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01/10 16:01
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The company reported a 4% YoY revenue increase and a solid gross margin of 52.5%, but concerns arise from its heavy reliance on the smartphone market and potential R&D delays. The Q&A revealed management's reluctance to provide specifics on new opportunities, adding uncertainty. The share repurchase program is a positive, yet broader economic risks and supply chain issues persist. With mixed signals from strong financials and cautious guidance, a neutral stock price movement is likely.
Revenue $561 million, up 4% year-over-year, driven by higher smartphone unit volumes and sales associated with latest generation products.
Gross Profit $294.7 million, with a gross margin of 52.5%, an increase year-over-year due to a more favorable product mix, partially offset by higher inventory reserves.
Operating Expenses $127.7 million, up $0.9 million year-over-year, primarily due to an increase in employee-related expenses (annual merit increases), partially offset by lower product development costs.
Operating Income $167 million, representing 29.8% of revenue.
Net Income $150 million, resulting in earnings per share of $2.83.
Cash and Investments $896 million, up $48.3 million from the prior quarter, driven by cash generated from operations, partially offset by share repurchases.
Inventory $236.4 million, down from $279 million in the prior quarter, with days of inventory at approximately 81 days.
Cash Flow from Operations $92.2 million for the quarter, with a non-GAAP free cash flow margin of 16%. For the trailing 12 months, cash flow from operations was $557.3 million, with a free cash flow margin of 27%.
Share Buybacks $40 million utilized to repurchase approximately 362,000 shares at an average price of $110.55, with $414.1 million remaining on the share repurchase authorization.
Smartphone Audio Components: Strong demand for the latest generation custom-boosted amplifier and 22-nanometer smart codec, which enhance power efficiency and audio quality. These components have a long lifecycle, providing sustained revenue.
Android Ecosystem: A leading Android OEM introduced a flagship smartphone featuring Cirrus Logic's boosted amplifiers and haptic driver. Continued engagement with customers on next-generation flagship products.
Camera Controllers: Strong customer engagement with camera controllers, which are key differentiators in the latest devices. Future projects aim to enhance features and performance.
Battery Performance and Health: R&D programs focused on battery performance and health, leveraging mixed-signal expertise to bring innovation to customers.
PC Market Expansion: Secured first mainstream consumer design expected to ship next year. Expanded engagement across multiple PC platform vendors. Focused on growing share in consumer and commercial laptops, leveraging audio and voice expertise for AI-enabled PCs.
General Market Products: Strong interest in products serving professional audio, automotive, industrial, and imaging markets. Gained design momentum with prosumer and automotive customers on ADCs, DACs, and audio codecs. Sampling high-performance analog front-end components for imaging applications.
Revenue Growth: Achieved record September quarter revenue of $561 million, driven by smartphone component demand. Revenue up 38% sequentially and 4% year-over-year.
Gross Margin: Non-GAAP gross margin at 52.5%, improved due to favorable product mix despite higher inventory reserves.
Operating Expenses: Non-GAAP operating expenses at $127.7 million, below guidance due to lower product development and employee-related costs.
Cash Flow and Buybacks: Generated $92.2 million in cash flow from operations. Utilized $40 million for share repurchases, with $414.1 million remaining in authorization.
Diversification Beyond Smartphones: Focused on expanding into PCs and other markets like automotive and imaging. Leveraging expertise in audio and mixed-signal solutions to grow in new applications.
AI-Enabled PCs: Developing PC-specific products for enhanced voice capabilities, including voice wake for AI applications. First product to sample in December quarter.
Regulatory and Tax Changes: The reinstatement of immediate expensing of domestic R&D under the One Big Beautiful Bill Act, while favorable in the short term, introduces potential uncertainties in tax planning and compliance.
Inventory Management: Inventory levels decreased to $236.4 million, but maintaining optimal inventory levels remains a challenge, especially with fluctuating demand in the smartphone market.
Customer Concentration Risk: The company has a significant reliance on its largest customer, which it refrains from discussing in detail. This dependency poses a risk if the customer reduces orders or shifts to competitors.
Market Diversification: While the company is expanding into PCs and other markets, its core revenue still heavily depends on the smartphone market, which is subject to cyclical demand and competitive pressures.
R&D Investment Timing: Shifts in project timelines and lower-than-expected product development costs indicate potential delays or inefficiencies in R&D execution.
Economic and Market Conditions: The company faces risks from broader economic uncertainties and market conditions that could impact consumer demand for smartphones and other devices.
Supply Chain and Component Costs: Higher inventory reserves and potential supply chain disruptions could affect gross margins and operational efficiency.
Revenue Guidance for Q3 Fiscal 2026: Revenue is expected to range from $500 million to $560 million.
Gross Margin Guidance for Q3 Fiscal 2026: Gross margin is expected to range from 51% to 53%.
Non-GAAP Operating Expense Guidance for Q3 Fiscal 2026: Non-GAAP operating expense is expected to range from $128 million to $134 million.
Fiscal Year Non-GAAP Effective Tax Rate Guidance: The fiscal year non-GAAP effective tax rate is expected to range from approximately 16% to 18%.
PC Market Expansion: The company expects a range of consumer and commercial laptops featuring its components to come to market over the next year, including its first mainstream consumer design expected to ship next year.
Voice Technology in AI-Enabled PCs: The first product featuring enhanced voice capabilities for AI applications is expected to sample to customers in the December quarter.
General Market Products: New end products utilizing the latest generation ADCs, DACs, and ultra-high performance audio codecs are expected to come to market over the next 12 months.
Share Repurchase: In Q2, the company utilized $40 million to repurchase approximately 362,000 shares of common stock at an average price of $110.55. At the end of Q2 fiscal 2026, $414.1 million remained on the share repurchase authorization.
The company reported a 4% YoY revenue increase and a solid gross margin of 52.5%, but concerns arise from its heavy reliance on the smartphone market and potential R&D delays. The Q&A revealed management's reluctance to provide specifics on new opportunities, adding uncertainty. The share repurchase program is a positive, yet broader economic risks and supply chain issues persist. With mixed signals from strong financials and cautious guidance, a neutral stock price movement is likely.
The earnings call presents a mixed outlook. While financial performance and product innovation show positive trends, the guidance indicates a potential decline in revenue and gross margin. The Q&A highlights uncertainties in demand and management's vague responses. Share repurchases are a positive, but supply chain commitments pose risks. Overall, the sentiment is neutral, with no strong catalysts for significant stock price movement.
The earnings call summary presents strong financial performance with record revenues and increased earnings per share. The company also announced significant share repurchases, which is a positive signal. Guidance is optimistic, and there is a focus on expanding into new markets. The Q&A section highlights growth opportunities in PCs and automotive, despite some uncertainties in timing. Overall, the combination of strong results, positive guidance, and strategic growth initiatives suggests a positive stock price movement.
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