CIRRUS LOGIC INC

Previous wording

“project,” “believe,” “goals,” “estimates,” “intend,” and variations of these types of words and similar expressions which are intended to identify these forward-looking statements. In addition, any statements that refer to our plans, expectations, strategies or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and readers should not place undue reliance on such statements. We undertake no obligation, and expressly disclaim any duty, to revise or update publicly any forward-looking statement for any reason.

Current wording

This Quarterly Report on Form 10-Q including Management’s Discussion and Analysis of Financial Condition and Results of Operations and certain information incorporated herein by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). These forward-looking statements are based on expectations, estimates, forecasts and projections and the beliefs and assumptions of our management as of the filing of this Form 10-Q. In some cases, forward-looking statements are identified by words such as “expect,” “anticipate,” “target,” “project,” “believe,” “goals,” “estimates,” “intend,” and variations of these types of words and similar expressions which are intended to identify these forward-looking statements. In addition, any statements that refer to our plans, expectations, strategies or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and readers should not place undue reliance on such statements. We undertake no obligation, and expressly disclaim any duty, to revise or update publicly any forward-looking statement for any reason.

Previous wording

The Company remains committed to our three-pronged strategy for growing our business: first, maintaining our leadership position in smartphone audio; second, increasing HPMS content in smartphones; and third, leveraging our strength in audio and HPMS to expand into additional applications and markets with new and existing components. During the third quarter of fiscal year 2024, we continued to execute on these strategic initiatives that we expect will drive additional diversification of our portfolio and expand our addressable market.

Current wording

The Company remains committed to our three-pronged strategy for growing our business: first, maintaining our leadership position in smartphone audio; second, increasing HPMS content in smartphones; and third, leveraging our strength in audio and HPMS to expand into additional applications and markets with new and existing components. During the first quarter of fiscal year 2025, we continued to execute on these strategic initiatives, as we began ramping our next-generation custom audio components, saw positive design momentum in laptops, and introduced new general market products.

Previous wording

Our discussion and analysis of the Company’s financial condition and results of operations are based upon the unaudited consolidated condensed financial statements included in this report, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts. We evaluate the estimates on an on-going basis. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Current wording

Our discussion and analysis of the Company’s financial condition and results of operations are based upon the unaudited consolidated condensed financial statements included in this report, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts. We evaluate the estimates on an ongoing basis. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Previous wording

There have been no significant changes during the three and nine months ended December 30, 2023, to the information provided under the headings “Critical Accounting Estimates” and "Summary of Significant Accounting Policies" included in our fiscal year 2023 Annual Report on Form 10-K for the fiscal year ended March 25, 2023.

Current wording

There have been no significant changes during the three months ended June 29, 2024, to the information provided under the headings “Critical Accounting Estimates” and "Summary of Significant Accounting Policies" included in our fiscal year 2024 Annual Report on Form 10-K for the fiscal year ended March 30, 2024.

Previous wording

Our fiscal year is the 52- or 53-week period ending on the last Saturday in March. Fiscal year 2024 is a 53-week fiscal year, including a 14-week fiscal third quarter. Fiscal year 2023 was a 52-week fiscal year.

Current wording

Our fiscal year is the 52- or 53-week period ending on the last Saturday in March. Fiscal year 2025 is a 52-week fiscal year. Fiscal year 2024 was a 53-week fiscal year, including a 14-week fiscal third quarter.

Previous wording

The following table summarizes the results of our operations for the third quarter and first nine months of fiscal years 2024 and 2023, respectively, as a percentage of net sales. All percentage amounts were calculated using the underlying data in thousands, unaudited:

Current wording

The following table summarizes the results of our operations for the first quarter of fiscal years 2025 and 2024, respectively, as a percentage of net sales. All percentage amounts were calculated using the underlying data in thousands, unaudited:

Previous wording

Net sales for the third quarter of fiscal year 2024 increased $28.4 million, or 5 percent, to $619.0 million from $590.6 million in the third quarter of fiscal year 2023. Net sales from our audio products increased $31.3 million, primarily driven by higher smartphone unit volumes and an additional week of revenue in the quarter associated with the 53-week year, partially offset by continued weakness in sales of general market products other than smartphones. Net sales from HPMS products decreased $2.9 million for the quarter versus the third quarter of fiscal year 2023, primarily due to a decline in general market sales excluding smartphones.

Current wording

Net sales for the first quarter of fiscal year 2025 increased $57.0 million, or 18 percent, to $374.0 million from $317.0 million in the first quarter of fiscal year 2024. Net sales from our audio products increased $23.2 million, primarily driven by higher smartphone unit volumes. Net sales from HPMS products increased $33.8 million for the quarter versus the first quarter of fiscal year 2024, primarily due to higher volumes and content gains in smartphones, partially offset by continued lower general market sales.

Previous wording

International sales, including sales to U.S.-based end customers that manufacture products through contract manufacturers or plants located overseas, were approximately 99 percent and 96 percent of net sales for the third quarters of fiscal years 2024 and 2023, respectively, and 99 percent and 97 percent for the first nine months of fiscal years 2024 and 2023, respectively. Our sales are denominated primarily in U.S. dollars.

Current wording

International sales, including sales to U.S.-based end customers that manufacture products through contract manufacturers or plants located overseas, were approximately 99 percent of net sales for the first quarters of fiscal years 2025 and 2024, respectively. Our sales are denominated primarily in U.S. dollars.

Previous wording

Since the components we produce are largely proprietary, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may purchase our products directly from us, through distributors, or third-party manufacturers contracted to produce their designs. For the third quarter of fiscal years 2024 and 2023, our ten largest end customers represented approximately 96 percent and 94 percent of our net sales, respectively, and 95 percent and 92 percent of our net sales for the first nine months of fiscal years 2024 and 2023, respectively.

Current wording

Since the components we produce are largely proprietary, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may purchase our products directly from us, through distributors, or third-party manufacturers contracted to produce their designs. For the first quarter of fiscal years 2025 and 2024, our ten largest end customers represented approximately 96 percent and 93 percent, respectively, of our net sales.

Previous wording

We had one end customer, Apple Inc., that purchased through multiple contract manufacturers and represented approximately 89 percent and 88 percent of the Company’s total net sales for the third quarter of fiscal years 2024 and 2023, respectively, and 87 percent and 83 percent for the first nine months of fiscal years 2024 and 2023, respectively.

Current wording

We had one end customer, Apple Inc., that purchased through multiple contract manufacturers and represented approximately 88 percent and 83 percent of the Company’s total net sales for the first quarter of fiscal years 2025 and 2024, respectively.

Previous wording

No other end customer or distributor represented more than 10 percent of net sales for the three and nine months ended December 30, 2023 or December 24, 2022.

Current wording

No other end customer or distributor represented more than 10 percent of net sales for the three months ended June 29, 2024 or June 24, 2023.

Previous wording

Research and development expense for the third quarter of fiscal year 2024 was $112.7 million, a decrease of $5.4 million, from $118.1 million in the third quarter of fiscal year 2023. Significant drivers of the decrease included reduced amortization of acquisition intangibles expense, increased R&D incentives, and reduced acquisition-related costs, partially offset by higher employee-related, stock-based compensation and facilities-related expenses for the quarter.

Current wording

Research and development expense for the first quarter of fiscal year 2025 was $105.4 million, a decrease of $0.9 million, from $106.2 million in the first quarter of fiscal year 2024. Significant drivers of the decrease included reduced acquisition-related costs and product development costs, offset by increased variable compensation and facilities-related expenses for the quarter.

Previous wording

The Company reported interest income of $5.1 million and $13.9 million, for the three and nine months ended December 30, 2023, respectively and $3.0 million and $5.0 million for the three and nine months ended December 24, 2022, respectively. Interest income increased in the current period due to higher yields on combined average cash, cash equivalents and marketable securities balances, compared to the prior period.

Current wording

The Company reported interest income of $8.4 million and $4.8 million, for the three months ended June 29, 2024 and June 24, 2023, respectively. Interest income increased in the current period due to higher yields on higher combined average cash, cash equivalents and marketable securities balances, compared to the prior period.

Previous wording

The Company reported interest expense of $0.2 million and $0.7 million for the three and nine months ended December 30, 2023, respectively and $0.2 million and $0.7 million for the three and nine months ended December 24, 2022, respectively. Interest expense consists primarily of commitment fees associated with the Company's Revolving Credit Facility (see Note 8 - Revolving Credit Facility).

Current wording

The Company reported interest expense of $0.2 million for each of the three months ended June 29, 2024 and June 24, 2023. Interest expense consists primarily of commitment fees associated with the Company's Revolving Credit Facility (see Note 8 - Revolving Credit Facility of the Notes to the Consolidated Condensed Financial Statements).

Previous wording

For the three and nine months ended December 30, 2023, the Company reported other expense of $0.3 million and $0.0 million, respectively, and $3.7 million and $2.9 million in other expense for the three and nine months ended December 24, 2022, respectively. This activity primarily related to remeasurement on foreign currency denominated monetary assets and liabilities and an equity investment write down in fiscal year 2023.

Current wording

For the three months ended June 29, 2024 and June 24, 2023, the Company reported other income of $1.6 million and $0.4 million, respectively. This activity primarily related to non-investment related income and remeasurement on foreign currency denominated monetary assets and liabilities.

Previous wording

Our income tax expense for the third quarter of fiscal year 2024 was $33.4 million compared to $37.0 million for the third quarter of fiscal year 2023, resulting in effective tax rates of 19.4 percent and 26.3 percent, respectively. Our income tax expense was $74.5 million and $83.0 million for the first nine months of fiscal years 2024 and 2023, respectively, resulting in effective tax rates of 24.5 percent and 26.5 percent, respectively. Effective tax rates for all periods presented were unfavorably impacted by a provision in the Tax Cuts and Jobs Act of 2017 that requires research and development ("R&D") expenditures incurred in tax years beginning after December 31, 2021 to be capitalized and amortized ratably over five or fifteen years depending on the location in which the research activities are conducted, resulting in higher global intangible low-taxed income ("GILTI"), which is treated as a period cost. In addition, our effective tax rates for all periods presented were unfavorably impacted by U.S. tax rules related to refundable tax credits, including R&D expenditure credits available to us in the United Kingdom, that reduce the amount of foreign tax credits available to offset GILTI. Our effective tax rates for the third quarter of fiscal year 2023 and the first nine months of fiscal year 2024 and 2023 were higher than the federal statutory rate primarily due to these two items, partially offset by the effect of income earned in certain foreign jurisdictions that is taxed below the federal statutory rate. Our effective tax rate for the third quarter of fiscal year 2024 was lower than the federal statutory rate due to tax benefits recognized for decreased GILTI inclusions in our fiscal year 2023 U.S. tax return and fiscal year 2024 estimated effective tax rate resulting from a change in capitalized R&D expenditures.

Current wording

Our income tax expense for the first quarter of fiscal year 2025 was $14.5 million compared to $7.2 million for the first quarter of fiscal year 2024, resulting in effective tax rates of 25.6 percent and 31.5 percent, respectively. Effective tax rates for all periods shown were unfavorably impacted by a provision in the Tax Cuts and Jobs Act of 2017 that requires R&D expenditures incurred in tax years beginning after December 31, 2021 to be capitalized and amortized ratably over five or fifteen years depending on the location in which the research activities are conducted, resulting in higher GILTI, which is treated as a period cost. In addition, our effective tax rates were unfavorably impacted by U.S. tax rules related to refundable tax credits, including R&D expenditure credits available to us in the United Kingdom, that reduce the amount of foreign tax credits available to offset GILTI. Our effective tax rates for the first quarter of fiscal year 2025 and 2024 were higher than the federal statutory rate primarily due to these two items, partially offset by the effect of income earned in certain foreign jurisdictions that is taxed below the federal statutory rate.

Previous wording

Cash generated from our operating activities is net income adjusted for certain non-cash items and changes in working capital. Cash generated from operations was $251.1 million for the first nine months of fiscal year 2024 versus $291.3 million generated for the corresponding period of fiscal year 2023. The cash flow from operations during the first nine months of fiscal year 2024 was related to the cash components of our net income and an $87.4 million unfavorable change in working capital, primarily as a result of an increase in accounts receivables (see Note 6) and inventory and decreases in accounts payable and other accrued liabilities and acquisition-related liabilities, partially offset by prepaid wafer usage (related to the Capacity Reservation Agreement) beginning in the second quarter of fiscal year 2024. The Company anticipates inventory to remain at increased levels during fiscal year 2024 as we balance product demand and wafer purchase commitments. The cash flow from operations during the corresponding period of fiscal year 2023 was related to the cash components of our net income and a $60.3 million unfavorable change in working capital, primarily as a result of an increase in accounts receivables and inventory and a decrease in accounts payable and other liabilities.

Current wording

Cash used in or generated from our operating activities is net income adjusted for certain non-cash items and changes in working capital. Cash generated from operations was $87.2 million for the first three months of fiscal year 2025 versus $39.8 million used during the corresponding period of fiscal year 2024. The cash flow from operations during the first three months of fiscal year 2025 was related to the cash components of our net income and a $16.1 million favorable change in working capital, primarily as a result of increases in income taxes payable, accounts payable and other accrued liabilities and prepaid wafer usage (related to the Capacity Reservation Agreement), partially offset by increases in accounts receivables. The cash flow used in operations during the corresponding period of fiscal year 2024 was related to the cash components of our net income and an $82.0 million unfavorable change in working capital, primarily as a result of an increase in inventory and accounts receivables, partially offset by an increase in income taxes payable.

Previous wording

Net cash used in investing activities was $60.8 million during the first nine months of fiscal year 2024 versus $24.2 million during the first nine months of fiscal year 2023. The cash used in investing activities in the first nine months of fiscal year 2024 was related to capital expenditures of $30.7 million and net purchases of marketable securities of $30.1 million. The cash used in investing activities in the corresponding period in fiscal year 2023 was related to capital expenditures and technology investments of $25.1 million, partially offset by net sales of marketable securities of $0.9 million.

Current wording

Net cash used in investing activities was $66.6 million during the first three months of fiscal year 2025 versus $14.6 million during the first three months of fiscal year 2024. The cash used in investing activities in the first three months of fiscal year 2025 was related to capital expenditures of $10.1 million and net purchases of marketable securities of $56.4 million. The cash used in investing activities in the corresponding period in fiscal year 2024 was related to capital expenditures and technology investments of $12.3 million and net purchases of marketable securities of $2.3 million.

Previous wording

Net cash used in financing activities was $152.2 million during the first nine months of fiscal year 2024 and was primarily associated with stock repurchases for the period of $136.0 million. The cash used in financing activities during the first nine months of fiscal year 2023 of $202.4 million was primarily associated with stock repurchases during the period of $156.4 million and the payment of the Acquisition-related holdback of $30.9 million.

Current wording

Net cash used in financing activities was $32.0 million during the first three months of fiscal year 2025 and was primarily associated with stock repurchases for the period of $41.0 million, partially offset by $9.0 million in net proceeds from the issuance of common stock, primarily related to stock option exercises. The cash used in financing activities during the first three months of fiscal year 2024 of $39.0 million was primarily associated with stock repurchases during the period of $38.5 million.

Previous wording

On March 20, 2023, the Company, entered into the First Amendment (the "Amendment") to its Second Amended Credit Agreement, with the lending institutions party thereto and Wells Fargo Bank, National Association, as administrative agent. The Amendment updates the benchmark interest rate provisions to replace the London interbank offered rate ("LIBOR") with the forward-looking secured overnight financing rate ("Term SOFR"), for the purposes of calculating interest under the terms of the Second Amended Credit Agreement.

Current wording

On March 20, 2023, the Company, entered into the First Amendment (the "Amendment") to its Second Amended Credit Agreement, with the lending institutions party thereto and Wells Fargo Bank, National Association, as administrative agent. The Amendment updates the benchmark interest rate provisions to replace LIBOR with Term SOFR, for the purposes of calculating interest under the terms of the Second Amended Credit Agreement.