Synaptics (SYNA) 3 Nov 222023 Q1 Earnings call transcript

[Abrupt start] First Quarter Fiscal Year 2023 Financial Results Conference Call. All participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And without further ado, I'll hand the conference over to your first speaker today, Munjal Shah, Vice President and Head of Investor Relations at Synaptics. Munjal. ahead, go Please

me President accessed Dean Butler, afternoon, and first company's you call. quarter I'm Relations of Relations. from is the This our web the website is Good are and live today the broadcast My joining on Munjal, Investor With Investor being of over Synaptics' fiscal CEO; at Head and today's and our Eric. call for Michael thank us name on CFO. call Thanks, Hurlston, XXXX also can synaptics.com. be section conference

also the a on In slide addition to supplemental Relations Investor of presentation, remarks we prepared have posted the website. copy our

acquisition refer to on for certain other press related at results, provide the company’s today company’s the non-recurring of after a management and market results, can non-cash the supplementary or detailed addition recurring Investor be a to close will non-GAAP Please release which GAAP results from accessed basis, or section which also of compensation, the issued Relations costs, synaptics.com. reconciliation In non-GAAP items. and GAAP share-based excludes website

would Synaptics we statements. make to Additionally, the that will forward-looking conference this remind course of during like call, you

of projections performance our statements expectations Forward-looking condition, objectives, to and plans, and current financial our results business. give operations, future relating

actual you Although subject may statements. We and prove factors over could be differ to XX-K, recent to update may call our this and with Michael. our cause company’s company’s for actual filed to I now suggested those to including obligation forward-looking Synaptics are information. expressly important in to materially beyond materially any reports forward-looking contained from most will periodic believes to any Synaptics the Annual current in differ future our statement. disclaims control Report and performance forward-looking to SEC, the that results estimates on reasonable, turn a cautions Form that Synaptics risks they results risk the and refer from assumptions the inaccurate. uncertainties number any of be

solid with of welcome Thanks, year-over-year to our our Munjal. to PCs. mid-point benefitting non-GAAP I’d of non-GAAP the EPS continued mix into maintained fiscal high-end in positive first like levels and above our sales had Revenue XX% We above below profitability guidance everyone today’s quarter. anticipated non-GAAP and was the We gross margin slightly GAAP guidance of our our operating and due high-end call. results than weaker in range. We to from the IoT. increased our delivered solid guidance, margin was product

me in customers are the Before of to span seen facing spending. a abrupt months. have we I moving demand positions the the an excess my shortage Never from environment inventory due with thirty-year business in highlight to providing macroeconomic let few career challenges such update, in primarily decline our a global change consumer in

grew macroeconomic our by prior uncertainties, Given exit smartphone build portion headwinds, reset of business of the lockdowns we IoT affected an by in our smartphone as economic depleting our China. customers in selling are customers quarter IoT September and been their we has next slowdown with as customers operators. working wireless, had instead in to large believe patterns Despite over greatly the to results the correct challenges and headsets, are broadband such and of these are that two, Reality The impacted portfolio PC the accumulation inventory we struggling combination is through XX% the three year-over-year guidance. TAM continued IoT and PC concerns line the most and facing focusing on A in that confidence of inventories. in of quarters. our the Meanwhile, consumer will a due is pandemic. Virtual have in macro in acute a areas our slowdown and own business in businesses forecasts and The inventory business

products Automotive for promising; integrated the to products our larger infotainment Automotive us. shift drivers tailwinds be growth to adoption and for are continue the and screen all well Our of sizes, long-term increased performed electric vehicles,

wins strong additional We displays gaining center discrete between nearly all conversion two market a as TDDI information pipeline control is with increasing have of more major for device required screen With happens integrated or devices. timing design our traction are sizes, OEMs from to chipsets to the and an solution. semiconductor

content increases dollar these come As significantly. online, our

wireless see new our Our or such as booths. and tremendous video their activity will customers our from solution rates be continue a CES, and to as products. we applications new refreshed to design two docking. the upcoming interface one we win products develop customers docking wireless have In showcasing continue applications, core we docking growing attach to in marquee expect benefitting similar product are At

traction Our protocol also platforms. reference adapter new business Intel won is gaining having two

Wireless, continue move we successfully conferencing design-wins increasing. In such networked to Finally, displays, our and and opportunities applications into systems. as smart are monitors, new

such Smart and customers, are releasing Home as large products Amazon new technology. our on Our based Google,

to are which We for on-going IoT Synaptics’ XE still and choosing continue is benefit and Wi-FiX solution in power efficiency better the to higher in its devices, throughput. and transition from infancy. Customers

in our next-generation We are Samsung’s shipping hub Home Matter-enabled highlighting in of devices our strength Smart the wireless competitive products.

at gaining doing ADT, quarter, well. are for the The also were very product are security which launched last products wireless ramps Our traction. market

our proud focus pieces This the and in has is Synaptics share opportunity Vivint, secular quarter, Wireless and others. Verisure, supporting portfolio. for our resulted on has the home security wins that together long-term glue right new connectivity that become the to with multiple we’re additional of market pulls

see to multiple Finally, platforms opportunities base. different customer we across into our technologies to cross-sell continue more

our to are largest applications. us. of docking customers phones with UCC, audio introduced we utilizing technology cross-selling In for video two the VoIP example, five processors from transport devices For new different have two

We this sales to to Synaptics. many a we opportunities for our near-term the have be ability cross-sell and like driver believe continue funnel in will growth

is the demand during path upcoming of the conferencing experience. driving with performance Long-term, opportunity predicted near-term the in for laptop Despite product After unlock two year. pads In smallest our in expect Certainly, now looking issue touch Let calendar volatility the and Mobile, are China. sequential this the platform customers groups. we user video to to we video in content acute several than us. pull innovate on September the and forecasted we business, a market, customer use improve non-IoT expectations PC recent opportunity. the weaker was force me demand stabilization our decline move to years, additional and increasing to an the in voice haptics to see we had our originally a quarter

the new likely will several incremental drive not trends handset launches we December believe do market As underlying demand, we the we have have look that changed. in marginal into but quarter, the

acquisition Emza let last team small acquired update of we Now, announced you vision. Israel-based me engineers focused on a computer on week. We algorithms the for

detection solution an application is at already in X is Synaptics presence PCs shipping first for and customer. Tier existing the The

We and additional into home will PC sell as smart applications. different expect such offer solution the to automotive also areas customers, but to

Before let me share our on conclude, this navigate I perspective environment. to our plans through

the several cautious varying of become degree and in pockets have customers is inventory there market. of Our

to for orders find and We pushouts placed and customers are previously of with working we are solution. cancellations a requests mutually beneficial seeing

quarter limited but the the believe a Our and visibility we issues business. is current macro unclear, reflects in material already into our change

a going second will forward deterioration, and magnitude of resume no likely is with growth economic change believe in calendar of further the we recovery small XXXX. there half be Assuming to the

period, our we to to this priorities. plan true During stay allocation capital

and the will automotive. such areas growth expenses and of prioritize manage as portfolio We our wireless money toward

to portfolio execution, profits, the on focus we coming inorganic our smaller, By acquisitions our to to seem With emerge continuing shift shares downturn will plan focusing paydown will buy excess back we expect our continue that internal to to reshape be company. and stronger We accretive as growth-driven market. and a from current the tuck-in debt. on

our the outlook. provide Let Dean over me turn review now quarter results first to and call our financial to

inventory PC our and our in quarter quarter products were I’ll to XX% year-over-year. In Revenue revenue deliver demand Michael, weakness below PC from an to start product year-over-year, Wireless, our our increase sequentially quarter outlook. sequentially IoT IoT of revenue up midpoint market. and, year-over-year our the all September the guidance led of Interface, and growth. held due significant Revenue PC, Automotive, strong in was and good double-digits customers. to PC, and for XX% products then a end Reality X%, Thanks and discussed for X% result, down we IoT, and IoT below consolidated Video results September review provide in the the our with the current during our of despite and of was for strong XX% growing weakness was the in a afternoon million, down Growth weakening September expectations completed revenue grew $XXX.X Virtual earnings XX% quarter by was call. continued to financial by recently was as due XX%, respectively. a Year-over-year, XX%, September quarter as last quarter Mobile up everyone.

the commercial are because expect of economic PC Although outperform downturns, not overall mix. notebooks to higher we immune Synaptics market still this to commercial

ahead, visibility mid-XXXX. expect we demand we market PC while As through look limited, pressure is continue to

than sequentially Our XX% prolonging product year-over-year, the be continues sell-through was expectations. and Android down September clearing declined our XX% to revenue smartphone of lower based inventory. quarter Mobile weak, prior

have the in flagship December products, China, expect customer’s marginally concerns quarter to market new benefit to from we ramp delayed a recovery. expect the the this We of given several but economic

the than During a quarter, OEMs. had servicing customer greater XX%, distributor multiple XX% of approximately at one we revenue,

guidance of expenses intangible operating $XXX.X which below of share-based at compensation from million with new repeat, lower the as share-based $X.X non-GAAP new gross end XX.X%, of personnel development of acquisition a which were not likely of million, point million margin GAAP gross related $X.X was costs than $XXX.X of million product quarter, asset of high and driven our quarter amortization costs. in of costs to during includes preceding our our includes amortization, strong expected primarily and million, guidance, our operating $XX.X costs the consisting September at began were prepaid above by September record GAAP $XX.X hiring. down benefit to and the we due basis intangibles the September which and quarter $X.X record along million. a amortization quarter For non-GAAP meter range company to quarter, related also expenses million mix. quarter the XXX September margin compensation a XX.X% was company is of

rate of net quarter, rate our $X.XX GAAP XX.X% were becoming rates of per effective quarter, and had Both we GAAP XXXX. Our the GAAP tax In changes law tax by XX%. September GAAP or tax impacted fiscal non-GAAP the income non-GAAP share. income million for $XX.X was net tax our diluted and was in

quarter same quarter operating EPS a year in a the and expenses of $XXX.X gross margins September was was previous XX% as the $X.XX, directly Our from income the to quarter million guidance from of range decrease prior share lower non-GAAP above flowed the and Non-GAAP the a diluted ago. high-end our net per strong bottom-line. increase X% of

days, Now, the $XX of by paid both to $XX the slowed. million. for and million million down turns above million was the the used million quarter and sheet. of depreciation and repurchase turning and operations to $X.X have capital ending for XX ended hand; $XX of days sales quarter. million, balance offset share equity from inventory our on $XXX cash and last expenditures million quarter as were were last payroll cash XX $XXX with of increase $XXX September with of balance end short-term used Days of days partially flow our million program quarter investments quarter taxes compensation cash equivalents, XX related an from were program. from inventory the Cash inventory preceding outstanding XX, of at of under cash, We Receivables were $XX for cash

of in with September XXX working the the back approximately expect shares to repurchase We adjust cost and quarter to we again increase levels but in current back program aggregate next million. are the supply demand before our for beginning our restarted $XX We bought in inventory down. quarter roughly to interim, environment, an bring partners thousand to share the our

plan As our sufficient available toward We dry acquisitions, quarter tuck-in million for available we to powder $XXX authorization. shares highlighted last to to end reserve at we excess cash repayment buybacks. plan repurchase under quarter, continue debt the of current have use and cash and flow with share

Now, turn quarter outlook. our December let me to

orders. are There we mentioned, product turned requests cancellations Michael As from partners our reduce for orders their cautious have three headwinds pushouts of customers as multiple and across existing channel and their with groups inventory. facing are to customers

million. the in mid-point. for to to be As sequential a A $XXX the $XXX result, million the we December anticipate XX% at range decline quarter of approximately revenue of

the will to and expectation from in the environment be XX%, quarter We approximately expect XX% further our revenue economic products respectively. Mobile is weakens, Unless December XX%, our and mix PC, that their IoT, macro second customers of normal half. levels to depleted position in the in much by many be consumption and of to XXXX return mid-calendar growth these have inventory and therefore a resume

our the XX.X%. maintain quarter to to range with gross for gross in the expect strength We margin margins, December be expected to XX.X% GAAP of in

year gross We in range which XX% of the be expect the margin of XX%, the approximately higher ago. same to XXX would mid-point points non-GAAP XX% quarter one basis at than

expect $XXX and operating million million, amortization, cost compensation. includes expenses which the in to range amortization, share-based December the $XXX to in quarter development We be GAAP intangibles prepaid of

of with our remain expectation to investment range growth $XX volatile resuming through results revenue We to committed times expect in our the technology million. We focus be expense markets roadmaps the quarter funding and these an as December million our line non-GAAP expansion resumes. in $XXX with in September and be operating of to

and a net the anticipated diluted GAAP to for to As of result, share the fully of be $X.XX $X.XX is income $X.XX share, non-GAAP per in range XX.X share an to expected is per range per on be net in estimated December diluted shares. our to million $X.XX income quarter diluted

be net We expense interest approximately to December million in non-GAAP the expect $X.X quarter.

remain our tax XX% rate expect of and We the XXXX long-term XX%. non-GAAP range fiscal to to in

supply on to the This will wraps not Q&A Operator? do operator revenue to controls or our the remarks. or effect we material over newly like the Export any the turn Lastly, chain. call prepared now Synaptics’ imposed up I’d believe US has to have session. start

you question open line ahead, first Rajvindra, session. Thank go Needham we very much. Instructions] Rajvindra [Operator question-and-answer from Our Gill, & your the comes Yes, conduct please will Company. is

I taking for details my some the can. IoT Yes. on if you Maybe Thank more questions. business,

I sequentially. being burned implies Dean, that areas some interface. of But was kind and about of about of acute guide you were across mentioned down the there inventory specific you know talk could that's IoT the any consumer video more So, if sub-segments. XX% bit little accumulation Wondering a weakness broad off. kind pronounced Michael are

you past. wireless slowing further VR if elaborate I'm You've in little Is talked about IoT? the down? within bit just maybe could a curious

VR problem Yes, that. mean Raji, me in probably take glasses that area. biggest let is I I say would the the

nearly other do and pretty interface we've areas video We we've choppy, think do Wireless one to and but businesses, issues, I think there automotive the say acute. I'd some really areas there. to continue seen more on relatively as traction strong. well. our acute really, design issues that some consumer-facing have problems is on I not the they're in is upside inventory but touched had where that's significant you

temporal one So, we're is a issue. pretty that more that, of confident

would Thanks a margins kind -- of the I on despite for business gross away a guiding this you good revenue this these imagine high margins, XX% to that curious, certain Michael. see. disciplined a sequentially, And XX% to kind coming it's margins are you gross which is very not levels? down I'm XX%, Is just able margin revenue maintain how terms threshold? in of walking of coming are margins. because to those from is approach at down Are when is meaning

a are more I business, disciplined mean, And we've That's pressure necessarily Raji. to price to I approach. into to pretty the getting given first but sectors maybe number market answer, certain attacking away of is seeing maybe parts more on. mean, as walking X I don't be that disciplined that, we conversation for not said like. say continue three continue we're apropos Yes. the in if I while. think what's I'd be price I it's there's we're to our from know time a going our before, we than is Having customers about in a would talked we

from I think up going margin imagine be gross long-term, over I code, it the ZIP the don't but much So, the will in here.

it. Appreciate you. Thank

question comes from Gary, line Fargo. open, is your please the ahead. at Mobley And Wells next go Gary

or Thanks of the XXXX. you the $XX million completion inventory roughly expectations. providing from the look the at for prior comments a calendar off that I I mid-part quarter, and December it's a about of bottom same you're flush for But perhaps guys. the appreciate my guidance see if sequentially Dean, Hey taking year question. that amount the by

much of half first into pricing related? so it And How how as year? representative calendar of inventory How factors well, serve? how of that much draw is then down? the And of markets baseline much it a you all progression is new of of those the playing the of do sort that you see is for

Good sustained of trying broad partners so would we it, If levels. been channel each What back probably PC. it's about level. say a Yes. for market hearing think with question, we're actually we've really ahead down the probably the decline, I will the think work in shipping to draw in way rewind And of I there. probably drawdown. mutual out from less sequential inventory inventory honestly quickly. the in the example, happen beneficial in we're customers of fact, that I would drawdown what we I a in customers the get terms, from little to to lot There's clock, into we're area, under-shipping say fact, Gary. market at PC pieces a point. find And mostly relatively working this pre-COVID different and can than a market kind

will I that amount has would going it's pretty I inventory actually you couple through and to And IoT, a sort that broad, seen would attribute significant insignificant next pretty shift, different over pricing. of be say the to market then should of get happen have lastly, probably it there's corrections that quarters. so In they think an fast. I So, I think

pricing While I here. there's that's factor think a some conversations, significant don't

speak wondering that Thanks to or able you're foundry your on to whether your year. view right. for And to I'm along this on that's guess, seeing there your All hear some Dean. be color that if if I there's, you'll from partners. quotes And increased out some customers case, those quotes. not love I'd the about foundry pass higher

bag. it's mixed I mean Gary. Yes, a

first So, from supply reductions some our for time, we've chain. the actually, seen

time direction movement has significant, fact, Taiwan team And now. in some reductions worked leaders the in the to pretty negative supplier who probably Having at operations said telegraphed long right increase of significant sort in in mid-single of alluding a time. pricing end but long, tirelessly that, our calendar we've fairly the first you're seen year. Our a supply operations a digit not for the

still working on if At to are degree. know I watering we'll don't that. in this successful that be down point, We any

going have the As largest to additional they work customers the past, our that see take price will to increase if get we in from on we we're our with supplier.

time past. I this it that in challenge a fair, it think to has the in going I very been increase. think than had pricing be difficult be past mean, pass will we've bigger I it's to more be on the than to

that So, with any there. to we're optimistic Again, way bit. not that be we're down a supplier going work tamp in to trying successful to that sure

half that going we're the So, year. to to in of have next navigate first

you. Thank

is our your open, next Krish caller. Cowen Sankar go at please ahead. line is Krish,

my thanks for hi question. have taking two of them. Appreciate it. I Yes,

of margin First the one you gross for sustainability. Can about Dean. kind

next margins around had kind middle of revenue I'm quarter, the of in how I may your of think declines then if in on first calendar be ZIP on comments half year and bottoming we gross a be the about just code. based should margin And XXXX? gross into mentioned You March curious, same should June follow-up. things

Yes, Krish.

XX% years cost tremendous margins that to we premium And a pretty we've had our the the right, been alluded our quite devices, of structures. done disciplined And sort worked hard Michael pretty range. honestly, three mix in for our selling get on gross getting So, last job. improving we've

the So, XX%. at ended XX%, just guiding at we midpoint quarter

staying sort there of for So, near-term. we the we're think

sustainably little bit minute go as of bit a going question be a being that That XX% little Look, through pressure about company gross a the to remind there's target margin to not wanted continue you volatile just we macroeconomics. all call, our downside a the on look, in customers it's longer sensitive about kind just times more is with said, do or if for everybody to significant. think long-term the ago I to pressure, could foundry especially think the on With better. the term be margins, prices ASPs, being what of probably to and

XXs high Krish. to So, is way it, think it's kind of low the about XXs, probably

to Got for something And mobile and your the IoT? it. you Dean, consideration? PC, think is have strategic have not long-term sense just for to a home a their of mobile focused under Michael, IoT become color. do system want you a helpful, find That's a it assets then super and question for better I quarter XXX% and Thank makes you. this PC Or booking

get asked quarter. it's Krish, we almost definitely something every that

a it's question. fair So I the would following. say

all, think of mobile business First local is minimum. I a our

now that that are own continue the is not optimistic right? A about. headwinds are we They that a second people probably buyer, the be those we are people the the can lot of that that our to economics not have might selling of have very issue a make to. presents business. significant progress buyers, which Most in be inquired say sell problem. our So, mobile business -- end. is can making. We're on of Our business would we I'd difficult we is Chinese

the portion did portfolio, it our like sleep it's or to a And it doesn't us it. say something that when time. right four all in So, But good that ago cause cash. know, as now, context, that of I throws It's we amount And years to it big grow. considered business it's less certainly something off that position small of XX%. in you than comes a us five a a of a was as up to said, we're continue for Standpat. It's expect part the we I It's of lose would portfolio.

a the And lot Michael. insights. Thanks appreciate really and it. thanks Got

Krish. Yes, thanks

line for coming your open. today have Susquehanna. Christopher go Rolland last in at caller Please Christopher, from We is ahead. one

quickly Hey guess, Wi-Fi shortages question. question, seems Wi-Fi. guys. moving is Thanks for the It I pretty from excess. around is My to like consumer

So, perhaps guys didn't part terms there know now Is you talk you there, in what seeing. is wafers of well great? that the cancellations a pricing you that can I are I know supply pushouts expectation of would about and as how outlook for for while. guys have don't position but be and any the

Yes, Chris, all fair questions.

think the customers components actually if is and one expecting host they which of we've take together significant some that buildup RF was were remember, seen industrial put our in pretty you that as happened the a of where some a inventory where customers, enterprise I even they Wi-Fi business are business I module customers. one it of whole which largest supplier, to of then of our ship ship match a And consumer, bunch or of set. part some think to end die, is are a what other

them difficulty a build shipping component. may So, sell-off, had were as had one been other the guy to have And came those wireless to orders difficult some missing customers. enabling then on then they in, out shipping the module out a -- some end finished the customer goods difficulty out They were there components module.

said, inventory work said, we been because we a our business. there's So, as That wireless primarily through expect buildup quickly, to Dean relatively continue that to win appreciable on there.

have record the measure Wi-Fi, in That's we our company, the for funnel strongest it's design wins. we at in where the wins, strongest you the look our a company. If design opportunity

one we We've I design the wins, We to business. inventory But around and this -- positive about previous number continue happened think think, GPS very maker. module feel Bluetooth is I in of about feel Wi-Fi our question, I got both and a new that mostly said So, a good and issue. really, in I some temporal in this as it's really Chris, to business. buildup think in

much next And very Thank around for DisplayLink Michael I is that. or IoT guess overall. PC docking products and you question my

and by, it TAM products or Is been that reduced maybe versus those same? like it there thoughts. docking third. reduction? kind Is better the you the quarter, of a looks to has it love a call So, PC expect overall trend stations How TAM your even would Would worse? about it, your

Yes, has of an PC because get offsetting at least I'm a sure has gone up the Certainly, pretty event. in dock The a actually to been the station reduced gone PC you reduction. bettering rate where client or It TAM remain has flat TAM TAM. quite the considerably the reduction attach not there's up the shipment. docking or offsetting

feel feel we -- to So good about docking. continue

I the automotive strength portfolio that be two top, IoT that in areas the the think dock. at I seeing true. said Chris, are we're that and And continues to

are of with believe We Broadcom to and momentum. docking on monitors conferencing, long-term the We're us. we're -- we asset pleased two smart drivers our asset applications a growth other secular build have opportunities like now and video continue that different that we that increases that is into to like from particularly of that going that asset Wi-Fi TAM, obviously, got but our size, have and opportunity ahead

sounds your PC was and they'll The it Yes. That's exactly in like the relationship outperform. what asking. between markets, I TAM

very thank appreciate guys. it. you I much So,

Chris. Thanks

out our are Okay. Instructions] And more from questions any there there [Operator audience?

Hurlston, time, like at I'd this to to CEO remarks. I it turn think President for Synaptics back Michael at closing and

our for like your at support to the would to joining for investor all Thanks time quarter. of look forward during attention speaking conferences today. continued of and company. to We I you you and upcoming the thank us

our concludes this program. And

you. Thank disconnect. now may You