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Cirrus Logic's (CRUS) Q4 Earnings Beat Estimates, Up Y/Y

Zacks Equity Research

Cirrus Logic CRUS delivered better-than-expected fourth-quarter fiscal 2020 results. The company’s quarterly non-GAAP earnings per share of 68 cents outpaced the Zacks Consensus Estimate of 47 cents and surged approximately 84% year on year.

This year-over-year growth was mainly driven by higher revenues and reduced operating expenses. However, the company’s bottom-line results plummeted nearly 52% sequentially mainly due to lower revenues compared with the fiscal third-quarter figure.

Revenues

Total revenues of $279.3 million also surpassed the Zacks Consensus Estimate of $263 million and improved 16% year over year as well. Increased component shipments in smartphones and digital headsets, along with higher content in smartphones and tablets, primarily drove the top line.

However, on a sequential basis, revenues declined 25% due to reduction in unit volumes for certain components shipping in smartphones. Nonetheless, increased volumes of boosted amplifiers and haptic drivers in Android, along with the production ramp-up for a recently-introduced tablet partially offset the sequential decline in top-line results.

Segment wise, portable audio product revenues (89% of total revenues) came in at $249.7 million, up 21% year over year. However, non-portable audio and other products (11%) decreased 11% to $29.6 million. Sequentially, product and non-portable audio and other products segments’ revenues slid 19% and 1%, respectively.

Cirrus Logic, Inc. Price, Consensus and EPS Surprise

Cirrus Logic, Inc. Price, Consensus and EPS Surprise

Cirrus Logic, Inc. price-consensus-eps-surprise-chart | Cirrus Logic, Inc. Quote

Cirrus Logic’s largest customer, apparently Apple, accounted for 75% of its sales for the reported quarter.

Profits & Margins

Non-GAAP gross profit of $146.3 million climbed 17% on a year-over-year basis. Non-GAAP gross margin expanded 40 basis points (bps) to 52.4%, chiefly driven by supply-chain efficiencies. Favorable product mix and cost reductions on certain products were also positives.

However, non-GAAP gross profit and margin declined sequentially 26% and 40 bps, respectively. The sequential decline mainly reflects higher allocated supply-chain costs on lower unit volumes.

Cirrus Logic’s non-GAAP operating expenses dropped 4% year over year to $98.7 million. Operating expenses also declined 4% sequentially.

Non-GAAP operating income of $47.6 million too surged 116% year on year. However, it declined approximately 50% sequentially. Non-GAAP operating margin of 17.1% expanded 790 bps from the year-ago quarter but shrunk 820 bps from the fiscal third quarter.

Balance Sheet and Cash Flow

The company exited the fiscal fourth quarter with cash and marketable securities of $314.1 million compared with the $355.4 million witnessed at the end of the prior quarter.

Accounts receivables were $154 million compared with $175.9 million recorded in the fiscal third quarter. Notably, the company did not have any long-term debt as of Mar 28, 2020.

Cash flow from operations was $49.3 million in the fiscal fourth quarter and $295.8 million for the full fiscal year. During the reported quarter and fiscal 2020, the company bought back stocks worth $50 million and $120 million, respectively. As of Mar 28, 2020, Cirrus Logic has $120 million remaining under its share-repurchase authorization.

Outlook

Cirrus Logic believes it is well positioned to weather the coronavirus crisis and emerge stronger over the long run. The audio chip maker stated that with roughly $600 million in cash and no debt obligations, it is well poised to sail through this turbulence and keep banking on its growth opportunities.

The company didn’t provide any specific data regarding the pandemic’s impact on its quarterly results. However, it stated that its supply chain remained robust during these difficult times. Cirrus Logic noted that TSMC and Global Foundries are its main suppliers for wafers and both companies consistently met the production schedules despite the challenges. Therefore, the company did not expect any adverse impact on its supply chain.

Nonetheless, Cirrus Logic projects the pandemic to adversely impact smartphone volumes in the near term, thereby denting its operating results.

For the first quarter of fiscal 2021, the company projects revenues between $200 million and $250 million, indicating a decline of 19% sequentially and 5% year over year at the mid-point. Moreover, revenue guidance at the mid-point is way below the Zacks Consensus Estimate of $248 million.

Zacks Rank and Key Picks

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

Better-ranked stocks in the broader technology sector include Zoom Video Communications, Inc. ZM, Pixelworks, Inc. PXLW and InterDigital, Inc. IDCC, each flaunting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Pixelworks and InterDigital is currently pegged at 26.6%, 20%, and 15%, respectively.

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