Cirrus Logic Inc. (CRUS) reported strong third quarter fiscal 2015 results that beat the Zacks Consensus Estimate. The Zacks adjusted earnings per share of 89 cents were well ahead of the estimated 61 cents.
On a GAAP basis, reported earnings came in at 35 cents per share compared with 63 cents in the year-ago quarter.
Quarter Details
Total revenue for the third-quarter of fiscal 2015 not only increased 36.4% from the year-ago quarter to $298.6 million but also beat the Zacks Consensus Estimate of $276 million. The year-over-year increase was primarily due to higher revenues across its business segments.
As per revenue segments, Portable audio products revenues increased 39.4% year over year to $253.3 million, while Non-portable audio and other products revenues were up 21.9% year over year to $45.3 million.
Adjusted gross margin in the quarter was 43.8% versus 47.4% in the year-ago quarter. Gross margin declined primarily due to higher cost of sales.
Higher-than-expected adjusted operating expenses (up 53.8% year over year) led to a decline in operating margins. Moreover, as a percentage of revenues, operating expenses increased 296 basis points from the year-ago quarter to 26.2%, thereby impacting margins. Adjusted operating margin (excluding amortization and other one-time items but including stock-based compensation) came in at 19.9%, down from 24.3% in the year-ago quarter.
Adjusted net income (excluding amortization and other one-time items but including stock-based compensation) came in at $55.5 million compared with $52.1 million in the year-ago quarter.
On a GAAP basis, net income came in at $22.7 million, down from $41.5 million reported in the year-ago quarter.
Cirrus exited the quarter with cash and marketable securities of $172.7 million versus $134 million in the previous quarter. Long-term debt balance stood at $200.4 million at the end of the quarter.
Outlook
For the fourth quarter of fiscal 2015, the company expects revenues in the range of $220 million to $240 million, in line with the Zacks Consensus Estimate of $230 million at the mid-point. Apart from this, gross margin is expected between 45% and 47%. Combined research & development (R&D) and selling, general & administrative (SG&A) expenses are expected to range between $88 million and $92 million.
Our Take
Cirrus Logic reported better-than-expected third quarter fiscal 2015 results. The year-over-year comparisons were also encouraging. Margins were impacted due to higher-than-expected operating expenses. Moreover, the company provided modest fourth-quarter revenue guidance.
We remain cautious about the company as the current global economic downturn might affect its business potential, going forward. Moreover, the company faces competition from the likes of Texas Instruments Inc. (TXN) and STMicroelectronics (STM), which remains a headwind.
Nonetheless, continued investments in the audio segment are expected to have a positive impact in the long run. Additionally, synergies from acquisitions and expansion in the LED market continue to drive growth.
Cirrus Logic carries a Zacks Rank #2 (Buy). Investors can also consider Avago Technologies Limited (AVGO), which sports a Zacks Rank #1 (Strong Buy).
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