UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of February 1, 2024, the Company had
SYNAPTICS INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 30, 2023
TABLE OF CONTENTS
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Item 1. |
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Condensed Consolidated Balance Sheets—December 30, 2023 and June 24, 2023 |
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6 |
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Condensed Consolidated Statements of Cash Flows—Six Months Ended |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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32 |
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Item 4. |
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32 |
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Item 1. |
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33 |
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Item 1A. |
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33 |
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Item 2. |
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47 |
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Item 6. |
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48 |
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49 |
PART I—FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value and share amounts)
(unaudited)
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December |
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June |
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2023 |
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2023 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Acquired intangibles, net |
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Right-of-use assets |
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Non-current other assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation |
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Income taxes payable |
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Other accrued liabilities |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term debt |
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Other long-term liabilities |
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Total liabilities |
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Stockholders' Equity: |
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Preferred stock: |
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$ |
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Common stock: |
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$ |
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Additional paid-in capital |
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Treasury stock: |
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( |
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( |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total stockholders' equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements (unaudited)
3
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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December |
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December |
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2023 |
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2022 |
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2023 |
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2022 |
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Net revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of revenue |
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Gross margin |
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Operating expenses: |
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Research and development |
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Selling, general, and administrative |
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Acquired intangibles amortization |
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Restructuring costs |
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Total operating expenses |
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Operating (loss) income |
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( |
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( |
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Interest and other expense, net |
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( |
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( |
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( |
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( |
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(Loss) income before provision for income taxes |
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( |
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( |
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Provision for income taxes |
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( |
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Net (loss) income |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Net (loss) income per share: |
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Basic |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Diluted |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Shares used in computing net (loss) income: |
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Basic |
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Diluted |
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See accompanying notes to condensed consolidated financial statements (unaudited)
4
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in millions)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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December |
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December |
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2023 |
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2022 |
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2023 |
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2022 |
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Net (loss) income |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Other comprehensive income, net of tax |
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Unrealized income on available-for-sale-securities |
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Comprehensive (loss) income |
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$ |
( |
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$ |
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$ |
( |
) |
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$ |
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See accompanying notes to condensed consolidated financial statements (unaudited)
5
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except share amounts)
(unaudited)
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Common Stock |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Treasury Stock |
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Accumulated Other Comprehensive Income |
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Retained Earnings |
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Total Stockholders' Equity |
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Balance at June 2023 |
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$ |
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$ |
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$ |
( |
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$ |
— |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for share-based award compensation plans |
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— |
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— |
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— |
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— |
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Payroll taxes related to net share settlement of share-based awards |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at September 2023 |
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( |
) |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for share-based award compensation plans |
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— |
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— |
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— |
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— |
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— |
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- |
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Payroll taxes related to net share settlement of share-based awards |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at December 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
|
See accompanying notes to condensed consolidated financial statements (unaudited)
6
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except share amounts)
(unaudited)
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Common Stock |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Treasury Stock |
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Accumulated Other Comprehensive Loss |
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Retained Earnings |
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Total Stockholders' Equity |
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Balance at June 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of common stock for share-based award compensation plans |
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— |
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— |
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— |
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— |
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Payroll taxes related to net share settlement of share-based awards |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
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Common stock repurchased |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at September 2022 |
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( |
) |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for share-based award compensation plans |
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— |
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— |
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— |
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— |
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Payroll taxes related to net share settlement of share-based awards |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
Common stock repurchased |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at December 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
|
$ |
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$ |
|
See accompanying notes to condensed consolidated financial statements (unaudited)
7
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
|
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Six Months Ended |
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|||||
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December |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net (loss) income |
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$ |
( |
) |
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$ |
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Share-based compensation costs |
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Depreciation and amortization |
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Acquired intangibles amortization |
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Deferred taxes |
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( |
) |
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( |
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Other |
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Changes in operating assets and liabilities, net of acquisitions: |
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Accounts receivable, net |
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Inventories |
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( |
) |
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( |
) |
Prepaid expenses and other current assets |
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( |
) |
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( |
) |
Other assets |
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Accounts payable |
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( |
) |
|
Accrued compensation |
|
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( |
) |
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( |
) |
Income taxes payable |
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( |
) |
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( |
) |
Other accrued liabilities |
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( |
) |
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( |
) |
Net cash provided by operating activities |
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Cash flows from investing activities |
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Acquisition of business, net of cash and cash equivalents acquired |
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( |
) |
|
Proceeds from maturity of investments |
|
|
|
|
|
|
||
Purchases of short-term investments |
|
|
( |
) |
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of intangible assets |
|
|
( |
) |
|
|
( |
) |
Advance payment on intangible assets |
|
|
( |
) |
|
|
|
|
Other |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from issuance of shares |
|
|
|
|
|
|
||
Payroll taxes related to net share settlement of share-based awards |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
|
|
|
( |
) |
|
Repayment of debt |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
||
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
||
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
See accompanying notes to condensed consolidated financial statements (unaudited)
8
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and United States generally accepted accounting principles, or U.S. GAAP. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations. In our opinion, the financial statements include all adjustments, which are of a normal and recurring nature and necessary for the fair presentation of the results of the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future period. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended June 24, 2023.
The condensed consolidated financial statements include our financial statements and those of our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation. Certain reclassifications have been made to the amounts for prior years in order to conform to the current year’s presentation.
Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. Our fiscal 2024 is a 53-week period ending June 29, 2024, and our fiscal 2023 was a 52-week period ending on June 24, 2023. The fiscal periods presented in this report are 13-week periods for the three months ended December 30, 2023 and December 24, 2022, respectively. For simplicity, the accompanying condensed consolidated financial statements have been shown as ending on calendar quarter end dates as of and for all periods presented, unless otherwise indicated.
Use of Estimates
Prepayment of Intangible Assets and Asset Acquisition
During the first quarter of fiscal 2024, we entered into an amendment to our wireless license agreement with Avago Technologies (“Broadcom”), to license four developed technology products and to extend the exclusivity period of certain developed technologies that were previously licensed from Broadcom in July 2020. As of December 2023, we have not obtained control of the four technology products and, accordingly, the relative fair value of these technology products are presented as a non-current asset in our condensed consolidated balance sheet.
The technologies included in the agreement do not constitute a business and, as such, we accounted for this transaction as an acquisition of an asset in accordance with the applicable guidance when we receive control of the developed technology. Refer to “Note 4. Prepayment of Intangible Assets and Asset Acquisition” for further discussion of the transaction.
Accounting Pronouncements Recently Issued
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, “Segment Reporting: Improvements to Reportable Segment Disclosures.” This guidance requires disclosure of incremental segment information on an annual and interim basis. This amendment is effective for our fiscal year ending June 30, 2025 and our interim periods within the fiscal year ending June 30, 2026. We are currently assessing the impact of this guidance on our disclosures.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes: Improvements to Income Tax Disclosures.” This guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and disclosures of income taxes paid by jurisdiction. This amendment is effective for our fiscal year ending June 30, 2026. We are currently assessing the impact of this guidance on our disclosures.
9
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2. Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. Most of our revenue, except an inconsequential amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and conditions.
Rights to our intellectual property, or IP, are either sold or licensed to customers. Revenue recognition from the licensing of our IP is dependent on the nature and terms of each agreement. We recognize revenue from the licensing of our IP upon delivery of the IP if there are no substantive future obligations to perform under the arrangement. Sales-based or usage-based royalties from the license of IP are recognized at the later of the period the sale or usage occurs, or the satisfaction of the performance obligation to which some or all of the sales-based or usage-based royalties have been allocated.
Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive consideration from customers. To date, there have been
Contract liabilities and refund liabilities were $
Revenue from contracts with customers disaggregated by geographic area based on customer location and product category is presented in Note 15. Segment, Customers, and Geographical Information.
3. Net (Loss) Income Per Share
The computation of basic and diluted net (loss) income per share was as follows (in millions, except per share data):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
December |
|
|
December |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shares, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive share-based awards and convertible notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shares, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Our basic net income per share amounts for each period presented have been computed using the weighted average number of shares of common stock, $
4. Prepayment of Intangible Assets and Asset Acquisition
During the fourth quarter of fiscal 2023, we paid an aggregate consideration of $
The purchase consideration allocated to the extension of the exclusivity period was $
10
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
economic useful life of three years. The remaining balance of the purchase consideration, totaling $
5. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consisted of the following (in millions):
|
|
December |
|
|
June |
|
||
|
|
2023 |
|
|
2023 |
|
||
Raw materials and work-in-progress |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
Inventories are recorded at standard cost, which approximates actual cost computed on a first-in, first-out basis. We record a write-down, if necessary, to reduce the carrying value of inventory to its net realizable value. The effect of these write-downs is to establish a new cost basis in the related inventory, which we do not subsequently write up. We also record a liability and charge to cost of revenue for estimated losses on inventory we are obligated to purchase from our contract manufacturers when such losses become probable from customer delays, order cancellations, or other factors. The following factors influence our estimates: changes to or cancellations of customer orders, unexpected or sudden decline in demand, rapid product improvements, technological advances, and termination or changes by our original equipment manufacturers, or OEM, customers of any product offerings incorporating our product solutions.
6. Cash, Cash Equivalents and Short-Term Investments
The following table summarizes our cash, cash equivalents and short-term investments by category at December 2023 and June 2023 (in millions):
|
|
December 2023 |
|
|
June 2023 |
|
||||||||||||||||||
|
|
Amortized Cost |
|
|
Gross unrealized loss |
|
|
Fair Value |
|
|
Amortized Cost |
|
|
Gross unrealized loss |
|
|
Fair Value |
|
||||||
Cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Treasury bills |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|