Cirrus Logic Returns to Growth

Image source: Cirrus Logic.

Audio-chip developer Cirrus Logic (NASDAQ: CRUS) reported its fiscal second-quarter results after the market close on Oct. 27. The company followed through on its previous guidance calling for substantial revenue growth, beating its own expectations and delivering earnings growth in excess of 100%. Guidance for the third quarter was also strong, with another double-digit revenue increase predicted. Here's what investors need to know.

Cirrus Logic results: The raw numbers


Q2 2017

Q2 2016

Growth (YOY)


$428.6 million

$306.8 million










Data source: Cirrus Q2 earnings release. YOY = year over year.

What happened with Cirrus this quarter?

Cirrus beat its own guidance for revenue, driven by the launch of new products.

  • GAAP gross margin expanded by 300 basis points year over year to 49.4%, and GAAP operating margin expanded nearly 10 percentage points to 24.2%.
  • GAAP operating expenses increased by just 9.8% year over year.
  • Cirrus' dependence on Apple grew during the quarter, with 78% of revenue derived from its largest customer. That's up from 68% during the first quarter.
  • Cirrus began volume shipments of its first digital headset solution and a new boosted amplifier during the quarter, and it began shipments of a smart codec at a leading customer aimed at mid-tier smartphones.

Cirrus expects to produce a strong third quarter.

  • Revenue is expected between $475 million and $515 million, up 42% year over year at the midpoint.
  • GAAP gross margin is expected between 47% and 49%.
  • Combined research and development and selling, general, and administrative expense spending is expected between $107 million and $113 million, compared to $107.7 million during the second quarter.

What management had to say

Cirrus CEO Jason Rhode summed up the quarter:

In the company's letter to shareholders, management laid out its general strategy going forward:

Looking forward

The launch of the iPhone 7 drove Cirrus' revenue higher during the second quarter. Despite the company's attempts to diversify, Apple remains the overwhelmingly dominant source of revenue for Cirrus. Progress was made on that front during the quarter, with the company talking up a smart codec aimed at mid-tier phones. But Cirrus remains highly susceptible to any weakness in iPhone sales.

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Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends AAPL. The Motley Fool has the following options: long January 2018 $90 calls on AAPL and short January 2018 $95 calls on AAPL. The Motley Fool recommends CRUS. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.