Q4 2024 Cirrus Logic Inc Earnings Call - Q&A

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic fourth quarter and full fiscal year 2024 financial results Q&A session. At this time, all participants are in 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. 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.

Ladies and gentlemen, thank you for standing by while it comes at a feverish logic fourth quarter and full fiscal year 'twenty 'twenty four financial results Q&A session. At this time all participants are in listen only mode. After a brief statement, we will open up the call for questions from analysts.

Operator: 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 tougher Nathalie <unk>, Vice President of Investor Relations Ms. Katherine <unk> you may begin.

Chelsea Heffernan: Thank you and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer, and Venk Nathamuni, Chief Financial Officer. Today at approximately 4 p.m. Eastern Time, we announced our financial results for the fourth quarter and full fiscal year 2024. The shareholder letter discussing our financial results, the earnings press 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.

Chelsea Heffernan: Thank you and good afternoon, joining me on today's call is John Forsyth, Cirrus Logics, Chief Executive Officer, and think nothing really Chief Financial Officer.

Chelsea Heffernan: Today at approximately four P M. Eastern time, we announced our financial results for the fourth quarter and full fiscal year 2024.

Chelsea Heffernan: The shareholder letter discussing our financial results the earnings press release and the webcast of this Q&A session are all available.

Chelsea Heffernan: At the company's Investor Relations website. This call will feature questions from the analysts covering our company. Additionally, the results and guidance. We will discuss 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.

Chelsea Heffernan: Additionally, the results and guidance we will discuss on this call will include non-GAAP financial measures that exclude certain items. Reconciliations of these non-GAAP measures to the 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.

Chelsea Heffernan: In our earnings release and are all available on the company's Investor Relations website.

Chelsea Heffernan: 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.

Chelsea Heffernan: 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 development or otherwise. Please refer to the press release and the shareholder letter issued today, which are all 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 Now, I'd like to turn the call over to John. Thank you.

John: Whether as a result of new development or otherwise.

John: Please refer to the press release and a shareholder letter issued today, which are all 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.

Chelsea Heffernan: 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.

John M. Forsyth: Thank you, Chelsea, and welcome to everyone joining today's call. As you saw in the press release, in the March quarter, Cirrus Logic delivered revenue of $378.1 million, above the top end of our guidance range due to the strongest and anticipated demand for smartphone products. In FY 24, Cirrus Logic delivered full fiscal year revenue of $1.79 billion, down 6% year-over-year due to a reduction of general market and custom components, primarily in

John: Thank you Chelsea and welcome to everyone joining today's call.

John M. Forsyth: As you have seen in the press release in the March quarter, Cirrus logic delivered revenue of $378 $1 million above the top end of our guidance range due to stronger than anticipated demand for smartphone products.

John M. Forsyth: In FY 'twenty for Cirrus logic delivered full fiscal year revenue of $1 $79 billion down 6% year over year due to a reduction of general market and custom components, primarily in non smartphone applications.

John M. Forsyth: Despite those challenges, we are proud that our disciplined execution helped to grow both non-GAAP earnings per share year-over-year for the quarter and both GAAP and non-GAAP EPS for the full year. I think I'll take the reins in a few moments to walk us through the details of the financial results for the quarter and for the year. But before I turn the call over to you, I want to share an update on the progress we've been making on our strategy in the past four quarters.

John M. Forsyth: Those challenges we are proud that our disciplined execution helped to grow both non-GAAP earnings per share year over year for the quarter.

John M. Forsyth: And both grow GAAP and non-GAAP EPS for the full year.

Speaker Change: Thank you, we'll take the reins in a few moments to walk us through the details of the financial results for the quarter and for the year, but before I turn the call over I want to share an update on the progress we've been making on our strategy in the past four quarters.

John M. Forsyth: We've previously communicated that our growth strategy is based around three broad principles. Number one, maintaining leadership in our core flagship smartphone audio business. Number two, expanding into areas of high-performance mixed-signal functionality in smartphones. And number three, leveraging our audio and high-performance mixed-signal capabilities to penetrate new markets. This year we have made exciting progress on all three fronts. In our flagship smartphone audio business, most notably in the past year, we completed our design work on and delivered to our customers two next-generation products, a boosted amplifier and a smart codec. The boosted amplifier introduces an innovative new architecture, significantly improving system performance and efficiency while saving valuable board space.

John M. Forsyth: The smart codec will be Cirrus Logic's first 22 nanometer product and will similarly deliver meaningful advances in audio and mixed signal processing capabilities to our customers. Taken together, these devices represent a considerable engineering investment and the culmination of many years of work and close collaboration with our customers. We anticipate both products will launch in devices in the fall of this year.

John M. Forsyth: We have previously communicated that our growth strategy is based around three broad principles number one maintaining leadership in our core flagship smartphone audio business number two expanding into areas of high performance mixed signal functionality in smartphones.

John M. Forsyth: Three leveraging our audio and high performance mixed signal capabilities to penetrate new markets.

John M. Forsyth: Looking beyond audio, we also made significant investments in certain HPMS areas where we believe our mixed signal design and signal processing expertise can enhance our customers' products. A core element of our HBMS strategy is camera controller products, where we shipped our third generation controller in the fall of 2023, itself a key enabler of marquee features in customer devices.

John M. Forsyth: This year, we have made exciting progress on all three fronts.

John M. Forsyth: Moreover, in the last quarter, we continued to develop our roadmap by tapping out new camera controller IP on a new process node, an early investment which we expect will pave the way for further feature and performance enhancements in the future. Beyond camera controllers, we also continue to invest in a number of power and battery-related technologies and innovations. And while new product introductions in these domains are a little further out, we are excited about the progress we made in the development of both key intellectual property and silicon in these areas during FY24.

John M. Forsyth: And our flagship smartphone audio business, most notably in the past year, we completed our design work on and deliver to our customer to next generation products.

John M. Forsyth: During the year, we also saw encouraging signs that our IP and audio and HPMS can be valuable and highly relevant as we reach into new markets, most immediately in laptops. In FY24, we sampled, won designs with, and shipped a new codec and a new boosted amplifier that were specifically designed for this market. We also won customer designs with a new power converter product designed for the laptop market and sampled a laptop-focused haptic driver product.

John M. Forsyth: Three of these devices, the Codec, the Boosted Amplifier, and the Power Converter, were also featured as part of Intel's Lunar Lake reference design. And their capabilities contribute meaningfully towards our customers being able to create better laptops. Compared to competitive alternatives, Cirrus Logic solutions sound better, play louder, conserve battery life, and save board space.

John M. Forsyth: Boosted amplifier and a smart codec.

John M. Forsyth: Boosted amplifier introduces an innovative new architecture significantly improving system performance and efficiency, while saving valuable board space.

John M. Forsyth: The smart codec will be Cirrus logic, first 22 nanometer products and will similarly deliver meaningful advances in audio and mixed signal processing capabilities to our customer.

John M. Forsyth: Taken together these devices represent a considerable engineering investment and the culmination of many years of work in close collaboration with our customer.

John M. Forsyth: We anticipate both products will launch in devices in the fall of this year.

John M. Forsyth: Looking beyond audio we also made significant investments and certain <unk> areas, where we believe our mixed signal design and signal processing expertise can enhance our customers' products.

John M. Forsyth: A core element of our H BMS strategy is camera controller products, where we shipped our third generation controller in the fall of 2023 itself a key enabler of marquee features in customer devices.

John M. Forsyth: Moreover, in the last quarter, we continued to develop our roadmap by taping out new camera control of our IP on a new process node and early investment, which we expect will pave the way for further features and performance enhancements in the future.

John M. Forsyth: Beyond camera controllers. We also continued to invest in a number of power and battery related technologies and innovations and while new product introductions. In these domains are a little further out we are excited about the progress we made in the development of both key intellectual property and silicon in these areas in FY 'twenty four.

John M. Forsyth: During the year, we also saw encouraging signs that our IP and audio and H pms can be valuable and highly relevant as we reach into new markets. Most immediately in laptops.

John M. Forsyth: In FY 'twenty four.

John M. Forsyth: Sampled one designs with and shipped a new codec and a new boosted amplifier that was specifically designed for this market.

John M. Forsyth: We also won customer designs with a new power converter products designed for the laptop market and sampled a laptop focused haptic driver product.

John M. Forsyth: Three of these devices the codec the boosted amplifier and the power converter were also featured as part of Intel's Lunar Lake reference design and that capability is contribute meaningfully towards our customers being able to create better laptops.

John M. Forsyth: Compared to competitive alternatives Cirrus logic solutions sound better play louder conserve battery life and save board space.

John M. Forsyth: While there is still a lot of work ahead of us in the laptop space, we exit the year optimistic about the momentum that we are building in this market. Against this backdrop of investment in supporting our customers and in future growth, we remained committed to disciplined execution. Throughout the year, we worked hard on increasing both our own operational efficiency and the efficiency, competitiveness, and diversity within our supply chain. Additionally, during the year, we returned $186 million of cash to shareholders in the form of share repurchase.

John M. Forsyth: While there is still a lot of work ahead of us in the laptop space, we exit the year optimistic about the momentum that we're building in this market.

John M. Forsyth: Against this backdrop of investment in supporting our customers and in future growth, we remain committed to disciplined execution.

John M. Forsyth: Throughout the year, we worked hard on increasing both our own operational efficiency and the efficiency competitiveness and diversity within our supply chain.

John M. Forsyth: Additionally, during the year, we returned $186 million of cash to shareholders in the form of share repurchases and these combined actions along with a decrease in our tax rate during the year contributed to a 17% year over year increase in non-GAAP earnings per share to $6 59.

John M. Forsyth: And these combined actions, along with a decrease in our tax rate during the year, contributed to a 17 cents year-over-year increase in non-gap earnings per share to $6.59. And with that, I now turn the call over to Venk to provide an overview of our financial results for the fourth quarter and full fiscal year 2024, as well as the outlook for the first quarter of fiscal 2024.

Speaker Change: And with that let me now turn the call over to <unk> to provide an overview of our financial results for the fourth quarter and full fiscal year 2024, as well as the outlook for the first quarter of fiscal 2025.

Venkatesh R. Nathamuni: Great. Thank you, John, and good afternoon, everyone. I'll start with a summary of our financial results for both our fiscal Q4 as well as full year fiscal 24, and then provide guidance for our fiscal Q125. Revenue in Q4 was above the high end of our guidance range at $371.8 million, as shipments remain robust throughout the March quarter. On a sequential basis, revenue was down 40% due primarily to a reduction in smartphone volumes, which follows a stronger-than-seasonal December quarter, which, as you recall, was a 14-week quarter.

Venk: Great. Thank you John and good afternoon, everyone.

Speaker Change: Start with a summary of our financial results for both our fiscal Q4 as well as full year fiscal 'twenty four.

Venkatesh R. Nathamuni: And then provide guidance for our fiscal Q1 'twenty five.

Venkatesh R. Nathamuni: Revenue in Q4 was above the high end of our guidance range at $371 $8 million.

Venkatesh R. Nathamuni: As shipments remained robust throughout the March quarter.

Venkatesh R. Nathamuni: On a sequential basis revenue was down 40% due primarily to a reduction in smartphone volumes.

Venkatesh R. Nathamuni: Which follows a stronger than seasonal December quarter.

Venkatesh R. Nathamuni: As you recall was a 14 week quarter.

Venkatesh R. Nathamuni: On a year-over-year basis, revenue was roughly flat. Fiscal year 24 revenue of $1.79 billion was down 6% from a year ago. The decline was driven by a reduction in shipments of our general market and custom products, primarily in non-smartphone applications.

Venkatesh R. Nathamuni: On a year over year basis revenue was roughly flat.

Venkatesh R. Nathamuni: Fiscal year 'twenty for revenue of $1 $79 billion.

Venkatesh R. Nathamuni: Was down 6% from a year ago.

Venkatesh R. Nathamuni: The decline was driven by a reduction in shipments of our general market and custom products, primarily in non smartphone applications.

Venkatesh R. Nathamuni: Turning to gross profit and gross margin, non-GAAP gross profit in the quarter was $193 million, and non-GAAP gross margin was 51.9%. Gross margin was above the high end of our guidance range due mostly to supply chain efficiencies and lower freight expense. On a sequential basis, gross margin increased by 50 basis points, driven by a favorable product mix, while on a year-over-year basis, gross margin increased 180 basis points largely due to lower supply chain costs, including freight.

Speaker Change: Turning to gross profit and gross margin non-GAAP gross profit in the quarter was $193 million.

Venkatesh R. Nathamuni: And non-GAAP gross margin was 51, 9%.

Venkatesh R. Nathamuni: Gross margin was above the high end of our guidance range due mostly to supply chain efficiencies and lower freight expense.

Venkatesh R. Nathamuni: On a sequential basis gross margin increased by 50 basis points, driven by a favorable product mix.

Venkatesh R. Nathamuni: On a year over year basis, gross margin increased 180 basis points due largely to lower supply chain costs, including freight.

Venkatesh R. Nathamuni: This was partially offset by a less favorable product mix.

Venkatesh R. Nathamuni: non-GAAP gross profit for our full fiscal year 'twenty four was $917 5 million.

Venkatesh R. Nathamuni: And non-GAAP gross margin was 51, 3%.

Venkatesh R. Nathamuni: This was partially offset by a less favorable product. Non-GAAP gross profit for our full fiscal year 24 was $917.5 million, and non-GAAP gross margin was 51.3%. Gross margin increased year-over-year due to a decline in supply chain costs, including the absence of wafer premium, lower freight expense, as well as a reduction in inventory reserve. And all of this was partially offset by a less favorable product.

Venkatesh R. Nathamuni: Gross margin increased year over year due to a decline in supply chain costs, including the absence of wafer premiums lower freight expense as well as a reduction in inventory reserves.

Venkatesh R. Nathamuni: And all of this was partially offset by a less favorable product mix.

Venkatesh R. Nathamuni: Now I'll turn to operating expenses. Non-gap operating expenses for the fourth quarter were $116.5 million. On a sequential basis, OPEX declined $9.2 million primarily due to decreased variable compensation, lower employee-related expenses, mostly due to one fewer week of salary, as well as increased R&D incentives. On a year-over-year basis, operating expense was down $3.3 million, largely due to an increase in R&D incentives and lower product development costs. This was partially offset by an increase in variable compensation.

Speaker Change: Now I'll turn to operating expenses.

Venkatesh R. Nathamuni: non-GAAP operating expense for the fourth quarter was $116 5 million.

Venkatesh R. Nathamuni: On a sequential basis Opex declined $9 2 million.

Venkatesh R. Nathamuni: Primarily due to decreased variable compensation.

Venkatesh R. Nathamuni: Lower employee related expenses, mostly due to one fewer week of salaries.

Venkatesh R. Nathamuni: As well as increased R&D incentives.

Venkatesh R. Nathamuni: On a year over year basis operating expense was down $3 $3 million.

Venkatesh R. Nathamuni: Largely due to an increase in R&D incentives.

Venkatesh R. Nathamuni: And lower product development costs.

Venkatesh R. Nathamuni: This was partially offset by an increase in variable compensation.

Venkatesh R. Nathamuni: Non-GAAP operating income for the quarter was $76.5 million, or 20.6% of revenue. For the full fiscal year, non-GAAP operating expense was $470.4 million, down $16 million from the prior year, primarily due to increased R&D incentives, a reduction in variable compensation, as well as lower product development expenses. This was partially offset by an increase in employee-related expenses.

Venkatesh R. Nathamuni: non-GAAP operating income for the quarter was $76 5 million.

Venkatesh R. Nathamuni: Or 26% of revenue.

Venkatesh R. Nathamuni: For the full fiscal year non-GAAP operating expense was $474 million.

Venkatesh R. Nathamuni: Down $16 million from the prior year, primarily due to increased R&D incentives in.

Venkatesh R. Nathamuni: The reduction in variable compensation.

Venkatesh R. Nathamuni: As well as lower product development expenses.

Venkatesh R. Nathamuni: This was partially offset by an increase in employee related expenses.

Venkatesh R. Nathamuni: Non-GAAP operating income for fiscal year 24 was $447.1 million. As a result, full fiscal year 2024 operating margin came in at 25%, up slightly from the prior fiscal year, despite the revenue headwinds we experienced in fiscal 24. Turning now to taxes, for the March quarter, our non-gap tax rate was 17.6%. However, for the full fiscal year, our non-gap effective tax rate was roughly 21%, which was in line with our previous guidance.

Venkatesh R. Nathamuni: non-GAAP operating income for fiscal year, 'twenty, four was $447 1 million.

Venkatesh R. Nathamuni: As a result full fiscal year 2024 operating margin came in at 25% up slightly from the prior fiscal year. Despite the revenue headwinds we experienced in fiscal 'twenty four.

Venkatesh R. Nathamuni: Turning now to taxes for the March quarter, our non-GAAP tax rate was 17, 6%. However for the full fiscal year non-GAAP effective tax rate was roughly 21%, which was in line with our previous guidance.

Venkatesh R. Nathamuni: And lastly, on the P&L, non-GAAP net income in the fourth quarter was $69 million, or $1.24 per share, as the higher revenue and profitability flowed through to the bottom line. And for the full fiscal year, non-GAAP net income was $369.3 million, or $6.59 per share, up 17 cents from fiscal 23. The increase in non-gap earnings per share was driven by disciplined execution, share repurchases, as well as a decrease in the tax rate that I alluded to earlier.

Venkatesh R. Nathamuni: And lastly on the P&L non-GAAP net income in the fourth quarter was $69 million.

Venkatesh R. Nathamuni: Or $1 24 per share as.

Venkatesh R. Nathamuni: As the higher revenue and profitability flowed through to the bottom line.

Venkatesh R. Nathamuni: And for the full fiscal year non-GAAP net income was $369 3 million.

Venkatesh R. Nathamuni: Or $6 59 per share up <unk> 17 from fiscal 'twenty three.

Venkatesh R. Nathamuni: The increase in non-GAAP earnings per share was driven by our disciplined execution share repurchases as well as a decrease in tax rate that I alluded to earlier.

Venkatesh R. Nathamuni: Let me now turn to the balance sheet. Our balance sheet continues to remain strong, and we ended fiscal 24 with nearly $700 million in cash and cash equivalents. Our ending cash balance was up $182.6 million from the prior year, primarily due to strong cash flow from operations, which was partially offset by stock repurchase. We continue to have no debt outstanding and have $300 million undrawn on our revolver.

Speaker Change: Let me now turn to the balance sheet.

Venkatesh R. Nathamuni: Balance sheet continues to remain strong and we ended fiscal 'twenty four with nearly $700 million in cash and cash equivalents.

Venkatesh R. Nathamuni: Our ending cash balance was up $182 6 million from the prior year, primarily due to strong cash flow from operations, which was partially offset by stock repurchases.

Venkatesh R. Nathamuni: We continue to have no debt outstanding and have $300 million.

Venkatesh R. Nathamuni: Undrawn on our revolver.

Venkatesh R. Nathamuni: The inventory balance at the end of the fourth quarter was $227.2 million, down from $256.7 million in Q3-24. Days of inventory were up 38 days sequentially, and we ended the quarter with approximately 116 days of inventory. Looking ahead to Q1 Fiscal 25, we expect inventory to increase from the prior quarter as we begin to build ahead of seasonal product launches in the second half of the calendar year. In fiscal 25, inventory is expected to be elevated as we continue to support customer demand and fulfill our wafer purchase commitments in accordance with our long-term capacity agreement with Global Foundries.

Venkatesh R. Nathamuni: Inventory balance at the end of the fourth quarter was $227 2 million.

Venkatesh R. Nathamuni: Down from $256 7 million in Q3 'twenty four.

Venkatesh R. Nathamuni: Days of inventory was up 38 days sequentially and we ended the quarter with approximately 116 days of inventory.

Venkatesh R. Nathamuni: Looking ahead in Q1 fiscal 'twenty five we expect inventory to increase from the prior quarter as we begin to build ahead of seasonal product launches in the second half of the calendar year.

Venkatesh R. Nathamuni: In fiscal 'twenty five inventory is expected to be elevated as we continue to support customer demand and fulfill our wafer purchase commitments in accordance with our long term capacity agreement with Globalfoundries.

Venkatesh R. Nathamuni: Turning now to cash flow, cash flow from operations was $170.5 million in the March quarter, and CapEx was roughly $7.7 million, resulting in a non-GAAP pre-cash flow margin for the quarter of roughly 44%. For the 12-month period ending in the March quarter, cash flow from operations was $421.7 million, and CAPEX was roughly $38.3 million, resulting in a non-GAAP free cash flow margin of roughly 21%, a 500 basis point improvement compared to a free cash flow margin of 16% in Fiscal 23.

Venkatesh R. Nathamuni: Turning now to cash flow.

Venkatesh R. Nathamuni: Cash flow from operations was $175 million in the March quarter, and Capex was roughly $7 7 million.

Venkatesh R. Nathamuni: Resulting in non-GAAP free cash flow margin for the quarter of roughly 44%.

Venkatesh R. Nathamuni: For the 12 months period ending of the March quarter cash flow from operations was $421 7 million and Capex was roughly $38 3 million.

Venkatesh R. Nathamuni: <unk> in non-GAAP free cash flow margin of roughly 21%.

Venkatesh R. Nathamuni: A 500 basis point improvement compared to free cash flow margin of 16% in fiscal 'twenty three.

Venkatesh R. Nathamuni: On the share buyback front, in Q4, we utilized $50 million to repurchase approximately 548,000 shares of our common stock at an average price of $91.23. For the full fiscal year, we returned $186 million of cash to shareholders as we repurchased 2.3 million shares at an average price of $80.68. At the end of Q4 fiscal 24, the company had $315.1 million remaining in its shared 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.

Venkatesh R. Nathamuni: On the share buyback front in Q4, we utilized $50 million to repurchase approximately 548000 shares of our common stock at an average price of $91 23.

Venkatesh R. Nathamuni: For the full fiscal year, we returned $186 million of cash to shareholders as we repurchased two 3 million shares at an average price of $80 68.

Venkatesh R. Nathamuni: At the end of Q4 fiscal 'twenty four the company had $315 1 million remaining in its share repurchase authorization.

Venkatesh R. Nathamuni: We expect to continue to return capital in the form of stock repurchases.

Venkatesh R. Nathamuni: We believe we will provide a long term benefit to shareholders going forward.

Venkatesh R. Nathamuni: For Q1 of Fiscal 25, we expect revenue in the range of $290 million to $350 million, reflecting seasonal weakness in general market product sales and lower smartphone units. We expect gross margin to range from 49% to 51%. I'd like to point out that we expect gross margin during the current quarter to be towards the lower half of the range, as we incur costs to ramp production of our new 22 nanometer codec, as well as the new boosted amplifier.

Venkatesh R. Nathamuni: And now on to the guidance.

Venkatesh R. Nathamuni: For Q1 of fiscal 'twenty five we expect revenue in the range of $290 million to $350 million.

Venkatesh R. Nathamuni: Seasonal weakness in the general market product sales and lower smartphone units.

Venkatesh R. Nathamuni: We expect gross margin to range from 49% to 51%.

Venkatesh R. Nathamuni: I'd like to point out that we expect gross margin during the current quarter to be towards the lower half of the range as we incur cost to ramp production of our new 22 nanometer codec as well as the new boosted amplifiers.

Venkatesh R. Nathamuni: Non-GAAP operating expense is expected to range from $118 million to $124 million, up sequentially due to an increase in product development and employee-related expenses. I note that with the start of a new fiscal year, our annual merit increase takes effect during the June quarter. This is partially offset by lower variable compensation expense. We'll continue to control discretionary spending while investing strategically in product development to drive long-term growth. We expect our Fiscal 25 non-GAAP tax rate to be approximately 22% to 24%, which is slightly higher than our tax rate in Fiscal 24. You may recall that we had a large one-time tax benefit last quarter from applying new IRS guidance to our capitalized R&D amount. We do not expect to have a similar one-time benefit in fiscal 25.

Venkatesh R. Nathamuni: non-GAAP operating expense is expected to range from $118 million to $124 million.

Venkatesh R. Nathamuni: Up sequentially due to an increase in product development and employee related expenses.

Venkatesh R. Nathamuni: I'd note that with the startup of new fiscal year, our annual Merit increase takes effect during the June quarter.

Venkatesh R. Nathamuni: This was partially offset by lower variable compensation expense.

Venkatesh R. Nathamuni: We will continue to control discretionary spending while investing strategically in product development to drive long term growth.

Venkatesh R. Nathamuni: We expect our fiscal 25, non-GAAP tax rate to be approximately 22% to 24%, which is slightly higher than our tax rate in fiscal 'twenty four.

Venkatesh R. Nathamuni: You may recall that we had a large one time tax benefit last quarter from applying new IRS guidance to our capitalized R&D amongst we.

Venkatesh R. Nathamuni: We do not expect to have a similar onetime benefit in fiscal 'twenty five.

Venkatesh R. Nathamuni: In closing, thanks to the collective efforts of the entire Syros Logic team over the past year, we increased operating efficiencies and exercised physical discipline, which contributed to year-on-year earnings for shared growth. We're pleased with the progress we've made this year and 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, I'd like to note that when we understand there is intense interest related to our largest customer, in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship. With that, let me now turn the call over to Chelsea to start the Q&A session.

Speaker Change: In closing thanks to the collective efforts of the entire Cirrus logic team over the past year, we increased operating efficiencies and exercise fiscal discipline, which contributed to year on year earnings per share growth.

Chelsea Heffernan: We're pleased with the progress we've made this year and will continue to focus on the best opportunities to enable the company to grow both revenue and profitability over the long term.

Chelsea Heffernan: And before we begin the Q&A I'd like to note that while we understand there is intense interest related to our largest customer and.

Chelsea Heffernan: In accordance with citizen logic company policy will not discuss specifics about our business relationship.

Venkatesh R. Nathamuni: With that let me now turn the call to Chelsea to start the Q&A session.

Chelsea Heffernan: Thanks, Venk. 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: Bank, we will now start the Q&A portion of the earnings call. Please limit yourself to a single question and one follow up.

Chelsea Heffernan: We are now ready to take questions.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Chelsea Heffernan: Thank you the floor is now open for questions. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad through Asia and joined the queue. If you would like to draw your question Sanjay branch or when again. If you are called upon to ask your question is are listening dialogues sticker on your device. Please pickup your handset.

Operator: Ensure that your phone is not on mute when asking your question.

Operator: We do request for today's session that Julie please limit to one question and one follow up again, Brett our lines and joined the queue.

Operator: We do request for today's session that you please limit to one question and one follow-up. Again, press star 1 to join the Q&A. And your first question comes from the line of Matt Ramsay with TV Cover.

Operator: Your first question comes from the line of Matt Ramsay with TD cargo.

Matthew D. Ramsay: Thank you very much, everybody. Good afternoon.

Matthew D. Ramsay: Thank you very much everybody and good afternoon.

Venkatesh R. Nathamuni: I think I wanted to start on the gross margin stuff you mentioned in your script, maybe being a little bit below the middle of the range for June, and that's all fine. I wanted to ask, as you roll through the next 12, 15 months, are you going to be introducing the new codec on 22, the new boosted amplifiers? You would think that the laptop business would become a little bit more material to the company.

Matthew D. Ramsay: I wanted to start on the gross margin stuff you mentioned in your script, maybe being a little bit below the middle of the range.

Venkatesh R. Nathamuni: For June and and that's all that's all fine I wanted to ask as you roll through the next 12 15 months youre going to be introducing the new codec on 'twenty two than the nuc.

Venkatesh R. Nathamuni: Boosted amplifiers.

Venkatesh R. Nathamuni: You would think that.

Venkatesh R. Nathamuni: The laptop business becomes a little bit more material to the company. If you could just kind of walk us through how you're thinking about things on the gross margin front given all of those variables that I don't really care that much about one quarter budget.

Venkatesh R. Nathamuni: If you could just kind of walk us through how you're thinking about things on the gross margin front, given all of those variables. I don't really care that much about one quarter, but just over this product cycle, if there's anything new that we should consider.

Venkatesh R. Nathamuni: This product cycle. If there is anything new that we should consider and just kind of the puts and takes on margins. Thanks.

Matthew D. Ramsay: Yeah, thanks for the question, Matt, and good afternoon. Yeah, so in terms of just the overall gross margin, as you correctly pointed out, for the current quarter, we do expect to see it slightly below the midpoint, primarily because of the ramp cost that I alluded to in the prepared script. But as you've seen over the last several quarters, we have made significant strides in terms of improving our supply chain efficiencies and lowering freight costs, and so forth.

Speaker Change: Yes, thanks for the question and good afternoon.

Matthew D. Ramsay: Yes. So in terms of just the overall gross margin as you correctly pointed out with the current quarter, we do expect to see slightly below the midpoint, primarily because of the ramp costs that I alluded to in the prepared script.

Matthew D. Ramsay: But as you've seen over the last several quarters, we have made significant strides in terms of improving our supply chain efficiencies and lowering freight costs and so forth.

Matthew D. Ramsay: Our long-term gross margin model continues to be 49 to 51%. That's the range that we're still comfortable with. Now, obviously, we'll continue to improve the efficiencies as we go forward, but I think we'll just provide guidance later on as we get more visibility into the gross margin performance. And then, as it relates to your question about the mix as things progress, as you pointed out, we are making some good strides in the PC space today.

Matthew D. Ramsay: Our long term gross margin model continues to be 49% to 51%. That's the range that we're still comfortable with now obviously will continue to improve the efficiencies as we go forward, but I think we'll just.

Matthew D. Ramsay: Divide guidance later on as we get more visibility into the gross margin performance and then as it relates to your question about the mix as things progress.

Matthew D. Ramsay: Pointed out we are making some good strides in the PC space today, It's still I think we talked about this on the previous earnings calls we expect in fiscal 'twenty five PC.

Matthew D. Ramsay: It's still, I think we talked about this on the previous earnings call, we expect fiscal 25 PC contribution to be somewhere in the low tens of millions of dollars. So as it becomes a bigger portion of our revenue in future years, it'll have some impact on gross margin, but right now, think of it as being in line with our corporate average, and we'll provide updates as we get further along.

John M. Forsyth: Got it. Thank you for that.

John M. Forsyth: <unk> contribution to be somewhere in the low tens of millions of dollars.

John M. Forsyth: So as it becomes a bigger portion of our revenue in the future years. It will have some impact on gross margin, but right now think of it as being in line with our corporate average and we'll provide updates as we get further along.

Matthew D. Ramsay: Um, I guess, just as my follow up. It's a new market for you guys in notebook computers, and you've sized it, in the near term. John, maybe you could give us a little bit on how the early strides have gone for Notebook. I mean, can this be a much bigger market over time? I mean, what's relative to where you thought you'd be as you sort of start down this path? I mean, what's been the early experience and the breadth of interest across the different platforms at the PCOEMs? Is this a niche for now and growing over time, or are you sort of pleased with the early progress and maybe it's potentially a bit larger than you thought?

Speaker Change: Got it thank you for that.

Matthew D. Ramsay: I guess just.

Speaker Change: My follow up.

Matthew D. Ramsay: It's a new market for you guys in notebook and <unk> sized it.

John: In the near term.

Matthew D. Ramsay: John maybe you could give us a little bit on how.

Matthew D. Ramsay: Early strides have gone in notebook can this be a much bigger market over time, I mean, whats relative to where you thought you'd be as you sort of start down this path I mean, what's been.

Matthew D. Ramsay: The early experience and sort of the breadth of interest across the different platforms that the PC OEM business.

Matthew D. Ramsay: Niche for now and growing over time or are you sort of pleased with the early progress and maybe it's potentially a bit larger than you thought.

John M. Forsyth: Thank you, Bat. We're certainly pleased with the early progress. It's going to take time to grow it to be a real needle mover for us, but we see a great opportunity there. And when we look... A few years out, we see over a billion dollars of SAM there for us to attack, as I've mentioned previously.

John: Thank you Matt Yeah, we're certainly pleased with the early progress it's going to take time to grow it to be a real needle mover for us, but we see a great opportunity there and when we look at.

John M. Forsyth: A few years out we see we see over $1 billion of Sam.

John M. Forsyth: For us to for us to attack as I've as I've mentioned previously if you look back over the past year in particular, I think we've hit a number of really positive milestones both with <unk>.

John M. Forsyth: If you look back over the past year in particular, I think we've hit a number of really positive milestones, both with sampling our new codec and boosted amplifier designed for the laptop market, and then seeing those launch in customer products. And then now, since the last quarter's report, seeing them actually shipping into end users' hands. So that's great.

John M. Forsyth: Sampling, our new codec and.

John M. Forsyth: Boosted amplifier design for the <unk>.

John M. Forsyth: Haptic market and then and then seeing those launch in customer products.

John M. Forsyth: And then now since the since the last quarter's report seeing them actually shipping into end users' hands.

John M. Forsyth: That said, great and alongside that of course, we had the.

John M. Forsyth: And alongside that, of course, we had the integration of that codec, that boosted amplifier, along with the power converter product in the Intel Lunar Lake reference design. And that, we do believe, can be a great engine for further design wins and growth in the coming years. So Lunar Lake will be something that makes more of a difference to us in calendar 25. So that's in the hands of a lot of OEMs right now.

John M. Forsyth: <unk>.

John M. Forsyth: Integration, all that codec that boosted amplifier along with the power converter product in the Intel Luna late reference design and that we do believe can be a great engine for <unk>.

John M. Forsyth: Further design wins.

John M. Forsyth: And growth in the coming years, So Luna Lake will.

John M. Forsyth: Be something that makes more of a difference to us in calendar 'twenty five so that's in the hands of a lot of Oems right now, we're certainly working with.

John M. Forsyth: We're certainly working with, as we said, the top five OEMs. And they are all in various stages of evaluating Lunar Lake and building Lunar Lake designs, and we'll see those come to market during calendar 25, which means that the bulk of the impact of that on our P&L will be from FY26 and going forward. And our view on what we expect in FY25 is unchanged, as Venk said. We think of that as low tens of millions, but with a great opportunity to grow it as we look further out.

John M. Forsyth: So you said with the top five Oems.

John M. Forsyth: And they are they are all in various stages of evaluating Luna Lake and building lunar Lake designs, and we will see those come to market here in calendar 'twenty, five which means that the bulk of the impact of that on our P&L will be from FY 'twenty six and going forward.

John M. Forsyth: And our view on what will what we expect in FY 'twenty five is unchanged as bank said, we think of that as low tens of millions.

John M. Forsyth: But with a great opportunity to grow it as we as we look further out.

Operator: Your next question comes from the line by Christopher Rolland with Susquehanna.

John M. Forsyth: Your next question comes from the line of Christopher Rolland Susquehanna.

Christopher Adam Jackson Rolland: customer asks this question. Can you hear me?

Christopher Adam Jackson Rolland: Customer of this question.

Operator: Chris, we couldn't hear you. Can you start over? Yes, can you hear me?

Christopher Adam Jackson Rolland: Can you hear me.

Christopher Adam Jackson Rolland: Chris We couldn't hear you can you start over.

Operator: Yes, can you hear me now? Yes. We can. You can.

Christopher Adam Jackson Rolland: Yes can you hear me now.

Christopher Adam Jackson Rolland: Yes, we can Chris.

Operator: Okay. I was saying, despite my interest in your largest customer, this question will be about all of the revenue not related to that customer. So I think last year it was about 232 million total. And I'm wondering, as we enter this next fiscal year, how should we think about growth there? Is like the 30% area with these laptop and other handset games? Is that like a reasonable expectation? How should we think about that thing?

Christopher Adam Jackson Rolland: You can okay.

Operator: He was saying despite my interest in your largest customer. This question will be about all of the revenue not related to that customer.

Operator: So I think last year, it was about $232 million total.

Operator: And I'm wondering as we enter this next fiscal year, how should we think about growth there is like the 30%.

Operator: Area with these laptop and other handset games is that like a reasonable expectation how should we think about that thanks.

Operator: Yeah.

Venkatesh R. Nathamuni: Yeah, Chris, thanks for the question. So, I'll split the non-top customer revenue into a couple of smaller buckets just for some additional clarity. So, if you look at the composition of that business, it can vary anywhere from 12 to 15 at the high point, which is probably about 20% of our revenues. And I'll break it into three components.

Speaker Change: Yes, Chris Thanks for the question. So I'll split the non top customer revenue into a couple of smaller bucket is just for some additional clarity.

Venkatesh R. Nathamuni: We look at the composition of that business. It can vary anywhere from 12 to 15 to the.

Venkatesh R. Nathamuni: High point is probably about 20% of our revenues.

Venkatesh R. Nathamuni: So, one part of it is what we call the general market catalog business, which is not very dissimilar to what you'll see in a general-purpose, high-performance, analog portfolio. And that business is sold predominantly through distribution. We've seen, just as our peers have, that business has been fairly weak for the last several quarters, and we are seeing some signs of stabilization there. For the last couple of quarters, we've seen distribution inventory be fairly stable and such, and I think that will recover as the economy improves and as general market conditions improve. So, that's very tied to the overall macro.

Venkatesh R. Nathamuni: I'll break it into three components one part of it is what we call. The general market catalog business that is not very dissimilar to what you will see in general purpose high performance analog portfolio.

Venkatesh R. Nathamuni: And that business.

Venkatesh R. Nathamuni: So predominantly through distribution, we've seen this as our peers have that business has been fairly weak.

Venkatesh R. Nathamuni: For the last several quarters and we are seeing some signs of stabilization. There. The last couple of quarters, we've seen distribution inventory fairly stable and such and I think that will recover as the economy improves.

Venkatesh R. Nathamuni: General market conditions improve so thats very tied to the overall macro the second piece of that business is the Android business and I would say non.

Venkatesh R. Nathamuni: The second piece of that business is the Android business, and I would say the non-big customer smartphone business. And I would say we're doing fairly well in the Android space today. We've had some good wins there, and we're participating in whatever is happening in that market. And then the third piece of it is the PC space. And with PCs, as John just alluded to, we've made some really good progress in terms of design wins.

Venkatesh R. Nathamuni: Big customer smartphone.

Venkatesh R. Nathamuni: Business and I would say, we're doing fairly well in the Android space today, we've had some good wins, there and and we're participating in what is happening there in that market and then the third piece of it is the PC space and in Pcs as John just alluded to we've made some really good progress in terms of design wins is a lot of momentum across multiple <unk>.

Venkatesh R. Nathamuni: There's a lot of momentum across multiple OEMs, and we're seeing more adoption, especially with Intel Lunar Lake reference design wins and so forth. But it will take a few quarters, maybe even a few years, for that to be a needle mover. And I think in the fiscal 25 timeframe, we have framed it as low tens of millions of dollars in revenue, substantially higher than that in fiscal 26 and beyond. But that's the way I would frame the portion of our business that's not related to our top customers.

Venkatesh R. Nathamuni: <unk> and <unk>.

Venkatesh R. Nathamuni: We're seeing more adoption, especially with Intel lunar Lake reference design wins, and so forth, but it will take a few quarters, maybe even a few years for that to be a needle mover and I think in the.

Venkatesh R. Nathamuni: Fiscal 'twenty five timeframe, we have framed it as low tens of millions of dollars in revenue, we think it can expand substantially higher than that in fiscal 'twenty and beyond but that's the way I would.

Venkatesh R. Nathamuni: The the portion of our business that is not related to our top customer.

Venkatesh R. Nathamuni: Yeah.

Christopher Adam Jackson Rolland: Okay, low tens of millions, I guess would be just 10 percent, and then layer these other opportunities on top, and if it's tens of millions, 20 million, I mean that would be 20 percent, 10 percent plus growth. But I guess moving on, you talked about how you guys taped out your next-gen CLC. Just curious as to any new functionality or ASP, and if not, maybe talk about your new power and battery products, even though the timetable is further out.

Venkatesh R. Nathamuni: Yes.

Venkatesh R. Nathamuni: Okay low tens of millions I guess would be just 10% and then layer. These other opportunities on top of its tens of millions $20 million.

Christopher Adam Jackson Rolland: That would be 20%.

Christopher Adam Jackson Rolland: 10% plus growth.

Christopher Adam Jackson Rolland: But I guess moving on you talked about.

Christopher Adam Jackson Rolland: You guys taped out your Nextgen CLC.

Christopher Adam Jackson Rolland: Just curious as to any new functionalities or ASP.

Christopher Adam Jackson Rolland: And if if.

Christopher Adam Jackson Rolland: If not maybe talk about your new power and battery products, even though the timetables further out.

John M. Forsyth: Thank you, Chris. Yeah, I mentioned that we did see silicon for our first camera control IP on a new process. We're excited about that. It's kind of running ahead of our roadmap a little to get our arms around a new process and new IP, and new customer features. What we see in that part of our product portfolio is a continued desire over time for increased processing capability, which translates into higher performance, stabilization, focus, and other features that are very meaningful to the end user camera experience.

Speaker Change: Thank you, Chris Yeah, I mentioned that we in the past quarter.

John M. Forsyth: <unk>.

John M. Forsyth: See silicon for our first.

John M. Forsyth: Great.

John M. Forsyth: Control of IP on a new process, where.

John M. Forsyth: We're excited about that that's kind of running ahead of our roadmap a little to get our arms around.

John M. Forsyth: New a new process and new IP and new customer features so what we what we see in that part of our product portfolio is a continued desire over time for increased processing capability.

John M. Forsyth: That translates into higher performance stable.

John M. Forsyth: Stabilization focus and other features.

John M. Forsyth: Very meaningful today and use our camera experience. So we have I think a pretty rich roadmap, there and we will continue to invest in it and.

John M. Forsyth: So we have, I think, a pretty rich roadmap there, and we'll continue to invest in it and continue to see, I think, over time, that kind of steady rate of growth that we've seen since the introduction of the first camera controller four years ago. In the battery and power space, we've made a lot of progress over the past year on IP, both in design and seeing much of that in silicon. We're actively engaged with customers in how that product gets to market.

John M. Forsyth: Continue to see I think over time that kind of steady rate of growth that we've seen since the introduction of the first camera controller.

John M. Forsyth: Four years ago.

John M. Forsyth: In the <unk>.

John M. Forsyth: Battery and power space, we've made a lot of progress over the past year on on IP both.

John M. Forsyth: In design in and seeing much of that in silicon.

John M. Forsyth: We're actively engaged with customers and how that gets to market clearly.

John M. Forsyth: Clearly, there are areas in the general market business where you can see some of our power IP being productized. For example, I mentioned the power converter product that's a part of the Lunar Lake reference design, but we really want to get that into the hands of as many of our customers and across as much of our business as possible. We're excited about that. As I've said previously, we're very interested in stuff around the battery, in particular, building on what we've done to date around sensing and managing battery health. We don't have more to report right now on what the product roadmap and timing looks like for that, but we're excited that we're making good progress in this space.

John M. Forsyth: There are areas in the general market business, where you can see some of our power IP being product ties for example, I mentioned the power converter product Thats, a part of the Luna late reference design, but we really want to get that into the hands of.

John M. Forsyth: As many of our customers and across as much of our business as possible and we're excited about that as I said previously we're very interested in the stuff around the battery in particular kind of building on what we've done to date around sensing managing battery battery health and.

John M. Forsyth: So we don't have more to report right now on what the product roadmap and timing looks like for that but we're excited that we're making good progress in this space.

Operator: Your next question comes from the line of Tore Svanberg with Staple.

John M. Forsyth: Your next question comes from the line of salaries Banbury with Stifel.

Tore Egil Svanberg: Yes, thank you, and congratulations on the strong cash flows. But I had a question for you first, John.

Tore Egil Svanberg: Yes. Thank you.

Tore Egil Svanberg: Graduations on the strong cash flows.

Tore Egil Svanberg: Had a question for you first John.

John M. Forsyth: So I'm not asking a question about your largest customer or anything like that. But, you know, with LLMs starting to trickle down to edge devices like tablets and smartphones. You know, I assume that the best interface is voice, you know, for AI at the edge. But I'm just wondering, just from an architectural perspective, if that is something that, you know, will, I mean, are you starting to see some new designs with your IP for those types of use cases?

Tore Egil Svanberg: So I'm not asking a question about your largest customer or anything like that but.

John M. Forsyth: With LLS, starting to trickle down to edge devices like pieces in smartphones.

John M. Forsyth: I assume that the best interfaces voice for AI at the edge, but I'm just wondering just from an architectural perspective, if that is something that will.

John M. Forsyth: I mean are you starting to see some new designs with your IP to.

John M. Forsyth: To those types of use cases.

John M. Forsyth: I mean, I know there's a lot of different angles here. It could be battery, it could be power, you know, it could be voice, or audio. But, yeah, any color you could share with us as far as the new design that's going to evolve on LLMs trickling down to edge devices.

John M. Forsyth: I mean, I know, there's a lot of different angles here I could be bad battery could be hour or it could.

John M. Forsyth: It could be voice audio, but yes, any any color you could share with us as far as new designs that are starting to evolve.

John M. Forsyth: Llm's trickling down to edge devices.

John M. Forsyth: Yeah, absolutely, Tore. I think, you know, we see a multitude of positives and opportunities around the Gen AI space. And voice is certainly one of them. That's one where, across our customer base, you know, we have multiple customers who are interested in how the voice interface evolves and assists user interaction with generative AI. So that's clearly one thing that we're very interested in and looking at, but I think the opportunity set is really broader than that for us in the AI space.

John M. Forsyth: Yes, absolutely I think we see a multitude of positives and opportunities around the Gen III space.

John M. Forsyth: And voice is certainly one of them.

John M. Forsyth: That's one where.

John M. Forsyth: Across our customer base and we have multiple customers who are interested in how the voice interface evolves.

John M. Forsyth: <unk> assists the.

John M. Forsyth: User interaction with with generative AI and so that's clearly one one thing that we're very interested in and looking at but.

John M. Forsyth: But I think the opportunity set is really broader than that for us in the AI space. That's a very important part of us.

John M. Forsyth: That's a very important part of, you know, a part of the signal path that goes through our silicon, so we care a lot about voice. But there are other ways in which it can drive significant value for Cirrus. I think, you know, not only, of course, if it drives an upgrade cycle in smartphones, watches, AR, VR, and laptops, I think we're extremely well positioned to participate and benefit from that. I think, secondly, it's really clear that generative AI on the edge is first of all going to be a thing as you allude to because, for privacy and latency reasons, I think that really has to be the case.

John M. Forsyth: A part of the signal path.

John M. Forsyth: Goes through our silicon So we care a lot about voice, but there are other other ways in which it can drive significant value for cirrus.

John M. Forsyth: Not only of course.

John M. Forsyth: It drives the upgrade cycle.

John M. Forsyth: In smartphones watches AR VR and laptops, I think we're extremely well positioned to.

John M. Forsyth: To participate and benefit from that.

John M. Forsyth: Secondly, it's really clear that generative AI on the edge is first of all it is going to be a thing as you as you allude to because of privacy and latency reasons I think that really has to be the case that means there is going to be a lot of data and processing going on on the client device.

John M. Forsyth: That means there's going to be a lot of data and processing going on in the client device. And that means that we are going to see more memory needed, and more and bigger processors, and probably more and bigger batteries as well. And so that does a couple of things. One is it puts tremendous constraints on board space. And that's, you know, our advanced geometry, Mexico engineering really kind of. All of these are a place squarely into that.

John M. Forsyth: It means that we are going to see more memory needed.

John M. Forsyth: More and bigger processes, and probably more and bigger batteries as well and so that does a couple of things one is it puts tremendous.

John M. Forsyth: Strengths on board space.

John M. Forsyth: And that.

John M. Forsyth: Our advanced <unk>.

John M. Forsyth: Geometry, Mexico engineering really kind of.

John M. Forsyth: Our place.

John M. Forsyth: Squarely into that we habitually are delivering.

John M. Forsyth: We habitually are delivering very, very compact solutions in the mixed signal space and integrating other components from around the board, so I think the premium on board space is probably going to increase in these client devices. And along with that, the premium on power efficiency as well. And again, that's kind of squarely in the bullseye of a lot of our R&D investments and efforts. So I think of all of those things together as being potential levers for us in the opportunity set around AI. Yeah, no, that's...

John M. Forsyth: Very very compact solutions in the mixed signal space and integrating other components from round. The board. So I think the premium on board space is probably going to increase.

John M. Forsyth: In these client devices.

John M. Forsyth: And along with that the premium on power efficiency as well.

John M. Forsyth: And again, that's that's kind of squarely in the Bull's eye of a lot of our R&D investments and efforts. So I think I think of all of those things together as being potential.

John M. Forsyth: Levers for us in in the.

John M. Forsyth: The opportunity set around AI.

Tore Egil Svanberg: Yeah, no, that's great. And as for my follow-up, obviously you got the smart codec and the amplifiers ramping up, you know. I assume that obviously means some higher content, but at least, initially, but as, you know, I think you said in your share of the letter, those will sort of remain workhorse products for a while. How should we think about sort of ASP declines every year, you know, once those products have been introduced to the market? Should we think about sort of a low to mid single-digit decline?

Speaker Change: Yes, that's great and as my follow up.

Tore Egil Svanberg: So obviously, you've got the smart codec and the amplifiers ramping.

Tore Egil Svanberg: I assume that obviously means some higher content, but at least of course initially but as.

Tore Egil Svanberg: I think you said in your shareholder letter.

Tore Egil Svanberg: We'll remain workhorse products for a while how should we think about sort of.

Tore Egil Svanberg: ASP declines every year once those products have been introduced to the market should we think about sort of like low to mid single digit declines.

John M. Forsyth: I think it's difficult to say precisely, Tore, though I do think we're entering a more normal, more typical kind of pricing environment than we've seen over the past few years. So I think a reasonable assumption, and certainly we expect this of our suppliers, so I have no reason to think that our customers don't expect it of us, is that we see reasons for efficiency to increase and prices to come down somewhat in the coming years. But at the same time, you know, our goal will always be to offset that through our own operational efficiency, but also through feature enhancements and integration of other functions into the devices we're delivering to our end But I think, you know, I think we're probably moving back into an environment where there is something approaching a more typical pricing curve.

Speaker Change: I think it's difficult to say precisely Atari, though I do think we're entering a more normal more typical kind of pricing environment than we've seen over the past few years. So.

John M. Forsyth: I think I think a reasonable assumption and certainly.

John M. Forsyth: We expect this of our suppliers. So I have no reason to think that our customers don't expect any of US is that we see reasons for.

John M. Forsyth: Efficiency to increase for prices too.

John M. Forsyth: Come down somewhat in the coming years.

John M. Forsyth: But at the same time, our goal will always be to offset that.

John M. Forsyth: Through.

John M. Forsyth: Through our own operational efficiency, but also through feature enhancements.

John M. Forsyth: <unk> integrates integration of other functions into into the devices.

John M. Forsyth: Delivering to our end customers, but I think yes.

John M. Forsyth: I think we're probably moving back into an environment, where there is something approaching a more typical pricing curve.

Operator: Again, if you would like to ask a question, press star then number one on your telephone keypad. And your next question comes from the line of Thomas O'Malley with Barclays.

John M. Forsyth: Again, if you would like to ask a question Press Star then the number one on your telephone keypad and your next question comes from the line of Thomas O'malley with Barclays.

Operator: Hey guys, thanks for taking my question. I just wanted to ask something in relation to just the broader smartphone ecosystem.

Thomas O'malley: Hey, guys. Thanks for taking my question I, just wanted to ask something in relation to just the broader smartphone ecosystem a couple other players.

Thomas O'malley: A couple other players in your largest, you know, your largest customer's realm talked about a weaker June due to some inventory work down. I just want to understand your timing with customers. Do you generally recognize some benefit in the June quarter from new platforms on a year over year basis? And are you seeing any of the inventory headwinds that we've heard about in the market from others?

Thomas O'malley: In your largest your largest customers Ron talked about a weaker June.

Thomas O'malley: Due to some inventory work down I just wanted to understand your timing with customers do you generally recognize some benefit in the June quarter from new platforms on a year over year basis and are you seeing any of the inventory headwinds that we've heard about in the market from others.

Venkatesh R. Nathamuni: Yeah, Tom, thanks for the question. So, you know, when we look at our booking patterns from our top customers, you know. If you ignore what happened during the pandemic, I would say in the last year and a half or so, we've returned to some semblance of normalcy. So there's this typical seasonal pattern that we're beginning to see, especially in the last four or five quarters. And based on those patterns, I would say that there tends to be very little in terms of new product introduction that's related to the June quarter.

Speaker Change: Yes, John Thanks for the question so.

Venkatesh R. Nathamuni: When we look at our bookings patterns from from our top customer.

Venkatesh R. Nathamuni: Okay.

Venkatesh R. Nathamuni: If you ignore what happened during the pandemic I would say in the last part of the year and.

Venkatesh R. Nathamuni: Hopper, so we return to some semblance of normalcy right. So this is typical seasonal pattern that we're beginning to see especially in the last four or five quarters and based on those patterns I would say that tends to be very little in terms of new product introduction that's related to the June quarter.

Venkatesh R. Nathamuni: Now, as you talk about what some of our peers have mentioned on their earnings calls, especially in the smartphone space, I recognize that some of them had inventory issues and some of them didn't. And for us, it's really hard to compare our booking patterns with what we see with our peers because the dynamics are very different. As you know very well, we've had a 15-year history of working incredibly closely with this customer.

Venkatesh R. Nathamuni: As you talk about what some of our peers have mentioned on their earnings calls, especially in the smart smartphone space.

Venkatesh R. Nathamuni: Recognize that some of them had inventory issues and some of them.

Venkatesh R. Nathamuni: And for US, it's really hard to compare our bookings patterns with what we see with our peers because the dynamics are very different as you know very well we've had a 15 year history of working incredibly closely with this customer and we tend to have much longer visibility at least in terms of new products and so forth and I think.

Venkatesh R. Nathamuni: And we tend to have much longer visibility, at least in terms of new products and so forth. And I think to compare our patterns with what we're hearing from others, I don't think it's something that we have the ability to prognosticate.

Venkatesh R. Nathamuni: The compare our guidance with what we're hearing from others I don't think this is something that we have the ability to prognosticate.

Thomas O'malley: Super helpful. And then if I just look at the full year, I know just being sensitive to customers, et cetera, but you have a really nice content roadmap here this year with the new codec, new amps. And I look at kind of the full year, and I'm not seeing kind of the expected growth that I would normally see in a content-rich environment year over year. To what extent are you guys baking in headwinds regarding total units?

Speaker Change: Super Helpful. And then if I just look at the full year I know just being thank you have on customers et cetera, but you have a really nice content roadmap here this year with new Kodak New amps.

Thomas O'malley: We look at kind of the full year.

Thomas O'malley: And I'm not seeing kind of the expected growth that I would normally see.

Thomas O'malley: Content rich environment year over year.

Thomas O'malley: To what extent are you guys baking in.

Thomas O'malley: Headwinds regarding total units can you talk about what conservatives on your kind of introducing into the model over the next couple of quarters and maybe just your expectations for.

Thomas O'malley: Can you talk about what conservatism you're kind of introducing to the model there over the next couple of quarters? And maybe just your expectations for, you know, smartphones in general for this calendar year, just because it seems like when I'm looking at your numbers here, I would expect a little bit more in terms of revenue growth on the audio side, given the content increases you're describing.

Thomas O'malley: <unk>.

Thomas O'malley: Smartphones in general for this calendar year.

Thomas O'malley: Because it seems like when I'm looking at your numbers here.

Thomas O'malley: I would expect a little bit more in terms of revenue growth on the audio side given the content increases youre describing thank you.

John M. Forsyth: Thanks, Tom. Obviously, we're just guiding the quarter right now, so I can't speak to what numbers you may have for the full year. To your point, we don't get too far out over our skis on assumptions about units, of course, and we think that's prudent. And, you know, we also, as you say, feel good about the content that we have coming this fall. But beyond that, we're not giving you guidance right now.

Speaker Change: Thanks, Tom obviously, we're just guiding a quarter right now so I can't speak to what numbers you may have for the full year.

John M. Forsyth: To your point, we don't we don't get too far out over our skis on assumptions on units of course, and we think thats prudent.

John M. Forsyth: And.

John M. Forsyth: We do also as you say, we feel good about the content that we have coming this fall, but beyond that we're not giving guidance right now yeah, and if I could Tom just to add to what John said.

John M. Forsyth: Yeah, and if I could, Tom, just to add to what John said, we take all the factors into account in terms of what the ordering patterns are, what the historical seasonality is, and things of that sort. And we try to provide guidance with what we think is the most likely outcome. But, you know, looking beyond the current quarter is not something that we are particularly equipped with.

John M. Forsyth: When we provide guidance we take all the factors into account in terms of what the ordering patterns are what the historical seasonality and things of that sort and we tried to provide guidance with what we think was the most likely outcome, but looking beyond the current quarter is not something that we are particularly equipment.

Venkatesh R. Nathamuni: And we have time for one last question.

Speaker Change: And we have time for one last question.

Operator: Your last question comes from the line of Ananda Baruah with Loop Capital. Hey, thanks guys, really appreciate it.

Venkatesh R. Nathamuni: Your last question comes from the line of Ananda Baruah with loop capital.

Ananda Prosad Baruah: Hey, thanks guys, really appreciate you taking the question and congrats on the great execution this quarter. I guess the question, maybe John, along those lines is, given the new technology that you have, Ramp and Goose at AMP and the Smart Codec. All things being equal, could you see better than typical seasonality through the back half of the calendar year?

Ananda Prosad Baruah: Hey, Thanks, guys really appreciate you taking the question and congrats on the on the great execution this quarter.

Ananda Prosad Baruah: I guess the question maybe got along those lines is given.

Ananda Prosad Baruah: Given the.

Ananda Prosad Baruah: The new technology that you have ramping duties to dampen the smart codec.

Ananda Prosad Baruah: All things being equal could you see better than typical seasonality through that through the back half of the calendar year.

Ananda Prosad Baruah: Yeah.

John M. Forsyth: I don't think I'm in a position to guide that right now, Ananda. I think a lot of that depends on the scheduling of orders around the ramp. As you would imagine, it's a really significant ramp of material with the boosted amplifiers being three per device and then the codec with a one attach rate as well. That's a lot of material, and so that will be showing up in our results as we go forward, but exactly how that pans out relative to typical seasonality, I don't think we're in a position to comment in detail.

John: I don't think I'm in a position to guide that right now and then I think a lot of that does depend on the scheduling of orders.

John M. Forsyth: Orders in around the ramp as you would imagine it's a really significant ramp of material with the boosted amplifiers being three per device and then the codec with a one attach rate as well.

John M. Forsyth: That's a lot of material and so that will be showing up in our results as we go forward, but exactly how that pans out relative to typical seasonality I don't think were in a position to comment in detail.

Speaker Change: That's helpful. And then just a quick follow up is <unk>.

Ananda Prosad Baruah: That's helpful. And then just a quick follow-up is given, sort of just pivoting back to your comment there about the Gen AI opportunity, given the multiple touch points you could have into the various potential areas of need, does that place the company in a stronger position to expand its customers' participation? participation. And that's it for me.

Ananda Prosad Baruah: Given sort of.

Ananda Prosad Baruah: Getting back to your commentary about Gen AI opportunity given the multiple touch points you could have.

Ananda Prosad Baruah: Into the variant.

Speaker Change: Joel areas that need is that place the company in that.

Ananda Prosad Baruah: Ron group position.

Ananda Prosad Baruah: Two expanded customer base.

Speaker Change: And that's it for me thanks.

John M. Forsyth: I certainly hope so. I think with our existing customer base... A number of those customers are many of the brands who I think will be bringing generative AI-centric devices to consumers. So we're very well positioned from that point of view, but I think we can target achieving deeper penetration of some of those customers as we go forward. I mentioned that there are multiple product categories where I think we can be relevant and where Gen AI can be relevant, such as smartphones, watches, AR, VR, laptops, and so on.

Speaker Change: I certainly hope so I think with our existing customer base.

John M. Forsyth: A number of a number of those customers are many of the brands, who I think will be bringing generative AI centric devices to consumers and we're very well positioned from that point of view, but I think we can targets achieving deeper penetration of some of those customers as we go forward.

John M. Forsyth: I mentioned that there were multiple product categories, where I think we can be relevant and where gen. III Gen AI can be relevant.

John M. Forsyth: Across smartphones watches AR VR laptops and so on.

John M. Forsyth: In some of those markets, we're still in the early innings, laptops being a prime example, and I think we have both, product solutions today which are highly relevant just in terms of delivering significantly increased power efficiency plus the engineering and IP expertise that will lend itself extremely well to participation in a GNI cycle of products. So yes is the answer. I'm hopeful that we can certainly be active participants in that cycle. And with that, we will end the Q&A session.

John M. Forsyth: In some of those markets, we are still in the early innings.

John M. Forsyth: Laptops being a Prime example, and I think we have both.

John M. Forsyth: Product solutions today, which are highly relevant just in terms of delivering significantly increased power efficiency, plus the engineering and IP expertise that will lend itself extremely well to participation in a.

John M. Forsyth: <unk> cycled product. So yes is the answer.

John M. Forsyth: I'm hopeful that we can we can certainly be active participants in that cycle.

John M. Forsyth: And with that, we will end the Q&A session, and I will turn the call back to John for his final questions.

John M. Forsyth: And with that we will end the Q&A session and I will turn the call back to John for his final remarks.

John: Thank you Chelsea.

John M. Forsyth: In summary, we're pleased to report these results for the quarter and to report the significant progress we made in fiscal 2024 across our main areas of strategic focus. I'd like to thank our customers for the trust they continue to place in us as a partner and supplier, and all of the Cirrus Logic employees worldwide, whose commitment to excellence in everything they do is what drives our collective success. We remain very excited about the opportunities that we see in front of us, and we thank you all for your continued interest in Cirrus Logic.

John: In summary, we're pleased to report these results for the quarter and to report the significant progress we made in fiscal 2024 across our main areas of strategic focus.

John M. Forsyth: Before we close, I would also like to note that we will be participating in the Cowen Conference in New York on May 29th and the Stiefel Conference in Boston in June. Please check our investor website for the details. I'd like to thank everyone for participating in the call today. Goodbye.

Operator: That concludes today's conference call. You may now disconnect.

John M. Forsyth: I'd like to thank our customers for the trust they continue to place in us as a partner and supplier.

Operator: And all of the Cirrus logic employees worldwide, whose commitment to excellence in everything they do is what drives our collective success.

Operator: We remain very excited about the opportunities that we see in front of us and we thank you all for your continued interest in Cirrus logic.

Operator: Before we close I would also like to note that we will be participating in the Cowen Conference in New York on May 29, and the Stifel Conference in Boston on June four please check our investor website for the details.

Operator: Please check our investor website for the details. I'd like to thank everyone for participating in the call today.

Operator: I'd like to thank everyone for participating in the call today Goodbye.

Operator: That concludes today's conference call you may now disconnect.

Operator: Please check our investor website for the details.

Operator: I'd like to thank everyone for participating in the call today.