Cirrus Logic, Inc. (CRUS) Earnings

Management highlights

- **Long-Term Strategic Growth Pillars** • Maintain strong leadership in the flagship smartphone audio business: continued strong demand for custom boosted amplifiers and smart codecs, supported by a strong product cycle from the company's largest customer, with expected multi-generation product shipments providing solid long-term revenue visibility. • Expand high-performance mixed-signal (HPMS) content in smartphones and edge products: ongoing progress in camera controllers (next-generation product roadmap in execution), battery and power solutions (Smart Power IC for 3D sensing development remains on schedule, with additional customer collaboration on new power/battery products to expand content over time). Management notes the opportunity pipeline for core audio and HPMS over the next few years is the strongest in the company's history. • Leverage audio and HPMS expertise to grow into new markets: - PC is the largest near-term new market opportunity: while 2027 fiscal year PC growth expectations have been lowered due to constrained key platform supply, broader market component shortages/pricing pressure, and delayed new OEM model introductions, management characterizes these as timing impacts, not fundamental changes. Customer engagement, design wins, and competitive position remain strong; the company's low-power smart codec for AI PC always-on voice wake word detection saw strong customer interest, with designs targeting next calendar year, and Cirrus Logic amplifiers/codecs will ship on upcoming OEM PCs based on NVIDIA's RTX Spark platform later this year. - General markets (professional audio, automotive, industrial, imaging): completed tape out of a new high-performance analog front end family for smart meters, with sampling planned for the September quarter. This product enables higher accuracy energy measurement, on-chip power quality analysis and fault detection, and reduces customer system cost; the underlying technology can be extended to adjacent applications including energy storage, data center DC metrology, EV charging, and grid monitoring. - **Operational Updates** • Signed a new capacity reservation and wafer supply agreement with GlobalFoundries, securing dedicated wafer capacity and pricing for calendar 2027 and 2028. The company continues collaboration on next-generation process technology and progress toward manufacturing products at GlobalFoundries' Malta, New York facility (US-based production). • Balance sheet remains strong: ended the quarter with $1.2 billion in cash and investments, no outstanding debt, and inventory of $262.7 million (~110 days of inventory). • Repurchased $34.5 million of common stock in Q1 FY27, with an additional $50.5 million in repurchases completed after quarter end, leaving $239.6 million remaining on the share repurchase authorization.

Guidance

- For Q2 FY27, management expects revenue in the range of $510 million to $570 million, with GAAP gross margin expected between 52% and 54%. • Q2 gross margin will receive a temporary one-time benefit from wafers purchased under prior favorable pricing agreements with GlobalFoundries, which are expected to largely sell through in Q2, after which gross margin will normalize. - Non-GAAP operating expense for Q2 FY27 is projected to range from $140 million to $146 million. - Full year fiscal 27 non-GAAP operating expenses are expected to increase as the company invests in R&D to support its broad pipeline of opportunities. - The full year fiscal 27 non-GAAP effective tax rate is expected to range from 16% to 18%. - Seasonality across 2027 fiscal year quarters is expected to be much tighter than historical averages.

Segment performance

The transcript does not break out financial performance by individual product segments with separate absolute revenue figures or revenue contribution percentages. Aggregate company-wide results for Q1 FY27 are: total revenue of $460 million (up 2% sequentially, 13% year-over-year), non-GAAP gross profit of $242.1 million (52.7% gross margin), non-GAAP operating expense of $135.4 million, non-GAAP operating income of $106.7 million (23.2% of revenue), non-GAAP net income of $96.1 million, and non-GAAP EPS of $1.84 (a record for the June quarter). Revenue growth was driven by higher smartphone component sales, partially offset by anticipated pricing reductions year-over-year.

Risks & headwinds

- Forward-looking projections are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in the company's SEC filings. - PC business growth in the current fiscal year faces headwinds from constrained supply of a key industry platform, broader memory and component shortages with associated pricing pressure, and delayed new model introductions from OEMs that push out expected content and volume growth. - Input and supply chain costs are monitored closely, with potential for ongoing cost pressures that could impact gross margin. - The company's focus on growth adjacent to its core relationship with its largest customer carries long-term competition and product design boundary risks, though management maintains the company focuses on niches where it provides unique value.

Analyst Q&A

• Q: How has seasonality changed this year versus historical trends, and can management comment on the long-term opportunity for the new smart meter analog front end product line? /

  A: Q1 revenue was significantly higher than the historical seasonal average, and all quarters this fiscal year will be much tighter in sequential performance than historical patterns. The initial smart meter product targets a market driven by rising energy demand, grid infrastructure strain, and new regulatory requirements for more accurate monitoring. Cirrus Logic's high-precision sensing and mixed-signal IP provides differentiation here, with sampling planned for Q2 FY27 and market launch expected in calendar 2028. The technology can also extend to adjacent power-related applications, but the opportunity is still early, and management will provide updates as it develops. This is an example of leveraging core R&D into new markets with minimal incremental investment.

• Q: What is driving the strong HPMS pipeline, and what explains the better-than-expected Q1 gross margin, plus any long-term margin pressures? /

  A: The strong HPMS pipeline includes mature roadmaps for camera controllers, a already announced smart power sensing socket, and multiple active new power product programs, with one already shipping in tablets and another upcoming accessory product. Management maintains its long-term gross margin outlook; most input costs have been pre-negotiated and are coming in as predicted. Q2 will see a temporary one-time margin tailwind from existing favorable wafer pricing, after which margins will normalize. The company will continue aggressive cost reduction work and targeted price increases as needed.

• Q: Where does the boundary fall between in-house silicon development at the largest customer and Cirrus Logic's merchant role, and what is driving higher Q1 CapEx? /

  A: Cirrus Logic focuses exclusively on products that require high-precision analog design, tight control loops, extreme power efficiency and low latency, where it can deliver category-leading performance that solves key problems for the customer. Success with the largest customer requires long-term, pre-emptive R&D investment that Cirrus Logic has a track record of maintaining, as seen with the recently fruitioned battery power product programs. Higher CapEx this quarter is mostly driven by new purchases of test equipment for OSATs; owning this equipment provides more supply chain flexibility and better financial returns for Cirrus Logic, and this is mostly a fiscal 27 investment.

• Q: What are the company's capital allocation priorities, including the possibility of a dividend, and what is the outlook for Android business? /

  A: Capital allocation priorities remain unchanged: first fund all attractive organic R&D opportunities (the recent increase in R&D and headcount reflects the strong current pipeline), second pursue M&A, third repurchase shares. The company's strong balance sheet provides flexibility for these priorities, and a dividend is not under near-term consideration. Cirrus Logic sees more durable attractive growth opportunities outside Android, so Android investment emphasis continues to decline. Android will remain a smaller contributor to income over time, as management prioritizes new markets like PC and industrial that have less competitive pressure and geopolitical overhang.