
Effect of Adjustment to income taxes		(0.08	)			(0.06	)			(0.12	)			(0.18	)			(0.45	)
Non-GAAP Diluted earnings per share	$	1.41			$	1.55			$	0.91			$	3.31			$	2.26
Operating Income Reconciliation
GAAP Operating Income	$	72,679			$	86,676			$	44,241			$	163,499			$	93,662
GAAP Operating Profit		19.4	%			22.3	%			13.6	%			16.3	%			9.9	%
Amortization of acquisition intangibles		6,470				6,722				7,630				20,420				33,763
Stock-based compensation expense - COGS		200				254				220				695				589
Stock-based compensation expense - R&D		9,343				7,830				6,761				24,413				20,845
Stock-based compensation expense - SG&A		4,617				5,675				4,200				14,597				15,672
Restructuring costs		1,323				-				-				1,323				-
Non-GAAP Operating Income	$	94,632			$	107,157			$	63,052			$	224,947			$	164,531
Non-GAAP Operating Profit		25.3	%			27.6	%			19.4	%			22.5	%			17.4	%
Operating Expense Reconciliation
GAAP Operating Expenses	$	124,826			$	121,257			$	118,939			$	364,433			$	379,196
Amortization of acquisition intangibles		(6,470	)			(6,722	)			(7,630	)			(20,420	)			(33,763	)
Stock-based compensation expense - R&D		(9,343	)			(7,830	)			(6,761	)			(24,413	)			(20,845	)
Stock-based compensation expense - SG&A		(4,617	)			(5,675	)			(4,200	)			(14,597	)			(15,672	)
Restructuring costs		(1,201	)			-				-				(1,201	)			-
Non-GAAP Operating Expenses	$	103,195			$	101,030			$	100,348			$	303,802			$	308,916
Gross Margin/Profit Reconciliation
GAAP Gross Profit	$	197,505			$	207,933			$	163,180			$	527,932			$	472,858
GAAP Gross Margin		52.7	%			53.5	%			50.3	%			52.7	%			50.0	%
Stock-based compensation expense - COGS		200				254				220				695				589
Restructuring costs - COGS		122				-				-				122				-
Non-GAAP Gross Profit	$	197,827			$	208,187			$	163,400			$	528,749			$	473,447
Non-GAAP Gross Margin		52.8	%			53.5	%			50.4	%			52.8	%			50.1	%
Effective Tax Rate Reconciliation
GAAP Tax Expense	$	5,996			$	12,148			$	2,381			$	19,577			$	705
GAAP Effective Tax Rate		8.0	%			13.7	%			7.4	%			11.6	%			0.8	%
Adjustments to income taxes		4,871				3,417				7,003				11,091				27,983
Non-GAAP Tax Expense	$	10,867			$	15,565			$	9,384			$	30,668			$	28,688
Non-GAAP Effective Tax Rate		11.3	%			14.3	%			14.5	%			13.3	%			17.0	%
Tax Impact to EPS Reconciliation
GAAP Tax Expense	$	0.10			$	0.20			$	0.04			$	0.32			$	0.01
Adjustments to income taxes		0.08				0.06				0.12				0.18				0.45
Non-GAAP Tax Expense	$	0.18			$	0.26			$	0.16			$	0.50			$	0.46

CONSOLIDATED CONDENSED BALANCE SHEET
unaudited; in thousands
	Dec. 28,				Mar. 30,				Dec. 29,
	2019				2019				2018
ASSETS
Current assets
Cash and cash equivalents	$	342,301			$	216,172			$	219,319
Marketable securities		13,098				70,183				59,793
Accounts receivable, net		175,937				120,656				142,135
Inventories		137,920				164,733				167,879
Other current assets		45,345				53,239				51,151
Total current Assets		714,601				624,983				640,277
Long-term marketable securities		250,162				158,968				165,063
Right-of-use lease assets		141,348				-				-
Property and equipment, net		174,390				186,185				191,324
Intangibles, net		47,133				67,847				76,389
Goodwill		285,904				286,241				286,678
Deferred tax asset		9,183				8,727				13,131
Other assets		24,819				19,689				24,003
Total assets	$	1,647,540			$	1,352,640			$	1,396,865
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	98,835			$	48,398			$	108,022
Accrued salaries and benefits		34,228				29,289				23,566
Other accrued liabilities		45,248				37,853				38,175
Total current liabilities		178,311				115,540				169,763
Non-current lease liability		133,993				-				-
Non-current income taxes		72,422				78,309				78,532
Other long-term liabilities		2,934				18,551				18,769
Stockholders' equity:
Capital stock		1,417,646				1,363,736				1,349,941
Accumulated deficit		(157,869	)			(222,430	)			(217,871	)
Accumulated other comprehensive income (loss)		103				(1,066	)			(2,269	)
Total stockholders' equity		1,259,880				1,140,240				1,129,801
Total liabilities and stockholders' equity	$	1,647,540			$	1,352,640			$	1,396,865
Prepared in accordance with Generally Accepted Accounting Principles