Dependence on Apple Pays Off for Cirrus Logic

Image source: Cirrus Logic.

Audio-chip developer Cirrus Logic (NASDAQ: CRUS) reported its fiscal third-quarter results after the market close on Feb. 1. The company exceeded its own guidance, with strong demand for its portable audio products driving year-over-year revenue growth in excess of 50%. Profits soared as well, and guidance called for slower but still solid revenue growth during the fourth quarter. Here's what investors need to know about Cirrus' third-quarter report.

Cirrus Logic results: The raw numbers


Q3 2017

Q3 2016

Year-Over-Year Growth


$523.0 million

$347.9 million










GAAP = generally accepted accounting principles; EPS = earnings per share. Data source: Cirrus Logic.

What happened with Cirrus Logic this quarter?

Cirrus exceeded its revenue guidance, driven by stronger-than-expected demand for certain portable audio products:

  • GAAP gross margin expanded by 140 basis points year over year to 48.8%, and GAAP operating margin jumped 10 percentage points to 28%.
  • GAAP operating expenses grew 7.9% year over year, far slower than revenue.
  • Cirrus generated 85% of its revenue from Apple, up from 78% during the second quarter and 68% during the first quarter.
  • Cirrus expanded the number of mid-tier devices sporting its chips, with several mid-tier smartphones launching during the quarter with Cirrus' smart codecs.
  • Shipments of new boosted amplifiers and hi-fi digital headset codecs accelerated during the quarter.

Cirrus expects a steep sequential decline in revenue during the fourth quarter due to seasonality:

  • Fourth-quarter revenue is expected in the range of $300 million to $340 million. At the midpoint, this represents year-over-year growth of 37.9%.
  • GAAP gross margin is expected to be between 48% and 50%.
  • Combined GAAP R&D (research and development) and SG&A (selling, general, and administrative) expenses are expected between $110 million and $116 million, compared to $109 million during the third quarter.

What management had to say

Cirrus Logic CEO Jason Rhode talked about the company's recent growth and its future opportunities:

In the company's letter to shareholders, management assured investors that it was working to diversify:

Looking forward

Cirrus' efforts to diversify haven't stopped Apple from dominating its customer list. The iPhone maker accounted for the vast majority of Cirrus' revenue during the third quarter, a blessing given the strong performance of the iPhone 7, but also a potential curse if iPhone sales don't remain as strong in the future.

It was a solid quarter in terms of revenue and profitability, and the company expects to continue growing at a blistering pace on a year-over-year basis during the fourth quarter. Revenue guidance fell a bit short of analyst expectations, but Cirrus will still finish out its fiscal year on a high note.

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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 Cirrus Logic. The Motley Fool has a disclosure policy.