Synaptics Incorporated

Good day and thank you for standing by. Welcome to the Synaptics Incorporated first quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To try your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah. Please go ahead.

Thanks, Jada. Good afternoon, and thank you for joining us today on Synaptic's first quarter fiscal 2024 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, and Dean Butler, our CFO. This call is 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 posted a copy of these prepared remarks on our investor relations website. In addition to the company's GAAP results, management will 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 detailed reconciliation of GAAP and non-GAAP results, which can be accessed from the Investor Relations section of the company's website at Synaptics.com. 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 operations, plans, objectives, future performance, and business. Although Synaptics believes our 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 a most recent annual report on Form 10-K and quarterly report on Form 10-Q for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. Synaptics expressly disclaims any obligation to update these forward-looking information. I will now turn the call over to Michael. Thanks, Manjal.

I'd like to welcome everyone to today's call. I'd like to start by thanking our team in Israel for their continued effort during this difficult period in their country. Our team continues to work tirelessly in the face of worry for their families and colleagues. In the last few years, we've been fortunate enough to establish a meaningful presence in Israel, and our thoughts are with our team there. With that said, the main theme of today's discussion is that our business is lining up essentially as we've outlined over the past several months. In the quarter, we saw overall inventories come down in the channel as expected. Reductions are not uniform, and we still have some work to do, particularly in enterprise. Margins continue to be below our target model due to product mix, but a return to normal enterprise numbers should lead us back toward our long-term target. In short, we continue to believe we are at or have now passed the bottom in our business and should start to climb out during calendar 2024. with both top line and mixed improvements. While visibility to the slope of the recovery is uncertain, customers have started to place orders again, engagements are increasing, and our pipeline is showing strength. Moving to the September quarter, revenue increased 5% compared to the three months prior and was slightly above the midpoint of our guidance range, with our enterprise PC products performing better than expected. Our product mix imbalance resulted in a drag on gross margins, putting us at the low end of the guide. We maintained our spending discipline and ultimately delivered non-GAAP EPS above the midpoint of guidance. As discussed at our Investor Day in September, we are redefining our product breakouts as Core IoT, Enterprise and Automotive, and Mobile. Beginning with our Core IoT products, we continue to make progress with multiple design wins and new product introductions. In wireless, we introduced a new cost-effective single stream device, this SYN43711. This product adds to our current high performance portfolio and is the first wireless device done from the ground up by the Synaptics team. I'm very proud to report that the device was a first pass success and was delivered on schedule. The other three devices we introduced this year the SYN43756E, a dual radio 2x2 Wi-Fi 6E product, the SYN4381, a 1x1 triple combo, and the SYN4382, a 2x2 triple combo, are all beginning to ramp at customers. In addition, the development of our first dedicated broad market chip is progressing as planned, and we expect to tape out the device next year. In the quarter, we saw the first orders from a new module partner, marking our initial channel expansion with the goal of extending our reach into the broader customer base. Finally, we won multiple designs in the high performance IoT market, sports cameras, drones, and sound bars. And we are engaged in new opportunities in trucking and logistics, TVs, and industrial automation applications. All of these designs require the highest performance Wi-Fi flawless interoperability, and unmatched Bluetooth coexistence. In our processor roadmap, we recently introduced a quad-core Linux-based, power-efficient, and cost-optimized system on a chip, the DVF-120. Like other SoCs in the processor portfolio, this device can be used to execute a variety of artificial intelligence applications. The DVF-120 can run machine learning models on chip, utilizing our standard toolkit and framework for rapid development and deployment. Early traction includes intelligent video and adaptive noise cancellation for the unified communications and collaboration market. The device also operates from our unified software development kit that supports existing Synaptics SoCs, demonstrating our extensible software platform. As with our wireless products, we had several wins in the quarter, some in our traditional operator customer base and others for more general purpose applications. For example, our customer Swisscom launched their next generation streaming device, TV Box 5, that is 35% more energy efficient and half the size of its predecessor, helping them achieve strict European ESG goals. Soon, we expect to announce our new family, of general-purpose SOCs targeting a wide variety of IoT applications that will enable Synaptics to expand our addressable market. Our enterprise and automotive products had two diametrically opposed stories during the quarter, with our PC and automotive products performing better than expected, but continued softness in video interface and enterprise headsets. Our automotive products remained steady, with new TDI-based wins at Toyota Tata Motors, Volkswagen, and Mercedes. The move to larger screen size is accelerating, but the corresponding ASP benefit is offset by continued competitive price pressure. Another favorable trend in automotive is increased adoption of local dimming, which brings LCD screens, which already have price and longevity advantages, to the performance level of high-end OLED giving us added confidence in our smart bridge rollout. PC as a second bright spot was solid sequential growth in fiscal Q1. Customer inventories appear to be back to normal levels and demand is improving. Our touchpad and fingerprint solutions continue to perform well with design wins across major OEMs and smaller customers. In addition, we're seeing solid traction in several focus areas within enterprise that we believe are long-term growth drivers. Our human presence detection solution for laptops performed better than initially forecast as early attach rates were higher than projected. We had our first wireless headset launch with one of our leading customers, Logitech, introducing a product that utilizes our AI-based voice processing for near-field and far-field noise suppression, as well as premium hybrid ANC algorithms. Our low power enterprise class audio SOC enables up to 40 hours of battery life. However, the remainder of enterprise is weak as inventory levels persist at relatively high levels. In addition, new product ramps are slower than normal with engineering cutbacks at our customers affecting the timeline of initial introductions. In spite of this, customer interest, design wins, and momentum remain strong for our products and it is only a matter of time before we see a return to normal run rate. In mobile, we believe the majority of Android handset makers are shifting more of their models to flexible OLED, which plays to our strength. Our Chinese customers are doing better against foreign competitors in the domestic market. Outside China, we continue to build momentum at Samsung following a successful launch of the Z Flip 5 phone, and we expect to see follow-on wins in the near future. To conclude, our business is stabilizing at current levels. We continue to expect a recovery starting in calendar 2024, though visibility to the strength and the slope of this recovery is still limited. We are confident enterprise inventories will return to normal levels over the next few quarters, improving our overall mix and margins. We are focused on executing our core IoT opportunities and are already seeing traction with our initiatives to expand our addressable market. Now, let me turn the call over to Dean for a review of our first quarter financial results and second quarter outlook.