CRUS earnings call transcript, November 4, 2026

Ladies and gentlemen, thank you for standing by. Welcome. Welcome to the CirrusLogic second quarter fiscal year 2027 financial results call.

Thank you and good afternoon.

Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer, and Jeff Wollard, our Chief Financial Officer. Today, at approximately 4 p.m. Eastern Time, we announced our financial results for the second quarter. For fiscal year, 2027. The shareholder letter discussing our financial results, the earnings press release, and the webcast of this Q&A session are all available at the company's investor relations website. This call will feature questions from the analysts covering our company. Additionally, the results and guidance we will discuss on this call will include non-GAAP financial measures that exclude certain items. Reconciliations of these non-GAAP measures for the most... ...directly comparable GAAP measures are included in our earnings release and are all available on the company's investor relations website. Please note that during this session, we may make projections and other forward-looking statements that are... ...subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward-looking... ...statements, whether as a result of new developments or otherwise. Please refer to the press release in the shareholder letter issued today, which are available on the SarasLogic website. The latest Form 10-K, as well as other corporate...

...filings registered with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations. Now I'd like to turn the call over to John.

Thank you, Chelsea, and welcome to everyone joining today's call. As you have seen in the press release, Cirrus Logic delivered solid results for the September quarter with revenue of $559.5 million, up 22% security. Sequentially, as well as gap and non-gap earnings per share of $2.23 and $2.70, respectively. Jeff will walk through the financials and our outlook for the December quarter in a few minutes. Before that, I'll... I'll cover what we've accomplished since August, a period that included important tape-outs, the first production orders for new industrial products, and an acquisition. I'll discuss progress on each of our three strategic priorities in turn. We are leading in smartphone audio, growing our high-performance Mixed Signal, or HPMS, content in smartphones and related devices, and expanding into new markets and applications. Starting with smartphone audio, this fall, our latest... ...generation custom-boosted amplifier and 22-nanometer smart codec were again featured in newly-launched flagship devices, and demand for both remained strong through the quarter. Beyond audio performance and power efficiency, these components enable considerable flexibility in system design. History is a good guide to their anticipated longevity. The prior generations of our codec and amplifiers shipped in flagship devices for five and six years. respectively. And we expect this generation to follow a similar path, giving us durable revenue and good visibility in our flagship business. Looking ahead, we remain closely engaged with our customer on future audio innovation.

financial results, as well as the outlook.

Thank you, John.

Good afternoon, everyone. I'll now walk through our Q2 financial results and provide guidance for Q3. In Q2 fiscal 2027... ...we delivered revenue of $559.5 million, which was above the midpoint of our guidance range. Revenue was up 22% sequentially and flat year-over-year. The sequential increase reflects higher smartphone... ...volumes in increased content shipping into smartphones, and to a lesser extent, growth in custom components in non-smartphone applications. This was partially offset by a decline in PCs, and to a lesser extent... ...a reduction in revenue from certain general market components that are coming to their end of life. On a year-over-year basis, an increase in smartphone unit volumes and higher content shipping into smartphones was offset... ...by lower general market sales and previously anticipated pricing reductions. Turning to gross profit and gross margin. Non-GAAP gross profit in the September quarter was $300.8 million... ...and non-GAAP gross margin was 53.8 percent. On a sequential basis, the increase in gross margin reflects lower waiver costs, largely driven by the temporary benefit from waivers purchased under prior agreements. ...with global foundries that we discussed last quarter, as well as lower production ramp expenses. On a year-over-year basis, an increase in gross margin was largely due to a favorable product mix, lower inventory... ...reserves and that same temporary wafer benefit. This was partially offset by higher freight costs and supply chain costs. Now I'll turn to operating expenses. Our non-GAAP operating expense...

...for the second quarter was $141.6 million. On a sequential basis, OPEX was up $6.2 million, primarily driven by higher product development expenses and variable compensation. Within employee-related expenses... ...higher salaries from increased headcount were offset by a seasonal reduction in benefit costs. On a year-over-year basis, operating expense was up $13.9 million, primarily due to higher employee-related expenses. ...product development expenses, and R&D development expenses. This was partially offset by lower variable compensation. These increases are consistent with our previously communicated plan to increase R&D investment in fiscal... ...to support the range of opportunities across our business. Non-GAAP operating income for the quarter was $159.2 million, or 28.5% of revenue. Turning now to taxes. For the September quarter, our non-GAAP tax rate was 17.5%. And lastly, on the P&L, non-GAAP net income was $139.2 million, resulting in... earnings per share of $2.70. Let me now turn to the balance sheet. Our balance sheet continues to be strong, and we ended the September quarter with $1.1 billion in cash and investments. Our ending cash and investments balance was down $90.9. million from the prior quarter as share repurchases more than offset cash generated from operations. We continue to have no debt outstanding. Inventory at the end of the second quarter was $271.2.

million up from $262.7 million in the prior quarter. Days of inventory were down sequentially and we ended the quarter with approximately 96 days of inventory. Turning to cash flow. Cash flow from operations was $50.9 million in the September quarter and capex was $8.6 million, resulting in non-gap free cash flow margin of 8%. For the trailing 12-month period. Cash flow from operations was $557.3 million and capex was $31.7 million. This resulted in a non-gap free cash flow margin of 26%. On share buybacks, in Q2, we utilized $125.5 million to repurchase 991,983 shares of common stock at an average price of $126.51. At the end of Q2, fiscal 2027, the company had $114.1 million remaining on its share repurchase authorization. The Board of Directors recently authorized the company to repurchase up to an additional $500 million. of Cirrus Logic common stock. Subsequent to Q2, fiscal year 27, the company utilized $18.6 million to repurchase 170,757 shares. an average price of $108.67 under a Rule 10B-5-1 trading plan. Now on to guidance. For Q3, fiscal 2027, we expect revenue in the range of 510. to $570 million. GAP gross margin is expected to range from 51% to 53%. Non-GAP operating expense is expected to range from $152 to $158 million. Additionally, as we indicated previously, given the breadth of opportunities ahead of us, we expect our full fiscal year 2027 operating expenses to increase as we invest in R&D.

The fiscal 2027 non-GAAP effective tax rate is expected to range from 16% to 18%.

Before we turn to Q&A, I'd like to address a number of investor questions that we received in advance. of this call related to our October 13th filing on Synaptics. We made acquisition proposals for Synaptics and are not currently pursuing a transaction. We pursued it because the strategic logic was strong. Pairing our mixed signal audio and power expertise with Synaptics connectivity and sensing would have built a broader edge platform and diversified our customer and end market mix. We also went in with a clear view of value and we held to it. We put forward what. What we believed was a compelling proposal for Synaptic shareholders that was also right for Cirrus Logic shareholders. When the price moved beyond that, we stepped back. Two things should be clear. First, inorganic growth is a real part of our strategy and we will keep. evaluating opportunities that strengthen our platform and broaden our markets. Second, we will stay disciplined. Our balance sheet and cash generation give us flexibility. We intend to use it in ways that create value for our shareholders. Finally, I would also like to note that while we understand there is an intense interest related to our largest customer, in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship. With that...

Let me turn the call over to Chelsea to start the Q&A session.

Thanks, Jeff.

We will now begin. the Q&A session. As stated, please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

As a reminder, if you would like to ask a question, please press star one to raise your hand.

Wait, Chelsea. Oh, actually, sorry. Just jumped in the queue. And with that, your next question comes from the line of Christopher Rowland with Susquehanna. Your line is open. Please go ahead.

This concludes today's call.

Thank you for attending.

You may now disconnect.