Synaptics Incorporated

today and thank you for standing by welcome to the synaptics inc third quarter fiscal year 2024 financial results 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 1 1 on your telephone you will then hear an automated message advising your hand is raised To withdraw your question, please press star 1-1 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, Vice President of Investor Relations. Please go ahead.

Thank you, Brianna. Good afternoon, and thank you for joining us today on Synaptic's third quarter fiscal 2024 conference call. My name is Munjal Shah, and I am Head of Investor Relations. With me on today's call are Michael Holston, our president and CEO, and Matt Padfield, our vice president of finance. 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. A copy of this prepared remarks and a supplemental slide presentation are also posted on the 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, certain other non-cash and 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. The information can be accessed from the Investor Relations section of the company's website at Synaptics.com. Additionally, 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 statement. 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 this forward-looking information. I will now turn the call over to Michael. Thanks, Manjal.

I'd like to welcome everybody to today's call. This quarter, we delivered results that were in line with expectations. Revenue, margin, and EPS met or were slightly above our prior guidance. Growth in core IoT offsets seasonal weakness in mobile. Over the last few months, we started building the foundation for our second driver of core IoT growth, our line of embedded AI IoT processors. That initiative culminated in the launch of our Astra processor platform at Embedded World in Germany in April. Astra is an AI native IoT compute platform targeting a $20 billion plus semiconductor silicon market. opportunity for edge IoT devices. Running AI models on device rather than in a data center gives devices security, power, and latency advantages. Synaptics differentiates by incorporating AI in every part of the flow, from chip development to software to the tool chain. In addition, with a novel gearing approach, we can deliver more inferences at any system power level than competition. We believe that the totality of our approach will make Synaptics the absolute leader when it comes to delivering AI processing solutions for IoT devices. With the Astra framework, which contemplates AI end-to-end, customers can bring their data to run on Synaptics AI reference models or bring their own AI models and optimize them to run efficiently and securely on Synaptics SoCs. Customers don't have to build a new AI model for every application, increasing adoption, efficiency, and time to market. The Astra platform includes a family of processors, an open software platform, an AI development toolkit, and model framework, as well as seamless wireless connectivity. The SL family of processors are AI-enabled MPUs targeted for the edge. and our first products to be released under the Astra umbrella. Two and four core versions are now sampling. The SR series of processors are AI-enabled MCUs and incorporate our pioneering gearing technique, which actively manages power as inferencing requirements increase or decrease. A flexible, innovative software platform extends across both product families and supports Linux and Android as well as leading RTOS offerings. In addition, both families leveraged the deep institutional knowledge at Synaptics around computer vision and audio machine learning algorithms. The launch of the Astra family of processors at Embedded World was a great success, with customer interest from a broad-based set of industries including automotive, consumer, industrial, security, and home appliances. Thousands of customers and developers visited our showcase, and the team generated a significant number of qualified customer leads. We hosted multiple technical presentations and a first-of-its-kind hands-on embedded AI workshop for product designers, creating strong demand for the Astra development kit. To top it all off, Synaptic's SL series embedded compute processors received the Best in Show Award ahead of solutions from several incumbent suppliers and competitors. Astra is an offshoot from our application-specific processors, which are currently in volume production. We saw improvement in this part of core IoT as inventory has generally returned to a more normal level. We had a major win at Deutsche Telekom for our video processors with AI capability, which will contribute to revenue in fiscal 2025. In addition, we had a win on Cisco's next generation AI-enabled collaboration devices with our high-end quad-core processor. In both wins, we were able to pull through wireless connectivity products, continuing our successful cross-selling initiative. Well, after grab the headlines, our wireless product delivered the news, driving core IoT revenue 26% higher compared to the prior quarter. Wireless product inventory has been worked down, except for a couple of SKUs. Design wins in wearables, security systems, home automation, and action cameras are starting to ramp. We expect these trends to continue, driving sequential revenue growth in core IoT next quarter. In addition, we remain on track to sample both our first broad market device and Wi-Fi 7 device later this year. The enterprise and automotive products were roughly flat on quarter. However, next quarter we expect to see growth in this piece of our business. The volume of our docking station products is beginning to increase again, though demand is off historic norms. In addition, our PC, touchpad, and fingerprint solutions are tracking the normal seasonal patterns, and we have opportunities to take some market share. Our HPD solutions are performing as expected, and we continue to see opportunities to increase share as platforms start to refresh. Demand across the rest of the enterprise products is suppressed as IT spending on hardware and accessories continues to be at historically low levels with no signs of an uptick. Further out in the calendar year, we keep hearing talk of a refresh cycle and new AI PCs driving unit volume higher, which would be good for us. However, We get to see orders consistent with anything like this. In automotive, our TDI products are seeing strong demand and performing better than expected. Our design wins at several OEMs in North America and Europe, including Audi, Chevy, Ford, Porsche, and Volkswagen are starting to ramp. Additionally, some other OEMs are extending their current models for another one to two years, which benefits us given our high market share in these designs. The strength in our TDI products is somewhat offset by a slowdown in legacy DDICs. Longer term, we would expect to increase content per car with smart bridges and Wi-Fi Bluetooth combos. Our mobile products performed largely in line with our expectations, and revenue was down from the prior quarter, driven both by seasonality on our touch products and by a decline in revenue from our large legacy DDIC customer. As that product finally goes to zero, which you'd expect at some point in the next fiscal year, it will present a headwind to fiscal 2025 mobile revenue. Aside from that, we expect our shipments to track seasonality for high-end Android phones. We see potential opportunities for further growth as the adoption of OLED technology expands into mid-tier phones. To summarize, we continue to be excited about our core IoT business. For the first time, Synaptics is selling differentiated general purpose products into large potential markets. Meanwhile, our traditional product lines, where we have leadership positions in smaller, more defined markets, are beginning to recover as inventory burns off and demand slowly returns. The combination of the two gives us confidence as we enter our next fiscal year. Before I pass the baton, I wanted to update progress on our CFO search. We have had discussions with dozens of highly qualified internal and external candidates. If all goes according to plan, we should have someone in place well before our next earnings call. Now, let me turn the call over to Matt for a review of our third quarter financial results and fourth quarter outlook.