SYNA - Earnings call transcript Q3 2018

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Operator

Good day, everyone, and welcome to the Synaptics Third Quarter Fiscal 2018 Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Jennifer Jarman. Please go ahead.

Jennifer Jarman

Thank you, Anne. you conference us call. thank third on and XXXX quarter afternoon for today joining Synaptics' Good With Bergman, and President on and me today's CEO; Wajid call Ali, are Rick CFO. and being section Relations the company's over is the synaptics.com. of broadcast at call accessed from also the This Web can website be Investor live posted reminder have slide on a quick A we our presentation supplemental that Investor website. Relations add on SEC have an financial exhibit current and report as earlier our also the to with furnished Form color been slides filed results. supplementary The X-K on additional today, our

issued In will other addition a for share-based on basis, results, the or to of after compensation, reconciliation the non-GAAP company's detailed results. release Please or exclude noncash also a and market GAAP management items. close which certain results provide to non-recurring supplementary today and GAAP recurring acquisition-related costs refer non-GAAP press

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

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

that now any call ended materially estimates believes update performance June forward-looking contained prove of actual Rick Synaptics for Rick? reports the number results forward-looking in they reasonable, SEC, subject the and obligation are disclaims beyond XXXX Synaptics to results XX-K We Synaptics those be materially statements. including differ for that, future with And XX, differ with this forward-looking you the in and to from the periodic a year Synaptics filed risk Although to and inaccurate. statements. cautions I'll information. be company's fiscal could refer control to may turn current factors the and to uncertainties expressly Bergman. over to from important our any that cause Form may the any risks assumptions company's actual suggested our to

Richard A. Bergman

fiscal of smartphone quarter like the million at pleased our anticipated, as performance came I'm projected revenue third despite I'd high Total to of everyone in to well-documented Jennifer, financial the Thanks, end for market. to with that $XXX report line the roughly and welcome softness our today's range. in call. was the

we On expansion. diluted more non-GAAP as $X.XX of the favorable is a gross quite becoming automotive achieved projected margins gain through we of posted product Synaptics The range. per set a our was while growth per consecutive products, fiscal midpoint our QX business our and improvement broader the of of represents video-enabled earnings our margin and period VR. the we as revamp the strong share X.X consumer quarters, GAAP as momentum non-GAAP well our I'm evident growing of IoT new share of $X.XX, includes margin reflecting last above of opportunities XX.X%, platform more our and bottomline, markets our with the voice customers. loss few third a This mix. pleased products, with towards as and capitalize We over primarily traction and of on diversification as gross

market, mobile as as see shortages in as sequential our mobile-related quarter, to well we healthy of the initiatives these where we products. offset expect us conditions, challenging growth a smartphone the are a help helping challenging in Importantly, few weather current IoT

supporting we gross trend XL specifics and mobile priorities drill some on and all towards now profitability the predicted made trend our comprise This up products on our forward. development us aspect years in towards of greater make several as includes addition, XXXX We TDDI XL new market these this now than enabling phones indicating solutions. fully screen nearly established, In is focus investment and is going our the The of that ratios QX, move starting greater designs. of with margin growth expanded I'll bulk business. XX:X contribution ago breadth reports forward. of will for with the to providing platform market a around recent opportunities several our down designs substantial half

remains on the virtually our includes support enable have in all that mobile and value result, first CPU. OEMs of narrow the large market on the believe future and end, were These OLED with this We provide solutions chip market designs. the to At These to today powerful the to high I'm the be will our will DDIC meaningful In designs the two display to soon COF across in will of this DDIC our to solutions majority are into bezels. volume shipping deliver significant a starting are the done introduction of feature. manufacturers, the pleased and represent (XX:XX:XX) LCD track in quarter. significant DDICs designs. achieve are production in our space. appear chips opportunities cutting-edge compete our the multiple new portfolio very OLED to previously September the entrance quarter As there phone's growth meantime, enabling mass by reached to market OLED mention solutions features XL OLED that

Swift XXXX. Latitude PCs, and sensors newest a Acer new capacitive buyer technology our and curved fair the for Dell selected to both models market TouchPads side, secure quarter, sensor for that adding introduction I of Along of and ClickPad the our our within for compensation it's HP addition, authentication fingerprint fingerprint is and of for sensors is TouchPad very and fingerprint, remains chose fingerprint fingerprint for solutions. for ClickPads with adoption where market the chose the solution Vostro convenience panels. Switch our our The multiple Pavilion growth case platforms. XX-inch xXXX. no for the the MVPCs. with our our competitive, in for increasingly enabling our X the HP supporting along also chose models. mobile. ClickPads three on the OEMs, both Pavilion say our XX-inch fingerprint wins, growing see enterprise authentication think In and socket notched are longer HP of OEMs consumer growing In industry-leading we LCD and the not the it's fingerprint a at This and number

Finally, than here more by both Lenovo and is upshot in for the a various our our socket PC markets. are channeling in growing highest one more segments case it's how flattish the winning ClickPads that even for and fingerprint XXXS. per our we within Synaptics adopted a is focus profitable on market, point And growth The computer.

we to following The that, more for with Vivo's high-end phone at given the XXX production second-generation at UD CES smartphone smartphones, announce is in-display is expected. ID market, featured conditions our fingerprint to within than Synaptics are pleased XXX world's the optical adoption Clear Moving and current UD that our featuring technology, mass solution on that are XXX smartphone. UD the to happening first Vivo ID, Clear slowly sensors, Plus sold I broader of fingerprint was want now retail. smartphone showcased in-display acknowledge the technology

is believe where move in highly-innovative IoT now and the to display video convergence at video continue infinity we to phones both audio created has as appetite opportunity. our world-class approach for uniquely phones, and I'll audio devices available positioned out solution things and leader customers is technology, of the we featuring market business smart in feature rapidly-growing see this capabilities. our a for the with home both all retail quickly. consumer now tremendous Synaptics and this have our However, as the resonating sold featuring and as

make We progress our to also the continue in of within opportunities pipeline establishing market. auto

in requirement a also SoC, applications mobile for Google are Alexa, services over listening shipping leading by service, their Assistant integrated on there using as we estimate see other the We DOCOMO's in far-field experience technology. Bixby Synaptics we far-field million Bluetooth and tablets. far-field speaker and XXX Simple announced DSP and a as hands-free voice speech DSP cloud Bluetooth AudioSmart agent smart Japan's quarter, by cost Wi-Fi eliminate can empower mobile high-fidelity its recognition, Allure phones as service, operator, speakers retail. AudioSmart utilizing Kardon high-quality with selected critical voice powerful running reducing leverage at voice Bluetooth Mic, of voice solution for was wireless Bluetooth and two-microphone the speakers as with agent voice our speaker, DOCOMO tablets to music, recognition Simple tablet over announced speech communications that technology for AudioSmart Harman Bluetooth with bridge is as and processor now we a its shipping telephone such with a excellent calls. with technology, far-field truly far-field Bluetooth-based Synaptics family. that wireless Bluetooth DSPs speakers communicates The Voice-enabled devices smartphones AudioSmart the opportunity well to Last units power, great while premium DSPs NTT quarter, DOCOMO, During speakers Synaptics which smartphone with Mic thus were selected our today. speaker. globally

Baidu, to to are years. electronics consumer has including significant from growth on With This partnership in service market all others. recent solution DOCOMO, pleased trends Synaptics AudioSmart most quarter, to a as highlight voice China of Tencent exciting continues in voice platforms, and solutions, voice in is Far-field Amazon, our giant and with the on LINE, rapidly well-positioned industry we one Tencent. capitalize Harman through those been global is major opportunities Google, our the Microsoft, adopted proliferate

is a well-positioned well such worldwide solutions, codecs. solutions. leader AudioSmart our as with noise established codecs another strong solutions to ranging portfolio voice voice smart fidelity headset and as active in pick-up, jump USB-based roadmap, Let's product, hybrid high from is technology feature-rich to our entry-level as cancellation, and headset suppression digital Synaptics

significantly markets smartphones. solution seen very and pleased across expand to into year-over-year are growing for attach have market corporate of a a gaming, with new we IT We to rates range from

for smartphones. trend designed solutions now smartphone eliminating headphone production X.X-millimeter Huawei, a for the USB makers. latest of our headset jack Leading its and is with PXX selected headphones second-generation of and major who Pro in in is the Our mass OEM with analog also PXX legacy solution digital family SoC multiple flagship Type-C shipping other

we SoC see subscribers. utilizes sell-thorough of the we stated TV last in and of our XK their Google HD second-generation which bring Ultym, Home their our Ultra to France TV expansion of significant box, see SoC. using Telecom multimedia On Android continue our content launched as And service platforms. quarter, to to provider set-top the in continue business, to IoT Android Bouygues the the Bbox the Mini VideoSmart adoption we side adoption

with strong to the for provider service voice capability intelligence We also see additional the platforms. in far-field in adopting enthusiasm conjunction edge bringing

I'll touch now jointly targeting solution integrated automotive and with is system top We're calendar Xs. on touch OEMs Let's beyond to interest the voice where our year are then reliability, to review we make that our make now we our report and we complete XXXX sensors And continued Traction validate of full every are automotive more from in seeing financial in strong I'll with OEMs year in guidance. are technologies. OEM to two fingerprint, pleased calendar there a our almost our continues for we building before fingerprint leveraging to solution. be opening Wajid major Q&A. interest and the drivers, production continue tier With and back some as progress, to and design-ins also in-depth anticipated TDDI design-ins platforms. most also display performance call now regard call controllers, display panels that touch XXXX. was touch display first turn mentioned for manufacturer and business, at results over to our December, in remarks strong for closing

Wajid Ali

$XXX Thanks, Rick. for Revenue was quarter March the million.

revenue quarter Year-over-year well in PC market was increase March in uptick partially declines product the an fingerprint. as revenue mobile quarter was by XX%, reflecting in X% year-over-year Third primarily due an within reflecting product offset was decline down revenue. driven as the declines primarily lines. in mobile down revenue (XX:XX) primarily our acquisitions, revenues, IoT to A capacitive by our seasonality expected our sequentially,

During we XX% revenue three the threshold, had customers at above and XX% the XX%. XX%, quarter,

to level this down with compared sequentially down from XX% products from products certain due adoption capacitive provide presentation As down will March advance Revenue our results. XXX% released with PC and over revenue was PC XX%, quarter March I GAAP Revenue of customers up increase fingerprint non-GAAP Rick PC ago the X% talked call, XX%, reflected XX% the in was respectively, and and quarter. of follow mobile Revenue results up XX% down was the will year Much in earlier. PC in year-over-year ago and with quarter. and year-over-year. compared was for sequentially from of year with high in were materials of about now a products XX% the the quarter. X% IoT sequentially IoT corresponding the and of our that review mobile, the

million, costs. quarter, of fair $XX.X includes XX.X%, value asset and our preparation includes restructuring were margin $X.X gross with million, million, and $XXX.X costs operating and million compensation consisting adjustment severance-related For $X $XXX,XXX which expenses GAAP amortization, of million $XX.X acquisition-related arbitration charges was the matters quarter intangible March the which costs, of costs compensation costs GAAP for post-acquisition March of the inventory $X.X share-based in transitory acquisition. program associated of of of of of and compensation with the $X.X intangibles million, and associated prior amortization million share-based

for $XX.X was had March million $X.XX or the In quarter a the share. million. Our loss GAAP of quarter, $X.X tax net we per benefit GAAP

reflects non-GAAP the primarily were top non-GAAP our quarter product Now, The million, our turning results, down gross of restructuring from mix. of the range near the quarter XX.X% March November margin guidance. overall guidance million our our operating towards midpoint quarter in savings March and operating was primarily of from reflects non-GAAP $XXX.X to came certain our quarter. preceding of our expenses $X.X expenses actions. incremental Non-GAAP decrease March

decline Our quarter guidance. or net XX% $XX.X sequential the our rate per diluted share, $X.XX Non-GAAP down for from was March non-GAAP was million quarter, unchanged a for year-over-year. the tax XX% income XX% and

days, our increase the quarter end cash while and was quarter by were cash, of the during of million. turns Capital the in driven and we with The million were million were depreciation the ended Turning to $XXX and at $XX an was from quarter $XX were primarily increase X.X the million for inventories inventory million, preceding $XXX Receivables DSOs million. March operations. million flow balance XX $XXX of cash quarter. were from expenditures $X of sheet, $X.X

product product $XXX outlook. mix, backlog entering $XXX Now, will in million. a million I on we June to and of as our approximately anticipate well subsequent for revenue regarding patterns, quarter, our forecasts, be of sell-through $XXX quarter to bookings, June make expected timing sell-in few Based range comments the the quarterly customer the million as

DDIC lower Our spot of to guidance market, the than challenges on growth smartphone few in due our anticipates and coupled a shortages initially in noted current TDDI the quarter expected with the products.

in will compensation data mix from quarter June products of provide We including now XX%, We outlook charge respectively. and million fourth quarter data. our IoT GAAP range consumer June to the expect and will revenue the $XX follow with mobile, XX% approximately non-GAAP the anticipate to quarter outlook in PC be $XX.X in for and of sales. approximately XX%, the the be to stock-based million, $XXX,XXX cost in I

approximately In addition, million be to intangibles charges of of be operating of approximately of which, sales. we will expect million noncash June for in net quarter income $XX.X expected reflected amortization, $XX cost is GAAP

in include to $XXX,XXX. June XX%. million the charges range in to value million fair expected inventory in gross outlook to now cost quarter. expenses GAAP be the of by In our are are of operating reflected expected driven XX% to for margins the be addition, to approximately million and adjustments to sales are I initiated $X.X to provide in be GAAP year. of anticipate We range fiscal in will $XXX to our June data expected restructuring our $XXX restructurings million non-GAAP this $X quarter be

point the that quarter period. represents non-GAAP be in margins the over June XX% improvement almost year XX%. gross margin to an It gross midpoint expect noted should We range this to the be in between non-GAAP of ago XXX-basis

to of operating $XXX $XXX We the million. quarter be range in to non-GAAP in June the expect expenses million

in tax to Regarding of maintain we XX%. range rate, the non-GAAP XX% will guidance our long-term our

in to offsetting also to impact what initiatives the June net end. enhancements pleased tax for share. anticipate in our positive complete the remarks, $X.XX planning diversification per the we will continues very to analysis of mobile $X while anticipated global rate tax conclude my paving share evaluate range will year effectiveness dynamic Non-GAAP we quarter on our our non-GAAP the call. financial our Any opportunities shared be for June by To a be model. marketplace earnings to continue way our are to of to and by We is diluted be per income

Richard A. Bergman

Wajid. Thanks,

conclude for As it the transition the calendar and With that, through based our business. into to half consumer benefits we products product the more the we to innovative second strong fiscal to the profiles as growth into the our and focused several profitability the I over our maximizing industry-leading another of We expansion year the turn and begin of new opportunities remain line-up begin poised prioritize on company a operator Q&A more leveraging prepare realize session. rollout diversified a fully IoT positive latest trends, on seasonality will technology year of are solutions. now within comprehensive and of to in we

Unknown Speaker

our from Capital you. take Vinh with first question Thank Markets. KeyBanc John We'll

John Vinh

my Hi. taking Thanks for question.

provide to just wondering gross Just TDDI wondering with. mobile. margin IoT those to profiles segment, also, upside but revenues were to that you strength that mix higher have that the to segments your margin and I'm shortages you given related show by that in the gross the I versus gross and referred quarter saw. line. that you about And by you then, some that the your in additional And a housekeeping Wajid, tend was margin you I underperformed reconcile quarter. DDIC color questions if if while could you off mix on last could had relative was to start talked largely mix, mobile bit, driven my you said is understanding little PC

Wajid Ali

Yeah. sure. Sure,

mean, absolutely I So, right. you're

mobile have products We higher still our a generally, you as an gross consumer product at margins overall at when had So it as products. look our than well some the within helped product IoT our products take And quarter a PC level, quite can momentum sequential line. margins within the IoT. by growth, there and consumer product of be lot a so, within of stack itself, provide gross variation line that

quarter, well, the PC during frankly, IoT, fortunate that quite came products. range through we for and products the were as and a provided we consumer so, margin And higher within demand was the that

you what saw. that's so, And

kind we've with to the in a And tick We seeing been Just actually margins throughout fiscal in a XX.X% coming on at the the the model to midpoint end take of expectations of gross been margins, XX% guiding the being set of a quarter our previous XX%. gross had consistently ahead year. this of moment we've we've year of actually either the range, higher first and quarters, us quarters that during two at even two last the or XX.X%. midpoint been of to

there we also really some So, seeing been but we've good is mix out cost efficiencies. pointed product that

combination So, in our to standpoint. bit what strength $XX seeing so starting it's your guiding approximately ahead kept impacted a quite DDIC from $XX a on million million. us been and our well been fiscal of products little up To a probably to pick as things in by TDDI QX of bit those products, we've of both China gross us that a the second have margin shortages, question we've again, with probably as of that's

the back. market so, kind in for it a we're what we're see we now, plan out recovery And a – there we going shortfall get at are revenue But working time, to real we of demand on through hope working to unfortunate, and although see those versus to this that's based right on the that certainly have products.

John Vinh

double-digit you your second rebound Wondering in remarks into it you you. just sort of a is saying you kind on back to of growth second year strong expect ended and year. calendar of you My half the you of the question a the that the half talk if possible for visibility Rick, could follow-up prepared to in Thank of for in year-over-year see the have year about what basis. the see half Great.

Richard A. Bergman

in lot guidance you for year. do out things as few the know, for of working giving quarters John, in fall favor of of only our kind Well, second we half the there. have trap the of We a a

after I few Wajid As persist through XXXX, usual add get, our my of the with. of there. again, home in the that of the seasonality fiscal certainly There's some some right especially little making Probably our from we a think, products, and talked very fiscal you're consumer remarks. there's in help with supply bit our months holiday-oriented a base, some probably major of mentioned, that, now. some our the course, acquainted in we're shortage And with that seasonality, that we'll QX growth bit the prepared moves well first which of in that'll that'll a of then, the with customers then, a see that there's, but VR we certainly – should products

than especially seeing the really strong what the And and a we're year. what by we're that very half is, so, quantify pretty other the I encouraged calendar of second finish can't to expect for year

Wajid Ali

to just got Rick's terms is fingerprint. kind of the to thing we've of the reconcile model growth John, And the in comments talking of you're help capacitive out type about, pull of

year, on of lines. portion back in the revenues offsetting in the growth our all that with we've fingerprint of half last other the basis, been and so, product So a was quarterly still capacitive a year, decent

So, that'll that of help Rick hopefully reconcile is the making. some comments you

Richard A. Bergman

a little capacitive clarification, make to on our fingerprint. Wajid, mobile Just

Wajid Ali

capacitive, yeah. Mobile

Richard A. Bergman

capacitive been fingerprint PC has better. never Our business

John Vinh

Great. Thank you.

Operator

Stone to next We'll with & go Company. Cowen Rob

Robert W. Stone

shortages, particularly hearing you to increasing loss shortages, what the about activities face about been these ask market to share of wanted or relative a Do do your think? in customers We've TDDI. various I do Hi. potential competitors. by you

Richard A. Bergman

and there, that. the various deal you on three elaborate tried drive voltage equipment. the requires for little bit. Taiwanese have our a use But great that Yeah. semiconductor specialized bets high in suppliers. drivers, which, of it's display Rob, me or But the let in XX-nanometer, worldwide, technology, We to XX-nanometer spread use the actually pixels around. to screen, to general, a We there's

example, can't product you display XX-nanometer other just technology drivers. And for from to so, some move,

saw industry this with products. We're it XX or to the we, whole guard able big were China degree, to days So so. uptick address market the when a some and caught a ago certain we smartphone bit in off

the products is, have but working of pin-for-pin inventory now. love on lot fill fall the a right to of have gap, We'd manufacturers smartphone build holiday to period. trying will be and the up when that help some just start for This course, to some that realistic. we're capacity We the we're more

kind quite the that the not seeing. sure totally question around So, color your of shortfalls we're that's I but answered there

Robert W. Stone

Okay. A you Rick, with fingerprint follow-up that expect in then, uptick somewhat that by you is more we when being see mentioned the optical Why and sensors. activity in-display the disappointed should to think do far so product?

Richard A. Bergman

Well, as a cost flagship the is I mentioned high what the in incremental that my of incremental to a approaching add is solution. globally we're phones said, there's terms zero remarks, it the of it's Rob, we see unfortunately, feature. a the fingerprint starting lot either activity. willing mighty is phone. cases, that always rapidly what the in now And flagship But they're to we've to seeing design-in world there premium is there. in of cool. some for continue points big consumers making think And costs have capacitive or either OEMs the aren't premium We as to is But just wins substantial is, or have some optical are fingerprint features we think pay delaying, a I for

that has it that it one single had but one So shipped, would phone the for and one Vivo phone example, we hopes we talked they phone be point, that every that At reality in is they phone. doesn't. about have

talking it the are well, attach now rate ones of we're fingerprint. that about our selling but nevertheless, extremely the Now, optical have

you market an thing, rate if up of can end XX% that XX%, down be size XXX% And that we in. attach so, instead the of greatly type of with reduces the to

back a bit at our of of to Day. folks a around it. just some certain kind in couple didn't manufacturers That's this get to or a higher about a them, a least where on start cost questions I got why know Financial why of was occurring on because the that oriented faster Analyst show sense very and of out an degree, – When about with phone one during we big optical number of I I growth we didn't growing was of talk juncture. meet at – are gave we right that So, they idea at December way little go that now. the magnitude, becoming The and priority. their point to want cost bit smartphone from

Robert W. Stone

Wajid, maybe are fully Okay. question materials, gets least about what through didn't the count the the And average missed it, that, share I assuming the directionally to quarter? guidance I within it diluted scanning And a relation $X.XX? for find the what was share weighted at quick but you in housekeeping that fourth count for to your

Wajid Ali

It was XX.X shares shares XX.X million and fully QX. fiscal for million diluted we're assuming

Robert W. Stone

you. Thank Great.

Operator

Stifel. We'll go next with to Kevin Cassidy

John Joseph Donnelly

any seeing question. restrictions this your on and to shipments there? you you in taking customers my have for Hi, for you're recovery Kevin. little provide detail seen is Donnelly on John Thanks Could a bit of on China smartphone the

Richard A. Bergman

Sure.

We kind that well into see for are that QX, (XX:XX) certainly So that's In was now there our we've moved documented, the an a our thanks to occurred John, bit of uptick. QX, slowness starting fiscal phones. question. nice pick-up point but the of I of perspective. lot prior as the what seeing midrange of in mentioned a that's indirectly question, And from we the we're the on mix a part a in price consider

So, fairly well one year. was carry believe weren't calendar that's now, Again, manufacturer. Yes, huge and of there robust the balance phone will we starting They demand documented. a appearing, customer the display through infinity in display Synaptics products in-display a designing latest – our of of OLED solution in such – did some and the process regards, but for lot our we're in as they drivers. it's

a flagship phone that of they disappointed heck they So, a because we're were kind had of planning.

government calendar year. and activities contribute But to will can activities up for again. we plan for balance the U.S. the our pick not revenue comprehended So those stop the we back unfortunately, you had poised they that gave we're that of the to that

John Joseph Donnelly

for And evolve you the Thanks. of kind what product those one-year the IoT on the an And to seasonality cycle improve? provide seeing are a since in then, announced, of there? for mark terms Okay. were continuing approaching refresh the technologies and expectations acquisitions you update as maybe could

Richard A. Bergman

then, I'll to and want contribute. Wajid Okay. answer, may

our projecting current avoid we that again, way fiscal go be we year. of aligned either the with at kind So into that line to we terms a the look with there ago, of And saw of quarter we of And marketplace. or had heavily the peer one to If Overall, wasn't market. falling of couple year and we lot we're didn't you do. whole A kind phone things step got next our mobile one hell back XX-plus honest, A a smartphone just knocked are percent trap the sneezed, were some in over. mobile. companies could into our in. of product that

with other quarter now, the are balance sub-XX% in products, This the doing pretty other ones well. and being mobile

ways. So that I after you to pleased exactly heard subsequent acquisitions the in really this the the percent year to do gross one diversification continue to in margin feel our as is we we allowing is as us from we're that time that don't of hill answering through some into we A shape. get we and do Wajid IoT pretty ways, of wanted, kind climb in roundabout your belt, of well lot want do that it for question way terms have one a – this in see only the of we first under to what going so products, quarters of seasonality

voice pretty What ship it's especially good. are timeframe. telling that the us historically, in in So, the QX least that Again, we Thanksgiving calendar stocking own are be U.S., or of products smart the products QX. partners for have going our products the products type for these VR around at stuff aligned calendar type of some we last at didn't is year

exciting up IoT. period for gearing we're an for So, our

We quarter, the longer and had announced growth. are lower of We up, too. have certainly, build But more XX some we continues. but over much broader a as in certainly and of wins term products, design mentioned of a those that helps more our seasonality. breadth it last bit the cases, pace get offset will And volume, we those in

John Joseph Donnelly

Great. Thank you.

Operator

next Ambrish Srivastava BMO. We'll take question our from with

Ambrish Srivastava

ID working seasonal for letting on the contribute you from guide ask back Rick, that a or much – half is and counting Hi. just very the year. shortages, Besides then, understand will normal the confidence the the the to you're recovery, growth? of not for makeup the Thank calendar through get wanted you to for – that not I to the me question. Clear

Richard A. Bergman

positive we given. rattle a growth have didn't talked and We really seasonality. of call it we of things a contributing the That's kind natural lot to that's Well, off. those about,

certainly that's positive. a So,

interesting display second the percentage OLED manufactures Our number, volumes. there. wins are to There's this going be have mentioned the in are it'll as ramp certainly on. have we display really and drivers growth a the new from perspective grow meaningful COF of the it'll tremendous We They the OEM XX% design quarter activity. to year so we'll up and specific from OLED now seeing half revenue get and and

those a those again, make but on QX. So our in happen smaller to of businesses. this stick years after beginning we quarter, and hockey but the in and the around big in upward initial revenue couple really substantial of quite at other put business, and in we're kind And in money smaller of parts sweat of QX then automotive, bets part – the of VR

in Now, be ago as just we on revenue as It's terms our months optical. of part in frankly, end the cost $XXX a not in the we big marketplace, $XXX $XXX, about due just into of three smartphones half saw. displays points degree, focus high that we're and that about story the not the the marketplace, previously and lower But the saw those more around it's Yes, of of in or quite in to a the marketplace we seeing infinity midrange cost wanted hitting points year. focus $XXX you $XXX, asked certain open to second the for cost specifically of shipments it. of to

Ambrish Srivastava

Okay. Thanks quick had I then, housekeeping candor. for Wajid. And you, for that one a

mobile filings IoT XX-odd business. and trying I number from the the what's the comp to IoT roughly go to the you've Just added year-over-year you. Thank trying the through for business? year-over-year understand But organic million business. the for dollars know

Wajid Ali

probably XX%, it's probably the grown is up business IoT actually X% X%. organic has less year-over-year. The or inorganic year-over-year than also But portion

Ambrish Srivastava

up business than Right. is less acquired But the you XX%.

Wajid Ali

acquired we is up year-over-year XX%. business the No,

Ambrish Srivastava

Okay.

Richard A. Bergman

QX about. clear, talking you're be fiscal To

Wajid Ali

QX. Fiscal QX fiscal versus

Richard A. Bergman

QX. Okay, versus

Okay.

Wajid Ali

yes. versus Yeah. for Fiscal QX QX,

Ambrish Srivastava

you. it. Thank got Okay,

Operator

We'll go Gill & next to with Company. Rajvindra Needham

Rajvindra S. Gill

in some how the Day? long-term Analyst on you the changes the at now targets the discussed about not of kind long-term you Rick, that think might questions. of given an kind And Wajid, handset off expected. fact OEMs, taking you Yes, think of thanks How in-display is also, for your the as do that my revenue Chinese about revenue optical taking you be behavior from that target? impact having

Wajid Ali

the months revenue off, Okay. don't did a we kind I'll any Rick start then, I over there. of actually than we few from think about think differently long-term can just target take and ago. it

that you pluses be rate would billion, that get a saw, pointed of number. to us drivers $X within we As and there that would had and number run to that some expected could we approximately that help a be minuses we

down issues coming we those think in our had we're so, – And is and in quite display probably drivers the we've already arrows, display within seen than probably than products even lower growth supply – has actually of see each uptick chain some had probably expected. in fiscal the expected. The probably and chip-on-film causing about direction of some strong though chip-on-film seeing is quarter been that OLED are we had that for this through TDDI QX. stronger if will of and that's factored I we coming But certainly both of the on

there chart, whether look as probably the capacitive expected, year expected, those math everything chip-on-film we were knew we we we and the confident pluses we on like fairly as as right, as or into So, had and well. fingerprint, but but confident said, is tracking and automotive But down in-display it we is well like And some is too. the be now wouldn't be then exactly up. plans this we're year, directionally, I OLED drivers and tracking and are we else get next display had for minuses fairly would initial

the customers time, of many our opportunities frankly. of side, on that IoT XXXX we're extend as and those as at beyond think with quite seeing I some So we had probably some not contemplated

positive that's as So, been well.

Richard A. Bergman

I've few surprises. was is they wasn't ago turn. it way that to alluded in it. to difficult Yeah, the or questions been add deal revenue the it's I guess There this years certainty Raj, a now market nice – of you only to any back bit, mobile to predict into Yeah, part throws is and a of and – two well and just seven the I a of our and to – a lot the so, when kind with XXs, now, had Synaptics year is – kind mobile little

Now, can where we we invest. shift

artificial more the the and make little at things fingerprint But audio So, profile mobile in intelligence I has to capacitive we've had is, great been part and team with to it's deteriorated The different bottom that that the higher doing investments pretty products profitable invest market we're open. We're so shift over the our even smarter, XX area months. not over just to a little in that's the something we're met have grow the and to a And IoT anymore. speak. last margin of going great going some dramatically smart line. to gross to luxury

Rajvindra S. Gill

me kind you No, Maybe help something. that's of reconcile helpful. can

target would cost the $XXX then why $XXX reason OEMs So the a are on OLED OEMs more to trying shifting they're forward well, I display on But you're you point, display, production ramping – moving that's in-display, focusing from to materials move to that if which the why very Chinese not would phones. OLED be expensive then to as OLED and they confident to as and LCD price OLED assume are OLED? build

move but for the care that about necessarily willing in-display lower an sensor? cost optical in-display in are Chinese the display to to OLED don't is say, So, OEMs versus, much fingerprint where an OLED

Richard A. Bergman

good there's a are below capacity well OLED Raj, some XXX% think manufacturers sitting idle. That's OLED have well documented a and display at been pretty that question, would capacity, ago, unfathomable which that I Yeah. would running year be

flavor costs OLED. rigid quite a you're think a even more bit between than of I that rigid and flexible seeing Flexible OLED.

And for, for the LCD displays. full and we bit which HD boy, LCD in of can costly they're are WQHD that do an TDDI say, alternative manufacturers also, Leading we seeing clearly, quite with the an with into we're seeing sticking online, we of coming seeing recognizing, Actually, rigid is we solution, course, if demand resolutions display surge OLED is rigid. the is we're on OLED will, that. that infinity And not mix is demand at look flexible. as much more is so so, demand and what a there's

Now, just there's of for OLED there. demand a amount out natural certain

going I the ahead bit expectations to to marketplace go and going is of OLED plans. the with it I see So, continue think with you're drop lower OLED the certainly, They're display OEMs. certainly to think a volumes was anticipated. what different in what than are OLED it the don't But than mix terms Chinese their within was

Rajvindra S. Gill

three Thanks. a but before statistics last do is that. years today it I want you auto think, of What momentum. the And just you of question got percentage lot and to be, revenue we've two, auto gave just for clarify what will really is me, ago? think I think

Wajid Ali

probably revenue. X% of historically X% right of revenue was it's about it Yeah, our and to company X% now our

Rajvindra S. Gill

Got you.

Richard A. Bergman

have to steady going bit growth. It's

it's see to type over XX people Day see XX, you'll (XX:XX) actually to of a kind number If terms And fiscal deployment said, you Analyst with into turning coming pipeline for to rewarding those as you go years fill the it's healthy finally qualifying back slides, in our after years. we XX, pretty for our and some of got of several the automotive. or of – solutions investment revenue

Rajvindra S. Gill

you. Thank

Operator

Dougherty Company. next go Charlie with & Anderson to We'll

Charlie Lowell Anderson

getting of questions. half have that in year. into taking as parts of a we're smaller how of new helpful. mix. my we bringing I that'd about profile a and lot Any should moving Thanks back calendar taking Yeah. the then, gross I've sounds And account, of It like wonder, follow-up. just bunch the portion a as of in all the are for the got the be business margin some we products commentary, a think

Wajid Ali

Sure, sure.

quarters, year. Everything back in we profiles to revenue grow about us, XX%. for a front in range revenue of and a been that the we look So, in around year, our the the of calendar at the we've last margin despite a that point QX bit the the expect the probably the gross all earlier two at of continue And of remain Like of throughout set product had seem that And of in end we to hovering first higher were that at kind half to the the quarters, we're that the range. we in end model calendar will two the seeing midpoint at range. we out see talked to call. XX% front the margins in in high the taken DDIC time, we fact mentioned Charlie, TDDI indicate about fiscal little we've I

the top generally, the profile And expect QX. the profile that's range last other of efficiencies quite based gross of so, in deteriorate. fiscal some we're we positive our ramp, that consumer continue to we and as product expect margin margin be cost IoT lines to seeing, for we've on that the and we're us seen see at strength as quarter to end the and should and seeing in that some DDIC because volumes But to contrary, volumes of TDDI our our

Charlie Lowell Anderson

opportunities Are to then, back do Is kind and time? And this some certain Rick, you it wonder, sort of you reallocating long that level of the point, want in of Thanks. a need are investments you term, just business? to this in-display this things Just the be of to where there commentary stand, going do at here? I there, fingerprint Great. point? rightsize investment to at the revisit worth of in over terms

Richard A. Bergman

in course, we do of that. Yeah. the Charlie, of mean, course normal I business,

financial a well AOP. midyear approaching we're we're you know, so As company,

market how ROI we'll at particular product look in we're look opportunity. portfolio the and it every investing our of of product. much We get not three, we versus that and the in So would at the horizon four-year just terms out

We decided to threats there as were with, our that fingerprint that market longer was absolutely did certainly and no so, And review solution growing was and business. mentioned and emerging it. earlier, commoditizing mobile the capacitive it I we'll rapidly

to we PC very business truncated we the So, it table investment, where and compelling, a that our places. they bring to of fingerprint other to we because certainly security, certain degree, shifted greatly value some and is which that

optical that do our So, businesses and same on. we'll so thing with IoT and

Charlie Lowell Anderson

is Wajid, Great. fingerprint of And percent update you willing a as to days revenue quick housekeeping, on roughly? just us be one where just these would then, maybe

Wajid Ali

that. mobile fingerprint under what's really that So, And PC our is actually, is about bigger fingerprint X%. than capacitive is probably interesting capacitive

moving PC business. into year, our mobile see fingerprint this being QX we'll So fiscal capacitive fingerprint than our capacitive bigger

Charlie Lowell Anderson

it. Got

so much. Thanks Okay.

Operator

Securities. next go Jun We'll with to Rosenblatt Zhang

Jun Zhang

taking my question. for Thanks Hi.

So, two questions.

solution So, with DDIC dollar could the a of you bit common give us use common that And a a new the revenue. chip-on-film compared with of will the gross DDIC could be? about kind what pass-through be should the chip-on-film of for the DDIC new I margin part on little color type older that dollar of this product? the think And small

my Thanks. that's first So, question.

Richard A. Bergman

average said – – dollar? sounded didn't you Okay. catch quite you it like content? price We the about asking or Are common

Jun Zhang

dollar chip-on-film using the solution... common the the of DDIC Yeah,

Richard A. Bergman

Well, the...

Jun Zhang

...compared older with product, yeah. the

Richard A. Bergman

the that DDIC you on that general, is versus flexes flex ways, be a ballpark. uplift solution. really It's range a depends on of that or density features a type, resolution, in – uplift. products though. the cases, pretty of XX%, it's you to particular in for if the kind XX% different can XX% TDDI types actual it's bit There's a There's a and want In certain COF the display actually for XX% ASP on. that of ballpark, DDI. costly And depending just and quite type need a products quite It some standard the rough the

Jun Zhang

I the (XX:XX) as the to Okay. your content your mostly XX% you premium you charge paid margin? of going taking clients, the better do enjoyed pass-through chip-on-film revenue? (XX:XX) it's most to manufacturer XX% And to premium think of should are or the gross You're the

Richard A. Bergman

you. for don't break kind we want to down model our Well, of business

our company in successful percent, big north margin, display where gross make gross to our chunk as the a probably display Just we're going. as our if we're profile anticipate, And well there. Wajid you is elaborated managing kind on for we're making – of heading margin revenue. be overall And of could up products still our gross margin products

Jun Zhang

second competition you're Yeah, of smart in especially Do MediaTek kind the competition speaker great. question Okay, of from smart growth is like for the your what product guys? biggest or And you turnkey the other opportunity some your market so IoT see any potential providers Thanks. Asia product? seeing of local speaker solution market. about the outside

Richard A. Bergman

Okay.

guys. the terms are and then, processor in of you that of multiple that competition, about, – categories there's of fielding So products actually kind kind is the ones there's read

and on. mentioned and so You Then, there's Qualcomm guys. connectivity MediaTek

hey, and There's is world's unique the it best positioned voice, at that world's that come the else best supplier. somewhat that video uniquely we're So, we really we're way. we're with, nobody there

have – how pick seeing get noisy same meet when environment to want how with voice able video to know They and great a or a connectivity. they that know we're we I at up don't voice great has how we great so, And the converge want how a voice customers, time. and make we're to they in can product

a proposition. bring different value we So,

large are prominent of we the as companies. we we And – would as based the see you the competitor from some of the faced then, Asia, expect, of audio the here do terms see that most in the certainly well companies U.S. is In Asia. – probably other that as some SoC MediaTek we

Jun Zhang

you're great. market what other seeing... And Okay,

Richard A. Bergman

(XX:XX).

Jun Zhang

Yeah, the yeah. potential –

Richard A. Bergman

the Echo Mini smart Google the speakers Home. Amazon There's or the that's Yeah. (XX:XX) but

the about there's dominate they and During the my doubt. talked remarks, prepared I – market, no

we we're that. get to Google enjoy in Home the Fortunately, so products

of to Amazon the business companies we're hard of it's models in have consumers or other there's And hardware spaces the Amazon's head-to-head to Mini kind two in those and of not other because product. the generally a daunting branded for products. all branded Google the outlying will first products it course, manufacturer side, we're party On makes it in but directly opt the because just buy compete

and if few move the the of other However, outside markets, there's a could players. you U.S. other

in different remarks there market's and isn't about for Tencent in The smart bit Bluetooth Japan. many from me my prepared one heard with Korea. competition that those brands. talk direct big a any example, in engaged manufacturers the and You speaker China, speakers, as We're and of

come bit we're seeing volume through did quite has think that. almost can you about that of a on And engagements I we're technology on. of so, talk possibly And seeing those. that's else everything

forth. systems and So camera home appliances, air so alarm systems, conditioners,

about them talked leverages well we're as course, lot volumes the you of And starting remarks, up my that as As in also us those the see this successful that the then, a singularly, prepared I smart to headset but none build nicely. markets finally, other big the opportunity had capabilities are quite speaker of speaker made the smart same in as market market. have of in

Jun Zhang

Thanks. great. Okay,

Operator

queue, And to closing turn would call any the management for no further questions over I to the or like with back remarks. additional in

Richard A. Bergman

forward out Okay. the some great you either again, next very had Well, and look thank a you And questions call on appreciate the August. Thank once I you, to much. or of our seeing everyone. certainly dialogue. number road in We

Operator

participation. your you This does for conclude conference. thank today's We

disconnect. now may You

Synaptics (SYNA) 9 May 182018 Q3 Earnings call transcript