NASDAQ: CRUS

Stock Quote: NASD

Last Price: 66.05

Change: +0.21 (+0.32%)

Open: 65.83

Previous Close: 65.84

May 26, 2017 10:38 AM Pricing delayed 20 minutes

Ask the CEO

Questions for our CEO can be submitted through the form at the bottom of this page.

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<span>(June 24, 2016)</span> Cirrus has significant operations in the UK. Do you anticipate any material issues for Cirrus stemming from the Brexit vote?
<span>(May 09, 2016)</span> I’ve seen recent phones launch in China with a USB-C port and no headphone jack. Does that reduce or eliminate the need for your products?
<span>(February 26, 2016)</span> I read online that you sold 30,000 shares of stock. Why did you sell those shares now when you expect the company to have a great year as you explained in the last shareholder letter?
<span>(January 6, 2016)</span> I saw the Form S-8 filing last month that registers ~6.1M shares for the employee stock plan. This follows ~5M shares in December 2014. Can you explain the reason for such large award and how this compares to the number of shares that have been repurchased with the $230M allocated for buybacks? The combined 11M shares for 2014 and 2015 seems exceedingly high compensation for what appears to be 3 or 4 years of stock awards.
<span>(August 27, 2015)</span> There have been reports of a decline in smartphone sales in China. Can you comment on demand for your products and the guidance for this quarter?
<span>(August 12, 2015)</span> Can you tell us more about your purchase of the Opalum AB subsidiary?
<span>(July 24, 2015)</span> I looked at the most recent teardown of the iWatch and noticed the audio codec was from Maxim and not Cirrus. I know you cannot talk about specific products, however can you talk about your approach to wearables in the short term? Are the volumes not large enough to make it worth pursuing or do you just not have enough resources currently. This was not addressed on the conference call and it has been on my mind. Any clarity would help.
<span>(July 9, 2015)</span> Several companies with Windows PC and enterprise exposure have negatively pre-announced earnings recently. Does Cirrus Logic sell into these markets?
<span>(July 9, 2015)</span> Any exposure to Greece?
<span>(March 03, 2015)</span> Is it possible for people not attending the Morgan Stanley conference to listen to your presentation?

(June 24, 2016) Cirrus has significant operations in the UK. Do you anticipate any material issues for Cirrus stemming from the Brexit vote?

Answer:
No. We have a relatively low level of revenue from the EU, and very few employees in the EU outside of the UK. From a revenue and COGS point of view, our buying and selling is done almost exclusively in dollars. Our exposure to the Pound is essentially limited to employment expense within the UK, and in that context a weaker Pound is good, but in any event it is not a large impact. Our exposure to the Euro is very low. Of course we do not have any particular insight into how these changes might effect the economy, but we expect the Cirrus specific impact to be minimal, and we continue to expect to have an outstanding year.

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(May 09, 2016) I’ve seen recent phones launch in China with a USB-C port and no headphone jack. Does that reduce or eliminate the need for your products?

Answer:
No. The types of phones that use our smart codecs are tremendously complicated from an audio and voice perspective, and the amount of circuitry dedicated to supporting the headphone jack is a relatively small percentage of such a device. These devices typically contain support for many microphone inputs, many channels of A/D and D/A conversion, sample rate conversion, clocking support, earpiece amplifier, some level of power management for the audio system itself, and a long list of advanced IP. This complexity is driven in part by the fact that there are a wide array of sources and destinations for audio and voice within a phone, some of which require signal processing to connect to one another, and when combined with the wide range of signal levels that must be comprehended, the resulting matrix of use cases is very large. The net of all this also drives higher performance requirements for the converters than one might expect, along with the associated signal processing.

Additionally, as the roughly 1.3 billion unit headphone market transitions to various digital interfaces, we see a significant opportunity for Cirrus Logic to provide interface circuitry, codecs, and headphone drivers into the digital headset market. As described in our most recent shareholder letter, we are very well positioned for this transition, with phenomenal products on the market today that enable the full range of digital headsets with various digital interfaces widely prevalent in the market - from flagship ANC headsets down to a basic analog headset replacement.

Of course, our boosted amplifier business is also a large and growing part of what we sell into handsets, and this is unrelated to headphones. In fact, we indicated in our most recent earnings material that we expect to exceed our long-term revenue growth target of 15% in FY17, with the growth this year being driven most significantly by amplifiers and headsets. We believe these vectors combined with our additional strategies to grow our business with handset OEMs 3-10, migrate content from flagships to the mid tier, and bring the technologies we’ve developed for handsets into new markets such as wearables, smart accessories, and the connected home position the company well for several years. Coupled with our longer-term investments such as microphones and voice biometrics, we are extremely excited about the outlook for the company.

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(February 26, 2016) I read online that you sold 30,000 shares of stock. Why did you sell those shares now when you expect the company to have a great year as you explained in the last shareholder letter?

Answer:
The exercise and sale of 30,000 options that you noticed was based on a pre-arranged stock trading plan that I adopted last year. That stock trading plan was intended to comply with Rule 10b5-1 of the Securities Exchange Act of 1934 and the Company’s insider trading policy. These options were due to expire next week. Overall, I own more shares now than at any time in the past.

I continue to believe we will have a very strong year and I am excited about Cirrus Logic’s future. At the same time, I have been with the company for over 20 years, and next year will be my 10th as CEO. Typically when the company grants stock options to employees the options expire 10 years from the grant date. Because of this, you will likely see additional trades from time to time over the coming years related in part to expiring options. Of course these trades will be disclosed as they are executed in accordance with U.S. securities laws. You will be able to find those filings on our investor page at www.investor.cirrus.com. If you are wondering about executive selling, I highly recommend you read the relevant Form 4 filing in detail, as it may contain information related to option expiration, or whether the trade was executed via a 10b5-1 trading plan.

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(January 6, 2016) I saw the Form S-8 filing last month that registers ~6.1M shares for the employee stock plan. This follows ~5M shares in December 2014. Can you explain the reason for such large award and how this compares to the number of shares that have been repurchased with the $230M allocated for buybacks? The combined 11M shares for 2014 and 2015 seems exceedingly high compensation for what appears to be 3 or 4 years of stock awards.

Answer:
Regarding share buybacks, we announced a $200M authorization in the fall of 2012. As of our last earnings call, we had utilized approximately $170M of this authorization, and the Board also authorized an additional $200M to buyback shares. We will update the current status of our repurchase program when we report our earnings at the end of the month. You may also recall that during 2014 we used a significant amount of cash to purchase Wolfson Microelectronics, which has been a very successful acquisition.

As to shares allocated for future issuance to our employees, the S-8 filing to which you are referring is a formal registration of the shares approved by our shareholders at our annual meeting in July. Please see our 2014 and 2015 proxy statements for the details and the rationale for requesting the approval of these additional shares. As documented there, we believe the increase in shares available for future grant was appropriate based on a number of factors, including our historical annual equity burn rates and our anticipated future needs for equity to be able to attract and retain key employees.

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(August 27, 2015) There have been reports of a decline in smartphone sales in China. Can you comment on demand for your products and the guidance for this quarter?

Answer:
We guided the September quarter at the end of July and we typically do not provide mid-quarter updates. In general, our direct exposure to the China market is somewhat limited as the majority of our components are found in products sold globally.

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(August 12, 2015) Can you tell us more about your purchase of the Opalum AB subsidiary?

Answer:
We acquired some IP in the area of speaker protection and linearization along with a small number of excellent people in this transaction. While we are excited about the long term potential for this addition to our amplifier efforts, the financial impact in the near term is expected to be relatively small.

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(July 24, 2015) I looked at the most recent teardown of the iWatch and noticed the audio codec was from Maxim and not Cirrus. I know you cannot talk about specific products, however can you talk about your approach to wearables in the short term? Are the volumes not large enough to make it worth pursuing or do you just not have enough resources currently. This was not addressed on the conference call and it has been on my mind. Any clarity would help.

Answer:
We did not spend a lot of time on wearables during the most recent earnings call, but we’ve addressed this market segment in our shareholder communications many times over the past year or so. We see wearables as a very interesting application for what we do over the long term, but during the past year you are correct that we’ve been pursuing and winning opportunities that we expect to be much larger in the near term. We are a major supplier of audio and voice technology with a compelling product portfolio and roadmap going forward, and we believe that we are well positioned to succeed in the wearables market. Even with that, we likely won’t always have the perfect part for every socket. Therefore, I wouldn’t read too much into any particular win or loss, particularly in the early stages of the wearables market – our outlook for growth this year and next are a good indicator that our team is focusing on the right stuff.

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(July 9, 2015) Several companies with Windows PC and enterprise exposure have negatively pre-announced earnings recently. Does Cirrus Logic sell into these markets?

Answer:
Very little - our primary market is mobile. We are looking forward to discussing our results and outlook when we report on July 22.

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(July 9, 2015) Any exposure to Greece?

Answer:
Nope.

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(March 03, 2015) Is it possible for people not attending the Morgan Stanley conference to listen to your presentation?

Answer:
Yes, anyone with an internet connection can listen by clicking here or by going to investor.cirrus.com. The presentation is on Thursday, March 5 at 10:30 am PST.

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