Cirrus Logic's (CRUS) CEO Jason Rhode on Q1 2015 Results - Earnings Call Transcript

Jul.23.14 | About: Cirrus Logic, (CRUS)

Cirrus Logic Inc. (NASDAQ:CRUS)

Q1 2015 Earnings Conference Call

July 23, 2014 5:00 pm ET

Executives

Thurman K. Case - CFO, Vice President of Finance and Treasurer

Jason Rhode - President and CEO

Chelsea Heffernan - IR

Analysts

Tore Svanberg - Stifel, Nicolaus & Company

Andrew Huang - Sterne Agee

Vern Essi - Needham & Co.

Jeff Schreiner - Feltl and Company

Chris Hemmelgarn - Barclays Capital

Chris Longiaru - Sidoti & Co.

John Vinh - Pacific Crest Securities

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic First Quarter of Fiscal Year 2015 Financial Results Q&A Session. At this time, all participants are in a listen-only mode. 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 call over to Mr. Thurman Case, Chief Financial Officer. Mr. Case, you may begin.

Thurman K. Case

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 first quarter of fiscal year 2015 at approximately 4 P.M. 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 Web-site at investor.cirrus.com. This call will feature questions from the analysts covering our Company as well as questions submitted to us via e-mail at investor.relations@cirrus.com.

Please note that during this session, we 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 Web-site, 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'd like to turn the call over to Jason Rhode, our President and Chief Executive Officer. Jason?

Jason Rhode

Thank you, Thurman. Before we begin taking questions, I'd like to make a few comments. For a detailed account of our financial results, please read the shareholder letter posted on our Investor Relations Web-site. Our financial results for the June quarter were at the high end of guidance, as we delivered GAAP EPS of $0.16 and non-GAAP EPS of $0.37 per share on revenue of $152.6 million. Sales of our portable audio products accelerated in Q1 as we continue to experience robust demand for higher performance audio solutions across our customer base. Sales in our Energy division remained relatively unchanged from the prior quarter.

During the quarter, Cirrus Logic announced its intention to acquire Wolfson Microelectronics for an enterprise value of approximately $467 million. This acquisition will augment the Company's core audio signal processing product portfolio, provides differentiated software capabilities particularly in the Android ecosystem, and adds new product categories such as MEMS microphone.

Further, the additional resources will enable the Company to better address the substantial opportunities driving future revenue growth in the portable audio market. We are excited to welcome Wolfson to the Cirrus Logic family and expect the acquisition to close sometime this quarter. Please note, as we do not have an exact close date, guidance for the second quarter does not include any potential contribution or expenses associated with the Wolfson acquisition.

We are pleased with the progress we've made in portable audio as we continue to experience strong demand for our custom and general market codecs, DSPs and amplifiers. In fact, we are now shipping general market products in the multiple handsets on seven unique customer platforms. During the quarter, we ramped shipments of our boosted amplifier with speaker protection and sound quality enhancement software to support the product launch of a recently added top tier smartphone customer.

Although as we've mentioned in the past the amplifier market is highly competitive, we are encouraged by our success with these products and expect to see year-over-year unit growth in FY '15. Additionally, we are excited to be sampling several of our new advanced geometry high-performance products and are actively engaged with customers on future designs.

Before we begin the Q&A, I would also 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 specifics about our business relationship. Operator, we are now ready to take questions.

Question-and-Answer Session

Operator

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

Tore Svanberg - Stifel, Nicolaus & Company

So my first question, I just wanted to clarify a statement you made, Jason, about year-over-year unit growth in fiscal '15. Did that refer to the amplifier business or is that for the total business?

Jason Rhode

The comment I made was specific to the amplifier business.

Tore Svanberg - Stifel, Nicolaus & Company

Okay, alright, just wanted to clarify that. The second question that I had is on R&D. So looks like you're guiding it to be up sequentially obviously based on new product tape-outs. I'm just trying to understand beyond that are we going to continue to see these types of increases or is it still sort of lumpy where you have heavier increases in the September and December quarters?

Jason Rhode

The September quarter is expected to be consistent with the guidance which is significantly flattened out certainly relative to the increase we saw in the June quarter. The tape-outs that we do now in 55-nanometer are pretty expensive. They can move the needle around definitely. So there is an element underlying the total that is lumpy, but we certainly don't expect to see the same kind of growth that we've seen in the past in OpEx.

And just to circle back on your previous question, I would estimate that we'll see overall unit growth in total as well, but the comment that I made was specific to amplifiers just because there's been a fair amount of rumor and speculation on that front.

Tore Svanberg - Stifel, Nicolaus & Company

Okay, very good. Just one last question. I'm just trying to understand directionally where the R&D is headed. Is it safe to say that we'll see a smaller percentage of custom revenue going forward? It just seems like based on all these new products you've come out with that they are targeted at potentially more than one customer.

Jason Rhode

It's hard to call. We'd like to see the total dollar amount of custom revenue go up and the percentage go down. I don't know if there's a bad way to grow, so it is how it is but it is certainly the case that we are taping out more general market product than we have done over the past few years. We went through a period where we grew so quickly that it was very difficult for us to bring in enough resources to keep up with all the new developments that we wanted to do, and the fact that we've had a little bit of a class buy here has enabled us to bring in the people to scale the development resources of the Company in a way that's proportional to the new revenue levels and that's got our ability to crank out new products increased in a pretty big way.

Tore Svanberg - Stifel, Nicolaus & Company

That's very helpful. Thank you very much, guys.

Operator

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

Andrew Huang - Sterne Agee

Just a follow-up on Tore's question. If general market products can increase as a percentage of your revenue, would that kind of put some pressure on gross margins but kind of maintain comparable level operating margins?

Jason Rhode

Generally speaking, the general market products are significantly higher in margin than most of the custom stuff that we do. I mean even within the custom stuff, there's some variability depending on the volume. Just to be clear, I think when we say 'custom', everybody assumes there's only one customer there. We've done custom products for quite a range of different companies. But generally speaking, the general market products are higher in margin.

Andrew Huang - Sterne Agee

And just to clarify that, is that higher in gross or operating or both?

Jason Rhode

We don't break individual products down to operating margin but the gross margin would certainly – is higher on average.

Andrew Huang - Sterne Agee

Okay, thank you. And then the follow-up question I had was, if you look at your Audio Products excluding your biggest customer, it looks like there was a pretty nice sequential move there. Do you expect that momentum to kind of continue over the next couple of quarters?

Jason Rhode

We're seeing a pretty strong environment in the general audio market, both in general and then specifically in portable where we've ramped with a number of customers that do move the needle. It's a continuation of the trends that we've seen where people are looking for new ways to differentiate their products whether it's louder speakers or tricky voice algorithms or noise type processing things that are right up our ally.

So as I alluded to in the opening comments, we're shipping on a number of new platforms with products that range from amplifiers to pretty complicated codecs and we think that that trend is something that over the next couple of years continues to grow, and that's a big part of the motivation for why we allocated more of the Company's resources on the audio as well as pursued the Wolfson transaction.

Andrew Huang - Sterne Agee

If you don't mind me asking, is it fair to say that your kind of these seven new customer platforms, would you consider those kinds of more emerging market type OEMs or like Tier 1 OEM?

Jason Rhode

It's a mix.

Andrew Huang - Sterne Agee

Okay, thanks very much.

Jason Rhode

There's definitely some Tier 1 names in there and there's a broad variety of I guess what you termed emerging folks.

Andrew Huang - Sterne Agee

Perfect.

Operator

Our next question comes from Vern Essi with Needham & Co. Your line is open.

Vern Essi - Needham & Co.

Thank you very much and congrats on the seven unique customers, and just to follow on the previous questions there from Andrew, in terms of – which I think ask this with you, Thurman, but if we look at the audio bucket outside of your largest customer, can you give us a sense of where the non-portable audio has been over the last year maybe roughly on a year-over-year basis, because I'm just trying to gauge how much the portable side has grown outside of your largest customer and any color on that I think would be appreciated?

Thurman K. Case

The non-portable audio has been relatively flat to down over the last year year-over-year. And so we don't really breakout the total percentage of that in terms of overall revenue but it is flattish to down.

Jason Rhode

Okay and just to follow-up on that, I mean I think that's reflective of where the Company's focus has been over the last handful years, the best opportunities that we've got are in portable and it really needed to see the number of customers that are interested in what we're doing in the portable space.

That said, that's largely been a matter of prioritization because we've been unable to do everything we would've liked to have done over the past couple of years, and both the reallocation of resources within Cirrus itself and then the addition of the Wolfson folks I think will give the combined company a significantly better ability to go target some of these opportunities outside of portable audio in addition to doing what we want to do in portable.

Vern Essi - Needham & Co.

Okay. And then, in your letter you discussed a mix shift in ASP declines and you've discussed this in the past year-over-year. I was wondering if you could elaborate a little bit more, and of course as specific as you want to be I think or be more generic, but in terms of how we should be looking at that going forward? And then also, I'm bringing the default here as it relates to your embedded software efforts, you've got some competitors out there at least on the context aware side that are investing pretty heavily in algorithms and whatnot. Do you see this as being a way for you to reinforce a certain level of ASP or dollar content or is this a scenario where we're going to see sort of a continued trend of price pressure that you would normally see in the industry?

Jason Rhode

Sure, yes. So on the ASP side for the last year, there's a mix of issues that related to it. I would say the previous year we had seen a huge increase in ASP and then we had to do some cost reductions et cetera to help our customers be successful, which is part of the process in this business. And then additionally some – a mix of products that went with maybe less complex products than they might have for us, so that also contributed to the ASP. But the important thing is the unit volume, we maintained our position in those sockets and the unit volume continued to increase.

So, generally speaking that's not something that we would expect to have continue going forward. Obviously our goal is to continue to add more and more functionality to the products, which historically for us has been largely focused on hardware, but I think you pointed out exactly the right thing which is that in a lot of the markets that we serve, significant value can be added in software and firmware algorithms and that was the motivation for the Acoustic Tech acquisition last fall that as you know we're pretty – we look real long and hard before we do an acquisition.

That one looked like it was going to be a good one and those guys have just knocked the cover off the ball for us. They're shipping in a bunch of different products, and in some cases where it's shipping of an algorithm alone, we're making good money per shipping code. Obviously the longer-term goal is to derive more revenue from our chips that contain that code, and again you're right that that's a great way for us to add value and hopefully keep our ASPs high in these markets.

Further on from that, it's a big element of the Wolfson acquisition again. They've been serving the Android market for longer than we have and that has pushed them to be a bigger part of the Android ecosystem than we have been to date. It's kind of a little bit of a nature of the beast with the customers that are in that space that they maybe aren't as able to look out three or four years on the hardware side and tell us what they're going to want, so that we can do custom devices for them and really make the hardware exactly what they want.

But it is the case that they can work on a software timeframe. So if we've got a general platform that will be applicable to whatever model of phone they might be developing, we can then add on and customize that in terms of software and firmware and the ability that the Wolfson guys have got on that front are a significant augmentation to our own.

Vern Essi - Needham & Co.

That's a great answer. Thanks a lot for delving into there, I appreciate it.

Operator

(Operator Instructions) Our next question comes from Jeff Schreiner with Feltl and Company. Your line is open.

Jeff Schreiner - Feltl and Company

Jason, I want to ask you kind of more of a technical question while we have you on the line to [teeth] (ph) your inputs. Just wondering what your thoughts are over the next 12 to 24 months in terms of where audio processing will be gone, is it going to be done in the MEMS microphone as many in that industry are talking about, is it going to move to the application processor, or is it still needed codec in between the two, how are you looking at that and what are your thoughts on that?

Jason Rhode

That's a good question, Jeff. I think it's going to be a mix of all the above depending on the exact application. There are some algorithms that if it's in an application where there is an applications processor, those are the smallest geometry transistors and it makes a lot of sense to do things there. The caveat to that is that if you've got to boost the whole thing up and enable the OS to make it fly, you're incurring a pretty significant power penalty for doing that.

So in a device where there is an applications processor, then there is definitely a class of algorithms. Some folks refer to them as kind of always-on type algorithms where having a sidecar device you could embed it in an audio codec and that's certainly the angle that we're pursuing and that we think benefits us. Having a sidecar DSP that's able to sit and be on at a very, very low QSM power level, respond to somebody's command say on a microphone or some other sensor's activity and then wake up the apps processor as appropriate, we think that's a great system partition.

And then further, as you mentioned in the microphone context, we think there's definitely an opportunity for smarter microphones out there. That was again another nontrivial aspect to why we wanted to pursue the Wolfson acquisition. They've got some great technology around microphones, they're shipping in some good platforms and Tier 1 accounts, and we think that being able invest in that product line and further differentiate our product offerings there gives us another arrow in the quiver as we go after these emerging classes of applications where potentially there is no apps processor.

Jeff Schreiner - Feltl and Company

Okay, thank you. One thing I just wanted to wonder or ponder on, and either Jason or Thurman, maybe you can answer this, it's been over a year now since the Barclays Conference, well beyond a year, where you provided mid-40s gross margin guidance, but continued to kind of deliver in the low 50s for a while now or moving to the high 40s. Is there some shoe that's going to drop that investors need to be worry about or what is driving the guidance to suggest that over the longer term margins are going to move to mid-40s?

Jason Rhode

The reason we said that at the time and the reason we continue to put that in our shareholder letter is we think that's what the business will support in the long term. And so from a shoe dropping perspective, we think you should keep that in mind from a long-term perspective that's where we expect it to be.

But that's obviously our goal is for margins to be as high as possible and our supply chain team does a great job. There's a variety of angles that they pursue to try to improve upon that and they've done a great job so far. There's a lot of moving parts in a quarter like this past one which is a lower quarter for the year than the mix of things like royalties from software algorithms or higher-margin general market products contribute a higher margin, so you see us come in at the upper end of our guidance.

So I don't think there's anything real mysterious going on, it's just our folks doing a good job and we're doing a typically conservative job of putting out guidance and making sure that we're able to deliver on what we say.

Jeff Schreiner - Feltl and Company

And my final question is that, I'm not sure if you guys know but there's this device that's coming out that's going to stay with the world, end world hunger, cure all diseases and bring about world peace, and there's supposed to be a lot of magnitude in terms of volume essentially surrounding these types of products, and I'm just trying to reconcile the magnitude expected by many in the industry versus what looks like a potentially down year-over-year revenue run rate, and also in the context trying to do that with what seems like it's some commentary suggesting that maybe concerns about amplifier losses may be overdone. Can you maybe broad stroke kind of help reconcile some of those things?

Jason Rhode

No, not really. I don't really have any comment about world hunger devices. Send me one if you happen to get in the queue when they are launched. We have said relative to our business that we expect it to be a flattish year, the first two quarters of the fiscal year at least, based on the guidance that we're putting out for Q2, are down a little bit, we still feel good about that flattish for the year guidance which would imply the second half of the year could potentially see some year-over-year growth.

We do see some potential for upside to that as we head into what we think is going to be a very strong FY '16 on the strength of a number of new product introductions from us. But do your own guesswork as far as what customers might launch what when. I would say relative to new categories, we have said on the last couple of calls that while we're really excited about wearables in the long-term, we don't expect that to be a meaningful contributor to our revenue in the short-term.

Jeff Schreiner - Feltl and Company

Thank you very much for your time, gentlemen.

Jason Rhode

Sure. And then just to follow-up on the amplifier thing, I don't know where the rumors and innuendo comes from but that's why we put in the letter and the opening remarks. But whatever it may be, this is a brand new product line for us, less than a couple of years old, we've grown it to be a big and profitable and growing business in a few short years. We're extremely proud of that. And as we said, we expect that to grow in units year-over-year. So our team has just done an exceptionally good job of building a new from scratch product line and shipping that into a number of different customers.

Jeff Schreiner - Feltl and Company

Thank you.

Operator

Our next question comes from the line of Chris Hemmelgarn with Barclays.

Chris Hemmelgarn - Barclays Capital

First one, I really appreciate the color you guys provided particularly on the amp front, and the additional color that you're reiterating in your guidance, but I guess when I put hose two bits together, that you expect to sell more amps and more units overall and you expect revenue to be kind of flat, it certainly looks like your largest customer by all expectations is going to ship quite a few more devices this year than last year. I mean that would indicate some additional content war. Is that the right conclusion to draw?

Jason Rhode

No. So let's see, so we put a fair amount of color last year on eroding ASPs. It will move to a lower margin structure which certainly indicates that. This has not been a big year of new product introductions for us. And so I think most people who follow the semiconductor industry recognize that there's a year-over-year – if you're selling the same parts to the same customers, they are probably going to expect price decreases. So that factors into it as well. But like I said, there's a lot of moving parts and amplifiers is one of the more competitive areas, we don't expect to have a monopoly there, we're going to win some, we're going to lose some, overall I'm very happy with how that product line is shaking out and we expect the units there to grow. And as I said, we do see some potential for upside in the second half of the year but we only guide to current quarter.

Chris Hemmelgarn - Barclays Capital

So you are holding to your original flat year-on-year revenue guidance, correct?

Jason Rhode

It's flattish.

Chris Hemmelgarn - Barclays Capital

Flattish, okay.

Jason Rhode

Flattish, and the first couple of quarters have been down year-over-year, so that would tell you the second half of the year…

Chris Hemmelgarn - Barclays Capital

Will be stronger. So okay, that's helpful. So I mean nothing, no major issues other than normal semiconductor price declines that we're familiar with. That makes a lot of sense.

Jason Rhode

Yes, we feel really good about the year. We're having this as a huge year of new product tape-outs and development for us. We're moving a lot of what we've historically done, which has been simpler products in older geometries such as the 180 nanometer. A lot of our new tape-outs are in advanced geometries, 65-nanometers, 55-nanometers. The only reason you do that in our space is if you're adding a lot more functionality, put the same part and moved it from 180 nanometer to 55 nanometer, all we need to do is make it more expensive. So it's a great year of new product development for us, and as we've said before, we still see revenue contributions from some of those new products kicking in as early as first calendar quarter of next year.

Chris Hemmelgarn - Barclays Capital

That's very helpful. One quick other follow-up, just the ever popular tax situation, inversions and other sorts of tax shenanigans have been a very hot subject in the news these days and your Wolfson acquisition certainly looks like it might offer the possibility of alleviating some of the coming tax burden you have. Just any comments on your plans there and what your tax expectations are for calendar '15?

Thurman K. Case

With the Wolfson acquisition, one of the positive things and one of the advantages to that acquisition is that we are acquiring an entity overseas that happens to be in a jurisdiction with a lower tax rate, around 20% in the U.K. Given that, that will provide advantages to us, and we do believe that as we look at our corporate structure going forward and we begin to formulate our longer-term plans, that the acquisition will provide us opportunities to reduce our overall corporate effective tax rate.

Chris Hemmelgarn - Barclays Capital

Thanks very much, Thurman, and thanks gentlemen.

Operator

(Operator Instructions) Our next question comes from the line of Chris Longiaru with Sidoti & Co. Your line is open.

Chris Longiaru - Sidoti & Co.

So you talked about this for a while, a trend towards the mid-40s gross margin. I was just wondering if – because this was before the Wolfson acquisition, if that comment changes at all with the Wolfson acquisition, does that speed up the movement because it's more audio and obviously some margins there are a little lower than your overall corporate average, can you just give a little color on that?

Jason Rhode

The development is of the same kinds of products that we are to serve in the same market, so we would expect it to be a similar margin profile to us. If you look at their most recently released results, back in I think the March timeframe as well as the guidance they gave at that time, that was for margins I think in the 47% range. So that's actually pretty supportive of where we think we need to be long-term, and that's before we start looking at whatever advantages we might bring to bear on their smaller business with our much larger supply chain. So we feel real good about the acquisition from a profitability point of view.

Chris Longiaru - Sidoti & Co.

Okay, great, that's helpful. And then just on the regulatory hurdles that you're facing there, can you just give a little more color to those and how do you expect to update the street, if [those goers] (ph) are just going to be an announcement that the deal is closed, can you give a little color on how that should play out in your head?

Jason Rhode

Yes, that's pretty much how it will play out in our head. We're going through all the inertia of the regulatory stuff and it's expected to close this quarter. There's lots of things and lawyers and accountants and whatnot that are involved, but we're just working through the process, don't expect any huge surprises but we're just going through the process and we'll update you once the deal is closed, hopefully sometime this quarter.

Chris Longiaru - Sidoti & Co.

And then just lapping, typically you have a big jump for obvious reasons in your inventories between June and September. Should we be thinking about kind of a similar move up from a percentage basis as last year, can you comment on that?

Jason Rhode

We've put some specific guidance on that in the letter. Thurman, I don't know if you want to…

Thurman K. Case

Inventories moves around quarter-to-quarter, particularly when we do see ramps, customer ramps, and as you noted, we saw in the June quarter over 20 million increase. Although we don't typically talk about specific inventory numbers because of that movement, we do expect inventory to increase again in the September quarter.

Chris Longiaru - Sidoti & Co.

Okay, alright, that's helpful. Thank you, guys, I appreciate it.

Operator

(Operator Instructions) Our next question comes from John Vinh with Pacific Crest. Your line is open.

John Vinh - Pacific Crest Securities

I had a follow-up question on the wearables market. I was wondering if you could talk about the content opportunity for wearable devices versus smartphones. Obviously most wearable devices on the market today don't have a speaker. I'm just trying to understand if there is a comparable content opportunity or if it's more or less?

Jason Rhode

It's probably all over the map. I think that that market is in such an infancy stage that while we're all excited about what it might be, it isn't really anything yet. But generally speaking, a lot of these devices are going to be pretty small, whether it's a wrist band that might not have a screen on it at all for fitness kind of stuff, we see voice as a really attractive interface. We think that the technology that we've got in the SoundClear family from Acoustic Tech as well as some of what we're acquiring along with Wolfson is really applicable in that market, something we're really excited about. I think there's opportunities in things such as sensor hubs where we can incorporate audio into some of that as well, throw some of our audio signal processing at it.

I think in terms of traditional audio, the need in such a small form factor are pretty low. Obviously it's a good opportunity for microphones. And as one of the earlier questions alluded to, there's lots of folks talking about putting more and more smarts in microphones, which I think makes a lot of sense in a wearable application.

So, I think on the whole, I guess if I had to benchmark it relative to a phone, I would say there's on average in the long run probably less audio in a wearable type thing than in a phone, but it's still an entirely new category and I think it is synergistic with phones rather than cannibalistic. So it's an exciting new category, it's still definitely the wild west, so we'll have to see how it unfolds but it's definitely a good incremental opportunity for a number of our products.

John Vinh - Pacific Crest Securities

Great. And then my follow-up question is on Wolfson. I was wondering if you could update us with your thoughts in terms of how you're thinking about cost synergies. I think you previously talked about $12 million in cost synergies. Given that you've had time to kind of obviously take a closer look, is that how we should be thinking about the synergies there?

Jason Rhode

Yes, I think we're real consistent at this point with what we've said at the time and as filed in the 2.7 document in association with the acquisition.

John Vinh - Pacific Crest Securities

Okay, thank you.

Operator

I'm showing no further questions at this time. I'd like to turn the call back to Chelsea Heffernan for further remarks.

Chelsea Heffernan

Thank you, operator. We will conclude the call with questions that we've received via e-mail this afternoon. The majority of the questions were addressed in the Q&A session. However, there were several that were not asked. Can you provide color on the change in headcount in the June quarter?

Jason Rhode

Sure. As we indicated a while back, we did a rebalance of the resources from our energy developments in the audio in order to more rapidly staff up and make sure that we are able to capitalize on our larger opportunities within audio. And then obviously, once we announced the Wolfson deal, that kind of put us in a little bit of a mode where we felt like we needed to take a little bit of a pause and reassess once we're integrated into one company.

Obviously we're still hiring, but once we did that reallocation of resources between energy and audio, there was a little bit of rebalancing there within that team. And then of course on top of that, you've got a normal, fairly low but normal attrition rate as well. So then, the net of all that ended up with being a small decrease in headcount during the current quarter.

Chelsea Heffernan

Great, thanks. The final question, can you provide an update on your share repurchase program?

Jason Rhode

Sure. We've still got a fair amount of authorization remaining. It's something that we consider from time to time. We view that as a good use of cash. However, obviously with the Wolfson acquisition, we've taken on or will be taking on a fair amount of debt. You can imagine that we'll be prioritizing paying down that debt as we go forward, but certainly share repurchases is something that in that context obviously we will still consider in line.

Chelsea Heffernan

Great, thank you. That was the last question.

Jason Rhode

Alright. In summary, we are pleased with our progress in Q1 as we delivered strong financial results and gained momentum across our portable audio products. We believe the portable audio market is in the initial stages of the next wave of growth, driven by the desire to differentiate products through the audio and voice experience. With a strong pipeline of compelling products and the pending acquisition of Wolfson, we are strengthening the Company's position as a market leader in audio with the comprehensive custom and general market product portfolio, differentiated software capabilities and a top tier customer base.

I would also like to note that we will be holding a virtual Annual Shareholders Meeting on Monday, July 28 at 11 A.M. Central Time. If you have any questions that were not addressed, you can submit them to us via the 'Ask the CEO' section of our investor Web-site. I'd like to thank everyone for participating today. Goodbye.

Operator

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

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