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Cirrus Logic Reports Q3 FY19 Revenue of $324.3 Million

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 third quarter fiscal year 2019, which ended Dec. 29, 2018, as well as the company’s current business outlook.

“Cirrus Logic reported revenue for the third quarter in line with our revised expectations as we experienced the effects of the turbulent macroeconomic environment and reduced demand for smartphones,” said Jason Rhode, president and chief executive officer. “Despite these challenges, we are encouraged to see continued broad-based interest for low-latency, low-power signal processing across a wide range of product categories. We are making considerable investments in technologies addressing audio, voice and other adjacent applications that we believe will fuel growth opportunities in the coming years.”

Reported Financial Results – Third Quarter FY19

  • Revenue of $324.3 million;
  • GAAP and non-GAAP gross margin of 50.3 percent and 50.4 percent, respectively;
  • GAAP operating expenses of $118.9 million and non-GAAP operating expenses of $100.3 million; and
  • GAAP earnings per share of $0.49 and non-GAAP earnings per share of $0.91.

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

Business Outlook – Fourth Quarter FY19

  • Revenue is expected to range between $200 million and $240 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 $119 million and $125 million, which includes approximately $12 million in share-based compensation and $7 million in amortization of acquired intangibles.

Share Repurchase Authorization

The company also announced that its Board of Directors recently authorized the repurchase of up to an additional $200 million of the company's common stock, in addition to the $50 million remaining from the Board’s previous share repurchase authorization in January 2018. The repurchases will be funded from working capital and anticipated cash from operations and may occur from time to time depending on a variety of factors, including general market and economic conditions and other corporate considerations. The share repurchase program is designed to comply with all applicable securities laws and may be suspended or discontinued at any time without notice.

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: 9569708).

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 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, along with estimates for the fourth 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 fourth quarter of fiscal year 2019, 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 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 EndedNine Months Ended
Dec. 29,Sep. 29,Dec. 30,Dec. 29,Dec. 30,
20182018201720182017
Q3'19Q2'19Q3'18Q3'19Q3'18
Portable audio products $ 288,640 $ 324,049 $ 438,650 $ 824,950 $ 1,101,099
Non-portable audio and other products 35,655 42,256 44,091 120,133 127,914
Net sales324,295366,305482,741945,0831,229,013
Cost of sales 161,115 181,186 247,653 472,225 620,927
Gross profit163,180185,119235,088472,858608,086
Gross margin50.3%50.5%48.7%50.0%49.5%
Research and development 88,575 96,381 96,978 282,888 270,888
Selling, general and administrative 30,364 33,160 34,604 96,308 95,504
Total operating expenses 118,939 129,541 131,582 379,196 366,392
Income from operations44,24155,578103,50693,662241,694
Interest income (expense), net 1,740 1,525 912 4,712 2,231
U.K. pension settlement (13,768 ) - - (13,768 ) -
Other income (expense), net 101 (378 ) 322 (67 ) (813 )
Income before income taxes32,31456,725104,74084,539243,112
Provision (benefit) for income taxes 2,381 (1,448 ) 70,961 705 93,121
Net income$29,933$58,173$33,779$83,834$149,991
Basic earnings per share: $ 0.50 $ 0.96 $ 0.53 $ 1.39 $ 2.36
Diluted earnings per share: $ 0.49 $ 0.93 $ 0.52 $ 1.35 $ 2.26
Weighted average number of shares:
Basic 59,511 60,472 63,453 60,482 63,655
Diluted 60,783 62,431 65,557 62,076 66,377
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 EndedNine Months Ended
Dec. 29,Sep. 29,Dec. 30,Dec. 29,Dec. 30,
20182018201720182017
Net Income ReconciliationQ3'19Q2'19Q3'18Q3'19Q3'18
GAAP Net Income$29,933$58,173$33,779$83,834$149,991
Amortization of acquisition intangibles 7,630 12,867 11,600 33,763 34,800
Stock based compensation expense 11,181 13,131 12,512 37,106 36,207
U.K. pension settlement 13,768 - - 13,768 -
Acquisition-related items - - - - (4,048 )
Adjustment to income taxes (7,003 ) (17,054 ) 46,273 (27,983 ) 31,756
Non-GAAP Net Income$55,509$67,117$104,164$140,488$248,706
Earnings Per Share Reconciliation
GAAP Diluted earnings per share$0.49$0.93$0.52$1.35$2.26
Effect of Amortization of acquisition intangibles 0.13 0.21 0.18 0.54 0.52
Effect of Stock based compensation expense 0.18 0.21 0.19 0.60 0.55
Effect of U.K. pension settlement 0.23 - - 0.22 -
Effect of Acquisition-related items - - - - (0.06 )
Effect of Adjustment to income taxes (0.12 ) (0.27 ) 0.70 (0.45 ) 0.48
Non-GAAP Diluted earnings per share$0.91$1.08$1.59$2.26$3.75
Operating Income Reconciliation
GAAP Operating Income$44,241$55,578$103,506$93,662$241,694
GAAP Operating Profit14%15%21%10%20%
Amortization of acquisition intangibles 7,630 12,867 11,600 33,763 34,800
Stock compensation expense - COGS 220 170 386 589 1,052
Stock compensation expense - R&D 6,761 6,834 6,995 20,845 19,289
Stock compensation expense - SG&A 4,200 6,127 5,131 15,672 15,866
Acquisition-related items - - - - (4,048 )
Non-GAAP Operating Income$63,052$81,576$127,618$164,531$308,653
Non-GAAP Operating Profit19%22%26%17%25%
Operating Expense Reconciliation
GAAP Operating Expenses$118,939$129,541$131,582$379,196$366,392
Amortization of acquisition intangibles (7,630 ) (12,867 ) (11,600 ) (33,763 ) (34,800 )
Stock compensation expense - R&D (6,761 ) (6,834 ) (6,995 ) (20,845 ) (19,289 )
Stock compensation expense - SG&A (4,200 ) (6,127 ) (5,131 ) (15,672 ) (15,866 )
Acquisition-related items - - - - 4,048
Non-GAAP Operating Expenses$100,348$103,713$107,856$308,916$300,485
Gross Margin/Profit Reconciliation
GAAP Gross Profit$163,180$185,119$235,088$472,858$608,086
GAAP Gross Margin50.3%50.5%48.7%50.0%49.5%
Stock compensation expense - COGS 220 170 386 589 1,052
Non-GAAP Gross Profit$163,400$185,289$235,474$473,447$609,138
Non-GAAP Gross Margin50.4%50.6%48.8%50.1%49.6%
Effective Tax Rate Reconciliation
GAAP Tax Expense (Benefit)$2,381$(1,448)$70,961$705$93,121
GAAP Effective Tax Rate7.4%-2.6%67.7%0.8%38.3%
Adjustments to income taxes 7,003 17,054 (46,273 ) 27,983 (31,756 )
Non-GAAP Tax Expense$9,384$15,606$24,688$28,688$61,365
Non-GAAP Effective Tax Rate14.5%18.9%19.2%17.0%19.8%
Tax Impact to EPS Reconciliation
GAAP Tax Expense (Benefit)$0.04$(0.02)$1.08$0.01$1.40
Adjustments to income taxes 0.12 0.27 (0.70 ) 0.45 (0.48 )
Non-GAAP Tax Expense$0.16$0.25$0.38$0.46$0.92

CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
unaudited; in thousands
Dec. 29,Mar. 31,Dec. 30,
201820182017
ASSETS
Current assets
Cash and cash equivalents $ 219,319 $ 235,604 $ 226,640
Marketable securities 59,793 26,397 12,822
Accounts receivable, net 142,135 100,801 217,619
Inventories 167,879 205,760 192,967
Other current assets 51,151 45,112 29,445
Total current Assets 640,277 613,674 679,493
Long-term marketable securities 165,063 172,499 173,717
Property and equipment, net 191,324 191,154 187,143
Intangibles, net 76,389 111,547 126,183
Goodwill 286,678 288,718 288,481
Deferred tax asset 13,131 14,716 16,467
Other assets 24,003 37,809 21,841
Total assets $ 1,396,865 $ 1,430,117 $ 1,493,325
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 108,022 $ 69,850 $ 116,274
Accrued salaries and benefits 23,566 35,721 29,543
Other accrued liabilities 38,175 34,638 29,903
Total current liabilities 169,763 140,209 175,720
Non-current income taxes 78,532 92,753 54,652
Other long-term liabilities 18,769 35,427 51,587
Stockholders' equity:
Capital stock 1,349,941 1,312,434 1,301,800
Accumulated deficit (217,871 ) (139,345 ) (92,402 )
Accumulated other comprehensive income (loss) (2,269 ) (11,361 ) 1,968
Total stockholders' equity 1,129,801 1,161,728 1,211,366
Total liabilities and stockholders' equity $ 1,396,865 $ 1,430,117 $ 1,493,325
Prepared in accordance with Generally Accepted Accounting Principles

Contacts:

Thurman K. Case
Chief Financial Officer
Cirrus Logic, Inc.
(512) 851-4125
Investor.Relations@cirrus.com

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