Cirrus Beats Earnings, Margin Falls
Cirrus Logic Inc. (CRUS) reported first-quarter 2014 adjusted earnings of 47 cents per share, surpassing the Zacks Consensus Estimate of 39 cents.
Revenues
Total revenue for the first quarter of 2014 soared 56.7% from the year-ago quarter, while revenue tumble by 25.0% to $155.1 million. Cirrus mainly benefited from its core engineering competencies in its present market and came up with innovative solutions. The company has witnessed significant expansion in the custom and general market product portfolios, which include the portable audio and LED lighting.
The company witnessed strong customer interest in the products which enhance the audio and voice experience for mobile phones. As per revenue segments, Audio Product revenues surged 77.9% year over year to $143.7 million, while Energy product revenues came in at $11.5 million, down 37.2% year over year.
Operating Results
Reported gross margin in the quarter was 51.2% versus 54.0% in the year-ago quarter as a result of higher costs. Gross margin declined as the company was unable to control its cost of production.
Operating margin was 20.3% versus 10.6% in the year-ago quarter. The company’s total operating expenses increased 11.7% on a year-over-year basis. Higher operating expenses were mainly due to 14.5% and 6.3% year-over-year increases in selling, general and administrative (SG&A) expenses, and research and development (R&D), respectively.
Net income on a GAAP basis was $20.6 million or 31 cents per share compared with $6.9 million or 10 cents in the year-ago quarter.
Excluding the amortization of acquisition-related intangible assets but including stock-based compensation expense, non-GAAP net income for the fourth quarter was $31.1 million or 47 cents for the quarter compared with $5.0 million or 7 cents in the year-ago quarter.
Balance Sheet
Cash and short-term investments were $67.2 million versus $66.4 million in the previous quarter. The company has no long-term debt.
Outlook
For the second quarter of fiscal 2014, the company expects revenues in the range of $170 million to $190 million. Apart from this, gross margin is expected between 46.0% and 48.0%, while the combined R&D and SG&A expenses are expected to range between $49.0 million and $53.0 million.
Our Take
Cirrus posted decent first quarter results, with the bottom line comprehensively beating the Zacks Consensus Estimate. Although revenues were good for the quarter, gross margin took a hit due to higher cost, as the company could not control production expenses.
We remain cautious about the company as the current global economic downturn might affect its business potential, going forward. Although the company increased its revenue guidance, it would be difficult for the company to achieve it given the current business condition. Moreover, the company is faced with stiff competition from the likes of Texas Instruments Inc. (TXN), STMicroelectronics (STM) and ON Semiconductor (ONNN) are also causes of concern.
The company carries a Zacks Rank #5 (Strong Sell).
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