Synaptics Incorporated
Jan 26, 2017

Synaptics Reports Results for Second Quarter Fiscal 2017

SAN JOSE, Calif., Jan. 26, 2017 (GLOBE NEWSWIRE) -- Synaptics Incorporated (NASDAQ: SYNA), the leading developer of human interface solutions, today reported financial results for its second fiscal quarter ended December 31, 2016.

Net revenue for the second quarter of fiscal 2017 increased 19 percent sequentially and declined 2 percent from the comparable quarter last year to $461.3 million. GAAP net income for the second quarter of fiscal 2017 increased $19.1 million sequentially from $3.7 million and decreased 35 percent from the prior year period to $22.8 million, or $0.64 per diluted share.   

Non-GAAP net income for the second quarter of fiscal 2017 increased 56 percent sequentially and declined 11 percent from the prior year period to $53.4 million, or $1.49 per diluted share. This includes a benefit of $0.11 per diluted share for the reduction of the year-to-date non-GAAP tax rate in the second quarter. (See below under the heading "Use of Non-GAAP Financial Information" and the attached table for a description and a reconciliation of GAAP to non-GAAP financial measures.)

"We are pleased to report solid results for the second fiscal quarter," stated Rick Bergman, President and CEO. "We saw several positive developments during the period including continued traction for our TDDI and fingerprint sensing solutions; the expansion of our biometrics portfolio with optical technology and our multi-factor biometric fusion engine; the introduction of our first display driver solution for OLED-based smartphones, which is now sampling to customers; and significant progress towards our in-display integration roadmap. We are benefitting from the investments we have made in key growth areas, strengthening our market leading position and expanding our customer base." 

Second Quarter 2017 Business Metrics

Wajid Ali, CFO, added, "Considering our backlog of $264 million entering the March quarter, subsequent bookings, customer forecasts and product sell-in and sell-through timing patterns, and the resulting expected product mix, we anticipate revenue for the third quarter of fiscal 2017 to be in the range of $410 to $450 million. We expect the revenue mix from mobile and PC products to be approximately 87 percent and 13 percent, respectively."

Cash at December 31, 2016 was $347 million. In the second quarter of fiscal 2017, the company generated $52 million from operations.

Earnings Call Information
The Synaptics second quarter fiscal 2017 teleconference and webcast is scheduled to begin at 2:00 p.m. PT (5:00 p.m. ET), on Thursday, January 26, 2017, during which the company will provide forward-looking information. To participate on the live call, analysts and investors should dial 800-723-6751 (conference ID: 9147499) at least ten minutes prior to the call. Synaptics will also offer a live and archived webcast of the conference call, accessible from the "Investor Relations" section of the company's Website at www.synaptics.com.

About Synaptics Incorporated
Synaptics is the pioneer and leader of the human interface revolution, bringing innovative and intuitive user experiences to intelligent devices. Synaptics' broad portfolio of touch, display, and biometrics products is built on the company's rich R&D, extensive IP and dependable supply chain capabilities. With solutions designed for mobile, PC and automotive industries, Synaptics combines ease of use, functionality and aesthetics to enable products that help make our digital lives more productive, secure and enjoyable. (NASDAQ: SYNA) www.synaptics.com.

Join Synaptics on Twitter, LinkedIn, and Facebook, or visit www.synaptics.com.

Use of Non-GAAP Financial Information
In evaluating its business, Synaptics considers and uses Non-GAAP Net Income, which we define as net income excluding share-based compensation, acquisition related costs, and certain other non-cash or recurring and non-recurring items the company doesn't believe are indicative of its core operating performance as a supplemental measure of operating performance. Non-GAAP Net Income is not a measurement of the company's financial performance under GAAP and should not be considered as an alternative to GAAP net income. The company presents Non-GAAP Net Income because it considers it an important supplemental measure of its performance since it facilitates operating performance comparisons from period to period by eliminating potential differences in net income caused by the existence and timing of share-based compensation charges, acquisition related costs, and certain other non-cash or recurring and non-recurring items. Non-GAAP Net Income has limitations as an analytical tool and should not be considered in isolation or as a substitute for the company's GAAP net income. The principal limitations of this measure are that it does not reflect the company's actual expenses and may thus have the effect of inflating its net income and net income per share as compared to its operating results reported under GAAP.

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 June 25, 2016, and other risks as identified from time to time in our Securities and Exchange Commission reports. Forward-looking statements are based on information available to us on the date hereof, and we do not have, and expressly disclaim, any obligation to publicly release any updates or any changes in our expectations, or any change in events, conditions, or circumstances on which any forward-looking statement is based. Our actual results and the timing of certain events could differ materially from the forward-looking statements. These forward-looking statements do not reflect the potential impact of any mergers, acquisitions, or other business combinations that had not been completed as of the date of this release.

SYNAPTICS INCORPORATED  
CONSOLIDATED BALANCE SHEETS  
(In millions except share data)  
(Unaudited)  
         
     December 31, June 30, 
      2016   2016  
         
Assets        
Current assets:      
 Cash and cash equivalents $  347.2  $  352.2  
 Accounts receivables, net of allowances of $3.8 and  $3.7, respectively   259.7     252.6  
 Inventories    159.7     146.4  
 Prepaid expenses and other current assets    38.6     28.9  
Total current assets    805.2     780.1  
         
Property and equipment at cost, net   115.1     112.7   
Goodwill      206.8     206.8  
Purchased intangibles, net   129.1     160.3  
Non-current other assets    46.3     40.3  
Total assets $  1,302.5  $  1,300.2  
     
Liabilities and stockholders' equity    
Current liabilities:     
 Accounts payable $  168.7  $  172.8  
 Accrued compensation    33.8     39.9  
 Income taxes payable   9.4     11.5  
 Acquisition-related liabilities   8.7     25.5  
 Other accrued liabilities    93.3     82.3  
 Current portion of long-term debt   15.0     18.8  
Total current liabilities    328.9     350.8  
         
         
Long-term debt    209.7     216.7  
Non-current portion of acquisition-related liabilities   5.5     6.2  
Deferred tax liabilities    4.2     9.0  
Other long-term liabilities    13.9     12.5  
Total liabilities     562.2     595.2  
         
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;     
   60,129,621 and 59,532,148 shares issued, and 35,301,551 and     
   35,212,141 shares outstanding, respectively   0.1     0.1  
 Additional paid in capital   964.2     928.6  
 Less: 24,828,070 and 24,320,007 treasury shares, respectively, at cost   (917.3)    (892.3) 
 Accumulated other comprehensive income   1.5     3.3  
 Retained earnings   691.8     665.3  
Total stockholders' equity    740.3     705.0  
Total liabilities and stockholders' equity $  1,302.5  $  1,300.2  
         

 

SYNAPTICS INCORPORATED 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(In millions except per share data) 
(Unaudited) 
           
     Three Months Ended   Six Months Ended 
    December 31, December 31,
     2016  2015   2016   2015 
           
Net revenue  $  461.3 $  470.5  $  847.5   $  940.5 
Acquisition related costs (1)    12.0    14.1     24.2     28.6 
Cost of revenue     310.6    291.2     561.2     582.9 
Gross margin      138.7    165.2     262.1     329.0 
Operating expenses        
 Research and development     73.5    78.6     146.9     159.1 
 Selling, general, and administrative    32.3    41.0     66.9     81.2 
 Acquisition related costs, net (2)    2.4    0.3     6.9     7.7 
 Restructuring costs (3)    1.7    -      7.0     1.9 
Total operating expenses     109.9    119.9     227.7     249.9 
           
Operating income     28.8    45.3     34.4     79.1 
Interest and other income/(expense), net    0.6    (0.8)    (0.3)    (1.6)
Income before provision for income taxes     29.4     44.5     34.1     77.5 
Provision for income taxes     6.6    9.5      7.6     18.7 
Net income  $  22.8 $  35.0  $  26.5  $  58.8 
           
Net income per share:        
 Basic  $  0.65 $  0.96  $  0.76   $  1.61 
 Diluted  $  0.64 $  0.93  $  0.74  $  1.55 
           
Shares used in computing net income per share:        
 Basic     35.1    36.4     35.0     36.6 
 Diluted     35.9    37.7     35.7     38.0 
           
           
 (1)These acquisition related costs consist primarily of amortization of acquired intangible assets associated with acquisitions.
 (2)These acquisition related costs, net consist primarily of changes in contingent consideration and amortization associated with certain acquired intangible assets. 
 (3)Restructuring costs primarily include severance costs and facility consolidation costs associated with operational restructurings. 
           

 

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, 
     2016   2015   2016   2015  
            
GAAP gross margin $  138.7  $  165.2  $  262.1  $  329.0  
 Acquisition related costs    12.0     14.1     24.2     28.6  
 Share-based compensation     0.6     0.4     1.1     0.8  
Non-GAAP gross margin $   151.3  $  179.7  $  287.4  $  358.4   
            
            
GAAP gross margin - percentage of revenue  30.1%  35.1%  30.9%  35.0% 
 Acquisition related costs - percentage of revenue  2.5%  3.0%  2.8%  3.0% 
 Share-based compensation - percentage of revenue  0.1%  0.1%  0.1%  0.1% 
Non-GAAP gross margin - percentage of revenue  32.8%  38.2%  33.9%  38.1% 
             
            
GAAP research and development expense $  73.5  $  78.6  $  146.9  $  159.1  
 Share-based compensation    (8.5)    (7.5)    (16.3)    (14.0) 
Non-GAAP research and development expense $  65.0  $  71.1  $  130.6  $  145.1  
            
            
GAAP selling, general, and administrative expense $  32.3  $  41.0  $  66.9  $  81.2  
 Share-based compensation    (6.5)    (6.1)    (12.8)    (11.1) 
Non-GAAP selling, general, and administrative expense $  25.8  $  34.9  $  54.1  $  70.1  
             
            
GAAP operating income $  28.8  $  45.3  $  34.4  $  79.1  
 Acquisition related costs    14.4     14.4     31.1     36.3  
 Share-based compensation    15.6     14.0     30.2     25.9  
 Restructuring costs    1.7     -      7.0     1.9  
Non-GAAP operating income $  60.5  $  73.7  $  102.7  $  143.2  
            
            
GAAP net income $  22.8  $  35.0  $  26.5  $  58.8  
 Acquisition related costs    14.4     14.4     31.1     36.3  
 Share-based compensation    15.6      14.0     30.2     25.9  
 Restructuring costs    1.7     -      7.0     1.9  
 Other non-cash items, net    (1.6)    (0.2)    (1.7)    (0.4) 
 Tax adjustments    0.5     (2.9)    (5.5)    (5.3) 
Non-GAAP net income  $  53.4  $  60.3  $  87.6  $  117.2  
            
            
GAAP net income per share - diluted $  0.64  $  0.93  $  0.74  $  1.55  
 Acquisition related costs    0.40     0.38     0.87     0.95  
 Share-based compensation    0.44     0.37     0.84     0.68  
 Restructuring costs    0.05     -      0.20     0.05  
 Other non-cash items, net    (0.05)    -      (0.05)    (0.01) 
 Tax adjustments    0.01     (0.08)    (0.15)    (0.14) 
Non-GAAP net income per share - diluted $  1.49   $  1.60  $  2.45  $  3.08  
            

 

SYNAPTICS INCORPORATED
 CONDENSED CONSOLIDATED CASH FLOWS
(In millions)
(Unaudited)
     
   Six Months Ended 
  December 31,
   2016   2015 
     
Net Income $  26.5  $  58.8 
     
Non-cash operating items    71.6     71.9 
Changes in working capital    (45.7)    (23.9)
     
Provided by operations    52.4     106.8 
     
Fixed asset & intangible asset purchases    (20.3)    (19.5)
Proceeds from sales and maturities of investments    7.5     0.6 
Investment in direct financing lease    (15.8)    -  
Used in investing    (28.6)    (18.9)
     
Treasury shares purchased    (25.0)    (125.0)
Equity compensation, net    9.4     13.0 
Debt related, net    (11.3)    (4.1)
Used in financing    (26.9)    (116.1)
Effect of exchange rate changes on cash and cash equivalents    (1.9)    0.3 
Net change in cash and cash equivalents    (5.0)    (27.9)
     
Cash and cash equivalents at beginning of period    352.2     399.9 
Cash and cash equivalents at end of period $  347.2  $  372.0 
     
Cash paid for taxes $  15.8  $  25.8 
Cash refund on taxes $  9.9  $  10.8 
          


For more information contact:

Jennifer Jarman

The Blueshirt Group

415-217-5866

jennifer@blueshirtgroup.com

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Source: Synaptics Incorporated

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