SYNAPTICS Inc Q2 FY2025 earnings call

• Michael Hurlston stepped down as president and CEO; Ken Rizvi serves as interim CEO. - Strategy pillars: investing in core product lines, growth in core IoT via partnerships/acquisitions, prudent capital allocation. - Recent agreements: $198M Broadcom deal, tuck-in acquisition of Packet Craft, Google partnership; retired term loan b. - Q2 results: Revenues $267.2M, up 13% YOY; non-GAAP gross margin 53.6%; non-GAAP EPS $0.92, up 61% YOY. - Core IoT: Processor demand improving, wireless sampling Wi-Fi seven, acquired Packet Craft. - Enterprise and automotive: Normal seasonal trends, UPD technology adoption ramping, first smart bridge design win in China. - Mobile touch: Headwind from large US customer behind, focus on high-end Android smartphones.

In the second quarter, revenue mix was 23% core IoT, 59% enterprise and automotive, and 18% mobile touch products. Core IoT product revenues increased 63% year over year to $61 million. Enterprise and automotive product revenue improved 17% year over year, while mobile touch product revenue was down 25% year over year.

For the third quarter of fiscal 2025, revenues are expected to be approximately $265 million at the midpoint plus or minus $15 million. Non-GAAP gross margin is expected to be 53.5% at the midpoint plus or minus 1%. Non-GAAP operating expenses in the March quarter are expected to be $101 million at the midpoint plus or minus $2 million. Non-GAAP net income per diluted share is anticipated to be $0.85 per share at the midpoint plus or minus $0.20 on an estimated 39.5 million fully diluted shares.

• Uncertainties in economic environment impacting revenue growth. - Risks associated with executing strategic transactions and partnerships. - Automotive market headwinds due to exposure to US and European customers.

Q: Regarding the $40 million annualized sales from the Broadcom transaction, which segment does it fall into?

A: Ken Rizvi says it falls into the core IoT segment as it's primarily wireless technologies.

Q: Specific areas driving improvement in bookings and orders in enterprise?

A: Ken Rizvi mentions it's fairly broad, with lean inventories and a path for sequential growth throughout the calendar year, though automotive space is still sluggish.

Q: About designs in progress for Android and ARVR markets from the Broadcom deal?

A: Ken Rizvi says there are designs in progress, with the team focusing on penetrating Android accounts and ARVR/consumer audio markets, with full benefit from the Broadcom acquisition starting in the June quarter.

Q: Quarterly revenue contribution from the Google deal?

A: Ken Rizvi states the Google collaboration is about validating the ASTRA platform, with no immediate change to the forecast, and sequential growth expected as the Broadcom deal ramps up.

Q: Mobile vs. Core IoT size from the Broadcom deal in the long term?

A: Ken Rizvi and Venkat Karawadi say the Broadcom deal expands into mobile segments like Android and ARVR, with focus on penetrating those markets over the next few years, with IoT wireless also a key growth area.

Q: Aastra platform and Google partnership impact?

A: Vikram Gupta says the Google partnership has accelerated traction, with the funnel for the Aastra platform growing due to interest in edge AI applications.

Q: User presence detection (UPD) adoption?

A: Ken Rizvi says UPD technology is gaining traction with new design wins at large OEMs, expanding market share.

Q: Confidence in driving incremental revenue?

A: Ken Rizvi cites improved visibility, lean inventories, and portfolio build-out as reasons for confidence in sequential growth.

Q: Margin impact of the Broadcom deal?

A: Ken Rizvi says margin guidance for the next quarter is around 53.5%, depending on mix, with a reasonable range.

Q: Synergy between touch and wireless in Android OEMs?

A: Vikram Gupta says the touch presence and wireless acquisition provide differentiated technology to tackle Android OEMs, expanding presence at existing customers.