Synaptics FY Conference Summary Company Overview - **Company**: Synaptics (NasdaqGS:SYNA) - **Focus**: Transitioning from PC and mobile markets to core IoT segment, particularly AI at the edge [6][9] Key Technologies and Growth Areas - **Core Technologies**: - Interface products (video and human interface) - Connectivity solutions (Wi-Fi and Bluetooth combo chips) - Processor segment focusing on AI at the edge with the Astra platform [7][8] - **Recent Developments**: - Sampling of the Astra platform began in October 2025, with general availability expected in Q2 2026 [8] - Significant growth in core IoT business, with over 50% year-over-year growth in the last six quarters [9] Market Dynamics - **Core IoT Growth Drivers**: - Recovery from COVID-19 impacts leading to leaner inventory levels - Increased demand in applications such as drones and security cameras utilizing Wi-Fi 7 technology [11][12] - **Competitive Differentiation**: - Strong engineering team (approximately 500 engineers) focused on high-performance connectivity solutions [16] - Introduction of cost-competitive broad market solutions alongside high-performance offerings [17] Processor Segment and Astra Platform - **Astra Platform**: - Incorporates Torque AI engine with Google’s RISC-V NPU, aimed at enabling AI capabilities at the far edge [23][24] - Target applications include drones, industrial fleet management, smart home devices, and wearables [46] - **Customer Feedback**: - Positive initial feedback from customers during tech day, highlighting power, security, and compute capabilities [44] Financial Outlook and Risks - **Revenue Growth Expectations**: - Anticipated growth in revenue from the new processor line and connectivity solutions [51] - **Risks**: - Market adoption of edge AI technology may be slower than expected, but significant investment in infrastructure is noted [52] Wireless Business and Acquisitions - **Acquisition Impact**: - Acquired assets from Broadcom have expanded Synaptics' IP portfolio, enhancing their competitive position in the Wi-Fi market [55] - Potential to expand market opportunity by $2 billion to $3 billion through new solutions [56] Mobile and Automotive Segments - **Mobile Market**: - Focus on high-end Android market with new Multi-frequency Touch Architecture for foldable phones, potentially doubling content opportunities [66] - **Automotive Market**: - Current sluggishness in automotive sector, with plans to expand into the Chinese market for growth opportunities [78] Long-term Strategy and Capital Allocation - **Long-term Goals**: - Targeting 57% gross margin and 30% operating margin with $1.6 billion in sales [88] - **Capital Allocation Strategy**: - Focus on investing in business growth, potential M&A opportunities, and returning capital to shareholders [101] Conclusion - **Investment Opportunity**: - Synaptics is well-positioned to capitalize on the growing demand for edge AI and IoT solutions, with a strong technology portfolio and strategic partnerships, particularly with Google [106]

Core Insights - Synaptics Incorporated (NASDAQ: SYNA) is identified as an overlooked tech stock with potential for investment [1] - The company has formed a strategic partnership with Qualcomm to enhance next-generation touch and fingerprint sensor technologies [3][4] Partnership and Technology Integration - The collaboration integrates Synaptics' AI-ready sensing technologies with Qualcomm's compute and biometric security platforms, aiming to innovate human-machine interaction in OLED and AI PC ecosystems [4] Market Performance and Analyst Ratings - Synaptics reported a 14% year-over-year growth in revenue for Q1 2026, totaling $292.5 million, with non-GAAP diluted earnings per share of $1.09 [6] - Analyst Christopher Rolland from Susquehanna reaffirmed a "Buy" rating for Synaptics with a price target of $95, highlighting strong performance in Core IoT and Enterprise markets, as well as the momentum of new Wi-Fi 7 products and Astra AI-native processors [5]

Core Insights - Synaptics Incorporated is participating in the Wells Fargo 9th Annual TMT Summit on November 19, 2025, where CFO Ken Rizvi will present [1] Company Overview - Synaptics (Nasdaq: SYNA) is focused on driving innovation in AI at the Edge, enhancing user engagement with intelligent connected devices across various environments [1] - The company offers advanced solutions including Synaptics Astra™ AI-Native embedded compute, Veros™ wireless connectivity, and multimodal sensing technologies [1] - Synaptics aims to create smarter, faster, and more intuitive digital experiences, impacting areas such as touch, display, biometrics, AI-driven wireless connectivity, video, vision, audio, speech, and security processing [1]

Core Insights - Synaptics and Qualcomm have entered a strategic partnership to enhance Touch and Fingerprint Sensor Technology across mobile and compute industries, aiming to improve security and performance in AI PC and mobile platforms [1][5]. Industry Trends - The demand for flexible OLED displays is projected to increase from approximately 600 million units in 2025 to over 800 million units by 2030, driven by the growth in smartphones, tablets, and wearables [2]. - The collaboration between Synaptics and Qualcomm is expected to facilitate seamless integration of touch and fingerprint systems, unlocking advanced AI features that enhance security and user experience [2]. Technological Advancements - The partnership aims to combine Synaptics' AI-ready touch and fingerprint sensing with Qualcomm's compute and biometric security capabilities, promoting secure and intuitive user experiences in AI PCs [3]. - Synaptics' Natural ID™ capacitive-based fingerprint solutions integrate secure biometrics and advanced encryption, designed for applications requiring strong security and ease of use [4]. Strategic Goals - The collaboration is intended to simplify integration for mobile OEMs and panel makers, accelerating time to market in the expanding OLED ecosystem [2]. - By merging their strengths in human interface, AI, and compute technologies, Synaptics and Qualcomm aim to redefine user interactions with devices, enhancing intelligence, security, and performance [5].

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Core Insights - Synaptics reported revenue of $292.5 million for the quarter ended September 2025, marking a year-over-year increase of 13.5% [1] - The earnings per share (EPS) for the same period was $1.09, compared to $0.81 a year ago, indicating significant growth [1] - The reported revenue exceeded the Zacks Consensus Estimate of $289.37 million by 1.08%, while the EPS also surpassed the consensus estimate of $1.06 by 2.83% [1] Revenue Breakdown - Revenue from Core IoT product applications was $103.6 million, exceeding the average estimate of $92.63 million from two analysts [4] - Revenue from Enterprise and Automotive product applications was $147.7 million, slightly below the average estimate of $152.63 million from two analysts [4] - Revenue from Mobile product applications was $41.2 million, which was lower than the average estimate of $43.77 million based on two analysts [4] Stock Performance - Synaptics shares have returned +2.7% over the past month, outperforming the Zacks S&P 500 composite's +1.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Revenue for fiscal Q1 2026 was $292.5 million, reflecting a 14% year-over-year increase, driven by strong performance in core IoT products [15][16] - Non-GAAP earnings per share increased by 35% year-over-year to $1.09 [5][16] - Non-GAAP gross margin for Q1 was 53.2%, consistent with guidance [16] Business Line Data and Key Metrics Changes - Core IoT portfolio revenue grew by 74% year-over-year, contributing significantly to overall revenue growth [5][15] - Enterprise and automotive product revenues remained flat year-over-year, with strength in the enterprise segment offset by softness in automotive [15][16] - Mobile touch product revenues were lower than expected due to supply chain constraints [16] Market Data and Key Metrics Changes - The revenue mix for Q1 was 35% from core IoT, 51% from enterprise and automotive, and 14% from mobile touch products [15] - The company is seeing increasing customer commitments in various markets, including home security systems and AI-enabled wearables [11][12] Company Strategy and Development Direction - The company is focusing on capturing opportunities in edge AI, with the launch of the next-generation Synaptics Astra edge AI processors [6][10] - The Astra processors are designed to enable a wide range of applications, including industrial systems and consumer devices, emphasizing a scalable architecture [8][10] - The company aims to integrate processing, wireless connectivity, and mixed-signal capabilities to provide comprehensive solutions [6][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of the AI-inference compute opportunity, with a healthy pipeline of customer engagements [10][14] - The company anticipates initial revenue contributions from the Astra SL2600 devices to begin in the second half of calendar year 2026 [9][10] - Management highlighted the importance of maintaining a disciplined execution strategy to drive long-term growth [14][74] Other Important Information - The company ended Q1 with approximately $459.9 million in cash and short-term investments, reflecting a $7.4 million increase from the previous quarter [16] - Capital expenditures for Q1 were $12.2 million, primarily for R&D efforts [17] Q&A Session Summary Question: Metrics to track Astra platform success - Management indicated that design wins for the Astra platform are ahead of expectations and will provide updates on the pipeline in the future [22][24] Question: Intersegment volatility and guidance implications - Management noted supply constraints in mobile touch products and strong growth in core IoT, maintaining confidence in guidance for Q2 [26][30] Question: Strength in specific end markets - Management highlighted the potential for significant growth in AI applications at the edge, particularly in consumer and industrial markets [34][36] Question: Growth expectations in enterprise, PC, and automotive - Management expects sequential growth in enterprise and automotive segments, driven by recovery in enterprise and ongoing design wins [37][70] Question: Opportunities in mobile market - Management acknowledged the potential for mobile OEMs to build their own app processors, presenting opportunities for Synaptics in wireless connectivity [40][41] Question: Update on high-volume shipments for MCU and combo chip products - Management confirmed that the SL2600 series will enter production in the second half of calendar 2026, with revenue expected to ramp up thereafter [43][44] Question: Expansion into industrial markets - Management is actively engaging with customers in industrial applications, although consumer markets are expected to ramp up faster [52][55] Question: Core technologies needed for edge AI portfolio - Management emphasized a strategy focused on open-source solutions and partnerships, while remaining open to acquisitions to enhance capabilities [61][65] Question: Signs of improvement in enterprise and automotive business - Management noted improving channel inventories and market share gains in the enterprise segment, with expectations for continued growth [68][70]

Financial Data and Key Metrics Changes - Revenue for fiscal Q1 was $292.5 million, up 14% year over year, driven by strength in core IoT products [18] - Non-GAAP earnings per share increased by 35% year over year to $1.09 [7][20] - Non-GAAP gross margin was 53.2%, in line with guidance [19] - Non-GAAP operating margin improved to 17.6%, up approximately 110 basis points sequentially [20] Business Line Data and Key Metrics Changes - Core IoT product revenues grew by 74% year over year, primarily due to increased demand for processors and wireless connectivity [6][19] - Enterprise and automotive product revenues were flat year over year, with strength in the enterprise portfolio offset by softness in automotive [19] - Mobile touch product revenues were lower than expected due to supply chain constraints [19] Market Data and Key Metrics Changes - The revenue mix for Q1 was 35% from Core IoT, 51% from Enterprise and Automotive, and 14% from Mobile Touch products [18] - The company is seeing increasing customer commitments in home security systems, Matter-enabled IoT hubs, and AI-enabled wearables [12] Company Strategy and Development Direction - The company is focusing on capturing opportunities in Edge AI, with the successful launch of the next-generation Tenaptics Astra Edge AI processors [7][8] - Astra processors are designed to enable a wide range of applications, including multimodal human-machine interfaces and AI inference [9][10] - The company is committed to an integrated approach to high-performance solutions, combining processing, wireless connectivity, and mixed-signal capabilities [8][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to strengthen leadership in the Edge AI market, with a healthy pipeline of customer engagements [11] - The company expects initial revenue contributions from Astra products to start in the second half of calendar year 2026 [11] - Management anticipates continued growth in the core IoT segment, projecting 25% to 30% growth for fiscal year 2026 [33] Other Important Information - The company ended Q1 with approximately $459.9 million in cash and cash equivalents, up $7.4 million from the prior quarter [20] - Capital expenditures for Q1 were $12.2 million, driven by lab build-outs to support R&D efforts [21] Q&A Session Summary Question: Metrics to track the success of the Astra platform - Management indicated that design wins have been secured ahead of schedule and will provide updates on the pipeline and awarded designs in the coming quarters [25][26][29] Question: Intersegment volatility and guidance implications - Management noted supply constraints in mobile touch products and strong growth in core IoT, maintaining confidence in guidance for the second quarter [31][32] Question: Strength in end markets and future growth - Management highlighted strong interest in AI applications at the edge and expects significant growth in markets such as robotics and home automation [38] Question: Opportunities in mobile and potential for more OEMs - Management acknowledged the opportunity presented by mobile OEMs building their own application processors, which could enhance demand for Synaptics' wireless connectivity products [43] Question: Status on high volume shipments for MCU and combo chip products - Management confirmed that the SL2600 series is in the sampling stage and expected to go into production in the second half of calendar 2026 [47][48] Question: Growth drivers in enterprise and automotive segments - Management noted strength in the enterprise segment and anticipated a rebound in automotive, driven by upgrade cycles and market share gains [75]

Financial Performance - Q1 2026 revenue reached $292.5 million, a 14% year-over-year increase[5] - Core IoT revenue experienced substantial growth, increasing by 74% year-over-year[5,6] - Non-GAAP EPS grew by 35% year-over-year, reaching $1.09[5,18] - Non-GAAP gross margin was 53.2%[6,16] - Cash flow from operations amounted to $30 million[16] Revenue Breakdown - Q1 2026 revenue distribution: Mobile contributed $41 million, Core IoT $104 million, and Enterprise & Auto $148 million[15] - Core IoT revenue accounted for 35% of the total revenue in Q1 2026[23] Q2 2026 Guidance (Non-GAAP) - Revenue is projected to be $300 million, with a variance of ± $10 million[31] - Gross margin is expected to be 53.5%, with a variance of ± 1.0%[31] - Operating expenses are estimated at $106 million, with a variance of ± $2 million[31] - EPS is forecasted to be $1.15, with a variance of ± $0.15[31] - Revenue mix forecast: Core IoT 31%, Enterprise & Auto 53%, and Mobile 16%[31]

Revenue Performance - Net revenue for the first quarter of fiscal 2026 was $292.5 million, a 13.5% increase from $257.7 million in the same period last year[97]. - Revenue from Core IoT product applications surged by 73.8%, driven by a 64.1% increase in units sold and a 5.9% rise in average selling prices[97][102]. - Revenue from Mobile product applications decreased by 18.4%, primarily due to a $10.5 million drop in licensing revenue despite a 21.4% increase in units sold[97][102]. - The Enterprise and Automotive product line generated $147.7 million, remaining flat compared to the previous year, with a 9.0% increase in units sold offset by an 8.2% decrease in average selling prices[101][102]. Financial Metrics - Gross margin decreased to 42.6% from 46.9% year-over-year, primarily due to increased amortization of acquired intangible assets and reduced revenue from licensing[98][103]. - Operating expenses totaled $147.8 million, a slight decrease from $149.3 million in the prior year, with research and development expenses rising to $94.4 million[101][106]. - Net loss for the quarter was $20.6 million, compared to a net loss of $23.1 million in the same quarter last year[101]. - Interest expense decreased significantly to $5.8 million from $11.7 million in the prior year due to the early repayment of the Term Loan Facility[112]. Cash Flow and Liquidity - Cash and cash equivalents increased to $459.9 million, up $7.4 million from $452.5 million as of June 2025[99]. - As of September 2025, cash and cash equivalents increased to $459.9 million from $391.5 million in June 2025, reflecting a positive cash flow trend[117]. - Cash provided by operating activities for the three months ended September 2025 was $30.2 million, a significant improvement compared to cash used of $11.4 million in the same period last year[119]. - Cash flows from investing activities showed a positive shift with $48.8 million provided, compared to cash used of $9.1 million in the prior year, primarily due to $61.0 million in proceeds from short-term investments[121]. - Financing activities resulted in cash used of $10.4 million for the three months ended September 2025, up from $3.5 million in the same period last year, mainly due to $7.2 million in common stock repurchases[122]. - The company had $350.0 million available under its revolving credit facility with no outstanding balance as of September 2025[123]. Operational Efficiency - Days sales outstanding improved to 37 days in September 2025 from 47 days in September 2024, indicating better collection efficiency[120]. - The company reported a decrease of $31.6 million in accrued liabilities primarily related to annual bonus payments during the three months ended September 2025[119]. Future Outlook - The company continues to monitor global macroeconomic factors and trade policies that may impact its operations and financial performance[100]. - The effective tax rate and cash flows were not materially impacted by the Pillar Two Model Rules or the OBBBA legislation for the first three months of fiscal 2026[114][115]. - The company believes existing cash, anticipated cash flows, and available credit will be sufficient to meet working capital and cash requirements for at least the next 12 months[125]. Commitments - Unconditional purchase commitments totaled $41.1 million as of September 2025, with $27.2 million due for the remainder of fiscal 2026[124].