Cirrus Logic Inc at KeyBanc Technology Forum Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Maybe the first thing we can just talk through is, when you reported your results, you talked about maybe seeing some pull forward of demand of smartphones and talked about how that shaped the back half of your fiscal year. I was just wondering if we could just recap that and talk about the dynamics that are driving that?

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Okay. Thanks for walking us through that, Jeff. Just a follow-up on that. You have been obviously shipping camera controller content for several generations right now. So if you've been shipping for several generations, why is it impacting the seasonality of this year versus previous years?

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Okay. Carl, just question for you, Mixed-signal's been a truly success story for you guys. You've done extremely well. You've seen a lot of growth in camera controllers. It seems like historically, the drivers have been increasing attach rates, maybe higher ASPs as you migrate to latest generation camera controllers. When we think about growth going forward, do you still see growth driven in camera controllers? And what are the dynamics that you expect to drive that growth? Carl Alberty - Cirrus Logic Inc - Executive Vice President - Mixed-Signal Products Yeah. I mean, I think we expect to see what's been happening since we started this business about five years ago, we expect to see that continue. We're shipping three different generations of products, the latest of which has higher functionality, higher performance, a 6x increase and processing capability and the customers continuing to take advantage of that. So I think we see that in the road map. So on a device-to-device basis, we see content expansion. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2025 / 4:30PM, CRUS.OQ - Cirrus Logic Inc at KeyBanc Technology Forum And then obviously, we see the attach rate and the kind of flow down through the portfolio to be kind of drivers of growth. And the road map, like I said, is very robust. It's super exciting. And the customer is obviously still investing quite a bit in innovation in this particular application, which is good for us. And like that partnership is super strong, both on the hardware side as we, again, are developing multiple products that further performance capabilities, channel counts, processing, et cetera, coupled with the algorithmic kind of firmware work and kind of the partnership we've got working with them to ultimately net out to a slow and steady kind of expansion of the content opportunity and therefore, the revenue over time, very exciting.

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Great. Maybe just related to that, I think it's the AI smartphone replacement opportunity, I think, has been a little bit underwhelming right now. But obviously, there are certain requirements around the concept of an AI smartphones. Is that something that you see kind of playing into kind of the increasing requirements around battery and power management and things like that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2025 / 4:30PM, CRUS.OQ - Cirrus Logic Inc at KeyBanc Technology Forum Carl Alberty - Cirrus Logic Inc - Executive Vice President - Mixed-Signal Products Yeah, certainly. I mean, we think we're well positioned. I mean, obviously, we've launched and ramped new devices last fall, including a 22-nanometer codec, which brought incremental value and covers off not just audio and kind of voice input capabilities, but other sensor inputs as well. And we think that's positioned really well to capitalize on new use cases and interfaces as it relates to AI. So we're certainly excited to kind of support that and look forward to kind of those consumer experiences just getting better and better. And certainly, in the power and battery space, as I was just talking about, there's a lot of demands on the system and peak power. And just frankly, the amount of power consumed by doing these kind of on-device processing for AI kind of use cases, will just put more demands on battery life for the phone, which kind of plays again to our strengths around how do you optimize power delivery, how do you manage battery life efficiently. And I mean, for our low-power signal processing IP in that portfolio, it plays really well into our strengths to kind of continue to capitalize on that as AI grows.

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : That's great. Maybe we could take a step back. As you know, if you look at the PC notebook opportunity, you kind of displaced kind of a long-time entrenched incumbent who's Taiwan company who's very focused on cost optimization. Maybe just talk about how you were able to kind of come in and displace such a well-entrenched incumbent there? Carl Alberty - Cirrus Logic Inc - Executive Vice President - Mixed-Signal Products Yeah. I mean, certainly, they are a well-entrenched incumbent shipping a variety of different technologies, of which audio is obviously one of them. To my point, I think the bar has been raised. And I think there are certain brands in the market that spend a lot on audio, and that shines through in that user experience. And a lot of customers were getting kind of left behind in terms of that benchmark for audio and voice, exacerbated by people working remotely in Zoom and Webex and kind of other things that we experienced during the pandemic. And again, there's really -- it's hard to go backwards. And so we look at it as not like what is your chip cost versus the incumbents, but what does the total cost of ownership look like for a company to do business with Cirrus. So it's the chip, but it's also the algorithms and the audio and voice software that we can embed on our chip that can eliminate royalties of software and other branded things. When you consider the quality, the reliability, the return rates and just what that means for OEMs dealing with returns on like bad quality or vibrations and mechanical rattle-induced kind of distortions and people just return them, like that total cost of ownership, coupled with our ability to enable customers to use cheaper transducers, cheaper speakers with our amplifiers, when you net all that out and look at the total cost of ownership, we actually think it's a win for customers. And with that, they also get premium audio and voice experiences that we feel are unmatched in the market.

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Great. Are there any questions? Great. Maybe another question for you is if you think about the market for the PC notebook market, obviously, the entrenching comment, you're probably not going to want to go after the kind of low end of the market. So can you talk about just what percentage of the -- or what part of the PC note market is actually addressable for you guys? Carl Alberty - Cirrus Logic Inc - Executive Vice President - Mixed-Signal Products Yeah. I mean, we view it as kind of the mainstream and app. So we don't really target the $600 kind of retail price point and below, which roughly is maybe 120 million laptops, give or take. And certainly, as I mentioned, we've been building a portfolio of products on codecs and amplifiers for audio and voice. We've been building out that portfolio to address a bigger part of the market. And again, we're seeing content expansion opportunities already in the mainstream, kind of building beyond the codec to include amplifiers. And so certainly, the baseline is audio and voice. But beyond that, we're shipping haptics drivers into really premium kind of flagship models. And we've got some power components as well for power delivery also in some of the AI models. So when you put that all together, it's like roughly 1 billion unit or $1 billion SAM for Cirrus. And so again, we started basically from zero. So we're seeing a lot of good design m mentum and like starting to get new products and filling out the portfolio to address these different technology areas, both audio and HPMS. So yes, I mean, $1 billion market in total for us, it's quite good.

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Right. Jeff, your long-term gross margin target is 49% to 51%. You've been running meaningfully above it for several quarters now. Is this sustainable? What's been driving kind of that outperformance? And is there potentially an upward bias to your long-term gross margin targets?

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Okay. Does HPMS just on average, have an accretive gross margin profile in general for your business?

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Okay. Maybe switching to operating margins, you've been running kind of in the mid-20s over the last several years. What's kind of the right target that you're looking at? And how do you kind of balance that against making the necessary investments in R&D to continue to drive growth?

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Great. Jeff, you come in with an extensive background in M&A I'm just wondering if you could just talk about kind of your framework in terms of how you're looking at targets at Cirrus Logic. Maybe talk about scale. Are you looking at tuck-ins or larger size deals? And is this something that you've been asked to maybe take a closer look at?

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Great. I get this question a lot. Just when you guys think strategically about customer concentration, how do you guys think about that? Is that a goal of yours to diversify away from that longer term? Or are you just focused on doing everything possible to grow revenues and to service that customer concentration to your best of your ability?

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Great. Maybe just to follow up on that, historically, the Android markets, you've had kind of some fits and starts there. How are you looking at the Android market these days? Is that still going to be something you're going to be focusing on growing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2025 / 4:30PM, CRUS.OQ - Cirrus Logic Inc at KeyBanc Technology Forum Carl Alberty - Cirrus Logic Inc - Executive Vice President - Mixed-Signal Products Yeah. I think we've actually pulled back in terms of investments in Android for the purpose of it not really representing a good exciting growth market for us. Certainly, we've talked about PC. We've talked about incubating other businesses beyond smartphones as like really important, exciting long-term options for us. We certainly still have competitive products for audio and haptics in the Android space. But it's just -- as a total market, especially with a big chunk of the customers residing in China and that just having a bit of risk inherently with the geopolitical kind of climate as it is. We're opportunistically selling what we have, but not really focusing the R&D investments on Android so that we can invest in, again, just expanding the HPMS content, but also building businesses beyond smartphones, especially in markets that have a bigger growth factor that's exciting for us long term.

Question: John Vinh - KeyBanc Capital Markets Inc - Analyst : Great. It looks like we're out of time. Thanks, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2025 / 4:30PM, CRUS.OQ - Cirrus Logic Inc at KeyBanc Technology Forum Carl Alberty - Cirrus Logic Inc - Executive Vice President - Mixed-Signal Products Okay. Thanks, John.