Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cirrus Logic Inc (CRUS, Financial) delivered revenue of $374 million, exceeding the top end of their guidance range due to stronger-than-expected shipments into smartphones.
- The company began ramping production of their next-generation custom boosted amplifier and first 22-nanometer smart codec, marking significant milestones.
- Cirrus Logic Inc (CRUS) has design wins with each of the top six laptop OEMs worldwide, indicating strong market penetration and future growth potential.
- The company reported a non-GAAP net income of $62.4 million or $1.12 per share, reflecting higher revenue and profitability.
- Cirrus Logic Inc (CRUS) ended the quarter with $744.6 million in cash and investments, showcasing a strong balance sheet with no debt outstanding.
Negative Points
- Non-GAAP gross margin decreased by 130 basis points sequentially, primarily due to higher supply chain costs related to new product ramps.
- Non-GAAP operating expenses increased by $1.5 million sequentially and $4.2 million year-over-year, largely due to higher employee-related expenses and variable compensation.
- Inventory balance increased to $232.6 million, up from $227.2 million in the previous quarter, indicating potential overstock or slower inventory turnover.
- The company anticipates higher inventory levels in the next quarter to support new smartphone launches, which could impact cash flow and operational efficiency.
- Cirrus Logic Inc (CRUS) faces risks and uncertainties that may cause actual results to differ materially from projections, as highlighted in their forward-looking statements disclaimer.
Q & A Highlights
Q: Could you talk about where the strength in your business is coming from, given the positive changes in your guidance? Also, can you provide an update on the PC market opportunities, particularly around AI PCs?
A: Our goal is to provide an accurate view of our expectations, considering inputs from field teams, supply chain, and customers. The June quarter saw more sustained demand than usual, reflecting strong demand for our customers' products. For the September quarter, our guidance includes one additional week of peak ramp activity due to a 53-week year last year. Regarding the PC market, we are excited about the AI PC upgrade cycle and the broader opportunity in the PC space. We have over 100 designs in progress for calendar 2025, indicating strong momentum.
Q: What is your strategy for targeting industrial applications with your data converter products? Are there any partnerships or customer relationships you can discuss?
A: We believe the return on investment in this area is strong, with products running for a long time at healthy gross margins. We are rejuvenating our broad-based analog catalog products, especially in audio. Our new suite of digital-to-analog converters, analog-to-digital converters, and codecs have received stellar customer feedback across prosumer, pro-audio, industrial, and automotive segments.
Q: Can you provide more details on your investments in power domains around the battery, especially with the potential strain from new AI features in devices?
A: We are making significant investments in areas where we can deliver improved performance through advanced analog mixed signal and digital signal processing. This includes sensing, monitoring, and processing information from the battery to extend battery life and system performance. We have multiple investments around the battery, and we will provide more clarity as these products come into focus.
Q: Can you confirm the timing of your quarters this year and discuss any potential impact on gross margin from new product ramps?
A: Yes, we had a 14-week quarter in December last year, so our quarters this year are shifted by a week. This means our September quarter includes one additional week of peak ramp activity. Regarding gross margin, we expect a slight improvement in the September quarter due to product mix and supply chain optimizations. Our long-term model remains unchanged.
Q: What other edge devices or markets do you see as opportunities for Cirrus Logic beyond handsets and laptops?
A: We are interested in markets where audio, power efficiency, and haptics can enhance the user experience. This includes wearables, AR/VR, and other edge devices. The laptop market has been a significant entry point for us, but we are also exploring other markets to leverage our technologies and drive SAM expansion.
Q: Are you seeing any acceleration in the PC market due to AI PCs, and how is this impacting your content opportunities?
A: There is a lot of excitement and urgency in the PC market, particularly around AI-driven cycles. We have over 100 designs in progress for calendar 2025, indicating strong momentum. The AI PC upgrade cycle is creating opportunities for us to provide more content and differentiate our products.
Q: How should we think about the contribution of new or enhanced content versus smartphone unit growth in driving content dollar growth over the next few years?
A: We do not make aggressive assumptions on smartphone unit growth. Our plan is to grow in a world where units are not the primary catalyst. We focus on managing our business to drive growth through new and enhanced content rather than relying on unit growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
