Synaptics(SYNA) - 2024 Q3 - Quarterly Results

Q3'24 Financial Results and Recent Business Highlights Synaptics reported Q3 FY2024 financial results including a net loss and non-GAAP net income, alongside strategic advancements in Core IoT with the Astra™ platform Q3'24 Financial Performance Synaptics reported Q3 FY2024 net revenue of $237.3 million, a GAAP net loss of $18.1 million, and a Non-GAAP net income of $21.0 million Q3 FY2024 Financial Performance (In millions, except per share data) | Metric | Q3 FY2024 Value | | :----------------------- | :------------------- | | Net Revenue | $237.3 million | | GAAP Net Loss | $18.1 million | | GAAP Loss per Basic Share | $0.46 | | Non-GAAP Net Income | $21.0 million | | Non-GAAP Diluted EPS | $0.53 | Strategic Business Highlights Synaptics launched its Astra™ platform for embedded edge AI, targeting a $20 billion+ market, and saw Core IoT revenue increase 26% sequentially - Successful launch of Astra™ platform, targeting a $20 billion+ market opportunity for embedded edge AI processors for IoT[4] - Core IoT revenue increased 26% sequentially, driven by growth in the wireless product family[4] Business Outlook Synaptics anticipates a modest sequential revenue increase for Q4 FY2024, with stabilizing business conditions and improving demand Q4 FY2024 Guidance Synaptics anticipates a modest sequential increase in fiscal fourth-quarter revenue, with stabilizing business conditions and improving demand, though recovery is slower than expected - Expects fiscal fourth quarter revenue to increase modestly from the prior quarter[5] - Business is stabilizing with supply chain inventory mostly at normal levels and improving demand conditions[5] Q4 FY2024 Financial Guidance (In millions, except percentages) | Metric | GAAP Range | Non-GAAP Adjustment | Non-GAAP Range | | :---------------- | :----------------- | :------------------ | :----------------- | | Revenue | $230M to $260M | N/A | N/A | | Gross Margin | 44.5% to 46.5% | $18M to $21M | 52.5% to 54.5% | | Operating Expense | $127M to $132M | $30M to $31M | $97M to $101M | Earnings Call and Supplementary Materials Details for Synaptics' Q3 FY2024 earnings call, webcast, and supplementary materials are provided Webcast and Registration Details Synaptics' Q3 FY2024 earnings call was held on May 9, 2024, with registration required and supplementary materials available online - Q3 FY2024 earnings call held on Thursday, May 9, 2024, at 2:00 p.m. PT (5:00 p.m. ET)[8] - Registration for the live call was available at Synaptics Q3 FY2024 Earnings Call Registration[8] - Supplementary slides, prepared remarks, and webcast accessible from the 'Investor Relations' section of the company's website[8] About Synaptics Incorporated Synaptics specializes in human-device engagement, offering diverse technologies including AI-enhanced processing and advanced connectivity Company Overview and Offerings Synaptics (Nasdaq: SYNA) engineers human-device engagement experiences, offering differentiated technologies in touch, display, biometrics, connectivity, and AI-enhanced processing - Synaptics engineers human engagement experiences with connected devices and data[9] - Offers differentiated technologies in touch, display, biometrics, advanced connectivity, and AI-enhanced processing for video, vision, audio, speech, and security[9] Use of Non-GAAP Financial Information Synaptics uses Non-GAAP financial measures to provide a clearer view of core operational performance by excluding specific non-recurring or non-cash items Purpose of Non-GAAP Measures Synaptics uses Non-GAAP measures to supplement operating performance indicators, excluding specific items not indicative of core operations for better comparisons - Non-GAAP Net Income is defined as net income excluding share-based compensation, acquisition-related costs, and certain other non-cash or recurring and non-recurring items[11] - Non-GAAP measures are used to facilitate operating performance comparisons by eliminating potential differences caused by specific charges and items not indicative of core operating performance[11] Non-GAAP Adjustments Explained The company's Non-GAAP measures exclude acquisition costs, share-based compensation, restructuring, and other non-cash items for clearer operational performance - Acquisition and integration related costs are excluded as they are not considered part of principal operations and can vary significantly[12] - Share-based compensation is excluded due to its non-cash nature (mostly) and variability, allowing for better comparison with peer companies[14] - Other exclusions include amortization of prepaid development costs, restructuring costs, site remediation accrual, other non-cash items (like debt discount amortization), and Non-GAAP tax adjustments to improve long-term modeling accuracy[15][16][17][18][19] Forward-Looking Statements This section outlines the disclaimer and inherent risks associated with forward-looking statements in the press release Disclaimer and Risk Factors This press release contains forward-looking statements subject to safe harbors and inherent risks, with no obligation for Synaptics to publicly update them - Forward-looking statements reflect current expectations and projections, identified by words like 'expect,' 'anticipate,' 'intend,' 'believe,' 'estimate,' 'plan,' 'target,' 'strategy,' 'continue,' 'may,' 'will,' 'should'[20] - Risks include temporary reduction in demand due to accumulated inventories, as well as factors identified in the company's Form 10-K and 10-Q reports[20] - The company disclaims any obligation to publicly release updates or changes to forward-looking statements[20] Condensed Consolidated Balance Sheets The condensed consolidated balance sheets present Synaptics' financial position as of March 2024, detailing assets, liabilities, and equity Balance Sheet Overview As of March 2024, Synaptics reported total assets of $2,539.7 million, with decreases in total liabilities and relatively stable stockholders' equity Condensed Consolidated Balance Sheets (In millions) | ASSETS | March 2024 | June 2023 | | :---------------------------------- | :--------- | :-------- | | Cash and cash equivalents | $828.1 | $924.7 | | Short-term investments | $0.5 | $9.6 | | Accounts receivable, net | $144.7 | $163.9 | | Inventories, net | $114.1 | $137.2 | | Prepaid expenses and other current assets | $35.1 | $36.6 | | Total current assets | $1,122.5 | $1,272.0 | | Property and equipment at cost, net | $74.0 | $66.4 | | Goodwill | $816.4 | $816.4 | | Purchased intangibles, net | $252.2 | $298.5 | | Right-of-use assets | $45.9 | $49.0 | | Non-current other assets | $228.7 | $109.1 | | Total Assets | $2,539.7 | $2,611.4 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $70.9 | $45.8 | | Accrued compensation | $25.5 | $45.9 | | Income taxes payable | $9.7 | $54.0 | | Other accrued liabilities | $98.8 | $108.4 | | Current portion of debt | $6.0 | $6.0 | | Total current liabilities | $210.9 | $260.1 | | Long-term debt | $967.7 | $972.0 | | Other long-term liabilities | $125.7 | $135.9 | | Total liabilities | $1,304.3 | $1,368.0 | | Common stock and additional paid-in capital | $1,083.8 | $1,009.3 | | Treasury stock | $(878.0) | $(878.0) | | Accumulated other comprehensive income | $0.2 | — | | Retained earnings | $1,029.4 | $1,112.1 | | Total stockholders' equity | $1,235.4 | $1,243.4 | | Total Liabilities and Stockholders' Equity | $2,539.7 | $2,611.4 | Condensed Consolidated Statements of Operations The condensed consolidated statements of operations detail Synaptics' financial performance for the three and nine months ended March 2024 Statements of Operations Overview For Q3 FY2024, Synaptics reported net revenue of $237.3 million and a GAAP net loss of $18.1 million, a decrease from the prior year Condensed Consolidated Statements of Operations (In millions, except per share data) | Metric | Three Months Ended March 2024 | Three Months Ended March 2023 | Nine Months Ended March 2024 | Nine Months Ended March 2023 | | :---------------------------------- | :---------------------------- | :---------------------------- | :--------------------------- | :--------------------------- | | Net revenue | $237.3 | $326.6 | $712.0 | $1,127.8 | | Acquisition related costs (1) | $14.3 | $23.7 | $46.5 | $70.5 | | Cost of revenue | $112.7 | $130.6 | $339.1 | $442.6 | | Gross margin | $110.3 | $172.3 | $326.4 | $614.7 | | Operating expenses: | | | | | | Research and development | $83.4 | $87.9 | $251.9 | $266.7 | | Selling, general, and administrative | $40.5 | $41.7 | $122.5 | $128.8 | | Acquired intangibles amortization (2) | $4.0 | $8.5 | $13.4 | $26.9 | | Restructuring costs (3) | $(0.2) | — | $9.1 | — | | Total operating expenses | $127.7 | $138.1 | $396.9 | $422.4 | | Operating (loss) income | $(17.4) | $34.2 | $(70.5) | $192.3 | | Interest and other expense, net | $(5.9) | $(7.0) | $(17.4) | $(22.0) | | (Loss) income before provision for income taxes | $(23.3) | $27.2 | $(87.9) | $170.3 | | Provision for income taxes | $(5.2) | $16.8 | $(5.2) | $73.3 | | Net (loss) income | $(18.1) | $10.4 | $(82.7) | $97.0 | | Net (loss) income per share: | | | | | | Basic | $(0.46) | $0.26 | $(2.12) | $2.44 | | Diluted | $(0.46) | $0.26 | $(2.12) | $2.41 | | Shares used in computing net (loss) income per share: | | | | | | Basic | 39.3 | 39.4 | 39.1 | 39.7 | | Diluted | 39.3 | 39.9 | 39.1 | 40.3 | Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures This section provides a reconciliation of Synaptics' GAAP financial measures to their corresponding Non-GAAP counterparts, detailing adjustments GAAP to Non-GAAP Reconciliation Synaptics reconciles GAAP to Non-GAAP financial measures, adjusting for items like acquisition costs and share-based compensation to show Non-GAAP net income and EPS Reconciliation of GAAP to Non-GAAP Financial Measures (In millions, except per share data) | Metric | Three Months Ended March 2024 | Three Months Ended March 2023 | Nine Months Ended March 2024 | Nine Months Ended March 2023 | | :------------------------------------------ | :---------------------------- | :---------------------------- | :--------------------------- | :--------------------------- | | GAAP gross margin | $110.3 | $172.3 | $326.4 | $614.7 | | Acquisition related costs | $14.3 | $23.7 | $46.5 | $70.5 | | Share-based compensation | $1.0 | $0.9 | $3.2 | $3.0 | | Non-GAAP gross margin | $125.6 | $196.9 | $376.1 | $688.2 | | GAAP gross margin - percentage of revenue | 46.5 % | 52.8 % | 45.8 % | 54.5 % | | Acquisition related costs - percentage of revenue | 6.0 % | 7.3 % | 6.5 % | 6.3 % | | Share-based compensation - percentage of revenue | 0.4 % | 0.2 % | 0.4 % | 0.2 % | | Non-GAAP gross margin - percentage of revenue | 52.9 % | 60.3 % | 52.8 % | 61.0 % | | GAAP research and development expense | $83.4 | $87.9 | $251.9 | $266.7 | | Share-based compensation | $(15.0) | $(12.1) | $(45.7) | $(39.5) | | Amortization prepaid development costs | — | $(0.8) | — | $(5.8) | | Non-GAAP research and development expense | $68.4 | $75.0 | $206.2 | $221.4 | | GAAP selling, general, and administrative expense | $40.5 | $41.7 | $122.5 | $128.8 | | Share-based compensation | $(13.9) | $(16.8) | $(43.4) | $(49.9) | | Acquisition and integration related costs | — | — | — | $(1.8) | | Site remediation accrual | — | — | $(1.6) | — | | Non-GAAP selling, general, and administrative expense | $26.6 | $24.9 | $77.5 | $77.1 | | GAAP operating (loss) income | $(17.4) | $34.2 | $(70.5) | $192.3 | | Acquisition and integration related costs | $18.3 | $32.2 | $59.9 | $99.2 | | Share-based compensation | $29.9 | $29.8 | $92.3 | $92.4 | | Restructuring costs | $(0.2) | — | $9.1 | — | | Site remediation accrual | — | — | $1.6 | — | | Amortization prepaid development costs | — | $0.8 | — | $5.8 | | Non-GAAP operating income | $30.6 | $97.0 | $92.4 | $389.7 | | GAAP net (loss) income | $(18.1) | $10.4 | $(82.7) | $97.0 | | Acquisition and integration related costs | $18.3 | $32.2 | $59.9 | $99.2 | | Share-based compensation | $29.9 | $29.8 | $92.3 | $92.4 | | Restructuring costs | $(0.2) | — | $9.1 | — | | Amortization prepaid development costs | — | $0.8 | — | $5.8 | | Other non-cash items | $0.6 | $0.7 | $1.9 | $2.0 | | Site remediation accrual | — | — | $1.6 | — | | Non-GAAP tax adjustments | $(9.5) | $1.4 | $(18.3) | $10.5 | | Non-GAAP net income | $21.0 | $75.3 | $63.8 | $306.9 | | GAAP net (loss) income per share - diluted | $(0.46) | $0.26 | $(2.12) | $2.41 | | Acquisition/divestiture and integration related costs | $0.47 | $0.81 | $1.53 | $2.46 | | Share-based compensation | $0.76 | $0.74 | $2.36 | $2.29 | | Restructuring costs | $(0.01) | — | $0.23 | — | | Amortization prepaid development costs | — | $0.02 | — | $0.15 | | Other non-cash items | $0.02 | $0.02 | $0.05 | $0.05 | | Site remediation accrual | — | — | $0.04 | — | | Non-GAAP tax adjustments | $(0.24) | $0.04 | $(0.47) | $0.26 | | Share adjustment | $(0.01) | — | — | — | | Non-GAAP net income per share - diluted | $0.53 | $1.89 | $1.62 | $7.62 | Condensed Consolidated Cash Flows The condensed consolidated cash flow statements present Synaptics' cash movements across operating, investing, and financing activities Cash Flow Overview For the nine months ended March 2024, operating cash flow significantly decreased, while cash used in investing activities increased due to advance payments Condensed Consolidated Cash Flows (In millions) | Cash Flow Category | Nine Months Ended March 2024 | Nine Months Ended March 2023 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Net (loss) income | $(82.7) | $97.0 | | Non-cash operating items | $176.8 | $207.2 | | Changes in working capital | $(23.2) | $(67.2) | | Provided by operating activities | $70.9 | $237.0 | | Acquisition of business, net of cash and cash equivalents acquired | — | $(15.5) | | Proceeds from maturities of short-term investments | $26.0 | $16.3 | | Purchase of intangible assets | $(13.5) | $(0.9) | | Purchase of short-term investments | $(16.6) | — | | Purchase of property and equipment | $(26.1) | $(29.0) | | Advance payment on intangible assets | $(116.5) | — | | Other (investing) | — | $1.0 | | Used in investing activities | $(146.7) | $(28.1) | | Repurchases of common stock | — | $(100.1) | | Equity compensation, net | $(17.8) | $(34.6) | | Payment of debt obligations | $(6.0) | $(4.5) | | Other (financing) | $3.4 | $5.0 | | Used in financing activities | $(20.4) | $(134.2) | | Effect of exchange rate changes on cash and cash equivalents | $(0.4) | $(0.7) | | Net change in cash and cash equivalents | $(96.6) | $74.0 | | Cash and cash equivalents at beginning of period | $924.7 | $824.0 | | Cash and cash equivalents at end of period | $828.1 | $898.0 |