Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic Third Quarter Fiscal Year 2022 Financial Results Q&A Session. [Operator Instructions] After a brief statement, we will open up the call for questions from analysts. Instructions for queuing up will be provided at that time. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference over to Mr. Thurman Case, Chief Financial Officer. Mr. Case, you may begin.

Thank you, and good afternoon. Joining me on today’s call is John Forsyth, Cirrus Logic’s Chief Executive Officer; and Chelsea Heffernan, our Vice President of Investor Relations. Today, we announced our financial results for the third quarter fiscal year 2022 at approximately 4:00 p.m. The shareholder letter discussing our financial results, the earnings press release, including a reconciliation of non-GAAP financial information to the most directly comparable GAAP information, along with the webcast of this Q&A session are all available on the Company’s Investor Relations website at investor.cirrus.com. This call will feature questions from the analysts covering our Company as well as questions submitted to us via email at investor.cirrus.com. Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the Company expressly disclaims any obligation to update or revise any projections or forward-looking statements whether as a result of new developments or otherwise. Please refer to the press release and the shareholder letter issued today which are available on the Cirrus Logic website and the latest Form 10-K as well as other corporate filings made with the Securities and Exchange Commission for additional discussions of risk factors that could cause actual results to differ materially from current expectations. Now, I’ll turn the call over to John.

Thank you, Thurman. Cirrus Logic reported record revenue of $548.3 million in the December quarter, above the top end of our guidance, driven by significant contributions from increased high-performance mixed-signal content shipping into smartphones and strong overall demand for our products. These results reflect our continued momentum in fiscal year 2022 and mark another milestone in the execution of our strategy to diversify our product and technology portfolio. High-performance mixed-signal products contributed 38% of total revenue in the quarter, with the most significant areas of growth coming from increased shipments of camera controller content and our power conversion and control IC. We were also encouraged by progress in other areas of our business. In fast charging, while we have seen some impacts from the comparative softness in parts of the China smartphone market towards the end of the calendar year, we continue to see OEMs heavily promote fast charging as a differentiating feature. And we taped out two new components during the quarter that are expected to go into production in the first half of the fiscal year. In our audio product lines, design activity for component shipping and flagship and mid-tier Android smartphones was robust, and we are excited about new devices utilizing our products that will be introduced in the first half of the calendar year. We also continued to see positive momentum with audio and laptops. Most of our laptop revenue in the past year has been driven by codec shipments. However, in the December quarter, we also began initial shipments of our first boosted amplifiers in this device category, again, marking great progress by the team towards one of our strategic objectives. Looking forward, we’re excited by the opportunities to expand our addressable market and drive diversification in the coming years through both our audio business and in particular, our high-performance mixed-signal business. With this in mind, today, we are funding strategic developments and new technologies in a range of areas, including sensing, power and battery systems. These investments target both opportunities for incremental content in products where we ship today and opportunities in new applications and markets. While our high-performance mixed-signal product line represents 33% of our year-to-date sales in fiscal year ‘22, we anticipate that this can expand to at least half of our revenue in the future, even as we continue to consolidate and build on our audio leadership. We are very encouraged overall by the traction we are gaining with our high-performance mixed-signal solutions and remain optimistic that there are meaningful opportunities for further growth and product diversification ahead. Before we begin the Q&A, I would like to note, as always, that while we understand there is intense interest related to our largest customer, in accordance with our policy, we do not discuss specifics about our business relationship. Operator, we’re now ready to take questions.

Thank you, sir. [Operator Instructions] Our first question comes from the line of Tore Svanberg from Stifel.

Yes. Thank you. And congratulations on the record results. My first question is on the guidance, which is better than seasonal. You made some references to better ASPs, but is that the main difference, the better ASPs, or are there other things contributing to the above seasonal guidance?

Thanks, Tore. The main drivers of both the guidance and the results we’re reporting are units and content increases with price adjustments also being a component. But as regards -- looking out to the March quarter, the guidance is mostly driven by the strength of demand for our products and our customers’ products and us working to meet that demand. So, in fact, when we look at the March quarter, it doesn’t look like a typical seasonal quarter -- seasonal step down from December to March. It looks very strong. We’re actually pulling material into the current quarter, wherever we can in order to try to meet customer demand. And so, our expectation, as we go beyond that, when we get into the June quarter, we’re not guiding the June quarter just now, but we expect the seasonal pattern between March -- the March quarter and the June quarter to be more typical of what we’d expect between the December and the March quarters. But the principal driver for the strong guidance and the strong results is units and the content gains, which we’ve talked about.

Very good. And as a follow-up, you obviously expect high-performance mixed-signal to continue with a very strong momentum. And you mentioned sensing, power and battery management are the three areas you are continuing to invest in. Just to give us some perspective, what kind of inning are we in as far as those three new product offerings or those two technologies becoming a more material part of the business going forward?

I think the potential is really great. We’re still in the early innings. On the power side, we are in the second quarter of shipping V1, our first power product. And then obviously, we’ve got fast charging products, most of which were really designed before the Lion acquisition was complete, either shipping or coming out, but we have a lot more in both of those areas that we believe we can do. In addition, if we look at the camera controller content, which is also an important contributor to the high-performance mixed-signal. Again, that’s an area where we saw some year-on-year content increase through additional attach rate in the current cycle, but where we anticipate sustained year-on-year growth, both through attach rate and through feature enhancement. And so, when we look at our road maps for whether it’s for sensing, power, battery-related technologies, camera controllers and so on, all the moving pieces in the high-performance mixed-signal space, we have a lot of projects that are either underway or we’ve got slated for the future there.

Our next question comes from the line of Matt Ramsay from Cowen.

I guess, I’m going to ask a couple of questions that are kind of interrelated to kick things off, and they’re around ASPs and gross margin. You guys had taken the gross margin range down a couple of quarters ago and are coming in well above that, which is great to see. So, I guess, for John and for Thurman, how sustainable do you think these margin levels are into the next fiscal year? And I guess, related to that, Tore touched a little bit on this ASP comment that was made in a couple of places in the shareholder letter. One big thematic in semis right now is input costs going up and the ability of companies to pass those input costs on to the customer base. And I think there was an investor assumption that given your concentration with your largest customer, that might be difficult for you guys, but come judging from the margins, it looks like that is, in fact, happening. So if you could discuss those two dynamics in relation to the gross margin, that would be helpful. Thank you.

Thanks, Matt, and thanks for the nice words there. I’d characterize our gross margin outlook as cautiously improved relative to my comments a couple of quarters back. But I would also encourage you and other folks not to extrapolate from the immediate quarter’s guidance. There are some transient effects here, and we expect the gross margin -- our gross margin to normalize around 50% as we look to the new fiscal year. So, that’s the right place to be modeling, I think. And what’s going on there is we have some price increases, price adjustments across a range of our products. But we’ve also absorbed a lot of cost increases over the past year and have some new cost increases kicking in, which kicked in at the start of this calendar year. And these things don’t true up perfectly in terms of timing. So, in the March quarter, we have some sales, which are going to be of inventory that was built on a slightly lower cost base. It inflates the gross margin a little for a period, but then we expect that to normalize around 50% again. So, regarding your broader question on pricing. Clearly, I think we’ve communicated in the past few calls that rising costs have been a feature of our business over the past year. We have absorbed a lot of that everywhere we can, really. At the same time, our customers rely on us for innovation and value our partnership. And so, across a range of products and across our customer base, we’ve worked very closely with customers to find ways of solving that. Clearly, we’re still absorbing costs, hence, my comments about normalizing around 50%, but we do feel on a better footing than we did a couple of quarters ago.

Thanks, John, for all the details there. As a follow-up, I appreciate the investments that are being made in the non-audio parts of the business, and that’s going to be a disproportionate piece of growth going forward. I think you guys have been very clear on that. There’s been new opportunities that have come up in non-smartphone markets. You mentioned laptops and a few others. I wondered, John, if you might offer some similar commentary about how you think the growth might be spread for your Company going forward in the smartphone arena versus other verticals. Thanks.

In particular, around the audio area, Matt, are you asking?

Just in general, smartphone growth going forward versus outside?

Yes. Okay. Well, clearly, when we add new content in the smartphone space, which we’ve done, and we’re intent on doing again, we see revenue jump in a way that’s hard to match with any other market. So, to that extent, smartphone is going to continue to dominate our revenue for the time being. But we do see encouraging signs in other markets, both in audio and in the high-performance mixed-signal space. The high-performance mixed-signal space, I think, is more one of potential. We have both technologies in the charging path and the discharging path around the battery, which are very innovative. We’re looking to leverage those into new product categories. I think that’s not going to deliver immediately, but it’s something we’re very excited about, and we believe gives us a really good basis for going and attacking new markets. There’s no shortage of batteries to go try to take that innovation to. And then, on the audio side, we have seen some significant growth over the past year in the laptop space. If you look back to the previous year, I think in fiscal ‘21, our total laptop revenue was very, very small. It was in the region of $5 million. And the -- we weren’t really focused on that. We communicated that we saw that as an area to grow audio for the full fiscal year ‘22. That’s probably going to be more around $40 million. I think depending on what happens in the PC market, we probably shouldn’t expect too much growth around that in fiscal ‘23. But looking further out, we continue to believe that the laptop market has really good content opportunities for us. That’s audio based around codecs, boosted amplifiers and then potential for haptic content, and power and charging content beyond that.

Our next question comes from the line of Blayne Curtis from Barclays.

John, I just wanted to go back to Tore’s first question. I want to make sure I heard it right. The thought -- in the letter you talked about March, I think you said offsetting factors were pricing and, I think, flagship smartphone ramp. But then it seems like, to your answer, you were talking more about just how ongoing demand in supply chain is catching up, but then -- so I wanted you to clarify that? And then I guess, I was just -- wanted to make sure I heard you right on June. I thought you said maybe given the strength in March, June could be more -- the sequential will be more like the March sequential. But I just wondered make sure if you could just reiterate what you said in terms of June, that would be helpful, too.

Yes. Thanks, Blayne. When we had this call relating to the previous quarter, I think there was a lot of -- there were a lot of open questions about what was going to happen to demand and what seasonality looked like as we went into the March quarter, just given the fact that everybody knew products we’re struggling to keep up with demand. So, I think from our perspective, this guidance shows that we have our answer. The March quarter is much stronger looking from where we are today than normal. That reflects the fact that we’re still playing catch-up with demand. And we are, wherever possible, pulling content in, so pulling our material into the quarter in order to meet customer demand. And I think the likely outlook beyond the March quarter is that we see that March to June quarter transition look much more like the December to March quarter normally looks like because clearly, these numbers and our guidance for March are highest than we typically expect.

And then, maybe just a follow-up to that. I was curious, you mentioned some weakness in the Android handset market. Just kind of curious, that was late December. I was curious in outlook for March and June, whether that outlook is any better. And obviously, you have a lot of content talking about some tape-outs, but just some perspective on what you’re seeing for the kind of the non-iOS markets for you for March and June? Thank you.

Yes. I don’t have a read yet on demand for new products that haven’t been launched. However, we’re excited about Android products, in particular flagship smartphones that are going to be launched in the first quarter of this year. So certainly, the signs around those are positive. So, we’re upbeat and optimistic about the opportunity there. I think it’s worth pointing out that where we -- given our coverage of the smartphone market, if -- and the overall picture, if we are seeing any weakness in Android, it quite often is translated into strength in iOS, which obviously works out well for our revenues as well.

Our next question comes from the line of Ruben Roy from WestPark Capital.

John, I want to start just talking about some of the new product areas and the investments that you’re talking about. If we put fast charging in kind of one side and think about some of the other high-performance mixed-signal solutions that you guys have been working on, whether it’s camera controller or power products, how should we think about the investments there? Are you guys looking to broaden sort of a catalog or merchant type of product family around these areas that you’ve mentioned, whether it’s sensing batteries, power, et cetera, or are you still kind of going down the road of sort of custom solutions for specific platforms and customers?

Yes. Thanks, Ruben. You’re absolutely right. Our strategy is kind of three parts. First of all, maintain our leadership in smartphone audio; secondly, broadening sales in audio beyond the smartphone in profitable segments where we can and then; thirdly, expand into adjacent product areas in the high-performance mixed-signal space. So, we talked about battery, sensing, haptics, power, camera controllers as part of that. Our view of that is that it’s going to be a mixture of custom silicon and broader market silicon. That’s certainly our goal. I think over time, you’ll see us build out in both of those areas. And yes, we’re excited about the potential for that to take us into new markets as well as grow incremental content in places where we’re shipping today.

Okay. So, just as a follow-up to that, maybe we can bring Thurman to the discussion, and just kind of thinking about your comments on significant engineering investments, et cetera. You did grow R&D pretty nicely this fiscal year, it looks like based on your guidance. Obviously, we put the Lion Semiconductor acquisition into the model. But, if you could maybe walk us through how to think about sort of these investments that you’re making as they might impact R&D growth as we move forward, that would be helpful.

Well, I mean, just starting with the guidance, the guidance was up higher. Of that guidance, there really is a pretty good size of that that’s payroll taxes and medical funding and things that only happened in the March quarter. So that was an uptick on that. If you look at -- we also -- some of that was a good piece of that was product development. And we’ve always said that product development expenses can move around with tape-outs and other investments, and it can go up and down quarter-over-quarter. So, at least that expense is not specifically associated with a run rate. So if you look into Q1, again, moving forward, at least one quarter, we’re not really guiding that, but you would -- when you take a look at what that will come in at, it will be lower than the Q4 results or the March results and probably a touch higher than what we saw maybe earlier in the year, and that can kind of give you a gauge. At that point, you really need to look at R&D, we’ll continue to invest. There will be different investments on that not only reallocating these resources, but also investing in new resources. And so, you should really pretty much scale that to revenue, like we’ve talked about historically, whatever revenue numbers you’re looking at, you can scale that. And then, SG&A, we’ll just continue to leverage that and keep that growing very slightly or as close to flat as possible.

Yes. And Ruben, if I could circle back and maybe add a little additional color. We managed to add significantly to our R&D headcount in the past year, which was really driven by the opportunities in high-performance mixed-signal that we saw in front of us. So, we’re generally pretty thoughtful about that kind of stuff. If we see concrete opportunities, then we’ll want to staff and get ahead of that. And we continue to add to our overall mixed-signal talent. But in addition, as we’ve -- given our strength in the audio space and our abundance of IP and products there, we also have the capability to redirect some of those resources to the new growth areas as well.

Our next question comes from the line of David Williams from The Benchmark Company.

Congrats on the quarter. And thanks for letting me ask a question. Just wanted to kind of see, if you think about maybe your non-major customer and where that revenue growth has been, it was up sequentially modestly, but up fairly large on the year-over-year basis. Just kind of think about how do you think we should maybe model that on a normalized expectation for revenues outside of that -- your core customer. What kind of growth rates would you expect to see just kind of given some of the newer platforms and newer products that you have coming on line?

Sorry. Can you just clarify your question there, David? Are you asking about growth rate for business outside of our largest customer?

Yes, that’s correct. Just how do you think that can trend over time?

Okay. Well, we’re obviously guiding for March right now. And I’ve tried to give some additional color regarding the June quarter. But, I’m not giving guidance beyond that. However, what I have indicated and what we’ve spoken to in the letter is that we’re really excited about the high-performance mixed-signal space and the opportunities in front of us there. So, some of that is very much targeted on growth of incremental content in places where we ship a lot today, but there’s a reasonable number of opportunities to diversify further in there in our plans and take our products into new markets. So, we’re delighted to grow our business meaningfully, whether that’s with our largest customer or beyond, I think there are opportunities to do both in the coming years. We’re not going to get ahead of ourselves and predict exactly what that’s going to look like, but there’s a lot of reasons to be optimistic about that.

Great. And then, maybe last for me. Just on the constraints -- supply constraints, whether there’s anything maybe that can you quantify what was left on the table maybe for the quarter, any place, in particular, you’re seeing significant supply constraints?

Well, our -- of course, our guidance always takes into account the availability of supply to us. So, that was true as we guided for the December quarter, it’s true regarding our guidance for the March quarter. We undoubtedly could have shipped more if we’ve been able to obtain more wafers for the quarter. Most of that obviously would be in the areas of our business where we do last long-range planning. So, when we’re thinking about our business with our largest customers, that tends to be something where we put a lot of effort into long-range planning and capacity agreements and so on. So, it’s more on the side of opportunistic business. There was still some degree of revenue that we would have been able to obtain if we’d had more wafers. Most of that -- and I’m sure we’re not alone in that case. Most of the semi industry has seen that over the past year or so. Most of that demand has been fairly resilient. The unmet demand has been fairly resilient as we’ve gone through the quarter. So, as wafer supply frees up, we’re hopefully able to take advantage of some of that.

Our next question comes from the line of Christopher Rolland from SIG.

I guess, in the shareholder letter, you guys talked about taping out two new fast-charging parts. I think these are Lion parts or iterations of. And maybe you can talk about how these ones are different? Do they have new features, or is there new process tech, or what’s going on there? And then, just talk about maybe broadening for this product set of fast chargers for Lion outside of just your Chinese customers today. Thanks.

Yes. Thank you. These products focus on higher charging rates. So, the overall competitive driving force in the fast charging market is the charging rate and the amount of power that you’re able to put into the battery and the efficiency of the product. So we have an extremely efficient architecture. We believe it’s class leading. And we have been steadily increasing the charging rates at which we’re able to deliver power into the battery. So, these were the next step in that. There was a point at which 33 watts was considered fast charging. Today, 67 watts fast charging is fairly well established in mainstream smartphones in China. We can see that transitioning higher to 120, 180 watts and beyond over time. So, our product rollout without getting into the minutia of specific products that haven’t been featured in announced devices yet, our devices are focused on driving those charging rates higher. And then, you asked about the opportunity for those products to extend beyond smartphones. That’s a big part of what we’re excited about with the Lion team. So absolutely, today, there’s good business and a lot of customer engagement around the smartphone-focused products. But we believe that, for example, in the laptop space, there’s meaningful opportunities for this charging technology to get a foothold in the coming years and then for us to extend it to other markets for battery-centric devices beyond that.

Okay. Thank you, John. Actually, the second part of my question was not beyond smartphones, but beyond China. But I did actually have a second question. And that was -- I just wanted to understand the guidance here. So seasonal -- I just went back for the last 10 years and the March is negative 32% on average. And you were saying June would have some effects like that. So, is -- I just want to make sure I understood you. Is that the kind of seasonality that we’re talking about from the March into the June quarter because we already have marched down, I think, 23% or something like that or are you guys talking about the combination of March and June equating to something closer to that 32% seasonality that I had?

Yes. So, that would really be -- when we talk about that, we’re talking about just the transition from March to June. Again, the strong results that we had in December, we’re not adding those pieces together. And really, we’re giving you that information because we’re just trying to give an indication of where the June quarter could be based on how we see the March quarter and how strong we are.

Our next question comes from the line of Rajvindra Gill Needham & Company.

Yes. Thanks and congrats on the momentum. Yes, just a follow-up again on the seasonality question. As the previous question was asked that the March is typically down 33% -- from December to March. And in the March quarter, you’re guiding down 23%. So, that’s roughly maybe 10 points above seasonal. So, it basically implies a pretty massive pull-in into the March quarter would be the kind of overwhelming reason for the upside in the March quarter as opposed to perhaps content gains or units if that’s right. So, I just wanted to get a sense of how we’re thinking about the moving pieces. In June, I appreciate you giving commentary there. And do we get to some sort of also normal patterns in the September, December quarter?

I think one thing is when you look at the December, it’s all-time record revenue for us. And so, it’s coming from a very high base. When you look at what we’ve guided for the March quarter, yes, I realize it’s down 22%. In addition to that, you have to look at the full picture that we’re looking at, which is extremely strong demand in December, continued strong demand through the March quarter. And we’ve kind of given that commentary that regardless of what it looks like between December and March, we are saying that we think it could be more similar. When I’m giving you an exact number, but on average, we know where it was. So I mean that’s basically the commentary.

Got it. Okay. And just big picture, John. It seems like Cirrus wants to expand the dollar content in smartphones beyond audio starting first with your top customer, then moving to the Android market. I know there’s a lot of focus from some folks about kind of moving -- diversifying away from smartphones, but it seems to me that the priority number one is to increase the dollar content in smartphones beyond just providing audio and then kind of branching outside of your top customer and kind of replicating that scenario in the Android market. So, I wanted to maybe dig into that a little bit in terms of where you see some of the key technology adjacencies beyond core audio, kind of the low-hanging fruit we continue to add out of dollar content. And is there kind of an estimated kind of dollar content that you have in mind aspirational goal per phone that you’re looking at?

We certainly see an opportunity to drive content per phone up meaningfully, in particular, driven by the high-performance mixed-signal space. So that has been in our sights from a strategic perspective as an immediate adjacency. So, we’re well established selling into key customers in the smartphone space today. We have great relationships there. We have a reputation for formidable execution, and we’ve long demonstrated that in audio. And now we’ve demonstrated that in high-performance mixed-signal, first with the camera controller content and more recently with the power conversion and control content. So we want to continue expanding that strategy to build out more high-performance mixed-signal content in the phone space and in the process, develop IP and products that we believe can take us into other markets.

Our next question comes from the line of Ananda Baruah from Loop Capital.

Congrats on the good execution of the strong results. Two quick ones, if I could. Both from the shareholder letter. Yes. In the letter, you mentioned mixed-signal revenues reaching 50% of revenues at some point. I was wondering if there’s any useful context for us to sort of think about time frame, anything at all with regards to that comment. And then, I have a quick follow-up.

We’re not going to put an exact time frame on it, but we have given you the -- we have broken it out so that you have the growth rate there and you’re able to see that progress over time. So, on the recent run rate, that’s -- it’s a very significant step up to being around a third of our revenue in the year-to-date. And that’s obviously a very meaningful step up from previous years. So, we’re going to hopefully continue that momentum. And I would anticipate that within the foreseeable future, that becomes half of our revenue.

So, that’s super helpful. And then, the other was actually from the shareholder letter as well. It’s more of a clarification question. You talked of share gain in mixed-signal. And I was just wondering if there’s any context you could provide around the share gains.

Specifically in the share gains -- in mixed-signal, we increased our camera controller content and displaced some camera control content from other vendors in the process. That increased the overall blended ASP of our camera control content shipping in the current smartphone cycle. And then, in addition to that, we introduced our power conversion and control IC. So in the first case, the camera control content increased to broadly a blended ASP of around $0.70 or $0.70 and change per device. And then the power conversion and control content, we’ve indicated you should model it around $1.

Our next question comes from the line of Vivek Arya from BofA Securities.

I had two. The first one, I’m still very confused about the June quarter outlook because if I use that 30%ish or so down sequential, that suggests year-on-year sales would be basically flat or only modestly up, even though you have your Lion contribution in the mix. So, John, how do we reconcile your optimism around unit and content growth with guidance that seemingly, I know June is still some ways out, so things could change. And I realize you tend to be conservative. But am I understanding the trends the right way that you’re essentially guiding to flattish year-on-year sales in June?

Yes, that’s right. I mean, if you look at the midpoint of guidance and you do the calculation. And again, what we’re seeing is a complete shift. This is not reflecting a normal seasonality that is generally a pretty much of a set pattern, although we do see a decrease in the March quarter, it’s from a higher base. And we do, at this point in time, based on our visibility, we’re not trying to give you very specific guidance. We’re trying to give you directional guidance on where on the expectations of a very close March and June quarter in revenue is not what we expect. We expect a significant step down or quite a bit of a step down. And so, I mean, we’re not getting into details and not telling you what’s driving that or not driving it. We’re trying to give some color on where we expect it. By the way, that whatever we’re talking about in that first quarter of next year has no way changed our internal thoughts in terms of what our overall revenue will be for the year.

Understood. And for my follow-up, I just wanted to revisit gross margins. I think you mentioned that gross margins could come back to the 50% or so level. Does that happen from June? Does it happen at a later period? And I think in the past, there was a suggestion that margins could even dip below 50%. Is that no longer the case? So I just wanted to get some views on how we should be thinking about the gross margins for the next several quarters? Thank you.

Yes. Vivek, we -- I referred earlier to the fact that there’s some transient effects going on with the gross margin as different costs and pricing gets phased in. So, the gross margin in our guidance for the current quarter is pretty high. We expect that to normalize back to 50% or around 50%. I think that will happen pretty quickly as this -- as these new prices and new costs get baked in. So, relative to previous guidance that we could dip below 50%, I think at this point, our overall outlook is cautiously improved relative to that. So, I think modeling 50% is a good place to be.

We have a follow-up question coming from the line of Tore Svanberg from Stifel.

Yes. Just two quick follow-ups. Thank you. First of all, you mentioned the strategic review in December. And I understand the emphasis on high-performance mixed-signal and how that should drive more sustainable growth and so on and so forth. So, you haven’t really talked about what that means financially. I know in the past, you’ve targeted sort of 20% plus operating margin, but should we think about this strategy potentially driving more operating leverage than that, perhaps getting operating margins as high as what you’re going to do here in the fiscal ‘23 year, which is about 25%?

That’s our longer-term goal, Tore, yes. We believe that we have a really, really solid foundation of our current core audio business and great growth and opportunities in high-performance mixed-signal, that’s obviously driving a lot of growth in the current fiscal year. So, if you take the midpoint of our guidance that we’ve issued here, that would have us at somewhere around 25% growth for the full fiscal year. And we believe that we’ve got opportunities ahead of us to continue driving that growth in the coming years, I indicated elsewhere, and you’ve seen in our capacity -- wafer capacity agreements and so on that we’re upbeat about that. And so, our expectation and our goal is that as we grow revenues, we will be able to drive increased leverage from R&D and SG&A and work on the operating margin over time.

And the last question that I had was you mentioned gaming in the shareholder letter. I think you may have made some reference in the past, too, but what exact content are you getting in gaming applications at this point?

We have to make sure of audio and haptic content in gaming devices. The particular gaming product that we have in mind there is -- it’s not public that we’re in it yet, but it’s imminent. And in both the gaming and the AR/VR spaces, we continue to be seeing design wins without a huge amount of volume attached to those as yet, but we’re obviously excited about opportunities that those might present for the long term.

Our next question comes from the line of Derek Soderberg from Collier Securities.

I want to start with audio and particularly audio content in handsets. It looks like audio revenue as a whole has been sort of flattish for the first three quarters here compared to last year. It seems like laptops and some other areas are growing nicely. Are some of your handset customers reducing audio content at all? Have you seen any change in audio attach rates in handsets, maybe relative to a year ago?

I don’t think we’ve seen meaningful change in attach rates, Derek. We have obviously had to pass on some opportunities just given wafer supply limitations. A fair amount of our general market business, especially around audio tends to have somewhat shorter planning horizons. And that means that there are certain opportunities we’ve not been able to target, which likely would have represented incremental audio revenue. So, we’ve been very careful about choosing sockets where we feel we have the most value, the most differentiated product and bring the most benefit to the customers within the constraints of the supply environment. As you noted, as part of that audio mix, we’ve continued to perform solidly in Android, but we’ve also added into that meaningful revenue in the past year from laptop audio as well. And that’s an area where -- you heard in my earlier comments with the addition of boosted amplifiers or the first boosted amplifier design-ins to laptops in the December quarter, we continue to see some long-term opportunity for us to diversify our audio revenues as well.

Got it. And as my follow-up, you just mentioned opportunities in AR, some designs there. I think there’s been some talk around some of those devices coming to market over the next year or so. Wondering how you feel about potential content on those devices for both audio and mixed signal. And I guess, if those devices eventually replace handsets, do you think that these AR wearables would be sort of more or less likely to have additional Cirrus content than handsets? Just trying to frame that opportunity for you guys. Thanks.

Yes. I think we’re very excited about the potential, but very moderate in our expectations over the near and midterm. It’s something that we want to be a part of for the long term where we’ve got customers with exciting visions around AR and VR. So, to date, we’ve been in a number of AR and VR headsets. In most cases, that’s really been where customers have picked up kind of off-the-shelf products. We have more recently developed some dedicated AR and VR content. We anticipate that volumes around those are going to be fairly small to begin with. But I think for the long term, it’s a great area to be a part of.

We have a follow-up question coming from the line of Christopher Rolland of SIG.

Hi, guys. Sorry to come back to the June guide again. But Thurman, I just want to make sure I understand. Are you saying -- or maybe you should elaborate maybe a little bit more on the September guidance. I would assume that you guys are expecting for stronger than typical seasonal for September. And -- or maybe put another way, is there any reason to think that that September number would be meaningfully different year-over-year or meaningfully down year-over-year? Thanks.

Oh, you mean September of our next fiscal year? No. I think what we’re saying is that we still feel good about our opportunities to grow revenue as we go into the year. We’re really just making a statement on the June quarter. And so, I mean, I think to keep that in context, we’re not really getting any further out than that. But we are -- again, we’re optimistic on our ability to grow revenue. So, I’m trying to -- we’re just trying to go ahead and indicate something that is really unseasonable that we see can affect our results over a couple…

Sure. It just looks like it’s a change in seasonality to your point. And then just another quick follow-up while I have you. The gaming AR/VR content and maybe the pipeline that you guys have, is this around haptics? Is this around amps? Is this around the audio chain? Where are you guys getting the most traction?

I’m not going to comment on anything that’s not released there, Chris, if you understand that. But in the space where products have already been launched, we’ve typically been in the audio domain. I think going forward, we can be more diverse than that.

We have another follow-up coming from the line of Matt Ramsay of Cowen.

The things that I’m getting from investors right now, just to reclarify, still trying to square the circle a little bit with the guidance and the comments, Thurman, that you made that the outlook for the next fiscal year that you guys are planning for haven’t changed. Could you guys just clarify that there’s no new content changes or socket changes that you guys are trying to message that this is just the timing issue on pulling of revenue versus a typical June quarter? Thanks.

Well, I think the other thing that you have to understand is that, okay, this year, we had a significant step-up in content that was driving revenue this year. And although when we go and look into revenue next year, we will get more benefits of the content that we -- the content increases we saw this year. But from a product cycle, we’re not talking about another step-up in terms of content gains coming into the next year, which has some effect on all of that. And again, even with that statement, we are optimistic about our ability to grow revenue.

Yes. I think maybe I’ll add a bit more kind of general color there, Matt. I mean, I think at one level, really, all we’re trying to say here is we have a significantly stronger March quarter than we normally do, which looks like it will, as I said, take us to -- based on the midpoint of guidance to somewhere around 25% growth for the full fiscal year. One of the drivers for that -- the strength of that March quarter is increased content and revenue, obviously. One of the drivers for the strength in the March quarter is the fact that some key customers are still working extremely hard to meet the demand for successful products. So as a consequence of that, there is more pressure than we would normally see in the March quarter to get every piece of material on deck. Some of that is reflected in our activities to try to bring in and expedite more material from outer quarters to try to accelerate the rate at which our customers can meet demand. Our expectation on the back of that would be that there'll be more of a step down between the March quarter and the June quarter than we would normally see because we're seeing a comparatively strong March quarter here.

We have another follow-up coming from the line of Blayne Curtis of Barclays.

Well, I was going to ask -- I think you just answered that, I was going to ask again. But I guess maybe a way to pivot this discussion. I know it's early, and you guys don't typically even guide out 2 quarters, but we've now had 8 or 9 questions on it and the stocks down a ton. So is there any way, John, that maybe you can give a perspective on fiscal '23? I mean it's just getting to the point here where I think there's a lot of discussion about what June is you're still very confident on where your content story is. But -- and to be honest, I'm not really fully understanding the context here because you have a customer that just told you they're still working themselves to catch up. They’re maybe launching another low-end phone with higher comps that should help you. So, there’s some reasons why seasonality might be better. And I’m just trying to understand, I guess, what you’re seeing or are you just estimating what could be for June, but I know you probably don’t want to answer that part. So, maybe can I just pivot the question? And is there anything you could tell us about fiscal ‘23?

Obviously, we don’t provide guidance out there, but some color might be helpful. I mean, I think in the current fiscal year, our growth is largely being propelled by significant content gains in new strategic areas. Hence, the really significant year-on-year revenue growth. As we look into the immediate coming cycle in fiscal ‘23, I think more of the growth story will be units driven, obviously, with the tailwinds of the second cycle of our new power products kicking in and continued progress on camera controllers. I’ve indicated that we expect to be able to continue to grow the contribution in that space year-over-year over the next few cycles. And then beyond fiscal ‘23, we believe are currently engaged in meaningful new product development that we believe is going to drive further incremental content and growth, and you’ve seen our signals associated with that. So, I think fiscal ‘23 looks strong to us from where we are, and we’ll continue to work on securing all the opportunities to serve our customers and to help them meet the demands that we can for that period.

[Operator Instructions] We have a follow-up question coming from the line of Vivek Arya from BofA Securities.

Just curious, how much is Lion Semi contributing in fiscal ‘22, and how should we think about that contribution in fiscal ‘23?

We’re not breaking out the guidance as we go forward, Vivek. We previously indicated that we expect Lion to contribute in the region of $60 million during the fiscal year between deal close and the end of the fiscal year. The current run rate looks a little soft relative to that, but we’ve got a great deal of customer engagement and opportunity. So, we’ll see how that goes in the end of the year. And then, beyond that, as we go into fiscal ‘23 and beyond, we have a lot of products and a lot of design momentum around the Lion charging products. So, we’re upbeat about that.

And just the last one, OpEx intensity. I know, Thurman, you had given some puts and takes around. Is there a way to think about OpEx in terms of OpEx as a percentage of sales? For example, in the last calendar year, it was just under 28% or so. Is that the right level, or can you be above or below that kind of OpEx intensity going forward?

Well, I think from a percent of revenue, we will be -- we believe that OpEx will become a -- over a longer period of time as revenue grows. And as we’ve talked about, we will continue to invest in what we need to invest in, in R&D. We have already done that. We’ll also be reallocating or allocating resources to key projects as we can internally and manage our expenses accordingly. So, if you ask in the longer term, we expect we’d be able to come in that that may be a lower number, somewhere down the line. But right now, yes, it falls into that particular area. And we certainly believe that SG&A will be leveraged in order to have that equity start looking to be a lower percentage of revenue also.

There are no further questions at this time. I will now turn the call over back to Ms. Chelsea Heffernan for additional remarks.

Thank you, operator. There are no additional comments. So, I’ll turn the call back to you, John.

Thanks, Chelsea. So, in summary, in the December quarter, Cirrus Logic delivered record revenue, saw a strong design momentum across our portfolio and made significant progress in expanding our high-performance mixed-signal business. Our world-class engineering capabilities and our extensive intellectual property portfolio have enabled us to develop and deliver key new technologies and expand into adjacent product categories, particularly in power conversion, battery management and fast charging. With a consistent track record of execution and a compelling product road map, we are excited by the opportunities ahead of us to drive further diversification and growth in the coming years. Before we close, I’d also like to note that we’ll be participating in the Morgan Stanley conference on March 7th. Please see our investor website for the details. If you have any questions that were not addressed today, you can submit them to us via the Ask the CEO section of our investor website. I’d like to thank everyone for participating today. Goodbye.

Thank you again for your participation. This concludes today’s conference call. You may now disconnect.