Cirrus Guides Above Expectation

Cirrus Logic, Inc. (CRUS - Analyst Report) reported mixed results for the first quarter of fiscal 2010, with in-line revenue and lower than expected EPS. The company’s second quarter guidance beats consensus estimate of revenue of $42.4 million . For the second quarter of 2010, Cirrus has guided for revenue in the range of $48.0 million to $52.0 million. Gross margin is expected to be between 50.0% and 52.0%.

Reported revenue of $37.5 million was in-line with our estimate of $38.0 million and the company’s guidance of $36.0 million to $40.0. Revenue was down 14.8% from $44.0 million reported last year. The sales decline in the quarter was driven by lower energy product sales (-42.1%), which were partially offset by higher audio product sales (+12.5%). Energy exploration products witnessed weaker demand due to softer exploration activity, while audio products benefited from ramp up of portable products and multi channel CODECS. 

Expenses included a benefit of approximately $2.7 million related to the settlement of the derivative lawsuit, $1.3 million related to stock-based compensation charges and $0.4 million related to intangibles amortization charges. Excluding these charges, non-GAAP operating expenses increased 4.5% year-over-year to $20.9 million, due primarily to tape out cost of the new 65-nm audio DSP. 

Gross margin for the quarter was 52.2%, down from 56.0% in the year-ago quarter primarily due to lower audio business margin. 

Cirrus reported non-GAAP net loss (excluding one time charges and stock compensation expenses) of $0.01 per share compared to a net income of $0.06 per share in the year-ago quarter. This was below our expectation of breakeven. The company’s lower-than-expected performance was primarily due to higher R&D costs (up 7.8% year-over-year). Management expects to incur higher R&D investments in the coming quarter. 

Cirrus has also lowered its capital expenditures to $0.5 million from $2.3 million in the previous quarter. The company has a strong balance sheet with no debt. The company anticipates higher energy product revenues in the long-term, and plans to reduce costs for the portable product line. Cirrus’s new product offerings are expected to benefit end customers. 

We maintain our Buy rating on the stock