CRUS - Earnings call transcript Q3 2019

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Operator

Welcome to the Cirrus Logic Third Quarter Fiscal Year 2019 Financial Results Q&A Session. At this time, all participants are in a listen-only mode. After a brief statement, we will open up the call for questions from analysts. Instructions for queuing up will be provided at that time.

As a reminder, this conference call is being recorded for replay purposes. to conference like Mr. over now would turn call the to I Case, Financial Thurman Officer. Chief Mr. begin. may you Case,

Thurman Case

Thank you, afternoon. and good

expectations. made cause Joining the to including current me Heffernan, Letter materially The Commission on filings financial factors year that Logic's the otherwise. session, the with refer Investor corporate will forward-looking information risk from website XX-K projections release and to uncertainties that at email may directly this this or President XXXX actual for today's a submitted latest results, Today, any comparable to and this discussing actual to reconciliation session, as covering the results website as along call a results update additional is Chief no financial that make cause to undertakes Relations. note of results projections. as or of differ press X:XX quarter issued earnings press risks This other Please Officer; available our Jason feature or forward-looking materially for By Form company Executive today, investor.relations@cirrus.com. developments differ Relations and at statements most the the are Securities on projections GAAP information, information, providing to may statements, of financial and the Please during questions analysts and the Logic obligation which is to company's we whether the that subject the could result and our from discussion the of revise announced approximately Q&A us call Cirrus available Shareholder well other non-GAAP with Chelsea XX-Q, new we Exchange our from third of and Director at investor.cirrus.com. Investor release, our of Rhode, company via fiscal webcast questions Cirrus as Eastern. at as PM, are all the well

Now Jason. over the I'll call turn to

Jason Rhode

you, Thank Thurman.

comments. taking Before questions, we begin I'd few to make a like

our Shareholder for was Cirrus For please delivered and than Revenue a revenue reduction on $XXX.X revised account smartphones. our in the products expectations. quarter results, Relations originally with audio website. anticipated XXXX QX our of FY line a the shipping of million, read Logic largely due detailed in posted lower of financial Letter sales Investor portable to

During design actively existing we the and traction engaged was solid with win variety of quarter, and remained new a customers.

and While industry, remain position, smartphone fuel to environment cash to the uncertainties strong a that positions believe This we cash strategic continued will to continue that sales initiatives sizable opportunities. new no in and an unit debt macroeconomic long-term growth company surrounding and we going invest Logic the expectation maintained will impact Cirrus on forward. flow focused generate

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

Operator

with Ramsay Instructions] begin session. open. comes Matt line first the will now [Operator Matt, Cowen. question We from question-and-answer your Your is

Matt Ramsay

you. afternoon. Good Thank

unit that's the from out Jason, little a XXXX. you I growth away a imagine year commentary Shareholder lower Letter, we fiscal through really, talked on now environment that's wonder, all guess, dynamic new the the expectations have about guys the growth. feel are for about? and changed backed you comfortable the anything you gains know I Because I just expectation realizing content fiscal that Just different XXXX. where there But unit be feeling thinking Thanks. should for bit it's like in for I the about if there? view your

Jason Rhode

up the truth being. it volume In And no grow. will end expectation. unit on. obviously, unit we got up would this monopoly a what got content would a we you've have good flat spot We've grow like story a purely year. environment, on we sounds that It straight It's of

amplifier's great amplifiers with handset a the Android our our extremely has there. making across integrated traction are We're Literally are not out going well. alone the progress under manufacturers. we're The under obviously, the We been on But the products, extremely of there, that's to board that We've got wide design side in like pretty array things. feel weaknesses. shipping control telegraphing is control top going well. or new our of XX significant everything we execution is wins the incredible

and we're remarks conservative the be where and helps best to the we that's stable one weak said the that times end with to year, another financial we the expect a so side, things And real wars other world the laid of as not wars able of up then advantage levels happened opening to the many ride, are as But actually company. close. full if definitely, time. just went-off our as – strong it's number will take how XXXX, to the But that it as We we because because you position. had of maybe the the out for in of kind hypothetical necessarily the ever circus we far on overall a financial that – where as it's we'd financial trade crazy get be but was were challenging able and economy of just in

approach And so that would certainly be again. our

nothing having appears to other And to Lincoln, results. imploding or guess. how the our was whole the than do that play? economy anyway macro other so Mrs. the So, potential impacting be than I

Matt Ramsay

guys have quickly we well I story. That's would to there. Thank Jason. mean, you know flexibility puts you Thanks the continue on very I on anticipate spending Thurman, has really future content for the as some kind takes have much. you on I for but you and assuming just do were that would OpEx, what nothing growth, that changed invest of what line? color of kind

Thurman Case

guidance on that or flat letter OpEx in guidance has other things QX things number FY that XXXX. the and the is in that. be some which help number number taxes you plan to QX like a the payroll of that, number talked move the can where middle in we But midrange given Well, range through that – about as expect of standpoint. you see to you as should on be that basis would an with we but But noting we quarter-over-quarter volatility, some the XXX,

Operator

from open. Your Tore comes next question is with your line Tore, Svanberg Stifel.

Tore Svanberg

Yes. Thank you.

I that's appears new at, stay a going you're little could if that what elaborate was about bit I'm away and closed-loop questions. a said be So great. by but Could controllers us Jason, that that your intrigued specifics some unit shareholder you looking But in systems. on market macro you something and from to that you is? would It letter give

Jason Rhode

the some expect actually – broader that in forward. markets question. it's we're for we Thank Sure. in, term going you. but I to that cover using then already a we're It's guess to that also some Thanks markets be

So can is years be on. provides for of more move or always processing. company is our things more in that signal tends area very example for It -- be things our many to and differentiation low-power wheel around that course wheelhouse It get to the differentiator another latency. low and also into as the house

a haptic, processing of haptic the And amplifier to -- applications tactile feedback really handset. something a so then in some where signal good drives and is, this our to sensing linear amplifier is example provide the And a does exactly interaction system a for then and our with actuator user. physical

latency example low instantly air on, drive to an action very experience. controller, that's either user on So always of a and very very, high-voltage, low-power closed-loop on or a

fact the the cases that made more of So eyes over opportunity business, other that we to have that we today. in us haptics we're participating haptic in from because are perspective the opportunity of that got of there and into but the time, technology audio provide kind similar of in in open and that our system the same our types more started in really we also amplifier a areas product that market -- but are to some

us there time. category tend fall kind squarely they new a So category bit that of statement at But the that into talk forward-looking that's long-term in beyond meaningful don't we and things a opportunities about are haptics. of for to the of are

Tore Svanberg

to topic in haptics of technology Good. also is of demand this market. And the the Can outside sort I smartphone on or... in smart on kind you or of see your or you area in you interest it starting mentioned like also mean elaborate the automotive on that? is home

Jason Rhode

a meaning phone that across just near many lot There of through. a more wearables a interaction some interest you be definitely move but term thing still But provide eliminate automotive. now things what at for form similar tablets, additional be would want with where a In to reality. case have whether not because to it's might additionally some of there's the in the of the consumer cases this in it lot we to feedback opportunity us that in devices. There's buttons people of button, for physical there's consumer touchscreen of it's other there have some serve. least applications or or just in in is even the a factors -- But of type haptic-type potential that

in other definitely to following in applications on nonetheless. its business So kind amplifier up things the of early haptic but the in than growth Shorter-term the audio that's larger But is for innings, the in are kind excited shorter-term piece audio. referring haptics. we're heels larger these in the is are close we're of overall the about our them really smartphones short-term opportunities

Operator

is Blayne Curtis line Your comes Barclays. ahead next from Please open. your go question with

Tom O’Malley

O’Malley is Curtis. Tom for Hey this guys, on Blayne

sizeable some voice the your opportunity story? one talk into quick opportunity there? laid pretty this potentially that you later may Can XXXX, talked you in in see or actually a past that about guys a have out Just there more you about deck And year about XXXX? layer still the as contribution slide revenue in into you on XXXX broad when does move XXXX, future, you biometrics is

Jason Rhode

meaningful has to like good evaluation modeled There from I to the have we’re going a to making and financial we feel of about fiscal We're Well, a of but for customers current types we I are that really we there itself it exactly year, driver product would accelerating technology more engagements and there. want so been, this mean don't talking as investigation talk say on progress. actual it. the is

with to we've a far time done far think about in in process voice associated very I the things by the done things to It's it's roadmap, we've the As the the top. I and of time. a long great that is design way previous would by the biometrics calls complex we companies of with goes on the going team talked decide sorts that it's biometrics company's company decision to most job the most to not it over that's voice a all engineering because do imagine add the in

increasingly So we we’re we've as the metrics product the in specific timeframe getting a and meaningful as so the call forth evaluations feel engagements I I rather goals other than have] little got in we going can. possibly reluctant aggressive are like timing, and yeah we to that about or [don’t track model call year. and [ph] so, fiscal well for current it say not calendar soon but to

Tom O’Malley

understood. this is question. more of I Okay, And Thurman

there's like is June, gross this [ph], flux] -- in about think [is there. So, of Android and you this higher how think slightly tracking your guiding do you’re what What we some you year, Obviously how out obviously margin, should seeing should story on parts on looking your XX some the year we obviously, roll a gross unit margins? a – not year? stories confidence trending guys revenue last into weaker, on, are year think were margins opportunities base but you're about the into the here unit moving

Jason Rhode

range that's us optimize XX% look we Yeah, certainly so margins for forward, we to you sustainable look is at we’re try as at looking it. going year. and We how that's XX%, of see through for still how gross the you for move how it us the margin and those when at type can

Thurman Case

of of your you them I obviously, color. customers important. margins as little but making a of just bid customer annoyed, those are that possible things Yeah, be as where one kind short mean, is high to like

be it that's or above at. -- expect be that's the but We the we and to drift range kind below and can here of range could expect bit or you can up long-term. to So it there we a drift it

Operator

Your next line with Anderson & question Charlie, comes from Dougherty open. your Charlie is Company.

Charlie Anderson

for thanks my Yeah, taking question.

margin to I on wonder in follow-up of the it future also and follow-up. then for operating adjacent Another could too, gross guys But products there into some hear new adjacencies shortly, then we'll there sounds that necessarily markets if new you about those you categories? not will move you a margin like speak of I've smartphone? the are And if requirements be half. maybe [indiscernible] side first them got And sampling profile on

Jason Rhode

Sure.

I mean, say about will in give necessarily more you just whatnot. of are doesn't that talking shown certainly because it. we them about we’ll detail and There's up I that mean a we're before So, without tear sampling whole something plenty sample downs lot things

So -- don't needs. support but expect front, not margins margin the businesses and new where getting about margin the the of company really deliberate kind range we’re we can the that that on we into

and our for below support a there We in XXs, else. provide business that. high a of works Our model lot upper white work really design everything doesn't experience much pretty touch the customers, glove it

we And our have in a margins. customers anything zero in, pretty that would range. so that that, the we're it's always that being meaningfully than we than it unlikely Obviously, follow-up. goal pursue higher being always maintain and have but then engaged anything new And will goal I be of that feel can confident think we we of different

Charlie Anderson

segment, $XX for quarter, that's so quarter million of a Thanks. between there? just a situation down that business Sure, this stable mid-$XXs was million, pretty of sort the baseline there? macro figures in wondering piece new been color that I audio, more is the non-portable sort think dipped a past And of a that $XX any the million

Jason Rhode

around move can Yes, bit. a it

just even seen meaningfully anything peers a -- different every you've haven't of long-term Certainly our down giant significantly. has mile-wide seen things pretty I perspective. from about entity think one We the big guided

customer our going an about is I But just a don't is effect likely that's about for that clearly, offering on I guess a is, a what point. can it's non-portable specific How impacting numbers the to that have business real engagement So, because from good product that. into nothing or different there way got much everything. macro there's had impact really perspective of

Charles Anderson

so Thanks much. it. Got

Operator

Your next go & open. line question Needham is comes from with Please your Rajvindra Company. Gill ahead,

Rajvindra Gill

said revenue for my for was be position you I amplifier about your your year it's year In could the Question -- market know this letter XX-nanometer questions. on changed it's you boosted been have business. would seems talk how I anticipate against meaningfully. share gains going how of fiscal OEMs. change I wondering top -- market market Thanks XXXX share there going taking to that low-power in were there you increase versus last -- the that to opportunities ramping. to handset some kind year. mean -- The amplifier if

forward? and market it of of any kind about that and kind now comment size should we So, on of that going the think

Jason Rhode

Sure.

we're market manufacturers to out platform the so and in in getting The it into space we've base very handsets. together pretty -- year, market have whoever But number on volume of low. a are essentially Obviously, supplying year, So, put other our numbers sure amplifiers handset top still hits the there. with to share audio primary it's good really our Android. last large, Android, just said -- year got is. now dominant started, share audio share XX for and market I we I'd because in the last comparatively zero. shipping in we're by underlying cross-section really as difficult a progress the we're a say Last apples-to-apples the But fair hard was basis make we've prior of reports an made is

else much audio and is speaker into amp either to just space that, the you or end as from the cheap or protects sound as so mid-tier market expect take mid-tier Android a doing low mid-tier and amplifier out the else transitioning to could you and talking the opportunities amplifier up, of -- with a make -- than probably are of ourselves quarter amp of or higher sort in content more But come gratifying. a perspective that -- the pretty has forth. entirety the and either an rest making of that we're end is stereo speaker meaningful late boosted maybe has wins customers pseudo-stereo someone as still and the So, that in quality somewhere transitioned even definitely provides and from the stuff high and dent if from XXXX. damage sound low some design possible. in still integrated throughout system a this louder very is about the kind FY that either really we in and the we're really we're base engaged hits which in mono for share Yes, some and -- and on so be increasingly or or that That the PMIC

Rajvindra Gill

That's helpful.

remember, in about flagship China on to that be next helpful. in handset there amplifier last year? additional spinning those the six case China Just weakness the the quarter launch lines the still integrated given color talked you months. Is this market I you expected would any with devices DSP your Just in

Jason Rhode

us significant are Yes, are to weaknesses producing. of is customers actually because the for China so the models hard such China some handsets. our a for in of opportunity speak lot pretty upside seen We've it

of array DSP it to like that all a the say, a and amplifier we've only on over little it's we're China. So the a models now number an I in again, customers and within year market integrated of had wide shipping increasing

they new then they're anyway. cases the maybe less I some year. on the us, there's is of that there's some previous whatever the shipping over them and the still there's it's economy, But opportunity maybe are all guess well So for possibility -- in the going in -- designing phones

some the other looks us, in significantly like So it in mind. that we forecast they're And cases, outperforming for the had just business.

pretty that China So, that we're there's obviously and Korea pretty about well. opportunity we're in excited some excited then in as about meaningful

Operator

from Bank question Lynch. of with America, Merrill Gonzalez Instructions] Adam [Operator ahead. go Your next comes Please

line open. Your is

Adam Gonzalez

taking for question. my Thanks Hi.

quarter? Just what into your kind you or track pushed of wanted your of to still about Can sequential customer XXXX, you that of throughout XX% to been largest talk the March customer. can business outside has about talking as growth in the maybe you get fiscal were move talk that going growth linearity expect on about Thanks. And we that are is out? this you second perhaps

Jason Rhode

No, current to I at real expect on having any our But ramp the customer. quarter. space, the the we're things as expect we business overtime, good really to with to Again do we And see in volume within I we'll year broadly of we to then letter those the amplifiers. the And use XX% our their market. on get do how More products context do on well. linearity the back the moment. guess, -- no, -- to -- in of well I wouldn't to absolutely a design throughout track material that we and think haptic spelled we continue rest the new out second with own more speaking well this of then, Android more wins

we're So could pretty of the anyone expect long course from way I to meaningful that truly on able but to consider actually year we it's make progress us this diversified, do front. think -- a be over

takes you certainly that really our experience it think did in as Wolfson. the is really built building call business takes the we from far along Wolfson So new But the undergo. that's as when And that. out really are to last anything business longer-term we one We in years that to voice and came about very we are it's our with Pointed of on that three taking haptics, is of enjoyed of XXXX. plus a enjoy acquisition that five big gratifying. the equals very coming should of one Amplifiers so benefits see true. that start prospect, part much acquisition of this speak part year biometrics part the the I that

stuff to that excited true. we're comes So how very

Adam Gonzalez

Got it. follow-up higher-level And as question. a just my just

flat back go about grow to comment Cirrus to smartphone earlier to able want how in Just union made a environment. type be of the you should

on points be basis is this down what content outgrow looks the Any for Just the The XXX wondering basis color year, what your are here by multiplier company? XXX points? helpful. would smartphone be units like Thanks. X% can might it take Cirrus

Jason Rhode

Yes.

year, out just to figure giving we doing, comfortable So if that I'm trying do – for we if and felt back is, to would which we wanted answer without circling how guidance that. the accidentally

sockets incremental So that it's kind got there's bunch where a we've of mix, moving of in been broad are a improvement. pieces. we've There

about the design that expect in with Over year, of products. there's where our talked that And the we're it's also, previously, we're now a course handset but current wins in quarter we're additional context, ramp to we've still excited and really within the that audio about in amps.

mix, you broad We and mix with longer-term, if about some in a in a in against wish meaningful XXXX. content of the we're cases from kind a a of of product to we're handsets were kind it's or new us different In already And perspective. incremental backdrop, think we it speaking. So FY broad in, or healthier expect progress we're it from content, FY pleased little economically making others. XXXX, make then content,

way speaking, significantly Obviously, larger plan go FY might probably frame. broadly basis, unit larger. be of XXXX larger the that We always play But We work content far XXXX. in say XXXX to content play of it things But be volume is significantly in in no no there's done timeframe. – to have still in the of imagining probably a I growth the a currently be doing sideways. out that amount for record say, FY and there's to opportunities what is for a would time the obviously, economy expect FY normalized

Operator

Chris question is line open. Chris, with Susquehanna. comes next your Your Rolland from

Chris Rolland

question Jason, you. for Hey, quick

cetera, market really were – product? you same when you biometrics talking think Are about for different the describing speaker different voice I you product speaker ASPs, time letter are to identification, is a in speaker different and a said et you mentioned there the So versus or there identification different were identification.

Jason Rhode

the to about that's paragraph, we the were read you exact you times when same avoid same document a that to those of using usual trying in I three worry write some to No, pleasant to. words things or probably think, try

So no used could speaker interchangeably. ID be

think mean when maybe little when are say talking grade voice we're they about probably less something usually biometrics. there I what about they some than forensic speaker we're a customers talking ID,

now anything we biometrics array didn't you But an mean do voice interesting there technologies. can that. things it by So since up, the brought that and related we of are with

want interface is which and e-mail, first my to is IT is to foremost for my me that handsets Our something if broadly for target of I world. secure that's And or the phone something I gold really to the we access kind the hands-free pretty I true departments be at it for that think standard a for not. on grade turn would around able trust

or do. single So a think hands-free thing to and really interface sensible practical do that's most a for thing to biometric, without the use it's not the of compelling case we handset voice a

are of So opportunities that's a be in to lot targeting that, like home, a first. of things connected lot that we're to what using willing the device experience is there friendly. stipulate where people might Outside anybody of though, user the enhance

you of security of have you don't most required e-mail a a accurately might would that XXX just there be for you there are -- that forensic-grade CEO's wish accurately a would people have it on Amazon still necessarily do to -year-old. to of versus your off to determined example. securing pounds wish predict versus likely that would order it of grade -- that so necessarily lots be but different you And was of tried chocolate may four security so That not to

but comply wide to umbrella. opportunities there biometric all the voice wasn't it that the fall array of terminology a that under So there with are try differentiated

Chris Rolland

Great.

then but for staying Sorry like were customer one understand the there. up way over And wondering then payables lot supporting up for too inventory what so DSOs there there, too? and not and kind DSO basis. still up you're on a more going seems analysis a the particularly I of there and Perhaps just on while was Thurman new Thanks.

Thurman Case

and that discussion saw through that -- we be inventory have don't to our we on quarter that during issues we with of our QX, and as to to although ended flat be the said, the any we or this little slower that went we're levels we ramps QX to a higher we saw very in through account into that take inventory comfortable relatively volumes it where it you though working mean and with said we QX I see that was guidance we've our QX. supporting the period expect all are And inventory quarter.

Jason Rhode

and on expand really just bit, to that business distribution business goes just on the lean plus inventories pretty customers. go And little inventory. enjoy see -- We just I that to a question is whole talking generally business was, huge such always about and a that through through lot a but speaking it direct distribution don't our isn't percent what whatnot a so your always Generally of our of with have business is does highlight

least But concerned to about it issue. that worry for one of is at not overly inventory can there chain before a our lot kind the or we or burn there other if impact see why go finished Obviously of that's that either inventory. from customers to order. raw -- obsolete pocket off we there to have So we we where that goods pools is inventory inventory set about stuff inventory last to write-offs a in are different of in us hold don't us out

Chris Rolland

you. Great. Thank

Operator

[Operator from your next open. Tore question comes line Instructions] Tore Your is Svanberg.

Tore Svanberg

thank Thurman, Yeah, you. I just had on follow-up OpEx. a

down up. was but March, the December quite guidance So in SG&A a R&D XXX I get was bit and for

the about we split should how think forward? So going

Thurman Case

-- that at would you general a looking get and were I will rate is OpEx where Well QX. run-rate in SG&A moving run year the think will to basis given we area flat in any in be when growth from you our of an if end where the at we R&D the flat staying generally then remain forward -- talked I when there on we total about

Jason Rhode

don't Yes we break really it out.

Thurman Case

don't We it out. break

Jason Rhode

forward is keenly on year we it think and Obviously, as on overall Thurman's through. aware continue work roughly should we'll I environment last a Looking and speaking, the to did quarters we're from be of flat. just like you roll it that update that on OpEx proven guidance and we'll

Tore Svanberg

Sounds good. you. Thank

Jason Rhode

Tore. Thanks,

Operator

will no have to the over this time. I Chelsea. turn at call phone over now further questions back We the

Chelsea Heffernan

answered operator. We had question today. you, one that wasn't Thank

Given the should how macro first about think quarter? we the uncertainties,

Jason Rhode

far very would case and for so. certainly -- the accurate expect particular done that to that to any exactly assume I entire beyond quarter our ability certainly color because to current at we've the provide hard hope continues as gone QX. strive this seems We softness give time the But it unpredictable, In guesstimate that just sort that that ball into The impacts things. to is carrying I pretty such same not guidance I would is slightly good. and of have our crystal bananas as world

one act the assume So as ways but like think it's and pessimist. of actually the and an it's a fundamental, soft we usual is company the like pretty run way optimist,

future that down prepare coming the soft it putting the model closely the try take we'll without in pinch, as we ourselves a a in other really things being for we of rosy see pipe. action and So some to appropriate as

through. hopefully, you and we we'll update go that's quarter-by-quarter as So helpful

Chelsea Heffernan

Great. Thanks, questions. Jason. There are more no

Jason Rhode

across of to operations we and portfolio supply continue user we that markets. believe Okay. and more intellectual invest In extensive With opportunities robust in coming dynamics processing signal market outstanding technologies current in leveraging summary, team support, into components property chain despite the key that deliver are seeking we experience years. target meaningful sophisticated engineers, drive will product a an roadmap are a our the better customers an

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

Cirrus Logic (CRUS) 30 Jan 192019 Q3 Earnings call transcript