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Cirrus Logic (CRUS) Q2 Earnings & Revenues Top, Shares Up

Zacks Equity Research
Updated

Shares of Cirrus Logic, Inc. CRUS inched up 1.7% yesterday following its better-than-expected second-quarter 2018 results. Further, the company provided an encouraging revenue outlook.

The company reported non-GAAP earnings per share of $1.36 per share, which surpassed the Zacks Consensus Estimate of $1.19 per share and increased 2.3% year over year.

Quarter Details

Although total revenues decreased approximately 0.7% year over year to $425.5 million, it surpassed the Zacks Consensus Estimate of $410 million. Reported revenues outpaced the mid-point of management guided range $390-$430 million (mid-point $410 million). This can primarily be attributed to higher adoption of its products and strength in customer relationships.

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Segment wise, Portable audio product revenues (90% of the total revenues) came in at $381.8 million, down marginally 0.4% year over year. Meanwhile non-portable audio and other products (10%) decreased 3.2% year over year and came in at $43.8 million. Notably, Cirrus Logic generates a significant portion of its revenues from Apple Inc. AAPL.

Non-GAAP gross profit was $211.6 million, approximately flat on a year-over-year basis. Further, as a percentage of revenues, it expanded 30 basis points (bps) from the year-ago quarter to 49.7%.

Non-GAAP operating expenses increased 3.8% on a year-over-year basis to $96.8 million, primarily due to higher research and development expenses. As a percentage of revenues, the same increased 100 bps from the year-ago quarter to 22.8%. This in turn negatively impacted the operating results.

Cirrus Logic’s non-GAAP operating income was $114.8 million, down 3.2% year over year, primarily due to higher operating expenses. Also, operating margin contracted 100 bps on year-over-year basis and came in at 27%.

On a non-GAAP basis, Cirrus Logic reported net income of $89.9 million compared with $88.5 million reported in the year-ago quarter.

The company exited the quarter with cash, cash equivalents and marketable securities of $195.6 million compared with $450.9 million at the end of the previous quarter. Accounts receivables were $232.4 million compared with $119.9 million in the last quarter. Notably, it did not have any long-term debt during the quarter.

Guidance

Cirrus Logic provided guidance for third-quarter fiscal 2018. For the third quarter, the company expects revenues in the range of $510-$550 million (mid-point $530 million). The Zacks Consensus Estimate is pegged at $525.8 million. The company predicts GAAP gross margin to be in the range of 48-50%. Combined GAAP R&D and SG&A expenses are anticipated within $131 million and $137 million.

Share Price

Notably, shares of the company have gained 3.5% in the last one year, underperforming the industry’s gain of 39.9%.

Our Take

Cirrus Logic is a premier supplier of high-performance analog circuits and advanced mixed-signal chip solutions. It reported better-than-expected second-quarter results and provided encouraging third-quarter revenue guidance.

Continued investments in the audio segment have helped the company to come up with innovative products from time to time. This aids in attracting new customers and brings in additional revenues.

Additionally, expansion in the LED market continues to drive growth. Cirrus Logic generates a significant portion of revenues from Apple. This means that there is always an inherent risk of losing an Apple design contract, which will significantly hurt the company’s financials.

Moreover, sluggish economic growth, as well as IT spending may affect performance, going forward. Further, the company faces competition from the likes of Texas Instruments TXN and STMicroelectronics STM, which also remains a concern.

Currently, Cirrus Logic carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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