Cirrus Logic Incorporated (NASDAQ:CRUS)
Q4 2016 Earnings Conference Call
April 26, 2016 05:00 PM ET
Chelsea Heffernan - Director, IR
Jason Rhode - President & CEO
Thurman Case - CFO & VP, Finance
Charlie Anderson - Dougherty
Suji DeSilva - Topeka
Blayne Curtis - Barclays Capital
Rajvindra Gill - Needham & Company
Tore Svanberg - Stifel
Christopher Longiaru - Sidoti & Company
Rick Schafer - Oppenheimer
Tom Sepenzis - Northland
Ladies and gentlemen thank you for standing by. Welcome to the Cirrus Logic Fourth Quarter and Full Fiscal Year 2016 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.
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, our Director of Investor Relations.
Today, we announced our financial results for the fourth quarter and full fiscal year 2016 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 Web site at investor.cirrus.com. This call will feature questions from analysts covering our Company as well as questions submitted to us via email at firstname.lastname@example.org.
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 Web site and 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.
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.
FY16 was an outstanding year for Cirrus Logic as the introduction of the new portable audio products and share gains with existing customers resulted in solid financial results. We delivered record revenue of 1.2 billion up 28% from the prior year driven by strong smart codec and amplifier sales. We are pleased to have exceeded our long-term revenue target model of 15% year-over-year growth and achieved our non-GAAP model of 20% operating margin. Revenue for the March quarter was 232 million as we continue to experience short-term weakness in portable audio.
Despite soft demand for smartphones in Q4, our engineering, technical marketing and supply chain teams were heavily engaged in new product ramps, takeouts and design activity. During the quarter we ramped a new flagship multi-core smart codec with a key customer and began shipping our first complete signal chain win with microphones and new mid-tier smart codec and a new boosted amplifier at another tier 1 smartphone customer.
Chip design activity was also robust as we take out a new flagship high performance codec, a hi-fi headphone deck, new boosted amplifier and finalized the design of a next generation mid-tier smart codec. This past year we significantly enhanced our product portfolio, increased our share with existing customers and OEMs 3 through 10, gained traction for having key flagship features in the mid-tier devices and introduced innovative products including those targeting the wearable and smart accessory market. As we move into FY17 we remain keenly focused on a wide range of strategic initiatives that we believe are essential for future growth and will strengthen our position as a market leader.
As the leading supplier of the complete audio signal chain Cirrus Logic has developed an extensive pipeline of new products and a compelling roadmap that addresses the technical and price requirements of a wide range of products, markets and customers. We believe the Company is uniquely positioned to address the rapidly growing audio and voice markets providing us numerous opportunities to fuel long-term growth opportunities in the coming years.
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're now ready to take questions.
Thank you. [Operator Instructions] Your first question comes from the line of Charlie Anderson with Dougherty & Company. Your line is open.
I was noticing in the shareholder letter note, Jason, there was a note about really strong growth in amplifiers you expect in FY17. And I wonder if you could talk about the difference between -- is that new customers versus existing customers? And then microphones, you also mentioned you picked up win there. If you just update us on where capacity is and sort of your ability to ramp that into FY17 and beyond?
Sure, well those are defiantly a couple of different magnitudes of impact there. Amplifier is a great market for us it has been since we entered it in 2012. It's been a big and growing piece of our business since then. A lot of great stuff going on in that market as customers seek to make their products lauder and sound better when they are laud. I think one used case that pretty much everybody wishes their handset had would just be the smartphone or the speaker phone rather would be loud enough, if you could just use it in a car without having to mess around a Bluetooth for any of that. So in addition to music there is voice experience things that drive customers to want to make their handsets lauder. So that requires a boosted amp or potentially multiple boosted amps we have got customers that have been interested in that. You can imagine the form factors on these things are incredibly constrained, so customers are talking about can we make them lauder by using two smaller speakers rather than one big one.
And any way, there is a lot things going on in that market, traditionally our business has been dominated by one big customer but we see really good opportunities to broaden that business out in the android space, so no real comment on things that haven't launched, but we do see that opportunities to broaden our customer base out in the amplifier market. So it's a big and growing market, it's defiantly possible for more than a one of the supplier to serve that space to grow. But we are just minding our own shop and making sure we are doing the right things to grow our business including we kind of alluded to in the shareholder letter migrating the amplifiers down from 180 nanometer. We are working on 55 nanometer today which is going to give us the ability to not only have a really world beating cost structure but also add a tremendous amount of digital features and also potentially integrate with our 55 nanometer Smart Codecs. Some number of years down the road, so that’s kind of what's going on in the amplifier space, no real specific comments about what is driving the growth this year we try not to get too far ahead of our customers. But we are excited about that.
On the microphone side, we are still just kind of doing the business of proving ourselves as a supplier we have got good wins there, it's not a material contribution to revenue yet, and we don’t expect it to be for some time to come but we are investing in the business to prove ourselves as a supplier and we think once we do that the opportunities for us to combine the microphones with other products in the portfolio like Smart Codecs etcetera, things like ANC where we can optimize the whole chip set of the system, really put us in a position that will be difficult for others to compete with and we think that’s a path to a margin profile in the mic business that we would actually like.
And then quick follow up from me. I wondered on the -- you guys mentioned expecting strong growth in ’17 above your long-term operating model. I wonder if you could speak to -- we're seeing a lot about slower smartphone in general, even down smartphone. What are you thinking in terms of unit assumptions for the market and your ability to grow in the face of that? Any color there?
Well, I mean we read all the same market prognostications that everybody else does, when we say stuff like strong growth in FY17 we have to be kind of mindful and be conservative of all that, so we are certainly not counting on any amazing unit growth. I generally think the industry tends to be too pessimistic on that front. We are certainly engaged with the right customers and we think they will all continue to do well. But relative to that statement, certainly we are not counting on anything amazing happening unit wise in the market, we are continuing to push on all the various different growth factors that we see, grow our business with our existing customers broaden out in the 3 through 10 drive down to the mid-tier, a number of other factors and we think that’s what really drives our growth it's not something where we are overly dependent on unit growth in the market.
Your next question comes from the line of Suji DeSilva with Topeka. Your line is open.
First of all, on the customers you are expanding out at the 3 to 10, can you talk about, particularly the China OEMs how far along they are in trying to match the premium feature set? And how argent that upgrade is for them to help you kind of drive your products through there?
Well, I mean in terms of really diversifying the business that’s aways down the road but we are engaged with all of the right folks certainly most of the right folks in that handset manufacturer 3 to 10 list, we are shipping with some of them today. Some of those wins in the past have been I would call them more opportunistic where they are using a device here, a device there and some of them make pretty radical changes model by model. But we have got more opportunities that we are engaged in with our Smart Codecs than we have ever had before this is really the first full year we have had mid-tier devices on the market which is really what's more applicable in the China market or at least the broad swath of it that is going to move any meaningful volume. So really moving to a Smart Codec is a pretty good commitment it takes a while to get in but it also not a design win that a customer takes lightly as something this much.
More likely to be sticky rather than opportunistic on a model-by-model basis, the Hi-Fi DAC that I referred to in the opening remarks is directly targeted at China and we've got as I said a couple of mid-tier smart codecs that have been out for a little while now and gaining traction there and a lot of times people start looking at one of those and realize that they don't want to give up on running all of the various stuff that some of their higher-end competitors are doing. And they end up migrating before the design is even over to one of our closer to our flagship devices. And so those are all good trends we're seeing very good growth out of those accounts, it we'll take awhile before they move the needle. But we often don’t push very hard on releasing customer names, but if you're paying close attention to product launches and tear-downs and all stuff you've really been able to see cases where our smart codecs have been shipping even in a case where they are shipping with one of our competitor’s AP in a kind of a broken bundle scenario. So now that those proof points are out there I think a lot of customers are realizing that they're a little more free to choose premium audio device if that's what suits their marketing needs. So I think it would be tough for that to be going too much better than it already is.
That's great color, Jason. The other question is on the headset opportunity, which I know was forthcoming. Do you have any update on how that is tracking, and your optimism on that being a large-volume opportunity versus an emerging one this year?
Well, I mean we mentioned headsets are a reasonable part of our growth expectation this year we're very excited about that transition it seems like there is a number market forces that are kind of conspiring to move what has been an analog headset market to be significantly more digital than it was in the past, so something that effectively had no analog or had no active circuitry and it suddenly needs something like a USBC interface device and conversion circuitry, amplifiers obviously I am speaking about the Android space here we don't obviously can't comment on what our largest customer might be doing or not. But it's a neat transition for the market so at the high end of the space we've got our ANC headset device which we are extremely excited about long-term. A number of customers designing with it, it is a very challenging acoustic problem to solve. We've done our part with the chip itself but it leaves a lot for our customer to work on that and really iron out how to make that device fly into production product, so we're working closely with a number of folks and very confident that that turns into revenue in the long run. But in the near term, the much larger section of the market is a little more basic headsets that have the potential to convert from analog to digital and we see very good opportunities with those probably near in and larger than the ANC.
Your next question comes from the line of Blayne Curtis with Barclays Capital. Please go ahead.
Jason maybe just talk about the overall guidance in the June slide, can you just talk about within that android you mentioned a lot of these wins intended directionally, is your Android business up or down into June and I don't know if you’ve mentioned whether you're going to get any headset revenue in this quarter but if you could talk about the timing there?
Yes so let’s see the bit on Android is kind of a mixed bag overall it is, overall I am happy with where we're sitting. I think the issue with our largest customer in the Android space I think is pretty well publicized about the share split that we've got this year which is a lot more typical I would say historically versus last year where we had 100% on the flagships when we did the Wolfson acquisition that was really never in the expectations that we would get 100%, so it's kind of a bit of a bluebird last year. So I would characterize that business as a little more kind of on a normalized as kind of normalized this year. So that’s obviously a headwind relative to last year, but countering that to a significant degree is the growth that we've seen in some of the other Android accounts. Our third largest customer as we indicated is doing very well we are already closely aligned we're doing a lot of cool stuff together and we expect that business to continue to grow. We've got a lot of -- we continue to have a lot of opportunity to grow the business in the Android space really across the board in the long-term via inclusion of the amplifiers which were -- which I think we've mentioned on previous calls and letters I mean it's a challenging support intensive design in, but once we're in there we think that will be a really good and growing business for us. We're investing in it in a pretty big way. I think as time goes by we would be in a position to that would be very difficult for other folks to compete with. So I see very good prospects there on the Android side to continue to grow our business and absolute dollars over the long-term.
Just one for Thurman OpEx is up I think 9% year-over-year can you just talk about what's driving that meaningful new projects and how do you think about OpEx for the rest of the year?
Yes it is growing, there is a lot of new projects and we're continuing to grow R&D part of the increase over FY16 was a full year of Wolfson so we are also seeing that carryover. We do except R&D to grow, continue to grow throughout the year but we have a lot of leverage on the SG&A side and we don't expect that to grow at a nearly the rate that we will continue with R&D.
Your next question comes from the line of Rajvindra Gill with Needham & Company. Your line is open.
I just wanted have a quick comment on the whole analog headset to digital headset transition, particularly on the android side, a lot of it is based on the tax rate for USBC ports in order to facilitate a digital transfer. So I wanted to get your sense in terms of what the adoption rates are as you are seeing first on the USBC for the android customers? And then within that what percentage or what's your thought process of those customers that have USBC moving to digital headphones?
So actually yes that’s -- thanks for that question that is helpful to be able to clear a couple things up one is really the transition to USBC is really more about the connector than it is about the underlying interface. We could do what we proposed to do we could do over traditional USB I guess micro the horrible connected that you can't even figure out which way it goes in the port. The problem with that is that -- if you use it as a headphone connector it will bend and do all sorts of horrible things. USBC connector is obviously it is much easier to get in the slot and additionally it's a much more robust connector. So as it happens the android space is somewhat fragmented into how it's going about utilizing that USBC, so you are right, it could be a digital interface as it relates to audio, but there is also the potential within the USBC spec to ship an analog variant over that cable.
So the interesting thing about our ANC headset or really any of the solutions that some of our customers might want to do. We are adding more functionality and there is -- whether it's -- well in particular for an ANC headset, whether it's analog or digital we don’t care about, what we care about is that there is a robust connector and that you can get power over the connector, so that you can eliminate the cost to the battery and try to drive the volume in these things up. So that is -- the ANC piece of it doesn’t necessarily relate to the conversion of the USBC actual physical interface from analog to digital. It's really more about the connector.
Now longer term , it is just is kind of clearly the case that a lot of people would like to once the USB folks kind of get a little bit more of a unified approach to how android is going to support that and do so on a lower power fashion in the digital domain. There is a lot of value that can be added in those products whether it's ANC or just smarter voice features or all manner of different things that there is interest in. And so that is a little bit further down the road but from a connector perspective not telegraphing any one customers’ plans but it's pretty hard to find anybody that is not talking about introducing models on the relatively near end horizon, if they haven't done so already.
And just one from my end, my follow up question is really on the competition on the digital headsets as well as the ANC, the data noise cancelation technology, what's your view on the competition and any thoughts on kind of what connection is doing on that side on noise cancelation technology? Thank you.
So we -- the difference between our product and anything that we are aware of that is out there is that our product is fully adaptive, it's all adaptive digital signal processing that’s far from a refined there are people getting their PhD’s in that exact field a long, long time from now. It's a very challenging system to come up with in the first place and the neat thing about it is that it enables you to create a number of form factors that are just flat not possible without the adaptability. So if you have gotten over the ear pair of amps there is a number of different solutions you could choose from there but that’s obviously going to be pretty unlikely to ship in a handset box both from a size and a cost perspective.
And then even the sealed up jobs whether it's a little silicon ear fitting or whatnot become problematic from a fit perspective, they don’t fit everybody you got to ship three different sizes all that kind of thing. So what our adaptive solution enables that as far as we are aware there are no other solution on the market does enable is what we refer to as a non-sealed or a lippy ear bud so a lippy ear bud would be typically the sort that you find in the handset box. So it doesn’t seal up your ear canal system a nice ear bud that wraps in your ear and it does all of the noise cancelation electronically rather than relying on passive isolation from the designer headphones themselves. So that eliminates further cost in the materials surrounding the ear piece it makes it smaller, it makes it fit better.
Now it's definitely not without its challenges from a designing perspective because it does relay on having a number of pretty significantly talented acoustics experts we happen to have a bunch of. But our customers don’t all have a bunch of depending on who we are talking about. And so it is a support intensive design win, it is a product that -- it's a new product type that takes customers a while to figure out the go-to-market strategy, how are you going to test it, how are we going to price it, how are we going to market it? And so that’s the kinds of things that we see customers going around and around on at the moment. But we are engaged with a bunch of interesting folks, I suspect we will have -- we will see our current expectation is to see products on the market this year in some form or another. We don’t expect it to be a huge contributor to revenue right out of the gate, but it is something that’s a real wow factor device that we think can make some meaningful changes out in the industry. So, we’ve got high hopes for it in the long run.
[Operator Instructions] Your next question comes from the line of Tore Svanberg with Stifel. Your line is open.
I was just wondering what that exactly means Jason. So it looks like neither one top 10 using the whole chain. Is the goal here to get more of those top 10 signed up this year? And eventually should we think about those three components eventually being integrated into one solution?
Well, I think it’d be unlikely we would integrate the microphone with the Smart Codec. Certainly, there’s possibilities to embed more of the DSP intelligence in their microphones that’s kind of a long-term goal. But in order to do that and when anybody is going to move the needle at all, you have to prove that you can be a single source, which I don’t know that anybody in the industry has done yet. So we’re, from a microphone perspective, we’re trying to put one foot in front of the other and prove that we can be a significantly more reliable supplier. So that’s a work in progress that I feel very good about but it is a work in progress nonetheless.
The Smart Codec and the amplifier certainly I kind of indicated earlier but just to be direct out we definitely expect opportunities that have after we have migrated the amplifiers down to 55 nanometer in addition to all of the other competitive advantages that’s going to give us the ability to integrate that with the Smart Codec and also to embed in standalone amplifiers a lot more DSP capability, both of those things are pretty meaningful advantages of consolidating around the 55 nanometer node.
So as to whether we want to ship a chipset of microphones and amplifiers and Smart Codecs certainly of course it's definitely easier to grow your business with your existing customers. So anytime we get a customer on any one of those devices, then the sales teams got pretty clear marching orders and a pretty good ready to grow their commission check of making sure that whatever device they’ve got in there today, they’re pitching the other ones and trying to find an advantage to shipping the whole chipset out. These products are complicated, customers value having one supplier to look to, to help them get through the designing process. It’s an incredibly complicated thing involving an intersection of DSP, an electrical design and acoustics design. We’re the largest supplier of that type of device today and we’re well known for it, we’re well known for our great support and we think that’s a meaningful advantage for us going forward.
And as a follow up on your amplifier business, so it was up more than 30% even without the benefit of 55 nanometer so, as you start shipping 55 nanometer amplifiers, does this really open up opportunity outside of the smartphone market as well? I mean the aftermarket is a pretty big market in audio. So I am just thinking automotive and other types of devices?
Well, it does in the long-term. I mean in the short term we’ve got our hands full in trying to serve what our customers are looking for in the handset space and that’s all whether the handset market is growing as people wish it would or not, that’s all incremental, a lot of that is incremental business for us. So, there is good growth opportunities and certainly bigger and near in than some of the other markets we might go after. Automotive is a great opportunity for a lot of our technologies in the long-term, but it's difficult to prioritize kind of that over some of the other things that we see there are driving near in opportunities. But, yes, certainly long-term certainly we would expect to see -- I think prior to seeing in an automotive you’d see us in other things that are low power, battery driven or just smaller in general as we see some of our technologies migrate out from handsets into wearables and the connected homes, things like that.
Your next question comes from the line of Christopher Longiaru with Sidoti & Company. Please go ahead.
So, my question has to do with just first just immense mic opportunity, because you talked a little bit about it. But is the, I guess the process because you said no one has all the market, most of that’s because of the manufacturing. So is the process there slowly gearing up your testing and your handling part of the businesses that you can get to a level where you’re serving more? Or is it more struggling to get the design wins, because what it sounds like is that there is probably more demand out there than anything else?
Yes, I think we’re being very careful with our go to market strategy. We’re partnering with customers that value the stuff we bring to the table and we’re try not to bite off more than we can chew until we really get to the point that we’re not going to be showing up on the front page of the paper having dealt somebody a supply issue pretty much it seems like every quarter somebody has got an issue with microphone supply and so we’ve got a very good reputation for execution and we don’t want to be one of those stories for anyone. So we’re approaching it pretty consciously, it's a long-term investment for us. There is definitely a capacity element as well, but we’re partnered with some folks these are pretty small guy and so we're definitely partnered with folks that can -- the folks that we’re shipping volume out of today can support a reasonably get amount of volume and we have got good plans for how we would expand that going down the road as volumes increase. But again just to be clear we're talking about microphones because it is a meaningful portion of the long-term strategy but we're certainly not counting on crazy growth in that space for us over the next year or so.
And just kind of sticking on that part of a long-term strategy, can you just give us a little more color into when you talked about some meaningful contributions from wearable digital headsets and connected home stuff that helped to offset some of the near term weakness in audio, can you give us an idea of where some of that is coming from and kind of what your expectations are for growth in that part of the business as we move to ’17?
Well other than -- I mean relative to the kind of the indications we gave on headsets I mean none of the products are around the market yet and again we're pretty cautious about making sure any of our customers win -- it's not our job to launch their products. So we're trying to be reasonably cagey about that other than just generally there is a pretty significant transition going on in the market and we're pretty uniquely positioned to capitalize on that. So aside from that and the colors that in there that you've heard before that's in the IR deck et cetera that's kind of the level of detail that we could get into there.
[Operator Instructions] Your next question comes from the line of Rick Schafer with Oppenheimer. Please go ahead.
Just had a couple of questions, the first is I'd like to get your general sense of kind of earlier view on where smartphone channel inventories are here just to again generally speaking and when we might see orders start to pick up seasonally would it be letter than what is sort of typical for your guys?
I don't actually have any visibility into smartphone channel inventories. Relative to our own inventory we're expecting to build inventory to support new products ramps that'll have later in the year we don't get the any further visibility into ends inventory than I guess whatever you guys get or whatever they aid as the right new stories about such things get so [Multiple Speakers]. What is that?
I wasn't talking about the actual phones, I was talking about the supply channel into smartphone I was just curious if that supply -- if it seemed like inventories there had normalized within the supply channel? [Multiple Speakers]
Yes, generally speaking all of our customers certainly all of the ones that move the needle know how to run a tight ship. They generally, at least as it relates to us seem like they run very smart modern lean and mean operation. So I haven't seen any of them get meaningfully oversupply on our components. I don't think that has been a huge part of any of our issue.
Your next question comes from the line of Tom Sepenzis with Northland. Your line is open.
I apologize I might have missed this but given the midpoint of your guidance for the June quarter which is sequentially I think, is that growth coming from Android space or where is that expected to come from?
Well, I mean it’s flattish call it just maybe up modestly but it's flattish. And we do have a number of good factors going on in the android space, so I wouldn’t say it is anyone thing that's real remarkable I talked about in response to your previous question we've obviously I think it is pretty well publicized and we have some headwinds from their share change at our largest Android customer, I think that has been pretty well understood for awhile, but we're doing a pretty good job of helping to offset some of that headwind with growth with our third largest customer which is also in the Android space with a pretty broad range of wins and a growing portfolio stuff we're doing there. So I like our -- it was a bit of a bluebird last year that we got 100% share at the biggest Android account. And so now we're on a basis probably a little bit more sustainable place to grow from if that helps. So it really just from a growth perspective obviously Q1 is really not the story for us this year, it's kind of the second half of the year and all the various good things we have got going on there.
And then OpEx as you discussed was up year-over-year but in the March quarter was down significantly which is not always the case in the March quarter so is that something that is sustainable or how should we be thinking about OpEx moving forward here?
Well, I mean, yes and no so that it's primarily probably doesn’t give you a tonne of time to read the shareholder letter. There is something there about some of the breakout of the employee, some of its employee costs actually headcount went up. But a good bit of that to be honest is variable compensation, so we've got a very robust variable comp program and when our expectations get scaled back then that obviously scales back the variable compensation path in that retrospect the OpEx quite a bit which is not always -- which is clearly not as employees we want to see but definitely the right answer from a variable comp program so we think that's well designed and doing what it is supposed do in an environment where we have a bit of a softer market. So no it's not sustainable because we expect to grow a lot in the back half of the year and that will drive variable comp as it should and additionally much like the challenge that we had in FY16 and FY17 we expect to grow pretty significantly, we expect to see in fact in excess of our long-term model again. And so that always causes us challenge on the R&D side to keep up with the hiring, so there is a very real chance if we don't keep our foot before there that we will fall behind on the R&D side. That said as Thurman alluded to earlier we do -- we're a big mature company we don't need to be adding all sorts of systems or other things that continue to grow, we feel like we have got the right infrastructure in place so we're keeping a very close eye on SG&A and that should provide additional leverage on the operating model as we go forward over the next couple of years. But as is relative to the numbers we reported for Q4, you can expect OpEx primarily driven by R&D to go up through the year.
Your next question comes from the line of Charlie Anderson with Dougherty & Company. Your line is open.
Just a quick follow-up from me Jason, I noticed in the shareholder letter there was a reference to can you hear me?
Okay sorry there was a reference to smart home and virtual reality headsets that I haven’t seen before and I wondered if you could provide a little color on what you are developing for those markets and if those are anything that's in the next 12 or 18 months or if those are longer term in nature for you?
Sure well I mean yes from a meaningful revenue contribution certainly they are longer term which is -- if my glass is half full, that's kind of a good thing so we've got obviously a lot of growth dialed in this year, so it is good to have something in the tank to drive the outer years. A key part of our gross strategy that we think a lot of the technologies we're already developing for handsets and mobile will migrate out very naturally into wearable and smart accessories and connected home that we call out connected home a lot of the things that we're doing are very applicable there whether it's amplifiers so they -- whatever smart connected things in your house can respond to you with your voice whether it's the noise suppression so that it responds in a loud environment or also on the long-term the voice biometrics investment we're making which is something that again is out there but that's one of that coolest long-term things we've got going it's a really compelling technology that essentially does for your voice what the thumb print sensor did for finger prints. We think we've got technology that can be a similar, similar error rate to figure print in the long term. We don't have any ambition of the replacing thumb print in a handset although we do think there is a good case for augmenting it with voice in a hands free environment.
But in a connected home, there is all sorts of devices that you would like to have be at least a little secure where it would very inconvenient if you had to put your thumb on them all the time maybe it's mounted on the ceiling or somewhere where you are not sitting. So we think voice security is a great opportunity there. So it's really, it's a lot of things that we are already developing for handsets that position us well to be able to sell the same technology and in some cases same chips into a lot of other applications which is good because there is rather than in another thing is really in automation of a whole bunch of stuffs, some small percentage of which are probably really going to take off. So if we have to invest in that, meaningfully to drive anyone of them that would be a challenge but the really cool thing about being an audio and a voice supplier is almost across the board that things that people are asking for are very, very similar. So ideally you can go-to-market with the same hardware small tweak on the software and help people get it again, so longer term but very, very exciting things that are happening in that space.
[Operator Instructions] This brings us to the end of our Q&A session. I’ll now turn the call back to Chelsea Heffernan, Director of Investor Relations.
Thank you, operator. The questions submitted via email this afternoon were answered during the Q&A. I’ll now turn the call back to Jason.
Thank you, Chelsea. In summary, we are extremely proud of our progress in FY16 as sales of Smart Codecs and amplifiers drove revenue up 28% year-over-year. As we move into FY17 we are delighted to see that the demand we experienced this past year for innovative audio and voice products across the signal chain continues to gain momentum. With a diverse product portfolio and extensive road map that addresses the technology and price requirements of flagship and mid-tier device in the mobile, digital headset, smart accessory, wearable and connected home markets Cirrus Logic is poised to deliver strong revenue growth above our long term target in FY17. I would also note that we will be presenting at the Stifel Conference in San Francisco on June 7th and the Baird Conference in New York on June 8th. A live webcast of these events will be available at investor.cirrus.com. If you have any questions that were not addressed today, you could submit them to us via the Ask the CEO section of our investor Web site. I'd like to thank everyone for participating today. Good bye.
This concludes today's conference call. You may now disconnect.
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