Q3 2022 Cirrus Logic Inc Earnings Call

January 31, 2022

2022 at approximately 4 PM.

The shareholder letter discussing our financial results the earnings press release, including a reconciliation of non-GAAP financial information to the most directly comparable GAAP information along with the webcast of this Q&A session are all available on the company's Investor Relations website at Investor.Cirrus.com.

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This call will feature questions from the analysts covering our company as well as questions submitted to us via email at Investor@Cirrus.com.

Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections.

By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise.

Please refer to the press release in the shareholder letter issued today, which are available on the Cirrus Logic website and the latest Form 10-K as well as other corporate filings made with the security and Exchange Commission for additional discussions of risk factors that could cause actual results to differ materially from current expectations.

Now I'll turn the call over to John.

Thank you, Kevin.

Cirrus Logic reported record revenue of $548.3 million in the December quarter above the top end of our guidance driven by significant contributions from increased high-performance mixed-signal content shipping into smartphones and strong overall demand for our products.

These results reflect our continued momentum in fiscal year, 2022, and marking another milestone in the execution of our strategy to diversify our product and technology portfolio.

High performance mixed signal products contributed 38% of total revenue in the quarter with the most significant areas of growth coming from increased shipments of camera controller content and our power conversion and control IC.

We were also encouraged by progress in other areas of our business. In fast charging, while we've seen some impacts from the comparative softness in parts of the China smartphone market towards the end of the calendar year, we continue to see OEMs heavily promote fast charging as a differentiating feature and we taped out two new components during the quarter that we expected to go into production in the.

First half of the fiscal year.

In our audio product lines, design activity for components shipping in flagship and mid-tier Android smartphones was robust and we are excited about new devices utilizing our products that will be introduced in the first half of the calendar year.

We also continued to see positive momentum with audio and laptops. Most of our laptop revenue in the past year has been driven by codec shipments. However, in the December quarter, we also began initial shipments of our first boosted amplifiers and this device category. Again marketing great progress by the team towards one of our strategic objectives.

Looking forward, we're excited by the opportunities to expand our addressable market and drive diversification in the coming years through both our audio business and in particular, our high performance mixed signal business.

With this in mind today, we are funding strategic developments in new technologies, and a range of areas, including sensing power and battery systems.

These investments target both opportunities for incremental content in products, where we ship today and opportunities and new applications and markets.

While our high-performance mixed-signal product line represents 33% of our year to date sales in fiscal year '22, we anticipate that this can expand to at least half of our revenue in the future even as we continue to consolidate and build on our audio leadership.

We are very encouraged overall by the traction we are gaining with our high-performance mixed-signal solutions and remain optimistic that there are meaningful opportunities for further and further growth and product diversification ahead.

Before we begin the Q&A, I'd like to note as always that while we understand there is intense interest related to our largest customer in accordance with our policy, we do not discuss specifics about our business relationship.

Operator, we're now ready to take questions.

Thank you, sir. As a reminder, to ask a question you will need to press star one on your telephone keypad.

Again that is star one to ask a question.

And if your question has been answered you may press the pound key to withdraw yourself from the queue. We will pause for just a moment to compile the Q&A roster.

Our first question comes from the line of Tore Svanberg from Stifel. Your line is open.

Sandburg from Stifel. Your line is open.

Yes, thank you and congratulations on the record results.

My first question is on the guidance.

Which is better than seasonal.

You made some references to better ASPs.

But is that the main difference the better ASPs.

Or are there other things contributing to the above seasonal guidance?

Thanks, Tore.

The main drivers of both the guidance and the results we are reporting our

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Units and content increases.

With price adjustments also being a component.

But as regards looking at to the March quarter. The guidance is mostly driven by the strength of demand for our products and our customers' products and us working

To meet that demand.

In fact, when we look at the March quarter, It doesn't look like seasonal quarter, seasonal step down from December to March.

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Seasonal quarter seasonal step down from December to March.

It looks very strong.

We're actually pulling material into the current quarter wherever we can in order to try to meet customer demand.

And so our expectation as we go beyond that.

When we get into the June quarter, we're not guiding the June quarter, just now, but we expect the seasonal pattern between March, the March quarter in the June quarter to be more typical of what we'd expect between the December and March quarters.

But the principal driver for the strong guidance and the strong results.

Is units and the content gains, which we've we've talked about.

Very good and then just a follow up.

You obviously expect iPhone mixed signal to

Continue the very strong momentum and you mentioned fencing power and battery management as the three areas you are continuing to invest in.

Just to give us some perspective, what kind of ending are we in as far as.

Those three product offering so those two technologies, becoming a more material part of the business going forward.

I think the potential is really great. We're still in the early innings. On the power side, we

Sure.

In the second quarter of shipping we won our first power product and then obviously, we've got fast charging products.

Most of which were really designed before the line acquisition.

With complete either shipping or coming out, but we have a lot more in both of those areas that we believe we can do.

Either shipping or coming out, but we have a lot more in both of those areas that we believe we can do.

In addition, if we look at the camera controller content, which is also an important contributor to the high performance mixed signal. Again, that's an area, where we saw some year on year content increase.

Through additional attach rate in the current cycle, but where we anticipate sustained year on year growth both through attach rate and through feature enhancements and so when we look at our roadmaps for

Whether it's presenting power battery-related technologies.

Camera controllers, and so on all the moving pieces in the high performance mixed signal space. We have lots of projects that are either underway or we've got slated for the future of that.

Our next question comes from the line of Matt Ramsay from Cowen. Your line is open.

Thank you very much, congrats, good afternoon, guys.

I guess and ask a couple of questions that are kind of interrelated to kick things off.

And they're around ASPs and gross margin.

Asps and gross margin.

You guys had taken in the gross margin range down.

A couple of quarters ago and are coming in.

Well above that which is great to see so I guess for John and for Thurman.

How sustainable do you think these margin levels are into the next fiscal year?

And I guess related to that Tore touched a little bit on this ASP comment.

Comment that was made in a couple of places in the shareholder letter.

One big thematic in semis right now as input costs going up and the ability of companies to pass those input costs on to the customer base and I think there was an investor assumption that given your concentration with your largest customer that might be, it'd be difficult for you guys, but

Judging from the margins it looks like that is in fact happening. So if you could discuss those two dynamics in relation to the gross margin that would be helpful. Thank you.

Thanks, Matt and thanks for the nice words there. I'd characterize our gross margin outlook is cautiously improved relative to.

My comments, a couple of quarters back, but I would also encourage you and other folks not to extrapolate from the immediate quarters guidance.

There was some transient effects here and we expect the gross margin.

Our gross margin to normalize around 50.

As we look to the new fiscal year. So that's the right place to be modeling I think.

And what's going on there is we have some price increases price adjustments across a range of our products.

But we've also absorbed a lot of cost increases.

Over the past year. And have some new cost increases kicking in which kicked in at the start of this calendar year. And these things don't true up perfectly in terms of timing. So in the March quarter, we have some sales, which you're going to be of inventory that was built on a slightly lower cost base.

It inflates the gross margin a little.

For a period, but then we expect that to normalize around 50 again.

So regarding your broader question on pricing clearly.

Regarding your broader question on pricing clearly.

I think we've communicated in the past few calls the rising costs of being a feature of our business over the past year, we have absorbed a lot of that everywhere we can really.

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absorbed a lot of that everywhere we can really.

At the same time, our customers rely on us for innovation.

And value of our partnership and so across a range of products and across our customer base. We've worked very closely with customers to find ways of solving that clearly we are still absorbing costs, hence my comments about normalizing around 50%.

Sure.

Find ways of solving that clearly we are still absorbing costs, hence my comments about normalizing around 50%.

But we do feel on a better footing.

Than we did a couple of quarters ago.

Thanks, John for all the details there.

As a follow-up. I appreciate the investments that are being made in the non-audio parts of the business and that's going to be.

I appreciate the investments that are being made in the non audio parts of the business and that's going to be.

a disproportionate piece of growth going forward. I think you guys have been very clear on that.

There's been new opportunities that have come up in non-smartphone markets, you mentioned laptops and a few others I wonder, John, if you might offer some similar commentary about how you think the growth might be spread for your company going forward in the smartphone arena versus in other vertical.

In particular in the audio area.

Matt, are you asking.

Just in general smartphone growth going forward versus outside. Yes.

Okay, well clearly when we add new content in the smartphone space, which we've done and where we are intent on doing again.

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We see revenue jumped in a way that is hard to match with with any other market. So to that extent smartphone is going to continue to dominate our revenue.

For the time being but we do see encouraging signs in other markets both in audio and in the high performance mixed signal space.

The high performance mixed signal space I think is more one of potential we have both.

Technologies and the charging path in the discharging path around the battery, which are very innovative we're looking to leverage those into new product categories.

I think that's all going to deliver immediately but it's something we're very excited about and we believe gives us a really good.

Basis for going in and attacking new markets, there's no shortage of batteries to go.

To go try to take that innovation tube.

And then on the audio side, we have seen some significant growth over the past year in the laptop space. If you look back to.

The previous year, I think in fiscal '21, our total laptop revenue was very very small in the region of $5 million.

And the, we weren't really focused on that. We communicated that we saw that as an area to grow audio.

What really focused on that we communicated that we saw that as an area to grow audio.

For the full fiscal year '22, that's probably going to be more around $40 million.

I think depending on what happens.

In the PC market, we probably shouldn't expect too much growth around that in fiscal '23, but looking further out we continue to believe the laptop market has really good content opportunities for us.

That's audio based around codecs boosted amplifiers, and then potential for haptic content.

And power and charging content beyond that.

Our next question comes from the line of Blayne Curtis from Barclays.

Your line is open.

Thanks for taking my question.

So I just wanted to go back to Tore's first question. I want to make sure I heard it right.

And Larry you talked about March I think you said offsetting factor for pricing and I think flagship smartphone ramp, but then it seems like your answer you were talking more about

how ongoing demand and supply chain catching up but then so I wanted to clarify that and then I guess.

I wanted to make sure I heard you right on June. I thought you said, maybe given the strength in March, June could be

More sequential, it would be more like the March sequential but I just wanted to make sure if you could just reiterate what you said in terms of June. That'd be helpful.

Yes, thanks, Blayne.

When we had this call relating to the previous quarter I think there was a lot of there were a lot of open questions about what was going to happen to demand and what seasonality looks like as we went into the March quarter.

Relating to the previous quarter I think there was a lot of there were a lot of open questions about what was going to happen to demand and what seasonality looks like as we went into the March quarter.

Just given the fact that everybody knew products were struggling to keep up with demand.

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So I think from our perspective, this guidance shows that we have our answer the March quarter is as much stronger looking from where we are today to normal.

That reflects the fact that we're still playing catch up with demand and we are wherever possible putting content in so pulling all material into the quarter.

In order to meet customer demand.

And I think the likely outlook beyond the March quarter is that we see that March to June quarter transition look much more like the December to March quarter normally looks like because clearly these numbers and our guidance for March.

Outlook beyond the March quarter is that we see we see that March to June quarter transition look much more like the December to March quarter normally looks like because clearly these numbers and our guidance for March.

Our highest and then we typically expect.

Thanks, and then maybe just a follow up to that. I was curious, you mentioned some weakness in the Android handset market.

Some weakness in the Android handset market.

Just kind of curious that was late December. I was curious on the outlook for March and June whether that outlook any better and obviously you have a lot of content you're talking about some tape-outs.

But some perspective on what you're seeing for the kind of the non iOS market for you for March and June. Thank you.

Yes, I don't have a read yet on demand for new products that haven't been launched, however, we're excited about

Android products in particular small flagship smartphones that are going to be launched in the first quarter of this year.

Quarter of this year.

So certainly the signs around those are positive. So we are upbeat and optimistic about the opportunity there I think it's worth pointing out that were we given our coverage of the smartphone market if.

Certainly.

The the signs around those are positive.

So we are upbeat and optimistic about the opportunity there I think it's worth pointing out that were we given our coverage of the smartphone market if.

The overall picture if we are seeing any weakness in Android it quite often is translated into the strength in the iOS, which obviously worked out well for our revenues as well.

Seeing any weakness in Android it quite often.

Translated into the strength in the iOS, which which obviously worked out well for our revenues as well.

Our next question comes from the line of Ruben Roy from West Park Capital. Please ask your question.

Yes. Thank you. John, I want to start just talking about some of the new product areas and the investments that you're talking about.

If we put fast charging and kind of one sided.

And think about some of the other high-performance mixed-signal solutions that you guys have been working on whether it's camera controller power products.

How should we think about the investments there? Are you guys looking to broaden sort of a catalog or merchant type of product family around these areas that you mentioned? Whether it's something batteries power et cetera, or are you still kind of going down the road of sort of custom solutions for specific platforms and customers?

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Yes. Thanks, Ruben. You're absolutely right. Our strategy is kind of a three part. First of all, maintain.

Youre absolutely right.

Our strategy is kind of a three part first of all maintain.

Our leadership in smartphone audio. Secondly, broadening sales in audio beyond the smartphone and profitable segments.

Where we can and then thirdly, expand into adjacent product areas and the high performance mixed signal space. So we've talked about battery sensing haptics power camera control as part of that.

Our view of that is that it's going to be a mixture of custom silicon.

Custom silicon and.

And broader market silicon, that's certainly our goal.

I think.

I think over time, you'll see us build out in both of those areas.

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And we're excited about the potential for that to take us into new markets as well as grow incremental content in places, where we're shipping today.

Okay. This is a follow up to that maybe we could bring permanent to the discussion.

This is a follow up to that maybe we could bring permanent to the discussion.

Kind of thinking about your comments on significant engineering investments et cetera.

You did grow R&D pretty nicely this fiscal year and it looks like based on your guidance. Obviously, we put the line semiconductor acquisition into the model, but if you could maybe walk us through how to think about sort of these investments that you're making as they might impact R&D growth as we move forward that would be helpful.

Yeah.

Pretty nicely this fiscal year and it looks like based on your guidance. Obviously, we put the line semiconductor acquisition into the model, but if you could maybe walk us through how to think about sort of these investments that youre, making as they might impact R&D growth as we move forward that would be helpful.

Well, I mean just starting with the guidance. The guidance was higher of that guidance.

Just starting with the guidance the guidance was higher of that guidance.

There really is a pretty good size of that payroll taxes and medical funding things that only happen in the March quarter. So that was an uptick on that if you look at we also have some of that was a good piece of that was product development. We have always said that product development expenses can move around with tape-outs and other investments and it can go up and down quarter over quarter.

A pretty good size of that payroll taxes and medical funding things that only happen in the March quarter. So that was an uptick on that if you look at we also have some of that was a good piece of that was product development. We have always said that product development expenses can move around with tape outs and other investments and it can go up and down quarter over quarter.

So at least that expense is not specifically associated with our run rate. So if you look into Q1 again.

At least that expense is not.

Specifically associated with our run rate. So if you look into Q1 again.

Looking forward at least one quarter, we're not really guiding that.

When you take a look at what that will come in at, it'll be lower than the Q4 results are the March results in probably a touch higher than what we saw maybe earlier in the year and that can kind of give you a gauge at that point.

You really need to look at R&D will continue to invest there will be different investments on that.

Not only reallocating resources, but also investing in new resources.

So you should really pretty much scale that to revenue like we've talked about historically whatever revenue.

You should really pretty much scale that to revenue like we've talked about historically whatever revenue.

Numbers you're looking at. You can scale that and then SG&A will just continue to leverage that and keep that.

Growing very slightly or as close to flat as possible.

Yes, and Ruben, if I could circle back and maybe add a little additional color, we manage to add

I could circle back and maybe add a little additional color, we manage to add cigna.

Significantly to our R&D head count in the past year, which was really driven by the opportunities in high performance mixed signal that we saw in front of us. So we're generally pretty thoughtful about that kind of stuff, we see concrete opportunities.

Then we'll want to staff and get ahead of that.

We'll want to staff and get ahead of that.

And we continue to add to our overall mixed signal of talent, but in addition, as we

Add to our overall mixed signal of talent, but in addition, as we.

Okay.

Given our strength in the audio space and our abundance of IP and products that we also have the capability to redirect some of those resources to the new growth areas as well.

Our next question comes from the line of David Williams.

From the Benchmark company. Please ask your question.

Hey, good afternoon, congrats on the quarter and thanks for letting me ask a question.

Just wanted to kind of see if you think about maybe your non-major customer and where that revenue growth has been it was up sequentially modestly, but a fairly large on that year over year basis, just kind of think about how do you think we should maybe model that normalized expectation for revenue outside of that core customer what kind.

Growth rates would you expect to see just kind of given some of the newer platforms and newer products you have coming online.

Sorry, could you just clarify your question there, avid? Are you asking about growth rate for business outside of our largest customer?

Business outside of our largest customer.

Yes, that's correct, just how do you think that can trend over time.

Okay. We're obviously guiding for March right now and I've tried to give some additional color regarding the June quarter.

We're obviously guiding for March right now and I've tried to give some additional color regarding the June quarter.

But I'm not giving guidance beyond that, however, what I have indicated and what we saw.

Beyond that however, what I have indicated and what we saw.

Spoken to in the letter is that we're really excited about the high performance mixed signal space and the opportunities in front of us there.

Some of that is very much targeted on growth of incremental content in places, where we shipped a lot today, but

there's a reasonable number of opportunities to diversify further in their and our plans and take our products into new markets.

We're delighted to grow our business meaningfully.

Whether that's with our largest customer or beyond I think there are opportunities to do both in the coming years, we're not going to.

Get ahead of ourselves.

And predict exactly what that's going to look like but there's a lot of reasons to be optimistic about that.

Great and then maybe last for me just on the.

The constraints supply constraints, where there's anything maybe can you quantify what was left on the table maybe for the quarter any place, in particular, has seen significant supply constraints.

Significant supply constraints.

Well, of course, our guidance takes into account the availability of supply to us so that was true as we guided for the December quarter is true regarding our guidance for the March quarter.

Of course, our guidance.

It takes into account the.

The availability of supply to us so that was true as we guided for the December quarter is true regarding our guidance for the March quarter.

We undoubtedly could have shipped more if we've been able to.

Obtain more wafers for the quarter, most of that obviously would be in the areas of our business, where we do last long range planning.

So when we're thinking about our business with.

Our largest customers, that tends to be something where we put a lot of effort into long range planning and capacity agreements and so on.

So it's more on the side of opportunistic business. There is still.

More on the side of opportunistic business there is still.

Some degree of revenue that we would've been able to obtain if we had more wafers. Most of that I'm sure. We're not alone in that case. Most of the semi industry has seen that over the past year or so. Most of that demand has been fairly resilient. The unmet demand has been fairly resilient as we've gone through the quarters, so as wafer supply.

Obtain if we had more wafers most of that I'm sure. We're not alone in that case most of the semi industry has seen that over the past year or so most of that demand has been fairly resilient. The unmet demand has been fairly resilient as we've gone through the quarters, so as wafer supply.

Frees up. We're hopefully able to take advantage of some of that.

We're hopefully able to take advantage of some of that.

Our next question comes from the line of Christopher Rolland from SIG. Please ask your question.

Hey, guys. Thanks for the question.

I guess in the in the Shareholder Letter.

You guys talked about taping out two new fast charging parts. I think these are lying parts or iterations of.

And maybe you can talk about how these ones. Are different they have new features or new process tack or what's going on there? And then just talk about maybe broadening for this product set of fast chargers for lying outside of just your Chinese customers today. Thanks.

Thanks.

Yes. Thank you. These products focus on higher charging rates so the overall competitive driving.

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Force in the fast charging market is charging rate.

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The amount of power they are able to put into the battery and the efficiency of the product. So we have an extremely efficient architecture.

We believe it's class-leading and we have been steadily increasing the charging rates at which we are.

We have been.

Steadily increasing the charging rates at which we are.

We're able to deliver power into the battery. So these were the next step in that.

There was a point of which 33 watts was considered fast charging. Today 67 watts

Fast charging is fairly well established in mainstream smartphones in China.

We can see that transitioning higher to 120 to 180 watts and beyond over time.

So our product rollout without getting into the minutia of specific products that haven't been.

Featured in announced devices yet. Our devices are focused on driving those charging rates higher.

Devices yet.

Our devices.

Focused on driving those.

Charging rates higher.

And then you asked about the opportunity for those products to extend beyond smartphones, that's a big part of what we're excited about with the alliance team.

To extend beyond smartphones, that's a big part of what we're excited about with the alliance team.

So absolutely today there is good business and a lot of customer engagement around the smartphone focused products.

Good business and a lot of customer engagement around the smartphone focused products.

But we believe that for example in the laptop space there is meaningful opportunities.

For this charging technology to get a foothold in the coming years and then.

For us to extend it to other markets for battery centric devices beyond that.

Okay. Thank you, John. Actually, the second part of my question was not beyond smartphones, but beyond China.

But I did actually have a second question. And that was.

I did actually have a second question.

And that was.

I just wanted to understand the guidance here so.

Seasonal I just want back for the last 10 years in the March is negative 32% on average. And you were saying June would have some effects like that so.

I just want to make sure I understood you. Is that the kind of seasonality that we're talking about from the March into the June quarter?

Because we already have March down, I think 23% or something like that or are you guys talking about the combination of March and June equating to something closer to that 32% seasonality that I had.

Yes, so that would really be.

When we talk about that, we're talking about just the transition from March to June.

Transitioned from March to June.

Again, the strong results that we had in December.

The strong results that we had in December.

We're not adding those pieces together and really we're giving you that information because.

We're just trying to give an indication of where the June quarter could be based on.

How we see the March quarter, and how strong we are.

Okay.

Our next question comes from the line of [Rich Bindra Gill] from Needham and company. Your line is open.

Yes, thanks, and congrats on the momentum. Just a follow up again on the seasonality question.

Question.

As the previous question was asked that the March is typically down 33% from December to March.

From December to March.

And the March quarter, you're guiding down 23%, that's roughly maybe 10 points above seasonal.

So it basically implies a pretty massive pull in into the March quarter would be the kind of overwhelming reason for the.

Basically implies a pretty massive Poland.

To the March quarter would be the kind of overwhelming reason for the.

The upside in the March quarter, as opposed to perhaps content gains or units.

The June quarter's going to be down.

At that rate. So I just wanted to get a sense of how we're thinking about the moving pieces of June. I appreciate your commentary there.

The moving pieces of June I appreciate your commentary there.

And do we get to some sort of awesome normal patterns in the September December quarter?

Yeah.

I think one thing is when we look at that it's an all-time record revenue for us.

So it's coming from a very high base.

When you [look at] what we've guided for the March quarter. It's down 20%.

The March quarter.

It's down 20%.

20% in.

In addition to that. You have to look whole picture that we're looking at.

Strong demand in December continued strong demand through the March quarter.

Strong demand through the March quarter.

And you've kind of given that commentary that regardless of what it looks like between December and March.

That commentary that regardless of.

What it looks like between December and March.

We are saying that we think it could be more similar than not giving you exact number but.

That we think it could be more similar than not giving you exact number but.

[inaudible] We know where it was so.

I mean that's basically the commentary.

Got it, okay. And just big picture, John It seems like Cirrus wants to expand the dollar content in smartphones beyond audio.

Just big picture, John It seems like.

Sirius wants to expand the dollar content in smartphones.

Beyond audio.

Starting first with your top customer and then move into the Android market. I know there's a lot of focus.

From some folks about kind of moving diversifying away from smartphones, but it seems to me that the priority number one is to increase the dollar content in smartphones beyond just providing audio and then kind of branching.

Outside of your top customer and kind of replicating that scenario in the Android market. So wanted to maybe dig into that a little bit in terms of where you see.

Some of the key technology adjacencies beyond core audio. Kind of the low hanging fruit, we continue that dollar content and is there kind of an estimated kind of dollar content that you have in mind aspirational goal per phone and you're looking at.

Key technology Adjacencies beyond core audio.

Kind of the low hanging fruit, we continue that dollar content and is there kind of an estimated kind of dollar content that you have in mind aspirational goal per phone and Youre looking at.

We certainly see an opportunity to drive content per phone up meaningfully.

In particular, driven by the high performance mixed signal space.

So that has been in our sights from a strategic perspective as an immediate adjacency.

So we are well established selling into key customers in the smartphone space today.

We.

We have great relationships there. We have a reputation for [formidable] execution, and we've long demonstrated that in the audio.

And now we've demonstrated that in high performance mixed signal. First with the camera controller content.

And more recently with the power conversion and control content. So we want to continue expanding that.

That strategy to build out more high performance mixed signal content.

In the phone space.

And in the process develop IP and products that we believe can take us into other markets.

Our next question comes from the line of [Ananda Baruah] from loop capital. Your line is open.

The ruler from loop capital your line is open.

Hey, yeah. Good afternoon, guys. Thanks for taking the question.

And congrats on the good execution and strong results.

Good execution and strong results.

Two quick ones if I could.

Both in the shareholder letter. In the letter you mentioned mixed signal revenue, reaching 50% of revenue.

At some point. I was wondering if there's any useful contacts.

For us to think about timeframe.

Think about timeframe.

Anything at all with regards to that comment. Then I have a quick follow up.

I have a quick follow up.

We're not going to put an exact timeframe on it but we have given you the.

We have broken it out so that you have the growth rate there and you're able to see that progress over time so.

Yes.

On the recent run rate that's very significant step up to being around a third of our revenue in the year to date.

Very significant step up to being around a third of our revenue in the year to date.

And that's obviously, a very meaningful step up from from previous years, we're going to hopefully continue that momentum.

I would anticipate that within the foreseeable future, that becomes half of our revenue.

Within the foreseeable future that becomes half of our revenue.

That's super helpful. And then the other is actually from the shareholder letter as well it's more of a clarification question.

You talked of share gain in mixed signal and just wondering if there's any context, you can provide around what those share gains and that's it for me.

Mixed signal and just wondering if there's any context, you can provide around what those share gains and that's it for me.

Specifically in the share gains in mixed signal.

We increased our camera control of content.

Camera control of content.

And displaced some camera control content from other vendors in the process.

Camera control content from other vendors in the process.

That.

That increase the overall blended ASP.

Of our camera control content shipping in the current smartphone cycle.

And then in addition to that, we introduced our power conversion and control IC.

In the first case, the camera control content increased too broadly a blended ASP of around 70 cents or 70 change per device and then the power conversion and control content.

The camera control content.

Increased too broadly a blended ASP of around 70 17 change per device and then the power conversion and control content.

We've indicated you should model it around $1.

Yeah.

Our next question comes from the line of Vivek Arya from BofA Securities. Please ask your question.

Thanks for taking my questions. I had two the first one I'm still very confused about the June quarter outlook, because if I use that 30% ish or so down sequentially not suggest year on year sales would be basically flat or only modestly up even though you have.

Your line contribution in the mix so, John, how do we reconcile your optimism around unit and content growth with

Guidance that seemingly, I know June is to announce so think things could change and I realize you tend to be conservative.

But am I understanding the trends that I tell you that you're essentially guiding to flattish year on year stands in June?

Understanding the trends that I tell you that you're essentially guiding to flattish year on year stands in June.

Yes, that's right. I mean, if you look at

The midpoint of guidance and you do the calculation and again, what we're seeing is a complete shift this is not.

Reflecting a normal seasonality that is generally a pretty much of a set pattern. Although we do see a decrease in the March quarter from a higher base.

And we do at this point in time based on our visibility we're not trying to give you.

Very specific guidance, we're trying to give you a directional guidance on where on that the expectations of a very close March and June quarter in revenue is not what we expect we expected.

Significant stepped down quite a bit of a step down and so.

I mean, we're not getting into details and not telling you what's driving that or not driving it. We're trying to give.

Some color on where we expect it. By the way, whatever we're talking about in that first quarter of next year has no way.

Change our internal thoughts on in terms of what our overall revenue will be for the year.

Understood and for my follow up, I just wanted to revisit gross margins.

I think you mentioned that gross margins could come back to the 50% or so level.

Does that happen from June? Does it happen at a later period?

And I think in the past there was a suggestion that margins could even dip below 50%.

Is that no longer the case? So just just wanted to get some.

Views on how we should be thinking about gross margins for the next several quarters. Thank you.

Yes, Vivek, I referred earlier to the fact that there is some transient effects going on with the gross margin. As different costs and pricing get phased in.

We.

I referred earlier to the fact that there is some.

Transient effects going on with the gross margin.

As different costs and pricing get phased in.

So the gross margin in our guidance for the current quarter is pretty high.

We expect that to normalize back to 50.

Back to 50.

Or around 50, I think that will happen pretty quickly as these new prices and new costs get baked in.

This.

As these new prices and new costs get baked in.

Relative to previous guidance that we could dip below 50.

Dip below 50.

I think at this point our overall outlook is cautiously improved relative to that so I think modeling 50 is a good place to be.

Outlook is cautiously improved relative to that so I think modeling 50 is a good place to be.

We have a follow-up question coming from the line of Tore Svanberg from Stifel. Please ask your question.

Denburg from Stifel. Please ask your question.

Yes, just two quick follow-ups. Thank you. First of all, you mentioned the strategic review in December.

And I understand the emphasis on high-performance mixed-signal and how that should drive more sustainable growth and so on and so forth, but you haven't really talked about what that means financially.

I know in the past you've targeted sort of 20% plus operating margin.

But should we think about this strategy potentially driving more operating leverage than that perhaps getting operating margins?

No more operating leverage than that perhaps getting operating margins.

As high as what you're going to do here in the fiscal '22 year, which is about 25%.

That's our longer-term goal target, yes. We believe that we have really really solid foundation of current core audio business and great

Really really solid foundation.

<unk> current core audio business and great.

Growth and opportunities in high performance mixed signal.

That's obviously driving a lot of growth in the current fiscal year. So if you take the midpoint of our guidance that we've issued here, that would have us at somewhere around 25% growth for the full fiscal year.

And we believe that we've got opportunities ahead of us to continue driving that growth in the coming years.

We believe that we've got opportunities ahead of us to continue driving that growth in the coming years.

Indicated elsewhere and you have seen in our capacity wafer capacity agreements and so on that we are upbeat about that.

And so our expectation and our goal is that as we grow revenues, we will be able to drive increased leverage from R&D and SG&A.

Grow revenues, we will be able to drive increased leverage from.

R&D and SG&A.

And work on the operating margin over time.

Very good. Thank you and the last question that I had was you mentioned gaming in the shareholder letter.

I think you may have made some references in the past too. But what exact content are you getting in gaming applications at this point?

We haven't make sure of audio on haptic content.

In gaming devices, the particular gaming products.

Gaming product.

That we have in mind there it's not public but we're in it yet, but it's imminent.

It's not public but we're in it yet, but it's imminent.

And in both the gaming and VR spaces.

In both the gaming and VR spaces.

We continue to be seeing design wins without a huge amount of volume attached to those as yet.

Seeing design wins without a huge amount of volume attached to those as yet.

We're obviously excited about.

Opportunities that those might present for the long term.

Those might present for the long term.

Excellent. Thank you.

Our next question comes from the line of Derek Soderberg from Colliers Securities.

Your line is open.

Hey, guys. Thanks for taking my questions. I wanted to start with audio and particularly audio content in handsets. It looks like audio revenue as a whole has been sort of flattish for the first three quarters here compared to last year.

Seems like laptops and some other areas are growing nicely.

Are some of your handset customers reducing audio content at all?

Have you seen any change in audio attach rates and handsets, maybe relative to a year ago?

I don't think we've seen meaningful change in attach rates.

Derek, we have obviously had to pass on some opportunities just given wafer supply limitations, a fair amount of our general market business, especially around audio tends to have somewhat shorter planning horizons.

And that means that there are certain opportunities we've not been able to target, which likely would have represented incremental audio revenue. So we've been very careful about choosing.

Choosing.

Sockets where we feel we have the most value, the most differentiated product and bring the most benefit to the customers.

Within the constraints of the supply environment.

As you noted, as part of that audio mix, we've continued to perform solidly and Android.

Part of that audio mix, we've continued to perform solidly and Android but.

But have also added into that meaningful revenue in the past year from laptop audio as well.

And that's an area where.

You heard in my earlier comments with the addition of boosted amplifiers are the first boosted amplifier design ins to laptops in the December quarter, we continue to see some long term opportunity for us to diversify our audio revenues as well.

Okay. Got it and as my follow up you just mentioned opportunities in AR some designs there.

Got it and as my follow up you just mentioned opportunities and some.

Some designs there.

I think there's been some talk around some of those devices coming to market over the next year or so. Wondering how you feel about potential content those devices for both audio and mixed-signal and I guess if those devices eventually replace handsets.

Do you think that these are wearables would be sort of more or less likely to have additional serious content than handsets? Just trying to frame that opportunity for you guys. Thanks.

Okay.

Yes, I think we are very excited about the potential but very moderate in our expectations over the near and midterm.

Moderate in our expectations over the over the near and midterm.

It's something that we want to be a part of for the long term, where we're we've got customers with.

With exciting visions around AR and VR.

So to date, we've been in a number of AR and VR headsets. In most cases, that's really been where customers have picked up.

Kind of off the shelf products, we have more recently developed some dedicated AI and VR content.

We anticipate that volumes around those are going to be fairly small to begin with but I think for the long term.

Fairly small to begin with but but I think for the long term.

It's a great area to be a part of.

Okay.

We have a follow-up question coming from the line of Christopher Rolland of SIG. Your line is open.

Your line is open.

Hi, guys, sorry to come back to the June guide again, but Thurman.

Just want to make sure I understand. Are you saying.

Or maybe you should elaborate maybe a little bit more on the September guidance. I would assume that you guys are expecting for stronger than typical seasonal for September. And or maybe put another way is there any reason to think that that September number would be meaningfully different year.

Over a year or meaningfully down year over year. Thanks.

You mean September of our next fiscal year? No.

I think what we're saying is that we still feel good about our opportunities to grow revenue as we go into the year.

We're really just making a statement on the June quarter.

And so, I mean, I think to keep that in context.

Sure.

I mean, I think to keep that in context.

We're not really getting any further out than that but we are.

Again, we're optimistic on our ability to grow revenue. So I'm trying to, we're just trying to.

Go ahead and indicate something that is really on seasonable that we see.

Something that is really on seasonable that we see.

Affect our results over a color. Sure. It just looks like it's a change in seasonality to your point and then.

Another quick follow up while I have you. The gaming AR, VR content.

Our content.

And maybe the pipeline that you guys have. Is this around haptics? Is this around [AMPs]? Is this around up the audio chain?

Where are you guys getting the most traction?

I am not going to comment on anything that's not released, Chris.

Chris.

If you understand that but in the space where products have already been launched, we've typically been in the audio domain, I think going forward, we can be more diverse than that.

Space, where products have already been launched we've typically been in the in the audio domain I think going forward, we can be more diverse than that.

Thanks, guys.

We have another follow up coming from the line of Matt Ramsay of Colin. Please ask your question.

Colin Please ask your question.

Thank you very much guys for letting me back in and indulging another question.

But the things that I'm getting from investors right now just to re-clarify still trying to square the circle, a little bit with the guidance and the comments, Thurman, that you made that the outlook for the next fiscal year that you guys are planning for haven't changed.

Could you guys just clarify that there is new content changes or socket changes that you guys are trying to message? That this is just the timing issue on pulling a revenue versus a typical June quarter. Thanks.

New content changes or socket changes that you guys are trying to message. This is just the timing issue on Poland revenue versus a typical June quarter. Thanks.

Well I think the other thing that.

You have to understand is that okay. This year, we had a significant step up in content.

That was driving revenue this year and although when we go and look into revenue next year.

We will get more benefits of the content.

That the content increases we saw this year.

But from a product cycle, we're not talking about another step up in terms of content gains coming into the next year, which has some effect on all of that and again, even with that statement.

We are optimistic about our ability to grow revenue.

Got it, yes. I think maybe I'll add a bit more kind of general color there, Matt.

Add a bit more kind of general color than that.

I think at one level really all we're trying to say here is we have a.

Significantly stronger March quarter than we normally do.

Which looks like it will as I said take us to.

Like it will as I said take as to.

Based on the midpoint of guidance to somewhere around 25% growth for the full fiscal year.

One of the drivers for the strength of that March quarter is increased content and revenue obviously.

One of the drivers for the strength in the March quarter is the fact that some key customers are still working extremely hard.

To meet the demand for successful products.

So as a consequence of that there is more pressure than we would normally see in the March quarter to get every piece of material on deck.

As a consequence of that there is more pressure than we would normally see in the March quarter to get every piece of material on deck.

Some of that is reflected in our activities to try to bring in and expedite more material

Is.

Reflected in our activities to try to bring in an expedite more material from.

From out of quarters to try to accelerate the rate at which our customers can meet demand.

Our expectation on the back of that would be the.

There'll be more of a step down between the March quarter and the June quarter than we would normally see.

More of a step down between the March quarter in the June quarter than we would normally see.

Because where we're seeing a comparatively strong March quarter hit.

Got it. Thanks, guys. I appreciate it.

We have another follow-up coming from the line of Blayne Curtis of Barclays. Please ask your questions.

Barclays. Please ask your questions.

Hey, guys. I was going to ask, I think you just answered that.

I was going to ask again, but I guess, maybe a way to pivot in this discussion I know it's working early and you guys don't typically even guide out two quarters, but we've now had eight or nine questions on it and the stock's down a ton so.

Is there any way John maybe if you can give a perspective on fiscal '23?

It's just getting the point here, where I think there's a lot of discussion about what June is. You're still very confident on where your content story is but.

And to be honest, I'm not really fully understanding the context here because you have a customer that just told you there is still working themselves to catch up.

There may be launching another.

Low end phone with higher confidence should help you. There are some reasons why seasonality might be better.

And I am just trying to understand I guess what you're seeing or you just estimating what could be for June.

But I know you're probably not want to answer that part. So maybe you can just pick up the question. Then is there anything you could tell us about fiscal '23.

Yeah, obviously, we don't provide guidance out there, but some color might be helpful. I mean, I think in the current fiscal year.

Our growth is largely being propelled by significant content gains and new strategic areas.

Hence the really significant year on year revenue growth.

Really significant year on year revenue growth as.

As we look into the immediate coming cycle in fiscal '23, I think more of the growth story will be units driven obviously with the tailwind of the second cycle of our new power products.

Kicking in and continued progress on camera controllers I've indicated that we expect.

To be able to continue to grow the contribution in that space year over year.

Over the next few cycles.

And then beyond fiscal '23, we obviously are currently engaged in meaningful new product development that we believe is going to drive further incremental content on growth.

And you've seen up signals associated with that.

Signals associated with that.

So I think fiscal '23 looks strong to us from where we are. And will continue to work on

Fiscal 'twenty three looks strong to us from from where we are and will continue to.

To work on.

Securing all the opportunities to serve our customers and to help them meet the demands.

To serve our customers and to help them meet the demands.

That we can for that period.

Thanks, John.

Once again as a reminder, if you have questions, please press star one.

We have a follow-up question coming from the line of Vivek Arya from BofA Securities. Please ask your question.

Thanks for the follow-up. Just curious how much is [alliance semi] contributing in fiscal '22? And how should we think about that contribution in fiscal '23?

We're not breaking out the guidance as we go forward Vivek, we previously indicated that we expect to contribute.

The guidance as we go forward Vivek, we previously indicated that we expect <unk> to contribute.

In the region of $60 million during the fiscal year between deal close in.

And at the end of the fiscal year, the current run rates.

Current run rates.

It looks a little soft relative to that but we've got.

A great deal of customer engagement and opportunity.

We'll see how that goes and the end of the year.

And then beyond that as we go into fiscal '23 and beyond.

We have a lot of products and a lot of design momentum around the lion charging products. So we're upbeat about that.

A lot of products and a lot of design momentum around the lion charging products. So we're upbeat about that.

And just the last one. Opex intensity, I know terminal you had given some puts and takes around.

Is there a way to think about Opex in terms of Opex as a percentage of sale? For example, in the last calendar year, it was just under 28% or so is that the right level or can you be above or below that kind of Opex intensity going forward.

Well I think from a percent of revenue.

We will be.

We believe that Opex will become a, over a longer period of time as revenue grows and as we've talked about, we

Become a.

Over a longer period of time as revenue grows and as we've talked about we.

Yeah.

We will continue to invest in what we need to invest in R&D. We have already done that. We will also

Be reallocating or allocating resources to key projects as we can internally and manage our expenses accordingly, so if you're asking the longer term, we expect to be able to come in.

That may be a lower number somewhere down the line, but right now.

Yes, it falls into that particular area and we certainly believe that SG&A.

We will be leveraged in order to have that equity start looking to be a lower percentage of revenue also.

Have that equity start looking to be a lower percentage of revenue also.

There are no further questions at this time. I will now turn the call over back to Ms. Chelsea Heffernan.

For additional remarks.

Thank you, operator, there are no additional comments. I'll turn the call back to you, John. Thanks, Chelsea.

So in summary, in the December quarter, Cirrus Logic delivered record revenue, saw a strong design momentum across our portfolio and made significant progress in expanding our high-performance mixed-signal business.

Our world-class engineering capabilities and our extensive intellectual property portfolio have enabled us to develop and deliver key new technologies and expand into adjacent product categories, particularly in power conversion battery management and fast charging.

With a consistent track record of execution and a compelling product roadmap. We're excited by the opportunities ahead of us to drive further diversification and growth in the coming years.

Before we close, I'd also like to note that we will be participating in the Morgan Stanley Conference on March 7th. Please see our Investor website for the details.

If you have any questions that were not addressed today, you can submit them to us by the Ask the CEO Section of our Investor website. I'd like to thank everyone for participating today. Goodbye.

Thank you again for your participation. This concludes today's conference call. You may now disconnect.

Okay.

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