Synaptics Incorporated (NASDAQ: SYNA), the leading developer of
human interface solutions, today reported financial results for its
fourth fiscal quarter and fiscal year ended June 27, 2020.
On April 16, 2020 the company completed the divestiture of its
Mobile LCD TDDI business, as a result the company received
approximately $139 million in cash proceeds. The Company
recognized a pre-tax gain on sale of $105 million. The
results for the fourth quarter and full fiscal year 2020 include
this former business only through the date of the divestiture.
Net revenue for the fourth quarter of fiscal 2020 was $277.6
million. GAAP net income for the fourth quarter of fiscal 2020 was
$90.0 million, or $2.55 per diluted share. Non-GAAP net income for
the fourth quarter of fiscal 2020 was $43.8 million, or $1.24 per
diluted share.
For fiscal 2020, net revenue was $1.33 billion. GAAP net income
for fiscal year 2020 was $118.8 million, or $3.41 per diluted
share. Non-GAAP net income for fiscal year 2020 was $207.2 million,
or $5.95 per diluted share. Fiscal 2020 was a record high year for
Synaptics for both GAAP and non-GAAP earnings per diluted share
“Synaptics delivered a strong finish to our fiscal year with
fourth quarter revenues exceeding the mid-point of our guidance,
gross margins at the high-end of our guidance, and continued
improvement in our operational efficiency,” said Michael Hurlston,
Synaptics’ president and CEO. “As we look into fiscal 2021, I am
excited by the traction we have in our organic business as well as
with the new opportunities that our recently closed acquisitions
present.”
Cash at the quarter end of June 27, 2020 was $763.4 million.
Cash flow from operations during the fourth quarter of fiscal 2020
was $53.5 million.
Business Outlook On July 23, 2020, the company
completed the acquisitions of certain assets and manufacturing
rights associated with Broadcom’s wireless IoT connectivity
business and on July 31, 2020, completed the purchase of
DisplayLink Corp. These newly acquired businesses are now
incorporated into our consolidated Q1 fiscal 2021 guidance as of
their respective date of close and are part of our IoT
business.
Dean Butler, Chief Financial Officer of Synaptics, added,
“Fiscal year 2020 was one of the strongest 12-month periods of
financial performance in the company’s history with significant
margin expansion and a record setting earnings per share. For our
first fiscal quarter, we see robust demand for our products and
enter the quarter with a strong backlog despite the uncertainties
that remain in the macro economy.”
For the first quarter of fiscal 2021, the company expects:
|
GAAP |
Non-GAAP Adjustment |
Non-GAAP |
Revenue – Consolidated with Acquisitions |
$315M to $335 |
N/A |
N/A |
Gross Margin – Consolidated with Acquisitions |
N/A* |
N/A* |
47.5 percent to 49.5 percent |
Operating Expense – Consolidated with Acquisitions |
N/A* |
N/A* |
$87M to $90M |
*We are unable to provide a reconciliation of these
forward-looking non-GAAP financial measures to their respective
comparable GAAP financial measures because, without unreasonable
efforts, we are unable to predict with reasonable certainty the
amount or timing of certain adjustments (including purchase price
accounting and related charges associated with the acquisition of
DisplayLink Corporation and the acquisition of assets and
manufacturing right associated with the wireless IoT connectivity
business of Broadcom) that are used to reconcile to these non-GAAP
financial measures. These adjustments are currently uncertain
or unknown, depend on various factors that are beyond our control,
and could have a material impact on, in each case, the most
directly comparable GAAP financial measure.
Earnings Call and Supplementary Materials The
Synaptics fourth quarter and fiscal 2020 teleconference and webcast
is scheduled to begin at 2:00 p.m. PT (5:00 p.m. ET), on Wednesday,
August 5, 2020, during which the company will provide
forward-looking information.
Speakers:
- Michael Hurlston, President and Chief Executive Officer
- Dean Butler, Chief Financial Officer
- Jason Tsai, Head of Investor Relations
To participate on the live call, analysts and investors should
dial 888-203-1112 (conference ID: 3376718). Supplementary slides, a
copy of the prepared remarks, and a live and archived webcast of
the conference call will be accessible from the “Investor
Relations” section of the company’s Website at
https://investor.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, biometrics, voice,
audio, and multimedia products is built on the company’s rich
R&D, extensive IP and dependable supply chain capabilities.
With solutions designed for mobile, PC, smart home, 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 does not 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. In addition, the company
presents components of Non-GAAP Net Income, such as Non-GAAP Gross
Margin and Non-GAAP operating expenses, for similar reasons.
We are unable to provide a reconciliation of forward-looking
Non-GAAP Gross Margin and Non-GAAP operating expenses to their
respective comparable GAAP financial measures because, without
unreasonable efforts, we are unable to predict with reasonable
certainty the amount or timing of certain adjustments for the
acquisition of DisplayLink Corporation and the acquisition of
assets and manufacturing right associated with the wireless IoT
connectivity business of Broadcom. These adjustments are currently
uncertain or unknown, depend on various factors that are beyond our
control, and could have a material impact on, in each case, the
most directly comparable GAAP financial measure.
As presented in the “Reconciliation of GAAP Financial Measures
to Non-GAAP Financial Measures” tables that follow, Non-GAAP Net
Income and each of the other Non-GAAP financial measures excludes
one or more of the following items:Acquisition/divestiture related
costs.
Acquisition/divestiture 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,
- 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 or
divestitures, including non-recurring post-acquisition costs and
services.
These acquisition/divestiture 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/divestiture, the lives assigned to the
acquired intangible assets, and the maturity of the business
acquired. Excluding acquisition/divestiture related costs from
Non-GAAP measures provides investors with a basis to compare
Synaptics against the performance of other companies without the
variability and potential earnings volatility associated with
purchase accounting and acquisition/divestiture related items.
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, performance stock units, phantom stock
units and the employee stock purchase plan. Share-based
compensation settled with stock, which includes stock options,
deferred stock units, market stock units, performance stock units
and the employee stock purchase plan, is a non-cash expense, while
share-based compensation settled with cash, which includes phantom
stock units, is a cash expense. Settlement of all employee
equity award programs whether settled with cash or stock 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 share-based compensation 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-linked compensatory 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 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 restructuring
costs designed to address cost structure inefficiencies in its
business.
Retention program costs. Retention program costs consist of
employee retention arrangement costs designed to ensure operational
continuity and support through employee retention. These costs are
cash-based and designed to ensure retention of certain key
engineering and management employees as we transition the company
through senior level management and product focus changes. As a
result, the company excludes retention program costs from its
internal operating forecasts and models when evaluating its ongoing
business performance. The company believes that Non-GAAP measures
reflecting adjustments for retention program 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 retention program costs designed to ensure
operational continuity and support through employee retention
during a transition of senior level management and product focus
changes.
In-process research and development. In-process research and
development represents research and development that is not yet
complete. In the context of a business combination,
in-process research and development costs will be capitalized and
subsequently amortized over an estimated life or impaired. In
the context of an asset acquisition, in-process research and
development costs will be expensed immediately unless there is an
alternative future use. From time to time, we may acquire
in-process research and development assets as part of an asset
acquisition. If determined to have no alternative future use, these
in-process research and development assets will be expensed in the
period acquired. As a result, the company excludes in-process
research and development costs from its internal operating
forecasts and models when evaluating its ongoing business
performance. The company believes that Non-GAAP measures reflecting
adjustments for in-process research and development 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 in-process research and development
costs.
Gain on sale of assets.Gain on sale of assets, represents the
gain on the sale of our TDDI product line. From time to time, we
may sell product line assets from our product portfolio that we
believe are not aligned to our product roadmap, are not considered
necessary for our future success, or are not performing to our
internal requirements. Excluding the gain on sale of assets
from our Non-GAAP measures provides investors with a basis to
compare the company’s principal operating performance against the
performance of other companies without the variability created by
infrequent transactions such as the gain on the sale of assets that
are not considered to be part of our core business.
Other non-cash items. Other non-cash items includes non-cash
amortization of debt discount and issuance costs. These items are
excluded from Non-GAAP results as they are non-cash. Excluding
other non-cash items from Non-GAAP measures provides investors with
a basis to compare Synaptics against the performance of other
companies without the variability associated with other non-cash
items.
Recovery on sale of investment. Recovery on sale of investment,
represents the gain on the recovery of an investment in which the
cost basis was previously written down to fair value. This item is
excluded from Non-GAAP results as the previous write-down was
excluded from Non-GAAP results. Excluding recovery on sale of
investment from Non-GAAP measures provides investors with a basis
to compare Synaptics against the performance of other companies
without the variability associated with recovery on sale of
investment.
Arbitration settlement, net Arbitration settlement, net
represents the impact of the settlement of an arbitration matter
net of related legal and consulting services that is unusual or
infrequent. As a result, the company excludes from its internal
operating forecasts and models, when evaluating its ongoing
business performance, arbitration settlement amounts net of related
costs. The company believes that Non-GAAP measures reflecting
an adjustment for arbitration settlements net of related costs
provides investors with a basis to compare the company’s principal
operating performance against the performance of other companies
without the variability created by infrequent, non-recurring or
non-routine arbitration settlements net of related costs.
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 share-based compensation, 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,
including our expectations regarding the potential impacts on our
business of the COVID-19 pandemic, 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 risk that our business, results of operations
and financial condition and prospects may be materially and
adversely affected by the COVID-19 pandemic and that significant
uncertainties remain related to the impact of COVID-19 on our
business operations and future results, including our first quarter
fiscal 2021 business outlook; 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 29, 2019
(including that the impact of the COVID-19 pandemic may also
exacerbate the risks discussed therein) and our Quarterly Report on
Form 10-Q for the fiscal quarter ended March 28, 2020; 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.
For more information contact: Jason TsaiHead of
Investor Relationsjason.tsai@synaptics.com
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