SYNA - Earnings call transcript Q3 2020

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Operator

Good day and welcome to the Synaptics third 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.

Jason Tsai

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

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

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

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

current impacts our of COVID-XX give business, plans, pandemic. our to and projections the future and results business of statements Forward-looking operations, our financial objectives, regarding expectations including on performance relating our potential conditions, expectations the

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

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

June and with X started, more we our we on to forward our and that details that on discussing get term at are time. like we to details before hosting targets Now strategy Analyst you I out planning And still sending Day look we would about more remind shortly. be you will long

I call the Michael turn will over now to

Michael Hurlston

Thanks I today I pleased today's quarter report speaking despite a with am you be to everyone welcome of call. to to all would and uncertainty COVID-XX. global the Jason. like again solid of ongoing

chain During at was supply a the quarantine. quarter, due the the in to much largely of March standstill China

weeks, impacts As the portfolio. pandemic subsequent spread our different to the throughout we seen product in globe have

people are PC are our discretionary of seeing While home, from automotive and the of IoT our number businesses consumer weakness we related in spending meaningfully. increased working part declined as benefiting from electronics for business,

expectations challenges, was our with higher the margin line products line largely low-end business for drove expectations third stronger of company. quarter. continuing quarter value March solutions to focus was during our our margins mobile on higher than profitability in expected Despite the with and the better Our our in these added revenue while gross and

performance to products details increasing further further invest improve term us a much of business mobile have P&L balance should month. most to stronger allowing margins. Dean profitability will our our pleased am provide enable to in more we gross us the able on I our We were which LCD long close and while sheet financial TDDI last call. differentiated divestiture in now more the later also

to challenges. address provide to share on I those to thoughts you would are affecting getting what us I my pandemic the global our like business, and we update with Before an how is

by I to them and uncertain dedication. and extremely times our and and am First off, these the safety thank health pleased their steps is for top measures safeguard to priority our employees and continue execution take of their focus we them. in implement

are faring engagement others with the that business a some and in are from strong short earlier, term the said across I better globe. we customers we continued As than our areas seen standpoint, seeing have

and on supply supply our We able to point. face effectively deliver been roadmaps and chain have managing adapt We our disruptions this various continue the to chain. ensuring to to normalizing see we that our commitments at our and minimal execute on customers

and contingency We positioned team place we global to look in conditions have put a the decline are in and that. economic with deal global to at the event plans pandemic how further consider

of conditions to engagements, increasing invest to continue term. and normal, long to return our wins customers of this Our will engaged all enable pipeline new intention as our stay with growth and our is design through customer and products

business. our drivers highly several display as months Now you our Pro phones. with our on let flexible me as mobile market, Pro launched Plus the handsets controllers, of the in past our well with anticipated on-cell In the touch including OLED PXX and Huawei update customers have couple

displays. touch new a capabilities that on-cell OLED We of single-chip solutions integrate and are all introducing several flexible broad differentiation for sweep high-end

as delivering report and pens. as integrating Detect industry in features displays active rates Touch infinity touch well Side enable This fastest for to includes the the and support Face

OLED grow, of in we As our our position. leadership maintaining production momentum is to confident and flexible panels are on-cell continues and design availability accelerating

year. handset low-end Assuming calendar of anticipated, the mid-range month their using solutions OLED the hold, last customer current smartphone our market. designed DDIC in our it received well schedules LCD by into launched at this highly to XX touch end phones has large been least our more Separately, and be should flexible flagship the

provider the of of on and computer hub SoCs, SoCs GPU versatile Smart NPU strong of audio, homes, traction set-top multiple seeing uniquely addition In are powerful platform, smart of across IoT, purpose-built launch single family that successful and vision OTT the with set-top integrating a VSXXX AI and boxes combine AI. Serving boxes CPU, smarter including getting our design a and retail products. activity entertainment our the Edge customer we streaming are video, as following markets service

smart including with devices and sound displays. in video voice-enabled finding customers new retail bars and our integrate network premium are high-performance neural Our cameras bars, ways to accelerators sound

ecosystem with companies. electronics activity partnerships design Europe, win to the partners across significant drive our wins consumer We have with service numerous with and Americas providers Asia and strong along

space a have in product will the next course solid over this of and see the We rollouts initial XX roadmap months. you

excited video new be are and support HDMI have targeted optimized to the drive by commercial our docks, end taped ICs interface docks of in screens. at about ultra-portable Those X.X products that up products are We be year. will these to retail recently the out. and and also XK Designs are travel dongle accessories to

new our increase home in of of is and rise businesses upgraded home momentum laptops. employees activity and to work video benefit In activity. work see the strong multi-stream our increase more their due continue we design to continues to The addition, Enterprises are from outfitting with from seeing a existing with in volumes products growing accelerating. demand PC-related are

are consumers learning. their remote to to addition, In enable laptops video upgrading moving and also applications are students

result, connectivity fingerprint high-speed sharply. wired and touchpads, docking a of our are sensors stations As for increasing sales

the PC-related anticipated, While businesses this previously we than expect to in strength sustainable. our be longer don't is strength lasting we

our I on control. our due will still execution but our team's focus. months remains we am in pleased COVID-XX to and Overall, and can be volatility continuing by coming uncertainty focus the what Undoubtedly, there

in with our will be that drive solutions support and results, invest will our even uncertain in environment. and customers portfolio continue to to continue operating We to of engage an will we there

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

Dean Butler

start current I to of our review afternoon quarter for our QX. then good and financial everyone. recently Michael a for our results Thanks will fiscal with completed our provide outlook

X% of million end slightly previous our Revenue of down XXXX below the from range, last the for low the and $XXX quarter the down third fiscal was quarter XX% same from of quarter fiscal guidance year. preceding

was of global to COVID-XX. negatively impacted constraints revenue the spread customer production by delays chain Our supply to by slow due the effort driven

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

and in million a million, million, GAAP March quarter net the XX.X%, of March asset $XX.X and million our million, $X rate XX.X%. of share. the operating $X.X bringing $XXX,XXX program We margin accrued GAAP share-based intangibles tax intangible $X.XX $X.X year-to-date which were for includes $XX.X $X.X million diluted of or expenses GAAP our million. the quarter costs. to which income income amortization $X.X For of of million, the expenses gross includes in compensation was quarter, restructuring of $XXX.X of compensation of quarter share-based amortization net per GAAP tax cost expense was retention GAAP

quarter The million our of benefit work the below margin at XX.X% gross basis, preceding basis during non-GAAP due the guidance million the savings was the high-end expense of non-GAAP and a of expenses cost from low-end restructuring and On $XX.X above our from to and down activities restrictions operating quarter, range home reflecting primarily the COVID-XX. savings operating guidance our primarily $X.X reflects March range were March quarter points XX non-GAAP of ongoing initiatives.

tax March and was increase million income quarter we compared year-over-year focus $X.XX third Non-GAAP in the was on fiscal quarter of non-GAAP continue an $XX diluted per as XX%. as the period net with share, share the results, for Our $X.XX million to quarter or rate $XX.X bottomline XX% for improved per or diluted year-to-date of XXXX.

driven than sheet. was balance it opportunistically initially the ended quarter, repurchased the shares operations. the quarter million COVID-XX was XXX,XXX to an early became going flow by changing our approximately for of million to from $XXX quickly $XX primarily once cash a $XX.X hand, We turning in cash Now prior of mode average thought. last We before increase with that price much on downturn cash to market million impact longer and $XX.XX, conservation obvious from

Capital and million were million $X.X March were XX. and DSOs quarter were were expenditures inventory depreciation was of Inventories days. million for the $X.X days end million. $XX were $XXX and Receivables XX

ensure invest it transactions drive will to million will leaving additional let balance to turn down to our cash uncertain and put to term revolver, opportunistically was operations of of on we times. these available will to our our million available a I couple plans Before when grow April long believe provide and our our sheet X, post-quarter-end drew $XXX to greater in needed prudent remind the execute ability me We an be it on us. for our this flexibility guidance, $XXX On you business. that

we XX, our received TDDI April buyer. closed million the divestiture and LCD from of $XXX mobile product On approximately line the

opportunities Our million $XXX potential lines the end or strategies. growth to adjusted cash of at capitalize two $XXX cash and to that on term balance well in acquire us product these quarter longer into post-quarter balance will includes to gross businesses positions our the addition events million. This the that margin fit is

divestiture highlight the million on TDDI the per our this also P&L SEC the quarter. an me In on $XX sales generated in million from the our half XXXX, XX. first average Let impact of fiscal mobile $XXX or that we business April referenced of about historical with of filing

to be from at our flat is the Excluding the of June seasonality. range sequentially, divestiture, expected which effect approximately typical quarter than this in the is better midpoint our slightly revenue

will is this margins in incorporated June quarter see result as a today. in sale. the guidance improvement expenses also also into It our We meaningful gross and of operating a

In addition, couple markets consideration revenue our of taking and increasing quarter into we guidance demand, $XX impact continues range million for June quarters. of COVID-XX up to broadening the that we from and million, have $XX range the provided consumer on in to past are end the the uncertainty the

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

IoT. the XX% in and expect inline reflecting mix and mobile and continuing business to offsetting XX%, near from our XX%, PC-related products be We strength respectively, Mobile, our in sales, PC term weakness IoT revenue

our be XX%. provide our quarter with for Now GAAP margins June in and non-GAAP the of We gross XX.X% I will to outlook: range outlook expect follow GAAP to

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

the fiscal XX% range tax in fiscal to XX% full We for of for rate expect to XXXX be GAAP year. the our

line. our for and XX% reflecting between gross June the the to will of We be margins expect margin low now non-GAAP June divestiture our quarter I positive impact quarter: outlook non-GAAP product provide in TDDI of the XX%

non-GAAP XXXX product positive TDDI from reflecting million, to expect in rate expenses XX%. be our in June of range the the our of $XX continue divestiture the the $XX anticipate that of XX% be non-GAAP We to We to to quarter fiscal million impact for tax line. also operating the in range to

$X.XX diluted $X.XX Our to June net for quarter per non-GAAP in range of to the per income is share the share. anticipated be

This remarks. prepared wraps our up

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

Operator

Instructions]. [Operator

question with first & Co. Our Rajvi Needham Gill from comes

Rajvi Gill

could a If stores IoT? on of obviously. sequentially. business, the down at the IoT you lot to Any business, that going and there mobile you TDDI, it will divestiture in But the since about impact business consumer the implies successful be look demand understanding, Thank home? describe business. guidance, that retail is divestiture of IoT congrats the Yes. or IoT Does XX% color it the My that be inflation of hurt on if the consumer-focused, of products the helpful. wondering COVID at for is we

Michael Hurlston

we speakers has or IoT business basket seen But I effects the kind And our of to various spending different and on is have think Yes. on. whether negative on largely of speaking, a Rajvi, due consumer devices as it's things. been different know, had that's impact devices, video of you some our patterns. in-home the are generally impact some products those various

our seen see business. have don't normalcy. that's push I know demand customers been on until if orders. But return impact some back We comes to out the IoT the that real we

Dean Butler

other from that's several point. maybe an automotive includes reported as add, have that sort at automotive our I different business there IoT business no this would others The and of that you thing we know, have been challenging Rajvi,

Rajvi Gill

top What going the to just Thanks mobile you just What back have approximately the you pipeline June sense imply sequentially. business, design the in add it China mobile business have in in Any seen be a you the there $XX And thoughts in mobile quarter. into helpful. in the market? million then traction been quarter terms handset funnel? on has a customer for business, the that the to the of seen that. growing if would of would the wanted I get mobile

Michael Hurlston

that characterizing of In on nice Yes. picked momentum touch that kind are to products. Rajvi. of overall our on-cell in the led you position have an situation is unusual general, we sort the I we an up mean unusual some of of think position well, I sector. which that's And tailwind design that kind

very think done well. We do continue Chinese the with we going have We to makers. to well are handset

see to we to about As flip schedules I the if more hold, touch on-cell said, expect XX our major solution. phones

and our have that's of So nice And we phones. some good presence for tailwind. I that's product driver our business. have been with LCD the end still Coupled seen meaningful display mean that, in launch a area been got a we new lower

touch are So from feel mobile. in we on-cell position about feel good to touch. we out, good see our generally about we And shift DDIC. as look I think maybe away going towards that But continued and really you

Rajvi Gill

on divestitures And through for and for just moving shift, margin. Fantastic mix the really the question on job June. gross margins up me XX% last

have and what forward, line are of drivers? takes the As the you divestiture, margin on puts that look now we some the the completed

Dean Butler

sort joined emphasis. of the company say, sort since seen been as forward big focused have we one and would Mike a really Yes. that's Rajvi, I are driving on you this of I

certainly not done. We are

this work area. to continue We

cost in aggressive pursue fairly but value the enable on also trying can, that are on portfolio light. sure and where products reductions We the focusing to are making that those we high the really shine are to

So should focus continue on as cost I to mix we forward, improve. margin that think going and

Rajvi Gill

Thank you.

Operator

Instructions]. [Operator

Christopher take Group. question from with Susquehanna Rolland our International will We next

David Haberle

taking for our Haberle Rolland. David questions. Chris on behalf Thanks It's Hi. of

touch you old So between frame flexible helping ramping in for or is what touch. have past? similar maybe there your us you you wins? Or the on-cell OLED OLED differences wins can margin any these this display these have new start won that XX by versus pricing Are to the

Michael Hurlston

our compared as Is that to touch wins? the previous question? OLED Against

David Haberle

wins the pricing Or OLED have. explain touch same? previous differences? that there and these are you the Are versus on-cell differences Can The you margin Yes. that?

Michael Hurlston

are both There margin perspective wins. Yes. a in with ASP line and from prior touch

David Haberle

lot of be And this of how currently IoT this revenue a the over ramp the next you? on very really from and XX thinking traction you Are that should product? for you Smart then AI we grow there. have about And seeing product confident months? it. Edge you big SoCs can in as made a Or Got side, kind the seem that the

Michael Hurlston

Yes.

clarify, set back CES. announced product these are of that to a Just so at we January in

of for it's a product class brand-new us. So

are question, very and customer think are We the from products. answer a interest is base no, we today seeing revenue. certainly your no promising. to of they lot But there new are These

David Haberle

well? like Thank next next quarter. around have probably going Great. to But my mean then hang you. PC sound win Or it? work strength for trend design the it about the the And of that doesn't as think I this people really market ends, PC from is back quarter work beyond would confidence for momentum last to And pushing as normal that you? question ton or to be go you home of is so. phase I will is go that's there the behind kind just back

Michael Hurlston

our win business. our as in mean I it's design and probably Yes. pipeline fingerprint strong touchpad as both been I core on is think

So the more home. recent to of sustainable. I are from We PC surge part work the That's do it. due think don't think it's comments to with buying in particularly

have in the had business. good PC a We run

us followed you few the strength. been quarters, has last good If there over

we sustain. this quarter levels, I the year a business from I what And commercial are traction up we think But revenue more with commercial I as to characterizing end to where have it picked our think from unusually high work was home. PC consumer more and the toward exposure. then I think is difficult of around think commercial, from last starting shift are

in position is Our share, sustainable. market, very our much think, I the

David Haberle

you. Thank Great.

Operator

Hurlston turn to And closing the I any this further there no back are like conference appears at or Michael to additional it time. for would remarks. questions

Michael Hurlston

seeing forward at us Thank thank to during our at least for you you. virtually, June joining the upcoming X. investor quarter our of as I Day today. We all to as well would conference you, Analyst on like look

Operator

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

Good now may disconnect. You bye.

Synaptics (SYNA) 7 May 202020 Q3 Earnings call transcript