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Synaptics Reports Results for Second Quarter Fiscal 2018
- Revenue of
$430.4 million - GAAP net loss per share of
$2.42 reflecting one-time tax charges - Non-GAAP net income per diluted share of
$1.11 - Retail availability of new Vivo flagship phone featuring industry’s first in-display fingerprint solution from
Synaptics - Introduction of new chip-on-film technologies enabling LCD infinity displays
- First mass production orders for OLED display drivers
Net revenue for the second quarter of fiscal 2018 declined seven percent from the comparable quarter last year and increased three percent sequentially to
Non-GAAP net income for the second quarter of fiscal 2018 decreased
“Synaptics is starting to benefit from our transition encompassing a more diversified product portfolio and customer base, and we expect to see strong momentum from our investments in infinity displays and consumer IoT in the second half of this calendar year,” stated
Second Quarter 2018 Business Metrics (fingerprint products classified according to type of device)
- Revenue mix from mobile products was approximately 61 percent. Revenue from mobile products of
$261.8 million was down 11 percent sequentially and down 30 percent year-over-year. Mobile products revenue includes all touchscreen, display driver, and applicable fingerprint products. - Approximately
$20.9 million of mobile product revenue for Q2 fiscal 2017 has been reclassified as IoT revenue. - Revenue mix from consumer IoT products was approximately 25 percent. Revenue from consumer IoT products totaled
$106.9 million and includes$25.3 million of revenue formerly classified as mobile revenue. - Revenue mix from PC products was approximately 14 percent. Revenue from PC products totaled
$61.7 million , a sequential decrease of six percent and a decrease of three percent year-over-year, and includes applicable fingerprint products.
Cash at
Earnings Call and Supplementary Slides
The
About
Join
Use of Non-GAAP Financial Information
In evaluating its business,
As presented in the “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” tables that follow, each of the non-GAAP financial measures excludes one or more of the following items:
Acquisition related costs.
Acquisition related costs primarily consist of:
- amortization of purchased intangibles, which includes acquired intangibles such as developed technology, customer relationships, trademarks, backlog, licensed technology, patents, and in-process technology when post-acquisition development is determined to be substantively complete,
- changes in contingent consideration,
- inventory adjustments affecting the carrying value of inventory acquired in an acquisition,
- transitory post-acquisition incentive programs negotiated in connection with an acquired business or designed to encourage post-acquisition retention of key-employees, and
- legal and consulting costs associated with acquisitions that have been announced and are expected to close or have closed, including non-recurring post-acquisition costs and services.
These acquisition related costs are not factored into the company’s evaluation of its ongoing business operating performance or potential acquisitions, as they are not considered as part of the company’s principal operations. Further, the amount of these costs can vary significantly from period to period based on the terms of an earn-out arrangement, revisions to assumptions that went into developing the estimate of the contingent consideration associated with an earn-out arrangement, the size and timing of an acquisition, the lives assigned to the acquired intangible assets, and the maturity of the business acquired. Excluding acquisition related costs from non-GAAP measures provides investors with a basis to compare
Share-based compensation.
Share-based compensation expense relates to employee equity award programs and the vesting of the underlying awards, which includes stock options, deferred stock units, market stock units and the employee stock purchase plan. Share-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond the company's control. As a result, the company excludes this item from its internal operating forecasts and models. The company believes that non-GAAP measures reflecting adjustments for share-based compensation provide investors with a basis to compare the company’s principal operating performance against the performance of peer companies without the variability created by share-based compensation resulting from the variety of equity awards used by other companies and the varying methodologies and assumptions used.
Restructuring costs.
Restructuring costs consist primarily of employee severance and office closure costs, including the reversal of such costs. These costs are generally infrequent, cash-based, and designed to address cost structure inefficiencies. As a result, the company excludes restructuring costs from its internal operating forecasts and models when evaluating its ongoing business performance. The company believes that non-GAAP measures reflecting adjustments for restructuring costs provide investors with a basis to compare the company’s principal operating performance against the performance of other companies without the variability created by infrequent restructuring costs designed to address cost structure inefficiencies in its business.
Other non-cash items, net.
Other non-cash items, net includes non-cash amortization of debt discount and issuance costs, and the gain on redemption or the accretion of interest income on certain of the company’s investments in auction rate securities, in which the cost basis was previously written down in value. These items are excluded from non-GAAP results as either the previous write-down was excluded from non-GAAP results or the item is non-cash. Excluding other non-cash items, net from non-GAAP measures provides investors with a basis to compare
Equity investment loss
Equity investment loss represents an adjustment in the book value of an equity investment in a minority owned company. The equity investment loss is a non-cash item. As a result, the company excludes equity investment loss from its internal operating forecasts and models when evaluating its ongoing business performance. The company believes that non-GAAP measures reflecting adjustments for equity investment loss provide investors with a basis to compare the company’s principal operating performance against the performance of other companies without the variability created by non-cash items.
Non-GAAP tax adjustments.
The company forecasts its long-term non-GAAP tax rate in order to provide investors with improved long-term modeling accuracy and consistency across financial reporting periods by eliminating the effects of certain items in our Non-GAAP net income and Non-GAAP net income per share, including the type and amount of deductible stock options, delivery of shares under deferred stock unit awards and market stock unit awards, the taxation of post-acquisition intercompany intellectual property cross-licensing or transfer transactions, and the impact of other acquisition items that may or may not be tax deductible. The company intends to evaluate its long-term non-GAAP tax rate annually for significant events, including material tax law changes in the major tax jurisdictions in which the company operates, corporate organizational changes related to acquisitions or tax planning opportunities, and substantive changes in our geographic earnings mix.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, and can be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such as ”expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “target,” “strategy,” “continue,” “may,” “will,” “should,” variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best judgment and are based on several factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to, the risks as identified in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” sections of our Annual Report on Form 10-K for the fiscal year ended
For more information contact:
415-217-5866
jennifer@blueshirtgroup.com
| SYNAPTICS INCORPORATED | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (In millions except share data) | |||||||||||
| (Unaudited) | |||||||||||
| December 31, | June 30, | ||||||||||
| 2017 | 2017 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 252.2 | $ | 367.8 | |||||||
| Accounts receivables, net of allowances of $2.6 | 236.4 | 255.2 | |||||||||
| Inventories | 140.6 | 131.4 | |||||||||
| Prepaid expenses and other current assets | 18.3 | 37.6 | |||||||||
| Total current assets | 647.5 | 792.0 | |||||||||
| Property and equipment at cost, net | 118.8 | 113.8 | |||||||||
| Goodwill | 368.3 | 206.8 | |||||||||
| Purchased intangibles, net | 263.5 | 101.0 | |||||||||
| Non-current other assets | 39.9 | 53.1 | |||||||||
| Total assets | $ | 1,438.0 | $ | 1,266.7 | |||||||
| Liabilities and stockholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 119.7 | $ | 135.8 | |||||||
| Accrued compensation | 28.1 | 31.9 | |||||||||
| Income taxes payable | 22.2 | 17.2 | |||||||||
| Acquisition-related liabilities | 8.7 | 8.7 | |||||||||
| Other accrued liabilities | 95.9 | 101.8 | |||||||||
| Current portion of long-term debt | - | 15.0 | |||||||||
| Total current liabilities | 274.6 | 310.4 | |||||||||
| Long-term debt | - | 202.0 | |||||||||
| Convertible notes, net | 442.2 | - | |||||||||
| Deferred tax liabilities | 7.8 | - | |||||||||
| Other long-term liabilities | 28.2 | 14.1 | |||||||||
| Total liabilities | 752.8 | 526.5 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders' equity: | |||||||||||
| Preferred stock; | |||||||||||
| $.001 par value; 10,000,000 shares authorized; | |||||||||||
| no shares issued and outstanding | - | - | |||||||||
| Common stock; | |||||||||||
| $.001 par value; 120,000,000 shares authorized; | |||||||||||
| 61,933,342 and 60,579,911 shares issued, and 34,293,466 and | |||||||||||
| 34,638,435 shares outstanding, respectively | 0.1 | 0.1 | |||||||||
| Additional paid in capital | 1,135.9 | 1,004.8 | |||||||||
| Less: 27,639,876 and 25,941,476 treasury shares, respectively, at cost | (1,073.9 | ) | (980.3 | ) | |||||||
| Accumulated other comprehensive income | 1.5 | 1.5 | |||||||||
| Retained earnings | 621.6 | 714.1 | |||||||||
| Total stockholders' equity | 685.2 | 740.2 | |||||||||
| Total liabilities and stockholders' equity | $ | 1,438.0 | $ | 1,266.7 | |||||||
| SYNAPTICS INCORPORATED | |||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||
| (In millions except per share data) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Net revenue | $ | 430.4 | $ | 461.3 | $ | 847.8 | $ | 847.5 | |||||||||||||
| Acquisition related costs (1) | 38.4 | 12.0 | 70.1 | 24.2 | |||||||||||||||||
| Cost of revenue | 276.8 | 310.6 | 548.1 | 561.2 | |||||||||||||||||
| Gross margin | 115.2 | 138.7 | 229.6 | 262.1 | |||||||||||||||||
| Operating expenses | |||||||||||||||||||||
| Research and development | 90.8 | 73.5 | 177.0 | 146.9 | |||||||||||||||||
| Selling, general, and administrative | 36.4 | 32.3 | 74.0 | 66.9 | |||||||||||||||||
| Acquisition related costs, net (2) | 5.4 | 2.4 | 11.5 | 6.9 | |||||||||||||||||
| Restructuring costs (3) | 6.6 | 1.7 | 8.0 | 7.0 | |||||||||||||||||
| Total operating expenses | 139.2 | 109.9 | 270.5 | 227.7 | |||||||||||||||||
| Operating income/(loss) | (24.0 | ) | 28.8 | (40.9 | ) | 34.4 | |||||||||||||||
| Interest and other income/(expense), net | (4.7 | ) | 0.6 | (10.7 | ) | (0.3 | ) | ||||||||||||||
| Income/(loss) before provision for income taxes | (28.7 | ) | 29.4 | (51.6 | ) | 34.1 | |||||||||||||||
| Provision for income taxes | 53.3 | 6.6 | 56.5 | 7.6 | |||||||||||||||||
| Equity investment loss | (0.4 | ) | - | (0.8 | ) | - | |||||||||||||||
| Net income/(loss) | $ | (82.4 | ) | $ | 22.8 | $ | (108.9 | ) | $ | 26.5 | |||||||||||
| Net income/(loss) per share: | |||||||||||||||||||||
| Basic | $ | (2.42 | ) | $ | 0.65 | $ | (3.22 | ) | $ | 0.76 | |||||||||||
| Diluted | $ | (2.42 | ) | $ | 0.64 | $ | (3.22 | ) | $ | 0.74 | |||||||||||
| Shares used in computing net income/(loss) per share: | |||||||||||||||||||||
| Basic | 34.1 | 35.1 | 33.8 | 35.0 | |||||||||||||||||
| Diluted | 34.1 | 35.9 | 33.8 | 35.7 | |||||||||||||||||
| (1) | These acquisition related costs consist primarily of amortization of acquired intangible assets and inventory fair value adjustments associated with acquisitions. | ||||||||||||||||||||
| (2) | These acquisition related costs, net consist primarily of amortization associated with certain acquired intangible assets as well as transitory acquisition related compensation plans. | ||||||||||||||||||||
| (3) | Restructuring costs primarily include severance costs and facility consolidation costs associated with operational restructurings and acquisitions. | ||||||||||||||||||||
| SYNAPTICS INCORPORATED | |||||||||||||||||||
| Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures | |||||||||||||||||||
| (In millions except per share data) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| GAAP gross margin | $ | 115.2 | $ | 138.7 | $ | 229.6 | $ | 262.1 | |||||||||||
| Acquisition related costs | 38.4 | 12.0 | 70.1 | 24.2 | |||||||||||||||
| Share-based compensation | 0.7 | 0.6 | 1.4 | 1.1 | |||||||||||||||
| Non-GAAP gross margin | $ | 154.3 | $ | 151.3 | $ | 301.1 | $ | 287.4 | |||||||||||
| GAAP gross margin - percentage of revenue | 26.8 | % | 30.1 | % | 27.1 | % | 30.9 | % | |||||||||||
| Acquisition related costs - percentage of revenue | 8.9 | % | 2.6 | % | 8.3 | % | 2.9 | % | |||||||||||
| Share-based compensation - percentage of revenue | 0.2 | % | 0.1 | % | 0.1 | % | 0.1 | % | |||||||||||
| Non-GAAP gross margin - percentage of revenue | 35.9 | % | 32.8 | % | 35.5 | % | 33.9 | % | |||||||||||
| GAAP research and development expense | $ | 90.8 | $ | 73.5 | $ | 177.0 | $ | 146.9 | |||||||||||
| Acquisition and integration related costs | - | - | (0.4 | ) | - | ||||||||||||||
| Share-based compensation | (9.8 | ) | (8.5 | ) | (18.9 | ) | (16.3 | ) | |||||||||||
| Non-GAAP research and development expense | $ | 81.0 | $ | 65.0 | $ | 157.7 | $ | 130.6 | |||||||||||
| GAAP selling, general, and administrative expense | $ | 36.4 | $ | 32.3 | $ | 74.0 | $ | 66.9 | |||||||||||
| Acquisition and integration related costs | - | - | (1.5 | ) | - | ||||||||||||||
| Share-based compensation | (7.3 | ) | (6.5 | ) | (14.0 | ) | (12.8 | ) | |||||||||||
| Non-GAAP selling, general, and administrative expense | $ | 29.1 | $ | 25.8 | $ | 58.5 | $ | 54.1 | |||||||||||
| GAAP operating income/(loss) | $ | (24.0 | ) | $ | 28.8 | $ | (40.9 | ) | $ | 34.4 | |||||||||
| Acquisition related costs | 43.8 | 14.4 | 83.5 | 31.1 | |||||||||||||||
| Share-based compensation | 17.8 | 15.6 | 34.3 | 30.2 | |||||||||||||||
| Restructuring costs | 6.6 | 1.7 | 8.0 | 7.0 | |||||||||||||||
| Non-GAAP operating income | $ | 44.2 | $ | 60.5 | $ | 84.9 | $ | 102.7 | |||||||||||
| GAAP net income/(loss) | $ | (82.4 | ) | $ | 22.8 | $ | (108.9 | ) | $ | 26.5 | |||||||||
| Acquisition related costs | 43.8 | 14.4 | 83.5 | 31.1 | |||||||||||||||
| Share-based compensation | 17.8 | 15.6 | 34.3 | 30.2 | |||||||||||||||
| Restructuring costs | 6.6 | 1.7 | 8.0 | 7.0 | |||||||||||||||
| Other non-cash items, net | 4.3 | (1.6 | ) | 10.0 | (1.7 | ) | |||||||||||||
| Equity investment loss | 0.4 | - | 0.8 | - | |||||||||||||||
| Non-GAAP tax adjustments | 47.7 | 0.5 | 45.6 | (5.5 | ) | ||||||||||||||
| Non-GAAP net income | $ | 38.2 | $ | 53.4 | $ | 73.3 | $ | 87.6 | |||||||||||
| GAAP net income/(loss) per share - diluted | $ | (2.42 | ) | $ | 0.64 | $ | (3.22 | ) | $ | 0.74 | |||||||||
| Acquisition related costs | 1.28 | 0.40 | 2.47 | 0.87 | |||||||||||||||
| Share-based compensation | 0.52 | 0.44 | 1.02 | 0.84 | |||||||||||||||
| Restructuring costs | 0.19 | 0.05 | 0.24 | 0.20 | |||||||||||||||
| Other non-cash items, net | 0.13 | (0.05 | ) | 0.30 | (0.05 | ) | |||||||||||||
| Equity investment loss | 0.01 | - | 0.02 | - | |||||||||||||||
| Non-GAAP tax adjustments | 1.41 | 0.01 | 1.34 | (0.15 | ) | ||||||||||||||
| Non-GAAP share adjustment | (0.01 | ) | - | (0.03 | ) | - | |||||||||||||
| Non-GAAP net income per share - diluted | $ | 1.11 | $ | 1.49 | $ | 2.14 | $ | 2.45 | |||||||||||
| SYNAPTICS INCORPORATED | ||||||||
| CONDENSED CONSOLIDATED CASH FlOWS | ||||||||
| (In millions) | ||||||||
| (Unaudited) | ||||||||
| Six Months Ended | ||||||||
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Net Income/(loss) | $ | (108.9 | ) | $ | 26.5 | |||
| Non-cash operating items | 131.1 | 71.6 | ||||||
| Changes in working capital | 81.0 | (45.7 | ) | |||||
| Provided by operations | 103.2 | 52.4 | ||||||
| Acquisition of businesses | (395.9 | ) | - | |||||
| Fixed asset & intangible asset purchases | (27.2 | ) | (20.3 | ) | ||||
| Proceeds from sales and maturities of investments | - | 7.5 | ||||||
| Investment in direct financing lease | - | (15.8 | ) | |||||
| Used in investing | (423.1 | ) | (28.6 | ) | ||||
| Treasury shares purchased | (93.6 | ) | (25.0 | ) | ||||
| Equity compensation, net | 4.6 | 9.4 | ||||||
| Debt related, net | 293.4 | (11.3 | ) | |||||
| Provided by/(Used in) financing | 204.4 | (26.9 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | (0.1 | ) | (1.9 | ) | ||||
| Net change in cash and cash equivalents | (115.6 | ) | (5.0 | ) | ||||
| Cash and cash equivalents at beginning of period | 367.8 | 352.2 | ||||||
| Cash and cash equivalents at end of period | $ | 252.2 | $ | 347.2 | ||||
| Cash paid for taxes | $ | 18.1 | $ | 15.8 | ||||
| Cash refund on taxes | $ | 1.0 | $ | 9.9 | ||||
Source: Synaptics Incorporated