Cirrus Logic Reports Fiscal Third Quarter Revenue of $590.6 Million

By: Cirrus Logic, Inc. via Business Wire

February 02, 2023 at 16:00 PM EST

Smartphone Sales Drive Record Revenue

Cirrus Logic, Inc. (NASDAQ: CRUS) today posted on its website at investor.cirrus.com the quarterly Shareholder Letter that contains the complete financial results for the third quarter fiscal year 2023, which ended December 24, 2022, as well as the company’s current business outlook.

“Cirrus Logic delivered record revenue in the December quarter, with sales driven above the high end of guidance by demand for smartphones,” said John Forsyth, Cirrus Logic president and chief executive officer. “During the quarter, customer engagement across our product portfolio remained strong. We taped out our next-generation 22-nanometer smart codec and we made excellent progress on numerous other audio and high-performance mixed-signal products. Going forward, we will continue to leverage our intellectual property into other applications and markets as we target opportunities for incremental content, including in the areas of sensing, charging, and power. With a solid product roadmap and a deep commitment to innovation, we believe Cirrus Logic is well-positioned to drive further growth and product diversification in the future.”

Reported Financial Results – Third Quarter FY23

Revenue of $590.6 million;
GAAP and non-GAAP gross margin of 50.2 percent and 50.3 percent;
GAAP operating expenses of $155.3 million and non-GAAP operating expenses of $123.2 million; and
GAAP earnings per share of $1.83 and non-GAAP earnings per share of $2.40.

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

Business Outlook – Fourth Quarter FY23

Revenue is expected to range between $340 million and $400 million;
GAAP gross margin is forecasted to be between 49 percent and 51 percent; and
Combined GAAP R&D and SG&A expenses are anticipated to range between $153 million and $159 million, including approximately $22 million in stock-based compensation expense, $8 million in amortization of acquired intangibles, and $3 million in acquisition-related costs.

Cirrus Logic will host a live Q&A session at 6 p.m. EST today to discuss its financial results and business outlook. Participants may listen to the conference call on the investor relations website at investor.cirrus.com. A replay of the webcast can be accessed on the Cirrus Logic website approximately two hours following its completion, or by calling (647) 362-9199, or toll-free at (800) 770-2030 (Access Code: 95424).

About 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.

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, the company 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, tax expense impact on earnings per share, effective tax rate, free cash flow, and free cash flow margin. 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 ability to leverage our intellectual property into other applications and markets including in the areas of sensing, charging, and power; our ability to drive incremental content, growth, and product diversification in the future; and our estimates for the fourth quarter fiscal year 2023 revenue, gross margin, combined research and development and selling, general and administrative expense levels, stock compensation expense, amortization of acquired intangibles and acquisition-related costs. 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, and readers should not place undue reliance on such statements. These risks and uncertainties include, but are not limited to, the following: the effects of the global COVID-19 outbreak and the measures taken to limit the spread of COVID-19, including any disruptions to our business that could result from measures to contain the outbreak that may be taken by governmental authorities in the jurisdictions in which we and our supply chain operate; the susceptibility of the markets we address to economic downturns, including as a result of the COVID-19 outbreak and the actions taken to mitigate the spread of COVID-19; increased industry-wide capacity constraints that may impact our ability to meet current customer demand, which could cause an unanticipated decline in our sales and damage our existing customer relationships and our ability to establish new customer relationships; the potential for increased prices due to capacity constraints in our supply chain, which, if we are unable to increase our selling price to our customers, could result in lower revenues and margins that could adversely affect our financial results; recent significant increases in inflation in the U.S and overseas; the level and timing of orders and shipments during the fourth quarter of fiscal year 2023, 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 26, 2022 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 expressly disclaim any 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
(in thousands, except per share data; unaudited)

	Three Months Ended									Nine Months Ended
	Dec. 24,			Sep. 24,			Dec. 25,			Dec. 24,			Dec. 25,
	2022			2022			2021			2022			2021
	Q3'23			Q2'23			Q3'22			Q3'23			Q3'22
Audio	$	347,297		$	337,811		$	341,897		$	939,604		$	860,027
High-Performance Mixed-Signal		243,285			202,763			206,452			585,191			431,461
Net sales		590,582			540,574			548,349			1,524,795			1,291,488
Cost of sales		293,877			269,288			258,827			754,170			626,576
Gross profit		296,705			271,286			289,522			770,625			664,912
Gross margin		50.2	%		50.2	%		52.8	%		50.5	%		51.5	%

Research and development		118,063			115,471			107,101			343,250			294,913
Selling, general and administrative		37,262			39,598			38,247			115,502			111,526
Total operating expenses		155,325			155,069			145,348			458,752			406,439

Income from operations		141,380			116,217			144,174			311,873			258,473

Interest income		2,777			1,285			(78	)		4,367			718
Other income (expense)		(3,716	)		295			(87	)		(2,915	)		1,530
Income before income taxes		140,441			117,797			144,009			313,325			260,721
Provision for income taxes		36,964			30,609			16,373			82,953			30,780
Net income	$	103,477		$	87,188		$	127,636		$	230,372		$	229,941

Basic earnings per share:	$	1.87		$	1.56		$	2.23		$	4.13		$	4.01
Diluted earnings per share:	$	1.83		$	1.52		$	2.16		$	4.02		$	3.88

Weighted average number of shares:
Basic		55,239			55,726			57,178			55,748			57,374
Diluted		56,583			57,418			59,031			57,280			59,317

Prepared in accordance with Generally Accepted Accounting Principles


RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL INFORMATION
(in thousands, except per share data; unaudited)
(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. 24,			Sep. 24,			Dec. 25,			Dec. 24,			Dec. 25,
	2022			2022			2021			2022			2021
Net Income Reconciliation	Q3'23			Q2'23			Q3'22			Q3'23			Q3'22
GAAP Net Income	$	103,477		$	87,188		$	127,636		$	230,372		$	229,941
Amortization of acquisition intangibles		8,807			7,787			9,083			24,429			19,135
Stock-based compensation expense		20,487			20,483			17,833			59,108			49,368
Acquisition-related costs		3,176			3,164			3,155			9,504			8,989
Investment write off		2,746			—			—			2,746			—
Adjustment to income taxes		(2,936	)		(4,135	)		(7,903	)		(11,371	)		(16,897	)
Non-GAAP Net Income	$	135,757		$	114,487		$	149,804		$	314,788		$	290,536

Earnings Per Share Reconciliation
GAAP Diluted earnings per share	$	1.83		$	1.52		$	2.16		$	4.02		$	3.88
Effect of Amortization of acquisition intangibles		0.15			0.14			0.16			0.43			0.32
Effect of Stock-based compensation expense		0.36			0.35			0.30			1.03			0.83
Effect of Acquisition-related costs		0.06			0.05			0.05			0.17			0.15
Effect of Investment write off		0.05			—			—			0.05			—
Effect of Adjustment to income taxes		(0.05	)		(0.07	)		(0.13	)		(0.20	)		(0.28	)
Non-GAAP Diluted earnings per share	$	2.40		$	1.99		$	2.54		$	5.50		$	4.90

Operating Income Reconciliation
GAAP Operating Income	$	141,380		$	116,217		$	144,174		$	311,873		$	258,473
GAAP Operating Profit		23.9	%		21.5	%		26.3	%		20.5	%		20.0	%
Amortization of acquisition intangibles		8,807			7,787			9,083			24,429			19,135
Stock-based compensation expense - COGS		309			312			245			898			763
Stock-based compensation expense - R&D		14,710			14,228			12,260			41,530			32,368
Stock-based compensation expense - SG&A		5,468			5,943			5,328			16,680			16,237
Acquisition-related costs		3,176			3,164			3,155			9,504			8,989
Non-GAAP Operating Income	$	173,850		$	147,651		$	174,245		$	404,914		$	335,965
Non-GAAP Operating Profit		29.4	%		27.3	%		31.8	%		26.6	%		26.0	%

Operating Expense Reconciliation
GAAP Operating Expenses	$	155,325		$	155,069		$	145,348		$	458,752		$	406,439
Amortization of acquisition intangibles		(8,807	)		(7,787	)		(9,083	)		(24,429	)		(19,135	)
Stock-based compensation expense - R&D		(14,710	)		(14,228	)		(12,260	)		(41,530	)		(32,368	)
Stock-based compensation expense - SG&A		(5,468	)		(5,943	)		(5,328	)		(16,680	)		(16,237	)
Acquisition-related costs		(3,176	)		(3,164	)		(3,155	)		(9,504	)		(5,528	)
Non-GAAP Operating Expenses	$	123,164		$	123,947		$	115,522		$	366,609		$	333,171

Gross Margin/Profit Reconciliation
GAAP Gross Profit	$	296,705		$	271,286		$	289,522		$	770,625		$	664,912
GAAP Gross Margin		50.2	%		50.2	%		52.8	%		50.5	%		51.5	%
Acquisition-related costs		—			—			—			—			3,461
Stock-based compensation expense - COGS		309			312			245			898			763
Non-GAAP Gross Profit	$	297,014		$	271,598		$	289,767		$	771,523		$	669,136
Non-GAAP Gross Margin		50.3	%		50.2	%		52.8	%		50.6	%		51.8	%

Effective Tax Rate Reconciliation
GAAP Tax Expense	$	36,964		$	30,609		$	16,373		$	82,953		$	30,780
GAAP Effective Tax Rate		26.3	%		26.0	%		11.4	%		26.5	%		11.8	%
Adjustments to income taxes		2,936			4,135			7,903			11,371			16,897
Non-GAAP Tax Expense	$	39,900		$	34,744		$	24,276		$	94,324		$	47,677
Non-GAAP Effective Tax Rate		22.7	%		23.3	%		13.9	%		23.1	%		14.1	%

Tax Impact to EPS Reconciliation
GAAP Tax Expense	$	0.65		$	0.53		$	0.28		$	1.45		$	0.52
Adjustments to income taxes		0.05			0.07			0.13			0.20			0.28
Non-GAAP Tax Expense	$	0.70		$	0.60		$	0.41		$	1.65		$	0.80


CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands; unaudited)

	Dec. 24,			Mar. 26,			Dec. 25,
		2022			2022			2021
ASSETS
Current assets
Cash and cash equivalents	$	434,544		$	369,814		$	195,121
Marketable securities		28,373			10,601			3,719
Accounts receivable, net		270,493			240,264			326,131
Inventories		152,426			138,436			148,525
Other current assets		127,649			80,900			90,025
Total current Assets		1,013,485			840,015			763,521

Long-term marketable securities		44,784			63,749			72,118
Right-of-use lease assets		150,938			171,003			173,054
Property and equipment, net		156,602			157,077			157,186
Intangibles, net		133,032			158,145			165,581
Goodwill		435,936			435,791			437,783
Deferred tax asset		8,630			11,068			7,203
Long-term prepaid wafers		154,575			195,000			195,000
Other assets		67,907			91,552			96,671
Total assets	$	2,165,889		$	2,123,400		$	2,068,117

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	117,406		$	115,417		$	110,250
Accrued salaries and benefits		42,187			65,261			43,044
Lease liability		14,024			14,680			14,653
Acquisition-related liabilities		18,195			30,964			30,964
Other accrued liabilities		36,737			38,461			40,603
Total current liabilities		228,549			264,783			239,514

Non-current lease liability		143,252			163,162			164,896
Non-current income taxes		72,267			73,383			77,683
Long-term acquisition-related liabilities		—			8,692			5,528
Other long-term liabilities		5,501			13,563			17,749
Total long-term liabilities		221,020			258,800			265,856

Stockholders' equity:
Capital stock		1,639,056			1,578,427			1,556,746
Accumulated earnings		80,865			23,435			6,416
Accumulated other comprehensive loss		(3,601	)		(2,045	)		(415	)
Total stockholders' equity		1,716,320			1,599,817			1,562,747
Total liabilities and stockholders' equity	$	2,165,889		$	2,123,400		$	2,068,117

Prepared in accordance with Generally Accepted Accounting Principles


CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands; unaudited)

	Three Months Ended

	Dec. 24,			Dec. 25,
	2022			2021
	Q3'23			Q3'22
Cash flows from operating activities:
Net income	$	103,477		$	127,636
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		18,624			17,446
Stock-based compensation expense		20,487			17,832
Deferred income taxes		10,886			733
Loss on retirement or write-off of long-lived assets		3			196
Other non-cash charges		2,832			82
Net change in operating assets and liabilities:
Accounts receivable, net		34,053			(45,165	)
Inventories		12,145			39,835
Other assets		6,458			208
Accounts payable and other accrued liabilities		(20,521	)		(293,661	)
Income taxes payable		(10,656	)		(4,161	)
Acquisition-related liabilities		3,160			3,164
Net cash provided by (used in) operating activities		180,948			(135,855	)
Cash flows from investing activities:
Maturities and sales of available-for-sale marketable securities		3,691			8,946
Purchases of available-for-sale marketable securities		(3,433	)		(9,553	)
Purchases of property, equipment and software		(6,777	)		(3,363	)
Investments in technology		(831	)		(361	)
Acquisition-related payments		—			(1,242	)
Net cash used in investing activities		(7,350	)		(5,573	)
Cash flows from financing activities:
Debt issuance costs		—			(2	)
Payment of acquisition-related holdback		(30,949	)		—
Issuance of common stock, net of shares withheld for taxes		393			5,359
Repurchase of stock to satisfy employee tax withholding obligations		(13,541	)		(15,550	)
Repurchase and retirement of common stock		(50,000	)		(39,999	)
Net cash used in financing activities		(94,097	)		(50,192	)
Net increase (decrease) in cash and cash equivalents		79,501			(191,620	)
Cash and cash equivalents at beginning of period		355,043			386,741
Cash and cash equivalents at end of period	$	434,544		$	195,121

Prepared in accordance with Generally Accepted Accounting Principles


RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL INFORMATION
(in thousands; unaudited)

Free cash flow, a non-GAAP financial measure, is GAAP cash flow from operations (or cash provided by (used in) operating activities) less capital expenditures. Capital expenditures include purchases of property, equipment and software as well as investments in technology, as presented within our GAAP Consolidated Condensed Statement of Cash Flows. Free cash flow margin represents free cash flow divided by revenue.

	Twelve Months Ended			Three Months Ended

	Dec. 24,			Dec. 24,			Sep. 24,			Jun. 25,			Mar. 26,
	2022			2022			2022			2022			2022
	Q3'23			Q3'23			Q2'23			Q1'23			Q4'22

Net cash provided by operating activities (GAAP)	$	549,533		$	180,948		$	35,989		$	74,365		$	258,231
Capital expenditures		(33,535	)		(7,608	)		(10,247	)		(7,224	)		(8,456	)
Free Cash Flow (Non-GAAP)	$	515,998		$	173,340		$	25,742		$	67,141		$	249,775

Cash Flow from Operations as a Percentage of Revenue (GAAP)		27	%		31	%		7	%		19	%		53	%
Capital Expenditures as a Percentage of Revenue (GAAP)		2	%		1	%		2	%		2	%		2	%
Free Cash Flow Margin (Non-GAAP)		26	%		29	%		5	%		17	%		51	%