Synaptics Incorporated

Welcome to Synaptic's first quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Manjal Shah, Vice President in Investor Relations. Please go ahead.

Thank you, Kathy. Good afternoon, and thank you, everyone, for joining us today on Synaptic's first quarter fiscal 2025 conference call. My name is Manjal Shah, and I'm the Head of Investor Relations. With me on today's call are Michael Holston, our President and CEO, and Kent Rizvi, 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 the supplemental slide presentation, we have also posted a copy of these prepared remarks on our investor relations website. 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 cost, and certain other non-cash or recurring or non-recurring items. Please refer to our earnings press release issued after market close today for a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures presented, 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 in our prepared remarks and may make additional forward-looking statements in response to your questions. These forward-looking statements give our current expectations and projections relating to our financial conditions, 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. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statement. Therefore, 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 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 excels. expressly disclaims any obligation to update the 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 delivered very solid performance this quarter. Revenue increased 8% year over year and exceeded the midpoint of our guidance range, driven by continued strength in core IoT product sales, which dropped 55% compared to the prior year. Our profitability continues to improve with non-gap growth and operating margins higher compared to the prior quarter and the year ago. We delivered strong EPS growth with non-gap EPS increasing 56% year over year. We had another great quarter in core IoT led by our wireless and processor products. We're introducing new products, winning new designs and increasing our pipeline. Our core IoT funnel has grown nearly 30% since our last update a year ago, increasing from about 2.2 billion in September of 2023 to over 3 billion today. This design pipeline supports a compounded revenue growth of 25% to 30% over the next five years. In wireless, we're making progress in broad markets, which we defined as a part of the wireless connectivity market that requires a lower power and lower cost solution. At our analyst day just over a year ago, we outlined our SAM from this market segment as approximately $3 billion. Our first broad market shift is back from FAB and is on track to sample this quarter, allowing us to address this opportunity for the first time. Given our level of differentiation, we expect to build share in broad markets and establish a meaningful position over the next two years. Meanwhile, in high performance Wi-Fi, we continue to build our position with new customer wins and market share gains. The pace of new wins accelerated, nearly doubling in number as compared to just three months ago, and spanned across a broad range of customers and applications. In addition, we remain on track to sample the first Wi-Fi 7 device designed specifically for the IoT market later this month. While our overall share is still modest, we continue to believe that we can be a leading player in the next few years. Moving to processors, our Astra products recently earned recognition from industry experts by winning the 2024 Edge Awards in the Machine Learning and Deep Learning category. Our solutions are gaining market traction with our funnel growing 300 million in the quarter. Our primary progress to date has been in designs for home automation, security, and appliances. Additionally, we are seeing interest from ODMs and customers for an AI hub that connects to multiple devices, reducing or eliminating the need for cloud connectivity. Customers are drawn to our products because they bring AI capability to edge devices at very competitive price points. In this way, a decision doesn't need to be made immediately as to the AI use cases because our products are plug and play replacement for existing MPUs. In enterprise and automotive, we're seeing gradual improvement across the enterprise portfolio. Our PC product revenue increased by a high single digit percentage in the quarter, benefiting from market seasonality and incremental share gains. While 2024 was a year of stabilization in the PC market and notebook units didn't grow quite as expected, There is an increasing belief that demand will grow more appreciably in 2025, driven by multiple factors, including the age of the fleet, Windows 10 end of life, and new AI PCs. Given our market position in fingerprint sensors, touchpads, and user presence detection, any growth will be beneficial to our top line numbers. Even with limited growth in units next year, we expect our UPD products to double in FY25, albeit off a relatively small base. We are ramping design wins in our lead customer and sit on Intel's reference design for their Panther Lake platform. The progress with both Intel and our major customer shows the significant advantage we have. We expect to be able to bring those differentiators to new PC customers and to other applications growing revenue for this product line over the next five years. Next, our video interface products are showing signs of life again as we have mostly worked down inventory. While revenue from these products improved a double digit percentage compared to the year ago quarter, they are still 40% or more below the normal run rate. Irrespective of the PC market, we believe our video interface products will see improvement in 2025 due to technology standard upgrades and increased manageability requirements. For example, next year's notebook models will include Thunderbolt 5, and our latest devices uniquely support its high bandwidth requirement. Our latest video interface product, Carrera, should see a high rate of adoption as it enables more displays, higher refresh rates, and faster charging capability. Further benefiting this product line is the advent of new ARM-based PCs. Our newly introduced DisplayLink Pro is CPU and GPU agnostic and the only solution available that can support both ARM and x86 processors. In automotive, end market demand has deteriorated and these products were actually down year over year. We remain cautious regarding this product line given the broader market slowdown the continued decline in legacy DDIC products, and delays in the adoption of new technologies. In mobile, our touch controllers are aligned with the high end of the Android market and are seeing good strength. We continue to win replacement designs with major customers and see opportunities down market with some OEMs. We are also introducing a new frequency-based touch controller, which should not only help build share in handsets, but also potentially unlocks new non-mobile applications. We also plan to begin deploying capital this quarter. Ken will provide more details in his prepared remarks, but our focus will be on share repurchases. To conclude, we are making progress in core IoT, gaining share in high-performance Wi-Fi while building a foundation in broad market connectivity and edge IoT processors. In addition, Our enterprise product sales are growing again, and any further increase in end demand should result in improved margins. Finally, we are driving higher earnings and starting to return capital to shareholders. Let me turn the call over to Ken for a review of our first quarter financial results and the second quarter outlook.