Cirrus Logic, Inc. (NASDAQ:CRUS) Q3 2023 Earnings Call Transcript

Blayne Curtis: Hey, good afternoon. Thanks for taking my questions. I had two. Just going back to Matt’s question, I think just analyzing December, if you could just talk about the upside. I think the shutdowns were kind of happening, right, as you kind of guided, so you probably added some conservatism. So that with the beat, what we’re seeing, I mean obviously, you have content gains and you may not track that customer, but they’re down year-over-year. I think they missed a bit on the quarter and guide. So I guess that’s the question we’re going to get a lot is how do you beat when your customer is down, but it might be the wrong measure because you might add some conservatism. So just can you explain to me a little bit more, that would be helpful.

John Forsyth: Yes, sure, Blayne. I think we guide with all the information we have at the time, so it’s our best estimate of where we’re going to land. I think when you think about December, especially kind of how that matches up with our largest customer, and you’ll forgive me, I hope, if I haven’t fully passed all of Tim and Lucas comments yet, but I think the big picture is, number one, you can’t always €“ it’s not always easy to true up our shipments with customer shipments. From our perspective, demand signals from our customers throughout the quarter were strong and sustained, and that included request for expedites, drop shipping, a lot of material and so on. The kind of things that carry additional costs. And so they really tend to be things that customers are asking for if they really need it.

And so that’s what we saw from the demand side. I think the other things that are worth keeping in mind in terms of just analyzing our results. And number one, we were on the second cycle following significant content expansion with the power conversion control chip that came in, in the previous generation, but we obviously get a tailwind effect from that. And secondly then, because our content tilts higher towards the higher-end devices, to the extent that there was any mix bias towards the premium models, that would have benefited us and the demand signals that we saw and what we were shipping were consistent with that.

Blayne Curtis: Thanks. And then, John, my second question, I just wanted to ask, in your shareholder letter, you talked about shipping the Gen 2 camera controller. You did a good job explaining the new codecs and amps, so I was wondering if you do kind of the same there as we’re trying to handicap maybe the content boost from that. Could you explain the different geometry, like different functionality? Any color there to help us kind of get a grasp on what the content uplift would be good?

John Forsyth: Yes. It’s a significant feature enhancement. I think the biggest challenge around for you and for us, I think around the camera controller content, is when you take into account the differing attach rates across skews within a generation, the differing attach rates across generations, and then the different products from us ourselves with different ASPs, that gets very, very difficult to analyze. So we’ve tended to talk in terms of blended ASP just the total value of the camera content. Obviously beginning at baseline back in €“ back three generations ago where we indicated it was in line with an amplifier, and then we saw a step up that was of the order of $0.20-ish from there. And then saw something similar beyond that.

And then as we go into the next cycle, we’ll see another incremental step up. But the benefits that we get from higher value content of which this is, is really elongated over a number of years because it will cascade down through the models most likely, and then wash through subsequent generations as well.