Cirrus Logic (NASDAQ:CRUS) shareholders are reaping the rewards of the company's recent performance, with shares up more than 50% over the past 12 months. Last quarter saw Cirrus' high-performance, low-power chips for audio signal processing make additional inroads with Android device OEMs, helping propel shares to recent all-time highs. Can Cirrus' good times continue? Here are the items I'll be paying close attention to when the company reports first-quarter earnings on Aug. 2.
Strong revenue growth, but then what?
For fiscal year 2017, Cirrus' revenue was $1.5 billion, up 32% year over year. And the company expects strong demand for its smart codecs, digital-to-analog converters and boosted amplifiers to continue into Q1 2018, guiding for revenue of $300 million to $340 million. At the midpoint, this would represent 23% growth. Analysts are, on average, expecting revenue of just above $320 million.
However, on Cirrus' last conference call, the company also said it expects only "modest 2018 revenue growth." While Cirrus has plenty of growth initiatives on the horizon, many of them are longer-term opportunities. And without a nearer-term catalyst, analysts are expecting growth to stall over the remainder of the year. Next quarter, the average analyst estimate calls for a revenue decline of 5.2%, and for the full fiscal year, the average estimate is for just 6.5% growth.
What to watch for: Any hints that Cirrus will experience a revenue growth recovery later this year.
The Apple factor
Customer concentration remains Cirrus' biggest risk, with 79% of revenue in fiscal 2017 coming from Apple (NASDAQ:AAPL). That's a huge percentage of the company's sales tied up with one customer, and is the highest that number has been in three years.
But Cirrus is attempting to diversify. The company received 78% of its revenue from Apple in Q4 2017, down sequentially from 85% in the previous quarter, as Cirrus cited increasing penetration of both flagship and mid-tier Android devices. This will continue to be the most likely path in the short term to reducing Cirrus' dependence on Apple, as the company notes it now has a strong case study to take to the remaining Android OEMs in China.
The company generally doesn't comment about its working relationship with Apple, or even mention its largest customer by name, so don't expect any updates about Cirrus' role in the iPhone 8, which is expected to launch later this year.
What to watch for: Any new customer announcements, plus the percent of revenue from Cirrus' "largest customer." Over time, as Cirrus' efforts with Android-based OEMs pay off, this number should decrease.
Additional growth opportunities gaining traction
Cirrus has placed some large bets in markets beyond the smartphone that are in various stages of development. The company has introduced products for the emerging digital headset market, and is also benefiting from Android OEMs that are transitioning to a USB-C interface, which can be used to power better sound quality and other premium features in headsets. Cirrus has also invested heavily in a budding microphones business, that -- while the company admits is lower-margin than its other products -- has a potential to be a nice revenue booster.
Looking further out, Cirrus is working on a voice biometrics product that will allow your phone to confirm your identity using your voice. Beyond phones, Cirrus believes this could be used for security purposes in literally any device that uses a voice interface. The company also believes it can be a player in smart-home devices, recently launching a voice capture kit with Amazon to assist manufacturers who are looking to create Alexa-enabled accessories.
What to watch for: Any updates on these projects that could help improve Cirrus' revenue picture sooner than later. While there are still plenty of questions about where Cirrus' growth is going to come from, if one or more of these initiatives takes off, it should help begin to ease fears that Cirrus' future is tied solely to the fortunes of the iPhone.