Cirrus Logic, Inc. (CRUS)

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Cirrus Logic Inc. (CRUS)

Q1 2010 Earnings Call

July 22, 2009 5:00 pm ET


Jason Rhode ā€“ President & CEO

Thurman Case - CFO


Vernon Essi - Needham & Company

Christopher Longiaru ā€“ Sidoti & Company



Welcome to the Cirrus Logic first quarter fiscal year 2010 financial results conference call. (Operator Instructions) I would now like to turn the conference over to Mr. Thurman Case, Chief Financial Officer. Mr. Case, you may now begin.

Thurman Case

Thank you and good afternoon. Joining me on today's call is Jason Rhode, Cirrus Logic's President and Chief Executive Officer.

Before we begin, you are reminded that during the course of this conference call, we will make projections and other forward-looking statements regarding and among other things, our estimates for our second quarter fiscal year 2010 revenues, gross margin levels, combined R&D and SG&A expenses, amortization of acquired intangibles and share-based compensation expense, as well as our estimates and assumptions regarding future demand for our products and expected revenue and market share growth.

These statements are predictions that are subject to risks and uncertainties that may cause actual results to differ materially from our projections. By providing this information, we undertake no obligation to update or revise any projections or forward-looking statements whether as a result of new developments or otherwise.

Please refer to our press release issued today which is available on our website, our latest Form 10-K for the fiscal year ending March 28, 2009, as well as our other filings made with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from our current expectations.

I also want to mention before we proceed that all financial numbers are prepared unless noted in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial information provided in today's call to the most directly comparable GAAP information is included in today's press release and in our website in the Investor section.

Non-GAAP financial information is not meant as a substitute for GAAP results, but is included because we believe such information is useful to our investors for informational and comparative purposes.

In addition, we use certain non-GAAP financial information internally to evaluate and manage our operations. As a note, the non-GAAP financial information we use may differ from that used by other companies. These non-GAAP measures should be considered in addition to and not as a substitute for the results prepared in accordance with GAAP.

Now Iā€™d like to discuss our results, net revenue in the June quarter was $37.5 million with sales of audio products generating $24.8 million and energy product sales generating $12.7 million. As you see in the tables we issued with our press release earlier, sales of audio products grew 13% year over year as we began ramping production in new design wins associated with our portable products as well as new designs featuring our multi channel CODECS.

Revenue for our energy products was down year over year as demand for our energy exploration products was more heavily than we anticipated combined with general softness across various other industrial product lines. Historical revenue break downs by product category are available on our website.

Gross margin for our June quarter was 52%, down from 56% in the quarter a year ago and down from 55% in the March quarter. This decrease in gross margin is largely the result of the strong year over year we are seeing in our lower margin audio business coupled with the continued significant in sales of our higher margin energy products.

We expect to driver higher revenues in energy products in the long-term while we continue to work to reduce costs in our ramping portable product line. Total GAAP operating expenses for the June quarter were $19.8 million compared to $24.2 million in the previous quarter. Non-GAAP operating expenses were approximately $20.9 million for the quarter compared to $20 million for the March quarter.

As I stated earlier reconciliations are available in our press release issued today as well as on our website.

The increase in non-GAAP operating expenses is primarily a result of targeted expenditures such as the tape out of our new 65-nm audio DSP. We expect that expenses will remain at these levels due to additional new tape outs coming in the fall and continued R&D investments.

The loss from operations on a GAAP basis was approximately $250,000 while the non-GAAP loss from operations was $1.3 million. We recorded GAAP net income for the quarter of $220,000 essentially zero cents per share based on 65.3 million diluted shares. In the same quarter a year ago we reported net income on a GAAP basis of $2.1 million or $0.03 per share based on 67.2 million diluted shares.

On a non-GAAP basis we recorded a net loss for the quarter of approximately $800,000 or $0.01 per share. In the June quarter a year ago we reported non-GAAP net income of $3.7 million or $0.06 per share.

We ended the June quarter with 484 employees, up from 479 employees at the end of March. Moving to our balance sheet we ended the [March] quarter with $14 million in net receivables up from $10.8 million at the end of the March quarter. Our days sales outstanding remains consistent and as we have stated before we will continue to actively manage our credit risk.

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