Q1 2025 Cirrus Logic Inc Earnings Call
Chelsea Heffernan: Although 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 current expectations. Now, I'd like to turn the call over to John.
Operator: Providing the synchronization, 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.
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.
Chelsea Heffernan: Please refer to the press release and the shareholder letter issued today, which are available on the Cirrus Logic website.
Please refer to the press release and a shareholder letter issued today, which are available on the Cirrus logic website.
Chelsea Heffernan: In 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 current expectations, now I'd like to turn the call over to John.
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 current expectations now I'd like to turn the call over to John.
John Forsyth: Thank you, Chelsea, and welcome to everyone joining today's call. As you have seen in the press release, in the June quarter, Cirrus Logic delivered revenue of $374 million, above the top end of our guidance range due to stronger than expected shipments into smart. In a moment, I'm going to hand over the call to Ulf to discuss our financial results for the June quarter in greater detail, as well as our outlook for the September quarter. But before we get to that, I'd like to make a few remarks regarding our recent progress. Our long-term strategy is based on three broad principles.
John Forsyth: Thank you, Chelsea, and welcome to everyone joining today's call. As you have seen in the press release, in the June quarter, Cirrus Logic delivered revenue of $374 million, above the top end of our guidance range due to stronger-than-expected shipments into smartphones.
John: Thank you Chelsea and welcome to everyone joining today's call.
John: As you have seen in the press release in the June quarter, Cirrus logic delivered revenue of $374 million above the top end of our guidance range due to stronger than expected shipments into smartphones.
John Forsyth: In a moment, I'm going to hand over the call to Ulf to discuss up financial results for the June quarter in greater detail, as well as our outlook for the September quarter. But before we get to that, I'd like to make a few remarks regarding our recent progress.
<unk>: In a moment I'm going to hand over the call to <unk> to discuss our financial results for the June quarter in greater detail as well as our outlook for the September quarter.
John: Before we get to that I'd like to make a few remarks regarding our recent progress.
John Forsyth: Our long term strategy is based around three broad principles. Number one, maintaining leadership in our core flagship smartphone audio business. Number two, continuing our expansion in areas of high-performance mixed-signal functionality in smartphones. And number three, leveraging those audio and high performance mixed signal capabilities to penetrate and grow in new markets. In our flagship smartphone audio business, this past quarter marked a very significant milestone, as we began ramping production of our next generation custom boosted amplifier and our first 22 nanometers smart codec ahead of new product launches expected later this year. At Cirrus, we do not innovate in a vacuum, but believe in focusing closely on our customers' needs and aspirations.
John Forsyth: Number one, maintaining leadership in our core flagship smartphone audio business. Number two, continuing our expansion in areas of high-performance mixed-signal functionality in smartphones. And number three, leveraging those audio and high-performance mixed-signal capabilities to penetrate and grow in new markets. In our flagship smartphone audio business, this past quarter marked a very significant milestone as we began ramping production of our next generation custom boosted amplifier and our first 22 nanometer smart codec ahead of new product launches expected later this year. At Cirrus, we do not innovate in a vacuum but believe in focusing closely on our customers' needs and aspirations.
Our long term strategy is based around three broad principles number one maintaining leadership in our core flagship smartphone audio business.
John Forsyth: And both of these products represent significant multi-year development efforts undertaken in close collaboration with our customers. We're excited about the performance, efficiency, and system cost improvements that the new components will deliver. We anticipate that both the Boosted Amplifier and the new Smart Kodak will ship for multiple generations of customer devices following their introduction. As a reference point, over the past six years, the preceding smart codec and boosted amplifier have shipped over one billion units and three and a half billion units, respectively.
Number two.
Speaker Change: Continuing our expansion in areas of high performance mixed signal functionality in smartphones.
John Forsyth: And both of these products represent significant multi-year development efforts undertaken in close collaboration with our customer. We're excited about the performance, efficiency, and system cost improvements that the new components will deliver. We anticipate that both the boosted amplifier and the new smart codec will ship from multiple generations of customer devices following their introduction. As a reference point, over the past six years, the preceding smart codec and boosted amplifier have shipped over one billion units and three and a half billion units, respectively. It takes an extraordinary level of dedication to excellence in both engineering and execution to deliver that kind of accomplishment.
John Forsyth: It takes an extraordinary level of dedication to excellence in both engineering and execution to deliver that kind of accomplishment, and we believe that same dedication can help our new next-generation components have similar success. Looking beyond audio, our goal is to continue to broaden our high-performance mixed-signal content in smartphones, where we see a meaningful opportunity to not only expand our addressable market but also to grow and diversify our revenue. With new customer introductions that we expect to see later this year, we believe we will benefit from more favorable content in smartphones on the market that include our third-generation camera controller.
John Forsyth: And we believe that same dedication can help our new next generation components have similar success.
John Forsyth: Looking beyond audio, our goal is to continue to broaden our high performance mix signal content in smartphones, where we see a meaningful opportunity to not only expand our addressable market, but also to grow and diversify our revenue. With new customer introductions that we expect to see later this year, we believe we will benefit from a more favorable content in smartphones on the market that include our third generation camera controller. We also believe there is significant potential to continue to grow value in this area in the future. And we are today investing in a roadmap of further products and features in pursuit of that goal.
John Forsyth: We also believe there is significant potential to continue to grow value in this area in the future, and we are today investing in a roadmap of further products and features in pursuit of that goal. In this area, we continue to be excited about the opportunities we see in the laptop. These components offer sustained differentiation with improved performance, lower power consumption, and new feature enhancements, and we have received outstanding customer feedback across professional and pro-sumer audio segments.
John Forsyth: Beyond camera controllers, we have also previously indicated that we believe advanced power and battery-related technologies represent great opportunities for the company. But today we have a number of R&D programs underway related to high-efficiency charging, battery management, and system-side power delivery. We believe that the investments we are making in this space today can continue to drive our product diversification in the future.
John Forsyth: The third element of our strategy is our focus on expanding into new applications and markets outside of smartphones. In this area, we continue to be excited about the opportunities we see in the laptop business. Today we have design wins with each of the top six laptop OEMs worldwide and are actively pursuing many future design opportunities across multiple generations of customer products. We see significant customer demand and engagement around our audio codec, boosted amplifier, haptic driver, and power converter products. Supporting our belief that this is a market where Cirrus Logic can enhance the end user experience, improve the performance of our customers' products, and increase both content per device and market share over time.
John Forsyth: Additionally, following the launch of our latest generation of analog to digital converters last year, during Q1 we also added a series of new digital to analog converters and an ultra-high performance audio codec to this product family. These components offer sustained differentiation with improved performance, lower power consumption, and new feature enhancements. And we have received outstanding customer feedback across professional and prosima audio segments. We believe they can be valuable contributors to our profitability in the years to come.
Ulf Habermann: And with that, let me now turn the call over to Ulf to provide an overview of our financial results as well as the outlook. Thank you, John, and good afternoon, everyone. I will start with the summary of our financial results for our fiscal first quarter 2025, then provide guidance for Q2 F525. Revenue in Q1 F525 was above the high end of our guidance range. At $374 million due to stronger than anticipated shipments into smartphones. On a sequential basis, revenue was relatively flat. On a year of year basis, sales were up 18% due to an increase in smartphone unit volumes and HPMS content gains.
Speaker Change: Trees in smartphone unit volumes and <unk> content gains.
Ulf Habermann: This was partially offset by lower general market sales.
Speaker Change: This was partially offset by lower general market sales.
Ulf Habermann: Turning to gross profit and gross margin. Non-GAAP gross profit in the quarter was $189.2 million. And non-gap gross margin was 50.6%. On a sequential basis, gross margin decreased by 130 basis points, mostly driven by higher supply chain costs related to new product rents.
Speaker Change: Turning to gross profit and gross margin.
Speaker Change: non-GAAP gross profit in the quarter was $189 2 million and non-GAAP gross margin was 56%.
Speaker Change: On a sequential basis gross margin decreased by 130 basis points, mostly driven by higher supply chain costs related to new product ramps.
Ulf Habermann: cross-margin increased slightly on a year-over-year basis, resulting in a non-gap free cash flow margin for the quarter of roughly 21%.
Ulf Habermann: Gross margin increased slightly on a year-over-year basis.
Speaker Change: Gross margin increased slightly on a year over year basis.
Ulf Habermann: Now I'll turn to operating expenses. Non-GAAP operating expense for the first quarter was $118 million. On a sequential basis, up was up $1.5 million, primarily due to an increase in employee related expenses. This was offset by lower product development cost. On a year-over-year basis, operating expense was up $4.2 million, largely due to higher variable compensation. Non-GAAP operating income for the quarter was $71.2 million. For 19% of revenue.
Speaker Change: Now I will turn to operating expenses.
Speaker Change: non-GAAP operating expense for the first quarter was $118 million.
Speaker Change: On a sequential basis Opex was up $1 5 million <unk>.
Speaker Change: Primarily due to an increase in employee related expenses.
Speaker Change: This was offset by lower product development cost.
Speaker Change: On a year over year basis operating expense was up $4 $2 million largely due to higher variable compensation.
Speaker Change: non-GAAP operating income for the quarter was $71 $2 million for 19% of revenue.
Ulf Habermann: Turning now to taxes. For the June quarter, for non-gap tax rate was 23% in line with our previous guidance. And lastly, on the P&L, non-GAAP net income in the first quarter was $62.4 million for $1.12 per share, as the higher revenue and profitability flowed through to the bottom line.
Speaker Change: Turning now to taxes for the June quarter, our non-GAAP tax rate was 23% in line with our previous guidance.
Speaker Change: And lastly on the P&L non-GAAP net income in the first quarter to $62 $4 million for $1 12 per share as the higher revenue and profitability flow through to the bottom line.
Ulf Habermann: We now turn to the balance sheet. Our balance sheet continues to remain strong and re-ended the June quarter with $744.6 million in cash and investment. Our ending cash balance was up $44.6 million from the prior quarter, primarily due to strong cash flow from operations, which was partially offset by stock purchases. We continue to have no debt of standing and have $300 million undrawn on our revolve. Inventory balance at the end of the first quarter was $232.6 million, up from $227.2 million in Q4 and 524. Days of inventory were done slightly sequentially, and we ended the quarter with approximately 115 days of inventory.
Speaker Change: We now turn to the balance sheet.
Speaker Change: Our balance sheet continues to remain strong and we ended the June quarter with $744 $6 million in cash and investments.
Ulf Habermann: Looking ahead in Q2, we have 525. We expect inventory to increase from the prior quarter in supportive news, marked from launches expected later this fall. Turning to cash flow, cash flow from operations was $87.2 million in a June quarter, and cash was roughly $10.1 million. Resolving a non-gap free cash flow margin for the quarter of roughly 21%. For the 12 months period, cash flow from operations was $548.6 million in cash was roughly $36.2 million. This resulted in a non-gap free cash flow margin of roughly 28%, which is up from 10% for the same 12 months period a year ago.
Ulf Habermann: From the share buyback front in Q1, we utilized $41 million to purchase approximately 361,000 shares for our common stock at an average price of $113.48. At the end of Q1, if by 25, the company had $274.1 million remaining in its 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.
Ulf Habermann: Now on to the guidance. For Q2 of FY25, we expect revenue in the range of $490 million to $550 million. I would like to take a moment to note that when comparing our September quarter outlook to the equivalent quarter last year, our September quarter this fiscal year begins and ends one week later. Thus, it encompasses one week more of the higher volume production associated typical seasonal productments. Gap growth margin is expected to range from 50% to 52%. Non-Gap operating expense is expected to range from $125 million to $131 million, up sequentially, due to higher variable compensation expense and increased product development cost.
Ulf Habermann: We will continue to control discretionary spending while investing strategically in product development to drive long-term growth. We expect our FY25 non-GAAP tax rate to be approximately 22 to 24%, unchanged from our previous guidance. This range is slightly higher than our FY24 tax rate, which was impacted by a favorable catch-up benefit related to updated RIS guidance on the R&D capitalization rule.
Ulf Habermann: In closing, we delivered outstanding results for the June quarter. We are pleased with the progress we have made this year and remain focused on executing on our strategy that we believe will enable the company to grow both revenue and profitability over the long term.
Chelsea Heffernan: Before we begin the Q&A, I would like to note that while we understand there's 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 for the Q&A session. Thank you, Ulf. 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. Thank you. We are now opening the call for question-and-answer session. If you'd like to ask a question, please press star 1 again, star 1.
Thomas O'malley: Our first question comes from Thomas O'Malley from Barfins. Your line is now open. Thanks for taking my question, and congrats on the results. Obviously, sensitivity around the largest customer, but some big numbers changes here to the positive side. Could you just talk about three months ago going into this cycle. There was an expectation for the next several quarters, and things have come in a bit better. On the guide inside, can you talk about where that strength is coming from in your business? That's part one. And then part two. I kind of wanted to ask on the PC side.
Thomas O'malley: You mentioned it again in the script, but could you talk about the opportunities around AIPC and potential incremental content for you guys. You had previously kind of given some targets for the full year about where you thought AIPC in general could go, but maybe any update to that, just given what we're hearing on the AIPC ground. Thank you. Absolutely. Thank you, Tom. On the guidance side, well, on the results and the guidance, I think, as you know, our goal when we guide is to provide. As accurate a view as we can of what we expect, and we talk to our field teams, we talk to our supply chain, we talk to our customers, and we look at historical patterns.
John Forsyth: And we take all that together and use that as inputs to the guidance model. As you've seen in the June quarter, which was also the case in the quarter before, we saw demand, which was simply more sustained than it typically has been. And I think that speaks to the strength of demand out there in the real world for our customers' customers' products. So we're obviously delighted by that and very pleased with the results. When we look out to the guidance for the September quarter, it obviously embraces again all the information we have from the supply chain.
John Forsyth: And our customers, about what we're anticipating, building, and shipping over the current quarter. The one additional data point that I'd give, though, when we look to the year-on-year comps for the September quarter guidance is that this year, our September quarter, our quarter is a slightly offset as a consequence of the 53-week year we had last year. So December was supporting week quarter. And that means we have this we have this slight offside, so the offset. So the September quarter ends on September 28, versus September 23, last year. Which a week may not sound like a lot, but that's right in a peak period of building and shipping for us.
Speaker Change: Cadence is that this year our sept.
Speaker Change: September quarter, all quarters are slightly offset as a consequence of the 53 week year. We had last year. So December was a 14 week quarter.
Speaker Change: And that means we have this we have the slight off site.
Speaker Change: So that our September quarter ends on September 28th versus September 23rd last year.
Speaker Change: Which are weak may not sound like a lot, but that's right in a in a peak period of building and shipping for US. It's one of the kind of peak periods during the year.
John Forsyth: It's, you know, one of the kind of peak periods during the year. So that means the September quarter guidance kind of encompasses. One week of more intense ramps than it did last year. So I keep that in mind when drawing a year on your comparisons.
Speaker Change: So that means the September quarter guidance kind of encompasses.
Speaker Change: One week of more intense ramps and suddenly it did last year, so I'd keep that in mind, when when drawing a year on year comparisons there.
John Forsyth: You also asked about the PC market and the outlook there. I think we're really delighted with the progress that we're seeing. I think the AI PC kind of upgrade cycle is certainly something that excites us, but the content we have really delivers a lot of benefits across a full kind of spread of PCs, across a portfolio whether or not that they're fully focused on AI features. So I guess in terms of the progress, you know, I've talked in the past about the SAM. What we see is the overall opportunity in the PC space. I've said that somewhere around a billion or more; we still believe that.
Speaker Change: You also asked about the PC market and in the air.
Speaker Change: Look there I think we're really delighted with the progress that we're seeing I think the.
Speaker Change: The AI PC kind of upgrade cycle is certainly something that excites us, but the content we have.
Speaker Change: Deliveries a lot of benefits.
Speaker Change: Cros are full.
Speaker Change: We'll kind of spread of Pcs across the portfolio, whether or not there.
Speaker Change: We're fully focused on on AI features so.
Speaker Change: I guess.
Speaker Change: In terms of the progress I've talked I've talked in the past about.
Ulf Habermann: The SAM, what we see is the overall opportunity in the PC space. I've said that somewhere around a billion or more, and we still believe that. And then I talked about the outlook that we have for FY25, being in the low tens of millions revenue-wise. We still believe that's appropriate. And then thirdly, I guess I'm talking about the momentum that we're seeing. So we're delighted with the design momentum that we're seeing across customers now and across our range of products. So we have
Speaker Change: Sam what we see is the overall opportunity in the PC space have said that.
Speaker Change: Somewhere somewhere around $1 billion or more we still believe that.
John Forsyth: And then I've talked about the outlook that we have for FY25, being in the low tens of millions revenue-wise. We still believe that’s appropriate. And then, certainly I guess I talk about the momentum that we're seeing. So we're delighted with the design momentum that we're seeing at cross-customers now and across a range of products. So we have audio products in the form of boosted amplifier and the codec. We also have haptic drivers and power converter products. And if you take those together across the top five PC laptop OEMs, we believe there's somewhere north of a hundred designs in progress right now, which are targeted at shipping in calendar 25.
Sam: And then I've talked about the outlook that we have for FY 'twenty five of being in the low tens of millions revenue wise.
Speaker Change: We still we still believe that.
Speaker Change: That's appropriate and and then thirdly, I guess I'd talk about the momentum that we're seeing so we're delighted with the design momentum.
Speaker Change: We're seeing across customers now and across a range of products that we have.
Speaker Change: Audio.
Speaker Change: <unk> in the form of boosted amplifiers and codec. We also have haptic drivers and power converter products and if you take those together across the top five PC laptop Oems.
Speaker Change: We believe this somewhere north of 100 designs in progress right now which are targeted at shipping in calendar 'twenty five. So so we're excited still about the opportunity there and we believe we're tracking really well versus the goals that we set out previously.
Operator: So, you know, we're excited still about the opportunity there. We believe we're tracking really well, versus the goals that we set out previously. Thank you very much.
Speaker Change: Thank you very much.
Jeremy Confortori: Our next question is, Tor Benberg from Cycle. Your line is now okay. Yes, good afternoon. This is Jeremy Confortori. Just a question on the data converter products. You know, obviously you have a significant experience in the audio and consumer markets. But what is your strategy in terms of going after industrial applications for this segment? You know, are there partnerships that you can talk about? Maybe relationships with customers, anything that can give us a little bit more color would be great. Thanks. Yeah, thanks for asking about this, Jeremy. We really like this part of our business and believe that the return on investment over the long run is a good one.
Speaker Change: Our next question.
Dan: Sure Dan.
Speaker Change: Greg.
Speaker Change: Paul Your line is now okay.
Speaker Change: Yes. Good afternoon. This is Jeremy <unk>.
Speaker Change: Just a question on the data converter products.
Speaker Change: You know obviously you have significant experience in the audio and consumer markets.
Speaker Change: But what is your strategy.
Speaker Change: In terms of going after the industrial applications for this segment.
Speaker Change: Are there partnerships that you can talk about maybe your relationships.
Speaker Change: With.
Customers.
Speaker Change: You think that can give us a little bit more color would be great. Thanks.
Speaker Change: Yes, thanks for asking but this Jeremy we really like this part of our business.
Speaker Change: And our belief that the.
Speaker Change: The return on.
Speaker Change: Investment over the long run is a good one it's not by comparison, it's not a a big units.
John Forsyth: It's not, by comparison, it's not a big unit-driven business in any one year, but products tend to run for a long time. And at very, very healthy growth margins and so on. So one of the things that we've been doing as we've gotten through some major R&D lifts, we've had over the past few years, like the 22 anatomy, the smart codec, and so on, is deploying some of our mixable resources on kind of rejuvenating and re-energizing some of those kind of broad based analog catalog products. And especially not exclusively in the audio space, but especially in the audio space.
Speaker Change: Driven business and in any one year, but products tend to run.
Speaker Change: For a long time and at a very very healthy gross gross margins and so on so one of the things that we've been doing as we've.
Speaker Change: Sorting through some major R&D lifts, we've had over the past few years like the 22 nanometer smart codec and so on is deploying some of our Mexico resources on a kind of rejuvenating and reenergizing some of those kind of broad based.
Speaker Change: Analog catalog products, and especially not exclusively in the audio space, but especially in the audio space.
John Forsyth: And that's really, that's really key for us, and the audio leadership is, you know, is part of our heritage. It's also something that gives us a halo that extends to all of our audio products. And these products that we've launched over the past quarter and last year now comprise a suite of digital analog converters, or DACs, ADCs, and the codec, all of which have absolutely uncompromised performance in audio capture and reproduction. So the customer feedback on those has been stellar. That's across both the prosumer space and the pro audio space where we have, you know, we have a great network of relationships.
Speaker Change: And that's really a.
Speaker Change: That's really key for US I think audio leadership is.
Speaker Change: Part of our heritage. It's also something that gives us a halo that extends to our to all of our audio products and these products that we've launched over the past quarter and last year now comprise a suite of.
Speaker Change: Digital to analog converters, dacs, Adcs and a codec all of which have absolutely uncompromised performance in audio capture and reproduction. So the customer feedback on those has been stellar.
Speaker Change: That's across both the protium of space.
Ulf Habermann: and the pro audio space, where we have a great network of relationships, and then in some other industrial segments and parts of the automotive market. So we've seen amazing customer feedback, and we anticipate end user feedback is going to be equally positive in due course.
Speaker Change: And the pro audio space, where we have we have a great network of relationships.
John Forsyth: And then in some other industrial segments and an automotive, apart from the automotive market. So we've seen an amazing customer feedback, and we anticipate the end user feedback is going to be equally positive in due course. Great, and maybe just in terms of timing for revenue, any indication there and maybe which segment you might see first from four data converters. Thank you. We don't break out this part of our business by revenue. It's really a kind of long; it's part of our kind of long tail business. So if you look at any given quarter, our business outside of our largest customer will be maybe 12, 15, 20% depending on the particular quarter.
Speaker Change: And then in some other industrial segments and an automotive.
Speaker Change: Parts of the automotive market.
Speaker Change: So we've seen an amazing customer feedback and we anticipate the end user feedback is gonna be equally positive in depots.
Speaker Change: Great and maybe just.
Speaker Change: Yeah in terms of what.
Speaker Change: Timing for revenue.
Speaker Change: Any indication there and maybe which segment you might see first from four data converters. Thank you.
Speaker Change: Yes, we don't break out this part of our business by revenue, it's really it's really a kind of long.
Ulf Habermann: You know, it's part of our kind of long tail business. So if you look at any given quarter,
Speaker Change:
Speaker Change: Yeah as far as part of our kind of long tail business. So if you look at any given quarter.
Speaker Change: Our customer our business outside of our largest customer will be you know, maybe 12 15, 20% depending on on the particular quarter.
John Forsyth: That general market business then splits into kind of three categories. So there is Android, there's the PC business which I was talking about, and then there's this kind of broader based catalog business. So these products will contribute to that, as I said, in a very healthy growth margin, and we'll be sure to give an update on progress as we move forward with this.
Speaker Change: That's general market business, then splits into.
Speaker Change: Kind of three categories. So there is a Android is the PC business, which I was talking about and then there's this kind of broader based catalog business.
Speaker Change: These products will contribute to that as I said in a very healthy gross margin and <unk>.
Speaker Change: We'll be sure and give an update on progress as we move forward with us.
Operator: Our next question comes from Matt Ramsey from T.D. Cohen. Your line is now
Matt Hamsey: Our next question comes from Matt Hamsey, from TD Cohen; your line is now. Hey, everybody. Good afternoon. Thank you for taking the questions. John, I mean, this is not new commentary necessarily, but a little bit of different emphasis, I think, in your script and in the shareholder letter about maybe different power domains for HTML around battery, and that emphasis has continued to go up. So maybe I depreciated if you'd spend a little bit of time there. I know there's a lot of new AI features potentially coming down the pike in phones and in other devices that will no doubt strain battery life, making, I don't know, the usage of the battery and the draining of it and also the charging of it more critical.
Mark <unk>: Our next question comes from Mark <unk>.
Speaker Change: TD Cowen your line is now.
Speaker Change: Okay.
Mark: Hey, everybody good afternoon, and thank you for taking the questions.
Matthew Ramsay: John, I mean, this is not necessarily new commentary necessarily, but a little bit of a different emphasis, I think, in your script and in the shareholder letter about
Mark: John I mean, this is not new commentary necessarily but a little bit of different emphasis I think in your script and in the shareholder letter about.
Speaker Change: Maybe different.
Mark: Power domains for HD maps around battery.
Speaker Change: And that emphasis has continued to go up so I I, maybe I would appreciate it if you could spend a little bit of time, there I know, there's a lot of.
Speaker Change: New AI features pretend potentially coming down the pike in phones and other devices that will.
Speaker Change: No doubt.
Mark: Strain battery life, making I don't know the usage of the battery and the draining of it and also the charging of it more critical so if you could maybe spend a little bit of time to the extent you can I'm talking about some of those opportunities and investments.
John Forsyth: So if you could maybe spend a little bit of time to the extent you can talking about some of those opportunities and investments, and then I got to follow up. Thanks. Yeah, thank you, Matt. It's certainly true that those are areas where we're making considerable investments, and we believe that there are meaningful opportunities for us. If you think about how we think of our strengths, we believe that leading edge analog makes signal combined with digital signal processing is kind of sweet spot for us. So, in the power space, we're not really that interested in traditional power management stuff, but we're very interested in areas where we can deliver meaningfully improved performance through the integration of more logic, more digital, and that will tend to mean that you will benefit from being on an advanced node for analog signal, which we typically are.
Speaker Change: And then I've got a follow up thanks.
Mark: Okay.
Beth: Yeah. Thank you Beth.
Speaker Change: It's certainly true that those are those areas, where we're making considerable investments and we believe that there are there are meaningful opportunities for us if you.
Speaker Change: Think about how we think of our strengths, we believe that leading edge.
Mark: Analog mixed signal and combined with our with digital.
Beth: Signal processing is as kind of a sweet spot for us so in the power space we're not.
Mark: Really that interested in in kind of traditional.
Mark: Power management stuff, but.
Mark: But we're very interested in areas, where we can deliver meaningfully improve performance.
Mark: Through the.
Mark: The integration of more more logic more digital.
Mark: And that will tend to mean that you will benefit from being on an advanced node for analog mixed signal, which we typically are.
John Forsyth: So that's how we think about it, and what that lends itself to is certainly stuff around the battery, where a lot of sensing and monitoring, and then kind of processing of the information you're getting from the battery, can be extremely valuable both for extending battery life and the impact of a battery consumption and peak power consumption on the rest of the system performance. So we have a bunch of investments around that area, probably either side of the battery, would be a good way of thinking about it. There are multiple ways in which those investments could manifest in terms of products, and we'll certainly kind of give more clarity as those come into focus in due course.
Beth: How do we think about it in and what that lends itself to is.
Mark: Suddenly stuff around the battery, where a lot of sensing and monitoring and then kind.
Mark: Processing of the information.
Mark: Guessing from the battery.
Mark: Can be can be extremely valuable, but for extending battery life and.
Mark: And the impact of.
Mark: Our battery consumption and peak power consumption on the rest of the system performance and so we have a we have a bunch of investments around that area, probably he decided the battery would be a good way of thinking about it there there are multiple ways in which those investments could manifest in terms of products and will suddenly kind of give more clarity as.
Mark: As those come into focus in due course.
Matthew Ramsay: Thanks, John. I guess this is my follow-up question.
Matt Hamsey: Thanks, John.
Mark: Got it thanks, John I guess, there's buying.
Matt Hamsey: I guess it's my follow-up. I want to say hello, Ulf. Welcome to the call. I've got a couple questions for you. I guess the first one, and you guys went through it fairly quickly there, and I got a couple questions on it tonight. I just want to make sure that I'm crystal clear on the 14-week quarter. Was December last year? So everything that we're looking at for this year, whether it's September or in December, as we pushed through, is all 13-week quarters. It's just shifted a little bit in timing relative to smartphone ramps. I just wanted to come from that.
Speaker Change: I'll follow up.
Speaker Change: I wanted to say Hello, and welcome to the call I've got a couple of questions for you.
John: I guess the first one and you guys went through it fairly quickly there and I got a couple of questions on it Tonight I just wanted to make sure that I'm Crystal clear on the 14 week quarter was December last year. So everything that we're looking at for this year or whether it's the September guide oriented December as we pushed through.
Speaker Change: It was all 13 week quarters, its just shifted a little bit in timing relative to <unk>.
Speaker Change: Smartphone ramps. So I just wanted to confirm that and second everything seems to be playing out as you guys had sort.
Ulf Habermann: And second, everything seems to be playing out as you guys had sort of described it with new versions of the codec and amplifiers coming later this year. As you're getting closer to those ramping, anything that we should think about just collectively about how that might move the gross margin makes. You don't often have all new product on that much content coming in one generation. So I don't know, calibrating my model makes sure nothing really moved there with the gross margin makes. Thank you. Yeah, thanks, Matt. I am going to jump in and comment on this though, especially given I gave the comment to the top of the call regarding the offset and the consequences of that 14-week quarter last year.
Mark: Sort of described it with.
Speaker Change: New versions of the codec and amplifiers coming later this year.
Speaker Change: As you are getting closer to those ramping anything that we should think about just collectively about how that might move the gross margin mix you don't often have all new product on that much content coming in.
Speaker Change: In one generation. So I was just I don't know calibrate my model make sure nothing really moved there with the gross margin mix. Thank you.
Speaker Change: Yeah, Thanks, Matt I am going to jump in and comment on this though especially given I I gave the comments at the top of the call regarding.
Speaker Change: The offset in the.
Speaker Change: The consequences of that 14 week quarter last year, So you've got it absolutely right. We had a 14 week.
Ulf Habermann: So you've got it absolutely right. We had a 14-week quarter in December of last year, and that means a couple of things when we get around to comps this year. Firstly, yes, everything is just shifted to the right by a week. So the September quarter begins and ends a week later, but that means it embraces a kind of larger proportion of that peak ramp. So that's worth keeping in mind when comparing year over year. And then of course, when it gets to December comps, there is also the fact that that's a 13-week comp compared to 14-week last year. In addition to which we obviously had some stuff which we commented on previously about the December quarter last year, which was that we had an unusual case of an Android flagship launching then when it normally it normally hits later in our in office.
Speaker Change: Quarter in December of last year and that means.
Speaker Change: A couple of things when we get around to two comps. This year. Firstly, yes, everything has just shifted kind of to the right by a week so the September quarter.
Speaker Change: It begins and ends a week later, but that means that it embraces a kind of a larger proportion of that that Pete Graham.
Speaker Change: So that's worth keeping in mind, when when comparing year over year, and then of course when it gets to the December comps.
Speaker Change: There is also the fact that that's a 13 week comp compared to a <unk>.
Speaker Change: 14 week last year.
Speaker Change: In addition to which we obviously had some.
Speaker Change: Some stuff, which we commented on previously about the December quarter last year, which was that we had a we had an unusual case or an android flagship launching than when it normally it normally hits later in our fiscal year.
Ulf Habermann: So that's the picture. I think you have that absolutely right on what we meant by that comment. On gross margin, I guess, you know, we just coming out of a quarter where our gross margin declined by 130 basis points quarter on quarter for reasons that we discussed previously. And we're obviously still quite meaningfully below where we were pre-pandemic as we went into the pandemic, but as we get into the September quarter, pair our guidance, we do expect a slight improvement relative to what we just reported. Nothing that makes us think differently about our long term model, to be clear, but there is a slight improvement there, which is reflective of over a number of things.
Speaker Change: So yeah. That's that's the that's the picture I think you've I think you have that absolutely right.
Speaker Change: On the on what we meant by that comment on gross margin.
Speaker Change: I guess.
Speaker Change: We are.
Speaker Change: Just coming out of a quarter, where gross margin declined by 130 basis points quarter on quarter for reasons that we discussed.
Speaker Change: Previously and we're obviously still quite meaningfully below where we were pre pandemic.
Speaker Change: We went into the pandemic, but as we get into the September quarter per our guidance, we do expect a slight improvement relative to what we just reported.
Speaker Change: Nothing that makes us think differently about our long term model to be clear, but but there is a slight improvement there which is reflective of a number of things obviously, partly that's product mix, which you allude to it's also.
Operator: Obviously, partly that's product mix, which you alluded to. It's also partly, you know, a great deal of work we've been doing on the supply chain side with our Foundry partners, with those ads and others, in order to optimize costs. And that's really been a kind of key feature of our activity as we've seen the pricing environment and the supply environment normalizing that, you know, we've been working really hard on driving a more competitive environment in those parts of the supply chain so that, you know, we and our customers see some benefits. Thank you. Before we continue, if you'd like to ask a question, please press star one.
Speaker Change: Partly a great deal of work, we've been doing on the supply chain side.
Speaker Change: With our foundry partners with those apps and others in order to optimize costs.
Speaker Change: And that's really been kind of a key feature of our activity as we've seen the pricing environment and the supply environment normalizing.
Speaker Change: We've been working really hard on driving.
Speaker Change: A more competitive environment in <unk>.
Speaker Change: Those parts of the supply chain.
Speaker Change: So that we and our customers see some benefit.
Speaker Change: Thank you before we continue to ask your question. Please press Star one again star one.
Operator: Again, that's star one.
David Williams: Our next question comes from David Williams, from the Benchmark Company, Sir Lion Snow Open. Hey, good afternoon. Thanks for taking the question, and let me give you my congrats as well for the solid results here. You know, maybe first, just kind of thinking about the success that you've had, moving beyond the handset and into the laptop, just kind of curious how you think about some of the other edge type devices as we move, kind of push forward further out. You know, automotive and what other areas are we maybe not thinking about where there could be some really nice content opportunity for Cirrus as we expand closer to the edge here?
Speaker Change: Question comes from David Williams from the Benchmark Company. Your line is now open.
David Williams: Hey, good afternoon. Thanks for taking my question and let me give you my congrats as well for the solid results here.
Speaker Change: Maybe first just kind of thinking about it.
David Williams: Access that you've had moving beyond the handset into the laptops just kind of curious how you think about some of the other edge type devices as we move kind of push for further out you know automotive and what other areas. We may be not thinking about where there could be some real nice content opportunity for for Cirrus.
Speaker Change: As we expand close it could be an issue.
John Forsyth: Yeah, thank you, David. We certainly think a lot about that. I'm also conscious that, you know, if we talk about that, we'll get into a cycle of giving 13-week updates on stuff that can take quite a while to build. But to your direct question, I think anywhere where audio power efficiency, haptics can really deliver a benefit to the user experience that that would be those would be areas that we're seriously evaluating, or in the case of wearables, they are already present in. So we certainly believe that our opportunity to leverage audio and HPMS technologies to drive some expansion for us goes well beyond the laptop market.
Speaker Change: Yeah. Thank you David we certainly think a lot about that.
Speaker Change: I'm also conscious that you know.
Speaker Change: If we talk about that will will get into a cycle of green, giving 13 week updates on stuff that can take quite a while to build.
Speaker Change: But to your direct question I think anywhere where audio power efficiency haptics can really deliver a benefit to the user experience that that would be those would be areas that we are.
Speaker Change: Seriously evaluating or in the case of Wearables, ne rnvr already present there.
Speaker Change: So we certainly believe that our opportunity to leverage our audio and <unk> technologies.
Speaker Change: To drive <unk>.
Speaker Change: Sam expansion for Us goes well well beyond the laptop market.
John Forsyth: It so happens that the laptop market was or has been a place where there are a number of architectural transitions there, which created great entry points for us. And a significant step up in what OEMs wanted to provide to their users in terms of the haptic and the audio-visual experience. So that's that's kind of synchronized incredibly well with our product offering. We're very happy with the momentum there, but we're not, you know, we're not going to we're not going to call it quits there. We certainly do have a great deal of interest in expanding into other markets as well.
Speaker Change: It so happens that the laptop market was or has been a place where there were a number of architectural transitions, there, which created great entry points for us.
Speaker Change: And a significant step up in what Oems wanted to provide to their users in terms of the haptic in the audiovisual experience. So that's that's kind of synchronized incredibly well with our product offering.
Speaker Change: We're very happy with the momentum there, but we're not we're not going to.
Speaker Change: We don't get to.
Speaker Change: Call. It quits there we certainly do have a have a great deal of interest in expanding into other markets as well.
John Forsyth: Okay, good color. Thank you. And then maybe just on the PC side, obviously, you're having some really great success, but just are you think you're seeing maybe an acceleration from the AIPC just given the additional content and kind of the price point there, but it feels like those are certainly at the upper end more luxury or at the top end of the market. It seems like that could draw in more content. Are you seeing that and maybe any urgency from those OEMs? Thank you. We certainly see a lot of excitement, a lot of urgency, a lot of energy.
Speaker Change: Okay. Good color. Thank you.
Speaker Change: Maybe just on the PC side, obviously, you have some really great success, but just are you do you think youre seeing maybe an acceleration from the AIP C. Just given that the additional content and kind of the price point there, but it feels like those are certainly at the upper end more luxury or at the top end of the market. It seems like that could draw in more content are you seeing that and then maybe any urgency.
Speaker Change: Those Oems thank you.
Speaker Change: We certainly see a lot of excitement a lot of urgency a lot of energy I alluded to the fact that.
John Forsyth: I alluded to the fact that we believe there's over a hundred designs in progress using at least one serious product; in many cases, more than one. That the targeted at calendar 25 launches, and obviously, you know, we're building for the period beyond that as well. And we still think we're still gathering momentum. So I think, you know, honestly, a few months ago, I would say that number is ahead of where we would have expected to be, and that does seem to be some degree of kind of re-energization of the PC market in anticipation of the kind of AI-driven cycle.
Speaker Change: We believe there's over 100 designs in progress using.
Speaker Change: Using at least one series product in many cases more than one.
Speaker Change: They are targeted at calendar 'twenty five launches and obviously you know we're building building for the period beyond that as well and we still we think we're still gathering momentum.
Speaker Change: <unk> I think.
Speaker Change: Honestly, a few months ago I would say that number is ahead of where we would have expected to be and it does seem to be.
Speaker Change: Some degree of a of kind of re <unk> of the PC market in anticipation of the the kind of AI driven cycle whether that hits.
Operator: Whether whether that hits, you know, exactly when they hit, so I don't think anybody is quite sure and not maybe a hundred percent sure on what the kind of ultimately compelling user features are going to be, but there's certainly there's certainly a lot of excitement about the potential for differentiation.
Speaker Change: Exactly when that hits I don't think anybody is quite sure and not maybe a 100% sure on what.
Speaker Change: What the kind of ultimately compelling use of features are going to be.
Speaker Change: But then suddenly there's certainly a lot of excitement about the potential for differentiation.
Operator: This will be our last question. Thank you.
Speaker Change: This will be our last question.
Speaker Change: Okay.
Speaker Change: Thank you our last question comes from Ananda Baruah from loop capital. Your line is now open.
Ananda Baruah: Our last question comes from Ananda Baruah from Luke Capital. The line is now open.
Ali Kahn: Hey guys, it's actually Ali Kahn from Nanda. I have one question. So my question is, of the content dollar growth you guys see over the next few years, within smartphones, what's a good way to think about the contribution from new or enhanced content relative to smartphone unit growth, being the driver of the content growth. So, just, if I understand the question correctly, you know, we don't make any, any, any particularly aggressive assumptions on smartphone units when we're looking at it at our own growth model internally. Obviously, we also don't guide beyond the current quarters, so, you know, I'm not going to get into what our expectations are over the next, you know, year plus.
Speaker Change: Hey, guys, it's actually Alec on for Mike.
Alec: I have one question. So my question is of the constant dollar growth do you guys see over the next few years within smartphones, what's a good way to think about the contribution from new or enhanced content relative to smartphone unit unit growth being the driver of content growth.
Speaker Change: Yeah.
Speaker Change: So just if I understand the question correctly.
Speaker Change: We don't make any any any particularly.
Speaker Change: Our aggressive assumptions on smartphone units when we're looking at it.
Speaker Change: At our own.
Speaker Change: Growth model internally, obviously, we also don't guide beyond the current quarter. So I'm, you know I'm I'm not going to get into what our expectations are over over the next year, plus but what I would say is that you know.
John Forsyth: But what I would say is that, you know, our plan is really always to make sure we've got means of growing in a, in a world where units aren't the, aren't the primary catalyst for that and we're not, we're not dependent on that. So that, that's certainly how we think about the business and, and, and how we seek to manage it.
Speaker Change: Our plan is really always to make sure we got means of growing.
Speaker Change: In a in a world where units are the primary catalyst for that and we're not we're not dependent on that so that's certainly how we think about the business.
Speaker Change: And how we seek to manage it.
Ali Kahn: Got it. Thank you, guys.
Speaker Change: Got it thank you guys.
Speaker Change: Okay.
John Forsyth: With that, well, in the Q&A session, I will now turn the call back to John for his final remarks. Thank you, Chelsea. In summary, Syrismology delivered revenue above the top end of our guidance range for the first quarter and made solid progress across each of the three key areas of our strategy. We remain very excited about the opportunities in front of us, and we thank you for your continued interest in our progress. I'd also like to thank all of our employees worldwide for their incredible dedication and commitment.
Speaker Change: And with that we'll end the Q&A session I will now turn the call back to John for his final remarks, Thank you Chelsea.
John: In summary, Cirrus logic delivered revenue above the top end of our guidance range for the first quarter and made solid progress across each of the three key areas of our strategy.
John: We remain very excited about the opportunities in front of us and we thank you for your continued interest in our progress.
John: I'd also like to thank all of our employees worldwide for their incredible dedication and commitment.
John Forsyth: Before we close, I'd also like to note that we will be participating in Oppenheimer's virtual conference on August 14th. Please check our investor website for the details.
John: Before we close I'd also like to note that we will be participating in the Oppenheimer Virtual conference on August 14th Please check our investor website for the details.
Operator: Finally, I'd like to thank everyone for participating in our call today. Goodbye. Thank you for attending today's call. You may now disconnect. Have a wonderful day.
Speaker Change: Finally, I'd like to thank everyone for participating in our call today Goodbye.
Speaker Change: Thank you for attending today's call you may now disconnect have a wonderful day.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Yeah.
Speaker Change:
Speaker Change: