Synaptics Incorporated

Good day and thank you for standing by. Welcome to the Synoptics, Inc. first quarter fiscal year 2022 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to hand the conference over to your host, Mr. Munjal Shah, Head of Investor Relations. Mr. Shah, you may now begin.

Thank you, Chris. Good afternoon, and thank you for joining us today on Synaptic's first quarter fiscal 2022 conference call. My name is Munjal Shah, and I'm Head of Investor Relations. With me on today's call are Michael Holston, our President and CEO of and Dean Butler, our Chief Financial Officer. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at synaptics.com. In addition to a supplemental slide presentation, we have also posted a copy of these prepared remarks on our Investor Relations website. The supplementary slides have also been furnished as an exhibit to our current report on Form 8-K filed with SEC earlier today and add additional color on our financial results. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs, and certain other non-cash or recurring or non-recurring items. Please refer to the press release issued after market close today for a detailed reconciliation of GAAP and non-GAAP results. Additionally, we would like to remind you that during the course of this conference call, Synaptics will make forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operation, plans, objectives, future performance, and business, including our expectations regarding the potential impacts on our business of the COVID-19 pandemic and the supply chain disruption and component shortages currently affecting the global semiconductor industry. All those synaptic beliefs are estimates and assumptions to be reasonable, They are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statements. We refer you to the company's current and periodic reports filed with the SEC, including our most recent annual report on Form 10-K for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. Synaptics expresses expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Michael. Thanks, Manjal.

I'd like to welcome everyone to today's call. We had a great start to our fiscal year 2022, and I'm pleased with what we were able to achieve in the last three months. Revenue for the September quarter was above the midpoint of our guidance, driven by continued growth in our IoT products. Our mix of IoT revenue improved again, resulting in record GAAP and non-GAAP gross margin. Higher revenue and gross margin in turn drove our non-GAAP operating margin and non-GAAP EPS to record levels in the quarter. Two factors are contributing to this success. First, we are working with Tier 1 customers whose products are generally exceeding market expectations. In our existing customer base, We've been able to cross-sell multiple product lines, increasing our content, improve our mix, and shift ASPs upward by delivering higher performance and more integrated solutions. Second, we have had success selling into totally new customers. We saw several new ramps in the quarter, which had meaningful impact on revenue. Our IoT revenues increased 70% year over year. Most every area of our IoT portfolio has experienced dramatic growth in design wind momentum. Our fastest growing piece of the portfolio continues to be our Wi-Fi Bluetooth combo devices, which are seeing traction in a number of new applications, such as handheld scanners and networked fitness equipment. Our wireless devices are an example of our cross-selling success, as we can attach them to almost every other piece of our IoT portfolio. Our latest generation triple combo wireless device has recently taped out and is now back in our labs for full qualification. This new family of products combines multiple wireless technologies in a single solution, including Wi-Fi 6E, Bluetooth, and now 802.15.4. We plan to offer a thread networking protocol stack on the 802.15.4 engine. Thread is an industry standard that will primarily be applied to in-home automation and industrial use cases. We will also be able to support Zigbee and Matter on the same integrated circuit. Synaptics will now be one of the first silicon vendors offering these triple combo devices, and we are seeing strong customer interest as we begin sampling. In general, our wireless products are seeing increased design wind traction across a long tail of customers and applications, giving us confidence in believing we will achieve our target of doubling revenues again over the next 18 months. In our video interface products, we continue to see strong demand for our premium docking solutions. Docking stations have experienced a market inflection, driven both by replication of the office setup at home and by flexible workplace configurations. According to Omdia, the TAM for commercial docks is expected to increase again in 2022. In addition, we've been successful in increasing content in our docking stations. For example, we have a design win at a top OEM customer that combines both our traditional DisplayPort technology with DisplayLink. Our expansion into the protocol adapter and converter market is starting to bear fruit with more than 25 design wins. Our next generation device in this area, Spider, is now in production at multiple customers and was also selected for use on industry leading GPU and CPU reference designs. Protocol adapters and converters are an incremental market for us that we estimate to be up to 80 million addressable units. Another example of our ability to expand our TAM and market reach utilizing our core technology is our success in taking our highest-end mobile display drivers and applying them to the virtual reality market. We're seeing incredible traction in this area with over 30 models shipping today using Synaptics devices, including the market leader who recently announced a $10 billion investment in this technology area. Synaptics is shipping today in almost all the leading virtual reality platforms and we enjoy undisputed market share leadership in this category. Our key differentiators include display resolution and fast refresh rates, which are both extremely important in a virtual reality headset, given the proximity of the display to the human eye. These products had historically been lumped together in mobile, but given their distinct application and growth potential, We are now correctly classifying them in our IoT sector. Dean will go into further details about the financial reclassification in his section. Our automotive products are seeing continued momentum and remain on track to achieve our 100 million annual revenue goal by the end of fiscal 2022. We've executed well on our TDDI devices and now have multiple generations both in production and InDesign at most all major automotive OEMs. While a small part of our automotive revenue mix today, we expect TDDI products to buoy a more meaningful percentage in the coming quarters, giving us confidence that we can meet or exceed our stated revenue goal. Moving on to our Edge AI processors, our recently announced AudioSmart family of products is a highly integrated single chip solution with AI-enabled noise cancellation algorithms. We are already in pre-production for this premium headset solution, which also reduces systems cost by integrating multiple previously external components. More importantly, it significantly reduces power consumption, enabling extended battery life. Our shipping audio products have seen a boost with the advent of Microsoft Teams and Zoom certifications. Here we enjoy a performance advantage and have been able to gain significant share in professional-grade wired headsets used in video conferencing. Coupled with our strong presence in gaming headsets, as well as the addition of DSPG, we should continue to see strength in this part of the portfolio. In addition, our dedicated AI-focused Katana platform is beginning to show early positive signs with our first production customer taking full advantage of the capabilities of this platform now shipping. In addition, we are expanding our ecosystem around Katana with new partnerships for machine learning development to support faster time to market for our customers. This market is still in its infancy, but we expect increasing numbers of AI applications at the edge and are encouraged by the early indicators. Let me move on to our PC business. After two years of strong growth, we believe the market demand will likely normalize. Last year, Chromebook demand was strong, but the current mix is biased toward commercial notebooks, which plays more to our strength and has resulted in more stable demand for our products. The focus on innovation in our PC business is showing results, the best example of which is Microsoft's high-end Surface Studio notebook, which features Synaptics Touch in its large form factor force pad with precision haptics. A second example is our palm rejection technology, which uses AI to prevent unintentional touches from moving the cursor. This enables the design of larger touchpads with a far better customer experience and is now being designed in at several OEMs on their high-end platforms. Finally, in mobile, I'm pleased to say that we have made progress in diversifying our customer base. As we had said previously, we expected the June quarter to be the revenue nadir for our mobile products. That has indeed proven to be the case as we increased our revenue sequentially in the September quarter. almost all leading Chinese and Korean Android handset manufacturers are now shipping our touch technology on their flexible OLED panels. Our second-generation controller, which significantly advances performance in high-noise environments, started shipping earlier this year and is now the product of choice, particularly in China. Our new high-end flexible OLED display driver qualifications are progressing well and we continue to expect these wins to hit production in calendar 2022. Before I conclude, let me give you all a quick update on our supply chain status. Overall, the supply situation is still very tight with constraints across our full product portfolio. The constraints are most prevalent in our IoT products where we are winning and expanding our market share quickly, adding pressure to an already difficult environment. We are working with our partners and in select places have been able to garner some incremental supply, though we expect broad challenges to continue through all of calendar 2022. To conclude, I'm extremely pleased with the progress we've made in positioning the company for sustained growth. I am very happy with the strength of our portfolio and the opportunities that lie ahead of us to grow our business. We continue to be positive on the potential opportunities that a combined Synaptics plus DSP group will have, and happy to report that we remain on track to close the pending merger by the end of the calendar year. Now, let me turn the call over to Dean to review our first quarter financial results and provide our outlook.