- Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic Second Quarter Fiscal Year 2023 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.

conference recorded this replay reminder, a is for being purposes. As the now over like would conference to I turn call to Ms. Chelsea of Investor President Heffernan, Vice Relations. Ms. begin. may you Heffernan,

Chelsea Heffernan

Thank you and afternoon. good

Executive all John discussing from me this XXXX. Today, Officer. fiscal will results X:XX we release, Cirrus Joining letter for call shareholder Time are approximately at along Q&A Venk our of is Eastern our the today's Logic's webcast Chief on at feature Chief year our announced the Investor press Officer; PM The company's financial Financial earnings the with call session, and Nathamuni, Relations analysts quarter Forsyth, financial available the This company. result, website. covering questions second

the developments obligation Commission Cirrus the latest to Form of issued to now current letter Relations the factors will Reconciliation new materially measures exclude release available comparable our Additionally, refer we for and and filings like that as results from I'd corporate registered our Investor and to discussion these otherwise. the John. the that Please of or other to note GAAP results to update in available forward-looking the that risk also disclaims release guidance actual information, and shareholder their that with of or and are projections. as turn non-GAAP call revise the measures certain that are providing to materially By result over session, and include most projections well Please and company items. Exchange will any earnings from may during other uncertainties differ the are differ measures this Securities non-GAAP call to projections website. website any we whether on as risks actual included could subject make this expectations. or forward-looking cause XX-K, additional directly today, the results a statements statements, Logic on company's to are financial on discuss may which press cause expressly this

John Forsyth

and everyone Chelsea, joining you, today's thank for Thank you call.

the release, I'd valued our chain to we all second earnings As press which collaboration the of quarter quarter thank Logic corresponding the record the fiscal team partners consecutive for outstanding set in these customers, for in September revenue work per period. hard you've fifth a entire the like also seen Logic revenue in have our quarter marked delivered their share. and and Cirrus Cirrus The supply achieving throughout and results. record

we believe and area both other seen in greater smartphones applications to performance third, elements call provide in also on from three a strategy the this within our future momentum. to The and outside of smartphones; currently that category update driving results the I'd detail, contribute discuss engineering our like leveraging pillars we progress to can class key and Before growing of audio we strategy the products is delivering the our audio expanding are: first, already that in our key significant world our smartphone contribution class We've mixed signal second, presents the products and profitable components leading and to market; audio our world execution products leadership of of outstanding lines. build customers beyond position a of meaningfully in in in what reach high the this growth. meaningful product technologies maintaining footprint signal opportunities in mixed expertise markets by

for us began of and are also boosted backdrop In important amplifiers codecs XX-nanometer we three codec, our vitally successfully amplifier. for of to but available quarter, remains development against strong exciting a strategic these and next-generation our the smart we of These a demand customers. all continued where the and in only audio generation execute of not products continue next This on custom initial development excess and our for vectors. supply,

point new Our bring given products. our codec enjoy sensing sustained significant and and to power visibility longer production, revenue these products us and architectural advantages that performance, and I'd our cases potential in efficiency for about help a to business performance product we other long out audio, lifespan will that development of with signal believe to next-generation these efficiency a level and good also types new provide of will initiatives development customers' their optimism amplifier term our typically contribution. to bring like boosted XX-nanometer regarding processing use

of softness the users greater to in and due more laptops like of quality hybrid serviceable areas our Looking increased in the customers available its audio a secular on a and between thermal multiple audio and potential a we expanding to beyond These an that profitably. near-term the distinguish end transition the in amplifiers. power market and all the like about experiences a the are see meaningfully opportunity long we and smartphones, we've our and smartphone to thinner I'd space spoken of audio the PC run. factors, towards form boosted aware the for working, our components laptop that where drive evolution we're as expand of believe that drivers and include efficiency, leverages emphasis market previously architecture remote growth one to higher lighter reach from greatly an

first and engaged enabled laptops. SoundWire for design customers our we specifically codec activity started amplifier our design also around in we with first quarter this designed This for sampling specifically multiple market

represent of for We a can audio technologies. continue our market believe this the products and to valuable area expansion

growing progress revenue we're quarter. XX% the of September to proud total on the we've mixed represented signal Moving in our high which products, made HPMS revenue, performance of

and this launch helping also experiences. an to new smartphone outstanding controllers, looking of of in spoken to delighted the trend space we the forward see increase about and to fall, role innovation vital play of the seen previously product have continue expansion generation introduction been camera believe a camera camera we've this that we I've in first future. value With consistent year-on-year devices opportunities adoption the the our we've in further in deliver of deliver since a of our which

to Turning power.

expand products in battery related can to high we years. to are around growth lineup area in products, signal in technologies expand power investment In growth drive our we mixed charging, exciting let and years. believe made with will well new for our that fiscal the provide other company third solutions in coming call the the contribute that, will developing continued results and today remained also key and areas second an our with quarter customers position and our investments shipping And future now overview product that footprint these financial of currently power opportunities our the believe of components extremely over coming our summary, are of we multi-year in believe engagement XXXX. health, metrology, to we quarter further both range XXXX we as fiscal to initiatives quarter and strong. turn positioned Venk for progress strategic to the the this sustained and existing compelling audio as products on With and guidance and innovative me diversification performance well We

Venk Nathamuni

mixed John higher helping team A driven and second was strong unit the year by resulted mentioned content a guidance record strong up execution the above quarter year-over-year the of our Thank these signal a quarter quarter-over-quarter and Cirrus which deliver was corresponding revenue revenue as driven range during smartphone quarter million, volumes in product was period. $XXX.X like and performance revenue in basis, outstanding customers' of high record, September was higher by the new I'd supply performance you, in XX% quarter chain fifth and from ago. with was performance unit up increase fiscal for to by our ASPs, the a consecutive Revenue associated earlier, volumes smartphone ramps. end organization the high gains. Fiscal On represents revenue and the XX% John. entire highlight an results. the

net to gross margin. the gross roughly provided. non-GAAP was up in more lower million intend we XX.X%. with margin despite than gross higher million, a to Non-GAAP income share. employee $XXX.X XX% $XXX.X in January that in expenses compensation was extent margin Non-GAAP to chain lesser to quarter On P&L in by the the supply was while the below came expenses as operating guidance And operating guidance an quarter was This in a second related into gross finally million due line that our of Turning had primarily came in in profit new the midpoint $X.X The basis, sequentially. We operating was and gross non-GAAP the of sequential offset I'd costs costs margin the chain $X.XX discretionary continue $XXX.X $XXX.X million development change per variable reflects second controlling and reserves. increased million in reserves, income invest XXXX expenses. and costs. were spending. higher to effect higher on down in or product or higher and product mix the development product of increase revenue quarter revenue. Non-GAAP strategically quarter note year-over-year range was range supply in midpoint was

Let me now turn sheet. balance to the

the XXXX balance revolver. of had remain fiscal $XXX and and cash our with and continues we ended Our quarter million in $XXX second equivalents, year undrawn cash strong sheet on approximately to we million

quarter. operations, quarter, primarily stock offset $XX.X the flow Our down the prior cash was cash balance roughly ending million during from from to by repurchases due

generated operations September of timing slower flow due from the cash the quarter, ramps. to cash $XX we generation quarter is during Specifically, product for which seasonally a million of

inventory QX we down sequentially, our to down turning have days product debt XX and We cash of support days outstanding, million customers’ sequentially $XX was was flow. XX inventory ramps. to And million, in ship no product days $XXX new and as

was million. roughly earlier, $XX shares at for stock price $XX of was million the to an average QX, in $XX.XX. from XXX,XXX mentioned quarter of flow In September repurchase As cash I cash operations common $XX.X our the Free flow we quarter. million utilized

the buybacks average XXX,XXX at had repurchase $XX of $XX.XX of of subsequent to QX XXXX, an year we $XXX.X plan. end a additional million to of stock the an in trading part share executed remaining repurchase quarter price as As our million We in authorization. fiscal roughly shares XXbX-X end

return We of shareholders continue to going expect And capital on guidance. a long-term will the to to provide to benefit we believe the form repurchases, stock in now forward. which

$XXX of of range in million quarter we revenue to third fiscal the the For million. $XXX expect XXXX,

development range expected We expect by XX% flat as expense XX%. product $XXX million is Non-GAAP range higher lower to to million of to offset from $XXX expense. sequentially in be the to is margin SG&A cost operating gross

will but development in invest to product drive continue to strategically long-term discretionary growth. We control spending

fiscal approximately of five our range effective effective R&D and amortize current expenses as a and to tax non-GAAP We expectation XX% to a the under our tax XX%. any rule, rather in tax have due this this that may years we the capitalize deduct continue to R&D will year absent year, as that expect additional in return about years tax rule maintain to discussed, decrease previously than be to On legislation. XXXX the rate we normalized our are largely requires purposes, companies changes expenses them effective to rate amortized for tax to front,

However, I range. to closely. typical fiscal executed watching strong In without be delaying results. a there XXXX year rule, we of mid-teens legislative as are QX impact or for to strong support more eliminating well deliver had would appears rule, our effective tax these the be we note our this rate non-GAAP that this closing, which in we

enable customer, policy, call focus specifics on to over the discuss like not start to and the related Chelsea we we session. understand to relationship. there that, will our best largest And interest we the me business while will that intense Going With to about finally, company begin to before the long-term. continue revenue company turn in the Cirrus let profitability to grow I’d opportunities Q&A, Q&A note accordance forward, Logic is now the both our to we with

Chelsea Heffernan

Thanks, Venk. [Operator take Instructions] to ready Operator, are questions. we

Operator

comes Your with the Instructions] from [Operator question line first Needham. of Gill Rajvindra

line open. Your is

Rajvindra Gill

strong for tough results questions really congrats in you and a Yes, environment. my on taking thank

volatile quite question on business. the of of been a seasonality kind Just year patterns. It’s deviating and this from normal of the kind

general. we’re a How potential on how seasonality supply chain wondering about basis. thinking with also in volatility your thinking Just we’re just top about go-forward customer,

thoughts any of kind delivery would and be seasonality understand. to you. So chain supply Thank on helpful

John Forsyth

wishes. comments add Venk I’ll add if few a thank invite you. he little and color, Yes, to more a

most I of the of climate side chain the has close this that to has on year think capacity. one of supply characteristics running pretty been the supply the been

launches. big And meant, in seasonal to typically. they ramps builds have so kind that been And have have think, acceleration more just things product of has headroom supply little that been for of and I there production. linear that would we a the Obviously, be the chain hasn’t than

I with the that’s that persisting further primarily has out remain to the in chain sales just supply guiding. that has supply -- linearity that we’re Not relative as still to supply to XXXX go how around say demand would wafer well. going the certainly situation coupled led that think our supply. being and in is continued available and very see best this supply the I really relative of to beyond the sure So, constrained we the looks quarter perspective, We calendar from And chain is we persist the that year. well high into general. regard is fact as high

Venk Nathamuni

John, thanks. of of most questions you Yes, answered the Rajvi.

comment. your for thanks Rajvi, of So all, first nice

course, years, asked, as been difficult know, is in so what’s we just the normal forth. couple last what overall. given I and to with say macro normalcy seasonality over several then, customer of predict back. the last in few the just probably patterns and and years, of have But now coming you last the you So of ordering would the it semblance deal that to in that question of economy has changes uncertainty some especially months, the seasonality there’s not perhaps terms the

And call our just fulfilling we as it to launches forward. a the relates specific are to patterns. take as relates to demand. we’ll we’re So it’s as one that new And especially it good it earlier, to demand, in quarter clearly, the in and out going John seasonality seeing at from hard product customers, time general, seasonal alluded

Rajvindra Gill

increased midrange trends helping audio your that. fast have number -- namely of market, my for kind and you the Thank your kind controllers follow-up, expansion two, thinking that lastly, how And wondering, camera amplifier. for just expansion the some you’re rates into for the business, of John, been of charging then your about attach and the into

could those talk Just Thank wondering segments you of bit markets. and if kind about a you. little

John Forsyth

Thank number strings of you. Yes, are there bow. a that to

picture multiple big that’s the that hearing the is whatever rather been been relying think units fronts. than with on I and we’ve content purely happens expansion on

had the bringing the range we we’ve in significant So and to I mobile both audio, within but laptop mentioned we that of expanding of the also expansion growth are the opportunity market see, that there devices. products

as said, the around products, in charging fact, number a technologies yet include those So you of battery.

audio our additional power forward, technology and to So, is last multiple we as battery of we reason believe health. we believing we expand can the in then -- we on other gives that’s that year-on-year forward. got something And visibility believe which have control brought growth to high-performance chip market outside where that we’ve area. for and focused And conversion we’ve year, opportunities content going the space, mixed signaled us go signal that we deliver

Operator

Your next question Rolland of comes with from Susquehanna. Christopher the line

open. is line Your

Christopher Rolland

in the I products a the for thanks mentioned new there’s letter. guys you guys, Hi question. couple that guess of

more engage HPMS your to HPMS new component economics the around you I detail the any additionally, change this? XX-nanometer guess terms of a guys develop that Also or component. How of kind as then continue continue you mean, cost first overall new you ASPs around does I with well. for around to and think all, I the Kodak guys as strategic well? in of customer

John Forsyth

HPMS additional will to content, as referred that product early of little on I category say think actually we well. to Chris. a give color the it’s new much Yes, I another

XX-nanometer generation our content, also off next HPMS development custom amplifier. kicking So Kodak obviously, the but the additional of

about. – talking have we that’s what So we’re

market. – as expect. We the hope before stuff Those well while come in a have those it’ll be other little to and would as you pipeline

we next road HPMS to towards that We some working now content half back additional in a of There’s long signaled bringing timeline market have and the between are of year. a then.

give we’ll closer So locked. expect, time as plans you’d as get and get to color we more the

Venk Nathamuni

And you just John, said. add to just to what

having good in our – in we our and fact multi-year content in our continuing in And I results increase evident terms think in and that’s to past gains. long-term of the content talked one also visibility is about the products. customer’s some guidance things in the are visibility we’ve of these that

mix of a stand that feel increasing content we in And So area. is performance good time. relative to coming single – lot we about that the where high over

Christopher Rolland

if can kind of talk some we products that as as given strength. strength largest I you been as seeing surprised up that background wondering as outside know it of a was coming Great. non of And have you’ve there revenue Where’s custom to follow-up, your out the amps there. Android all was customer or is weak that strength customer products? this where Is I from was well. talking strong kind new your was. your percentage you of this I out be maybe PC that might from? biggest

John Forsyth

Android Well, tell I’m going to not the market you that is strong.

of of general the all aware what I strongest work being challenges with we’re that in we well is approach to strongest different think see around that the always But I say the our will with market. parts products. customers as

we specifically audio Android content addition this have better to the current so than And getting gains flagship seen we’ve climate. in done in around in phones haptic devices. meant phones, year our and perhaps flagship in have into solutions that And that’s that’s some

but and is the products they’re going we in as doing So on the resilient we’ve and I demand It’s tough be current most focus well to been continue and the believe, climate. where there. sockets to said, strongest a market, we the customers

Operator

line Your Svanberg Stifel. next of question with Tore is the from

open. Your is line

Unidentified Analyst

is This Hi, good on afternoon. Tore. for Jeremy

and presentation, laptop new I content. think the $X.XX. add would congratulations ASPs here. I here? on out guess guess to results smartphone maybe noticed can of I the it counterparts? their Thanks. call there integration I that on maybe cycle you up any me just record in of be my – would the Is on helpful. integrated between Anything were a can early stage call differences Is the be early you the it Let the range question first reason

John Forsyth

comment multitude in will greenfield different the very of It’s thanks see socket Thanks, I us. to much the Jeremy. actually laptop And this for reiterate, is And that there. for time do with market. the nice space opportunities we over

constituent terms to coming overall of and kinds see addressable very we of there be that set in see than what would that color the SAM the boosted to units. two, even of sockets parts four amplifiers. in the of amplifiers expanding boosted you’ve But So side, we may but or conservative a market that representing to in see even the with on four, more some significantly some cases got assumptions around audio you our happens years, give codecs, you market

So you content for have multiple there. expansion opportunities

to us related opportunities fast addition side there has the really that, for IP In sockets battery the given our either of in laptop. charging

potential multiple the opportunity. that. again, the see mechanical lighter, towards sockets get touch content pads around like. haptics will then provides and moving as that we and So and of from away devices again, thinner And a for trend And more course, be

out say space. in if somewhere that four years that look of a probably would those audio in I I’ve third $X the opportunities see five or about on there two-thirds billion. you HPMS roughly and out, of I So space north is it the a of years based of XXXX, SAM guess calendar we outlined

Unidentified Analyst

were rank you. the by breakdown I give was driven guess if you. would HP available, if could maybe question impacts? very gains. Venk the you year-over-year the rough our aren’t a I results various specific I unit those order think other numbers wondering and maybe of [ph] impacts, HPMS helpful. us Thank Thank have you could Great. be you mentioned content That’s

Venk Nathamuni

comment. Yes, three mentioned. type mentioned, primarily the Jeremy, as your changes by the yes, – the those I And you factors that thanks again driven nice for year-on-year

have We them in the significant. stated order of

and it’s I that general, what with volumes a we’ve we But also it’s we’ll in fair over story. content think So to the benefited from assume consistent in increase time gain stated. see unit

Operator

with Your next and Cowen Matt Ramsay the line Company. question comes of from

Your line is open.

Ethan Potasnick

think of a Yes. actually wanted on going little rather results into just the any be on the differently at This prior here. unit I piggyback of back maybe socket growth had primarily is guess the half by Ethan question, expectation year, Matt. Potasnick ask to I it we that Hey than driven expansion. kind customer guys. your would for or I the content primary

how there So customer additional were either upside given phone about or within at in your the wins that the should we maybe still it other largest or think results guide, maybe the products drove here? is that

John Forsyth

your a I of worth second as solution do we story significant as think, of primarily the have when came the the addition devices content into there. did the that power that mind question in as from it’s of last year to phones into is we that keeping expansion generation I would – The say around launched with we well. a conversion that the generation and tailwind we control have go devices latter

So to contribute continues the to it revenue growth.

Ethan Potasnick

here. Okay. more Understood. And have expectations clarity my you a wanted follow-up, XXXX of through modest. I should on more that growth the how previously If then think through visibility Is on of correctly, fiscal we year? said the it to remainder guys the of just get recall be might little the about as remainder demand state

Venk Nathamuni

Yes. Hi, this is Venk.

we account lead have more high to is. in couple is there’s of we of indication a the level, factors, a But obviously, into the just from such. tied market have guidance which what announced and and our demand takes general another the of the business, good at We pattern terms provided element clearly customer So what given right? also

quarter not and time. give next the we so certainly see call. and update on concerns, beyond. that’s story, it’s that to, the John account given taken assume But we’ll we We’ll guidance. earnings see that guidance that the gain fair want a something that alluded at as probably this to do this we – content but looking guidance we But with more you point, you the multiyear specific provided at for to the have macro And stick we some as current that into of

Operator

with is of Your Williams Company. next from the Benchmark line David the question

line is Your open.

David Williams

the Congrats afternoon. so much Thanks taking for good the excellent results. Hey, on questions.

supply and just to more what were First, I just on maybe understand the – revenue kind side, wanted kind puts up if the the ability on the takes I’m down on quarter. and to flex we or to you the about maybe the side of just the trying side maybe business was on forward. and ask surprise this any of provide maybe as curious maybe demand color think can going

John Forsyth

the we and Certainly, demand had them going particular the our and was demand forecasting expected than of greater that strong were in content than smartphones, stronger components which for did into more back guided, devices, when guided. we towards in when amount tend we we

the really is guide demand side, the say the story. supply I with catch was our on our was and that demand-led. strong up will keep try majority shipments. chain of and keep to impact that up bringing the in incredibly hard to partners supply with of kind relative here So a working to very team But

David Williams

some there. for Certainly and I is, we concerned with And think Asia there color are December China then hearing as the the or in anything Is you the follow-up in COVID of for kind terms just secondly Thanks anything me things a you’re restrictions helpful. there? of some as of guess, we’re about specifically seeing quarter?

Venk Nathamuni

what as and of we’re it as situation. our in the reading we we insight have well that the into hear don’t But account some as takes monitoring entire into chain. December provided in have China COVID constantly been entire in just any about And guided restrictions well from we’re what terms but and we with taken beyond those our all manufacturers we’ve of our you for And supply We’ve Yes. as quarter. contract such, account uncertainties, clearly, constantly we contract as manufacturers into have special chain. guidance touch reports those our supply

Operator

[Operator Instructions]

Chelsea Heffernan

our be last question. will This

Operator

Bank comes final with of Blake Your line from the of America. question Friedman

line Your open. is

Blake Friedman

This my yes. on is for Vivek. question. Hi, for Thanks Blake taking

environment Can versus been resilient, as know Android a line follow-up just to businesses curious and engagements? time surprisingly your this weaker the the at broader a it’s market. or implementation that But of other was question of still general. what maybe looking you seems of earlier. like that’s the demand of data kind tone kind Just just as a change I in I

John Forsyth

supply might the with there been that color mean about through of the serve. I results the to regarding nature of what the reference this able Android customers there We’ve has of That’s seeing softer, very fiscal in been well. to sockets maybe environment calls you’re I be demand we’ve given because constrained necessity the don’t but a key would some as and meant I chase I’ve been engagement anybody been on of certainly that previous our to all we’ve out fiscal and last year which and year-to-date. selective want let We down. think

We’ve leading generally been we’ve and sockets into shipping having typically – end flagship performance where of have top the be is been class. had leaders there. we committed their flagships. products So customer very have just selective to the into been in in are at smartphones the the market performance very And given to the we’re their providing

been over has just because think constraints, the changed. that of past as I supply year doing So been that resilience weather anything serving there’s the meant over the but has a market that the fact we’ve there

Blake Friedman

your Great. And then of focusing balance. kind at were of semi those following just of quickly kind cash I levels. the to similar line on kind back acquisition know

how you buybacks. just cash of about lower, valuations returns in or maybe still kind environment are curious through think So when M&A more if through you’re focused just this

Venk Nathamuni

Blake. question, the for Thanks Yes.

to is and mentioned prepared that in then pretty one is stated all shape. in three in growth essentially the for it to as on number M&A I is cash, the do And the side. and drive R&D. business to balance, So along our we’ve And share good use remarks buybacks cash of our investment through is primary number uses two

now opposed a there’s market relates of the want and based lot the M&A we market aspects standpoint just to are that strategy M&A So discovery it do just are. be both the the to very as price where uncertain, as performed. we’ll situation selective about more is specifically conditions current market clearly, we how what And it in question what has pursue, from of to a your still us, for given purely on

you’ve basis, at our of pull we that R&D, number time. invest to one so on cash in regular in continue quarter, a for M&A we M&A then we’ll the additional very And primary our seen but regular right to do an as at opportunities been to and we look deploy balance. we’ll quarters, appropriate how the tool uses to are the opportunity use cash trigger our But have few buyers last cash that stock, in the and continue buybacks. as And of of terms over

Chelsea Heffernan

we will the end turn call I now that, With the for Q&A final to John his remarks. session. back will

John Forsyth

Thank you, Chelsea.

summary, revenue high-performance in new in sales broadening our are; earnings beyond our quarter our continuing Logic audio, of areas. of smartphones delivered across applications three strategic second into and So those Cirrus per mixed-signal to share, smartphone And execution expertise the audio focus. record areas driven components and strong key adjacent in expand profitable quarter, applying leadership by signal mixed September in

and in Cirrus about ever we than that opportunities your us, front the see thank you Logic. for in excited more We’re of interest continued

check X be Please will I’d details. to on Conference close, also the investor in we that Before Francisco. our note website participating December we for Barclays in the like San

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

Operator

call. this today’s gentlemen, conference and concludes Ladies

disconnect. now may You

Cirrus Logic (CRUS) 1 Nov 222023 Q2 Earnings call transcript