SYNA - Earnings call transcript Q4 2019

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Operator

Good day, everyone, and welcome to the Synaptics Fourth Quarter Fiscal Year 2019 Conference Call. I’ll remind you that today’s call is being recorded. And now, it’s my pleasure to turn the conference over to Jason Tsai. Jason?

Jason Tsai

Good afternoon, and thank you for joining us today on Synaptics’ fourth quarter fiscal 2019 conference call. Tsai, Synaptics. am Jason Investor Head is of Relations name and the I of My on call Awsare, me Division, Chief and With today’s Manager, Corporate Accounting CFO our General Relations. Officer; and Marketing Interim & and our Saleel of Senior Investor President are Vice IoT Kermit Nolan, live also the and website synaptics.com. the can Relations be This call over Investor of is accessed section being broadcast web from the at

remarks a supplemental been copy slide presentation, our also The have website. a add prepared exhibit furnished to also to we of our on posted supplementary these results. the with additional current today addition filed SEC on an have and relations on investor color report financial In slides X-K earlier Form as our

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

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

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

our forward-looking differ results to in statements. suggested may believes prove actual be any and a Synaptics to company’s uncertainties that estimates reasonable, our from subject be may and control Although Synaptics future number assumptions the and they are to beyond of risks materially inaccurate. performance cautions

important factors in any from differ the obligation XX, disclaims the this results information. actual to SEC, periodic that Synaptics XX-K expressly statement. We could fiscal any reports materially for risk the for cause refer Synaptics filed including and June update contained current ended to XXXX, year those forward-looking forward-looking the you Form company’s to with

Saleel over turn now will call the Awsare. to Saleel? I

Saleel Awsare

on you be Board behalf Committee. happy Thanks, I’d to today’s I’m Executive call. Leadership to everyone and speaking and Jason, our welcome today to of like to the

appointment As saw and Hurlston I’m August you as our of sure on earlier appointment. he the Synaptics President XX. to He CEO, the week, new is date expected his the start we of Michael announced join will Board this and

to results. a great growth We in as cultural for will wealth in believe the delivering especially in that to a forward leadership the and of we next in transformation that happy with be record and focused are company company. the has track his he fit brings welcome of We wave the Michael look driving a Michael semiconductors, him are on, and experience strong for markets

Now, first as will discuss management short-term company new year to XXXX was uncertainty, geopolitical provide corporate increased and business. business on in our profitable I we and the well more in will our a Despite weakness for our drove on transitions these off challenges, results Kermit Synaptics transforming transformation, our fiscal outlook. that our a as Fiscal financial an macro stronger, into long-term. and for laser-focused time then due year and challenging update kicked

the corporate innovation, business the and within the kicked better initiative call, earnings driving transformation off long-term. towards last our on about profitability focuses expertise, aligning untapped product talked extensive on unlocking and technologies We we portfolio our potential

speed sensors IoT wire display touch for edge areas consumer identified for mobile higher OLED smart and and automotive, TDDI high We for VR. and peripherals SoCs the growth. for SoCs and in true have and the investment wireless devices, include connectivity for PCs, audio fingerprint and These computing headsets, for wired profitability home,

growth, We profitability. margins higher with a are executing company now stronger deliver the on stronger transformation diversified to and more

differentiated developing and more more intelligence. more focus we that software, areas, encompass are these For solutions firmware

their for development. continuing and our doing aligning collaboration essential is to are customers by roadmaps partner our product this be long-term with We an

Based actions, XX%. are with quarter deliver highlighted our gross consecutive better margins on margin second above beginning these we to by

with for revenue XXXX. have fiscal we just diversified now XXXX, for IoT addition, of over for accounting more in XX% XX% most down of and a from XX% fiscal In QX mix mobile our accounting revenue

people are success we long-term. key ability Our off company’s our and foundation area, the and ensure headcount, to to and These to management this actions our restructured our Further, establish we’ve program this workforce kicked to In a our retention compete and to reduced a direction. aligning retain future key helping our necessary strategic planned and transformation. growth. through strong personnel continuity for to the are engineering strategic

focused you share on remains recent innovating some highlights. IoT let Synaptics the Now in with business. business me

wins strong computing We edge in innovation SoC IoT will year of home. consumer targets portfolio XXXX. smart fiscal in double-digit have the grow our a is that the it pipeline and confident are Leading

are market. edge building our capabilities, firmware enabling a video-centric to accelerate franchise We around quickly solutions voice AI leverage their integrate our strong and IP smart and software time that and to customers

and this latest for enhanced vision NPU in AI edge. investments expanding the will GPU significantly at combine our functionality area CPU, Additional capabilities, computer

and products. media tremendous seeking seeing are global generation a developing OEMs We to interest monetize providers streamers service on new from of smart home

in last we shipping SoCs AI retail Smart starting and highlighted we Edge AudioSmart major expecting to selling now we started begin As their next customer a are quarter, products quarter.

designs and WiFi into bars based and sound embed consumer hardware now engaging off streamers. mesh makers and these other several voice-capabilities routers with on like devices SoCs media to also are new TVs, We kicked other and

these few customer to quarters. over retail at see the products next expect We

highly phone on every for to to at ship quarter. of building starting retail expected anticipated Jumping in design our we with three is two are world’s headset box success with the this top audio that win OEMs smartphone flagship new SoCs, a a

active technology. wireless our software the as cancellation, solutions capabilities cutting-edge and of to advanced headsets. in and firmware continued greater such adoption us experience, voice next generation and wired investments Additional noise area our playback audio growth this and hybrid These unique enrich processing, innovations in leverage strong technology drive expecting pick-up for

gross mobile segments the are The we on market. focusing higher business, of margin, premium

across OLED win designs due display to major and our continue to smartphone OEMs and touch performance superior features. We

smartphones OEMs relationships, part and for well-established encouraged portfolios few makers’ handsets their LCD-based support OLED. manufacturer years. to we the of vital development transition Through a remain see the LCD-based ongoing display are to by for will next smartphone opportunity the

As partnering prepares screens the the leverage are resolution give better manufacturers smartphone XG also high-performance with industry display that LCD consumers performance faster we with transition bandwidth OEMs with XG, networks to to improvement and networks. a and the in for displays and to deliver OLED meaningful higher

energized and production OEM from we model customer we solution and fingerprint, XXXX in lead With automotive start opportunity our to business, sensors regard TDDI approval automotive for to we our expect our of first and cars. to the Moving solutions. about are fingerprint investing in see long-term year are fingerprint received

OEMs, America, display China. OEMs Our of XXXX manufacturers Tier-Xs TDDI worldwide. platform Japan to Europe, to with TDDI. fiscal their design full Many at wins across systems year using well have exited these by a are We and of solutions OEMs been North six TDDI all display transition and received in-cell planning major future

Additionally, with touch several OEM/Tier-Xs in that we active screens. conventional to are is additional discussions migration centered TDDI around from

cost performance expected year and car optical in this We automotive long-term. of trend to significant to wins is as are continue expect XXXX, advantages offers we another with design to manufacturers. and market TDDI to committed fiscal TDDI This products have successful

is our our expanding As fiscal XXXX. part of transition, product to portfolio industry efforts Synaptics enable in this

the touchpads Synaptics Dell well fingerprint with for PC remains business, our authentication. secure makers, Growth major as at as is new HP, market for the Lenovo. major fingerprint Within share and highlighted PC designs both leader in PC all including

pleased biometrics to secure We and trusted leaders. partner leader are in a these industry with

We’ve transformation. to you highlights, in the areas our As investment are we in can making our and these identified progress right strategy. are executing

Our well a in transformation margins stronger, more more to profitable becoming becoming are journey improving, and customers we are and our are our business company. underway diversified

Kermit our With results and now will outlook. that, discuss

Kermit Nolan

revenue and fiscal Saleel, XXXX fiscal down hello year. was XX% last Thanks, billion everyone. Synaptics’ of $X.XX for from

quarter. million, For placed and accounting was our of $XXX the the in our guidance list the on $XX entity XX% million than reflects quarter, sequentially Huawei, impact fourth customer, our slightly below impact being for down range year-over-year, of and and XX% more revenue

to without as to to the components. on other can limitation, ability markets our phones impacted ability U.S.-based we solutions restrictions technologies source for well produce ship While by their certain certain Huawei has adversely their been as to access

XX% XX% and at Revenue quarter IoT PC was XX%, and approximately revenue, We products mobile, respectively. XX%, had of in and for the XX%. June XX% above customers two

for the of For intended vendor amortization, XX.X%, assets GAAP gross our a a margin to from of was $XXX,XXX and charge minimum which commitment supply the end was arrangement, June costs, of million a quarter, calendar an on supplier through agreement, XXXX. which loss the million includes $X intangible a compensation accrual a secure of share-based commitment $XX.X

under loss commitments to projected longer no we an is achieve demand supply have required, minimum estimated accrued the agreement. As the

$X.X were $X.X operating and of the costs, costs of compensation share-based costs acquisition $X.X million, transitory restructuring million, $X.X amortization program program million, of intangibles of related retention in which includes million. GAAP expenses expenses $XXX.X consisting post-acquisition and quarter million, June of compensation

be the As overall continuity from fiscal and as will approximately part senior we cost of through and retention as of management retention into costs. and period accrued entered our anticipate project result savings in engineering arrangements plan restructuring level over June, expense operational product we with key support $XX of million is to transformation, XXXX we annualized our The and support transition expected million be ensure the XXXX. initiated outside corporate which changes, arrangement November company ending management $XX and of Also, a part in to XX-month and focus we the certain exiting operating reduced approximately will headcount, employees.

negative XXXX, and the $X.XX diluted for $XX.X or loss of GAAP net loss $XX.X or had million, Our a loss diluted for X% was share, GAAP quarter, of fiscal In per a a of $X.XX loss was tax net per we rate fiscal million, GAAP share. XXXX. June

non-GAAP range basis, and our primarily high margin guidance preceding product mix. of quarter XX.X% a the quarter our a On at and million the below were above $XXX.X of was non-GAAP $X.X reflects up of low better June gross operating range end expenses guidance million end quarter. non-GAAP June our the from

tax XXXX, was XX%. rate fiscal For our non-GAAP

for quarter essentially income $XX.X a net $XXX.X $X.XX net share to $XX.X fiscal the for year-over-year with of year. $X quarter per diluted share, last million or or fiscal the Non-GAAP share, per compared was decline million, diluted million, XXXX in $X XXXX. compared per million, flat Non-GAAP fourth XX% $XXX.X fiscal diluted income was June or

balance used of operations to an in sheet, for of quarter. the last partially our the quarter with of million $XX quarter of million, by shares. $XXX flow the in cash for cash X.XX $X increase purchase increase from million $XX from The program driven we of cash Turning repurchase was by approximately offset million which cash, primarily share our ended was million

$XXX to of $XXX operations beginning by which cash million, or of outstanding, primarily our program in the repurchase over cash Year-over-year, X% used $XX from partially share our increased generating of offset for ongoing shares driven commitment million, by was reflecting value. our million shareholder by flow purchase shares X.XX million

As to the expiration the extended XXX,XXX by mentioned in repurchased shares an release, additional earnings the XXXX. $XXX repurchase in authorization July, and increased million we date July

Receivables were the X. Capital at and were days the were $XXX million $XX was quarter. loaded XX and $XX back-end Inventories DSOs expenditures million were for June were end turns $XXX a year million and of depreciation million. reflecting inventory

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

We business, increase respectively. and flat business sequential XX%, business, guidance in XX%, due products from in be reflects and This double-digit mobile IoT mix our our a remaining with mobile, ongoing to Huawei. uncertainty PC and revenue expect small increase sequential the XX% to our IoT, a PC

sequential would business strong growth. mobile our effect, this Excluding showing be

$XX be stock-based will provide follow the and first data September of our $XX outlook now charge quarter for data. GAAP with We to million range I in anticipate non-GAAP to outlook will million. compensation quarter, the the in

related million in September cost addition, will charges which be $XX reflected expenses non-cash of include of In intangibles will of approximately amortization, to sales. $XX million GAAP quarter approximately

the expect first million to also accrue of and We $X retention restructuring costs million, to of million in costs quarter. $X $X

fiscal our for to we for tax XXXX Finally, XX% the to GAAP the of in fiscal rate expect XX% range year. be

September now into anticipated overall with I between mix, XX%, quarter non-GAAP provide Taking revenue be we the be quarter. gross margin September data XX% our margin gross will for outlook account in expect third to our non-GAAP consecutive our XX%. above and quarter to

XX%. We range September the diluted to per XXXX to share the of range of the be range $XX in share. We our net expect anticipated anticipate million income for September per million. $X.XX non-GAAP $X.XX to be fiscal operating quarter the expenses be XX% rate for of non-GAAP to $XX Non-GAAP quarter is tax in in in to long-term the to

Now, fiscal XXXX. I’d like our outlook discuss to for

shifting As from long-term that uncertainties mobile driven will a low-teens will flat we significantly transformation. shift related current model, a tension, to business IoT by U.S./China and and in for milestone essentially investments representing OLED. macroeconomic our to gross with customer’s result key revenue of our by will due high-end the LCD be percentage, to be margins direction and increase mobile trade a corporate improve XXXX, PC to our to to of our down short-term XX% product We midpoint increasing anticipate strategic new XX% the anticipate non-GAAP fiscal

decline to will XX% the progresses. as approximately to year you revenue XXXX, look fiscal updating XX% year-over-year. forward We For

the With up prepared Saleel to our now wrap to over remarks. that, I turn Saleel? call will

Saleel Awsare

by for lie In summary, opportunities we Kermit. Thanks, as are start new us the fiscal we our excited that ahead year.

in further dividends expect investments investments our and will longer-term. performance aligned strategy our higher we have improve priorities already pay to our on to margin that focus and Our begun differentiated, corporate products

With the now to the over call the start to turn session. that, I’ll operator Q&A

Operator

Thank at Gill will Instructions] And Needham. Rajvi first go you. [Operator to we

Rajvindra Gill

How you A customer us OLED. going had front? elaborate and of position China units? if going are in the further fiscal seeing to about mobile kind if other XXXX OLED by to you handset shift a at to issues on that? the China? customer, don’t are give to Yes. guess, taking could in Why a of outlook, due what China I down And we top in take market sense is questions. I significantly OLED Thanks terms being affected you separate then Chinese handset you on competitively mean, Huawei, your overall LCD question And macro mentioned overall – the be just if of your top we the my lower shift the what from you for is year forward? that

Kermit Nolan

question. Good

products, to for be will Huawei, As on would that do down, anticipate with anticipate and the we other customers, somewhat depending down be our China obviously we also respect too. that

customer. to overall, So anticipating will tied that DDIC particular one be we TDDI down. our DDIC that products and more are key Obviously, the

In terms of OLED...

Saleel Awsare

are your are Rajvi, generically. answer Yeah. Saleel. you? this me is Hey, How Let OLED at question just

not non-Korean that display usually, OLED non-Korean to do industry forward. Tianma year. like next market to working to our continue past, million vendors customer as we are the with this said we we very comment past, faster expect closely high-end And million we to BOE Chinese as and last the year online biggest we’ve don’t come XX we go market in doubling them on increase far and lead we the And XX the and the I’ve from is as well to and OLED about for grow that. change. drivers And units, are So year, said the OLED analysts positioned in are as even as expecting

Rajvindra Gill

just Okay. XX% the XX%, on I understand. going do if Because the is down mobile to overall imply going to down to business it’s I revenue be the well that over XX%. math outlook,

you give can what is Huawei? percent of a of So sense sales us

Kermit Nolan

It’s XX%. probably about

Rajvindra Gill

Can forward kind little to to you you shift about, exiting think on good So see that? it’s XXXX fiscal on of be of what XXXX it’s OpEx? kind Can basis will a XXXX? of bit really] [well, year $XX the a [ph] go $XX that year overall will mentioned talk be million. of that fiscal kind recovering. and What stabilizing fiscal OpEx year are that and you profile, the the there I of margins reduction elaborate exiting And a was the million

Kermit Nolan

reduce forecast, Sure. Sure. by to obviously, had we The corporate largely effort transformation a focused initiatives. costs driven

fiscal also they time, throughout approximately year, little. those QX, the outside for but And anticipate those be primarily fiscal the and savings is we a transitioning that at $XX the of would of we the saw million. costs, year, project in were benefits annualized same So headcount end And are costs of support our by some this costs. but the lot

Rajvindra Gill

you. Thank

Operator

will go Susquehanna. next we And at Rolland to Christopher

David Abraham

of It’s guess, XX% at start out midpoint – Rolland. couple to David a quarter over Chris question. for next It’s way long congratulations guess, behalf taking I guys. Abraham Thanks guidance of Hey, on margins. my years. for past gross I come really your the

for Do throughout right hurting growth on year like XX% As and a going seems it year. year of kind think the a the to guide and that’s Or it revenue the margins? your the given gross about you is being conservative target? a just under we bit XX% transformation businesses next now, of of think ongoing down

Kermit Nolan

Yeah.

probably lines. would really is it the margin, of anyway gross revenue So product with That’s that mix range. in going margins of combined view down be within that XX% to affect is each the to the why being XX% product the my

David Abraham

The gross And as the supply was related And that can in as then an product to? continue detail June for what impact total the expect to from to the housekeeping forward? taken going any loss this all commitments, it. loss on the quarter? this share well. do was that then was Got margins Or on accrual you you

Kermit Nolan

It accrual the an all was loss This do quarter. products. for had taken with mobile total the in to June

David Abraham

approach your one, there revenue than And percentage, guiding total there? is final it. in I kind of that leading or seeing behavior guidance, backlog look the patterns Got order cautious in your customer high was pretty you’re my it Is higher at of you’re anything unusual September that as then for a a normal to. to

Kermit Nolan

lot Huawei last we our as QX. really the from relates quarter saw especially perspective, given – impact to It’s uncertainty there’s it in of a

reasonable the that China/U.S. but of light it is conservative, be macroeconomic is bargaining Huawei war. think a also that it that in fact current to argue within I effectively in war, trade could You trade chip conditions, seems

David Abraham

Thank Great. you.

Operator

we to move Charlie next at And Instructions] will Anderson [Operator & Company. Dougherty

Charlie Anderson

for questions. about Good Thanks script automotive. There taking my the of fair were on amount Yeah. afternoon. comments a

if nil be, I within much pretty wonder you sensors. fingerprint how I that per speak car then on guys of Thanks. over a the wins could and some I adoption if getting you think, got dollar automotive? both content much could the time any are imagined in mention is follow-up. to it I’ve fingerprint TDDI and of you design sensors today thoughts that

Saleel Awsare

How side, specifically, on of here. are Charlie, So the dollar the Saleel on double-digit content is depending the you? automotive Charlie, number screens, Hey, dollars.

So it’s quite substantial.

We the have that – with will first cars said XXXX in fingerprint the market earlier be XXXX.

that seeing we’re adoption tremendous and we’re really and of interest seeing on. this going amount of So

we So about feel good it. really

designed in to closely happen. make their and we screens that then the go to being automotive are enable you, the TDDI, to to with the in and And So company I of and we getting more and is multiple most working wonderful guys be are more solutions. production are cars more are going more that is and the ones as told very

Charlie Anderson

And investment guys the was you for PCs, – high VR. and areas went connectivity sort you to me was of the through wired that, and Thank one then Great. new also speed peripherals there was Saleel. for I that think

all. could Thanks. that you if expand wonder I at So on

Saleel Awsare

And tables, had the technology happening of this – future had the and part laptops, IoT looking that what’s we’ve have IoT as right. I at a most the So we’ve left. speed you is connectivity in Charlie, portfolio. of months interface these connector portfolio my that’s last is the as the device call, part only needs that of a Synaptics Every said right And technologies nuggets of few even has of this at this in-house. in-house, high PCs, tremendous had a last now one dock business. And this USB our buy

dongle to a So these buy you one solutions have in or dock. of integrated a either as

So we are extremely well positioned.

exciting And it SerDes hard content it’s the involved speed got therefore, a for people lots space in. high is of reason to very jump and because is like this analog is

and last at tremendous plus we ourselves are wired as speed call, to high you, the it today. we and longer space telling market, spoke, where traction future, DDIC requires Where with early that’s wired with designed a as but [ph] getting the of seeing our I taking we I’m four connectivity, be but we’re some think growth, dollars we our the VR three days VR already speed is into for of I’m in into like high are [bump] connectivity. this So It’s VR in we these term want in. double-digit kind headsets. the chips And position

Charlie Anderson

Perfect.

Okay. much. Thanks so

Saleel Awsare

Yeah.

Operator

no we additional And time. questions this have at

thank today’s joining conclude will us. would conference. again, that like I Once everyone to So

may now evening. good Please You a disconnect. have

Synaptics (SYNA) 8 Aug 192019 Q4 Earnings call transcript