SYNA - Earnings call transcript Q2 2020

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Operator

Good day and welcome to the Synaptics Second Quarter Fiscal 2020 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jason Tsai. Please go ahead, sir.

Jason Tsai

Thank you, and good morning, thank you for joining us today on Synaptics’ second quarter fiscal 2020 conference call. Tsai, the Jason Relations. of is name and Head I’m Investor My me Michael our Dean are today’s CFO. our With call CEO; Hurlston, on President and Butler, This of our the website at live accessed call the company’s being can from section and be over Relations Investor synaptics.com. is also web broadcast

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

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

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

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

control, of Although and they are number our be uncertainties to reasonable, Synaptics to to a beyond estimates believes subject be prove and assumptions and our inaccurate. may risks

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

about started, sending we'll at June targets New details shortly. that out get like to we long-term in time. and hosting on are we And strategy be our that before details discussing with York we more in you Analyst our forward and Day announce look planning to more Now I'd

will over the to now turn Michael I call

Michael Hurlston

call. I'd of today I'm December as and and Jason, today's we all were be everyone and to business, to PC finish outstanding to we again customer In pleased our to Thanks, results strong mobile our report months demand an quarter speaking like from the with to largest XXXX. better well calendar in quarter, welcome ago. as unusually than three leading forecasted you saw that

expected. continue disciplined We to our that spending, be in than was resulting with OpEx lower

into our and financial income record performance efficiencies our team's line. quarter pleased place but and execution that than XX% of non-GAAP for later put this in the net our first our quarter operational to call, the margin operating by we've bottom in All led really and non-GAAP I'm on are and years beginning control Dean of EPS. and will to a impact more in X go details more

risks. Now the our end to let high reshaping Synaptics we in strategic year, our our me started update the last business sustainable, and of Toward and you on transforming assess deliver long-term growth. process the progress margin, internally we're opportunities review of to making

end can in capabilities While SoCs These in computing our early embedded differentiated variety we're and highly and the touch networks feature OLED I'm a by process, neural our span edge smart markets. SoCs. power, capabilities products still and the high-performance low devices encouraged video audio AI really and of like for

spending to invest product also continue order opportunities envelope. and areas we we're portfolio of parts to reasonable here, continue deemphasize certainly a keep we'll about excited to the in these While in the in will other

ongoing product that million the This As mobile June move will divestiture part and right ASP quarter. line $XXX optimization, is we would our our of expect line. not to the with TDDI LCD we the close mobile this TDDI we a have on for announced margins. to of our transaction be continued Synaptics, move as pressure, divest dilutive. the portfolio in drag Had already it this made And December, in LCD for was product margin gross very

our and develop and display touch and retain for discrete OLED displays to TDDI ability do solutions, automotive. sell TDDI We for

of expected would from details as the opportunities look impact to Dean on provide ways that to look transaction high-margin, add at sale this P&L One is the use our inorganic portfolio. financial our we the to to will to later have. differentiated, this assets is to more cash more accretive

you businesses. our update on me let Now

I expectations mobile, demand this and in the strength from into as quarter in quarter. our December mobile continues are cycle cycle Demand we – our for product product strength mentioned unusual at drivers and as In that that handsets benefit current term the short continue saw plays largest earlier customer display in powering current exceed this out. continues we this the to to

design We're sensor. also demand seeing with strong and OLED touch momentum our

our progress high with first remember, we're touch rates last differentiated face for XX a Hertz and win flexible was of support, Mate report premium support that latest OLED and very making good generation features you solution XXX customers As on-sell and the our include Huawei pen on XX and of year with detection with active delivering the Pro displays. Hertz

will of by a driver for by panel very driven flexible excited long-term, and I'm ramp OLED our the production. that I'm industry-leading here meaningful pipeline OLED controllers Synaptics confident be our touch growth

and video, new business SoCs solid and announced VSXXX performed and including quarter enriched with launches several computer performance our demoed and that GPU deep this products, CES software product NPU IoT month, over combine learning. as power, customers of edge-computing At expected CPU, six results. teraops IoT, vision as of family to audio we in new multiple the with last to delivered Moving

retail family for makers to a bars strong intelligence connected combining and smart capabilities, and device smart seeing an cameras, generation and this sound voice-enabled consumers. enhanced We're devices set-top AI from interest new providers emerging provide of experience power TV will and service personalization SoCs displays, boxes, of products. other new

to all growth strong Synaptics. IT driver of our business that across segments to be and will a confident grow for are continues pipeline design we Our continue the

saw In of PC, quarter, couple driven we by strength this dynamics. a unusual different

be what anticipated about ahead As upgrade orders talked market the December, quarter, Windows to we in of enterprise to Windows tariffs in January. XX in X that as we be accelerated ahead to strength to that last we continue the companies supposed believe saw of enacted ended but also were we support saw

be our While I'm the lines. the in not excited market in momentum product strength to and expect really market high pad seeing the we do in Overall, PC by to share we touch enjoy we're continue fingerprint business. our sustainable,

wins customers. major with We our have of strong all a pipeline

we transformation, pay discipline work ahead is are in by of adding this is that a our solutions making to operational us I'm and team more executing the Our have incredible off our stronger, and more for on toward our early very progress is encouraged strategy higher focus profitable to Synaptics. to of differentiated margins We but future lot leverage still that model. have beginning a

call provide Now turn our to let review outlook. me to Dean quarter the financials over and our second

Dean Butler

and second fiscal X% our the for up $XXX to start quarter, high with for QX. review financial Michael, afternoon end XX% million current and quarter for the down was quarter from our then range, X% same I'll year. results quarter above and the of our last Revenue a of guidance previous provide from of XXXX outlook approximately preceding our the Thanks, everyone. fiscal good recently completed of

LCD customer reflects primarily quarter largest the from strength display from our from customers. our better than revenue demand expected and Our PC

the above revenue XX% XX%. of two at we had During quarter, customers and XX%

a compensation $XXX,XXX December agreement. asset the XX%, accrued a previously margin costs, amortization, which of million $XXX,XXX For of gross comment million of of quarter, share-based costs GAAP $X.X program intangible our was and on includes supplier reversal loss $X.X partial retention

year-to-date operating restructuring of December and $X.X resulted have the the million operating million, that product quarter expenses retention million the a from December the savings amortization of for overall the activities net includes share-based program X a our quarter in of cost-saving of reflects of of which $X of million. gross XX.X%. tax schedule. XX.X% in quarter. primarily restructuring points million, $XX.X of expense non-GAAP accrued On December GAAP $XX.X million, benefit basis the expenses an the range $XXX.X previously ongoing expenses a was $XX.X above net $X.XX were quarter quarter million to share. end of below The at for of of down GAAP better rate guidance the cost announced the and preceding basis, end $X.X per range. high income of months compensation the And $XX.X GAAP We Primarily low annualized our $XX diluted intangible mix. GAAP were and achievement non-GAAP non-GAAP or tax OpEx reflecting quarter our guidance ahead million, margin million $XX million was XX income bringing initiatives

in was point to pleased years for I'm earlier, XX% than more from comments operating quarter that Michael's first non-GAAP this margin reiterate Synaptics. for to And out our five the

and net quarter share, of XX% high was in XXXX. per period Our non-GAAP company. per XX%. December second diluted million the increase the diluted tax for quarter rate year-to-date of compared or Non-GAAP $X.XX share $X.XX income record year-over-year was $XX.X these a the quarter or $XX.X million with the for fiscal for were Both a

million ended from dropped of the were We quarter, of increase primarily million DSOs December approximately the operations. $XXX hand, from by at and cash with of quarter $XX XX sheet. Receivables million balance flow days. the cash our to driven on turning Now to prior end an $XXX

inventory days were XX, were quarter from $X.X the for reflecting Capital demand quarter and depreciation XX the and Inventory prior was expenditures throughout down were million stronger million quarter. the $XXX in product million. $X.X

our TDDI divestiture. please turn of our let expected Before the guidance, LCD I mobile me to impact discuss

inventory payment in for additional line it We And fiscal that will does million this close on-hand at cash expect time. receive quarter. this an we for plus transaction product to fourth when our $XXX

From this a and product sense LCD and P&L of TDDI mobile a me give scale line. scope you perspective, let

while P&L, quarters For some of is were than Mobile form us line for off trapped revenue million fiscal OpEx And mid-XXs. profitable XXXX, we to TDDI retain several the associated the gross will will $XXX and that was the a of the unwind. will product Synaptics. more take most costs LCD in of our OpEx move of the last year margins in

Revenue margins to in will expected pursued, but XXXX revenue in in XXXX, will be more opportunities to as average. which be TDDI corporate gross fiscal the fiscal LCD we've this dilutive higher fiscal the we've will from – been be still line mobile fiscal higher selective than that product decline is year this meaningful XXXX so to XXXX, as compared

additional color closes. provide after will transaction We the

of outlook our $XXX product revenue the mix, for million range $XXX as subsequent customer we patterns, the timing our approximately bookings, on discuss be well the expected in forecasts, million. as to sell-through me Based $XXX TDDI of let March third and total includes mobile to March Now quarter, our product sell-in quarter million quarter. for anticipate backlog entering which the

We and our PC expect with XX%, our products from to outlook respectively. and and March IoT mix I be follow XX% non-GAAP provide quarter outlook. will the now mobile for revenue XX% GAAP

margins gross GAAP our to to be expect range in We of the XX.X%. XX.X%

to expenses intangible for We charges includes operating restructuring expect in our approve amortization, stock-based expect retention-related we of to the $XXX also GAAP costs. to million, which range and and $XXX be million compensation,

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

will our outlook March I provide now non-GAAP for quarter.

non-GAAP be our above XX%, expect quarter the for XX%. margin be with consecutive gross margins and our March to anticipate third between We this XX% to quarter and non-GAAP gross

tax million. the We March $XX to of non-GAAP continue XXXX expect million to to in for expenses XX% anticipate operating rate range in $XX be to quarter XX%. the be in range We non-GAAP to the our of fiscal

Our remarks. wraps of be range This the up to is share to $X.XX $X.XX share. diluted prepared for March anticipated quarter non-GAAP per income in net our the per

So Operator? I'd call to to Q&A turn now to like the the session. operator over the start

take Dougherty [Operator Anderson & from Operator: Instructions] first We'll Charlie question our Company. of

Charlie Anderson

I congrats taking results. on to margins. gross with start wanted thanks and Yes, for questions my strong the

gross transaction, guys You levers taking of available of aside other And that to the could progress you what that potentially of mix LCD then a got then far. far I've of enhance maybe gross terms of made margin? wonder cost-saving there are TDDI you I helped and sort do? what's margin summarize the to so have guys And initiatives in sort are lot left beyond to what's a some just follow-up. that so done been

Michael Hurlston

nice Thanks Hi, Charlie. This the Michael. for is words.

couple some We've taken. that mix. we first Dean we've obviously TDDI we've had to business -- remarks, past, think think from have think I the talked in -- alluded his last back calls. I on some And the that in the is I of the benefit about we walked on of would that

definitely all we means really and of But whether certainly that our our a -- in And a been at cost, suppliers, variable that's So started from focus. have supply the we've lot benefit. chain. it's from more costs, operational parts looking

we're think to out we find some but the going that. started take the very continue to I there, And we cost early business. where innings to in do of We're opportunities can

be going to it. think that's multi-quarter a We're I project. trying

you very some better supply and I rationalize I supply wide. by early there. system. And that should about the moves Right think to chain, But we now think in is very, innings consolidate chain supply think get still leverage some more I making chain. to of hopefully the the our we're talked our get some and cost out I

we room, have some still there's So we margin gross the line. think on

Charlie Anderson

be parter a the sequentially And you'll it for for then a color. March. like in much two so of on follow-up, my up looks Thanks question kind IoT, here, Great.

seasonal June that that that I was to down the wondering year million so that this quarter year? pattern you've for And been teens. different IoT, you'll the the in to or in for a thought so grow year business I maybe heading happen. into the just historically $XXX And then full need think is I think maybe and what's typical the in March think low

us update on maybe so much. So for just full the Thanks IoT view your on year?

Dean Butler

a I'll of to let color. give But the IoT little handle just on you project visibility So from Michael a bit perspective.

the a So is quarter. up slightly as is of midpoint business. where think QX we year-on-year. IoT It QX for is down, actual kind versus Sequentially March

pattern seasonal down seasonally the our actually And in is so QX. this fiscal in

We're last to just we give it's double-digits were a year-on-year up from you little down. So seasonally where color, year.

So thing you on of Michael where has been want make if a... really kind positive this kind of to growing.

Michael Hurlston

I Yes. clicked I and be talked I think audio some off a there portfolio. strength Charlie some wired we SoCs, I we have the business, nice think talked the couple. we've pipeline about nice to continue Edge and with across wins there that continue of We The another mean optimistic we about headsets design see about growth. to inbox think areas

excited the business overall interface So a of a course, accretive or lower we but as the well. portion business along. margin line that continue is continues to grow continue And It's and our be business. on video pretty click to portion portfolio then about that we smaller to of

to continue So I think we optimistic. be

seasonal with think quarter said, what I next see in is this but Dean As patterns. coming down, we normally that's in of terms line

Charlie Anderson

Great. so much. Okay. Thanks

Operator

Thank our with you. from We'll next question take Rolland Christopher Susquehanna.

Christopher Rolland

quarter. for two region. is Thanks in Wuhan guys. manufacturing Hey, Display manufacturers the question and Chinese very know that there. of leading nice pretty display are I the the heavy OLED

was how business. there I might your of But commentary about wasn't think a affect there. Ken this lot

of you're least, sort Just through looking move at And wondered, have heads our adjustments how in we the what at we as quarter? should it?

Dean Butler

Yes.

So, this Chris Dean. is

about a we little guide sense thought So let our how you the me just give bit for quarter. just of

So it's fluid situation. a

whole lot lot right there's direct of there's the of think our for a factories I Year of China. extended the not kind what to Greater as lunar of in But now mean and given that say chain of kind through points supply region. clarity. a will is, doesn't Wuhan New kind out run everybody the I I

inside of Largely do customers' out, of Greater direct chain as for our you supply Greater a of our run large supply extent. point many outside correctly chains China But China. resides

on we've into feel we've be guide. chosen so how bit know of we've to kind of quarter our just we but as what little a conservative this that we incorporated And guided today

Christopher Rolland

but yes, $XXX said want you Dean TDDI – have million was the Great. like Thank declining. it sounded you. revenue that it about And to was you business,

June, we come stuff, like the than be basis quarter basis out here, rate less so more million in $XX gross company lower Thanks. a like wondering I'm And side then you But how point for a much like of said, maybe from when margin XXX using? end I'm walked margins it? this should this the be something you points already some XXX away on gross out. you've eventually with benefit take when So like run does also the getting

Dean Butler

math on that But not to business little Chris, north of about because quite little we kind you're internally, is, you We've think a estimating. a what this So, sure get size I'm I a was number the sense I $XXX give don't fiscal your But away bit year business selectively not bit last it's million. said, like from of walked there? different. to vastly

from might want we low this that TDDI. how the walked sort is So thing kind would double-digit it's you about say, would that think of of to cycle that of you seasonality probably incorporating This the to normal And percentage kind kind about I remember, think see. it. mobile other of

that I helps. So hope

Christopher Rolland

Thanks much. so Great.

Operator: question of Ariel from [Operator Instructions] Needham We'll take & our Company. Shusterman next

Ariel Shusterman

Hi. Raji This is Gill. for question Ari taking the

want good quarter. of first I sectors, M&A? we cash on the focus to want first there on, say expect be future? So my And regarding to areas, or can in great job off, Are use would particularly question you certain what or further the the

Michael Hurlston

that going large know, of Marvell page What is the Ari, acquisitions. say pursuit don't do what I in of -- think I more trying I specific and TAMS. tuck-ins bigger areas operating both income was and There thematically are TAM we're we're to that focus. the looked has for I to I we Connection call I on accretive. be Dean company that And of are will and margin think that in the that have past,

line. that are to our gross current in and to businesses line add both So going on much be adjacent more margin on we're current we'll margin the looking smaller the our perhaps business, for things with OP and line

least that's where directionally, at So, going. we're

things outset, into that zone. we but certainly we fall -- there anything that said that can that some have don't specifically at that I know there are think identified out I the As

Ariel Shusterman

And you. box mentioned about positioning follow-up a about Thank the market your of there? you opportunity. Can that potential be perhaps guys. you area? Previously, big we you. this focus you Thank area talk my would expect should that set-top ramp for in When

Michael Hurlston

think And on that go applications. feel about consumer the platform opportunity we generally. the SoCs, think I that good can Edge Edge into I a built SoCs, -- our we've there's

get year minimal American supplier, one Google. his need We we about they're platform, the to opportunity of I space. that for set-top wins some obviously but we Europe, that then, that time. design have will interesting need products box, in expect speaking, much It's a an we in not think to Swisscom. North very the Korea. generally presence segment. then that And potentially ramping in think set-top ramps think footprint, as and and customer customers We've fairly for on market But is example, We've calendar surveillance. We've on seen have our potentially small. team don't past. base there in to in And some have video today they And in those box. we in first qualified from got to North ramp. materiality got grow of a is terms America, that in take share. You've course, talked even this see their I quick The We

Ariel Shusterman

Thank you

Operator

Brett We'll Arete our question next you. take Research. Simpson Thank of from

Brett Simpson

see front OLED I of touch on have you. Yes. a very Thanks the much. in that opportunity question you

here. differentiation a OLED So more You Thanks. about question. big remarks your see gives you maybe see you mentioned going Huawei first talk really OLED opportunity you your sustainable in the touch? hear how that as touch? first confidence that mean customer Can sort the we're that's we generally just in you of what have guys here. you as Y-OCTA about prepared I And lot for a to

Michael Hurlston

A Brett. Yes, fair question.

the a a when OLED specific we challenge. technology driving flexible touch that is signal Y-OCTA environment definitely are circuit display the really feel our brand. good pixels display from about that the out noisy know. is pull segment. in a Samsung OLED, a the the And think right to is very you thinner I up as It against ability is very your

able that we to analog feel represents embedded are a very resolve next or to that that out, able your with finger to the that a from ends of LCDs really And and pull we've being backdrop capacitive signal touch right out noisy signal circuit. we're the the been comes front like pixels high-precision

today in We as result design have technology. differentiated of think and And proof Huawei. stated we've the good called our out we remarks We you a there. pipeline got as points that on a

good road that going of So lead a think to design we We've quarters. foreseeable we a us now and about can that. the there OLED cycles. think feel this that is a growing for in be that we're touch coming maintain focused segment And on we very very, set map a maintaining we for got

Brett Simpson

here. follow-up quick a beyond general. lot we mobile obviously on look just in moving If there's XXXX, maybe And a fiscal of parts

largest the the closing generally deal LCD TDDI have declining a forever. when you And have around is and – where TDDI is then state. also for in customer You of now your mobile nobody

Or some product medium-term And that the of Synaptics? Do think XXXX balance mobile areas think how and like growth? you in Thanks. Touch? returns the growth I'm about over to that mobile of cycles do fiscal between you think OLED looking year-on-year so for sort those you declining or fiscal see about the how XXXX, do you business managing front just beyond you at of

Michael Hurlston

of for doubt has appreciated for I But a us us. no are mean think forecast. not because off, There decline Yeah, to lot that they've think pundits had I the but display differentiation that's think growing it's I us. hard what's touch LCD sort segment a been we certainly in moving seen that our I that segment -- and this pieces, of to OLED declining think there's written that be on driver been a going and that is

How read LCD margin the enhance see to opportunities business But perspective, the move It right in feel operating a and how mobile good there on. have between our good we about know mix the don't to looks next margin depending year gross how And certainly we segment. OLED. pretty mix continue now. margin depends on I goes and together? gross that we from and go the on two pieces a launches

Brett Simpson

much. Great. Thanks very

Operator

question Thank you. JPMorgan. from We'll Chung our of Paul take next

Paul Chung

Hey thanks guys, for question. taking my

leverage just are levels large levels, first you can pretty with? after are offset hedges also you business sale, the I but any which the the just term better your should up, dilutive place be And will convertible? how there? comfortable excellent, a TDDI on impact longer even of to of in remind And us, think your follow-up. if have some you have dilution And we then So about

Dean Butler

Paul this is Yeah. Dean. Hey,

leverage in of So, June more Day, tune. which beginning so the one, just kind on ratio a when of there, little we have Jason at We'll structure our talking about to call. the be stay bit Analyst alluded cap

But we debt are from level. capacity I a where would say

but clear balance the have available to on intention to of no sheet. have now tap us, more We capacity going right we debt

me that. So, say just one, let

And have the we to It have instruments. you directly does and our any dilution? convert how the reserve do actually potential on that So, inside hey attached embedded our question hedges but hedges provision to it. have other convert of factor, call company does around, had a not our that's no, does about dilution think a

Paul Chung

then looks PC guide you another XQ. And quantify well? Can demand XQ it you XQ demand, on you can strength maybe quarter the and do you think Thanks. you solid as think drove just expect in -- Okay. pull-in like

you. million $XX Thank the longer of bit? affects move kind as you quarterly maybe revert a lower we run then we months at six to rate? XX point Or back think that from possibly out mid do kind now, And to of

Michael Hurlston

I Yeah. that it unusual. think I is mean,

probably rate. run So our revert see say I we'll would to normal generally, a quarterly

Our really your than back normal to But quarterly bit speaking, million. $XX a been point higher pleasant that. revert rate should It's run generally to a is we surprise.

a about remarks, end we it thought prepared we last was laptops of quarter on thought to think pull-ins be we're were of that have that those we sort ahead consumer. going think the we tariff, out the And basis, front commercial better the of we given have is seeing to very I and what -- laptops the coming commercial mix in but a what quarter higher it talked nice exposure a percentage I in than us. of of

of bit. Demand be sort seems a to little up

And big is better They growing which the are PC seem the think to the segment. customers to exposed three. in the I than commercial segment, maybe average. segment certainly X% but were commercial the to largely be X% doing

again, sustainable. market on business the balance, not So of think We rate that that segment. above But that growth the But PC of us to given expect. for that run very, the higher one is meaningfully market, be PC I share than do was exposure should we high have probably our market. not growing high something rate our in probably that's the very average is growing

Paul Chung

Great. you. Thank

Operator

[Operator have queue. at no this Instructions] questions in time And we

Michael Hurlston

With Analyst Thank you thank look conferences today. Okay. at for very upcoming that, much. I'd us We of Day. to like you seeing forward really all our to you joining in upcoming investor and certainly

Operator

This conference. gentlemen. and today’s Thank you, concludes ladies

now may disconnect. You

Synaptics (SYNA) 6 Feb 202020 Q2 Earnings call transcript