Cirrus Logic, Inc. (CRUS) Cash Flow Statement

The extreme quarterly volatility in OCF/NI, ranging from 0.08 to 3.80, indicates that earnings quality is heavily influenced by working capital movements rather than core profitability. The 2025Q2 quarter, where OCF was only $8.2M against $102.1M net income, appears to be a trough driven by a $134.1M working capital outflow, likely reflecting inventory builds ahead of product launches. Conversely, quarters like 2024Q4 show OCF at 3.8 times net income, suggesting strong cash collection and favorable timing. Investors should focus on the cumulative cash conversion over multiple quarters rather than any single period.

The FCF trajectory is highly seasonal, with peaks in the December quarter (2026Q3) and troughs in the March quarter (2027Q1), aligning with the customer's product cycle. The 2027Q1 FCF margin of 10.7% is the lowest in the trailing ten quarters, but this follows a record quarter, suggesting a normal sequential decline rather than deterioration. Over the last four quarters, cumulative FCF of $571.4M against net income of $411.6M indicates strong cash generation, with FCF exceeding net income by 39%, a positive signal for cash flow quality.

CapEx intensity is exceptionally low, with quarterly CapEx/Revenue ranging from 0.5% to 3.3%, underscoring the asset-light nature of the business. The elevated 2027Q1 CapEx of $15.1M is still modest in absolute terms and likely represents investment in test equipment or design tools rather than manufacturing capacity. This low capital intensity allows the company to convert a high proportion of operating cash flow into free cash flow, supporting its ability to fund buybacks and R&D without external financing.

The working capital line is the primary driver of quarterly cash flow volatility, with swings exceeding $100M in magnitude. The 2025Q2 outflow of $134.1M likely reflects inventory build-up ahead of a product ramp, while the 2024Q4 inflow of $105.9M suggests strong collections and payables management. This pattern is consistent with a supplier that must align production with a dominant customer's launch schedule, creating inherent lumpiness. Investors should monitor inventory levels and receivables as leading indicators of demand shifts, as the company's cash flow is highly sensitive to these timing effects.

The company has consistently returned cash to shareholders through buybacks, with quarterly repurchases ranging from $31.5M to $104.1M, totaling over $667M in the period. This aggressive buyback program, funded by robust operating cash flow, suggests management confidence in the business's cash generation and a commitment to offsetting dilution from stock-based compensation. Notably, no dividends are paid, indicating a preference for buybacks as the primary capital return mechanism. The absence of significant acquisitions (only $29.5M in 2024Q4) suggests a conservative M&A approach, focusing on organic R&D and share repurchases.

The cumulative OCF/NI ratio of 1.53 over the trailing ten quarters suggests that earnings are backed by robust cash generation, with non-cash charges like D&A and SBC adding back to cash flow. This divergence is positive, indicating that the company's accruals are conservative and that working capital is a source of cash over time. However, the quarterly volatility in this ratio underscores the lumpy nature of the business, and investors should be cautious about extrapolating any single quarter's conversion rate. The sustained excess of OCF over net income supports the quality of earnings and the sustainability of the buyback program.