Cirrus Logic Inc (CRUS) 2014 Q3 法說會逐字稿

Welcome to the Cirrus Logic third quarter fiscal year 2014 financial results Q&A session. At this time all participants are in a listen-only mode. After a brief statement we will open 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 call 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 Jason Rhode, Cirrus Logic's President and Chief Executive Officer, and Chelsea Heffernan from our Investor Relations team. Today we announced our financial results for the third quarter fiscal year 2014 at approximately 4.00 PM Eastern. 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 at 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. Relations@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 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 discussion of risk factors that could cause actual results to differ materially from current expectations.

Now I would like to turn the call over to Jason Rhode, our President and Chief Executive Officer.

Thank you Thurman. Before we begin taking questions, I would like to highlight a few of the things that we discussed in our Shareholder Letter. Our financial results for the third quarter were at the high-end of guidance, as we delivered GAAP earnings per share of $0.63, and non-GAAP earnings per share of $0.89 on revenue of $218.9 million.

During the quarter we gained traction in portable audio with our custom and catalog products and mobile devices, as many OEMs are increasingly interested in audio as a product differentiator. In LED lighting and power meters we expanded into additional SKUs with our customers in Q3. We continued to generate cash in Q3 exiting the quarter with approximately $328 million in cash, or approximately $5.00 per share. We believe the next catalyst of fuel growth in portable audio is the proliferation of voice as a key interface for mobile devices. The ability to intelligently interact with a device requires a substantial amount of analog and digital signal processing, t insure a consistent and exceptional user experience. Although this market is still in its early stages, we believe Cirrus Logic is well-positioned to be a key player, given our signal processing expertise, engineering execution, and portfolio of ultra low power components. Over the next six to nine months we plan to come out with a number of 55-nanometer products to address exciting opportunities in audio and voice applications. These products are expected to be key contributors to future revenue growth, beginning as early as calendar year 2015.

Also, I would just like to note that while we understand there is intense interest related to our largest customer, in accordance with our policy we do not discuss the specifics about our business relationship. Operator, we are now ready to take questions.

(Operator Instructions). Our first question comes from the line of Tore Svanberg with Stifel. Your line is now open. Tore, your line is open.

Yes. Sorry about that. A few questions. First of all, Jason, can you talk a little bit about the voice roadmap? I am trying to understand when you could potentially have meaningful revenue from any voice related products?

Well, we already do really. If we are in a product such as a phone, for example, typically all of the audio and voice goes through our device, but we are specifically investing heavily in improving that voice experience, and one example of that, there are a number of them, but one good example of that, is the Acoustic Technologies acquisition we did last fall. They provide functions such as echo cancellation, noise suppression, other types of things that enhance the voice call or a speakerphone application, for example. So thus far that acquisition has gone extremely well.

Those of you that follow the Company well know that I am not a huge fan of acquisitions in general, because most of them don't work, but thus far this one has gone extremely well, and so far putting their IP in with our devices has just been a great, great catalyst for a lot of good conversations with a number of our customers. So we are already there in the sense of providing acoustic adaptive noise cancellation, and we are trying to broaden that portfolio of technologies out as rapidly as we can.

I guess what I was referring more to, and I do realize that voice runs to a DSP, but I guess I was referring to more to potential dollar content growth above and beyond what you have today?When should we expect that to start happening because of voice type products?

Well, I mean I expect it is going to be a fair number of incremental things that will happen for us, and again one of those is Acoustic Technologies, which are already happening, we are already booking meaningful revenue with those guys, and then we are taking and adding that to new products. Some of them being the 55 nanometer type devices that I was talking about a minute ago, that can start contributing as early as next year.

Okay. That is fair. My second question is on 55-nanometer, so you talked about coming out with products there. Is there going to be any sort of additional R&D expense that is going to come I guess in the March quarter but maybe potentially in the June quarter because of that?

Well, there is some already built into the March quarter, and there has been frankly some built into the past 12 months or so, either in the form of more advanced tools that are necessary to deal with these advanced processes, and then of course tape outs in advanced nodes like that are much more expensive than say 180-nanometer. So we have got a couple of those models in over this quarter and half a dozen or so scheduled out over the next six to nine months. So that certainly we are mindful of, we are not in a year that is up and to the right as some of our years in the past have been. We are certainly preparing for more of that in the future.

So we are mindful of expenses this year. At the same time we want to make the right investments to help us grow going forward, and a significant amount of the variability quarter on quarter will be in the form of some of these tape outs, which is a great problem to have as a company if you are going to spend a lot of money, the ultimate culmination of what we are doing is us taping out a device, and so that is a I good kind of expense to have.

Very good. Just two quick ones for Thurman. Thurman your inventory days came in at around 55 days, which I think is probably an all-time low. As we look forward here, would you expect your inventory days, inventory to be back up in the March quarter, or just given how volatile that number is, I am just trying to get some idea where it will settle in?

Yes. In the March quarter we think inventory will probably be flattish to down, so the days actually won't increase, but then as we move into next year, yes we will see that move up, the inventory levels increase a bit as we move through the year.

Okay, and then the last question is on the tax rate. I know you still have $50 million left on your tax program, but as you start paying taxes, I have sort of been trying to look at what the effective tax has been in the past, and I think the last three years it has ranged anywhere from 34% to 29%, so I am just wondering if you have any further thoughts on tax rate once you actually start paying a regular tax rate?

No. I mean I think realistically the federal tax rate is 35%, and then we have anywhere from 3% to 4% in taxes on some of the other tax payments that we have got to make, so I think in a total effective tax rate is probably 35% to 37%, or 38% or so,in that range. Coming out on this, and that is the way to model it until we have a better feel for what that is going to look like.

Sounds good. Thank you very much.

Thanks, Tore.

Our next question comes from the line of Vernon Essi with Needham & Company. Your line is open.

Thank you. I just wanted to ask something sort of a more macro question here. In your Shareholder Letter you have a lot of talk about changes in pricing structure with of course your largest customer, and you have had I guess a content loss on the amp front late last year. Going into this year how, is there any level of comfort you can give to the investment community as to what you might do, or milestones that we can look to, that would show proof of stemming these potential losses? I mean I know you have got a lot of development things in the pipeline, but are there any milestones we can sort of look for, prior to obviously product launches in the second half of the calendar year, that might give people comfort that there is more development in the works, as opposed to the mindset which seems to be, this is on a steady decline from here? That is a tough question. You can't really talk too much about your customer.

Yes. That is a bit of us to count.

Sure.

I mean obviously we can't get into specific wins and losses of products that may or may not come down the pipe, but rumors of our demise have been greatly exaggerated as usual. We think we have got a really robust pipeline of design wins and continuing business going forward. Some of our product lines are more competitive than others, amplifiers being one of those. We don't expect to win every socket out there for amplifiers. Frankly, there are a number of suppliers of those type products, it is one of the less sticky sockets that we go after and in general, some of them are quite inexpensive and those are of less interest to us.

So we specifically really look for products where we can add a meaningful amount of value by putting signal processing capabilities and embedding those in our amps, and when we are successful doing that we think there is a real good opportunity there. We certainly have got pretty good visibility because of such a large percentage of our portfolio coming from catalog products, so you can certainly look towards our guidance. We are certainly expecting a good, if unexciting year this year, as we build towards, build a platform towards a lot more growth in the further out years. So I don't see at least as far as we see it, a bunch of doom and gloom on the horizon. We are very, very excited about the position that the Company is in, it is just not a realistic expectation that we should just have a monopoly on every product category that we participate in.

Sure. This sort of leads to the next question, and you probably receive a lot of questions about the 55-nanometer developments taking place, but can you give us a sense of the profile of how many parts, I mean however you want to sort of describe the quantity, what would fall into sort of the catalog versus custom buckets, just so that we have an understanding of maybe what areas you might be targeting over the next 18 months?

Yes. Over the next six to nine months we are expecting on the order of half a dozen or so, and a significant percentage of the new development that we are doing going forward is in 55-nanometer. Obviously there are some products that don't make sense to push too far down the product pipeline, when you have got a significant amount of analog content, but it is a meaningful fraction of what we are doing going forward, and obviously we are not stopping at 55, but that does happen to be from our perspective a very good node for integration of our DSP capabilities, and the analog technology.

I would say the weighting between custom and catalog there is definitely both represented in that. We have got some great applications that are along the lines of these voice space technology, that we think could be pretty ubiquitous, I think they mature first in smartphones, and potentially have a lot of legs in other form factors, automotive being on the Internet of Things kinds of devices. I think that a lot of people mean a lot of things when we say, talk about the Internet of Things, or the market, for us at the moment it is very specifically voice interface to your devices. A lot of our audio products can be used very well in those applications, and we certainly look for opportunities to more closely optimize those for that application going forward. So I think that puts some color to your question there.

Okay. I am going to just a follow into that, you brought up the internet thing, so you opened that door.

Sorry.

No. It is okay. Definitely an overused theme, but are you getting a lot of in-bound requests from customers on that sort of integration, or that feature set into what they are doing with their roadmap?

I would say we are seeing some and it is a pretty interesting, yes. I would say we are seeing a healthy amount of demand, or a healthy amount of interest in how do people address this kind of technology. I think it is something that a lot of people are wading into very carefully, because it has the potential to be hugely annoying, not only for user but for everybody around them, but at the same time a lot of things in the Internet of Things are going to be really small, and you are not going to have screens or keyboards or what not, and voice is potentially a very efficient user-interface in those cases. So I don't see anything incredibly explosive that we are participating in the very short-term, but I see a lot of opportunity for us going forward, and it plays very well into the capabilities that we have as a Company, so we are pretty excited about it over the long term.

Okay. Great. Thanks a lot, Jason.

Our next question comes from the line of Andrew Huang with Sterne, Agee. Your line is open.

Thanks, guys.

Hi Andrew.

I first had a general question on voice control. So first I wanted to hear your opinion on that technology, and maybe some reasons why you think the phone market would go in that direction, and then I have a couple of follow-ups?

Well, I mean I think we have already seen plenty of examples of some form of voice control in the phones that are out on the market, so relative to phones, a phone is a connective device, there is a lot of sense of doing a lot of the processing in the cloud, but at the same time I think anybody that has interacted with that kind of technology has found that there are certainly areas for it to improve. The technology that we have acquired through the Acoustic Technologies deal certainly has the potential to improve that experience significantly, by filtering out background noise for example, and making these automatic speech recognition algorithm rhythms work more effectively in a loud environment. That is a key focus for us going forward.

So I think the beachhead has already been taken in phones, and there are a lot of good opportunities for us whether it is in straight up signal processing, like the example I just gave you, or simply the analog interface technology that we are a leader in, keeping a microphone powered up at a very low power. So for example there is a voice recognition technology that is out there, a voice wake up technology that is out there through a third-party. We have got by far the lowest power implementation of that I am aware of on the market. So it is areas like that I think are really going to be meaningful going forward for us in that voice interface area.

Okay. And I know it is going to be kind of hard to quantify it, but do you think the dollar opportunity is bigger for voice control in the handset space, or in everything else? In other words, like home automation or automotive, like in terms of the dollar I'm just trying to get a sense of the magnitude of the opportunity?

I wish I was wise enough to know what the right answer is. I certainly think there is a lot of opportunity sooner in mobile, but I think a lot of that technology will mature in that space, and then find its way out into other applications, like automotive, or all sorts of things for your home. So I think it is, I don't know what the right answer is there, but I think there is a lot of opportunity in both of those cases, and they play really nicely together, so mobile has a really nice advantage in that the products are fairly well self contained, so you can deploy the technology and get it right there.

The home always brings it with it the challenge of how do you get everything that you want to make home automation work. How do you get it all to play nice together. There are a number of companies out there that are doing interesting things in that space, but I think the earliest opportunity is most likely in mobile, and then as the infrastructure gets a little more solidified in the home there are some great opportunities there. Certainly all of us that have bought a car that hooks up with our phones would like that experience to go a lot better. Most of the voice experience that have provided in the automobile are really not what I think the rest us would like to see.

Okay. I was wondering about your success rate with mobile phone makers in China, and one thing specific I wanted to ask about was, maybe quantify the design cycle times with those customers? Maybe relative to the Tier 1 phone makers?

Well, we have seen a ton of interest there. A number of the mobile manufacturers in China are, they have gotten to the point where they are big enough where their product lines are diversified, they are trying to come up with interesting ways, on one hand they are certainly pushing the pricing down on the low end models, but at the high end they've got interesting products there. They are trying to do things that differentiate themselves relative to their competitors, and voice is a good application of that. They certainly move more quickly than some of the Tier 1 counterparts, and there are good things and bad things that go with that. But yes, they definitely can move a little more quickly. For us it accelerate things pretty significantly since for the most part what we are talking about is catalog devices that are already on the website, so we have short circuited that portion of the development cycle. We got to go off and develop a new device in order to capitalize on an opportunity.

Okay. And then just one last question if you don't mind. On LED lighting first, can you talk about your expectations for market growth in 2014, and then I was wondering if there were kind of any changes in your strategy relative to a year ago in that sentiment?

Sure. I don't have a great crystal ball for what the market is going to do in LED lighting, your guess is probably as good or better than mine. But we do see it as a significant growth market, one of the dynamics that we have certainly experienced over the last year is that it is a lot more fragmented than we expected. Every manufacturer has got a lot more SKUs, they are all trying out their different things. I don't think anybody has really hit a home run, of what light bulbs should ought to look like. Some of the thingsthat we have seen developed over the last year, certainly it is the case that some form factors are a lot more discriminating, in terms of dimmer compatibility than others, and everybody gets excited about whatever the latest, cheapest A19 form factor bulb is, but the fact of the matter is those are, especially in North America those are the least likely lamps to be connected to dinners, whereas things like MR16s and PARs are much more likely to be on a set of dimmers, and therefore put a lot more value on dimmer compatibility.

So one of the changes in direction for us is that the next-generation of products that we are working on are a lot more programmable, a lot more customizable, so one piece of silicon can target a wide variety of platforms, and do so at a very, very low bill of materials cost basis, even to the point of being able to compete with the so-called RCC solutions, where there is literally no IC involved. And at the same time improve the user experience significantly, simplify the product significantly for our customers as well. So it is an interesting market. It is always a bumpy road when you enter a new, when you enter a new market with new technology, but we are slugging through it, and I am excited about the line of products that we have got coming out over the next year, so we will just see where that takes us.

Thanks very much.

Thanks, Andrew.

Our next question comes from the line of Jeff Schreiner with Feltl and Company. Your line is open.

Thanks for taking the questions. You talked about the Internet of Things, you talked about voice control. How important is the [verbal] category for Cirrus?

I think it will be important eventually. I don't see so many opportunities that are really needle movers in the short term, but I think in the long run it is a great opportunity. I do think that there will be voice opportunity. I think it is important to note that like any audio market, there are going to be applications where it is a very rudimentary amount of voice content, where it is maybe voice in and out, transmits to maybe it is a device that is operating as a satellite to a phone, et cetera. Where really the opportunity is pretty limited, because there is not much processing actually happening in the device, but on the other hand I think over the long-term there will be devices that maybe aren't even connected at all, and so all of the processing has to happen within the device. So I think in the long run it is a very important space for us. I think it will be, I think most of the products that have been launched to-date are still works in progress before they are really an amazing driver of volume from a silicon perspective.

And then I was just wondering if there has been any tax planning that Cirrus has embarked on maybe in order to offset the full payer tax status? Is that something that the Company is currently looking at right now, or has been looking at and, if so, what is the status of that?

Sure. Well, I think Thurman pretty much answered that before. You should be modeling basically the standard tax rate for the US until we have got an update otherwise. Certainly we are well advised by the experts in that space. It is a complicated, complicated topic. A lot of the techniques, et cetera that people used to put in place it is a lot more difficult to do today than it used to be, and we certainly don't want to damage our ability to be a nimble Company in the process of pursuing a somewhat lower tax rate. So something we take very seriously, we want to make progress on that, but we don't really have anything to update you on at the time, so I would just model the standard rate for the time being.

And then what impact as you begin to take out and release new products with the 55-nanometer, what impact is that going to have on Cirrus' pricing?

Well, it is interesting. The reason as an analog and mixed signal suppliers that you pursue 55-nanometer, or that you pursue any advanced geometry, is different than in the cases where you are marketing a purely digital product. The pure digital world is driven on the Moore's law curve, and you are driving into advanced nodes to push your costs down, and so forth.

As an analog supplier in a lot of cases if you took the very same product and moved it down into an advanced node, a lot of times it could be make it more expensive very easily, if you look at a chip where it is 50% analog. The reason that we pursue advanced geometry is we think it gives us the capability to embed a lot more signal proceeding capability, and bring a lot more features to our customer base. So we see that as a good opportunity to bring higher value products to our customers, to integrate other things that were maybe on the board, designs that used to be implemented in multiple different, either ICUs or board level stuff, of things that weren't in the products at all before. We see all of that being brought to fruition in 55-nanometer, and it is just a great mode from an analog design point of view, we have got a great partner in that technology, and we are really looking forward to the first wave of products hitting the market.

Thank you very much for your time.

Sure. Thanks, Jeff.

(Operator Instructions). Our next question comes from the line of Blayne Curtis with Barclays. Your line is open.

Hey, guys. A couple of questions. I just wanted to understand the 55-nanometer timing. You said it takes about a year from tape out to get revenue, you also said revenue in 2015. You have been on this two-year cadence of products, and you had, you kind of broke that with this go around last year with some kind of reduced cost products. Are there any opportunities to increase content this year, or should we think about the same products then until those 55-nanometer chips are in the market the following year?

I think it is a complicated year in that there are a variety of things that happened. There are certainly mix changes from one form factor, from between different form factors customers are launching new products all of the time, either with existing products that we already have, or other products that we have got in development, but overall this year we expect to be less exciting from a revenue growth.

We certainly expect to be very profitable and continue to build this platform that we can grow on from here in the coming years. So we don't see a ton of stuff that is up and to the right this year, but at the same time we are launching new products, we are continuing to make progress with the products that we already have into either new designs, or continuation of existing designs. So there are a lot of things going on. The biggest story for us this year, though, really in addition to just business as usual, and making sure that we, the hole in the ground that we have already taken, is building this platform in 55-nanometer that we are able to really drive some meaningful growth going forward on in the coming years.

Thanks, and then Jason, you mentioned on the not on the amp positioning, obviously there was a well known loss you had, and obviously you can't have 100%, sure. I understand that. If you can just talk about where, what types of products your amps would fit in versus the more commodity amp, the socket you lost was a pretty high end tablet. Is it more phones where you think you have an advantage, or maybe you can talk about form factors, or any sort of color, as to where your capabilities fit in customers' products?

There is, I mean honestly it will be difficult to really get to the heart of it for anybody externally, because at the end of the day a really good engineer at any one of our customers has usually got multiple different ways to solve the problem, and it just depends on a lot of things that which way is going to be the most efficient. And most cost effective, but as a general trend, the type of value that we are adding with the signal processing in our tips, is to help make an existing speaker a given speaker a little bit louder, and to boost up the battery voltage so that you can get more power into the speaker, and that tends to add a lot more value, the smaller the form factor gets.

If you have got a lot more air volume it is kind of a universal rule in speaker design, that if you have got a lot more air volume within the product to work with, there is almost nothing else that you can do that compensates for that, that is just by far the easiest way to make something louder and sound better, is just devote a little bit more air volume to it and a little bigger speaker size, for example. But in cases where that worked against the form factor and the things that are getting smaller are things that are having your space encroached on by battery, then we add more value in those cases, and then all of that is against the backdrop of speaker manufacturers that are trying to make their speakers sounds better and more efficient at the same time as well.

So it is a pretty complicated dynamic. Obviously, the trends for us is, we know that we are not going to win 100% of the market in that space, but we are going to focus on the facts, where we add a lot of value, and we are going to try to make it easier to use our parts make them be more integrated with other kinds of signal processing capability, and hopefully tilt the odds in each of those cases a little more in our favor.

Thanks and just finally for Thurman, you talked about the out margin target of 20% for this fiscal year. You obviously had the well known reset in the gross margin profile, margins below that level for March. Is that still a reasonable target going forward, given the lower gross margin and the tape outs that you guys have been talking about?

Yes. I think we remain committed to the 20% operating profit level in the longer-term, and there is a lot of leverage that you can control, and some things you can't control as much, but we are committed to that number.

But we are, I mean one thing to add is, we are a pretty seasonal business so if you view us on a long-term basis at 20% we are going have quarters that are bigger, where we are above that number, we are going to have quarters that are weak quarters seasonally, where we might be below that number. It doesn't make a whole lot of sense to us to manage the growth of the Company based on arbitrary expectations for a given quarter either. Just I point that out because the dynamic of the industry is sometimes we have smaller investors maybe don't understand the market as well, that maybe don't understand the time scales involved. We absolutely run the Company to build value over the long run. That is how we view expenses. We as Thurman said, we are very committed to that 20% operating model over the long-term, but we are not at all shy about making investments where we can, to help drive more growth in the future either.

So the 55-nanometer stuff is a great example of that. It is very expensive. It is a strain in some sense on the Company today, but we think it is a huge part of the value proposition that we will be bringing to the market in the coming years.

Is there any way you can wrap any numbers on 55-nanometer tape out expense, I am assuming it is several million, but obviously six of them, is that hitting the June September quarter and the right way to think about it is a few million dollars, and then it sets back down?

Yes, per tape out. I mean I don't want to get into specifics because it is a competitive industry. It is sub-million but it is a lot, lot more expensive than 180-nanometer was, and additionally like I said before, it brings with it a lot of additional expense, in terms of CAD tools that you have to support, and you have to be a lot more careful on qual process, and things like that as well. So it is tape outs, but it is other things in addition to that.

Okay. Thanks, guys.

Sure. Thanks, Blayne.

Our next question comes from the line of Christopher Longiaru, Sidoti and Company. Your line is open.

Hey, guys. Thanks for making my question.

Sure.

My question, you talked about voice control and some of the design momentum you are seeing with mobile devices. How transferable is your technology to other areas? I mean I think longer-term we are going to voice control in a lot of other areas. I don't know even know if you are even seeing interest at this point from other areas outside of mobile. Can you talk about kind of a long-term approach to that market?

Yes. I thinkit is very applicable outside of mobile. Like I said earlier, I think it develops first, and becomes mature in mobile, simply because a mobile device tends, or at least has the opportunity to be kind of self-contained and you just get that one device right, and you have something that you can use, whereas most things that we dream of, the Jetson kind of stuff of for the home, there are not too many single applications where in and of itself, it makes a lot of sense. Most of that feels kind of clunky.

For the home it feels like it really needs somebody to make sense of the overall infrastructure, and knit it all together and then there is a lot of opportunity for individual nodes that we could participate in. Automotive, though I think is ripe for development in this area. Like I said, earlier it is, I don't know about everybody else, but I find that you have got this amazing phone and you can get in your car and connect it up over Bluetooth, and suddenly a lot of people's hard work on voice and audio, et cetera suddenly gets a lot worse. So I think that could be thought through better. I think the technologies that we have got, both things that Cirrus has developed previously, the next signal capabilities that we have got, as well as the voice based technologies that we acquired through the Acoustic Tech deal, can really move that further down the field.

How about in terms of just gaming as another option for that, are you seeing anything in terms of gaming, because I think that might happen pretty quickly?

Yes. We certainly see gaming headsets as an area where some of these voice technologies are definitely of interest. We have shipped product into that space. We have seen interest there as well. So yes, I would expect gaming to continue to be a good opportunity.

That is all I have. Thanks, guys.

Our next question comes from the line of John Vinh with Pacific Crest Securities. Your line is open.

Hi. Thanks for taking my question. First question I had was just if you could talk a little bit more about the China smartphone business, or some of your other kind of OEM customers in audio. Is there an opportunity for any of those customers either China or other OEMs to approach 10% of your audio revenues later this year?

Oh, I think that would probably be pretty aggressive. I mean we are pursuing a lot of opportunities in different handset manufacturers, but to be honest, if you look at the Smartphone market, there is number one, number two, and then there are a bunch of guys with 4% or 5% market share, so even if we were to clean sweep an individual account outside of number one or number two, it would be difficult for it to grow the size that you just threw out there, but that is fine, I mean honestly 4% or 5% of the phone market is a big number relative to the typical analog and mixed signal markets, and we really can't let the overall size of our business color the fact, or color the way that we go pursue these other opportunities. You never know what is going to be the next big thing. In any analog and mixed signal business $1 million to $5 million design wins are kind of the sweet spot of what you can expect to go after, and we need to be very efficient in going after those.

Great. And then for my follow-up, I had a follow-up on the operating margin question. I just wanted to clarify with all of the tape outs that you guys have in fiscal 2015, given that you are investing in future products that are really targeted at calendar 2015, is it a possibility that your 20% operating margins could dip below that are target for fiscal 2015? How should we think about that? Would you let it dip knowing that obviously you are investing in the future, or would you still magazine to that 20% operating target for the fiscal year?

Well we are very specifically not giving any guidance for any particular year. We are just reiterating that that is our model, and we think we will do well, and stand very close to that, maybe above it, maybe below it, but we are not specifically guiding the current year. But as I said a minute ago, we are not at all shy about making investments in areas that we believe in advance of winning opportunities that we see out there. So in short, we manage for the long run. We don't manage, we absolutely don't try to manage our expense on a quarter-over-quarter basis. Obviously, we pay a lot of attention to our expense. We don't want to waste money, we want to be very efficient about how we have deployed our expense, and make sure that it is being invested wisely, and that we are on track to seeing good returns for that.

Great. Thank you.

Sure. Thank you.

(Operator Instructions). One moment for a question. And I am showing we have a follow-up question from the line of Jeff Schreiner. Your line is now open.

Yes. Jason, can you talk about what ASP range, or content is for a voice controlled design win, let's say in a Smartphone?

It is kind of difficult to put a number on it because it could mean a lot of things. We have got wins that are related to voice control that could be, that are simply algorithm based, there might not even be any silicon. It could be stuff that is already going on from the Acoustic Tech area, and that has a wide range of ASPs. You can use like I say, one of our devices, where the value that we might add in the future could be something along the lines of keeping a microphone bias at a very low power level, so that you could listen 24/7 and respond to voice commands, all of the way up to a full blown very complicated phone CODEC list, noise suppression, noise cancellation, microphones, you name it, all being handled by that device. So it is a pretty broad range in short.

Okay. Thank you.

Sure. Thanks, Jeff.

(Operator Instructions). And I am not showing any further questions at this time. I would like to turn the call back over to Chelsea for additional remarks.

Thank you, Operator. We will conclude the call with several questions that we have received via email. Can you comment on the volatility of the stock price?

Well, I certainly don't have a good crystal ball there. We certainly hear from retail investors frequently about the stock. It is, nobody asks our opinion about what it ought to be obviously, and it is not something that we have any direct control over, so our job is just to manage the long-term prospects of the Company. We are very focused on making sure our investments are well placed, and that we are doing the right thing to grow the Company's revenue and profit over the long-term, and our expectation is that if we do a good job of doing that, that the stock will take care of itself.

We are a volatile stock, I think it is likely that continues to be the case. As I say, we don't have any control of that. I would pay a lot of attention to the corporate filings that we do. I would pay a lot of attention to in particular our Forms 10-K and 10-Q the risk factors that are in there. We put a lot of time into those. They are real. A lot of them are not particularly specific to Cirrus. Some of them are, but we are in a volatile industry, and if you are investing in any semiconductor company, you really should do your homework about what you are getting into, and make sure you are cognizant of the risks that are there. Obviously these are things that we put a lot of time into making sure don't happen, but it is not always up to us and it is not always under our control.

Thanks. And the final question today, have there been any discussions internally about announcing a stock dividend?

Well, at any given time we, our Board, myself, Thurman, spend time figuring out what is the most efficient and effective way to deploy our capital. Obviously our preference is if we can find valuable M&A that we can do that we think will actually work, a great example being the Acoustic Technology guys, which has worked out very well. We would love to find more of those, but it is definitely a challenge to find an acquisition that would be a good cultural fit, as well as a good geographic fit, and technology, and all of the rest of that, and we don't really want to buy anything that doesn't work out well.

On a more ongoing basis, we have analyzed dividends versus buy backs, and as a volatile stock along the lines of the previous comment, I think you could argue the case for either one, but at this point, thus far we felt like a buy back is the more efficient way to go, but it is something that we re-evaluate from time to time, and I am sure that we will continue to do so, but I will note that over the past years we have taken a significant amount of shares off even in the last year taking I think on the order of about 5 million shares off. So that is something we will continue to do. We do have a fair amount of authorization remaining on the buy back as well. Alright.

In summary we delivered outstanding revenue, operating profit, and earnings per share results for the third quarter. We are pleased to be on track to continue to achieve our long-term operating profit goal of 20%. While the next year will be a period of transition, as we focus on the introduction of new custom and catalog products, we are excited about our opportunities for long-term growth.

I would like to also note that we will be attending the Stifel Conference on February 11th in San Francisco. We hope see some of you there. If you have any questions that were not addressed, you can submit them to us via the Ask-the-CEO section of our Investor website. I would like to thank everyone for participating today. Good bye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a good day.