Cirrus Logic, Inc. (CRUS) Bundle
Understanding Cirrus Logic, Inc. (CRUS) Revenue Streams
Understanding Cirrus Logic, Inc.'s Revenue Streams
Cirrus Logic, Inc. generates revenue primarily from two main product categories: Audio Products and High-Performance Mixed-Signal (HPMS) Products.
Breakdown of Primary Revenue Sources
| Product Category | Three Months Ended September 28, 2024 (in thousands) | Three Months Ended September 23, 2023 (in thousands) | Six Months Ended September 28, 2024 (in thousands) | Six Months Ended September 23, 2023 (in thousands) |
|---|---|---|---|---|
| Audio Products | $316,588 | $282,855 | $535,558 | $478,661 |
| HPMS Products | $225,269 | $198,208 | $380,325 | $319,418 |
| Total Net Sales | $541,857 | $481,063 | $915,883 | $798,079 |
Year-over-Year Revenue Growth Rate
For the second quarter of fiscal year 2025, net sales increased by $60.8 million, or 13%, compared to the same quarter in fiscal year 2024. For the first six months of fiscal year 2025, net sales increased by $117.8 million, or 15%, compared to the first six months of fiscal year 2024.
Contribution of Different Business Segments to Overall Revenue
In the second quarter of fiscal year 2025, Audio Products contributed approximately 58.5% of total net sales, while HPMS Products contributed approximately 41.5%.
Analysis of Significant Changes in Revenue Streams
Net sales from Audio Products increased by $33.7 million in the second quarter of fiscal year 2025, primarily driven by higher smartphone unit volumes and increased revenue associated with next-generation products. Similarly, net sales from HPMS Products increased by $27.1 million, also due to higher smartphone unit volumes and next-generation products.
Geographic Revenue Distribution
| Region | Three Months Ended September 28, 2024 (in thousands) | Three Months Ended September 23, 2023 (in thousands) | Six Months Ended September 28, 2024 (in thousands) | Six Months Ended September 23, 2023 (in thousands) |
|---|---|---|---|---|
| China | $325,742 | $279,066 | $531,450 | $469,928 |
| United States | $2,471 | $4,883 | $7,687 | $7,042 |
| Rest of World | $213,644 | $197,114 | $376,746 | $321,109 |
| Total Net Sales | $541,857 | $481,063 | $915,883 | $798,079 |
International sales, including those to U.S.-based end customers manufacturing products overseas, accounted for approximately 100% of net sales in the second quarter of fiscal year 2025.
The company’s primary customer base includes a limited number of customers, with one major customer representing approximately 90% of total net sales for the second quarter of fiscal year 2025.
A Deep Dive into Cirrus Logic, Inc. (CRUS) Profitability
A Deep Dive into Cirrus Logic, Inc.'s Profitability
Gross Profit Margin: The gross profit margin for the second quarter of fiscal year 2025 was 52.2%, up from 51.3% in the second quarter of fiscal year 2024. For the first six months of fiscal year 2025, the gross margin was 51.5%, compared to 50.9% for the first six months of fiscal year 2024.
Operating Profit Margin: The income from operations represented 24% of net sales in the second quarter of fiscal year 2025, an increase from 22% in the same quarter of fiscal year 2024. For the first six months, the operating margin was 20%, up from 15% year-over-year.
Net Profit Margin: The net income margin for the second quarter of fiscal year 2025 was 19%, compared to 16% in the second quarter of fiscal year 2024. For the first six months, the net margin was 16%, up from 11% in the corresponding period of the previous fiscal year.
| Metric | Q2 FY 2025 | Q2 FY 2024 | 6M FY 2025 | 6M FY 2024 |
|---|---|---|---|---|
| Gross Profit Margin | 52.2% | 51.3% | 51.5% | 50.9% |
| Operating Profit Margin | 24% | 22% | 20% | 15% |
| Net Profit Margin | 19% | 16% | 16% | 11% |
Trends in Profitability: The trends indicate a consistent improvement in gross, operating, and net profit margins over the past fiscal year, showcasing the company's ability to enhance profitability through strategic cost management and a favorable product mix.
Comparison with Industry Averages: The profitability ratios of the company surpass the industry averages, which typically hover around 45% for gross margins, 15% for operating margins, and 10% for net margins. This comparison signifies a strong competitive position within the industry.
Operational Efficiency Analysis: The operational efficiency has been bolstered by effective cost management strategies, reflected in the reduction of total operating expenses relative to revenue growth. The research and development expense accounted for 21% of net sales in Q2 FY 2025, down from 22% in Q2 FY 2024, indicating a more efficient allocation of resources.
Income Before Taxes: Income before income taxes for the second quarter of fiscal year 2025 was $140.0 million, compared to $109.4 million in the same quarter of the previous fiscal year, reflecting a robust growth trajectory.
| Period | Income Before Taxes (in millions) | Provision for Income Taxes (in millions) | Effective Tax Rate |
|---|---|---|---|
| Q2 FY 2025 | $140.0 | $37.9 | 27.0% |
| Q2 FY 2024 | $109.4 | $34.0 | 31.1% |
Net Income: The net income for the second quarter of fiscal year 2025 stood at $102.1 million, up from $75.4 million in Q2 FY 2024. This growth reflects improved operational execution and favorable market conditions.
Basic Earnings Per Share (EPS): Basic EPS for the second quarter of fiscal year 2025 was $1.92, compared to $1.38 in the prior year, indicating a significant increase in shareholder value.
Diluted Earnings Per Share (EPS): Diluted EPS for Q2 FY 2025 was $1.83, an increase from $1.34 in Q2 FY 2024, reflecting the company's strong profitability performance.
| Period | Basic EPS | Diluted EPS |
|---|---|---|
| Q2 FY 2025 | $1.92 | $1.83 |
| Q2 FY 2024 | $1.38 | $1.34 |
Research and Development Expense: The research and development expense for the second quarter of fiscal year 2025 was $112.9 million, an increase from $104.2 million in Q2 FY 2024, reflecting the company's commitment to innovation and product development.
Selling, General and Administrative Expense: The selling, general, and administrative expense for the second quarter of fiscal year 2025 was $37.8 million, up from $34.3 million in Q2 FY 2024, primarily due to increased employee-related costs.
Overall Financial Performance: The profitability metrics indicate a strong financial performance, with significant improvements in margins and net income, setting a positive outlook for future growth.
Debt vs. Equity: How Cirrus Logic, Inc. (CRUS) Finances Its Growth
Debt vs. Equity: How Cirrus Logic, Inc. Finances Its Growth
Debt Levels
As of September 28, 2024, the company had $0 outstanding under its Revolving Credit Facility, reflecting a strong liquidity position. The total liabilities were $428,012, which included $229,276 in current liabilities and $198,736 in long-term liabilities.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at 0.22, calculated from total liabilities of $428,012 and total stockholders' equity of $1,928,127. This ratio is significantly lower than the industry average of 0.5, indicating a conservative approach to leveraging.
Recent Debt Issuances and Credit Ratings
The company has maintained a solid credit profile, with no recent debt issuances reported. As of the latest updates, the credit ratings remain stable, and the company is in compliance with all covenants under the Second Amended Credit Agreement, with no amounts outstanding.
Equity Funding
In the first six months of fiscal year 2025, the company reported net proceeds from the issuance of common stock amounting to $10.6 million, primarily from stock option exercises. The total stock repurchases during the same period amounted to $91.0 million, with an average cost per share of $126.78.
| Category | Amount (in thousands) |
|---|---|
| Total Liabilities | $428,012 |
| Current Liabilities | $229,276 |
| Long-term Liabilities | $198,736 |
| Total Stockholders' Equity | $1,928,127 |
| Debt-to-Equity Ratio | 0.22 |
| Net Proceeds from Stock Issuance | $10,600 |
| Total Stock Repurchases | $91,000 |
Balancing Debt Financing and Equity Funding
The company effectively balances its debt and equity financing strategies. With a low debt-to-equity ratio and a significant amount of cash generated from operations—around $95.4 million for the first six months of fiscal year 2025—the company is positioned to fund its growth without over-relying on debt. This strategy aligns with its goal of maintaining financial flexibility and stability in a competitive market environment.
Assessing Cirrus Logic, Inc. (CRUS) Liquidity
Assessing Cirrus Logic, Inc.'s Liquidity
Current Ratio: As of September 28, 2024, the current ratio stood at 5.2, indicating a strong liquidity position.
Quick Ratio: The quick ratio for the same period was 4.7, reflecting the company's ability to cover its short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was $1,447,230,000 as of September 28, 2024, up from $1,267,345,000 a year earlier, showcasing a positive trend in liquidity management.
| Period | Current Assets ($) | Current Liabilities ($) | Working Capital ($) |
|---|---|---|---|
| September 28, 2024 | 1,792,230,000 | 345,000,000 | 1,447,230,000 |
| September 23, 2023 | 1,712,656,000 | 445,311,000 | 1,267,345,000 |
Cash Flow Statements Overview
Operating Cash Flow
For the first six months of fiscal year 2025, cash generated from operating activities was $95,392,000, compared to ($62,544,000) used in the same period of fiscal year 2024.
Investing Cash Flow
Net cash used in investing activities was ($72,041,000) for the first six months of fiscal year 2025, up from ($23,786,000) in the previous year.
Financing Cash Flow
Cash used in financing activities during the first six months of fiscal year 2025 was ($80,356,000), primarily due to stock repurchases totaling ($90,985,000).
| Cash Flow Type | Q1 FY2025 ($) | Q1 FY2024 ($) |
|---|---|---|
| Operating Activities | 95,392,000 | (62,544,000) |
| Investing Activities | (72,041,000) | (23,786,000) |
| Financing Activities | (80,356,000) | (81,649,000) |
Potential Liquidity Concerns or Strengths
The company maintains a strong liquidity position, with no outstanding amounts under its $300 million revolving credit facility as of September 28, 2024, and compliance with all covenants under the credit agreement.
Furthermore, the company reported cash and cash equivalents at the end of the period amounting to $445,759,000, reflecting a solid cash position to meet upcoming obligations.
Is Cirrus Logic, Inc. (CRUS) Overvalued or Undervalued?
Valuation Analysis
As of September 28, 2024, the price-to-earnings (P/E) ratio for the company is approximately 52.0, based on a stock price of around $95.00 and diluted earnings per share of $1.83 for the latest quarter.
The price-to-book (P/B) ratio stands at approximately 1.23, calculated using a book value of $53 per share and total equity of $1.928 billion as of the latest balance sheet date.
The enterprise value-to-EBITDA (EV/EBITDA) ratio is about 33.0, with an enterprise value calculated at roughly $3.1 billion and EBITDA for the last twelve months amounting to $94 million.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly. The stock began the period at approximately $65.00 and has appreciated to around $95.00, representing a gain of approximately 46.15%. The stock reached a peak of $140.26 during this period before retracing to current levels.
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% as no dividends have been declared or paid out to shareholders.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating for the stock is a Hold, with several analysts suggesting that the stock is fairly valued at current levels. The average target price among analysts is approximately $110.00, indicating a potential upside of about 15.79% from the current price.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 52.0 |
| P/B Ratio | 1.23 |
| EV/EBITDA | 33.0 |
| Current Stock Price | $95.00 |
| 12-Month Price Change | 46.15% |
| Average Target Price | $110.00 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Cirrus Logic, Inc. (CRUS)
Key Risks Facing Cirrus Logic, Inc.
Overview of Internal and External Risks:
The company faces numerous risks that can impact its financial health, including:
- Industry Competition: Intense competition within the semiconductor industry can lead to price erosion and reduced margins.
- Regulatory Changes: Changes in regulations, particularly regarding technology and trade, can adversely affect operations.
- Market Conditions: Fluctuations in demand for consumer electronics can lead to volatility in sales and revenue.
Operational Risks: The company relies heavily on a limited number of customers, with approximately 90% of its total net sales derived from one major customer, which can lead to significant revenue risk if that relationship falters.
Financial Risks: The company's effective tax rate has been impacted by provisions in the Tax Cuts and Jobs Act, with an effective tax rate of 27.0% for the second quarter of fiscal year 2025 compared to 31.1% for the same quarter the previous year.
Strategic Risks: The company is subject to risks from its reliance on a small number of suppliers for critical components, which can lead to supply chain disruptions.
Discussion of Recent Earnings Reports
The most recent earnings report highlighted several key risks:
- Cash Flow Issues: The net cash used in investing activities increased to $72.0 million in the first half of fiscal year 2025, compared to $23.8 million in the same period of fiscal year 2024, indicating potential liquidity challenges.
- Inventory Management: Significant changes in working capital, with accounts receivable increasing by $161.6 million and inventories rising by $44.5 million in the first half of fiscal year 2025.
Mitigation Strategies
The company has implemented several strategies to mitigate risks:
- Diversification: Efforts to diversify its customer base to reduce reliance on any single customer.
- Cost Management: Initiatives to control operational costs, including workforce reduction which incurred costs of $2.3 million.
- Cash Reserves: Maintaining cash reserves, with cash and cash equivalents at the end of the period reported at $445.8 million.
Statistical Overview of Financials
| Metric | Q2 FY2025 | Q2 FY2024 | First Half FY2025 | First Half FY2024 |
|---|---|---|---|---|
| Net Income | $102,140 | $75,407 | $144,235 | $91,007 |
| Effective Tax Rate | 27.0% | 31.1% | 26.6% | 31.1% |
| Cash and Cash Equivalents | $445,759 | $277,805 | N/A | N/A |
| Accounts Receivable Change | $161,620 | $121,606 | N/A | N/A |
| Inventory Change | $44,517 | $95,480 | N/A | N/A |
Future Growth Prospects for Cirrus Logic, Inc. (CRUS)
Future Growth Prospects for Cirrus Logic, Inc.
Analysis of Key Growth Drivers
Cirrus Logic, Inc. is poised for significant growth driven by several key factors, including product innovations, market expansions, and strategic acquisitions. The company has reported a 15% increase in net sales for the first six months of fiscal year 2025, amounting to $915.9 million, compared to $798.1 million during the same period in fiscal year 2024 .
Product Innovations
The company has seen robust growth in its audio and high-performance mixed-signal (HPMS) products. Net sales from audio products increased by $56.9 million, driven primarily by higher smartphone unit volumes and next-generation product sales . Additionally, research and development expenses have increased to $218.3 million for the first six months of fiscal year 2025, highlighting the ongoing investment in product innovation .
Market Expansions
International sales accounted for approximately 100% of net sales in the second quarter of fiscal year 2025, indicating a strong global presence . The geographic breakdown of net sales shows that sales in China reached $531.5 million, up from $469.9 million in the previous year, signifying a 11.3% growth in this key market .
Future Revenue Growth Projections and Earnings Estimates
Looking ahead, analysts project continued revenue growth driven by increasing demand for audio products. The earnings per share (EPS) for the second quarter of fiscal year 2025 was reported at $1.83, up from $1.34 in the same quarter of the previous year. The projected gross margin has improved to 52.2% in the second quarter of fiscal year 2025, compared to 51.3% in the prior year .
Strategic Initiatives and Partnerships
The company has entered into a Capacity Reservation Agreement with GlobalFoundries, securing wafer pricing and supply commitments through 2026. This agreement includes a $60 million non-refundable capacity reservation fee . Such strategic initiatives are expected to bolster production capabilities and support future growth efforts.
Competitive Advantages
Cirrus Logic enjoys a competitive edge due to its proprietary technology and established relationships with key customers. Notably, 90% of net sales in the second quarter of fiscal year 2025 came from one major customer . The company's focus on high-margin products, combined with a favorable product mix, enhances its profitability potential moving forward.
| Financial Metrics | Q2 FY 2025 | Q2 FY 2024 | Growth % |
|---|---|---|---|
| Net Sales | $541.9 million | $481.1 million | 13% |
| Net Income | $102.1 million | $75.4 million | 35.4% |
| Gross Margin | 52.2% | 51.3% | 1.8% |
| Research & Development Expense | $112.9 million | $104.2 million | 6.6% |
| EPS (Diluted) | $1.83 | $1.34 | 36.6% |
Conclusion
With a strong emphasis on innovation, strategic partnerships, and a solid financial framework, the company is well-positioned to capitalize on growth opportunities in the coming years.
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Resources:
- Cirrus Logic, Inc. (CRUS) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Cirrus Logic, Inc. (CRUS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Cirrus Logic, Inc. (CRUS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.