SYNA - Earnings call transcript Q3 2024

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Operator

Good day, and thank you for standing by. Welcome to the Synaptics, Inc.

Third Quarter Fiscal Year 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Instructions]. [Operator like Munjal conference Investor Shah, now first to Relations. hand today, speaker Vice to would over the your I President of Please go ahead.

Munjal Shah

us With name over President Matt This of supplemental call this and is is at Vice Good you the President on Shah Hurlston, live and the section web Quarter Brianna. and slide our be broadcast Relations and of synaptics.com. of posted Munjal today's also XXXX today the the from accessed Investor a Padfield, Finance. call are Head prepared remarks joining Michael Relations. of Fiscal My you, can Relations being and Third Investor on website on our presentation and Call. A Thank Investor copy Conference CEO; I'm company's website. Synaptics' me afternoon, for thank are

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

call, the conference during Additionally, course forward-looking of Synaptics statements. make will this

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

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

Michael Hurlston

today's to like welcome I'd everybody to Munjal. call. Thanks,

were and This met delivered or with expectations. prior Revenue, IoT that weakness our quarter, in in Growth slightly mobile. above results line in we EPS offset margin, were guidance. seasonal core

Over few our Embedded line Germany processor Astra foundation platform the culminated our we our in in second started of building driver IoT That months, in AI World core at IoT embedded last April. the launch for processors. initiative growth, of of the

is data a silicon targeting by development differentiates to Astra for software an opportunity chain. the in $XX semiconductor center security, device of a Synaptics rather devices flow the from gives than devices. AI-native IoT to AI power, advantages. IoT and platform edge AI every Running latency compute IoT tool billion-plus part on incorporating models market in chip

leader We when of absolute solutions a to IoT Gearing in totality will with inferences processing it system we more AI deliver comes that power can addition, In for the Synaptics make approach level competition. than our approach, novel believe any delivering the devices.

and families Synaptics framework, SoCs. time as reference efficiently includes Astra AI as their don't model models, bring Synaptics model or the run to run With software on AI development platform framework, own contemplates and of versions incorporate platform, securely The A extends on which AI customers Linux for for flexible, leading to application RTOS their and processors pioneering the both of technique, our AI core end-to-end, software data be well which The are innovative efficiency, or our a Astra Astra offerings. product umbrella. as an have and every Android increase and interesting MPUs to supports platform build models released and AI-enabled an MCUs toolkit bring across family decrease. them manages the can power Customers market. SR-series are and targeted optimize well as of AI-enabled and Two actively requirements and open SL processors, family gearing as under increasing to four adoption, to AI a are The edge, first new processors now connectivity. wireless sampling. seamless product

processors technical automotive, families a ahead of of the customer algorithms. around kit. developers To Synaptics both hand audio top consumer, The in knowledge incumbent and a presentations learning showcase In multiple launch at kind best creating from family show addition, solutions World for institutional home customers of received embedded a compute leads. and AI on and a machine demand for security qualified and product development customer Astra of interest its great was team the industrial, of our broad-based significant all first-of-a-kind and designers, the vision Thousands of appliances. suppliers hosted generated embedded success industries, leverage of competitors. -- workshop and including award the in We Synaptics computer from Embedded Astra strong the SL-series processors with hands-on several off, first number deep set visited it

is normal win Astra this in major application-specific to for had our core returned revenue as Telekom level. Deutsche video generally in of to processors processors, will contribute AI more at inventory We an a a XXXX. are from volume in we capability, which which part production, fiscal saw has with our offshoot currently IoT improvement

continuing wireless on with had a In cross-selling able connectivity successful devices AI-enabled core quad win next-generation In processor. both addition, we products, pull were collaboration high-end wins, we our our Cisco's initiative. to through

our news, SKUs. been -- couple prior high product cameras Wireless home are and compared to higher product quarter. action driving the XX% delivered ramp. worked While inventory wearables, Astra to starting security automation revenue the for except and has IoT the Design a wireless core systems, wins grab down headlines, of

expect sequential continue core driving We these to quarter. growth IoT in trends revenue next

The sample products automotive flat to were first on later X our broad both enterprise market this and Wi-Fi remain roughly and we on track addition, device In year. quarter. device

However, is off again, products beginning our we in The this historic demand piece norms. increase next is our expect volume business. see docking to quarter, station to growth of of though

In patterns, PC addition, and seasonal are to some opportunities take tracking solutions we have fingerprint and to Touchpad share. our market normal

expected, signs for be talk is year, would which and unit we of low AI-PCs Demand uptick. new are HPD no of out volume see Further cycle keep to refresh higher, platforms calendar in rest continue levels performing driving to hearing at we IT and to an of refresh. as Our the historically increase accessories with us. the and as be to good a products across opportunities solutions on share spending the as enterprise start continues hardware suppressed

However, and automotive, we this. with yet better are products to strong demand anything consistent In see expected. than seeing performing TDI orders like our

wins ramp. North America at OEMs including design Volkswagen several and Audi, starting Europe, to Porsche, Our Chevy, in Ford, are and

other to per is current to our we another strength a given X for their somewhat offset market slowdown these years, combos. high designs. our some are with and extending car in benefits TDI The models which Additionally, expect increase content would X legacy us Longer-term, products by Wi-Fi/Bluetooth in SmartBridges OEMs share in DDICs.

a revenue prior products expectations quarter, products touch by our performed our was in from in large and seasonality driven revenue by our with line and the mobile decline DDIC Our from customer. down largely on both legacy

to next X, present point in revenue. XXXX headwind would fiscal year, some to expect goes finally product we will it a that the mobile fiscal As at

summarize, that, continue into from seasonality shipments Aside high-end We we mid-tier technology see adoption our To growth about opportunities we phones. potential to core the track to phones. as expands Android business. for further expect OLED for excited our be of IoT

our differentiated selling inventory returns. product products burns in recover time, positions as are first off into demand lines we fiscal next our year. we combination the is markets. beginning Synaptics smaller, large Meanwhile, and have as potential general-purpose markets confidence us defined For X of more gives to the slowly The where leadership traditional enter

the to CFO baton, progress update wanted Before I pass on I our search.

have discussions candidates. before plan, goes dozens to internal We have call. If external someone next highly according should earnings with place of in our we all well had qualified and

quarter review the fourth results of turn our me third let Matt to outlook. for call and over a financial Now, quarter

Matt Padfield

for our Automotive, fourth quarter. normal continue and sequential was down now guidance. an sequentially, XX% respectively. Michael, business. afternoon everyone. are Year-over-year, our we XX%, good see up core down quarter was XX% IoT, first for March and we in the revenue are of prior consolidated Several in continued Revenue are believe work March IoT quarters. midpoint from and XX% the the products which though our stabilizing, expect to and the financial We which down our enterprise and down I levels XX% and Thanks, through XX%, recently were inventories growth sequentially year-over-year. in inventory, XX%, automotive, fiscal reflects then year-over-year. quarter, and for Core revenue was Revenue million, results our quarter Enterprise to pockets coming stabilization the at mobile product above was sector, still this March compared slightly quarter. there quarter review revenue quarter, expect to to and enterprise $XXX.X in which provide of outlook flat current was In to excess will but completed but X%

our controller due Android from XX% quarter, prior year-over-year, products mobile seasonality touch the the product up March in for the mainly was down our but revenue For quarter, to ecosystem. XX%

In to company's also were of decline we continue DDIC total for them the down over the percentage year. our mid-single-digit products product sales fiscal to year and for low XXXX, legacy accounted Our quarter, customer primary this revenues. these next to expect

XX%. the we had During XX% than revenue greater customer X at approximately of quarter,

expenses up in includes of expense intangible was For costs. compensation range. of operating non-GAAP $X the gross share-based midpoint which intangible amortization $XX quarter non-GAAP $XX.X March in the operating the our with line quarter. XX.X% $XX.X range and share-based asset asset million $X includes million. quarter, was of March our and our guidance March $X million, margin from margin guidance $XXX.X XX.X%, the of million million March was GAAP million gross which of within preceding GAAP and quarter amortization quarter compensation of were million

our the a quarter benefit prior had bonus a Our from accrual reversal program. partial in for

around maintain to our operating discipline expenses. continue tight We

GAAP per quarter, tax net $XX million earnings non-GAAP decrease our prior GAAP a the or rate the $X.XX million, March a quarter of $XX.X the the $X.XX tax per in and the from recorded a was income creating midpoint year GAAP was range. quarter ago. benefit of a During $X.X million diluted million loss net of net guidance decrease of quarter quarter $X.X expected a share. maintained from basic X% a of loss was same our we expense. above March and XX% share of Non-GAAP Non-GAAP XX%,

$XX March approximately days, sheet. investments, to decrease. for was quarter. a operations inventory with sales as of used short-term payments cash manage and Receivables quarter prior $XX.X days Now, years. and million the was million ended we the were expenditures down due Ending $X.X purchases. We $XXX of the the to in increase were continue fiscal X% turning Capital equivalents balance flow and quarter to $X depreciation million, an X million million end million. cash, days were last $XXX.X of sequential million balance the Cash tax with of associated from was inventory outstanding $XXX.X $XX our XX at cautiously million

of days XX% quarter. sheet inventory declined to to balance calculated end XX% of on the the at Our also prior compared our

outlook. Now, our quarter let me turn June to

Our inventories seeing down product channel areas. have multiple worked is as business we stabilization across

we June on However, spending of $XXX X% million, increase million the anticipate level, midpoint. by slow to curtailed to quarter to enterprises from a a seeing at the are recovery consolidated in revenue hardware the be due an March in the approximately of range $XXX quarter products. At we

inventory the improving are products channel expected levels, wins. benefit the design from and ramp IoT to core demand normalization Our up of

to to products expected We Mobile and sequential improve slightly continue decline to legacy quarter. June in and revenue are double-digit Enterprise the the expected quarter. seasonality due expect in aggregate declines growth in June in to Automotive products. is

enterprise and be our Given XX% XX%, in to core mix automotive approximately these June and dynamics, respectively. we expect and from the quarter revenue XX%, products IoT, mobile

XX.X% to expect be gross GAAP of quarter the the for XX.X%. margin in to June We range

in improvement range to from March the the expect quarter. gross non-GAAP of We small XX.X%, a margin XX.X%

includes We intangible expenses operating $XXX June the expect compensation. be and million in the range million, share-based which quarter to GAAP in amortization to of $XXX

income on net in $X.XX to of is and range of share the the $XXX in We million share to our of for to non-GAAP range operating range anticipated loss to expect $X.XX, to million $X.XX basic net an $X.XX XX.X quarter non-GAAP fully per is expected GAAP be quarter expenses $XX June to June the per in per be in diluted estimated shares. million. diluted be share the

GAAP wraps expect I'd We the call the operator our and prepared million be turn This like to to session. over both the in net June up to approximately non-GAAP now remarks. $X the start interest expense Q&A to quarter.

Operator

will question-and-answer conduct this we [Operator session. At the time, Instructions].

Rolland Our first question comes of from Christopher Susquehanna.

Christopher Rolland

congrats more normal forward? guys. and the quarter. of solid I then guess to has And inventory, as see great most level. described start. would going kind would be my And question That I what challenges Thanks, love inventory you it for overhang know least Core, guess, the where on is challenges? to as you I

Michael Hurlston

Yes. of enterprise this and inventory, A Chris, to largely have enterprise as where our play. line. I challenge station in link around remarks business, down. out around see kind accessories on facing, hear inventory kind we would audio we're which we're has of demand inventory. numbers. of demand that pull been largely generally, as small the we hardware, enterprise for our inventory highlighted little product prepared headset say would I headsets. say good. good through our of well. and we feel hope the a speaking, spending that display But challenge should in particularly I that call, worked we from examples that in fell, There were is bit the note. as you're we we you. demand-related, I -- we Generally our still is think particularly the more is area, notable A the Thanks We said the for returns, working jail, feel docking our positive last in couple are up And and of pockets

Christopher Rolland

it how big just 'XX? you kind then And Great. of drag. in legacy so understand we it was how DDIC in can would the And big expect Roughly 'XX?

Michael Hurlston

think of to Matt. I a said mean, Matt mid- his called remarks, percentage in of revenue. I we low sort

year, of continue down think fourth second X hit go de of couple minimis the we'll a to I half for quarters. that part that I some part good mean, see next probably quarter. the of the by But the that by a in probably Chris. level, will it

we big a but a drag it's something So, we not that call it's should out. one, -- thought

was coming off it that our I some X, going to time. knew highlight I into aware thought the it everybody has because for been the think was around of to eventually it we but And thinking hasn't numbers gone to time table. right go it's the

Operator

next one And you. for Thank question. moment our

of next question & Needham Bolton Our from comes Company. Quinn

Quinn Bolton

you Thinking about shipping, quarters and inventory the more. $XXX takes normalizing soft the or think puts between by kind guys end I ago, of and be under several thought demand. consumption I you might million mean,

there than mentioned? of pockets that up just is good consumption? guiding enterprise of like of that million the indicative that consumption you inventory updated meaningfully. And out consumption feels part you higher $XXX on think smidge, end the given thoughts is had the correction a something there is base? any tail that you inventory of at be down revenue still wondering it are across IoT I'm be Or Now a do Should thinking consumption and some we you're if must where

Michael Hurlston

something that Yes, demand I we Quinn. mean, natural bunch are. we of the No, look, stated times. significantly that than higher think a I is where

a I low We X through hit the inventory also pieces think demand. we parallel. as point what had and had inventory, surprised we of moving us sort we're in working is in

numbers. now, demand. low in right enterprise And point at up to so, returns, as in automotive a we very pull we spending And as see expect we're would natural think returns, a the the

still is up to quite normalizes, So, that think be, bit our naturally that a We demand when would $X.XX, we be. and sort pull is where believe, than we a should any stretch demand we we're it lower see $X.XX going think of don't by numbers. $X.XX, in

situation, the So, lower we as we'd point is I inventory demand a to surprise, work where is natural we far be. the think again, hit than current expect through the demand

Quinn Bolton

it. Got

thinking kind interest about particularly that customers of then guess are Are it a And what backlog? the tracking to bookings, be like this think to cut I of the not sensitive of to do and rate pretty recovery, things recovery? might you sort point a the a clear. you That's What just the enterprise Okay. things signs year. factors we think might kickstart segment, demand, the which you turn get rate later be especially softest? and hopefully until demand biggest might Is seems

Michael Hurlston

Yes.

counter I think, the with and in that the are seems the going budgets even to presence. docking way bit headsets, we on But clearly of flat first these budget underlying language look it enterprise PCs, on you monitors, it slightly call, little stations, the large up, center big that data last down AI I going talked towards have numbers. on or toward because at back thing gadgets, IT where PCs, from the IT on is I'd that's mean, spending thing. a telephony IoT. compute about models is obviously, say away we stations, the balance spending a sort the of you is is I places detail running one if in the on think and docking is and

start I you beginning used kick docking to are We bunch about, introductions think we to too, for a running kick wireless talked we've the station platform, of the we to new product the invest second beginning used got in. thing -- that is in in. on downturn are products as to us, business our new to some

demand those NPI and portfolio help we've that to ramp, of pull are even should that start should, So, us got if up. our remains the numbers introduction different going to parts soft,

Quinn Bolton

that fairly a half low of in year? last I for growth growing base. it's digits calendar IoT Do double The me. the the core continues back clarification think you rate still know double-digit Maybe the June. in

Michael Hurlston

We growth over obviously double-digit we've of about mean, outgrowing grow. Yes. that now. We're right Certainly, time. hot. it's to in period very of going talked that an extended growing been I business kind

It to growth The So, I will would guidance. rate is grow. is grow. provided say that TBD, it going certainly we haven't and

Operator

one And for moment next our question.

Cassidy Our comes next from question Securities. of Rosenblatt Kevin

Kevin Cassidy

you standards, on quickly what my follow-up Wi-Fi then topic the the And far as Wi-Fi question how rate? As X, connectivity. Wi-Fi revenue be is adoption of can around that are say long as is split The growing? will the And now? and we're the for your wireless forecast right as what

Michael Hurlston

one, we from Kevin, Number good you. out. it Yes. to don't break hear

bit that that is the there. I fairly think core of into We're the don't better remarks. business come our that business that mean, about today, within trying that break wireless. will talked core processors Wi-Fi it's say is I story. It the space business But certainly appreciable folks IoT. rest of inventory, getting a breaking look We But stock in on doing some the plagued processor and quite what's you now was follow give and see we're way. to in by the IoT, out the mostly back out a and wireless. what's line prepared I to we starting we're Wi-Fi is by well. in now generally, wins back track. a

we feel So, pretty good about that.

generally For is question we But from might infrastructure launched haven't you there. it X. us, X still Wi-Fi you Wi-Fi an -- X different when a we on around it and touched isn't standpoint. available Wi-Fi have get

full issue of And products. we've now Wi-Fi X base transitioning X. a biggest Wi-Fi Wi-Fi is Our X suite the right from got to actually customer

is than Wi-Fi X. mix XX% still Our less on

customer transition X opportunity to significant So, Wi-Fi base a and we from to see X. X the pretty

look, that remarks, year. first IoT a to think be We But really going end we standard. product the foothold. a I before be at it ship the X any we're for that's X to Wi-Fi while as incorporates introducing of I think going meaningful in prepared Wi-Fi the And of will, sort class grabs the an said be

Kevin Cassidy

Great. on the inventory And then or to and station, docking still business quarter for see is come top be Okay. slow, Does so depleted? waiting we're it enterprise but that inventory And the be we the of before back growing again. on a enterprise is still might there just that? have

Michael Hurlston

Yes.

grow. mean, first, it Kevin, did I So,

pockets of we're inventory. off bottom think I There coming dock. the on still So, are

our a we which X bit that's we you think business. link, halves piece sides the and display The I gross link than anywhere is profile. question display display think has said that the need margin port may And kind previous of more inventory dock to I as business, well, I of of have a a to through. have work know the big of the

probably kind the So, at that's where been this highlighted automotive more that port of the suppressed demand in side of quarter. we challenge facing portfolio. equilibrium And I question, across that the display business, and particularly That's now. Quinn's grew The we're slow. on of I enterprise piece that's see pretty demand think

business demand we'd that expect docking up. pull normalizes, As universally back to

Operator

Krish Our TD next from question is Sankar of Cowen.

Sreekrishnan Sankarnarayanan

X had them. of Michael, I

margins. gross on one First

have You keep not edge you're gross margin vehicle lagging for hearing about seeing you. benefit down, any foundry come but prices

margins I'm else tied auto there kind So, is really segment? to is Or enterprise going volume or on? of just gross curious, something your in the

Michael Hurlston

right comment is pricing is question. that also the and have Yes, would there's seems of about factors there's strongest is dominant I margin. I the That's -- And And mix. mix gross us. But and enterprise business a I and with Krish. to for lot. our automotive issues highest of a this couple our profile, foundry now enterprise factor agree our driver. E&A one. And our within move talked again, and Fair the two, the I times. slowest mix mean, margin you automotive. think X we part you Comment One,

We are particular one with partnered guys. foundry

to very, our weighted of be you slowest we supplier the been heavily on pricing. know, That has toward As one moved supplier. one very move kind strategy to

price I -- the chain. hearing things are, that price semiconductor that would So, there's are supply are say across the relief same you we there

pricing move true that and partnered less of that's with of particular to certainly and some suppliers, has biggest, one the of supplier I the current think conditions. kind with bigger apt are less we respond and been to

Sreekrishnan Sankarnarayanan

seen of like devices? follow-up, but It standpoint, IoT run you Astra gave lately, out platform. platform. devices helpful, be you Got no your full in thanks optimized today? the AI around Got the very can smaller latency with to color inference full prices some more to you some From a with on require AI actually it. you've You the Are terms on come seems latency. And seems Astra Michael. model it. issue then for the model a seeing to That's Astra run

Michael Hurlston

Krish, can like Yes, large within I the you question. and AI core AI again, such gene gamut are good models a run very those that. They Look, the data Astra, AI size. things portfolio, well, a the we know from We whole in know will trained of run you But large as models. it sequencing think technology. can't or models language on center. source or NVIDIA And come X and be X traditional in an

highlight in And has have efficiency to forth little we AI run bring. that on Rather to this our advantages that size. back a them line. across lot that's mean, the models one And And with of division run far on without spent and the as Our at takes have I into I one those is we models we that high-power this can latency head, obviously, a advantages. our go business, center, product time those data significant and that trick than latency chip. having security, least you and it, of this code as latency, of high and compile we compiler problems. understand very the models we've these that's advantages

Operator

moment question. for next one And our

from final JP Peter Our Morgan. of Peng comes question

Peter Peng

well. I as X have

$XXX your IoT, in at it wireless portion for rate. kind core revenue Just run million the that was of

back we? where levels? think are to And you I still confident those in are getting

Michael Hurlston

being Yes, get to Peter. back we're levels. I No, to mean, those very in able obviously confident

a with the about demand we've and been like think wireless. there in I is enterprise issue talking automotive,

it's Some quite actually that's We consumer-facing. have enterprise-facing. bit it of of a

we Our said is as remarks inventory, through. in largely prepared the worked

expect we So, coming of little that that to a that it does, when online, products now also go online. we have work bit that, new demand we'd expect about, coming beyond. wins will in environment. and continue design lot a We'd or as addition, products talked demand to of through $XXX And have return. then million to new that a new we suppressed and And are are it's we

obviously to of gives wireless we to expect that and -- in total get those million, expect time would seen $XXX We as a sum the business. that goes us there snap So, forward. of back haven't lot beyond but we'd confidence

Peter Peng

mobile. Great. on And then your my thoughts

low that million quarter. single digit, revenue $XX almost to off million that's drop like $X a So, per

have talked And potentially Android then in the combine that you -- so, winning you about space some recovery. the with you mid-tier and Android

as think Any be up? mobile, your like we to going of indication So, about Cisco be down, this is helpful. flat, XX would kind for

Michael Hurlston

I say to Yes. would mean, probably I too early call.

that You got due general, think hole have DDIC in type we'll I that double-digit we takes, of the low puts to right. mean, of and sort I be a fill the to socket.

we've talked lots on calls. of I think right, about the numbers different and that about are

it of framing the roughly have correct. you that think I So,

We of really to large Android seem last over. one with We We are be in year really customers well China. up well did the winning. flipping holding

do, So, our as high we have we China mid-tier. is called very and win in out, to expect very, business We strong, handset the market share. now you

end that. I is balance, we would too early of total probably where flattish in on sum business. a of sort that to up again, But kind expect So, of call. that

Operator

showing I'm CEO, further for Michael you. no at Thank questions to like I remarks. back to time. closing would it turn this now Hurlston,

Michael Hurlston

you joining conferences of quarter. a like today. I'd to to We to Thanks upcoming investor you at for the thank lot. during look our speaking us just all forward

Operator

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

disconnect. now may You

Synaptics (SYNA) 9 May 242024 Q3 Earnings call transcript