John Forsyth

Thank you Chelsea and welcome to everyone joining today’s call.
As you’ve seen in the press release, Cirrus Logic delivered record revenue and earnings per share for the September quarter, revenue was $541.9 million near to the top end of our guidance range due to strong demand for products shipping into smartphones.
In a moment, I’m going to hand the call over to Ulf to discuss the financial results for the September quarter in greater detail, as well as our outlook for the December quarter. But before we get to that, I’d like to make a few remarks regarding our recent progress.
As many of you are aware, our long-term strategy for growing the company is based around three broad principles. First, maintaining leadership in our core flagship smartphone audio business; second, continuing our expansion in areas of high performance mixed signal functionality in smartphones; and third, leveraging those audio and high performance mixed signal capabilities to penetrate and grow in new markets.
In our flagship smartphone audio business this past quarter we were particularly excited to begin shipping our next generation custom boosted amplifier and our first 22 nanometer smart codec in recently launched smartphones.
The new amplifier provides significant power and efficiency improvements, while the smart codec in addition to being Cirrus Logic’s first 22 nanometer product of any kind delivers meaningful advances in audio and mixed signal processing capabilities.
Together, these components showcase years of engineering dedication and close collaboration with our customer and they contribute meaningfully to the power efficiency and extraordinary audio quality of our customers new products. We anticipate that both components will ship from multiple smartphone generations and in doing so provide us with an enduring and substantial revenue stream in the years ahead.
Looking beyond audio, we’re enthusiastic about the potential to grow content in smartphones with our high-performance mixed signal solutions. Our progress in this area is evident in the continued success of our camera controller product line.
Since the introduction of our first camera controller in calendar year 2020, our camera content has continued to increase in value over time. With the recent smartphone launch, we are benefiting from a more favorable overall mix of smartphones on the market that include our camera controllers.
We see considerable potential to add further value in this area as we identify more opportunities to enhance system performance and help enable advanced camera features. Beyond camera controllers, we also believe that advanced power sensing and battery related technologies represent excellent opportunities for us and we continue to invest in a number of R&D programs that are focused on these areas.
We anticipate that the investments that we are making in this space today will contribute to product diversification and expand our footprint in these product categories in the future. The third element of our strategy is focused on expanding into new applications and markets outside of smartphones. In this area. We continue to be excited about the opportunities we see in our laptop business.
While we are still in the early stages of revenue contribution from our recently introduced laptop components. We were pleased with our progress during the September quarter. That progress included securing our first high volume mainstream design win with our latest PC codec which combines cutting edge hardware with advanced algorithms for superior audio playback.
We’re also proud to ship our first power product designed specifically for laptops in multiple Tier 1 customers devices. Additionally, during the quarter, we saw the introduction of a new laptop from a top tier laptop OEM that exemplifies the breadth of our content opportunity in this market. In that it features eight service logic components including a codec, multiple audio amplifiers and multiple power converter chips. We anticipate many more customer product introductions in the laptop space in the coming months and are excited about the opportunity this market represents.
And with that, let me now turn the call over to Ulf to provide an overview of our financial results as well as the outlook.

Ulf Habermann

Thank you John and good afternoon everyone. I will start with a summary of our financial results for our second quarter, fiscal 2025, and then provide guidance for Q3 FY25. In Q2 FY25, we delivered record revenue for the September quarter of $541.9 million, near the high end of our guidance range.
On a sequential basis, revenue was up 45% due to higher unit volumes associated with new smartphone launches. On a year over year basis sales were up 13% driven by higher smartphone unit volumes and increased revenue associated with next generation products.
Also, as we indicated in Q1 FY25 in our shareholder letter when comparing our September quarter to the equivalent quarter last year, we would note that in FY25 our September quarter begin and end it one week later. Therefore, it encompassed one week more of higher volume production associated with typical seasonal product ramps, turning to gross profit and gross margin.
non-GAAP gross profit in the quarter was $282.9 million and NON-GAAP gross margin was 52.2%. On a sequential basis, the gross margin increase of 160 basis points was mostly driven by favorable product mix, the 90 basis points increase year-over-year was largely due to favorable product mix. This was offset in part by higher supply chain cost. Now turn to operating expenses.
non-GAAP operating expense for the second quarter was $126.8 million, on a sequential basis OpEx was up $8.8 million primarily due to higher variable compensation and product development costs. This was offset by a reduction in employee related expenses.
On a year-over-year basis, operating expenses up $12.3 million largely due to higher employee related expenses, increased variable compensation and higher product development cost. Non-GAAP operating income for the quarter was $156.2 million or 28.8% of revenue. Turning now to taxes.
For the September quarter, our non-GAAP tax rate was 23.8% in-line with our previous guidance.
And lastly on the P&L, non-GAAP net income was $125.3 million resulting in a record earnings per share for the September quarter of $2.25, as the higher revenue and profitability flowed through to the bottom line. Let me now turn to the balance sheet.
Our balance sheet continues to be strong, and we ended the September quarter with $706.6 million in cash and investments. Our ending cash and investment balance is down $38 million from the prior quarter, primarily due to cash spent on share repurchases partially offset by cash generated from operations. We continue to have no debt outstanding and have $300 million undrawn on our revolver.
Our inventory balance at the end of the second quarter was $271.8 million, up from $232.6 million in Q1 FY25. Days of inventory were down slightly sequentially, and we ended the quarter with approximately 96 days of inventory.
Looking ahead in Q3 FY25, you could expect a slight increase in inventory dollars from the prior quarter. We would also note as we move through FY25 and into FY26 we expect inventory to increase as we continue to fill the demand and manage our way for purchase commitments for long term capacity agreement with global foundries.
Turning to cash flow, cash flow from operations was $8.2 million in the September quarter and CapEx was roughly $2.7 million, resulting in non-GAAP free cash flow margin of roughly 1%. For the trailing 12-month period cash flow from operations was $579.6 million and CapEx was roughly $30.4 million. This resulted in non-GAAP free cash flow margin of roughly 29%.
On the share buyback front in Q2, we utilized $50 million to repurchase approximately 356,000 shares of our common stock at an average price of approximately $140. At the end of Q2 FY25 the company at $224.1 million remaining in its share repurchase authorization. We expect to continue to return capital in the form of stock repurchases which we believe will provide a long-term benefit to shareholders going forward.
Now onto the guidance. For [Q2] FY25 we expect revenue in the range of $480 million to $540 million. I would like to take a moment to highlight a couple of factors influencing our revenue guide. First, when comparing our December quarter outlook to the equivalent quarter last year guidance reflects one last week of revenue as FY24 was a 53-week fiscal year.
And second, as a result of the additional week, last year, the timing of the end of our fiscal quarters in FY25 has shifted. Therefore, the September quarter included one more week of higher volume production associated with typical seasonal product ramps. Moving on to gross margin.
GAAP gross margin is expected to range from 51% to 53%. Non-GAAP operating expense is expected to range from $124 million to $130 million. On a sequential and year-over-year basis guidance reflects increases in product development costs which are partially offset by lower variable compensation and a reduction in employee related expenses. We will continue to control discretionary spending while investing strategically in product development to drive long term growth.
We expect our FY25 non-GAAP tax rate to be approximately 22% to 24% unchanged from our previous guidance. This range is slightly higher than our FY24 tax rate which was impacted by a favorable catch-up benefit related to updated IRS guidance on the R&D capitalization rules.
In closing, we delivered outstanding results for the September quarter. We are pleased with the progress we have made this year. We remain focused on executing our strategy that we believe will enable the company to grow both revenue and profitability during the long-term.
Before we begin the Q&A, I would like to note that while we understand there is intense interest related to our largest customer in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship.
With that, let me now turn the call to Chelsea to start the Q&A session.

Chelsea Heffernan

(Event Instructions)

Operator

(Operator Instructions) Christopher Roland, Susquehanna.

Christopher Rolland

Hey guys, thanks for the question. So, I do think I understand the extra week in September and the effect there, but still, this is for for December a larger than typical seasonal decline. I guess maybe you can talk about the inner play there between content, your content expectations, what was actually delivered versus like build the patterns, whether you had chip ahead there versus just unusual weakness in units.
And then as we think about March, I know you don’t want to guide a quarter ahead, but given that seasonality is all messed up for December. March is typically down high 20s. How should we think about that? Just given the messed-up December. Thanks.

John Forsyth

Chris. I think the various kind of moving pieces make sense on December, but there’s a bit of unpacking to do so. So let me just do that and then circle around to the rest of your question.
So there are at least three factors when we look at the December year-on-year comps. So first, this September quarter that we’re reporting had one more week of the higher volume production. That is associated with the peak ramp period for us.
As a consequence of it coming later in the year because FY24 was a 53-week fiscal year for us. So that’s one factor just meant there was a week of higher volume, higher value stuff in September than we would normally see. Then the second thing to think about when comparing a year-over-year is that, of course, the December quarter in in fiscal ’24 was a 14-week quarter. So that also influences the comps.
And then a final point which I think I talked to on the last call is that in the December quarter, last year, we saw more Android production than we would normally see. In that period that was due to a large Android customer ramping their product earlier than they normally do. So, there were various factors that that contributed to a record-breaking December last year. And then obviously, to the comps that that we faced this December.
But I think when you look across the sequence of — obviously, the quarter boundary is different as it relates to the ramp. But the numbers taken together, can look fairly robust. So if you take the first three fiscal quarters of this year, using the midpoint of our December guide, then that compares that’s got slightly slightly up on the first three fiscal quarters of last year.
For example, so as you say that the seasonal picture is somewhat different, but more than anything that’s a function of these factors that I I’ve outlined. So when it comes to the March seasonality and our expectations there, yeah, to your point, as you know, I need to make the comment that we don’t guide more than one quarter out.
And the December quarters and the March quarters are the hardest to guide for us because they really depend on what the demand looks like as we go through the holiday period for the various key products that have been recently launched. So as a consequence of that, as you allude to historically, there’s been a fairly big spread of seasonality there.
We’ve seen anything from down 11% to down 40% I think over the past several years with probably an average shaking out around 30 — 30%. But we really have no color to give on March at this point. So I’ll have to leave it there for now and obviously update you with much more detail when we get around to reporting the December quarter.

Christopher Rolland

Understood John. Maybe the next one for Ulf. So on the way for obligations, I think they’re like mid-500s in ’24. You get some relief next year, I think high-300s, the inventory that you’re building, that’s I imagine on that 24 number just as it’s higher as we move into next year would you expect any inventory build or are we all out of the clear there on that side. And then anything else, any other pain points or things to think about on the way for obligations? Thanks.

Ulf Habermann

I mean, yeah, so we have to fulfill those way for obligations as you stated and you can see, our minimum lease, — our minimum commitment schedules out there as well in the case. But yeah, we expect to build inventory into early Q — into early FY26 as well, but that’s all inventory that we expect to sell long term, right? That’s all-long-term selling products that we’re building in that with global.

Operator

Tore Svanberg, Stifel.

Tore Svanberg

Yes, thank you. So John, I appreciate you can’t talk a lot about your largest customer, but it is a bit of an unusual time where, they’re kind of updating their operating systems and their product cycles kind of on the go. Right.
So I’m just wondering if that has created any unusual linearity for you, whether it’s staging inventory or lead times. Because it is a bit unusual. So I’m just wondering if that has created anything unusual for you as a supplier.

John Forsyth

I think it’s a little hard to judge that Tore, the biggest impact I think for us, that shapes this September, December transition is really the fact that September comps, our September quarter ended a little later. We think that’s the major factor there.
Obviously, with new content coming online this year. And as I referred to in the, — in my opening remarks, a more favorable mix regarding camera controllers there is a lot of build over the past few months. Obviously, it’s a significant amount of material and content which we ramp there.
But I think we’re still in the very early innings of, of those products. There’s obviously still, actually, some very exciting features yet to be launched and we’ve yet to go into the holiday period. So I wouldn’t want to call it more than that until we’re on the other side of that period. Tore.

Tore Svanberg

No, that’s fair and just as a follow up and I’ll use sort of what’s happening in the laptop to try to understand what could potentially happen in the smartphone. I know it usually happens the other way around. But you did talk about selling in and a new laptop now, basically a codec amplifiers and power conversion ICs. And I’m a little bit intrigued about the power conversion ICs. Is this something that, you expect to expand on in the smartphone market in 2025?

John Forsyth

That’s a great question. So let me talk about that product in particular. And then, and maybe also just put it within the context of all the product offerings that we have in the laptop space right now. We’re shipping today audio codex amplifiers, haptics drivers. And now in this quarter, we began shipping power conversion chips as well.
So those four different product categories which we’re really excited about. I think on a previous call, I highlighted when one of our customers launched a product with seven series logic chips in it, which included Haptics drivers, amplifiers in the Codec. It did not include power chips. So now I’m talking about [eight], which includes codec amplifiers and power chips, but no Haptics. So hopefully one day we will be here talking to you about a laptop that contains all of these.
But of course, we are very excited about the range of opportunities that having all these products represents. The power chip itself has its origins in some of the IP that we acquired as part of the [ion] semiconductor transaction a few years ago. It’s a switch cap DCDC converter with very, very high efficiency compared to legacy products and architectures for DCDC conversion.
What that really translates into is less power being lost through heat and less heat being generated within the laptop and needing to be dissipated so very attractive, both from the user perspective and the industrial design perspective. And that’s really a big part of what got it on the Lunar Lake reference design. And that’s driving these, some of these initial design ins that we’ve seen. It’s not always necessarily a one-to-one attach rate.
We’ve seen in that case, that I talked about with the OEM that launched a product with eight chips in it. There are three of our power conversion chips in there and they’re, — that represents a significant quantity of revenue and ASP for us.
As to whether or not that kind of chip finds its way into smartphones. We do sell power related products in smartphones today, both some one custom chip as you know, it’s not a classic power conversion chip like, like this one.
And in the general market, we are by and large focused on, — I don’t think we’ll see quite this chip coming to smartphones by and large in the smartphone space, we’re focused on a couple of things really, really high precision stuff, either side of the battery.
And then in the general market, we’re typically focused on selling products that we have today given that the R&D dollars that we, — we’re deploying in the power space, we feel a better deployed targeting the laptop market as we see that as being a larger overall opportunity for us.

Operator

Thomas O’malley, Barclays.

Tom O’Malley

Hey guys, thanks for taking my question. My first one is just on seasonality until the last fiscal quarter as well. I know you guys want to stay away from guiding there, but just if I take kind of the better end of the historical seasonality kind of down 11 in the March quarter.
And I look at where that puts you as a business, like you’re still kind of growing mid-single digits in fiscal year ’25. So I don’t think you’ve updated really your expectations on the content side for this year. And I think that, you had a couple of really nice upgrades there.
So what would, what would explain the difference, I guess between the initial outlook of a strong content year and kind of that fiscal year even at the best type of seasonality in March, not being up the kind of high single digits, low double digits.

John Forsyth

Well, we really just guide based on what we see. Tom, I’m not going to guide further out, but we really just based that on what we see in terms of backlog from our customers and our conversations throughout the supply chain. So we really just have to see how we go through this holiday period.
We certainly have delighted with the execution, the ramp, and the quality of the products that we’ve brought to market on this cycle. And then of course, we have a more favorable mix in the camera space. But yeah, we’ll just have to see how that translates into results as, as we go forward and get on the other side of the, the December quarter.

Tom O’Malley

Helpful. And then on the PC side, you had talked about tens of millions of dollars, kind of exiting this year. Could you maybe talk about, how that’s been tracking so far? And then as you look kind of into next year, are you still in kind of the tens of millions of dollars range or do you think that you have more confidence kind of sitting here today versus where you were three or six months ago on that side? Thank you.

John Forsyth

Thanks Tom. Well, the phrase tens of billions obviously encompasses a fairly, fairly broad range. My comment about this fiscal year was that we were tracking to, — we were targeting low tens of millions. We’re tracking to that. I’m very pleased to say and we do think, we’re in the very early stages of seeing our kind of PC focused products.
This this generation of products that we’ve developed across the different domains that I talked about. We’re in the early stages of seeing them come to market now, but we are seeing them come to market and I anticipate early in the coming calendar year, we’ll see a really great range of product launches from customers incorporating more serious content.
So those will land in terms of revenue impact more in, — they’ll have more greater impact on fiscal ’26 obviously. So we’ll give more color on that in due course as we get closer to fiscal ’26. But so far, it’s certainly tracking with our expectations and the momentum we have is really exciting. So we’re anticipating a meaningful step up in, in fiscal ’26 from where we’ve been tracking in fiscal ’25.

Operator

Ananda Baruah, Loop Capital.

Ananda Baruah

Yeah, thank you for taking the question. Yeah, I guess just one for me, is there any context or useful way any context you can provide or sort of useful way to think about as you think forward with on this is on the smartphone side. If the growth coming forward — and this is big picture, this is not next year, but it will be driven both from, I guess the content side or the unit side, more disproportionately, I guess really trying to think about where the bigger opportunity is for the company? If there, — if one is bigger than the other? Thanks.

John Forsyth

Thank you, Ananda. Well, we run the company on the basis that we want to be able to grow and be positioned for growth. If units are flat, that’s our objective. Obviously, if there’s a unit’s tail wind so much the better if there’s a significant upgrade cycle because of the features our customers are delivering them, that’s great.
But we want to be positioned well, even if smartphone units remain flat. And although that won’t mean necessarily content additions every year, we do on a second cycle, obviously get a tailwind because multiple generations of phones are on sale at any given time and we get into the second cycle of new content.
But we also believe when we look forward that there are significant opportunities for both incremental additions to sockets that we have today, which add more value and for the capturing of new sockets that we haven’t served before.
And so when I talk about some of our R&D investments in those areas, and obviously, some of that is, — for example, camera, some of that is in the power space. And and there are others beyond that, that’s the kind of thing I have in mind.
So we do believe there are great opportunities out there where we can lead on technology, lead on architecture, deliver better solutions than our customers have had in the past and obviously bring our execution to bear on that as well. So I think the opportunity even in a flat units world remains very constructive for us over the long run.

Ananda Baruah

That that’s really, really useful context. I really appreciate it. Yeah, that’s it for me. That’s great. Thank you so much.

Chelsea Heffernan

And with that, we’ll end the Q&A session. And I will now turn the call back to John for his final remarks.

John Forsyth

Thank you Chelsea. In summary, in Q2 fiscal ’25 Cirrus Logic delivered record revenue and earnings per share for the September quarter. And continued our solid progress in each of the three key areas of our long-term strategy.
We remain very excited about the opportunities in front of us and we thank you for your continued interest in our progress. I’d also like to thank all of our employees for their incredible dedication and commitment.
Before we close, I’d also like to note that we will be participating in Barclays 22nd annual Global Technology Conference on December 12, in San Francisco. Please check our investor website for the details on that.
Finally, I’d like to thank everybody for participating today. Goodbye.

Operator

This concludes today’s conference call. You may now disconnect.