Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic's Fourth Quarter and Full Fiscal Year 2021 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.

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

Thank you and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer; and Chelsea Heffernan, our Director of Investor Relations. Today, we announced our financial results for the fourth quarter and full fiscal year 2021 at approximately 4:00 p.m. 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 investor@cirrus.com.

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 the shareholder letter issued today, which are available on the Cirrus Logic website, and the latest Form 10-K and 10-Q, as well as other corporate filings made with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from the current expectations.

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

Thank you, Thurman and thank you everyone for joining the call today. In the past year Cirrus Logic made excellent progress on key growth factors and strategic initiatives that we believe will contribute to our continued success in the quarters and years ahead. We increase the penetration of our audio solutions in smartphones.

We gained momentum with audio and haptic solutions in exciting categories, beyond smartphones. And we brought innovative products to market in new technology domains, expanding the range of product areas where Cirrus is recognized for its leadership.

We're particularly pleased with the progress we've made in driving product diversification in the high-performance mixed-signal area, which we have highlighted as a key pillar of our strategic vision for the company's future.

The introduction of our first camera controller contributed to 55% year-on-year revenue growth in the high-performance mixed-signal category. I feel it's also especially important to take a moment to thank our employees for everything that they have done over the past year.

Amid many, many challenges, they've shown extraordinary dedication, both to supporting our customers with their current products and to keeping on track the many important development programs that we believe will be central to our end of customers' future success. Turning now to our results.

Cirrus Logic delivered FY 2021 revenue of $1.37 billion, up 7% year-on-year. And non-GAAP EPS of $4.58 up, 27% year-on-year, driven largely by content gains and higher unit volumes. Like many in the semiconductor industry, we have been experiencing strong demand and excessive supply.

And while capacity constraints have not meaningfully affected the largest parts of our business, they did have some impact on our revenue for the last quarter, as well as on our outlook for the first quarter of FY 2022.

Today, we still see demand and excessive supply in some areas of our business, most typically in older products and in some cases in parts of our audio business that we've added during the supply constraint period. And our experience team is working closely with our supply chain partners to meet that demand as rapidly as possible.

In the coming months, we will begin shipping new technologies to our customers across a range of end devices, including important new content in the high-performance mixed-signal category. And based on these factors, we expect to accelerate revenue growth in FY 2022.

With this pipeline of new products and the R&D investments, we're making to further strengthen our roadmap of compelling audio and high-performance mixed-signal solutions. We're extremely excited about the coming year.

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

[Operator Instructions] And our first question comes from the line of Matt Ramsay of Cowen. Please go ahead. Your line is open..

Thanks very much. Good afternoon, guys. John, I -- in light of the results and some of the stock action tonight [ph], I think it's appropriate to ask the question.

You guys have talked a bit openly to the extent that you can about content expansion expected in premium devices, both in the power domain for upcoming this fall, and also, in work that you've been doing on the 22-nanometer codec for future products.

And maybe you could just -- I know you can't give a ton of details and all of us have lots of questions about those things, but maybe you could just talk about if any of those expectations changed in terms of penetration content ASPs, visibility on those programs from the update you might've given us a quarter ago. Thanks..

Thanks for the question, Matt. Yes, I, obviously, will stress that we don't disclose details about customers' products, but you are absolutely asking about some of the things we are most excited about. So, I do want to provide a little more color, as we are a little further along the road than we were one quarter ago.

Specifically that you're referring in part to the power conversion and control IC that we've talked about, we're very excited by that. It's an expansion again into another high-performance mixed-signal area for us. We have said -- as I've said previously that we think that device will trend towards an attach rate of one.

That it's kind of natural state, I think. And we believe there's a compelling case for the beam 1 in every phone. And we believe it's going to have a pretty healthy attach rate straight out of the gate. We -- we're obviously still early in the year to say more than that.

But we're very excited about it also because of its value in ASP terms, which I previously said was meaningfully highest than the closed loop controller. So, indicatively, I think it's best to think of the value of that as being about $1. You also asked about 22-nanometer again, we've made really good progress there.

I previously talked about -- seeing silicon and we were really happy with and being deeply engaged with customers. We don't have a product vehicle that we're ready to talk about there yet. But we do see multiple applications for that technology on our roadmap that we are really excited about.

As a reminder, the reason you would invest in 22-nanometer is either to pack in more digital processing, close to the analog, and/or to make something that is radically smaller and more power efficient. So, we can see multiple applications for that IP investment across different device categories and products.

We have some particular routes to market that we're obviously working on that we've alluded to previously, but nothing more specific to say today..

Got it. Thanks. Thanks, John. I appreciate the color and also the sensitivity on it. For my follow-up question, Thurman, I wanted to ask about the printed results for the March quarter. I think most of us that follow the company realized that the June quarter is always transitional and seasonally down.

And it's a little bit of throwing darts from the outside to see if we can model that right. But I think the concerns that I've gotten in my calls -- in my inbox tonight, or around the March quarter print, given the upside that your largest customer showed in their results last night.

I would have imagined back in the December quarter as -- and in January, when you were giving the guide for March, you guys would have been able to understand the units that you had shipped into support from their phones and other devices and calibrate the guidance accordingly if you had over shipped versus what they had sold through.

So, maybe you could give us some color there about how you guys were thinking about that with the March quarter results. And then, if there was any other factors you mentioned supply constraints, et cetera, that might've affected the March quarter. Thanks..

Matt, maybe I'll just chime in quickly with a couple of thoughts on that. Because the last time I spoke a little bit about the difficulty of drawing a straight line between what we ship and recognize versus what our peers or customer ships. In particular, the closed loop controller content with the module assembly phase that that's got.

We talked at the time about the possibility that, that just put things a little out of sync on the scheduling of revenue versus customers and so on. I think we're seeing that. That's pretty visible now. If you look at our Q3, we were 30% up year-on-year. We took a lot of success there on the back of that content.

And I think, that's obviously been feeding product for our customers for some time since. In the March quarter, I think -- and you may be alluding to at least the possibility of this, so I'll clarify. We've been able to serve all the demand from our large customer -- our largest customers that we've had. So, supply constraints haven't impeded us there.

That's really just affected our ability to grab upside in some of the -- this moral -- areas of our business. Thurman, if you have any other additional content or color you want to add to that. Please go ahead..

Well, also, as we noted, we had -- we were able to service our largest customers, but we were constrained on some of our general market customers in the quarter. But again, we fulfilled the most of that and that really didn't -- none of those were factors in our results for the quarter..

Our next question comes from the line of Blayne Curtis of Barclays. Please go ahead. Your line is open..

You kind of change your reporting segment. I'm assuming the easy answers that your growth coming from these new products with DAC and the power chip.

But just kind of curious thought process around that, beyond that -- really just when you look at the segment, I guess audio kind of flat year-over-year, quarter-to-quarter, it's the first time we're seeing these numbers around the history, but how do you think about the growth rates this unit segment going forward?.

You're absolutely right, Blaine. The -- part of the thinking there is really to eliminate the growth that we anticipate in line with the strategic plan where we believe we've got great opportunities now and in the future around the high data -- high-precision mixed-signal category.

The growth rates -- going back to what I've said about strategic growth sectors, we see opportunity for growth in audio. The two primary areas that being the expansion of our footprint that we've talked about in Android and then in other non-smartphone categories. But we do think that growth rate in high-performance mixed-signal is going to be higher.

And so, over time, you'd see that as a logic portion of our revenue mix..

Gotcha. I just want to ask, it’s obviously harder to kind of back out and analyze now.

But just your performance in the Android world in the March quarter and then I think you mentioned in your letters, a positive outlook going forward, but perspective as to how that business turned it for you in March and into June?.

I think broadly in Android, our story there has been -- obviously, we were coming from content headwind in 2021 with the smart codec disappearing. So, we've got -- we had some room to make up there.

In our key Android customers, momentum was pretty slack during most of the last calendar year, but then really accelerated in the first part of this calendar year. And it sets us up for an FY 2022 in Android terms, which I think would probably looks at least from where we are today, like being at least as strong as anybody seen [ph]..

And our next question comes from the line of Tore Svanberg of Stifel. Please go ahead. Your line is open..

Yes. Thank you.

Just the question on the segments, you talked about some of the growth, but what about profitability? Is there a gross margin differential between the new segments?.

Broadly, no. The new products that we introduced had really consistent in gross margin profile, whether they were in audio or high-performance mixed-signal product.

There are one or two obvious exceptions to that in that we've mentioned in the small print, which you may not have thought to yet, but there are some legacy products that sit in high-performance mixed-signal, which typically do have high margin, they're very low volume, so they don't really move the needle around.

So, broadly, across both of those categories, the gross margin would be consistent with the corporate model..

Very good. And when it comes to capacity, you said it's still tight, but you were able to increase your inventory days.

I'm just wondering, as we think about the June quarter, do you think that you'll sort of be back into equilibrium before the ramp in the second half or no?.

No. We actually -- the constraints that we're seeing now on across a lot of products and we're doing what we can to build that. But as far as equilibrium, we think that the capacity constraints will actually flow through FY 2022 and even possibly beyond.

Again, it's not going to affect any of our ability to meet our ramp schedules or our -- that we have at the back half of the year. What it will -- the fact is we still are seeing strong upside demand that we may or may not be -- likely will not be able to meet all of that.

And we're continuing to work the process, but -- and try to find capacity where we can. But -- that's really how we look at it..

[Operator Instructions] Our next question comes from the line of Christopher Rolland of SIG. Please go ahead. Your line is open..

Hey, guys. Thanks for the question. Around maybe the PMIC and timing in the back half as well.

If you guys can talk about -- from a timing perspective there, are there any details around the preassembly for DAC [ph], or is only thing that can pull in the timing for that part? And then, as we transition into these next handsets, are there -- is an update of any parts so we might be seeing the drawdown of inventory today in order to ramp up a new part in the back half.

Just any sort of details as to a transition that may be taking place would be great..

Let me take a run at that and you can let us know in the follow-up whether we -- whether I hit the nail on the head there, Chris. So, first of all, on timing, there's nothing really out of the ordinary. We are, with the power conversion device, preparing for a ramp that takes us through a full launch of product. It's going to be a steep ramp.

As I said, we're expecting a pretty healthy attach rate straight out of the gate. So, there's a lot of wafers and content to move between now and then, a lot of work to do. But is the basis for our optimism and kind of upbeat tone about FY 2022, as you all picked up. But there's nothing really out of the ordinary from a schedule perspective there.

And then, the -- you may be alluding to this in the second part of your question, that product in particular, the power conversion and control IC, that's not replacing anything. So, there's nothing that gets phased out or impacted from a legacy product inventory perspective by that.

One thing that I haven't touched on elsewhere in the call, though, that may be looking in the background there, of course, we have mentioned previously, and there's been discussion about it that our camera controller device has given attach rates.

We -- again, without saying anything about our customer's products and there's a lot of stuff that we don't know about our customer's products, however, it would be very consistent with what we've seen in many of our customer's products over the years, if that attach rate were to go up over time with cascading of kind of high-end camera features through the -- that product is.

So, again, we think that's likely to happen, but there's nothing -- there's no particular drawdown of old inventory or anything like that associated with that ramp..

Thank you. [Operator Instructions] Our next question comes from the line of Derek Soderberg of Colliers. Please go ahead. Your line is open..

Hi, guys. Thanks for taking my questions.

Thurman, I'm wondering if you could provide any detail around the pricing environment, or ASPs in terms of -- ASP declines having an abnormal impact on results or guidance? And then, looking forward, do you expect ASP declines to be -- anything out of the ordinary this year? Any thoughts on the pricing environment would be helpful? And then I have a follow-up..

No, our ASPs -- we've seen normal declines on our -- on a year-over-year basis on our ASPs with our older products. So, I wouldn't say that there was anything abnormal in our ASPs this time or anything that was different from the store.

I'd say that probably the bigger effect would be pricing for us in terms of we saw some pricing pressure because of the capacity constraints on that side of it. We did see some effect..

Got it. And then, John, I'm wondering if you could describe to the extent you can, how the pandemic maybe opened up new opportunities, and new products that you sort of -- voice authentic -- authentication and interface. In the early days of the pandemic, there was a lot of talk about this new normal we're going to be using voice more.

I guess, I'm wondering if that's playing out at all. I think you called out some new products in the shareholder letter. Is that leading to shipments into any of these types of applications? Thanks..

Not in particular around those technologies. Although, I would say that one of the exciting areas of growth for us, which is suddenly -- and pod on the back of the pandemic is just through the increased use of laptops, tablets, and mobile devices.

We've seen consistent across those categories and across our different customers, a desire for a higher quality audio. I think because of the fact that the AB and the video conferencing experience, and the sheer amount of screen time has it become so central to people's lives for -- working from home and so on.

So, we've actually seen -- going from really having almost no PC related business a year ago, we've seen a high degree of customer engagement and starting to gain real momentum and traction there, which we're excited about because we do believe that those devices are going through a transition where they have -- many of the same challenges that we've seen in smartphones when it comes to audio and haptics.

As they get thinner and thinner, they're going to want exactly the same kind of boosted amplifies, haptic drivers to replace mechanical controls and so on, which represents a great opportunity for us, that gives us the ability to expand audio in new non-phone categories.

So, I would say that's one of the biggest areas where we've seen growth and new customer interest on the back of the pandemic. And it's certainly a meaningful part of the demand that we have sitting in the pipeline for FY 2022..

And our next question comes from the line of Christopher Rolland of SIG. Please go ahead. Your line is open..

Hi, guys. Just a quick follow-up on -- you did mention laptops and haptics in your notes here. And I think you actually said there were a couple of customers that were interested there.

Perhaps talk about that? And then, I don't know if you want to maybe illuminate what mixed-signal product besides I think the PMIC, that you're most interested in for 2021 or even 2022 as we look at..

Sure. Yeah. I think I may have just hit on most of my talking points around the PC space. But just to recap, there's a really interesting transition.

There were a couple of meaningful changes taking place in particular around Ultrabooks where their architecture and industrial design is becoming more and more akin to smartphones and encountering many of the same problems.

So, we anticipate that many of the mechanical assemblies in laptops as they get thinner and thinner will be replaced by haptic devices. And we've seen that in some products with trackpads, and we've talked about our all technology and collaborations around that, which we're really excited about.

And we've been seeing great customer interest and attraction there. In addition to that, the challenges that people faced with smartphone audio was really partly as a result of wanting better and better audio out of thinner and thinner devices. And that drove a desire for higher voltage, boosted amplifiers sitting close to the micro speakers.

And again, that's -- that something which has been hugely successful for us in smartphones. We believe there will be, and we are seeing a transition towards that in the Ultrabook space as well. So, for sure, that's been exciting avenue of opportunity that's opened up over the past year or so.

On the subject of the high-performance mixed-signal areas, I'm going to say we're not in the standard PMIC business here. Obviously, over time, we'll be able to share more details about what we're doing in the power conversion and control product that I talked about. But we're really not replacing anything there.

We're doing something new that we believe has a lot of value to certain kinds of battery based system. And so that in particular is very interesting and exciting for us for two reasons.

One is, because of the avenues it opens up, longer term we believe it's relevant to a whole load of battery based systems and is -- has a whole roadmap of innovation around it where we can continue to grow value and bring a new stuff to our customers, but also because of the real world near-term revenue impact for us.

That's a meaningful ballpark dollar additional content that we anticipate seeing from the fall of this year, and therefore will be very meaningful in FY 2022 and even more meaningful in the full cycle in FY 2023..

Thank you. Appreciate it..

[Operator Instructions] And there are no further questions in the queue. I will turn the call back over to Miss Heffernan. .

Thank you, operator. There are no additional questions, so I'll turn it over to John for final comments..

Thank you, Chelsea. In summary, we're proud of the year-on-your growth and the strategic progress that we've delivered in FY 2021. We're also incredibly proud of our employee's ability to execute on new product development and to provide outstanding support to our customers, despite the challenges associated with the COVID-19 pandemic.

With an extensive intellectual property portfolio and continued investment in compelling audio and high-performance mixed-signal solutions, we're excited about the opportunities ahead of us in FY 022 and beyond. I also like to note that we'll be participating in conferences, hosted by Cowen, Bank of America and Stifel this quarter.

Please check our investor website for the details. If you have any questions that were not addressed to you, you can submit them to us via The Ask the CEO section of our investor website. I'd like to thank everyone for joining the call today. Good bye..

Ladies and gentlemen, this concludes today's conference call. Again, thank you for your participation. You may now disconnect..