Cirrus Logic, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended March 26, 2022 (52 weeks). This is an annual filing, not a standalone fourth-quarter report. Cirrus Logic designs fabless mixed-signal semiconductors, primarily audio and high-performance mixed-signal products.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $1.781 billion | $1.369 billion |
| Gross profit / margin | $923.6 million / 51.8% | $707.3 million / 51.7% |
| Operating income / margin | $366.3 million / 20.6% | $237.2 million / 17.3% |
| Net income | $326.4 million | $217.3 million |
| Diluted EPS | $5.52 | $3.62 |
| Cash from operations | $124.8 million | $348.9 million |
- Audio revenue was $1.187 billion, up from $1.104 billion; high-performance mixed-signal revenue was $594.3 million, up from $265.2 million.
- Cash and cash equivalents were $369.8 million; marketable securities totaled $74.4 million. Current assets were $840.0 million versus current liabilities of $264.8 million.
- No revolver borrowings were outstanding at year-end. The company had a $300 million secured revolving credit facility maturing in July 2026.
Changes and notable developments
- Sales rose 30.1%, driven chiefly by smartphone content gains in high-performance mixed-signal products, including camera controllers and power products; laptop audio also contributed.
- Net income increased about 50%, while diluted EPS rose from $3.62 to $5.52. Gross margin was broadly stable: higher average selling prices were mostly offset by higher supply-chain costs.
- Operating cash flow fell to $124.8 million, chiefly reflecting a $316.1 million unfavorable working-capital movement, including a $195 million long-term wafer prepayment to GlobalFoundries and higher receivables.
- Cirrus acquired Lion Semiconductor in July 2021. The acquisition’s purchase-price allocation was preliminarily $312.8 million; Lion contributed $44.5 million of revenue from acquisition through year-end.
- Share repurchases totaled $167.5 million for the fiscal year; 2.1 million shares were repurchased and retired. No dividends were paid, and management did not anticipate dividends in the foreseeable future.
Outlook, risks and contingencies
- Management said COVID-19 uncertainty, industry supply constraints and their duration made FY2023 revenue, gross-margin and operating-expense outlook difficult to predict. It expects gross margins to normalize around its long-term model as higher-cost inventory ships; no specific numeric guidance was provided.
- Demand remained significantly above available capacity. The GlobalFoundries agreement covers wafer supply and pricing through 2026, includes an estimated minimum purchase obligation of approximately $1.6 billion, and carries risks of excess inventory, shortfall payments and liquidity or margin pressure. Related upfront payments included a $50 million reservation fee and wafer prepayments.
- Customer concentration is substantial: Apple represented approximately 79% of FY2022 sales, and the ten largest end customers represented approximately 93%. International sales were 98% of net sales.
- Other principal risks include reliance on foundries and suppliers, especially in Asia; customer order cancellations and pricing pressure; smartphone-market concentration; competition and product-development execution; export controls and geopolitical disruption; and cyber incidents.
- The IRS issued a May 17, 2022 Revenue Agent’s Report asserting approximately $170.5 million of additional tax plus interest and penalties of approximately $63.7 million over transfer-pricing matters for FY2017–FY2019. Cirrus disputes the proposed adjustments and intends to contest them; resolution may take years. Management believes reserves are adequate, but an adverse outcome could materially affect future results and cash flows.
- Unconditional purchase commitments totaled $1.712 billion as of year-end, principally for wafers, assembly and testing, and multi-year tool commitments. Operating lease liabilities were $177.8 million.
Investor verification priorities
- Track customer diversification and the sustainability of Apple-related sales, smartphone content gains and product attach rates.
- Assess whether supply capacity meets demand and whether the GlobalFoundries commitments align with actual requirements and future product economics.
- Monitor operating cash conversion, receivables, inventory and the use of wafer prepayments, alongside the $1.712 billion purchase commitments.
- Follow the IRS transfer-pricing dispute, potential tax exposure and any changes to recorded reserves.
- Review Lion integration, acquired-technology assumptions and the company’s progress toward product diversification and its long-term margin model.