Synaptics (SYNA) 8 Aug 242024 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Synaptics, Inc. Fourth Quarter Fiscal Year 2024 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah, Vice President of Investor Relations. Please go ahead.

you. Thank thank XXXX us conference and fourth on for fiscal quarter call. you afternoon, today joining Synaptics' Good My name is Head of Munjal Shah, and Relations. I Investor am the With our Vice our of Finance. Michael Rizvi, call CFO; President me CEO; our Padfield, and Ken Hurlston, Matt and on today's President are This also website company's at live being over can web and the call accessed section from of is be the broadcast the investor relations synaptics.com.

on of our slide presentation, relations we also these to prepared addition copy remarks a supplemental In investor posted website. have a

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

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

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

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

We we we to our goals. it fiscal and just accomplish closed as like of to year most today's able our welcome I'd call. while, planned, to for were Munjal. important Thanks, out everyone part, play most some the XXXX didn't

we began and growth slower recovery. prior to the to expectations muted During show though revenue demand end due at our versus year, incremental rate a stabilized

In clear able plagued X us issues to get were addition, the quarters inventory we the of so. largely for that or last

showing Finally, growth somewhat track, after core quarter is in fourth right significant, the IoT inconsistent the on bottoming of last albeit year.

XXXX, overall fiscal As enter we revenue better growth. drive and we a to earnings in place are

above Non-GAAP EPS range mid-point Moving incrementally with guidance, to came of OpEx above our resulting above provided target, guidance non-GAAP May. roughly forecast in the in products non-GAAP the slightly the in the of was mid-point our June while enterprise below revenue forecast. quarter, gross was margin at

products, overall a device. driven core best device reduction calendar a overall expected contribution that which in with compared with power Even interoperability sample as The in start is IoT to advantages, year product chip these marked the the to wireless. the to a size throughput first of toward taped XX% This our out our by middle in on-track maintain revenue the customers delivering in solution advances, and our end we this of calendar thereby category. to XXXX. features XX% and more decrease XX% die success primarily similar year-over-year quarter We more grew broad high-performance market than

and ahead expect toward we Our customers be Wi-Fi quarter. X sampling this end of device of is schedule, to first slightly the coming

and on improve. Pre-production for has addition, products GPS our sound started continues wins Wi-Fi/Bluetooth categories product In as to OTT our and demand drones, in key wearables of several design shipping such streamers. combos systems,

China partners expected. module been high Korea slower Japan, new though in to and adding than has success progress volume had have We shipments

that rates will double growth wireless basis. improve to believe occur and a to on may we continue digit expect revenue quarter-over-quarter increases while to continue We year-over-year vary,

We are our Embedded making also progress Smart Processors. with

systems. exceeded expectations commercial production to made making launch quarter, for line MCUs, RDKs categories and available ] demand and lowering (sic) software integrate our it for for MPUs a our such of has devices, security [ successful generated in of MPCUs appliances as last AI a broad we and Machina ramping easier to Initial navigation enabled Embedded product set customers generally our We are Astra, customers Following adoption. availability. interest barrier from

scale significantly relationships smart MCUs started our Finally, partners quarter, integrators system we enable vision-based us with building we system-on-module for use sampling SR-series faster. In are who of and the to cases.

sampling X/XE compute device combining are our In our AXX and with first wireless are Processor addition, portfolios in a Connected processors. quad-core driving Astra and in package we synergies Wi-Fi our

While Astra's and the schedule, until products our fiscal second we of XXXX. customer outlook, traction half materially contribute of haven't changed won't our is the ahead

While embedded operator processors future, our our to the generate product family smart continues are revenue today. solutions

have expected in to wins Japan new announced ramp and, quarter, production with launches started XXXX. recently calendar last Our customers in we over the added

at improved products, our revenue OEMs improvement in products. driven and video are automotive we Moving content larger market to TAM on platforms grow continues and gaining a think X% enterprise share multiple PCs, ARM haptics our adoption to and higher quarter and PC interface by with PC as driving drives touchpads of AI based the and do technology. cycle. refresh PCs We In

our in major Difficulty] model [Technical up customer, share presence stepping year XXXX. our user Our

given devices deliver AI-based customers We expect systems to longer the battery and they to these translating further adoption life. sell savings are to power PC working can additional

slowing rate is market overall able has existing product continue spending TDDI the personal grow IT to as below at sales good remain our new This as automotive, be sequentially, historic were us the the to on solutions adoption we are in production expected hardware infrastructure. In longer. we AI softness for been remains well disappointed of to technology. enterprise of capital recovery. being While is toward norms allocated

SmartBridge content However, our out, near-term. is product pushed being our uptake new of gains limiting

high end DDIC opportunity of see is seasonal expansion the older a volume for of the We moderate with down production models. In OLED the at as which displays higher price to in normal our trends. as mobile, away and capture Android are addition, legacy TAM controllers OEM. market percentage In touch do devices given aligned flexible shifts a come our continue seeing from

a high-end and engagements, and we be in advantages technical particularly garner starting wireless. more quarter. expect the future. ramps Korea. about very to from to position on next our have to track continue opportunity, both year, multiple design for remain and set ourselves market market market. To we high across products conclude, mobile core extracting major We customer China environment We product a we share our IoT Our had excited wins us ramps than smartphone confident processors this and and sufficient largely new differentiation in Through noisy our give Android in bright OEMs Android signal up

enterprise In up and addition, us flow products inventory the growth quarters the we for problems beyond. and positioned cash in plagued for growth. that the have a cleared our last earnings XXXX for set steadier and company phase few most of We've of

turn outlook, Matt CFO a and for his looking financial semiconductor am is to help me seasoned a of am make Before company. our Ken call driving He join finance a and Ken public can quarter served first let getting as to Synaptics. Ken, team executive, for growth profitable comments? I I take the having results Rizvi. our you our have previously a forward a CFO, to in few I the pleased of second quarter over and a to review fourth introduce new

the to previous good transforming company the few team only you of to a player. months. am joined this know weeks job and roles, to the and since done phenomenal a of everyone. a I long-term look all Several Michael, join Difficulty] the IoT I company. to afternoon at build and me as Michael leading it's upcoming looking I Thanks, have I'm company that excited you help [Technical forward from Synaptics my stage and forward the weeks drive and foundation growth. in been upon meeting And into

on I everyone. which to non-GAAP website. on earnings focus results afternoon GAAP will our to our in primarily good our and and materials Ken, release the my reconciled in tables are investor remarks Thanks,

turn of and to which in products, $XXX from our to down due fiscal financial IoT with in Now partially our XX% fiscal automotive and million, by our XXXX QX. was and enterprise our $X.XX core offset results net mobile largely let year, prior for year growth to revenue We products. me and the completed billion XXXX compared declines

XXXX or Non-GAAP came second from half fiscal fiscal in $X.XX per the year was across revenues multiple the levels. Non-GAAP while in gross XXXX income of Difficulty] fiscal be continues was demand The soft in markets, While end reducing cash into million [Technical $XX.X grow share. to diluted to XXXX. year operations channel company we XX.X%. fiscal margin at also able near year normal in were million XXXX net for to inventories for

PC core basis, a million, mobile revenue XX%, automotive above $XXX.X XX% were and benefiting seasonally and XX% a enterprise turn automotive, This me revenue sequential XX%, In automotive We market. Enterprise X% previous a and on XX% and up improve reflecting our modest sequentially. and digestion products and for our results. improvement on year- enterprise enterprise IoT sequential of and our X% with was X% wireless year-over-year largely end to above guidance, midpoint over-year IoT QX recovery in forecast. Total and was up reduced line product up with original was to up year-over-year automotive was products our was revenues up in with products expectations, basis. due our from our the inventory were in Revenue products. and let inventory the QX QX reduced sequentially IoT, X% from core core Revenue sequentially. up QX, and Now digestion saw products respectively.

The to to soft. Mobile we for behind end quarter-over-quarter sequentially. products correction revenue down and largely line XX% in the was product us, and While expect to performance trends with year-over-year seasonal continues demand relatively was these X% expectations. enterprise inventory largely due prior our remain primarily be

guidance revenue, greater During non-GAAP of the mid-point XX.X% and the our had with gross margin QX approximately X customers than XX% of in-line we range. was at quarter, XX%. each

guidance guidance a by operating increase XX% Our share maintain fourth quarter from tight lower expense continue Non-GAAP a than control. Non-GAAP part of operating of prior EPS in of million towards and income we million, QX an $XX.X anticipated quarter increase from our the same per end non-GAAP low our was as was diluted ago. was the $XX.X helped range, quarter the XX% in net to year $X.XX expense the expenses. above mid-point and of

$XX preceding the expenditures fiscal was quarter. short-term equivalents, from last days the were to turning million from investments the June ended up million. Receivables for the $X.X cash, of were were operations end XX quarter We sales depreciation hand; year $XX balance of flow from on Now million million and with and $XXX quarter $XXX Cash cash was of at quarter. XX $X.X outstanding million. days million down and Capital the days, and sheet.

inventory to $XXX compared ending days we our inventory on to balance our continue was balance million, The quarter, Our XX. manage inventory flat purchases. sheet as calculated last of were

a Our to cash with capital balance our flexibility needs. ample navigate deployment at healthy is level

to continue capital between share debt our prioritize We management M&A, allocation repurchases. and

our Now, to let of me first XXXX turn guidance. quarter

revenues million We at $XX million. be expect $XXX minus or the to plus mid-point, approximately

first from XX%, automotive, respectively. enterprise Our guidance expected to for September the the mobile XX%, in quarter quarter an core and IoT, and mix be and approximately products reflects revenue XX%

seeing and to order in and are improve. with normalcy trends We stabilization modestly to pipeline our return starting business

slow markets. However, our all recovery to and be gradual almost continues in end

margin X%, the or be plus minus quarter. to the XX.X% We gross expect previous mid-point at with consistent non-GAAP

$X million million. September minus operating non-GAAP plus in expect $XX mid-point to quarter be We at expense or the the

macroeconomic our the pace expenses. recovery we managing remain Given continued and operating slower focused of overall uncertainties, on

per mid-point operator per share an million start wraps the our to to to Q&A net Non-GAAP expense domestication property. or This non-GAAP of on included $X.XX, a of certain is the be now quarter. to plus over onshoring that fully turn $X.XX rate expect prepared XX%. the anticipated We to the the completed minus the our approximately $X foreign net is call certain up expected to XX% shares. This reduce diluted We September million to to interest subsidiaries in project a intellectual other diluted the estimated remarks. be I'd range XX.X and session. of income at non-GAAP recently tax share and like

Our with from Securities. Rosenblatt comes Instructions] [Operator Kevin first the line question of Cassidy

on results. the Congratulations And welcome, good also Ken.

Looking forward with you again. to working

Kevin. Thanks, Yes.

just years, the think was interface for be spending maybe would that in coming any enterprise down, the also. seems revenue. been anything like has cleared year, growth up, few just of out. video positive be new inventory that to wondering to if that related hearing mentioned You sure but you're strong starting be spending is It also, make the a it that I'm I -- would gross for would margin positive

Yes, Kevin.

First, bit the encouraging. and or quarters quarter, We which video for X a It's been of more thanks negative. interface question come this good see did probably is the business comments. positive up

was base. up, it come lower really it much see So off good although to a

our indications reset, and have as think maybe a business would your on looks I late probably December, handle seeing get think in I how November, probably pretty is typically I are interface then. IT think point, those we finally things start get December, of half I early back video our our patterns to -- this bottomed, I budgets decent better buying much year-over-year think growth But year. think we're we'd when expecting and reset

are driver. neutral being more And PC have exposure AI Great. also, And PCs the xXX, you wonder AI or Okay. any a between is that? ARM-based growth on just you you if mentioned the or

one PCs The generally to add seeing opportunity content. on Generally is neutral. neutral. connectivity the ARM-based I'd we're say

generally, do on ARM-based think PCs. have opportunity connectivity the connectivity have ARM-based non-Qualcomm So X an We we add PCs, PCs. traditional particularly on we to content

the We content would presume. across on various it's touchpad, will because Wi-Fi, think there's opportunity. our own fingerprint, is our main flat bundle But generally Kevin, the neutral, platforms, speaking, I platforms. But a the decent other we

line from next Quinn the Needham. of comes of Bolton Our question

Bolton question of next from comes Quinn Our the line Needham. from

Sorry, wireless. and wanted on I business, congratulations, just welcome was guys, echo mute. Michael; I to to momentum have by Synaptics. guess had core my driven on going guys to some I the you Ken was IoT mostly say I

some to a Michael, to still lumpy double-digits basis. double-digits ramp year. actually sequential you the that I guess come if business you be it's I actually expected low double-digit you as but off imply could think next in declines grow looking at into the script, the bottom, on -- said might

I thoughts the so to that And basis? lumpy, expect rates you quarter-over-quarter business. us said it's sequential but know generally you growth might trend wondering able if you be give on a be to up would some on still in

really we left growth. Obviously, definitely. had basis we really, a sorry, Yes, on a significant. quarters backward-looking if I'm of couple expect were strong here that

basis. out, you growth a expect As we would base. we an to correctly and continue both sequential But a annual it point as that look on low forward, was off

following think Got that a of be? business. touchpads up Perfect. last the it. then, interface? I upgrade PC AI And interface would would important would video primarily just think significant about of be just driver it the guess, do it PC how lot sensors. cycle on video enterprise, Do the Do How maybe you think in the you question side, pull-through on the a you PC the and fingerprint or

that give Just more second than and from 'XX. might latest can you probably AI an thinking But would thoughts thoughts. us I how upgrade benefit much your cycle, of you on your happens year half I'm PC love calendar next latest

Yes.

sort I and if call, in you timing the And you think of last the right. I got this you discussion. had remember

cycle, longer has refresh with sweating these would sort at with than ARM typical big that where point. a lot whether to just refresh PCs, that's We to of to that have consistent years do ordering patterns yet is whether A X PCs, typically seen that's not be we're for PCs are. years, they this X X.X at a probably X.X and AI cycle

which call it. products. to that it. would natural to our a pull-through there. But perspective of bit expect is early to a we The that generally be buying would on, refresh true speaking, seen from our I hit just little you a lot going is haven't It's expect other PC did So happening thing

at stations. when was we It the typically pulling monitors going exposure pandemic, saw It were pulling and headsets. things door other it through certainly we PCs high pulling was docking was during relatively that a and through rate, through out see it You -- to. the have

but if So it's it's haven't happen, I us, we it nice seen a it. think does -- tailwind for

talking we're We helps in else's everybody seeing and ensuing We quarters. but haven't We're come in remain certainly but it, hopeful that the hear yet. us growth, seen optimistic. call we that, the orders moderated growth, -- about

question comes TD Cowen. Krish next Sankar the of Our from line from

of double-digit. for shared Eddie growing you Chris. expectation is your Wi-Fi Michael, This

about wins X of You talked the some Wi-Fi also schedule of design there. and sampling ahead

there So range tailwinds. mind. growth you I say have possible the wonder it like some guys XX%, that we Like 'XX? are where somewhere grow can are when good Or a in But for revenues in you in can teens? feels you talking share fiscal if double-digit, is a there about scenario IoT XX%

for thanks Eddie, No, Okay. the question.

our our sort core rate. twice rate forecast and our line, What of generally XX% sort a long-term growing IoT normal we'd outlined speaking, IoT top of expect we're growth be at core I outlined we've at -- growth is -- XX% double saying think being the to normal of that that is rate. on we've to

from of there's outlined seen comments away us projections we that quarters that and those back would that So we've nothing handful those a ago.

doing wireless is In than our business fact, that. better

said the signs of we're Our business, to processor good kind we prepared seeing too early but tell, as there. early remarks, in

the nothing like of aggregate. back So XX%-plus again, off seen grower projections. us is those business we would wireless And feel on that we've

helpful. And a follow-up. just super That's

forward? these be any be Just helpful. had you significant partnerships specifically mentioned your bit well, would that about for Maybe, think are impact And to that a going can with that? a would they be? driver can integrators, growth it me. that you "growth I on Like Like significantly That's can your on before? haven't you as guys and partnering little of why applications geographies big color system specific focused how rate rate." Michael, talk that new or

you're we past business, wireless rapidly. these really Eddie, partner much the talk things, us to market key module bring in a You've one. partners set added quickly. In right? in prepared area And I really system help appreciate and it's much and The whereby question, components, Two other have similar module good those said go more the where is is thing time RF the more. on helping had one in power side, more they're amplifiers components, Yes. market folks that a We've a with you a connectivity, wireless of for with and have processor represent customers a about with guy me again, to system given to platform Those reach the heard customers for the to reach there's wireless, things different and wireless. remarks, of number a the a going that in broader lot module to us opportunities couple comment significant able very of that to tweak enable we've critical. much those that situation the a a because a out that's aggregate are wireless in and software, then processor, application. a and the modules integrators you referring slightly

So, very have experience partners scaling processor of lot processors the ability go to these wireless, to while I'm and optimistic so, module help we a these in much and broader that prevails to these customers model same less but us that a quickly, folks much deal in by a have many one much all easier customers we to we fashion with reach can we if can more set than go of scale ourselves.

of question line the Our JPMorgan. Peter from next comes from Peng

results, the team welcome Ken. to the and on Congrats

of -- it's quite gone digestion talked Just seems about inventory inventory on and kind clean. is you that like

at feel end that does still shipping kind your still this that you demand? based do you're shipping demand So kind guidance below shipping that we're end at to point? that you're of -- indicate of Or on

again, good I we're question. do think Peter, demand. shipping below Yes. end

I'd right, larger of it's we're course during hesitant the you channel and size a be the shipping, the of sell-in have the but out year, our cleared that's in can to clear worked we've that, inventory of think because the shipments. the has been down level sell-out clearly because quite inventory. significant I see under you amount that a than

still So muted I'd There say demand. that under-shipment phenomenon is end is there. pretty

-- had we've level So for issue there the is, not handful out I been thing has ship-out. on once clear a inventory the underlying we're that talked I to ship-in to of the shipment, us, is there of this of top higher expected we surprised much a think and get to last quarters than it. our that demand But that's less because problem, clearly, been we're think inventory about

under-shipping. profile that the see environment we're recovers, second or demand think kind this demand And a recovers a as I uptick. of So we'll

your positive of then And this kind is of and Got core the trajectory. IoT you're along. it automotive kind look enterprise If chucking it. continued most market, seems end and recovery and gross may margin kind a like of mobile on in at I be

is in to think would I So margin. that going product be your headwinds mix gross some there

over just next you gross couple of you think about how can about talk the quarters? margins So

Yes.

set then on wireless is based automotive basket that stand. I We've a target that full throat. is a or Processors automotive XX%, think XX% at enterprise XX% The in well from and that's below. XX% mobile slightly right. and and at number shipping really aside of quite enterprise are clearly is bit where below and above we and a

to So of shipping and basket IoT on XX%, up full on says the continues when the you're bit at the automotive, core gross there's a a would the aggregate well of right, expect opposition goes do that tilt as automotive, margin. kind to in and enterprise little downdraft to enterprise that we whole we're

next Securities. Our Getz from Jason Instructions] line the from question comes Mizuho of [Operator

November December, on and have reset in customers. You IT with you those conversations preliminary the budgets mentioned

pullback you that that need year? more Just can spend? they AI could include are in wondering those enterprise maybe enterprise budgets to on what spend some kind to for getting Do see stretched of you do a impressions before next be we think return? Or

toward very and don't we of companies I in second to I regard. really I through spend. get reset. very know been to can't tell things of that what don't to other have would more that the We to -- AI doing so. that now the on question, mean the hope part are going you're generally, But with budgeting that able limited Matt, mean have be much are the cycle we Yes. X part as budgets, allocation visibility. of sides going your first We equation think but both I we're numbers think related the is feed the and going Ken budgets our really question, internally,

a that more are then some demand, little as could But towards do Got follow-up can create that are back you it. on any of can we to big control you your that mix pricing guess just piece improvement track is of in Anything I costs it. like XX%? question maybe margin out? bit getting bit kind gross see the enterprise a levers a And get help of the of side. the that little something more of come Maybe the as or some upside a there?

number looking characterized I mean, level we coming we to our that. We've pricing command in remember, as from markets fair COVID. business and Yes. sort out, ability power. I ups that's about which I sizable foundry partners. particularly play, and lot some revisions the environment we if pricing significant a of of on as mean We're areas that at an all went where significant I've board, price have a the market during not how We of and on line through share pricing OSAT you strategy, of in think our we cost point. of Ken have of look seen the But power. having think a again, we

is, all think of What seeing opportunity potentially move on to markets I of look more you not the prices balance little see stronger in think raise cost tell do fiscal better, out really we're positions. look have we year, needle. we're a I at where line, that's across to that better I As this closely we can going TBD. the marginally have where favorably we pricing, to but the marginally enough and But

about then is look And -- may we Our levers #X mix we what do. don't we've we mix. see may we pricing can improving, needle see if as talked mover, always at to

it further time, Executive session. for now Michael turn like question-and-answer to This closing Hurlston, Chief no questions. concludes I'm this back Officer At would showing I remarks. to the

we this for look investor the joining call, I'd questions to to speaking thank you. forward to and Yes. upcoming like you quarter. and for their Thank events everybody at throughout

This your participation program. conference. the Thank you does for in today's conclude

may disconnect. You now