SEC Filing | Synaptics Incorporated

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 30, 2023


☐	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 000-49602

SYNAPTICS INCORPORATED

(Exact name of registrant as specified in its charter)

    Delaware

    77-0118518

    (State or other jurisdiction of
incorporation or organization)

    (I.R.S. Employer
Identification No.)

1109 McKay Drive

San Jose, California 95131

(Address of principal executive offices) (Zip code)

(408) 904-1100

(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
Common Stock, par value $.001 per share	SYNA	The Nasdaq Global Select Market

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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 39,303,612 shares of Common Stock outstanding.

SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 30, 2023

TABLE OF CONTENTS


			Page
Part I. Financial Information

	Item 1.	Condensed Consolidated Financial Statements (Unaudited):

		Condensed Consolidated Balance Sheets—December 30, 2023 and June 24, 2023	3

		Condensed Consolidated Statements of Operations—Three and Six Months Ended December 30, 2023 and December 24, 2022	4

		Condensed Consolidated Statements of Comprehensive (Loss) Income—Three and Six Months Ended December 30, 2023 and December 24, 2022	5

		Condensed Consolidated Statements of Stockholders’ Equity—Three and Six Months Ended December 30, 2023 and December 24, 2022	6

		Condensed Consolidated Statements of Cash Flows—Six Months Ended December 30, 2023 and December 24, 2022	8

		Notes to Condensed Consolidated Financial Statements	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	32

Part II. Other Information

	Item 1.	Legal Proceedings	33

	Item 1A.	Risk Factors	33

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

	Item 6.	Exhibits	48

Signatures			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)


	December			June
	2023			2023
ASSETS
Current Assets:
Cash and cash equivalents	$	846.1		$	924.7
Short-term investments		2.6			9.6
Accounts receivable, net		126.6			163.9
Inventories, net		125.1			137.2
Prepaid expenses and other current assets		47.0			36.6
Total current assets		1,147.4			1,272.0
Property and equipment, net		71.0			66.4
Goodwill		816.4			816.4
Acquired intangibles, net		270.4			298.5
Right-of-use assets		45.9			49.0
Non-current other assets		222.2			109.1
	$	2,573.3		$	2,611.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	83.0		$	45.8
Accrued compensation		22.4			45.9
Income taxes payable		38.0			54.0
Other accrued liabilities		103.9			108.4
Current portion of long-term debt		6.0			6.0
Total current liabilities		253.3			260.1
Long-term debt		968.7			972.0
Other long-term liabilities		131.0			135.9
Total liabilities		1,353.0			1,368.0
Stockholders' Equity:
Preferred stock:
$0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock:
$0.001 par value; 120,000,000 shares authorized, 69,404,215 and 68,687,511 shares issued, 39,287,776 and 38,571,072 shares outstanding, at December 2023 and June 2023, respectively		0.1			0.1
Additional paid-in capital		1,050.5			1,009.2
Treasury stock: 30,116,439 common shares at December 2023 and June 2023, at cost		(878.0	)		(878.0	)
Accumulated other comprehensive loss		0.2			—
Retained earnings		1,047.5			1,112.1
Total stockholders' equity		1,220.3			1,243.4
	$	2,573.3		$	2,611.4

See accompanying notes to condensed consolidated financial statements (unaudited)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)


	Three Months Ended						Six Months Ended
	December						December
	2023			2022			2023			2022
Net revenue	$	237.0		$	353.1		$	474.7		$	801.2
Cost of revenue		128.0			166.4			258.6			358.8
Gross margin		109.0			186.7			216.1			442.4
Operating expenses:
Research and development		82.0			89.3			168.5			178.8
Selling, general, and administrative		39.7			42.4			82.0			87.1
Acquired intangibles amortization		3.9			8.9			9.4			18.4
Restructuring costs		1.3			—			9.3			—
Total operating expenses		126.9			140.6			269.2			284.3
Operating (loss) income		(17.9	)		46.1			(53.1	)		158.1
Interest and other expense, net		(6.1	)		(6.7	)		(11.5	)		(15.0	)
(Loss) income before provision for income taxes		(24.0	)		39.4			(64.6	)		143.1
Provision for income taxes		(15.0	)		17.4			—			56.5
Net (loss) income	$	(9.0	)	$	22.0		$	(64.6	)	$	86.6
Net (loss) income per share:
Basic	$	(0.23	)	$	0.55		$	(1.66	)	$	2.18
Diluted	$	(0.23	)	$	0.55		$	(1.66	)	$	2.14
Shares used in computing net (loss) income:
Basic		39.2			39.8			38.9			39.8
Diluted		39.2			40.2			38.9			40.5

See accompanying notes to condensed consolidated financial statements (unaudited)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in millions)

(unaudited)


	Three Months Ended					Six Months Ended
	December					December
	2023			2022			2023			2022
Net (loss) income	$	(9.0	)	$	22.0		$	(64.6	)	$	86.6
Other comprehensive income, net of tax
Unrealized income on available-for-sale-securities		0.1			0.4			0.2			0.3
Comprehensive (loss) income	$	(8.9	)	$	22.4		$	(64.4	)	$	86.9

See accompanying notes to condensed consolidated financial statements (unaudited)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)


	Common Stock
	Shares		Amount		Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings			Total Stockholders' Equity
Balance at June 2023		68,687,511	$	0.1	$	1,009.2		$	(878.0	)	$	—	$	1,112.1		$	1,243.4
Net loss		—		—		—			—			—		(55.6	)		(55.6	)
Other comprehensive income		—		—		—			—			0.1		—			0.1
Issuance of common stock for share-based award compensation plans		612,283		—		8.5			—			—		—			8.5
Payroll taxes related to net share settlement of share-based awards		—		—		(25.3	)		—			—		—			(25.3	)
Share-based compensation		—		—		33.2			—			—		—			33.2
Balance at September 2023		69,299,794		0.1		1,025.6			(878.0	)		0.1		1,056.5			1,204.3
Net loss		—		—		—			—			—		(9.0	)		(9.0	)
Other comprehensive income		—		—		—			—			0.1		—			0.1
Issuance of common stock for share-based award compensation plans		104,421		—		—			—			—		—			-
Payroll taxes related to net share settlement of share-based awards		—		—		(4.3	)		—			—		—			(4.3	)
Share-based compensation		—		—		29.2			—			—		—			29.2
Balance at December 2023		69,404,215	$	0.1	$	1,050.5		$	(878.0	)	$	0.2	$	1,047.5		$	1,220.3

See accompanying notes to condensed consolidated financial statements (unaudited)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)


	Common Stock
	Shares		Amount		Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings		Total Stockholders' Equity
Balance at June 2022		67,745,800	$	0.1	$	924.1		$	(694.5	)	$	(1.8	)	$	1,038.5	$	1,266.4
Net income		—		—		—			—			—			64.6		64.6
Other comprehensive loss		—		—		—			—			(0.1	)		—		(0.1	)
Issuance of common stock for share-based award compensation plans		483,713		—		8.5			—			—			—		8.5
Payroll taxes related to net share settlement of share-based awards		—		—		(31.4	)		—			—			—		(31.4	)
Common stock repurchased		—		—		—			(13.4	)		—			—		(13.4	)
Share-based compensation		—		—		30.5			—			—			—		30.5
Balance at September 2022		68,229,513		0.1		931.7			(707.9	)		(1.9	)		1,103.1		1,325.1
Net income		—		—		—			—			—			22.0		22.0
Other comprehensive loss		—		—		—			—			0.4			—		0.4
Issuance of common stock for share-based award compensation plans		229,972		—		0.3			—			—			—		0.3
Payroll taxes related to net share settlement of share-based awards		—		—		(17.7	)		—			—			—		(17.7	)
Common stock repurchased		—		—		—			(61.1	)		—			—		(61.1	)
Share-based compensation		—		—		31.4			—			—			—		31.4
Balance at December 2022		68,459,485	$	0.1	$	945.7		$	(769.0	)	$	(1.5	)	$	1,125.1	$	1,300.4

See accompanying notes to condensed consolidated financial statements (unaudited)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Six Months Ended
	December
	2023			2022
Cash flows from operating activities
Net (loss) income	$	(64.6	)	$	86.6
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Share-based compensation costs		62.4			61.9
Depreciation and amortization		14.0			12.6
Acquired intangibles amortization		41.6			65.2
Deferred taxes		(7.2	)		(11.0	)
Other		17.5			12.3
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		38.1			69.3
Inventories		(1.3	)		(6.7	)
Prepaid expenses and other current assets		(10.5	)		(1.7	)
Other assets		3.9			10.2
Accounts payable		35.7			(62.1	)
Accrued compensation		(23.4	)		(54.2	)
Income taxes payable		(16.8	)		(6.6	)
Other accrued liabilities		(4.8	)		(47.3	)
Net cash provided by operating activities		84.6			128.5
Cash flows from investing activities
Acquisition of business, net of cash and cash equivalents acquired		—			(15.5	)
Proceeds from maturity of investments		23.9			11.9
Purchases of short-term investments		(16.6	)		—
Purchases of property and equipment		(17.1	)		(15.3	)
Purchase of intangible assets		(13.5	)		(0.9	)
Advance payment on intangible assets		(116.5	)		—
Other		—			1.0
Net cash used in investing activities		(139.8	)		(18.8	)
Cash flows from financing activities
Proceeds from issuance of shares		8.5			8.8
Payroll taxes related to net share settlement of share-based awards		(29.6	)		(49.1	)
Repurchases of common stock		—			(74.5	)
Repayment of debt		(4.5	)		(3.0	)
Other		1.7			2.8
Net cash used in financing activities		(23.9	)		(115.0	)
Effect of exchange rate changes on cash and cash equivalents		0.5			0.1
Net decrease in cash and cash equivalents		(78.6	)		(5.2	)
Cash and cash equivalents, beginning of period		924.7			824.0
Cash and cash equivalents, end of period	$	846.1		$	818.8

See accompanying notes to condensed consolidated financial statements (unaudited)

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

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates including, but not limited to, those estimates related to revenue recognition, allowance for credit losses, cost of revenue, inventories, loss on purchase commitments, product warranty, accrued liabilities, share-based compensation costs, provision for income taxes, deferred tax assets and the associated valuation allowance, uncertain tax positions, goodwill, intangible assets, investments and loss contingencies. We base our estimates on historical experience, current period developments, applicable laws and regulations, and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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.

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 no material credit loss charges recorded on accounts receivable. As of December 2023 and June 2023, contract assets recorded on our condensed consolidated balance sheets were $1.2 million and $1.3 million, respectively. Contract assets are presented as part of prepaid expenses and other current assets.

Contract liabilities and refund liabilities were $22.3 million and $38.4 million, respectively, as of December 2023, and $18.7 million and $39.8 million, respectively, as of June 2023. Both contract liabilities and refund liabilities are presented as customer obligations in Note 10. Balance Sheet Components. During the three months ended December 2023 and December 2022, we recognized $0.5 million and $1.0 million, respectively, in revenue related to contract liabilities, which was outstanding as of the beginning of such fiscal year. During the six months ended December 2023 and December 2022, we recognized $2.9 million and $2.8 million, respectively, in revenue related to contract liabilities, which was outstanding as of the beginning of such fiscal year.

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	$	(9.0	)	$	22.0	$	(64.6	)	$	86.6
Denominator:
Shares, basic		39.2			39.8		38.9			39.8
Effect of dilutive share-based awards and convertible notes		—			0.4		—			0.7
Shares, diluted		39.2			40.2		38.9			40.5
Net (loss) income per share:
Basic	$	(0.23	)	$	0.55	$	(1.66	)	$	2.18
Diluted	$	(0.23	)	$	0.55	$	(1.66	)	$	2.14

Our basic net income per share amounts for each period presented have been computed using the weighted average number of shares of common stock, $0.001 par value, or the common stock, outstanding over the period measured. Our diluted net income per share amounts for each period presented include the weighted average effect of potentially dilutive shares. We use the "treasury stock" method to determine the dilutive effect of our stock options, restricted stock units, or RSUs, market stock units, or MSUs, and performance stock units, or PSUs. Potentially dilutive shares whose effect would have been antidilutive are excluded from the computation of diluted net income per share.

4. Prepayment of Intangible Assets and Asset Acquisition

During the fourth quarter of fiscal 2023, we paid an aggregate consideration of $130.0 million to Broadcom to extend the exclusivity period of certain previously acquired intangible assets for an additional three-year period and to license certain developed technology intangible assets. The developed technologies are expected to be delivered at various dates through August 2025.

The purchase consideration allocated to the extension of the exclusivity period was $13.5 million and was recorded as a developed technology intangible asset in the first quarter of fiscal 2024. This intangible asset is being amortized over its estimated

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 $116.5 million relating to the four technology products to be received at future dates, has been recorded as a prepayment of intangible assets. This prepayment is classified under non-current other assets in our condensed consolidated balance sheets. Upon obtaining control of the developed technologies, the amounts recorded under non-current other assets will be reclassified as intangible assets based on their respective fair values determined as of the agreement date.

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	$	68.1	$	70.5
Finished goods		57.0		66.7
	$	125.1	$	137.2

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	$	285.7	$	—	$	285.7	$	853.9	$	—		$	853.9
Cash equivalents:
Money market funds		509.4		—		509.4		54.4		—			54.4
Treasury bills		—		—		—		16.4		—			16.4
Certificates of deposit		51.0		—		51.0		—		—			—
Total cash and cash equivalents	$	846.1	$	—	$	846.1	$	924.7	$	—		$	924.7
Short-term investments:											</