Cirrus Logic Inc (CRUS) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic fourth quarter and fiscal year 2011 financial results conference call. At this time all participants are in listen-only mode. Later we will open up the call for questions from analysts, and 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 call over to Mr. Thurman Case, Chief Financial Officer. Mr. Case, you may now begin.

Thank you, and good morning. Joining me on today's call is Jason Rhode, Cirrus Logic's President and Chief Executive Officer.

Before we begin, I would like to remind you that during the course of this conference call we will make projections and other forward-looking statements regarding, among other things, estimates for first quarter revenues, gross margin levels, combined R&D, and SG&A expenses, amortization of acquired intangibles and share-based compensation expense, as well as other estimates and assumptions regarding long-term gross margin and revenue growth goals, our ability to utilize our deferred tax assets and our associated effective tax rate and future demand for our products. These statements are predictions that are subject to risks and uncertainties that may cause actual results to differ materially from projections.

By providing this information, the company undertakes no 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 issued today which is available on the Cirrus Logic website, the latest form 10-K and 10-Q 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.

All financial numbers are prepared unless noted in accordance with generally accepted accounting principles. A reconciliation of the non GAAP financial information provided in today's call to the most directly comparable GAAP information is included in today's press release and on the company's website in the investors section. Non-GAAP financial information is not meant as a substitute for GAAP results but is included because management believes such information is useful to investors for informational and comparative purposes. In addition, management uses certain non GAAP financial information internally to evaluate and manage operations. As a note, non-GAAP financial information the company uses may differ from that used by other companies. These non GAAP measures should be considered in addition to and not as a substitute for the results prepared in accordance with GAAP.

And now, I'd like to discuss our results. Net revenue in the March quarter was $91.4 million, up 46% from $62.6 million in the March quarter last year, and down sequentially 4% from $95.6 million in the previous quarter.

Revenue from audio products in total contributed $66.9 million and represents 73% of total revenue in the March quarter. As you see in the tables we included with our press release today, quarterly sales of audio products grew 65% year over year. Revenue related to our largest customer was approximately 54% of total revenue for the March quarter, which is consistent with the December quarter.

Revenue from energy products was $24.5 million for the March quarter, which is up nearly 11% on a year-over-year basis. Gross margin for the March quarter was 50%, down from 55% in the December quarter.

As we announced on April 14, we recorded a charge of approximately $4.2 million or approximately 5 points of margin due to a production issue with a new audio device that entered high-volume production in March 2011. This charge was composed of finished goods inventory that had to be written off and other WIP inventory that was yielding at low levels. We expect there to be a residual impact to our gross margins in the first two quarters of fiscal year '12 due to the lower yields in process inventory. And we are actively working to minimize the impact of this issue going forward.

Total GAAP operating expenses for the March quarter were $32.4 million compared to $29.4 million the previous quarter. Non GAAP operating expenses were approximately $29.7 million for the March quarter compared to $28 million for the December quarter. A reconciliation of GAAP to non-GAAP expenses is included with our press release today.

Income from operations was $13.7 million or 15% on a GAAP basis and $16.4 million or 18% on a non-GAAP basis. GAAP net income for the quarter came in at $130.4 million or $1.80 per share based on 72.3 million diluted shares.

In the same quarter a year ago, we reported GAAP net income of $20.4 million or $0.31 per share based on 66.6 million diluted shares. GAAP net income for the March quarter includes a net tax benefit of approximately $117 million. As I stated in our last earnings call, due to our improved financial performance, we believe that the company will be able to utilize a large portion of our unrecorded deferred tax assets. As a result, we recorded the $117 million noncash income tax benefit, the value of the DTA, on our balance sheet.

As we move into the next fiscal year, we expect to record an additional noncash quarterly tax expense at a rate of approximately 35%. The company intends to treat both the tax benefit from this quarter and the additional quarterly noncash tax expense going forward next fiscal year as non GAAP adjustments.

We will continue to pay a small amount of federal income tax in the form of alternative minimum tax, and we expect an effective quarterly cash tax rate of approximately 3% for the foreseeable future.

Therefore, on a non GAAP basis, net income for the quarter was approximately $16 million or $0.22 per diluted share, which represents an increase of $5.4 million or approximately 50% from the March quarter a year ago, when we reported non GAAP net income of $10.7 million or $0.16 per diluted share.

Moving on to the balance sheet, we ended the March quarter with $39.1 million in net receivables, an increase of $1.8 million from the end of the December quarter. Days sales outstanding at the end of the quarter was approximately 39 days.

Ending net inventory increased slightly to approximately $40.5 million at the end of the March quarter while net inventory turns for the quarter increased slightly to 4.5. We ended the March quarter with $215 million in total cash and marketable securities, an increase of $24.8 million over the December quarter. We experienced strong cash flow from operations during the quarter of $20.4 million. Depreciation and amortization expense for the quarter was $2.2 million.

Lastly, as of the end of the March quarter, we had 570 employees, up from 549 at the end of December. The increase in head count is primarily focused on staffing new R&D projects.

And, now, I would like to turn the call over to Jason to discuss our business operations and guidance for the upcoming June quarter.

Thank you, Thurman. FY11 was an outstanding year for Cirrus Logic no matter how you look at it.

We grew revenue 67%, maintained our 55% gross margin target for the year, and increased operating profit from 13% to 24% on a non-GAAP basis. And while much of that revenue growth has been from our portable audio product line, we also saw meaningful progress in the new product development taking place in our other product lines, laying the groundwork for additional revenue growth in the future.

In energy products, our seismic business had a better Q4 than we expected going into the quarter; and in true seismic fashion, it looks to be down in Q1. We have put very little in the forecast for the quarter, so anything that does come in will be upside.

Our power meter products have been an important part of our new energy investment strategy, and we are now sampling a new general market device that we expect will be part of driving growth going forward.

We received our first sensorless brushless DC motor controller device back from the fab during Q4, and we expect to sample the device broadly in Q1.

Perhaps most importantly for the future of our energy business, we received our first digital LED lighting controller back from the fab, and I am pleased to report it is working extremely well. We have a customer waiting for this device; and, if everything continues on track, we should see revenue by this time next year.

Several years ago we made a significant investment shift away from our traditional industrial markets towards the newer higher growth market of digital energy control. As I have said on previous calls, I believe that progress in this area is our best opportunity for meaningful diversification of our revenue as a company. While this is still on the horizon, these latest developments improve our confidence greatly that we will be able to capitalize on this opportunity.

Audio has continued to drive the overall company growth, having grown 65% in Q4 versus Q4 a year ago, and 72% for the full year. This growth has been driven by our portable audio codec business, but we have seen some great signs of progress from some of the other audio product lines as well.

The automotive amplifier chips that we have mentioned previously is on track to ship in production. And while the situation in Japan has muted the near-term revenue from thiswin, the long-term outlook remains excellent. This platform also provides many opportunities for derivative products.

We also recently made the first shipments of our new portable audio DSP, which will enable a variety of noise and echo-cancellation features as well as provide a low-power platform for audio enhancement algorithms for mobile devices.

This DSP has been a real door opener at a number of new accounts as it provides a remarkable amount of processing power with minimal area and current consumption. This has substantially increased our potential to add value in a variety of portable applications, and we believe it will help us diversify our customer base.

For more information on these new devices, as well as a variety of other information about the company, I would like to direct you to the investor presentation on Cirrus.com.

Finally, our relationship with our largest customer remains outstanding. Of course, the elephant in the room is a hit to gross margin we took last quarter due to a production issue on a ramping product. I believe that both the press release and the Q& A on our investor website explain the situation about as completely as possible given the overall situation. But I would like to clarify a few points to ensure there's no misunderstanding.

First our relationship with the customer remains outstanding. We have been able to meet the customer's full demand, and we do not expect to limit their production volume in any way. These various deep product ramps can be quite a challenge, and I'm proud that our team was able to keep the customer's lines up and running while we worked through the issue. Supporting the customer while under adverse circumstances is often a great opportunity to improve a relationship, and I believe that this was the case here.

The success we've had in doubling our revenue of the company over the last two years has greatly improved our ability to hire and retain the best talent available, and nowhere is this more evident than in our design team. We increased the number of silicon design engineers by 35% during FY11, and this will greatly improve our capacity to bring new products to market going forward.

One of the things I enjoy most about my job is talking to new employees about why they joined the company and how they think we're doing. It is clear from these discussions that the investment we've made in our culture and the positive environment it provides is a good one. People who like their jobs and the people they work with, work harder, smarter, and more creatively, and they don't tend to leave. While no company is perfect, I am confident that people here generally love where they work. This is important given the inherently long-term focus needed to be successful in the semiconductor business, and we expect this to pay off for the company well into the future.

Looking forward to the first quarter of FY12, we expect revenue from audio products and portable audio in particular to continue to drive overall corporate year-over-year revenue growth. As a result, our guidance for the upcoming quarter is revenue to range between $88 million and $94 million. Gross margin is expected to be between 51% and 54%, reflecting the residual impact of the production yield issue we discussed earlier, and combined R&D and SG&A expenses to range between $32 million and $35 million which include approximately $2.7 million in share-based compensation and amortization of acquired intangibles expenses.

Last year we grew revenue at an outstanding 67%, led by strong demand for our audio products which was more than double the semiconductor industry average of around 30%.

As we move into Q1, demand for our products is generally healthy, and our audio products are selling well. While we are again forecasting year-over-year revenue growth this quarter, up at least 10%, this growth rate is below our model of 15%. In the near term, we are seeing lower forecasts from our automotive customers, in part due to the situation in Japan, and our older industrial products are facing headwinds that are stronger than we had previously anticipated.

However, we are expecting a much stronger second half of the fiscal year as new products for multiple customers hit full production. Currently we are modeling Q3 as substantially higher than Q2, but the Q2 to Q3 transition is always a little unpredictable, as the highest amount of shipments often occur in September and October, and significant movement between quarters can occur.

Longer term, we are extremely optimistic about what FY13 holds for Cirrus Logic. The number of meaningful opportunities, such as LED lighting remain very high, both with new and existing customers.

While we are, of course, focused on expanding our customer base, our highest priority will remain on keeping our existing customers happy and expanding our business with them.

Operator, we are now ready to take questions.

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. (Operator instructions)

And our first question does come from the line of Vernon Essi with Needham & Company. Please go ahead.

Thank you. I'm wondering if -- if we could dive a little bit more into the guidance. I appreciate some of the commentary here. I think you've said some color about the seismic business, automotive, and then also old industrial products. Can we talk about those sort of on a sequential basis and maybe what really is driving some of these puts and takes, if you will, into the guide? Thank you.

Yeah, sure. So quarter on quarter, the biggest impact is really seismic. You know, I think what we had expected going into the quarter was maybe a little bit more of a spread out of that business between Q4 and Q1, and it just happened that the customers were antsy to get their hands on stuff as quick as they could. So it was actually quite an outstanding job by our operations team to actually be able to hit some of the request dates that they had there.

And that business, as far as we can tell, is going to continue to be lumpy, and, you know, that's why at this point, you know, we have tried to put very little of it in the forecast. And whatever comes in will be upside.

And, Jason, just to -- sorry to interrupt you there. This is usually what I think in the past you have characterized it as around a third of your energy business in that range sort of on a trend basis?

Yes, I don't remember what we've said previously. But it can be that high. It can be higher in peak quarters. It can be -- if seismic is really on a tear, it can be closer to half. But in this particular case, we're saying a lot less than that.

Okay.

Automotive is -- we've seen muted forecasts from really pretty much across the board from automotive customers, even folks that you wouldn't expect would necessarily be hit as hard by the Japanese situation, you know, just seem to be forecasting lower numbers. You know, understand, we make a pretty small component that goes in a device that then goes in the car. So, it's not like we get, you know, an elaborate thesis on why they're going to be lower. So we can kind of speculate along with everyone else.

But, you can imagine it being, you know, scarcity of some component that you need to finish out the whole car. I don't really know. But it's not a result of anything, you know, any losses and whatnot. In fact, with the new chip set ramping into production and a number of other things we've got going on in audio, or in automotive rather, we feel really good about that business in the long term.

The impact quarter on quarter of what you characterized as the older products was not a -- it's not a huge impact quarter over quarter. Year over year, of course, it's down a fair amount because it's kind of what old products do.

But, really the focus for us and from anybody thinking about investing in the company is really -- needs to be on our progress on the new initiatives and where we're going there. And there the progress is just excellent.

It was - this LED lighting controller is really pretty cool, and to see the first one come back from fab and work as well as it does is amazing.

Okay, and then just to be clear here when we're talking about your two different main pieces here, energy and audio, you would -- you would say that on a sequential basis it looks more like energy is going to have the bigger drop, if you will, relative to audio. Is that a fair statement? I'm trying to balance in between the auto audio side as well as, you know vis a vis (inaudible) side.

Yes, audio -- sure, audio is strong. Audio is up and we feel great about what's going on there from Q4 to Q1 and really for the year. It was the headwind really is pretty much 100% in the industrial stuff.

Okay. And then my last question just to dive into the audio piece, the portable versus nonportable. I know you talked a little bit about automotive, but the other side of audio from the class D products across consumer electronics to, of course, your major customer and anyone else in the portable category. Just how is that playing out into the second quarter and the order outlooks in general?

Well, the outlook remains great. As we've mentioned in the script, it's always tough to call whether the fall ramp will be in Q2 or Q3. But, you know, our portable audio business looks to have another great year. I mean obviously we don't get a post 70% year-over-year growth every year. But, by any objective measure, it looks like it's going to be another good year.

And then what we're really excited about is seeing progress from our - from our newer kind of initiatives. You know a lot -- and what we characterized that -- traditionally what we've sold in portable audio is essentially a very low power audio codec. We have expanded that out to provide a low power audio DSP, and, like we've talked about on previous calls, we have got design wins from multiple different customers and different applications.

And that design win base continues to grow. You know it's from not only the US. We've seen stuff from Japan, all over the world. We've on occasion had a hard time getting doors opened. And, you know, when you roll in with a device that offers as much differentiation as this thing does, really opens the doors not only for that device, itself, but for anything else we can sell with it. So, that's provided a really significant landmark -- or land -- just a change for our portable audio business as we're able to provide more content around the codec. So we see that shaping up.

We've got things that are -- we're shipping that device in production now. But those design wins probably don't hit full stride until later in the year. And so that's one of the things that we see really driving the audio business, especially in the second half.

Okay, thank you very much.

Sure.

And our next question does come from the line of Jeff Schreiner with CapStone Investments.

Hi, guys. Thank you for taking my questions this morning.

Sure.

Jason, do you know -- let's just get the 800 pound gorilla out real quick and just talk about maybe -- you know, you talked about the relationship still being strong, but I'm wondering if you could give us as much insight as you can about did you guys have to be -- did you guys have to provide any concessions maybe for this? Maybe now in the future you're not going to get to see the ASP benefits you've been seeing typically from device generation to generation? I'm just wondering maybe was there anything that you kind of had to do to make nice to really keep this relationship tip-top?

Well, I mean in any scenario where you've got issues to work through with the customer. I think most mature customers understand that, you know, we're not baking cookies here. There's things that are going to happen. And, you know, it sounds maybe a little trite. But I really think it's true, that a mature customer recognizes that things are going to happen and that the suppliers they value are the ones that handle it well. So, and I think we did that under really complicated circumstances with a remarkable ramp. So, no, I think, if anything, it's improved the relationship and, you know, our folks did a really good job of taking care of business. So, no, we shouldn't have to be -- shouldn't have needed to be in any sort of, you know -- any of the situations like what you described.

Okay. And, you know, last year we looked at kind of -- you look at, you know, the balance of fiscal year '11 it's kind of even in terms of the overall seasonality. But it is kind of sounding like from some of your comments this morning that overall seasonality can be much more maybe second-half-weighted in fiscal year 2012. Is that the way to think about it on the top line?

Yes. Our model is that we see a substantially stronger second half. The only caveat to that being that it's frequently the case that -- and this looks to be the way the backlog is shaping up. You know, of course, everybody is trying to make a healthy Christmas season, and that backlog always shapes up to the customers want the bulk of the devices in September and October. And, you know, when we get -- it's a stressful period during Q2 where customers are moving orders around to, you know, multiple millions of dollars on a daily basis. And it's just kind of -- does it fall on, you know, a Monday or Friday, moves your quarterly numbers and then people view it as massive success or failure when it's, you know, really talking about a matter of a few days.

So, it's not -- you know, it does have no impact on the Company or how we run the business or anything else. But just we wanted to talk through that externally because it's frequently a source of a little confusion, I guess. But, yes, I would say the way you characterized it is the second half stronger than the first and with the only caveat being that, you know, how the orders fall around the end of Q2.

Okay, and one final question from me, and I'll get back in the queue here. But, you talked about this DSP audio solution, and it sounds like quite a unique design opportunity you have, and it's kind -- you've got that out for production. I was just wondering if you could clarify for us if that's a both for -- it's going into production for future design shipments outside of your largest customer in mobile devices that may ship this year? And is it out there, it sounds like, also being kind of worked with customers and almost sampling with other customers that may be new mobile customers 9 to 12 months from now if they were to so choose the device sometime around this timeframe?

Any help you can give us on, you know -- you've talked a little bit about it, but just maybe where that is and where we're really going to be in terms of revenue contribution from this DSP solution.

Sure. Yes, the magic decoder ring, I suppose, for future reference is we typically don't talk about stuff for our largest customer in advance. So this is essentially all new business with new customers -- or not necessarily new customers because obviously we've been in the audio business for a really long time. So there's not many audio customers we haven't done business with at one point in time.

So this should be all new. It's -- and we're still really trying to figure out how big can that get. But we think it's got a meaningful opportunity in tablets, headsets, potentially handsets, but that one we haven't locked down yet.

But it's such a compelling device that people are talking about putting it in all sorts of things from voice recorders to automotive applications to any number of different things because of the tiny footprint. For a little closer look at it, there's a video on the investors section where actually Vern was kind enough to play interviewer for us and run through a Q&A. And we kind of showed the device on a board and highlighted -- I mean the thing is just ridiculously small.

So in any event, you know, it's a meaningful ASP. It's a meaningful opportunity to expand the dollars that we sell into any particular box. And, it's all incremental. It's not like anything we've ever shipped before.

The only thing I don't have a great answer for you on is the magnitude of, you know, how much revenue that means. You know, it's certainly -- we expect it to be material. It's one of the biggest things we've got on the horizon within the next year or so.

But, we -- I wouldn't expect it to make a meaningful dent in our customer concentration in the short term, though, that said, just because that business continues to do extremely well also.

Okay. Thank you very much for you time, guys.

Sure. Thanks, Jeff.

And our next question does come from the line of Tori Svanberg with Stifel Nicolaus. Please go ahead.

Yes, thank you. A few questions. First of all, are you expecting your portable audio business to be up sequentially in the June quarter?

Yes.

Okay. And then, if you look at your largest customer in portable audio, would you expect the content with that customer to increase in the next fiscal year?

Let's see. Yes, I mean generally speaking that's kind of our model. I think we've been pretty successful there both with our largest customer and broadly in portable audio. The goal is always -- you know, it's easier to expand your business with existing customers than it is to go get new ones. So while we're focused on going to get new ones, we've had as much or more traction really in growing the business with our existing guys, and a lot of that has come through new devices with more content and higher ASPs. You've seen that in some recent product launches. And we're certainly working on making that trend continue into the future.

Okay, and just looking at your nonportable audio business, and I know some of that goes into things, like, you know, home entertainment. And I assume some of those customers there are from Japan. Is that also something that could potentially be an issue here in this quarter or is it primarily automotive in Japan that's the biggest Japan issue?

Well, interestingly, it's -- thus far what we've seen from it is that it has been primarily automotive in general and not even necessarily in Japan or from Japanese brands. Because, you know, this is such a global industry and everybody in that space has got suppliers all over the world. And, you know, all it takes is a windshield wiper blade and you can't finish out whatever it is. So, automotive in general seems to be down a bit.

We haven't seen anything internally that has been general home audio or that sort of thing. We don't have a ton of exposure to direct business in Japan in the first place, which is kind of a plus and a minus depending on how you want to look at it. We're focused on increasing that. But, so we haven't seen anything material pop up from Japanese accounts other than the automotive stuff.

But again, it's not always clear, you know, where we would find out in the process. None of the products we make are affected by the crisis at all as near as we can tell. You know, we've had to deal with some minor issues on substrates and things like that; but it's really not been a big issue for us.

Okay, very good. And on your DSP or your smart codec, what applications should we assume will be the first sort of real revenue production? Would that be the tablet market?

Tablets and headsets are kind of the area where we've had the most progress.

Okay. Last question is on your digital LED controller. I think you mentioned you are expecting to start to see some revenues in about a year from now. If we look at next calendar year, could this potential be like a multimillion-dollar revenue opportunity, or will it still be small and steady next year and then maybe more meaningful the following year?

You know, it's tough to call but we -- there is certainly a very good outlook that it can be in the multimillion-dollar range.

Great. Thank you very much.

Sure.

And our next question does come from the line of Christopher Longiaru with Sidoti & Company.

Hey, guys.

Hey, Chris.

Yes, so my question is about margins. You were able to even with the problems keep your margin above 50% in March. The guide of 51 to 54 looks like, you know, you're going to pretty much clear out a lot of the inventory from those low yields. So, do we expect to be back kind of in a normalized range of margins by September?

Well the challenge is, you know, we're working as we speak on improving the margins of the existing revision of silicon. You know, we're working on that. And, it's kind of an issue that you just kind of have to see how it unfolds. But, yes, certainly our goal is to continue to try to minimize that. And we'll just have to kind of wait and see how - what kind of progress we've made on that in Q2. Obviously, longer term we'll just eliminate the problem entirely and -- because obviously we've gone off and addressed the fundamental issue.

So this is kind of a -- it's a little bit of a -- so the guidance just reflects that it will take us a little while to work through, you know, shipping the existing revision, sorting out the test, trying to improve that as much as possible, and then in the longer term, you know, we'll get that transition happened and just be done with it.

And so the gap between the 51% and the 54% is basically how fast you can get that done? Is that...

Well, that and just the fact that the rest of our business -- I mean typically we give you a couple-point spread on margins in the first place. So we widen that out a little bit just due to the uncertainty as, you know, how much progress we can make on that particular issue.

Got it. And just from an accounting perspective, Thurman, on this tax benefit, basically you're going to show it as, you know, $102 million asset on your balance sheet, and that's going to trail off over time as you use it for - towards the tax situation? Is that the way it is going to end up being accounted for?

Yes, it's $117 million, and we'll start recognizing, you know, around, like -- about a 35% tax rate starting this, you know, in Q1. You'll see that on our GAAP results. It's a noncash event, and we'll start trickling that out at that same tax rate. You know, this is one of those things that we will reevaluate again at the end of the next fiscal year and see if - because this isn't utilizing all of it. But, that's the way it's going to work for now.

So on a pro forma tax rate, you're going to have somewhere around a 3% tax rate, not a GAAP tax rate? You're going to have a 35% tax rate?

That's correct.

Okay. All right, and that's going to be for -- I guess the 35% will be for the foreseeable future?

Yes.

Okay, great. Thanks, guys.

Sure.

And our next question does come from the line of Rick Schafer with Oppenheimer & Company.

Hey, guys. I just had a couple of questions. I guess the first one is has anything changed sort of significantly either in terms of sales or, I guess, margins or anything in the couple of weeks since you guys preannounced? And part of that question is how much, I guess, is a flat guide for the June quarter is related to the D factor yield issue versus sort of that industrial drop off that Jason talked about, you know, with the auto or seismic falling off?

None of it is related to the issue that we talked about. I mean, we're not -- as I said earlier in the prepared remarks, we're not impacting the customer at all. So it's not a revenue issue.

Okay. Okay, so it's all confined to the industrial side of the house?

Right, right. Yes, audio is doing great.

Okay. Okay, just a followup question on that, I guess. Did any of these parts make it into finished goods at your biggest customer? Or was this all caught really early and didn't actually make it into any devices?

Well, I don't want to get into their business. But, you know, like I say, we did a good job at containing the issue, and our customer really knows what they're doing as well. So, I'm not worried about it from an external point of view.

Okay. Okay, and then last question was just on the seismic business. I mean, I know, you mentioned it's pretty notoriously lumpy, but it is long lead time, I believe -- correct me if I'm wrong. You know, with oil prices up and I guess if it is longer lead time business, I mean, what have you seen if we look past the current quarter? I mean, could we see an uptake in seismic again in the back half of this year, the calendar year?

We certainly could. It is as you -- you would thing it's longer lead time. And, I'm sure there's elements of it that are. We certainly like to message that to our customers. But I don't -- you know, we're a pretty small component of the system. As much money as it feels like when these guys place an order, you know, where one boat, for example, can be north of $1 million dollars worth of chips from us, it's just a -- it's a real lumpy business.

And in particular, you know, when we came into the quarter we thought we had stuff that was kind of spread out between Q4 and Q1, and the customers were, you know, kind of jumping up and down about wanting to get the material as soon as they possibly could. So, like I say, our ops guys did a really good job of, you know, accelerating deliveries on that stuff.

So, yes, it should work in a lot more transparent and smooth and predictable fashion than it does. And why it doesn't has been -- has remained a bit of a mystery.

Okay, so fair to say it's just kind of beyond the current quarter it's kind of tough to call I guess is --

Right. Yes. Exactly.

Okay, well thanks.

All righty. So let's see we have got a couple of write-in questions. I think that's it from the calls. We've got a couple of write-in questions that were sent to our investor relations department from the investor community.

The first investor would like a little more information on the new brushless motor chip that we've been working on and the market opportunities that we're pursuing with that. So this must be an astute reader of the investor relations presentation that we have on our website, which once again I'd like the call your attention to.

So, yes, we've got -- it's a brushless -- sensorless is really the trick -- DC motor controller. The sensorless aspect is really kind of a holy grail, if there is such a thing, in this particular technical arena. We've got that device back. It's working very well. We think the technology has a really broad application all across the board. I don't want to get into what application we are going after on the -- for the first device because we think it's a fairly crafty plan that we've got. So I don't want to give away any competitive advantage. But it's something that you'll see, you know, more information from us on over the next couple of quarters as that device really gets out, gets sampling in the field, and we can start talking about it a little bit more.

But anyway, it's yet another big milestone for us on our digital energy control initiative, which really to me feels like it is starting to hit its stride. So, unfortunately I'll decline to comment on the market opportunities we're chasing with it. But it's something that you'll hear more about going forward.

The second question, we had an investor write in asking about our digital LED dimming technology. This investor has purchased a number of the commercially available LED lamps that are quote-unquote dimmer compatible, and has not had a very good experience. To that end, you know, his question asks if our part has been adopted by any leading light bulb manufacturers, which is no because we just got the device back. And, if it had, would our device be better than what is out there at this time? The answer to that is yes. Our goal is to help people make light bulbs that any of us would actually ever want to buy, which is not currently the case.

What that entails is, first and foremost, working with any dimmer out there. As near as I can tell, the bulbs that are on the market today that say dimmer compatible, what they mean by that is there exists one dimmer in the world somewhere where it will, in fact, work the way you want. But the reality is, you know, just on our own, we have uncovered hundreds and hundreds of different sorts of dimmers.

We have a collection of a hundred different types in our lab as kind of a torture test chamber. They all operate differently. They are all very nonlinear devices. And making a solid state bulb work gracefully with those dimmers is -- well, one of our technical fellows describes it as the hardest challenge that he has ever worked on, and this is coming from a guy with a couple of hundred patents to his name. So it's a hard thing to do.

So, like I say, our device is back. It's working really, really well. It's by far the best dimmer performance out there. So, yes, we expect that. Now longer term, we also think that color temperature matters a lot. I think a lot of the bulbs that are out there have a light quality that is maybe better suited to an operating room than a living room. That's also something that we're working on addressing with some of our potential customers in there.

So, yes, we feel your pain -- for this person who has written in. We are also unsatisfied with the bulbs that are out there today. Rest assured that we did not cause any of that to happen and we're working on fixing the problem for us -- for ourselves and you as well.

Second question, and I swear we didn't make up this question ourselves because it's really quite a good softball. Secondly, given the high price point in the market, he would like our take on when these bulbs will reach the $12 to $15 per lamp price point. We think that's a few years away. We think longer term where that market really hits its stride is when they get below $10, and then you start to see subsidies that take them down to $5, and that really makes them available to a whole lot more folks.

So hopefully that answers the question. If not, I'd like to encourage everyone to take advantage of our investor Q&A site where you can ask questions. If you look on there, you will note that there's not a whole lot of questions on there, and you might interpret that as meaning that we don't answer every question we get. Actually we do. So it appears our investment crowd is somewhat shy. But we would like to encourage you to take advantage of that site because we think it's extremely helpful. It's probably a little more informative than chatting around message boards and whatnot.

Anyway, before we sign off, I would like to mention that we have an updated investor relation presentation in the investor section of the Cirrus website. If you have questions that weren't addressed today, again please submit them via Ask the CEO site on the website or send our investor relations crew an E mail if that's more appropriate. And thank you for joining us on the call.

Thank you. Ladies and gentlemen, this does conclude the conference call for today. We do thank for your participation. You may now disconnect your lines at this time.