Cirrus Logic (CRUS) Q1 FY27 earnings call: guidance and Q&A

How is seasonality different this year, and what is the outlook for future seasonality?

Seasonality is different this year, with Q1 results significantly higher than historical averages. Future quarters are expected to be much tighter together than historically.

“Yes, when we gave guidance for this quarter, we made a note that seasonality looks different than it had historically. And we came in right at the midpoint of guidance. And as you recall, that was up. So our Q1 results the results that hit guidance were significantly higher than what the historical average would be. And we gave a peak into the rest of the year that seasonality would be much tighter. The quarters would be a lot tighter together than historical, and you're seeing that with our results and our guide that, yes, it is different this year and the quarters are a lot tighter from a historical perspective.”

asked by Christopher Rolland · answered by Jeffrey Woolard

Can you discuss the opportunity for the new high-performance analog front-end components, initially for smart meters, and its potential in other markets like data center metrology, EV charging, and grid monitoring, including TAM?

The initial target is smart meters due to rising energy demand and grid infrastructure strain, leveraging high-precision sensing and power IP. Sampling is expected in Q3/Q4 this year, with market entry in CY28. While excited about broader applications, it's premature to provide a TAM.

“The specific initial target for this IP is in the smart meter segment, as we said. And that's really reflective of the fact that there's a combination of the rising energy demand that we're all familiar with, the increased strain on grid infrastructure and changing regulatory requirements that's creating a need for meaningfully more accurate energy monitoring across residential, commercial, industrial applications and so on.”

asked by Christopher Rolland · answered by John Forsyth

You mentioned the strongest pipeline in HPMS for Cirrus. Can you elaborate on targets, design cycles, and the size of this opportunity?

The HPMS pipeline is very strong, especially in camera, smart power, and sensing. This includes active development programs for both phone and non-phone sockets, with silicon already delivered for power products shipping in tablets and accessories. The multi-year setup for this core business segment is very positive.

“I think I said it was as good as we can remember, which obviously sounds like it could be taken as an off-the-cuff expression. But in reality, we've had highly qualified lawyers of both the human and synthetic variety review that. And we're very upbeat about the potential we have in our core business across the high-performance mixed signal space.”

asked by Kyle Bleustein · answered by John Forsyth

Gross margin was better than guidance. What are the moving pieces, and are there long-term pressures from your largest customer, memory, or input costs?

The long-term gross margin outlook remains unchanged. While input costs are monitored, many are agreed upon. Q2 will see a temporary benefit from prior wafer agreements. The company will aggressively pursue cost reductions and targeted price increases.

“We continue to maintain our long-term gross margin outlook. We realize there's a lot of discussion out there about input costs in the supply chain. And we continue to monitor those dynamics closely.”

asked by Kyle Bleustein · answered by Jeffrey Woolard

How does Cirrus Logic differentiate itself and add value when its largest customer is increasingly designing silicon in-house?

Cirrus Logic focuses on unique value at the analog-digital boundary, specializing in high precision, tight control loops, power efficiency, and low latency. The goal is to be category-leading in these niches, solving complex problems for customers that they don't need to worry about. Long-term investment in innovation is key to winning sockets.

“We have, I think, a very clear idea of where we offer unique value and innovation, and we focus on that. And it's really at the analog digital boundary. And so when the products has a requirement for very high precision in the analog domain, very tight control loops, incredible power efficiency, very low latency, that's absolutely our wheelhouse.”

asked by Cam Tierney · answered by John Forsyth

Can you provide color on the step-up in CapEx this quarter?

Run-rate CapEx is in line with product development cycles. The new element is investing in testers for OSATs, which provides greater supply chain flexibility and better financial returns for the company. This is a change primarily for FY27.

“But there is a new element of CapEx, and that is we are investing in testers for our OSATs, and that is new. So rather than having the OSATs by that, we have done some purchases and we're planning purchases for this year.”

asked by Cam Tierney · answered by Jeffrey Woolard

With a strong balance sheet ($1.2 billion cash, no debt), what are the best uses of cash, and what are your thoughts on a dividend?

Capital allocation priorities remain unchanged: funding organic opportunities (R&D), M&A, and then buybacks. The healthy balance sheet provides flexibility for the first two priorities. A dividend is not being considered in the near term.

“Our capital allocation priorities remain unchanged. We want to make sure all of the organic opportunities are funded. And as John said, and there are a very broad range of opportunities we have, and that's the reason we've increased some of our R&D investments.”

asked by Trevor Bowers · answered by Jeffrey Woolard

Are there any noteworthy developments on the Android content front, particularly in China or Korea?

Cirrus Logic does not emphasize or invest heavily in Android, as it sees better and more durable growth opportunities elsewhere. Android is a long-running contributor but a decreasing fraction of overall income, a trend expected to continue. Focus is on PC, industrial, and AI-related consumer products.

“We don't put a huge amount of emphasis or investment in Android for a number of reasons. We think there are just simply better and more durable growth opportunities for the company elsewhere.”

asked by Trevor Bowers · answered by John Forsyth