Q3 2024 Cirrus Logic Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic third quarter fiscal year 2024 financial results Q&A session. At this time, all participants are in a listen-only mode.
Ladies and gentlemen, thank you for standing by welcome to the Cirrus logic third quarter fiscal year 2024 financial results Q&A session. At this time all participants are in a listen only mode. After a brief statement, we will open up the call for questions from analysts instructions for queuing up will be provided at that time.
Operator: After a brief statement, we will open up the call for questions from analysts. Instructions for queuing up will be provided at that time. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference call over to Ms. Chelsea Heffernan, Vice President of Investor Relations. Ms. Heffernan, you may begin.
As a reminder, this conference call is being recorded for replay purposes, I would now like to turn the conference call over to MS. Chelsea Heffernan, Vice President and Investor Relations Miss Heffernan, you may begin.
Chelsea Heffernan: Thank you and good afternoon, joining me on today's call is John Forsyth, Cirrus Logics, President and Chief Executive Officer, and Thanks, Naphtha Mooney Chief Financial Officer today at approximately four P. M. Eastern time, we announced our financial results for the third quarter fiscal year 'twenty 'twenty four.
Chelsea Heffernan: Thank you and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's President and Chief Executive Officer, and Venk Nathamuni, Chief Financial Officer. Today at approximately 4 p.m. Eastern Time, we announced our financial results for the third quarter of fiscal year 2024. A shareholder letter discussing our financial results, the company's earnings release, and the webcast of this Q&A session are all available on the company's investor relations website. This call will feature questions from the analysts covering our company. Additionally, the results and guidance we discuss on this call will include non-GAAP financial measures that exclude certain items.
Chelsea Heffernan: Shareholder letter discussing our financial results the company's earnings release and the webcast of this Q&A session are all available at the company's Investor Relations website.
Speaker Change: This call will feature questions from the analysts covering our company.
Naphtha Mooney: Additionally, the results and guidance discussed on this call will include non-GAAP financial measures that exclude certain items reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release and they're all available on the company's Investor Relations website.
Chelsea Heffernan: 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 and 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 and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from I will now turn the call over to John.
Naphtha Mooney: 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.
Naphtha Mooney: 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.
Naphtha Mooney: Please refer to the press release and a 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 and Exchange Commission for additional discussion of risk factors.
Naphtha Mooney: That could cause actual results to differ materially from current expectations I will now turn the call over to John Thank you Chelsea and thank you everyone for joining our call today.
John Forsyth: Thank you, Chelsea, and thank you, everyone, for joining our call today. As you saw in the press release that Chelsea referred to, in the third quarter of fiscal year 2024, Cirrus Logic delivered record revenue of $619 million and record non-GAAP earnings per share of $2.89. In a moment, I'm going to hand the call over to Venk to discuss these results in greater detail, but before we get on to that, I'd like to provide a quick update on the progress we've made in the last quarter regarding the long-term growth strategy that I have outlined on prior calls. As I've said previously, our first strategic priority is leadership in smartphone audio, where we are looking forward to introducing our next generation custom boosted amplifier and our first 22 nanometer smart codec later this year.
John Forsyth: As you've seen in the press release, the Chelsea referred to in the third quarter of fiscal year 2020 for Cirrus logic delivered record revenue of $619 billion and record non-GAAP earnings per share of $2.89.
John Forsyth: In a moment I'm going to hand, the call over to banks to discuss these results in greater detail, but before we get onto that I'd like to provide a quick update on the progress we've made in the last quarter regarding the long term growth strategy.
John Forsyth: And on prior calls.
John Forsyth: As I've said previously our first strategic priority is leadership in smartphone with you where we are looking forward to introducing our next generation custom boosted amplifier and our first 2000 2022 nanometer smart codec. Later this year. These new products will deliver significant performance improvements over prior generations.
John Forsyth: These new products will deliver significant performance improvements over prior generations, enabling our customers to build more compelling and power efficient devices for users. In addition to preparing these products for launch, we're also continuing to win designs with Android customers on next-generation flagship smartphones. During the quarter, a key Android customer began shipping its latest flagship phones featuring Cirrus Logic audio amplifiers.
John Forsyth: Enabling our customers to build more compelling and power efficient devices for users.
John Forsyth: In addition to preparing these products for launch we are also continuing to win designs with Android customers on next generation flagship smartphones during.
John Forsyth: During the quarter, our key Android customer began shipping its latest flagship phones, featuring featuring Cirrus logic audio amplifiers.
John Forsyth: And we also began ramping multiple components for the early 2024 launch of another leading Android flagship device. Shifting to the second pillar of our strategy, we remain very enthusiastic about the potential to grow content in smartphones with our high-performance mixed-signal solution. We view this product line as a substantial opportunity to not only expand our addressable market but also to grow and diversify our revenue. Our progress in this area has been showcased in our camera controllers. Since the introduction of our first camera controller in calendar year 2020, we have launched three generations of these products, with each delivering enhanced performance, functionality, and, most recently, in the fall of 2023, additional signal processing capabilities to enable new features.
John Forsyth: And we also began ramping multiple components, but the early 2024 launch of another leading Android flagship device.
John Forsyth: Shifting to the second pillar of our strategy, we remain very enthusiastic about the potential to grow content in smartphones with our high performance mixed signal solutions.
John Forsyth: We view this product line is a substantial opportunity.
John Forsyth: Not only expand our addressable market, but also to grow and diversify our revenue.
John Forsyth: Our progress in this area has been showcased without camera controllers since.
John Forsyth: Since the introduction of our first camera controller in calendar year 2020, we Havent launched three generations of these products with each delivering enhanced performance functionality and most recently in the fall of 2023 additional signal processing capability to enable new features.
John Forsyth: The overall value of our camera content has increased over time, and we foresee this upward trend continuing in the future as we maintain our close engineering collaboration with our customers to further innovate in this area. Beyond the camera, we also see significant potential to expand our addressable market with advanced power and battery-related technology, and today we are actively engaged in a number of R&D programs focused on power and battery performance, which we believe can fuel future growth. The third element of our strategy is our focus on expanding into new applications and markets beyond smartphones. In this area, we continue to be excited about the opportunities we see in the laptop business. Today, we are delivering content to each of the top five laptop OEMs and actively pursuing many future design opportunities.
John Forsyth: The overall value of our camera content has increased overtime and we foresee this upward trend continuing in the future as we maintain a close engineering collaboration with our customers to further innovate in this area.
John Forsyth: Beyond the camera, we also see significant potential to expand our addressable market with advanced power and battery related technologies and today. We are actively engaged in a number of R&D programs focused on power and battery performance, which we believe can fuel future growth.
John Forsyth: The third element of our strategy is our focus on expanding into new applications and markets beyond smartphones.
John Forsyth: In this area, we continue to be excited about the opportunities we see in the laptop business today, we are delivering content to each of the top five laptop Oems and actively pursuing many future design opportunities.
John Forsyth: In January, at CES 2024, we saw a leading laptop OEM introduce two flagship laptops featuring several of our amplifiers, multiple haptic drivers, and a codec. Moreover, in addition to our growing momentum in laptop audio, in the December quarter, we were pleased to have been awarded our first laptop power socket, further expanding our laptop content opportunity. And yesterday, we were proud to announce our collaboration with Intel and Microsoft on a new PC reference design for Intel's upcoming Lunar Lake processor. This reference design includes our codec, amplifier, and power converter products, and will enable the creation of richer, more immersive audio experiences for laptops, as well as extend battery life and enable thinner, sleeker laptop designs.
John Forsyth: In January at CES 2024, we saw a leading laptop OEM introduced two flagship laptops, featuring several of our amplifiers multiple haptic drivers and a codec.
John Forsyth: Moreover, in addition to our growing momentum in laptop audio in the December quarter. We were pleased to have been awarded our first laptop power socket further expanding our laptop content opportunity.
John Forsyth: And yesterday, we were proud to announce our collaboration with Intel and Microsoft on a new PC reference design for Intel's upcoming lunar Lake processor.
This reference design includes our codec amplify and power converter products and will enable the creation of richer and more immersive audio experiences for laptops as well as extending battery life and enabling thinner sleeker laptop designs.
John Forsyth: Okay.
John Forsyth: Finally, we remain keen to deploy our products and technologies in further markets beyond smartphones and laptops. And in the December quarter, we began ramping production of two custom components for a newly introduced augmented reality computing device. With our commitment to product innovation and world-class execution, we believe we can continue to identify and capitalize on further opportunities in new applications and markets in ways that grow our business. With this growing and diversifying portfolio of technologies and products, it is important that we actively invest in our supply chain, in order both to develop new process technology that will meet the needs of future generations of products, and in order to provide our customers with the assurance of supply and geographical diversity that is becoming increasingly important. During the December quarter, we took delivery of, and commenced validation of, our first silicon from a new Foundry partner. This development will serve to qualify both the process technology and core IP needed to enable the creation of next-generation power solutions and provides us with a path to delivering those products from fabrication facilities based in the United States.
John Forsyth: Finally, we remain keen to deploy our products and technologies and further markets beyond smartphones and laptops and in the December quarter, We began ramping production of two custom components for our newly introduced augmented reality computing device.
John Forsyth: With our commitment to product innovation and World class execution. We believe we can continue to identify and capitalize on further opportunities in new applications and markets and ways to grow our business.
John Forsyth: With this growing and diversifying portfolio of technologies and products is important that we actively invest in our supply chain in order both to develop new process technologies that will meet the needs of future generations of products and in order to provide our customers with the assurance of supply and geographical diversity that is becoming increase.
John Forsyth: Bingley important.
John Forsyth: During the December quarter, we took delivery of and commenced validation of our first silicon from a new foundry partner.
John Forsyth: This development will serve to qualify both the process technology and core IP needed to enable the creation of next generation power solutions and provides us with a path to delivering those products from fabrication facilities based in the United States.
John Forsyth: We believe that this initiative will help make our supply chain more resilient and competitive and help us meet our customers' needs for innovation and quality for many years to come. In summary, we're pleased with our progress in the December quarter as we delivered record financial results and executed on many important areas of product development. With a commitment to great execution and to serving our customers in their mission to deliver the world's most innovative products, we are today investing in the product areas that we believe will enable the company to grow and diversify in the coming years. And with that, let me now turn the call over to Venk to provide an overview of our financial results for fiscal Q3 2024, as well as guidance for the fourth quarter. Thank you, John. Good afternoon, everyone.
John Forsyth: We believe that this initiative will help make our supply chain more resilient and competitive and help us meet our customers' needs for innovation and quality for many years to come.
John Forsyth: Okay.
John Forsyth: In summary, we're pleased with our progress in the December quarter, as we delivered record financial results and executed on many important areas of product development.
John Forsyth: With a commitment to great execution and to serving our customers in their mission to deliver the world's most innovative products. We are today investing in the product areas that we believe will enable the company to grow and diversify in the coming years.
John Forsyth: And with that let me now turn the call over to bank to provide an overview of our financial results for our fiscal Q3, 2024, as well as guidance for the fourth quarter.
Bank: Thank you John and good afternoon, everyone.
Venkatesh R. Nathamuni: I'll start with our fiscal third-quarter results and then provide guidance for fiscal Q4. Thanks to outstanding execution from the entire Cirrus team, we delivered record revenue as well as record earnings per share for the fiscal third quarter. Revenue was $619 million, which was significantly above our guidance range, as sales of components, shipping, and smartphones exceeded our expectations, driven by strength and orders from our largest customers. Shippen stayed strong throughout the quarter, including the post-holiday week.
Bank: I'll start with our fiscal third quarter results and then provide guidance for fiscal Q4.
Bank: Thanks to outstanding execution from the entire <unk> team, we delivered record revenue as well as record earnings per share for the fiscal third quarter.
Bank: Revenue was $619 million, which was significantly above our guidance range.
Bank: Sales of components shipping in smartphones exceeded our expectations.
Bank: By strength in orders from our largest customer.
Bank: Shipment stayed strong throughout the quarter, including the post holiday week.
Venkatesh R. Nathamuni: And we also benefited from an additional week of revenue in the quarter associated with the 53-week fiscal year. As such, revenue was up 29% quarter over quarter and increased 5% year over year due to higher smartphone unit volume. Turning now to gross profit and margins. Non-GAAP gross profit in the quarter was $317.9 million, and non-GAAP gross margin was strong at 51.4%, driven by higher revenue. On a sequential basis, the growth margin was roughly flat, while on a year-over-year basis, gross margin increased by 110 basis points, reflecting lower supply chain costs, mainly driven by the absence of wafer premiums and expedite fees, as well as favorable inventory reserves. This was partially offset by a less favorable product mix. Non-GAAP operating expenses in the quarter were $125.6 million, up $11.2 million sequentially. Non-GAAP operating expenses increased by 10% sequentially but were substantially below the 29% quarter-over-quarter increase in revenue.
Bank: We also benefited from an additional week of revenue in the quarter associated with the 53 week fiscal year.
Bank: As such revenue was up 29% quarter over quarter and increased 5% year over year due to higher smartphone unit volumes.
Bank: Turning now to gross profit and margins.
Bank: non-GAAP gross profit in the quarter was $317 9 million.
Bank: And non-GAAP gross margin was strong at 51, 4% driven by the higher revenue.
Bank: On a sequential basis gross margin was roughly flat.
Bank: While on a year over year basis gross margin increased by 110 basis points, reflecting lower supply chain costs, mainly driven by the absence of wafer premiums and expedite fees as well as favorable inventory reserves.
Bank: This was partially offset by a less favorable product mix.
Bank: non-GAAP operating expenses in the quarter were $125 6 million.
Bank: Up $11 2 million sequentially.
Bank: non-GAAP operating expenses increased by 10% sequentially, but was substantially below the 29% quarter over quarter increase in revenue.
Bank: The sequential increase was mostly due to higher employee related costs, including an extra week of salaries and benefits associated with a 53 week year as.
Venkatesh R. Nathamuni: The sequential increase was mostly due to higher employee-related costs, including an extra week of salaries and benefits associated with a 53-week year, as well as variable compensation. As in prior quarters, we will continue to control discretionary expenses. Non-GAAP operating income was $192.2 million in the third quarter, or 31.1% of revenue.
Bank: As well as variable compensation.
Bank: As in prior quarters, we will continue to control discretionary expenses.
Bank: non-GAAP operating income was $192 2 million in the third quarter or 31, 1% of revenue.
Venkatesh R. Nathamuni: Turning now to taxes, our GAAP and non-GAAP tax rates for the December quarter were lower than expected due to recent IRS guidance issued to U.S. taxpayers regarding the R&D expense amortization rules in the Tax Cuts and Jobs Act of 2017. Consequently, our tax rates for the December quarter reflect the cumulative tax benefit of applying the IRS guidance to decrease R&D capitalization amounts for all periods since the fiscal year 23 effective date of this provision. And lastly, on the P&L, non-GAAP net income in the third quarter was $160.6 million, or a record $2.89 per share, as the higher-than-expected revenue and gross margin flowed through to the bottom line, in addition to the one-time tax benefit I alluded to earlier. Let me now turn to the balance sheet. Our balance sheet continues to remain strong, and we ended the third quarter of fiscal 24 with approximately $587 million in cash and cash equivalents. Our ending cash balance was up $234.5 million from the prior quarter, primarily due to strong cash flow from operations, partially offset by stock repurchases during the quarter. We continue to have no debt outstanding.
Bank: Turning now to taxes, our GAAP and non-GAAP tax rates for the December quarter with lower than expected due to recent IRS guidance issued U S. Taxpayers regarding R&D expense amortization rules and the tax cuts and jobs Act of 2017.
Bank: Consequently, our tax rates for the December quarter to reflect the cumulative tax benefit of applying the IRS guidance the decreased R&D capitalization amongst for all periods since the fiscal year 'twenty three effective date of this provision.
Bank: And lastly on the P&L non-GAAP net income in the third quarter was $166 million or a record $2 89 per share as the higher than expected revenue and gross margin flowed through to the bottom line. In addition to the onetime tax benefit I alluded to earlier.
Bank: Let me now turn to the balance sheet, our balance sheet continues to remain strong and we ended the third quarter of fiscal 'twenty, four with approximately $587 million in cash and cash equivalents.
Bank: Our ending cash balance was up $234 5 million from the prior quarter.
Bank: Primarily due to strong cash flow from operations, partially offset by stock repurchases during the quarter.
Bank: We continue to have no debt outstanding.
Venkatesh R. Nathamuni: Additionally, as noted in prior quarters, we have $300 million undrawn on our Revolver credit facility. I'd like to reiterate that our balance sheet remains strong with a solid cash position and no debt. During the December quarter, we reduced inventory levels. The inventory balance at the end of the third quarter was $256.7 million, down from $328.9 million in Q2, as we drew down inventory to support our largest customer's new product launch. As a result, days of inventory declined 50 days sequentially, and we ended the quarter with approximately 78 days of inventory, down from 128 days in the prior quarter.
Bank: Additionally, as noted in prior quarters, we have 300 million undrawn on our revolver credit facility.
Bank: I'd like to reiterate that our balance sheet remains strong with a solid cash position and no debt.
Bank: During the December quarter with reduced inventory levels.
Bank: Inventory balance at the end of the third quarter was $256 7 million.
Bank: Down from $328 9 million in Q2.
Bank: As we drew down inventory to support our largest customers new product launch.
Bank: As a result days of inventory declined 50 days sequentially and we ended the quarter with approximately 78 days of inventory down from 128 days in the prior quarter.
Venkatesh R. Nathamuni: Looking ahead, in Q4 fiscal 24, we expect inventory dollars to increase slightly from the prior quarter. We continue to actively manage our inventory position to meet customer demand while still fulfilling our purchase commitment. And turning to cash flow, cash flow from operations was $313.7 million in the December quarter, and CapEx was roughly $9.8 million, resulting in a non-GAAP free cash flow margin for the quarter of 49%. For the 12-month period ending in the December quarter, non-GAAP free cash flow margin was 14%.
Bank: Looking ahead in Q4 fiscal 'twenty four we expect inventory to increase slightly from the prior quarter.
Bank: We continue to actively manage our inventory position to meet customer demand, while still fulfilling our purchase commitments.
Bank: And turning to cash flow cash flow from operations was $313 $7 million in the December quarter, and Capex was roughly $9 8 million.
Bank: Resulting in non-GAAP free cash flow margin for the quarter of 49%.
Bank: For the 12 month period, ending in the December quarter, non-GAAP free cash flow margin was 14%.
Venkatesh R. Nathamuni: On the share buyback front, in Q3, we utilized roughly $57 million to repurchase approximately 780,000 shares of our common stock at an average price of $72.93. As of the end of fiscal 24, we had $365 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. Now, on to the guidance. For Q4 of fiscal 24, we expect revenue in the range of $290 million to $350 million. We expect gross margin to range from 49% to 51%. Non-GAAP operating expenses are expected to decrease sequentially and to be in the range of $114 million to $120 million, primarily due to lower variable compensation and one less week of salaries as we return to a 13-week quarter.
Bank: On the share buyback front in Q3, we utilized roughly $57 million.
Bank: The repurchased approximately seven 780000 shares of our common stock at an average price of $72 93.
As of the end of Q3 fiscal 'twenty four we had $365 million remaining in our share repurchase authorization.
Bank: 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.
Bank: And now onto the guidance for.
Bank: For Q4 of fiscal 'twenty, four we expect revenue in the range of $290 million to $350 million.
Bank: We expect gross margin to range from 49% to 51%.
Bank: non-GAAP operating expenses are expected to decrease sequentially and to be in the range of $114 million to $120 million primed.
Bank: Primarily due to lower variable compensation and one less week of salaries as we return to a 13 week quarter.
Bank: Overall from an operating expense perspective, we will continue to control discretionary spending.
Venkatesh R. Nathamuni: Overall, from an operating expense perspective, we will continue to control discretionary spending but invest strategically in product development to drive long-term growth. Our fiscal 2024 non-GAAP tax rate is expected to be approximately 21% to 23%, which is lower than our prior quarter's guidance of 24% to 26% and reflects the cumulative tax benefit of applying recent IRS guidance that clarified aspects of the capitalized R&D rules. In closing, we had a strong Q3 fiscal 24 as we delivered record revenue and record non-gap earnings per share. Thanks to the collective efforts and strong execution by the entire Cirrus Logic team. 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 finally, while we understand there is intense interest related to our largest customer, in accordance with Cirrus Logic company policy, we will not discuss any specifics about this business relationship. With that, let me now turn the call over to Chelsea to start the Q&A session. Thanks, Venk.
Bank: But invest strategically in product development to drive long term growth.
Bank: Our fiscal 2024, non-GAAP tax rate is expected to be approximately 21% to 23%.
Bank: It is lower than our prior quarter's guidance of 24% to 26%.
Bank: And reflects the cumulative tax benefit of applying recent IRS guidance I clarified aspects of the capitalist R&D routes.
Bank: In closing we had a strong Q3 fiscal 'twenty four as we delivered record revenue and record non-GAAP earnings per share.
Bank: Thanks to the collective efforts and strong execution by the entire citizen logic team.
Bank: 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.
Bank: And finally, while we understand there is intense interest related to our largest customer.
Bank: In accordance with citizen logic company policy, we will not discuss any specifics about this business relationship.
Bank: With that let me now turn the call to Chelsea to start the Q&A session.
Chelsea Heffernan: We will now start the Q&A portion of the earnings call. Please limit yourself to a single question and one follow-up. Operator, we are now ready to take questions. At this time, if you'd like to ask a question, simply press star 1 on your telephone keypad.
Chelsea Heffernan: We will now start the Q&A portion of the earnings call. Please limit yourself to a single question and one follow up operator, we are now ready to take questions.
Chelsea Heffernan: At this time, if you'd like to ask a question simply press star one on your telephone keypad. Your first question will come from the line of tore Svanberg with Stifel. Please go ahead.
Tore Egil Svanberg: Yes. Thank you.
Tore Egil Svanberg: Your first question will come from the line of Tore Svanberg with Stieple. Please go ahead. Yes, thank you, and congratulations on the record revenue and cash flows. First question, John, you said in your shareholder letter that the camera would come. Thank you, Tore, and thanks for the nice words.
Tore Egil Svanberg: Congratulations on the record revenue and especially the cash flows.
Tore Egil Svanberg: The first question.
Tore Egil Svanberg: So John you said in your shareholder letter that the camera content has increased over time, you just introduced your third generation.
Tore Egil Svanberg: But it's kind of like three generations in three years. So should we assume there's going to be a fourth generation next year that will.
Potentially have some additional content and obviously thats above and beyond what's happening on the audio side.
John Forsyth: Thank you Terry and thanks for the nice words I wouldn't assume that.
John Forsyth: I wouldn't assume that as a baseline assumption. What we have seen over time is that the value of the content has grown partly with the introduction of new camera controllers from us, which have more features, but partly also as a consequence of an increased attach rate and then greater proliferation through the SKUs and generations of products. We see that as being the collection of drivers to the trend of growth and value over time. But that's not to say that we don't have plenty of development work going on in the pipeline around the camera controller. We do have some very exciting stuff, but we're not signaling a timeframe for that coming to market yet. Okay, thank you. And as a follow-up, you announced the new foundry. It sounds like maybe that's more for power management. Correct me if I'm wrong here.
John Forsyth: As a baseline assumption what we have seen over time is that the value.
John Forsyth: The content has grown partly with the introduction of new camera controllers from us which have more features but partly also as a consequence of increased attach rate and then.
John Forsyth: Greater proliferation through the Skus and generations of products. So we see that as being a as is being the kind of collection of drivers to the trend of growth and value over time, that's not to say that we don't have plenty of development.
John Forsyth: What's going on in the pipeline around the camera control and we do have some very exciting stuff, but we're not signaling.
John Forsyth: A timeframe for that coming to market yet.
Speaker Change: Great. Thank you and as my follow up you announced a new the new foundry.
Speaker Change: It sounds like maybe that's more for power management, correct me, if I'm wrong, there but should.
Tore Egil Svanberg: But should we sort of assume that this goes hand in hand with some of the R&D programs you have going on the way? And how long would it take, I guess, for you and your funding partner to develop this to be a very high volume? Right. Yeah, great question.
Speaker Change: Should we sort of assumed that this goes hand in hand with some of the R&D programs do you have going underway and how long would it take I guess for.
Speaker Change: You on your funding partner to develop this to be a very high volume business.
Speaker Change: Right Yeah, great. Great question. The focus there is predominantly around power related devices. So that might include some power management power conversion obviously we've.
John Forsyth: The focus there is predominantly on power-related devices, so that might include some power management, and power conversion. Obviously, we've had some products out there that we call power conversion control and so on, which don't quite fit any of the neat boxes in that area of products, but that kind of stuff generally will be extremely well served as we go forward with this Foundry partnership. And so, yes, that's a yes to the first part of your question. In terms of the time frame, well, we've just seen the first silicon.
Speaker Change: Had some products out there that we call power conversion control and so on which don't quite fit any of the knee.
Speaker Change: <unk> in that in that area of products, but that kind of stuff generally will be extremely well served as we go forward by by this.
Speaker Change: Foundry partnership and so yes that's.
Speaker Change: Yes to the first part of your question in terms of timeframe. What we've just seen the first silicon I think where we're at.
John Forsyth: I think we're very excited about it, but we're still quite some way from that being a high-volume process for us. So, think of us as being still two, three years out from actually having product, and then probably not starting with a huge volume product just so that we can get up the ramp safely together. But these things take a while to develop, but then, as our track record has shown, certainly in other areas where we've invested and worked very, very closely with Foundry partners, we then get, you know, many, many years, and, in fact, in the case of some of our products, that's a decade or so of deriving a lot of competitive advantage and performance advantage from the work that we've done together on process development. Your next question comes from the line of Matt Ramsay with TD Cowan. Please go ahead. Thank you very much. Good afternoon.
Speaker Change: Excited by it but thats still quite some way from that being a high volume.
Speaker Change: It kind of process for us so think of us as being still two to three years out from actually having product and then probably probably not starting with.
Speaker Change: With a huge volume product just so that we can get up the ramp safely together, but these things are.
Speaker Change: Okay.
Speaker Change: They take a while to develop but then as I think our track record has shown certainly in other areas, where we've invested in and worked very very closely with foundry partners.
Speaker Change: We then get many many years.
Speaker Change: In fact.
Speaker Change: In the case of some of our product sets.
Speaker Change: A decade or so of deriving a lot of competitive advantage and performance advantage from the work that we've done together on process development. So it takes a while but they were very excited about where it can take us in the long run.
Speaker Change: Your next question comes from the line of Matt Ramsay with TD Cowen. Please go ahead.
Matthew D. Ramsay: Thank you very much good afternoon.
Matthew D. Ramsay: John, I wanted to ask about the notebook market. It's been something that's been on the horizon for Cirrus for a while, and you mentioned it, and congrats on the partnership with Intel and Microsoft. You mentioned being in Ah, shipping to each of the top five laptop OEMs. And I wanted it to be a fraction of the units of the smartphone market, but it's not that horribly different from the units shipped into the smartphone market by your largest customer. So I'm just trying to get my head around how you're thinking about the notebook opportunity over time in terms of the realistically addressable market for Being Human, a relatively similar opportunity to what your company is serving in the smartphone space, given you ship primarily to one big customer there I'm just trying to calibrate my expectations over a three to five year period of how you're thinking about that market. Thanks.
Matthew D. Ramsay: John I wanted to ask about the notebook market its been something thats been on the come for serious for a while and you.
Matthew D. Ramsay: Mentioned.
Matthew D. Ramsay: And congrats on the partnership with Intel Microsoft You mentioned being in.
Matthew D. Ramsay: Shifting to the each of the top five laptop Oems and I wanted the fraction of the units of the smartphone market, but it's not.
Matthew D. Ramsay: That <unk> different from the unit.
Matthew D. Ramsay: Shifting into the smartphone market by your largest customer so I'm just trying to.
Matthew D. Ramsay: Get my head around how you're thinking about the notebook opportunity over time in terms of.
Matthew D. Ramsay: Realistically addressable market in the next three to five years is this something that you could ship many of the same components into.
Matthew D. Ramsay: From a unit perspective, and an ASP perspective collectively.
Matthew D. Ramsay: Relatively similar opportunity to what your your company serving in the smartphone space. Given these ship primarily due to one big customer there I'm just trying to get calibrate my expectations over three to five year period of how youre thinking about that market.
John Forsyth: Yeah, thanks, Matt. So just to unpack that a little. We are in the early innings here.
Speaker Change: Yeah. Thanks, Matt So just to unpack that a little.
Speaker Change: We are in the early innings.
John Forsyth: And I've given a bit of color previously on what I expected our potential revenue ramp to be over the next year or two, so fiscal 24 really just is de minimis, but as we get into fiscal 25, we think that'll be in the low tens of millions and then growing beyond that. So the work that you're seeing us talk about today, when we talk about design-ins and the Lunar Lake reference platform, That's really mostly feeding into products that we'll see in calendar 25, so that should be an accelerant to revenue there. I would like to put a ceiling on the SAM that we see because as we uncover more opportunities, I think that we are feeling more optimistic about that in time. There are certain variables there, which honestly remain to be seen, like, for example, how many amplifiers are attached to the various different product tiers. So we see today designs ranging from between two boosted amplifiers to six boosted amplifiers, and that may be alongside a codec.
Speaker Change: I've given a bit of color previously on what I expected.
Speaker Change: Our potential revenue ramp maybe.
Speaker Change: It may be over the next year or two so we our fiscal 'twenty forward really just a de minimis, but as we.
Matthew D. Ramsay: Alright get into fiscal 'twenty, five we think that'll be low tens of millions and then growing beyond that so the work that youre seeing us talk about today, when we talk about design ins and the lunar Lake reference platform.
Matthew D. Ramsay: That's really mostly feeding into products that we'll see in calendar 'twenty five so that's that should be.
Matthew D. Ramsay: An accelerant to to revenue that I would like to put a ceiling on the on the Sam that we see because thats as we uncover more opportunities I think that.
Matthew D. Ramsay: We are feeling more optimistic about that over time, there are certain variables, there, which honestly are remained to be seen like for example, how many ample.
Matthew D. Ramsay: Amplifiers are attached in the in the various different product tiers. So we see today designs ranging from between two boosted amplifiers to six boosted amplifiers and that may be alongside a codec.
John Forsyth: And in the case of the flagship products that we talked about in the opening remarks that were launched in January, we also saw haptics drivers along there as well. So I think, you know, that's the color on the revenue ramp that we see right now. I think that the biggest and most important thing here is really the three milestones that we've passed. So, first of all, seeing the launch of the audio products, so those boosted amplifiers and the codec that were in those products that I mentioned, those are laptop-specific, brand new audio products from us.
Matthew D. Ramsay: And in the case of the.
Matthew D. Ramsay: The flagship products that we talked about in the opening remarks that were launched in January. We also saw haptic drivers along there as well. So I think that's the color on the revenue ramp that we see right now I think the biggest and most important thing here is really the three milestones that we've we've.
Matthew D. Ramsay: Past so.
Matthew D. Ramsay: First of all is seeing the launch of the audio products.
Matthew D. Ramsay: So those those boosted amplifiers and the codec that were in that product in those products that I mentioned those are <unk>.
Matthew D. Ramsay: <unk> specific brand new audio products from us.
John Forsyth: And the audio proposition, I think, is extremely strong. So, you know, what we've seen in benchmarking that against the competition is that our products enable you to double the output loudness, 3x the low frequency response, while consuming 50% less board space, 50% less power, and something like a third of the overall component count. So that's a very compelling proposition. It's going to take time to see people adopt it.
Matthew D. Ramsay: Then in the audio proposition I think is extremely strong so what we've seen in benchmarking that against the competition is that.
Matthew D. Ramsay: Our products enable you to double the output loudness.
Matthew D. Ramsay: <unk> the the low frequency response.
Matthew D. Ramsay: All consuming 50% last board space, 50% less power and something like a third of the overall component count.
Matthew D. Ramsay: That's a very compelling proposition, it's going to take time to see people adopt all of that or parts of it and for that to proliferate down through the tiers, but I think the.
John Forsyth: You know, all of that or parts of it, and for that to proliferate down through the tiers. But I think the opportunity is very, very significant. And then, so the first milestone was really getting those audio products into the market and launched. The second was winning our first power products. So, again, that's something where we can see an attach rate where that gets designed in. The attach rate can be two or three products, in some cases, conceivably more than that. But that, again, and those products, the power conversion products, are, you know, a fairly significant value by our standards. So, kind of a buck and change.
Matthew D. Ramsay: The opportunity is very very significant.
Matthew D. Ramsay: So the first milestone was really getting those audio products into the market and launched the second is winning our first power products. So again, that's something where we can see.
And attach rate, where where that gets designed in the attach rates.
Matthew D. Ramsay: Can be two or three products in some cases conceivably more than that but.
Matthew D. Ramsay: That again and those products of power conversion products.
Matthew D. Ramsay: Fairly significant value by a standard so kind of a buck in change.
John Forsyth: So we don't know exactly how far down the tier that can go yet. But again, it's it's represents a great opportunity. And getting the first design in for power products is a very significant milestone for us. And then the third milestone that we're talking about here today really is that reference design launch. And that, as we know, can be a real catalyst for helping design activity as we go. Yeah. And Matt, this is Venk.
Matthew D. Ramsay: So we don't know whether.
Matthew D. Ramsay: Exactly like how far down through the tiers that can go yet, but again its a represents a great opportunity.
Matthew D. Ramsay: And getting the first the first design in of power products is a very significant milestone for US and then third the third milestone that we're talking about here today really is that reference design launch in that.
Matthew D. Ramsay: As we know it can be a real catalyst for helping design activity as we go forward.
Matthew D. Ramsay: And Matt This is James just to add to what John said in terms of just the total size of the opportunity that we're looking at as well as the pricing question that you asked so clearly we're starting out with addressing the high end of the laptop space and as John just alluded to this a range of possibilities in terms of selling the codec and the amplifiers and then power eventually.
Venkatesh R. Nathamuni: Just to add to what John said, in terms of just the total size of the opportunity that we're looking at, as well as the pricing question that you asked, so clearly, we're starting out by addressing the high end of the laptop space. And as John just alluded to, there's a range of possibilities there in terms of selling the codec, and the amplifiers, and then power, eventually. And then just from a pricing standpoint, I'd say we expect this to be in line with or above our corporate average gross margins. So that's our model long term. And that's what we're working towards achieving. Thank you both for all the detail there. Don't worry; we won't get over our skis of modeling.
James: And then just from a pricing standpoint, I would say.
James: We expect this to be in line or above our corporate average.
James: Gross margins. So that's our model long term and that's what we're working towards achieving.
Speaker Change: Thank you both for all the detail there don't worry we won't get over our skis with modeling I'm, just trying to sort of calibrate mind my expectations over the longer term.
Matthew D. Ramsay: I'm just trying to sort of calibrate my expectations over the longer term. As my follow-up question. Thank you. A year where you reemphasize that you're going to be shipping a new Kodak on 22 nanometer and new boosted amplifiers, both later this year. And I guess I just wanted to ask.
Speaker Change: As my follow up question.
Speaker Change: It is.
Speaker Change: A year, where as you sort of.
Speaker Change: I guess reemphasize that youre going to be shipping a new.
Speaker Change: Kodak on 22 nanometer and new boosted amplifiers both.
Speaker Change: Later this year.
Speaker Change: I guess I just wanted to ask is there going to be anything different units aside, which obviously you don't want to predict but.
Matthew D. Ramsay: Is there going to be anything different, I mean, units aside, which obviously..., won't want to predict, but anything different in the revenue ramp cadence or timing given you have new products shipping in on both the Kodak and the amplifier sides? All else equal on units, would you expect a different shape to the year because both of those products would be new into SKUs?
Speaker Change: Anything different in.
Speaker Change: Revenue ramp cadence or timing given you have new products shipping in on both the codec and amplifier sizes.
Speaker Change: All else equal on units would you expect a different shape to the year because both of those products would be new into skus.
Venkatesh R. Nathamuni: Yeah, Matt, I'll address that. No, I think you correctly identified the increased content that we had alluded to in prior quarters in terms of what we expect in our fiscal 25. And I think in terms of just the timing of those ramps. The typical pattern with our customers is to ramp those products right around the middle of the year, plus or minus.
Speaker Change: Yes, Matt I'll address that.
Speaker Change: You correctly identified the increased content that we've alluded to in prior quarters in terms of what we expect in our fiscal 'twenty five.
Speaker Change: And.
Speaker Change: <unk>.
Speaker Change: In terms of just the timing of those ramps.
Speaker Change: The typical pattern with our customers begin to ramp those products and those.
Speaker Change: On the middle of the year or plus or minus so.
Thomas O'malley: So we don't see anything that's fundamentally changed in terms of the timing of those ramps. And in terms of the overall content, we did talk about those four components that will have a newer generation compared to the prior models. So we're pretty excited about the fact that we're reducing the next generation of the codec and three instantaneous stations for the next generation of the amplifier. And that's what we expect will drive our performance in Cisco 25. Your next question comes from the line of Thomas O'Malley with Barclays. Please go ahead.
Speaker Change: We don't see anything Thats fundamentally changed in terms of the timing of those ramps and in terms of the overall content. We did talk about the four components that.
Speaker Change: That will have a newer generation.
Speaker Change: Compared to the prior.
Speaker Change: Compared to the prior phone model. So we're pretty excited about the fact that we're reducing the next generation of the codec and three instantiation. So the next generation of the amplifier and Thats, what we expect will drive our performance in fiscal 'twenty five.
Speaker Change: Your next question comes from the line of Thomas O'malley with Barclays. Please go ahead.
Thomas O'malley: Hey, good evening, guys and thanks for taking the question.
John Forsyth: Hey, good evening, guys, and thanks for taking the question. John, in the script, you talked about two custom components for an augmented reality product. Could you talk about what sort of products you would be shipping into that genre and then potentially how you see that portfolio growing? You're seeing small unit volumes to start there over the past couple of years, but that could obviously be a lot larger in the coming years. I just want to understand where you guys can best address.
Thomas O'malley: John in the script, you talked about two custom components for an augmented reality product.
Thomas O'malley: Could you talk about what sort of products, you would be shipping into to that genre.
Thomas O'malley: And then potentially how you see that portfolio scaling.
Thomas O'malley: Seeing small unit volumes to start there over the past couple of years, but that could obviously deal up larger in the coming years.
Speaker Change: To understand where you guys best address that market.
John Forsyth: Yeah, thanks, Tom. I think we're excited about that category without really having anything significant in our model for it for now, as you alluded to. If you look back over the last three or four years, or perhaps even slightly longer than that, since the category has been emerging for VR and AR, we've got a very good track record of getting sockets in there, typically with off-the-shelf silicon and typically focused on audio.
Speaker Change: Yes, Thanks, Tom I think we're excited about that category without really having anything significant in our model for it for now as you as you alluded to.
Speaker Change: Look back over the last.
Speaker Change: Three or four years, I think perhaps even slightly longer than that since the category has been emerging.
Speaker Change: VR and AR and they are we've got a very good track record of getting sockets in typically with off the shelf silicon and typically focused on audio in this case the components that I was alluding to in my opening remarks, we're actually in the <unk> category I'm not going to.
John Forsyth: In this case, the components that I was alluding to in my opening remarks are actually in the HPMS category. I'm not going to be more specific about what they're doing than that, but again, that's a positive for us, I would say, as it demonstrates that we have both HPMS and audio-relevant capabilities for that category of device. And I think that that makes a lot of sense because we know that physical size, physical weight, and power efficiency are going to be incredibly important when it comes to anything that you have to wear on your head for extended periods. So we're excited long term, and we'll kind of continue to monitor that category as, hopefully, it accelerates. Super helpful. And then, switching to an entirely different topic, just back on the other updates in the new foundry, I just wanted to be clear. So you're talking about geographical diversity.
More specific about what they're doing in that but again, that's a that's a positive for us I would I would take as a.
Speaker Change: It demonstrates that we have both.
Speaker Change: <unk> and audio relevant capabilities for that category of device and I think that makes a lot of sense, because we know that physical size physical weight and power efficiency, you're going to be incredibly important when it comes to anything that you you have to wear on your head for extended periods.
Speaker Change: So we're excited long term and we'll kind of continue to monitor that category is hopefully if it accelerates.
Speaker Change: Super helpful. And then switching to an entirely different topic, just tack on to other updates and the new foundry.
Speaker Change: I just wanted to be clear. So you are talking geographical diversity youre talking to more power products. There is this a foundry that's based in the U S or just a foundry that has that facility in the U S. Just trying to understand better the.
Thomas O'malley: You're talking more power products there. Is this a foundry that's based in the US, or just a foundry that has a facility in the US? Just trying to understand the landscape better.
Speaker Change: The landscape. Thank you.
John Forsyth: Thank you. Yes. Yeah, the foundry facilities are in the U.S.
Speaker Change: Yes.
Speaker Change: Yes, yes, the foundry facilities or in the U S.
Speaker Change: I think.
John Forsyth: I think I'll probably leave it there. We're still in fairly early innings with them and in the partnership, but yeah, as you correctly highlighted, we have seen geographical diversity become an increasingly important concern, along with the other things that we look for within our supply chain and foundry partnerships, namely technological leadership, assurance of supply, and competitive playing field. Your next question comes from the line by Christopher Rolland with Susquehanna. Please go ahead.
Speaker Change: I'll probably leave it there we're still in fairly fairly early.
Speaker Change: Early innings with them in partnership.
Speaker Change: But.
Speaker Change: Yes, as you can.
Speaker Change: Correctly highlighted we have seen geographical diversity become an increasingly important concern along with the other things that we look look for.
Speaker Change: In our <unk>.
Speaker Change: Supply chain and factory partnerships, namely.
Speaker Change: Technology leadership.
Speaker Change: Assurance of supply and competitive playing field.
Speaker Change: Your next question comes from the line of Christopher Rolland with Susquehanna. Please go ahead.
Christopher Adam Jackson Rolland: Hey guys, thanks for the question. Minds around the Intel reference design. So, first of all, I just want to make sure you are not in the Meteor Lake reference design. I would assume that you're not in the Arrow Lake reference design, and so the first... One would be Lunar Lake.
Christopher Adam Jackson Rolland: Hey, guys. Thanks for the question.
Mines around the Intel reference designs.
Christopher Adam Jackson Rolland: So first of all I just want to make sure you are not in the Meteor Lake reference design.
Christopher Adam Jackson Rolland: Would assume that youre not in the Aero Lake and so the first one would be lunar lake.
John Forsyth: Um, I guess getting into a reference design, how does that change the profile of this market? All wins for this market. And I guess tied to this as well, this power product. Can you tell us a little bit more about this? Is it power conversion? Is it DC-DC?
Christopher Adam Jackson Rolland: I guess getting into a reference design, how does that change the profile.
Christopher Adam Jackson Rolland: <unk> wins for this market.
Christopher Adam Jackson Rolland: And.
Christopher Adam Jackson Rolland: And I guess tied to this as well this power product can you tell us a little bit more about this as a power conversion is at D. C D C what would.
John Forsyth: What's its actual function? Thank you. Yeah, thanks, Chris. I would love to be able to tell you with confidence what it's going to do for the design momentum, I think, but we, the truth is, we don't know yet. I think it can only be a good thing. I think we're certainly, we've been very excited in that collaboration with Intel and Microsoft about the vision for laptop devices which are substantially more immersive when it comes to the audio and visual experience and thinner, lighter, and more power efficient. So we're very, very proud to be a part of that and how that translates in terms of adoption and what it means for design in our components. It's probably too early for us to say, but typically, I think you can expect pretty good design momentum on the back of being on the reference design, as you would expect, and also, we're excited that it looks like that the laptop market may see a bit of a boost from the interest in AI-centric devices and use cases as well. So, you know, hopefully, we're getting aboard a train.
Speaker Change: Whats it sexual function. Thank you.
Speaker Change: Okay.
Speaker Change: Yes, Thanks, Chris.
Speaker Change: I would love to be able to tell you with confidence what it is going to do for the design momentum I think.
Truth is we don't know yet I think it can only be a good thing I think we're certainly we've been very excited in that collaboration with Intel and Microsoft about the vision for.
Speaker Change: Laptop devices, which is substantially more immersive when it comes to the audio and visual experience and thinner lighter and more power efficient. So we're very very proud to be a part of that.
Speaker Change: That translates in terms of adoption and what it means for designing of our components, it's probably too early for us to say I would say that.
Speaker Change: Typically I think you can expect pretty good design momentum on the back of being on the reference design as you would expect and also.
Speaker Change: Where we're excited that.
Speaker Change: It looks like that that laptop market may see a bit of a.
Speaker Change: Our cake from from the interest in the AI centric devices in use cases as well so hopefully we're getting a board a train.
Speaker Change: It's accelerating that.
John Forsyth: That's that's accelerating that The the power conversion product itself. Yeah, that's leveraging switch cap power conversion Technology which originated with the line acquisition that we did so it's it's replacing a kind of Classic Multi-phase buck controller Power converter power conversion architecture So it reduces the component count as well as really significantly increases the efficiency of the DC to DC conversion So your heat loss is a much lower You're you're able to to Effectively get get more done using less power drawn from the battery So that's really going to be focused primarily on driving, you know fanless and single fan design So thinner quieter more efficient product, It's great.
Speaker Change: The power conversion product itself, yes, that's leveraging switch cap power conversion.
Speaker Change: Technology, which originated with the Lion acquisition.
Speaker Change: But we did so it's replacing a kind of.
Speaker Change: A classic.
Speaker Change: A multiphase Buck controller.
Our power converter power conversion architectures reduces the component count as well as really significantly increases the efficiency of the DC to DC conversion.
Speaker Change: So youre heat losses are much lower.
You are able to.
Speaker Change: To effectively get more done using less power are drawn from the battery.
Speaker Change: So that's really going to be focused primarily on driving finalists and single sign designed so thinner quieter more efficient products.
Speaker Change: That's great nice to see that line acquisition come around.
Christopher Adam Jackson Rolland: Nice to see that line acquisition come around. My second question is around gross margin, and in particular, as we think about laptop products mixing in, but also this new content coming, you know, in the fall. Is there anything that we should consider regarding gross margin between here and there? Yeah, Chris, thanks for the questions, Venk. So, you know, from a gross margin perspective, as I alluded to earlier, as it relates to the PC business, we do expect that to be in line or slightly accretive to our gross margins over the long term. As you know, our model has been fairly steady between 49 and 51 percent. And in some quarters, we come in close to the high end, some quarters right in the middle.
Speaker Change: Sure.
Speaker Change: My second question.
Speaker Change: Is around gross margin.
Speaker Change: And in particular.
Speaker Change: As we think about laptop products mixing and but also this new content coming.
Speaker Change: In the fall.
Speaker Change: Is there any thing that we should consider regarding gross margin between here and there.
Speaker Change: Yes, Chris Thanks for the question so.
Speaker Change: From a gross margin perspective, as Ed alluded to earlier as it relates to the PC business, we do expect that to be in line or slightly accretive to our gross margins long term as you know our model has been fairly steady between 49 and 51%.
Speaker Change: Some quarters will come in close to the high end some quarters right in the middle and I think that's driven by the fact that we want to optimize between revenue growth and profitability such that we still are able to grow the top line.
Venkatesh R. Nathamuni: And I think that's driven by the fact that we want to optimize revenue growth and profitability such that, you know, we are still able to grow the top line at a fairly decent clip and maintain good profitability. Now, over time, our objective is obviously to improve profitability across the board. And that's driven by, you know, the fact that we want to improve the supply chain infrastructure and, you know, just boost efficiencies in general. But I think for the next at least a year or so, you can model it between the 49 to 51 percent.
Speaker Change: Early decent clip and maintain good profitability now over time.
Speaker Change: <unk>, obviously is to improve the profitability across the board and Thats driven by.
Speaker Change: The fact that we want to improve the supply chain.
Speaker Change: Infrastructure.
Speaker Change: Boost efficiencies in general, but I think for the next at least the Euro. So you can model. It between the 49 to 51 percentage and Thats inclusive of the PC business as I said with the PC business, we expect to be in line or above corporate average.
Venkatesh R. Nathamuni: And that's inclusive of the PC business. As I said, with the PC business, we expect to be in line or above the corporate average. Your next question comes from Ananda Barua with Loop Capital. Please go ahead. Hey, yeah, thanks guys for taking the questions this afternoon and congrats on the really solid execution. Um, I guess two quick ones if I could, maybe.
Speaker Change: Your next question comes from the line of Ananda Baruah with loop capital. Please go ahead.
Ananda Baruah: Hey, Yeah. Thanks, guys for taking the question good afternoon, and congrats on the on the really solid execution.
Ananda Baruah: I guess two quick ones, if I say Navy.
Ananda Barua: John, just dovetail it off of your remark about Gen AI a moment ago. It does seem like there's an increasing commitment from, you know, sort of edge device makers, phone makers, and PC makers to lean in to Gen AI sorts of configs. And so I guess the question is, if that were to happen, some critical math. The benefit to you, would it be a volume feature? Is there a mixed component
Ananda Baruah: Just dovetailing off of.
Ananda Baruah: Your remark about Gen AI.
Ananda Baruah: A moment ago.
Ananda Baruah: It does seem like there is an increasing commitment from sort of exit device makers.
Ananda Baruah: Makers, the PC makers Helene in pillar <unk>.
Ananda Baruah: NII so they can take and so I guess the question is if that were to happen.
Ananda Baruah: At some critical mass that benefit you would it be a volume feature.
Speaker Change: Is there a Mexican permanent I guess any context, you can share there.
John Forsyth: You know, I guess any context you can share there on how it would benefit you guys. And then I have a quick follow-up. Yeah, thanks.
Speaker Change: And how would that affect you guys and I have a quick follow up as well.
Speaker Change: Yeah. Thanks, Thanks for the question Ananda.
John Forsyth: Thanks for the question, Ananda. I think, I mean, there's certainly a growing tendency for people to jump on the AI bandwagon from a marketing perspective. I think there's probably some substance there, and that in some cases, there may be less.
Speaker Change: I think I mean, there's certainly a growing tendency for people to jump on the AI edge AI bandwagon from a marketing perspective.
Speaker Change: I think theres, probably some substance there in <unk>.
Speaker Change: And the debt.
Speaker Change: Some cases, there may be less.
Speaker Change: In our case, when we think about AI at the edge I really think it comes down to the potential that really comes down to three things one is like to the extent that it excites and inspires users and I think end users.
John Forsyth: In our case, when we think about AI at the edge, I really think the potential there comes down to three things. One is to the extent that it excites and inspires users, and I think end users do want a number of features. adoption of AI services, then that's exciting from a unit's point of view, and clearly when I talk about the laptop market, seeing that kind of coming over the horizon as a catalyst for unit sales, that's very exciting. Secondly, I think just that AI and JetAI have the potential to open up a lot more variety of ways in which you interact with the device. So to the extent that people are interacting with the device more via audio and speech interfaces, which are obviously enabled by AI.
Speaker Change: Do want a number of the features you can see that with the adoption of AI services.
Speaker Change: And then that's exciting from a units point of view and clearly when I talk about the laptop market is seeing that kind of coming over the horizon as a as a catalyst for.
Speaker Change: For unit sales, that's very exciting.
Speaker Change: Lee I think just that AI and <unk> AI has.
Speaker Change: <unk> has the potential to.
Speaker Change: Open up a lot more.
Speaker Change: A variety of ways.
Speaker Change: In which you interact with the device so to the extent that people are interacting with the device more.
Speaker Change: Via audio and speech interfaces, which obviously enabled by AI I think thats very good for us and we can see things that we could potentially do there.
John Forsyth: I think that's very good for us, and we can see things that we could potentially do in the audio domain that could be very beneficial. And then finally, I think on the power front, that's the third area where I think we stand to benefit because AI is clearly very power hungry. The result is that everybody wants to do more with less. And that's squarely what our power conversion products are aimed at and our overall approach to power efficiency and everything that we do. That's a great context. I appreciate it. That's super helpful. And I guess a quick follow up is just really a clarification. When you were speaking earlier about, I said something around like sort of putting the ceiling on the sand. Did you say you would or wouldn't?
Speaker Change: They're in the audio domain that could be very beneficial and then finally I think on the power front. That's the third area, where I think we stand to benefit because.
Speaker Change: AI is clearly very power hungry. The result, as everybody everybody wants to do more with less and that's squarely what our power conversion products are aimed at and our overall approach to power efficiency in everything that we do.
Speaker Change: That's great context I appreciate it that's super helpful.
Speaker Change: I guess a quick follow up is just really a clarification.
Speaker Change: When you were speaking earlier about PC Sam.
Speaker Change: <unk>.
Speaker Change: You said something around.
Speaker Change: Putting a ceiling on this and you say you would or wouldn't put a ceiling on that fan as you guys think about it.
Ananda Barua: I think it's premature to put a ceiling on it right now, as I indicated. There are, we've got a very good array of products. So we've got these kind of new to Cirrus laptop specific products across audio and power.
Speaker Change: I think it's premature to put a ceiling on it right now.
Speaker Change: As I indicated.
Speaker Change: We've got a very good array of products. So we've got these kind of new to serious laptop specific products across audio and power. We've got an amazing portfolio of haptics products.
John Forsyth: We've got an amazing portfolio of haptics products, and one of the things that we don't yet have a feeling for, and I think this is because the market is going to discover it, is what the right attach rates are for those various products. So in some cases, it'll be two boosted amplifiers. In some cases, maybe none, but driven by a codec.
Speaker Change: And one of the things that we don't yet have a feeling for it and I think this is because the market is going to discover it is what the what the right attach rates for those various products. So in some cases it'll be it'll be two boosted amplifiers in some cases.
Speaker Change: Maybe none, but driven by a codec and in some cases it might be six boosted amplifiers. Similarly, we saw multiple haptic drivers to drive very large trackpad areas and so on so I think I think we're still in the discovery phase there and the opportunities are very exciting.
John Forsyth: And in some cases, it might be six boosted amplifiers. Similarly, we saw multiple haptics drivers to drive very large trackpad areas and so on. So I think we're still in the discovery phase there, and the opportunities are very exciting. This will be our final question from the line of Tore Svanberg with CEPL. Please go ahead. Yeah, thanks. I just had a few housekeeping ones for you, Venk.
Speaker Change: This will be our final question from the line of Jordan <unk> with Stifel. Please go ahead.
Jordan: Yeah. Thanks, I just had a few housekeeping ones for you bank. Thanks. So this was your strongest cash balance ever.
Tore Egil Svanberg: Venk, so this is your strongest cash balance ever. Rates are high, so...um, how should we think about the other income lines going forward and, now that you have all that cash, should we assume continuous buybacks or, you know, are you also looking at some potential? Yeah, Tori, thanks for those questions. And yeah, and as you pointed out, our cash balance is really strong at $587 million. I think the way to think about the interest that we generated is that obviously, we've benefited, especially in the last three or four quarters, with the higher interest rates. And the way we've structured our portfolio, we do expect that to continue for some time to come. And clearly, from an M&A perspective, it certainly gives us some flexibility. Just for everybody's benefit, I do want to highlight the fact that, in terms of our strategy, the first use of cash is obviously to continue to grow the business. We have lots of irons in the fire in terms of the projects that we're working on, technologies that we're working on, and such.
Jordan: Rates are high so.
Jordan: How should we think about the other income line going forward and now that you have all this cash should we assume continued buybacks or are you also.
Looking at some potential M&A.
Speaker Change: Yes, it's alright, thanks for those questions and yes, and as you pointed out our cash balance is really strong at $587 million.
Speaker Change: I think the way to think about the interest that we generated obviously, we benefitted, especially in the last three or four quarters with the higher interest rates.
And the way we restructured our portfolio, we do expect that to continue for some time to come.
Speaker Change: And.
Speaker Change: Clearly from a from an M&A perspective, certainly gives us the optionality.
Speaker Change: Just for everybody's benefit I do want to highlight the fact that in terms of our strategy. The first use of cash is obviously to continue to grow the business and we have lots of irons in the fire in terms of the projects that we're working on the technologies that we're working on as such and we want to continue to invest in R&D going forward.
Venkatesh R. Nathamuni: And we want to continue to invest in R&D going forward, as we have in the past. And then, obviously, we've been doing buybacks, and we'll be regular buyers. The quantum of those buybacks will depend on market conditions and such. And then M&A is also an option. And in this environment, we do feel that the M&A environment is getting somewhat better than it was in the last couple of years. Obviously, it's too early to call what happens with regulation and such, but we feel there's enough in the pipeline for us to be able to consider M&A.
Speaker Change: As we have in the past and then obviously.
We've been doing buybacks and will be regular buyers the quantum of those buybacks will depend on market conditions and such and then M&A.
Speaker Change: Also an option.
Speaker Change: In this environment, we do feel that the M&A environment getting somewhat better than it was last couple of years, obviously too early to call what happens with regulation and such but we feel there's enough in the pipeline for us to be able to consider M&A and and at the right time, we will share that with you in more detail.
Venkatesh R. Nathamuni: And at the right time, we will share that with you in more detail. With that, we will end our Q&A session. I will now turn the call back to John for his final remarks. Thank you, Operator. In summary, Cirrus Logic delivered record revenue and earnings per share for the third quarter and continued to execute on important initiatives across each of the three key areas of its strategy.
Speaker Change: With that we will end the Q&A session I will now turn the call back to John for his final remarks.
John Forsyth: Thank you operator.
John Forsyth: In summary, Cirrus logic delivered record revenue and earnings per share for the third quarter and continued to execute on important initiatives across each of the three key areas of our strategy.
John Forsyth: We're excited about the opportunities in front of us, and we thank you for your continued interest in our program. In addition, I'd also like to extend my appreciation to the entire Cirrus Logic team and to our supply chain partners and customers around the world. It's thanks to their commitment, support, and partnership that we've been able to deliver these results. Before we close, I'd also like to note that we will be participating in the Susquehanna Virtual Technology Conference on February 29th, the Morgan Stanley Technology, Media, and Telecom Conference on March 7th in San Francisco, and the Loop Capital Conference in New York City on March 12th. Please check our investor website for all the details. Thank you, everyone, for joining our call today. And that does conclude today's call. Thank you all for joining us. You may now disconnect.
John Forsyth: We're excited about the opportunities in front of us and we thank you for your continued interest in our progress.
John Forsyth: In addition, I'd also like to extend my appreciation to the entire Cirrus logic team and to our supply chain partners and customers around the world is thanks to their commitment support and partnership that we've been able to deliver these results.
Before we close I'd also like to note that we will be participating in the Susquehanna Virtual technology conference on February 29th.
John Forsyth: The Morgan Stanley Technology Media and Telecom conference on March seven in San Francisco.
John Forsyth: And the loop capital Conference in New York City on March 12, Please check our Investor Web site for all the details. Thank you everyone for joining our call today.
Speaker Change: That does conclude today's call. Thank you all for joining you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.