Yahoo Finance Cirrus Logic Inc (CRUS) Q4 2024 Earnings Call Transcript Highlights: Navigating Market ...
Q4 Revenue: $371.8 million, above guidance due to robust shipments.
FY24 Revenue: $1.79 billion, down 6% year-over-year.
Q4 Non-GAAP Gross Margin: 51.9%, increased due to supply chain efficiencies.
FY24 Non-GAAP Gross Margin: 51.3%, improved from previous year.
Q4 Non-GAAP Operating Income: $76.5 million, 20.6% of revenue.
FY24 Non-GAAP Operating Income: $447.1 million, operating margin 25%.
Q4 Non-GAAP Net Income: $69 million, $1.24 per share.
FY24 Non-GAAP Net Income: $369.3 million, $6.59 per share, up $0.17 from FY23.
End of FY24 Cash and Equivalents: Nearly $700 million, up $182.6 million year-over-year.
Q4 Cash Flow from Operations: $170.5 million.
FY24 Free Cash Flow Margin: Approximately 21%, a 500 basis point improvement from FY23.
Share Repurchases FY24: $186 million, 2.3 million shares at average price $80.68.
Q1 FY25 Revenue Guidance: $290 million to $350 million.
Q1 FY25 Gross Margin Guidance: 49% to 51%.
Q1 FY25 Non-GAAP Operating Expense Guidance: $118 million to $124 million.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Cirrus Logic Inc reported a revenue of $378.1 million for the fourth quarter, surpassing the top end of their guidance due to strong demand in smartphone products.
The company achieved a full fiscal year revenue of $1.79 billion, with disciplined execution contributing to growth in both GAAP and non-GAAP EPS for the year.
Cirrus Logic Inc made significant progress in their strategic growth areas, including their core flagship smartphone audio business, high-performance mixed signal functionality, and new market penetration.
The company successfully introduced innovative products such as a boosted amplifier and a smart codec, which are expected to launch in devices in the fall of this year.
Cirrus Logic Inc maintained strong financial health with nearly $700 million in cash and cash equivalents by the end of fiscal 2024, and no debt outstanding.
Negative Points
Full fiscal year revenue of $1.79 billion represented a 6% decrease year-over-year, primarily due to reduced shipments in non-smartphone applications.
The company faces challenges in new product introductions in power and battery-related technologies, with significant developments expected to materialize further out.
Despite advancements, the revenue from new market segments like laptops is expected to be in the low tens of millions, indicating a slow initial growth in this area.
Cirrus Logic Inc anticipates inventory levels to be elevated in fiscal 2025 as they continue to support customer demand and fulfill wafer purchase commitments.
The company expects gross margin pressure in the upcoming quarter due to ramp costs associated with the production of new 22-nanometer codec and boosted amplifiers.
Q & A Highlights
Q: Venk, I wanted to start on the gross margin stuff. You mentioned in your script maybe being a little bit below the middle of the range for June and that's all fine. I wanted to ask, as you roll through the next 12, 15 months, you're going to be introducing the new codec on 22, the new boosted amplifiers, you would think that the laptop business becomes a little bit more material to the company. If you could just kind of walk us through how you're thinking about things on the gross margin front given all of those variables, I don't really care that much about 1 quarter, but just over this product cycle, if there's anything new that we should consider and just kind of the puts and takes on margins? A: Yes. Thanks for the question. Yes. So in terms of just the overall gross margin, as you correctly pointed out, with the current quarter, we do expect to see it slightly below the midpoint, primarily because of the ramp costs that I alluded to in the prepared script. But as you've seen over the last several quarters, we have made significant strides in terms of improving our supply chain efficiencies and lowering freight costs and so forth. Our long-term gross margin model continues to be 49% to 51%. That's the range that we're still comfortable with. Now obviously, we'll continue to improve the efficiencies as we go forward, but I think we'll just provide guidance later on as we get more visibility into the gross margin performance. And then as it relates to your question about the mix as things progress, as you pointed out, we are making some good strides in the PC space today. It's still -- I think we talked about this on the previous earnings call, we expect in fiscal '25 PC contribution to be somewhere in the low tens of millions of dollars. So as it becomes a bigger portion of our revenue in the future years, it will have some impact on gross margin. But right now, think of it as being in line with our corporate average and we'll provide updates as we get further along.
Q: Got it. I guess just as my follow-up, it's a new market for you guys in notebook and you've sized it in the near term. John, maybe you could give us a little bit on how the early strides have gone in notebook. I mean, can this be a much bigger market over time? I mean, what's relative to where you thought you'd be as you sort of start down this path? I mean, what's been the early experience and sort of the breadth of interest across the different platforms at the PC OEMs. Is this niche for now and growing over time? Or are you sort of pleased with the early progress and maybe it's potentially a bit larger than you thought? A: Thank you, Matt. We're certainly pleased with the early progress. It's going to take time to grow it to be a real needle mover for us, but we see a great opportunity there. And when we look a few years out, we see over $1 billion of SAM there for us to attack as I've mentioned previously. If you look back over the past year, in particular, I think we've hit a number of really positive milestones, both with sampling our new codec and boosted amplifier design for the laptop market and then seeing those launch in customer products. And then now since the last quarter's report, seeing them actually shipping into end users' hands. So that's great. And alongside that, of course, we had the integration of that codec, that boosted amplifier along with the power converter product in the Intel Lunar Lake reference design. And that we do believe can be a great engine for further design wins and growth in the coming years. So Lunar Lake will be something that makes more of a difference to us in calendar '25. So that's in the hands of a lot of OEMs right now. We're certainly working with, as we said, with the top 5 OEMs and they are all in various stages of evaluating Lunar Lake and building Lunar Lake designs. And we'll see those come to market during calendar '25, which means that the bulk of the impact of that on our P&L will be from FY '26 and going forward. And our view on what we expect in FY '25 is unchanged. As Venk said, we think of that as low tens of millions, but with a great opportunity to grow it as we look further at.
Q: Can you hear me? A: Chris, we couldn't hear you. Can you start over?
Q: Yes. Can you hear me now? A: Yes.
Q: You can. Okay. I was saying despite my interest in your largest customer, this question will be about all of the revenue not related to that customer. So I think last year, it was about $232 million total. And I'm wondering, as we enter this next fiscal year, how should we think about growth there? Is like the 30% area with these laptop and other handset games? Is that like a reasonable expectation? How should we think about that? A: Yes, Chris. Thanks for the question. So I'll split the non-top customer revenue into a couple of smaller buckets just for some additional clarity. So if you look at the composition of that business, it can vary anywhere from 12% to 15% to -- at the high point, is probably about 20% of our revenues. And I'll break it into 3 components. So one part of it is what we call the general market catalog business that is not very dissimilar to what you will see in a general purpose high-performance analog portfolio. And that business is sold predominantly to distribution. We've seen just as our peers have, that business has been fairly weak for the last several quarters. And we are seeing some signs of stabilization there. Over the last couple of quarters, we've seen distribution inventory be fairly stable and such. And I think that will recover as the economy improves and as general market conditions improve. So that's very tight to the overall macro. The second piece of that business is the Android business and I would say, non-big customer smartphone business. And I would say we're doing fairly well in the Android space today. We've had some good wins there, and we're participating in whatever is happening there in that market. And then the third piece of it is the PC space, and with PCs, as John just alluded to, we've made some really good progress in terms of design wins. There's a lot of momentum across multiple OEMs, and we're seeing more adoption, especially with Intel Lunar Lake reference design wins and so forth, but it will take a few quarters, maybe even a few years for that to be a needle mover. And I think in the fiscal '25 time frame, we have framed it as low tens of millions of dollars in revenue. We think it can
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
