Transcript Q2FY2022 (PDF)

Corrected Transcript

01-Nov-2021

Cirrus Logic, Inc. (CRUS)

Q2 2022 Earnings Call

	Total Pages: 18
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Cirrus Logic, Inc. (CRUS)	Corrected Transcript
Q2 2022 Earnings Call	01-Nov-2021

CORPORATE PARTICIPANTS

Thurman Klay Case	Chelsea Heffernan
Chief Financial Officer & Vice President-Finance, Cirrus Logic, Inc.	Director-Investor Relations, Cirrus Logic, Inc.
John Forsyth
President, Chief Executive Officer & Director, Cirrus Logic, Inc.

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OTHER PARTICIPANTS

Matthew D. Ramsay	Raji Gill
Analyst, Cowen and Company, LLC	Analyst, Needham & Co. LLC
Tore Egil Svanberg	David Williams
Analyst, Stifel, Nicolaus & Co., Inc.	Analyst, The Benchmark Co. LLC
Blayne Curtis	Vivek Arya
Analyst, Barclays Capital, Inc.	Analyst, BofA Securities, Inc.
Christopher Rolland	Derek Soderberg
Analyst, Susquehanna Financial Group LLLP	Analyst, Colliers Securities LLC

Ananda Baruah

Analyst, Loop Capital Markets LLC

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MANAGEMENT DISCUSSION SECTION

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic First Quarter Fiscal Year 2022 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.

I would now like to turn the conference call over to Mr. Thurman Case, Chief Financial Officer. Mr. Case, you may begin.

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Thurman Klay Case

Chief Financial Officer & Vice President-Finance, Cirrus Logic, Inc.

Thank you and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer; and Chelsea Heffernan, our Vice President of Investor Relations. Today, we announced our financial results for the second quarter fiscal year 2022 at approximately 4:00 PM Eastern. The Shareholder Letter discussing our financial results, the earnings press release, including a reconciliation of non-GAAP financial information to the most directly comparable GAAP information, along with the webcast of this Q&A session are all available at the company's Investor Relations website at investor.cirrus.com. This call will feature questions from the analysts covering our company, as well as questions submitted to us via email at [e-mail].

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Cirrus Logic, Inc. (CRUS)	Corrected Transcript
Q2 2022 Earnings Call	01-Nov-2021

Please note, that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward- looking statements whether as a result of new developments or otherwise.

Please refer to the press release and Shareholder Letter issued today, which are available on the Cirrus Logic website and the latest Form 10-K, as well as other corporate filings made with the Security (sic) [Securities] (00:02:40) and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations.

Now, I'll turn the call over to John.

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John Forsyth

President, Chief Executive Officer & Director, Cirrus Logic, Inc.

Thank you, Thurman. Before we discuss our results, I would like to make a few comments on today's announcement that Thurman is planning to retire from his position as Chief Financial Officer. I want to take this opportunity to thank Thurman for his outstanding dedication and commitment to Cirrus Logic over the past 21 years. All of us here greatly appreciate his many contributions to the company's growth, and to the development of a world-class finance organization during his nearly 14-year tenure as CFO.

Thurman will remain in his current role, while we conduct a comprehensive search to identify his successor, and will work to help ensure a seamless transition to that successor in due course. I want to thank Thurman sincerely from all of us at Cirrus Logic, and wish him all the very best in this next chapter.

In other news before we get to the quarter's results, I'd like to say how excited we are to have recently welcomed Raquib Hussein to the company's board of directors. Raquib has a deep knowledge of the semiconductor industry, strong technical expertise and a track record of both operational and strategic success. We believe he will be an extremely valuable in addition to the Cirrus Logic team, as we look to continue our growth momentum through innovation in mixed-signal products and expansion into new technologies and markets.

Turning to the results now, Cirrus Logic reported record revenue and earnings per share in the second quarter while also delivering year-over-year operating profit growth. Revenue was $465.9 million, up 34% year-over-year and our highest ever for the September quarter, due in large part to the ramping of components ahead of customers' new smartphone launches.

During the quarter, we also made great progress on the strategy that we have outlined to diversify meaningfully beyond audio, passing, as we did, several major milestones in the high-performancemixed-signal products area of our business. These included increasingly attach rate of our camera controllers and smartphones, bringing a new power conversion and control IC to market, and sampling new fast-charging products to our general market customers. These accomplishments represent a significant expansion of Cirrus Logic's technology and product mix, with our high-performancemixed-signal business delivering 30% of total revenue in the first half of fiscal 2022, up 117% from just a year ago.

As we discuss in the Shareholder Letter published on our website today, we continue to be very excited about the opportunities these new technologies offer for further growth and diversification in the future.

Before we begin the Q&A, I would also like to note that while we understand there is intense interest related to our largest customer, in accordance with our policy, we do not discuss specifics about our business relationships.

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Cirrus Logic, Inc. (CRUS)	Corrected Transcript
Q2 2022 Earnings Call	01-Nov-2021

Operator, we're now ready to take questions.

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QUESTION AND ANSWER SECTION

Operator: [Operator Instructions] And the first question comes from the line of Matt Ramsay of Cowen. Your line is now open.

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Matthew D. Ramsay

Analyst, Cowen and Company, LLC

Q

Thank you very much, good afternoon, everybody. First off, Thurman, congrats. It has been great to work with you down the years, and all the best going forward. For my - I guess, my first question, John, congrats to the whole team on getting Lion Semi closed. I wanted to pick your brain a bit, if you think about your current power IC road map and the technology and the people that you would be acquiring from Lion that are now within the company, can you ballpark for us what kind of integration efforts might be underway to bring those two product lines together, and what kind of timeline could we look at as sort of a minimum and then I guess a realistic timeline of when you could have product in market that would be fully integrated between the two company's? Thanks.

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John Forsyth

President, Chief Executive Officer & Director, Cirrus Logic, Inc.

A

Thank you, Matt. Yeah, I'll try to talk to that. I want to explain that some of the way we think about this is that we really want to give more ammunition to the Lion team and help them build out their road map and expand across customers and into other new markets as rapidly as possible. Of course, integration is a goal, because we believe the technology that the Lion team had developed can be highly complementary to other things we're doing, but actually, the first priority is execute on pretty significant raft of opportunities they have in front of them. The second priority is continue to expand that and accelerate the road map, and then the third priority is exploit the synergies between those technologies and other areas of our business.

So, right now, Clearly, Lion, the team there has seen a lot of interest within certain smartphone vendors, they're running extremely fast to execute on that and then continue to expand it, because that's still a market that has some ways to go in terms of rising expectations and demands on performance. So, we're excited about that, but then we also believe that there are other product categories that can benefit from that charging technology.

Now, so all of that's by way of saying our initial focus is really just helping the Lion team execute, scale up a bit, and so there's more of the demand that they have in front of them and we're really - it's an amazing group of people that we got there, we're super excited to be doing that, and then increasingly we do see further down the road, opportunities for synergies between the Lion technology and some of the other IP that we've been working on. I think we're - we haven't laid out a timeline for that yet, but that's something we're very excited about internally. Just to give you a little bit of flavor for that, we really believe that having the opportunity to innovate simultaneously both in the charge path and the discharge path around the battery, so really being able to deliver the silicon that sits around the battery, can deliver great value to our customers' products in due course.

The Lion IP and technology clearly represents the charge part of that, and then a lot of what we've been doing elsewhere, is more focused on the discharge path. So, it's highly complementary, it'll take us a while to actually converge given the number of opportunities that the team is addressing in the nearer term.

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Cirrus Logic, Inc. (CRUS)	Corrected Transcript
Q2 2022 Earnings Call	01-Nov-2021
Matthew D. Ramsay	Q
Analyst, Cowen and Company, LLC

No, I really appreciate all the color there, John. As a quick follow-up, it's been topical over the last six, nine months that in certain portions of the notebook market and that all your codecs from some other suppliers have been a bottleneck and you guys have called out in the letter and maybe on the, I think on the last earnings call as well, opportunities for Cirrus to grow into the notebook market. I guess, [ph] or (00:10:01) maybe you could help me quantify how large those opportunities may be in the next six, 12, 18 months? And, John, do you consider that strategic business or opportunistic business, and how are you investing there? Thanks.

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John Forsyth

President, Chief Executive Officer & Director, Cirrus Logic, Inc.

A

Yeah, that's a great question. Thank you, Matt. The nature of the comments in the letter were actually intended to tease apart the opportunistic and the strategic elements to it, because there's a bit of both. And, I think when we talked about seeing revenue grow in our laptop engagements, there was a little bit of reaction that, yeah, well, the supply chain disruption created opportunistic situations where that could occur, which to be clear has been true to date, but there were also some meaningful underlying factors that are strategic for us.

So, we've picked up a reasonable amount of codec business, especially over this year, we'll continue to build on that. I think there are reasons why a number of those customers will want to continue using our technology, we tend to be fairly difficult to dislodge once we get in somewhere, but the underlying factors, which is actually what we were shooting for originally, of a transition more towards boosted amplifiers, a transition towards potentially haptic trackpads and that kind of growing requirements around audio and video, those were things that we saw happening with or without any COVID-related supply chain disruption.

So, those represent a decent opportunity for us to continue to grow. Our estimate of that over the next five years is it that looks like something along the lines of a $400 million SAM for us to tilt at, so that's focused on the segments where we would play, it would tend to be at the upper end of the notebook market, it would tend to be the devices which are really focused on premium performance and being [indiscernible] (00:12:13) and having very high power efficiency and so on, but given that we see opportunities across audio, maybe haptics, maybe power in those segments, it means the total ASP per device, total content per device may actually be pretty significant that's reflected in that SAM.

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Matthew D. Ramsay

Analyst, Cowen and Company, LLC

Thanks very much, John. Congrats again, Thurman.

Q

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Thurman Klay Case

Chief Financial Officer & Vice President-Finance, Cirrus Logic, Inc.

Thanks, Matt.

A

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Operator: Next question from the line of Tore Svanberg of Stifel. Your line is open.

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Tore Egil Svanberg

Analyst, Stifel, Nicolaus & Co., Inc.

Q

Yes, thank you and, yeah, let me echo, say congratulations to Thurman, going to miss you and since this may be your last earnings call, you will get the first question, Thurman. So, could you elaborate a little bit on the $255

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