Q3 2023 Cirrus Logic Inc Earnings Call
That excludes certain items reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release and are all available on the company's Investor Relations website.
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 registered with the Securities Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations now.
I'd like to turn the call over to John .
Thank you Chelsea.
Thank you everyone for joining today's call.
As you've seen in the press release Cirrus logic delivered record revenue this quarter with sales of $596 million driven byproducts shipping in smartphones.
I'd like to express my sincere thanks to the entire Cirrus logic team innovation hard work and execution and commitment to our customers made these results possible.
And on behalf of all of US at Cirrus I'd also like to communicate our gratitude to our customers and to all those who work with us throughout the supply chain for their continued partnership.
Paul.
In a moment bank is going to discuss the results in greater detail, but before we get onto that I'd like to provide a progress update on the strategy driving our current momentum.
As most of you know the first pillar of that strategy is to maintain our leadership in smartphone <unk> and during the past quarter, we saw significant customer interest and traction across our portfolio of amplifies and codecs in this market.
We remain on track with the development of our next generation 22 nanometer smart codec, which we taped out during the quarter and with the development of our next generation custom boosted amplifier, we expect to see both components introduced within the next couple of years.
These new products will deliver significant performance improvements over previous generations, enabling our customers to build even more compelling and power efficient devices for their users.
One aspect of our flagship amplifier and codec business, that's not always fully visible to those outside the company is that these products are designed in a very thoughtful and feature rich way in close collaboration with our customers in order that they are able to run for numerous phone cycles. Following their initial introduction.
In fact over time, we've seen the lifespan of codec and amplifier increase and this means that in contrast to many components in the consumer smartphone market. We can anticipate multiple years of sales at high volumes from our next generation audio products, providing the company with sustained revenue contribution excellent long term visibility and the opportunity to re.
Deploy a highly skilled engineering teams onto innovations that target other products and markets.
So this is why maintaining our long term leadership in these product areas is foundational to our future growth.
The second key element of our growth strategy is to expand the reach of our audio components and technologies, especially into adjacent markets that we believe we can serve profitably by leveraging the intellectual property and innovations that we have developed for our smartphone products.
One of those markets as laptops and in spite of the current cyclical weakness in the PC space, we see laptops, largely as a greenfield opportunity, where we continue to expect our addressable market to grow significantly over the coming years.
As evidence of this in the last year alone Cirrus logic has been designed into more than 60 laptop models using existing audio products and building on that momentum during the last quarter. We saw considerable design activity around our new amplifier and codec products that have been specifically optimized for the laptop market.
We expect the first platform utilizing these new products to begin shipping in the second half of fiscal year 2024.
The third pillar of our strategy is to leverage our world class mixed signal engineering expertise to build a growing footprint of products and intellectual property and what we call our high performance mixed signal product lines.
The significance of this facet of our strategy is that doing so expands our addressable market significantly beyond audio and we believe that our considerable experience in mixed signal product development at advanced process nodes and in delivering high performance data converters high precision sensing and advanced signal processing is highly relevant to a number of product domains.
The fact that we have already seen meaningful contributions from products in this category highlights that our customers also increasingly see us more broadly as a world class mixed signal solution provider and today, we have more activity within our high performance mixed signal R&D teams than ever before.
During the quarter within those H BMS activities, we saw continued strong customer engagement and the camera space.
With noting that as a consequence of increased attach rates higher asps and a more favorable mix over time, we have grown the total value of our camera products in each of the last three smartphone generations and we expect this trend to continue with our next generation camera controller shipping later this year.
We also made excellent progress toward the introduction of a new <unk> component.
During the second half of this year and we continue to see strong interest in our capabilities around battery and power going forward. We believe there are further opportunities to grow our addressable market in the battery and power space, both within smartphones and beyond.
And indeed during the quarter. We also taped out our first general market power product targeting laptops, which is designed to deliver more efficient power conversion in order to enable Oems to create more powerful single fan and finalists laptop devices.
In summary in the third quarter of fiscal 2003, we continue to execute on our strategic initiatives to diversify our product portfolio and broaden our addressable market into new application areas and end markets.
With a solid pipeline of products expected to be introduced over the coming years and a deep commitment to investing in innovative technology. We believe cirrus logic is well positioned to drive growth and capture new opportunities in the coming years.
And with that let me now turn the call over to <unk> to provide an overview of our financial results for our fiscal Q3 2023 as well as guidance for fiscal Q4.
Thank you John and good afternoon, everyone.
I'll provide an overview of our financials.
Starting with fiscal third quarter revenue was $596 million.
Which was an all time record and represents the sixth consecutive quarter of record revenue for the corresponding fiscal period.
Revenue was up 9% quarter over quarter.
And up 8% from a year ago.
Our strong performance during the quarter resulted in revenue above the high end of our guidance range and was driven by demand for smartphones.
On a year over year basis revenue performance was driven by higher Asp's.
It's predominantly helped offset increased costs.
And to a lesser extent additional high performance mixed signal content in smartphones.
I'd like to highlight the continued outstanding execution by the supply chain organization and the entire suite of steam and helping deliver these strong results.
Especially in light of heightened disruptions in the global supply chain during the December quarter.
Turning to gross margin non-GAAP gross profit in the quarter was $297 million.
And non-GAAP gross margin was 53%.
This was roughly in line with the midpoint of the guidance range we've provided.
On a year over year basis gross margin decreased due to an increase in supply chain costs and to a lesser extent, a less favorable product mix.
non-GAAP operating expenses in the quarter was $123 2 million.
Roughly flat sequentially.
I would note that operating expenses came in below the midpoint of our guidance range despite higher revenue.
As higher product development costs and employee related expenses were offset by lower variable compensation.
We intend to continue to invest strategically in new product development as we see ongoing opportunities to increase our content.
While at the same time controlling discretionary spending.
non-GAAP operating income was $173 9 million in the third quarter or 29, 4% of revenue.
And finally on the P&L non-GAAP net income in the third quarter was $135 8 million.
Or $2 40 per share.
Let me now turn to the balance sheet.
Our balance sheet continues to remain strong and we ended the third quarter of fiscal year 'twenty, three with approximately $508 million in cash and cash equivalents.
Our ending cash balance was up nearly $80 million from the prior quarter.
Similarly, due to strong cash flow from operations.
Partially offset by stock repurchases during the quarter.
Specifically, we generated cash flow from operations of roughly $181 million.
During the December quarter, which is about 31% of revenue. Thanks.
Thanks for the excellent execution and collections performance by the team.
We continue to have no debt outstanding and also I would note we have 300 million undrawn on our revolver.
Inventory was $152 4 million.
<unk> from $164 6 million sequentially.
Days of inventory was 47 days in Q3 down eight days sequentially as we ship product to support our customers new product ramps.
Looking ahead to Q4 fiscal 'twenty three we expect inventory to increase from the prior quarter as we fulfill ongoing demand and manage inventory ahead of product ramps later in the calendar year.
Now turning to cash flow.
As I mentioned earlier cash flow from operations was $181 million in the December quarter, and Capex was roughly $8 million.
Solving and free cash flow for the quarter.
$173 3 million.
Free cash flow margin for the December quarter was 29%.
And for the 12 month period, ending in the December quarter free cash flow margin was 26%.
On the share buyback front in Q3, we utilized $50 million to repurchase approximately 713000 shares of our common stock at an average price of $70 and 14.
As of the end of Q3 fiscal year 'twenty, three we had $536 1 million remaining in our share repurchase authorization.
We expect to continue to return capital in the form of stock repurchases, which we believe will provide a long term benefit to shareholders going forward.
And now on to the guidance.
For the fiscal fourth quarter of 2023, we expect revenue in the range of $340 million to $400 million.
We expect gross margin to range from 49% to 51%.
non-GAAP operating expense is expected to be flat sequentially in the range of $120 million to $126 million.
As higher product development cost is offset by lower SG&A expense.
We will continue to control discretionary spending, but invest strategically in product development to drive long term growth.
On the tax front as we have previously discussed.
Due largely to a tax effective from the start of our fiscal year 2023.
That requires companies to capitalize and amortize R&D expenses, rather than deduct them in the current year.
We continue to expect our fiscal 'twenty non-GAAP effective tax rate to be approximately 23% to 25%.
We maintain our expectation that under this rule our effective tax rate will decrease and may return to a normalized range in about five years as additional years of R&D expenses are amortized for tax purposes absent any changes to the legislation.
I'd note that without the impact of this rule, our non-GAAP effective tax rate would be in our more typical mid teens range.
In closing we had a strong Q3 fiscal year 2023, as we executed well to deliver these results.
Going forward, we will continue to focus on the best opportunities to enable the company to grow both revenue and profitability over the long term.
And before we begin the Q&A session I would like to note that while we understand there is intense interest related to our largest customer.
In accordance with serious larger company policy, we will not discuss specifics about our business relationship.
With that let me now turn the call to Chelsea to start the Q&A session.
Thank you Frank we will now start the Q&A question of the earnings call. Please limit yourself to a single question and one follow up.
Operator, we are now ready to take questions.
Thank you.
We would like to ask a question press star followed by the number one on your telephone keypad.
Your first question today comes from the line of Matt Ramsey with Cowen <unk> Company. Your line is now open.
Thank you very much good afternoon guys.
I guess my first question.
Maybe this is for you I wanted to talk a little bit about seasonality obviously the.
The results in the December quarter, really strong and I think the guidance is sort of in line on a revenue basis for March, but that's down 25% give or take on a sequential basis.
Just maybe a bit more than typical seasonality or.
Or maybe you could just clarify what typical seasonality might be at this point in the cycle, but.
How do we kind of think about seasonality into June .
Theres been years, where June was down sharply theres been years, where June was up sharply.
Thinking.
To figure out how to characterize that because we're in a bit of an interesting period from an inventory perspective, all the way around in the smartphone space. Thank you.
Yes. Thanks for the question, Matt and let me start and then if John wants to add to it so as you pointed out.
Typical seasonality is no longer the case and especially given what's happened in the last couple of years with the pandemic.
But having said that as.
As you pointed out we had a pretty strong.
Q3 fiscal 'twenty, three and that was driven by the smartphone volumes, but I would say that looking ahead.
We have taken into account.
The demand signals that we have as we provide guidance for the March quarter, one thing to notice that in the prior year March quarter. We did have the benefit of the <unk> launch, which we do not expect.
This upcoming quarter.
And we'll take that into consideration along with all the other general market signals.
We have factored that into our guidance now as it relates to the June quarter, we're only giving guidance one quarter at a time and we'll deal with that at the next quarter's earnings call.
No. Thanks for that thanks fair enough.
John I was encouraged in your script that you talked about the tape out of the 22 nanometer codec and significant progress on the next generation of boosted amplifiers switch.
I think.
Lines up pretty well for some consistent.
Content expansion and new content for the company overall.
And then on the flip side you talked about.
The length of time in which your design wins stay relevant with your customer.
And talks about multiple years of revenue when you win something and I'm just trying to put those two things together in terms of.
The current generation of those products has been shipping for a while and youre going to have new generations coming how are you thinking about the potential for ASP resets or content expansion in dollar terms as those products launched generally understanding you can't be super specific given the customer.
Yes, thanks, Thanks Pat.
I'm not going to get into detail on the ASP front, but these are these are really big developments. If you look at that Kodak developed.
Development for example, not only is it a.
A really heavy lift to get all of that IP onto 22 nanometer we undertook.
Serious investment in the test chip.
And.
In that process.
What will be the best part of five years.
On a go by the time that product comes to market. So.
It's a very significant investment and frankly that chip is going.
Going to be phenomenal I think in terms of power.
Power consumption efficiency, what it does for our customers in terms of enabling system design flexibility.
And performance, it's a big leap forward and it can be the platform for a long time.
So in line with that yes, we would expect some some ASP uptake as we get.
We get to the launch of that.
Similarly with boosted amplifiers.
Goal when we were approaching a product like that is not only to look at how we can improve the product in Italy, but also how we can.
Save some costs and board space for our customers by integrating stuff that's around us on the board.
And with our new boosted amplifier, we're doing exactly that.
Where we're reducing the component count that sits around the amplifier.
And that gives our customers a real benefit and again when you are able to deliver benefit like that.
That results in a cost savings for the customer and should result in an ASP increase for us as well.
Your next question comes from the line of tore Svanberg with Stifel. Your line is now open.
Yes, Thank you and congratulations on the record results.
Maybe to follow on on that same topic.
Two nanometer smart codec and the boosted amp.
You did say you expect inclusive within the next couple of years I mean could you maybe be a little more granular.
Something that we should expect within the next two years next three years or is it sort of like within the next five years.
Oh, yes.
Thank you for the nice comment Terry by couple we mean too.
So we're old school on the definition of a couple.
We talked about the 22 nanometer codec being in design.
In the fall of last year and typically when we talk about setting aside all the all the work that comes before that and the test chip and so on when we talk about the actual product being in the design phase Thats typically a couple sorry, a couple meaning two years out from the actual introduction in the market.
Excellent and then on the topic of the laptop market you talked about 16, new models designed into last year I believe that was probably from your.
Didn't call them legacy products that you did talk about some new laptop specific products right. So those design wins are still on the come and and if Thats. The case with those also tend to carry higher asps.
Okay.
Yes, that's a great question and you're exactly right to clarify that those 60, plus design wins that I referred to are based on our products, which we had developed prior to targeting a laptop market is.
The expansion of our audio addressable market.
So we've really been doing very well with the existing product portfolio. However, you can.
Suddenly improve on that and optimize for for example battery architectures that we see in a variety of laptops.
I've talked about the sound wire interface being a feature that's coming over the horizon.
So we have we have these new generation products, which you are looking at addressing those needs and I think we will see our older products continued to run in parallel they certainly still perform extremely well in a highly relevant.
But yes, we would anticipate some some ASP increase as we as we see the introduction of those.
Of those new boosted amplifiers in particular.
Your next question comes from the line of Blayne Curtis with Barclays.
Your line is now open hey, good.
Afternoon.
Thanks for taking my questions I had two.
Just going back to Matt's question.
I think just analyzing December if you could just talk about the outside I think.
The shutdowns are kind of happening right as you kind of guided so you probably added some conservatism so that with the beat what were seeing I mean, obviously you have content gains and you may not track that customer, but they are down year over year, I think I missed a bit.
In the quarter and guide so I guess, that's the question we're going to get a lot is how do you view when your customers down, but it might be the wrong measure because you might add some.
It's conservatism. So just can you explain December a little bit more of that would be helpful.
Yes sure Blayne.
I think we got we guide with all the information we have at the time. So it is our best estimate of where we're going to land I think when you think about December , especially especially kind of how that matches up with our largest customer and Youll forgive me I hope I have.
Haven't fully passed all of Tim and Lukas comments, yet but.
But I think the big picture is number one you can't always it's not always easy to true up our shipments with customer shipments from our perspective demand signals from our customers throughout the quarter were strong and sustained.
That included.
Requests for Expedites drop shipping a lot of material and so on the kinds of things that carry additional costs and so they really tend to be things that customers.
Are asking for if they really need it.
And so that.
That's what we saw from the from the demand side I think the other things that are worth keeping in mind in terms of.
Analyzing our results and number one we are on the second cycle following significant content expansion with the with.
With the power conversion control chip that came in the previous generation, but we obviously get a tailwind effect from that and secondly, then because our content tilt higher towards the higher end devices to the extent that.
There was any.
Mix bias towards the premium models that would have benefited us.
And the demand signals that we saw and what we were shipping were consistent with that.
And then John My second question I, just wanted to ask in your shareholder letter you talked about shipping the Gen. Two camera controller.
You did a good job explaining the new codecs and am. So I was wondering if you do the kind of the same there is were trying to handicap, maybe the content boost from that could you explain the different geometry like different functionality any color there to help us get a grasp on what the content uplift would be good.
Yes.
A significant feature enhancement I think the biggest challenge around fit for for you and for US I think around the camera controller content is when you take into account the differing attach rates across skus within a generation the differing attach rates across generations and then the different.
<unk> from <unk>.
Selves with different Asps.
That gets very very difficult to.
To analyze so we've tended to talk in terms of blended ASP just the total value of the camera content, obviously, beginning at baseline back in.
Back three generations ago, where we indicated it was in line with an amplifier and then we saw a step up there was of the order of 20 ish from there.
And then or something something similar beyond that and then as we go into the next cycle, we will see it will see another incremental step up but the benefits that we get from higher value content of which this is.
It is really elongated over.
Over a number of years, because it will cascade down through the the models most likely and then washed through.
Subsequent generations as well.
And then if I could just add to what John said, just as we talked about the amplifiers and other products, where we have good visibility.
We are in a similar position with the camera controllers, having gone through multiple generations and there's also a lot of.
Our partnership.
Partnership with the customer to develop those products. So theres a lot of excitement about it.
And visibility about this.
Going forward.
Your next question comes from the line of Christopher Rolland with Susquehanna. Your line is now open.
Hey, guys. Thanks, Thanks for the question and congrats on December .
So actually as I look at December .
Your revenue at your largest customer is fantastic if you ex that out and look at our revenues from others.
It was perhaps a little lower than I had expected and.
<unk>.
Maybe the lowest we've seen in a while.
I guess.
Could you kind of address that is it just because you are catering to the needs and demands from your largest customer.
That you couldnt necessarily fulfill.
The other customers.
Or is does that really reflect true demand.
In the December quarter from other customers. Thanks.
Yes, Thanks, Chris.
Give a comment and invite bank to add any additional color if he'd like.
<unk>.
I think previous comments that I've given on how we approach the supply constrained environment probably.
Set the stage for what you've observed there which is that when we are.
Supply constrained what.
What we absolutely don't want to do is leave a customer in the lurch. So it tends to be on the granting of the nature of our business is that it tends to be on the granularity of our socket either we bid for a socket or we don't and if we are confident we can supply it we're not going to bid for it so winding back.
Multiple quarters before fiscal Q3, when we were bidding for these sockets, we were deep in the supply constrained environment, not really limited what we targeted.
Especially within the Android space and so yes that's.
That's resulted in.
Revenue I mean, I think great revenue story overall, but it's tilted.
A little towards our largest customer there for obvious reasons, we benefit in terms of total content value quite significantly with each of those devices that yourself.
Yes.
What John said.
If you think about the business that we sell outside of the largest customer. It's a combination of what we sell it to some of the other smartphone vendors.
Android, but also this is general market.
<unk> products the product portfolio that we sell into.
Typical analog.
Type of functionality and as you can imagine and we alluded to this on the previous call. The general market did see some softness and that's part of also why we saw the mix between the top customer and the rest of the business and we expect that to kind of continue and that's part of our guidance for the March quarter.
Okay.
That's very helpful. I guess, just a quick follow up on that one.
Should we expect to catch up to other customers in March, but secondly regarding supply that you had mentioned.
Can you talk about how comfortable you are now, particularly as we're seeing some supply slack from others around foundry or are you much more comfortable there or are you going to enter into larger wsh.
Kind of given this dynamic or just kind of.
Play it by ear.
Just anything around your supply situations strategy would be great.
Sure on the form a bit I would stop short of.
Talking about any catch up with other customers. We're excited about the sockets, we're in for sure, but given the macro uncertainty, it's hard to and some of the softness that we've seen in the general market that <unk> alluded to it's hard to be sure.
That's likely to play out.
The supply side, we have for sure are seeing.
Some easing up in certain areas, which has been been beneficial to us and is certainly.
Helped us.
<unk> planned to meet some of the commitments in.
Content growth that we see ahead of us.
But in some key.
Areas of our business, especially around our high voltage products.
We are still supply constrained in the that's in terms of absolute wafers and capacity for certain technologies that new forthcoming HMS products from us.
<unk>.
To that extent, where we're still we still see as we look forward through the coming quarters.
We have a lot of work to do on the supply side to meet the potential demand.
Your next question comes from the line of Rajiv Gill with Needham <unk> Company. Your line is now open.
Yes, Thank you and congrats on really good results.
Just a question.
Side of the smartphone market, particularly around the laptop traction that you're seeing I think in the past you've talked about the content per laptops estimated to start around $1 50 between the audio amps in the haptic drivers and the codex.
Wondering how you're kind of seeing both the unit penetration and kind of ASP.
Kind of mix within that market and you also talked about the opportunity to utilize your fast charging IP on both sides of the battery.
And so I think this is an important part of the story of the diversification story outside of mobile so.
Any thoughts on that market.
The progress there.
Yes, yes, thanks, Rajiv and thanks for the nice comment.
I think the way the way to think about the overall opportunity in the PC market or the laptop market for US which is why we're really focused with MPC.
As of the sound growth in the coming years, which we anticipate getting to over $1 billion by 2026, and thats going to be fueled by both an expansion of the audio Sam and the <unk>.
<unk>.
Includes both haptics and then the <unk>.
Our devices that you referred to so.
There are some different categories of power devices southern charging some elsewhere in power conversion within the laptops, but we do see good opportunity there.
I mentioned and we mentioned in the letter that we have taped out.
During the quarter.
Our first laptop focused power part so it's very early days for that I think it's going to be.
Something where we start seeing the impact of that in calendar 'twenty four.
But we're very excited about that and on the audio side that makes up the bulk of the Sam growth to about two thirds of that $1 billion plus Sam is audio and about one third <unk>.
But the the audio side really represents.
A more immediate opportunity to us given.
A where we are with products, where we've got existing products and new generation products.
And the fact that there is real immediate demand for a significant improvement in laptop audio.
And when you've heard laptops that incorporate our.
Our technologies.
Absolutely blow the competition away.
And I know that anybody used laptop for audio in the past five years, we will say that that's a fairly low bar to clear.
But it really is a game changer, what we can deliver an audio in that category. So we see that as being the bulk of the opportunity in the immediate term.
Yes, I appreciate that and for my follow up.
In terms of seasonality I know that's difficult to do.
To kind of articulate given the volatility in the industry. The last couple of years.
But when you're looking at your March guide.
Down.
Roughly 30% 37%.
Sequentially at the midpoint, how do we think about that seasonality kind of relative to historical patterns typically March is down roughly around 30%.
And then you.
June is also a little bit soft and then you have a big ramp in September December .
Given that more supply is coming we have a product cycle, how would you characterize the shape of the seasonality.
This year as it stands today.
Yeah. Thanks for the question Rajiv and thanks for your nice comments earlier.
As you pointed out with the.
With the performance that we had in the December quarter, obviously, we came in above the.
The high end of the guidance range, just driven by the.
The smartphone.
Content gains as well as the overall unit volumes now.
The March quarter as I mentioned in response to a previous question. We do see we took into account even though it's not typical seasonality as we pointed out, especially in the last couple of years, we did take into account that.
Unit volumes will be down sequentially.
Another thing that plays into our guidance for the March quarter actually two things I would say one is the fact that we didn't we won't have the benefit of the SC product launch from last year.
And so that accounts for a little more of the the guidance decline from the prior year and then the second aspect of it is also the general market product line that we.
Talked about earlier, which is essentially highly correlated with the macro and we certainly wanted to.
Take that into consideration as we provided guidance. So it's a combination of those things.
And then looking beyond the March quarter, I think it's too early for us.
It's anybody's guess, what the macro is going to do but we will provide you that guidance when we get to that next quarter's earnings call.
Operator, this will be our last question.
Your final question today comes from the line of Ananda Baruah from loop capital. Your line is now open.
Hey, guys. Appreciate you taking the question. Thanks, so much.
Yes, just two quick ones if I could.
Could you could you talk to what you what you see is the inventory environment to any extent yet visibility.
Across the business and then I have a quick follow up thanks.
Yes so.
I think John mentioned this earlier.
Which is essentially the signals that we got from our customer as we shipped into the December quarter.
Just that there was.
Significant demand for the products and.
The the.
The overall performance for the December quarter shows that we were.
Benefiting from from the smartphone unit volumes.
Looking ahead into the March quarter, we have taken into account.
The combination of what is typically a sequential decline in units and in addition to that the.
The macro thing, which is related primarily to the non.
In the smartphone business, which I talked about earlier, so it's a combination of those two things. So everything that we've seen so far suggests that we are shipping to demand, having said that we don't have perfect visibility into the customers' inventory and but.
The signals from our customers seem to suggest that we are shipping to the demand signals that we get.
Okay. Thanks for clearing that up that's really good context. Thanks, Mike.
And then this one is for.
For you, it's all you'll follow up yes.
The factors that will influence gross margin as you move forward here.
The pushes and pulls and Thats it for me. Thanks.
Yes, so the gross margin.
As we.
Reported in this quarter, we came in pretty close to the midpoint of our guidance range, probably 30 basis points higher.
The way to think about our gross margins long term as we want to obviously optimize between revenue growth and profitability over the long haul, we certainly want to stick with the 49 to 51 over time, we will.
As the mix of the product changes between how much we ship into smartphones versus what we ship into the general market will have some intra quarter.
<unk> gross margin, but the way to think about our long term model is to be in the 49% to 51% range such that we can continue to grow the top line at a very robust pace and maintain profitability at the current levels.
The operating margin is what we hope to expand over time, as we improve R&D efficiencies and controlled discretionary spending and so forth, but the gross margin is where we want to be.
I would now like to turn the call back over to Chelsea Heffernan.
Thank you operator with that we will end the Q&A session and I will turn the call to John for final remarks, Thank you Chelsey and <unk>.
Summary in the December quarter, Cirrus logic delivered record revenue with strong execution across our three areas of strategic focus number one continuing our leadership in smartphone audio number two broadening sales of audio components in key profitable applications beyond smartphones.
And thirdly, applying our mixed signal expertise to expand into new adjacent high performance mixed signal markets, we're more excited than ever about the opportunities that we see in front of us and we'd like to thank you all for your continued interest in Cirrus logic.
Before we close I'd also like to note that we will be participating in the Susquehanna Conference on March the second in New York. Please.
Please check our investor website for the details and if you have any questions that were not addressed on this call you can submit them to us via the ask the CEO section of our Investor website.
I'd like to thank everyone for participating today goodbye.
This concludes today's call. Thank you for attending you may now disconnect.
Sure.
Yes.
Yes.
Sure.
Okay.
Yes.