Cirrus Logic Reports Q2 FY21 Revenue of $347.3 Million

AUSTIN, Texas--(BUSINESS WIRE)--November 2, 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 second quarter fiscal year 2021, which ended Sept. 26, 2020, as well as the company’s current business outlook.

“Cirrus Logic delivered revenue above the high end of guidance in the September quarter. We experienced solid sales across the breadth of our product portfolio, with particularly strong demand for components shipping in smartphones,” said Jason Rhode, chief executive officer. “During the quarter, we were pleased to have expanded the number of smartphones, tablets and wearables that are utilizing our technology. The company also reached several meaningful development milestones that we believe will fuel product diversification and growth opportunities in the coming years.”

The company also announced today that the Board of Directors has appointed current President John Forsyth, 47, as president and chief executive officer effective Jan. 1, 2021, at which time Jason Rhode will transition into his new role as executive fellow. “John’s strong leadership and strategic vision make him the right choice to lead Cirrus Logic into what we believe is a very bright future,” said Jason Rhode, chief executive officer. In addition, the company announced that David Tupman will become chair of the Board of Directors, effective the same date, succeeding Al Schuele ahead of his retirement prior to the next annual meeting of stockholders.

For more information on the CEO and Board leadership transition plans, please visit http://investor.cirrus.com/.

Reported Financial Results – Second Quarter FY21

• Revenue of $347.3 million;
• GAAP and non-GAAP gross margin of 51.9 percent;
• GAAP operating expenses of $116.1 million and non-GAAP operating expenses of $97.8 million;
• GAAP earnings per share of $0.99 and non-GAAP earnings per share of $1.26.

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

Business Outlook – Third Quarter FY21

• Revenue is expected to range between $440 million and $480 million;
• GAAP gross margin to be between 50 percent and 52 percent; and
• Combined GAAP R&D and SG&A expenses to range between $121 million and $127 million, including approximately $15 million in stock-based compensation expense and $3 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 (416) 621-4642, or toll-free at (800) 585-8367 (Access Code: 9088457).

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, 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, 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 the company’s product diversification and growth opportunities in the coming years and our ability to lead the company into what we believe is a very bright future, along with estimates for the third quarter fiscal year 2021 revenue, gross margin, combined research and development and selling, general and administrative expense levels, stock 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 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; the risks of doing business internationally, including increased import/export restrictions and controls (e.g., the effect of the U.S. Bureau of Industry and Security of the U.S. Department of Commerce placing Huawei Technologies Co., Ltd. and certain of its affiliates on the Bureau’s Entity List), imposition of trade protection measures (e.g., tariffs or taxes), security and health risks, possible disruptions in transportation networks, and other economic, social, military and geo-political conditions in the countries in which we, our customers or our suppliers operate; the level of orders and shipments during the third quarter of fiscal year 2021, 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 28, 2020 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
(unaudited)
(in thousands, except per share data)
	Three Months Ended												Six Months Ended
	Sep. 26,				Jun. 27,				Sep. 28,				Sep. 26,				Sep. 28,
	2020				2020				2019				2020				2019
	Q2'21				Q1'21				Q2'20				Q2'21				Q2'20
Portable products	$	312,911			$	210,661			$	349,379			$	523,572			$	552,317
Non-portable and other products		34,414				31,912				39,533				66,326				74,848
Net sales		347,325				242,573				388,912				589,898				627,165
Cost of sales		167,115				115,101				180,979				282,216				296,738
Gross profit		180,210				127,472				207,933				307,682				330,427
Gross margin		51.9	%			52.6	%			53.5	%			52.2	%			52.7	%
Research and development		84,810				78,741				88,239				163,551				177,069
Selling, general and administrative		31,247				29,704				33,018				60,951				62,538
Restructuring costs		-				352				-				352				-
Total operating expenses		116,057				108,797				121,257				224,854				239,607
Income from operations		64,153				18,675				86,676				82,828				90,820
Interest income		1,378				1,576				2,250				2,954				4,535
Other income (expense)		784				111				(568	)			895				(946	)
Income before income taxes		66,315				20,362				88,358				86,677				94,409
Provision for income taxes		6,829				2,153				12,148				8,982				13,581
Net income	$	59,486			$	18,209			$	76,210			$	77,695			$	80,828
Basic earnings per share:	$	1.02			$	0.31			$	1.31			$	1.33			$	1.39
Diluted earnings per share:	$	0.99			$	0.30			$	1.27			$	1.29			$	1.34
Weighted average number of shares:
Basic		58,191				58,313				58,011				58,252				58,276
Diluted		60,127				60,280				60,213				60,203				60,260
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. 26,				Jun. 27,				Sep. 28,				Sep. 26,				Sep. 28,
	2020				2020				2019				2020				2019
Net Income Reconciliation	Q2'21				Q1'21				Q2'20				Q2'21				Q2'20
GAAP Net Income	$	59,486			$	18,209			$	76,210			$	77,695			$	80,828
Amortization of acquisition intangibles		2,998				2,998				6,722				5,996				13,950
Stock-based compensation expense		15,476				13,306				13,759				28,782				25,545
Restructuring costs		-				352				-				352				-
Adjustment to income taxes		(2,293	)			(2,982	)			(3,417	)			(5,275	)			(6,220	)
Non-GAAP Net Income	$	75,667			$	31,883			$	93,274			$	107,550			$	114,103
Earnings Per Share Reconciliation
GAAP Diluted earnings per share	$	0.99			$	0.30			$	1.27			$	1.29			$	1.34
Effect of Amortization of acquisition intangibles		0.05				0.05				0.11				0.10				0.23
Effect of Stock-based compensation expense		0.26				0.22				0.23				0.48				0.42
Effect of Restructuring costs		-				0.01				-				0.01				-
Effect of Adjustment to income taxes		(0.04	)			(0.05	)			(0.06	)			(0.09	)			(0.10	)
Non-GAAP Diluted earnings per share	$	1.26			$	0.53			$	1.55			$	1.79			$	1.89
Operating Income Reconciliation
GAAP Operating Income	$	64,153			$	18,675			$	86,676			$	82,828			$	90,820
GAAP Operating Profit		18.5	%			7.7	%			22.3	%			14.0	%			14.5	%
Amortization of acquisition intangibles		2,998				2,998				6,722				5,996				13,950
Stock-based compensation expense - COGS		197				207				254				404				495
Stock-based compensation expense - R&D		9,235				8,653				7,830				17,888				15,070
Stock-based compensation expense - SG&A		6,044				4,446				5,675				10,490				9,980
Restructuring costs		-				352				-				352				-
Non-GAAP Operating Income	$	82,627			$	35,331			$	107,157			$	117,958			$	130,315
Non-GAAP Operating Profit		23.8	%			14.6	%			27.6	%			20.0	%			20.8	%
Operating Expense Reconciliation
GAAP Operating Expenses	$	116,057			$	108,797			$	121,257			$	224,854			$	239,607
Amortization of acquisition intangibles		(2,998	)			(2,998	)			(6,722	)			(5,996	)			(13,950	)
Stock-based compensation expense - R&D		(9,235	)			(8,653	)			(7,830	)			(17,888	)			(15,070	)
Stock-based compensation expense - SG&A		(6,044	)			(4,446	)			(5,675	)			(10,490	)			(9,980	)
Restructuring costs		-				(352	)			-				(352	)			-
Non-GAAP Operating Expenses	$	97,780			$	92,348			$	101,030			$	190,128			$	200,607
Gross Margin/Profit Reconciliation
GAAP Gross Profit	$	180,210			$	127,472			$	207,933			$	307,682			$	330,427
GAAP Gross Margin		51.9	%			52.6	%			53.5	%			52.2	%			52.7	%
Stock-based compensation expense - COGS		197				207				254				404				495
Non-GAAP Gross Profit	$	180,407			$	127,679			$	208,187			$	308,086			$	330,922
Non-GAAP Gross Margin		51.9	%			52.6	%			53.5	%			52.2	%			52.8	%
Effective Tax Rate Reconciliation
GAAP Tax Expense	$	6,829			$	2,153			$	12,148			$	8,982			$	13,581
GAAP Effective Tax Rate		10.3	%			10.6	%			13.7	%			10.4	%			14.4	%
Adjustments to income taxes		2,293				2,982				3,417				5,275				6,220
Non-GAAP Tax Expense	$	9,122			$	5,135			$	15,565			$	14,257			$	19,801
Non-GAAP Effective Tax Rate		10.8	%			13.9	%			14.3	%			11.7	%			14.8	%
Tax Impact to EPS Reconciliation
GAAP Tax Expense	$	0.11			$	0.04			$	0.20			$	0.15			$	0.23
Adjustments to income taxes		0.04				0.05				0.06				0.09				0.10
Non-GAAP Tax Expense	$	0.15			$	0.09			$	0.26			$	0.24			$	0.33

CONSOLIDATED CONDENSED BALANCE SHEET
unaudited; in thousands
						Sep. 26,				Mar. 28,				Sep. 28,
						2020				2020				2019
	ASSETS
	Current assets
		Cash and cash equivalents				$	247,536			$	292,119			$	221,937
		Marketable securities					36,641				22,008				22,563
		Accounts receivable, net					181,496				153,998				217,962
		Inventories					209,050				146,725				144,829
		Other current assets					34,508				35,346				44,729
		Total current Assets					709,231				650,196				652,020
	Long-term marketable securities						328,255				283,573				238,741
	Right-of-use lease assets						137,045				141,274				142,834
	Property and equipment, net						153,640				158,244				178,420
	Intangibles, net						27,898				34,430				54,780
	Goodwill						287,673				287,088				285,321
	Deferred tax asset						7,899				10,052				9,026
	Other assets						48,223				27,820				22,489
		Total assets				$	1,699,864			$	1,592,677			$	1,583,631
	LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities
		Accounts payable				$	99,105			$	78,412			$	109,374
		Accrued salaries and benefits					41,707				42,439				34,870
		Lease liability					13,994				13,580				13,751
		Other accrued liabilities					23,237				24,206				34,801
		Total current liabilities					178,043				158,637				192,796
	Non-current lease liability						128,570				129,312				133,105
	Non-current income taxes						66,503				71,143				76,847
	Other long-term liabilities						9,917				3,806				2,258
	Stockholders' equity:
		Capital stock					1,466,978				1,434,929				1,392,650
		Accumulated deficit					(155,260	)			(201,681	)			(213,274	)
		Accumulated other comprehensive income (loss)					5,113				(3,469	)			(751	)
		Total stockholders' equity					1,316,831				1,229,779				1,178,625
		Total liabilities and stockholders' equity				$	1,699,864			$	1,592,677			$	1,583,631
Prepared in accordance with Generally Accepted Accounting Principles