UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission file number 000-49602

SYNAPTICS INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	77-0118518
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1251 McKay Drive

San Jose, California 95131

(Address of principal executive offices) (Zip code)

(408) 904-1100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.001 per share	SYNA	The NASDAQ Global Select Market

Number of shares of Common Stock outstanding at May 2, 2019: 34,498,484

SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 30, 2019

TABLE OF CONTENTS

			Page
Part I. Financial Information
	Item 1.	Condensed Consolidated Financial Statements (Unaudited):	3
		Condensed Consolidated Balance Sheets—March 31, 2019 and June 30, 2018	3
		Condensed Consolidated Statements of Operations—Three and Nine Months Ended March 31, 2019 and 2018	4
		Condensed Consolidated Statements of Comprehensive Income/(Loss)—Three and Nine Months Ended March 31, 2019 and 2018	5
		Condensed Consolidated Statements of Stockholders’ Equity	6
		Condensed Consolidated Statements of Cash Flows—Nine Months Ended March 31, 2019 and 2018	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4.	Controls and Procedures	33
Part II. Other Information
	Item 1.	Legal Proceedings	34
	Item 1A.	Risk Factors	34
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
	Item 6.	Exhibits	35
Signatures			36

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value and share amounts)

(unaudited)

	March 31,			June 30,
	2019			2018
ASSETS
Current Assets:
Cash and cash equivalents	$	323.8		$	301.0
Accounts receivable, net of allowances of $2.1 and $1.8 at March 31, 2019 and    June 30, 2018, respectively		266.8			289.1
Inventories		153.1			131.2
Prepaid expenses and other current assets		23.2			18.2
Total current assets		766.9			739.5
Property and equipment at cost, net of accumulated depreciation of $137.7    and $127.4 at March 31, 2019 and June 30, 2018, respectively		104.8			117.8
Goodwill		372.8			372.8
Acquired intangibles, net		163.1			219.2
Non-current other assets		61.0			50.5
	$	1,468.6		$	1,499.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	117.9		$	156.9
Accrued compensation		22.1			25.4
Income taxes payable		1.0			13.1
Acquisition-related liabilities		—			8.7
Other accrued liabilities		99.1			79.7
Total current liabilities		240.1			283.8
Convertible notes, net		463.8			450.7
Other long-term liabilities		38.0			36.0
Total liabilities		741.9			770.5
Stockholders' Equity:
Common stock:
$0.001 par value; 120,000,000 shares authorized,    63,942,166 and 62,889,679 shares issued, and 34,452,290 and 35,249,803 shares    outstanding, at March 31, 2019 and June 30, 2018, respectively		0.1			0.1
Additional paid-in capital		1,248.1			1,195.2
Treasury stock: 29,489,876 and 27,639,876 common treasury shares at    March 31, 2019 and June 30, 2018, respectively, at cost		(1,151.2	)		(1,073.9	)
Accumulated other comprehensive income		—			1.5
Retained earnings		629.7			606.4
Total stockholders' equity		726.7			729.3
	$	1,468.6		$	1,499.8

See accompanying notes to condensed consolidated financial statements (unaudited).

3

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
Net revenue	$	334.0		$	394.0		$	1,177.1		$	1,241.8
Cost of revenue		218.0			271.1			770.4			889.3
Gross margin		116.0			122.9			406.7			352.5
Operating expenses:
Research and development		82.6			93.7			256.9			273.0
Selling, general, and administrative		34.2			37.9			103.6			115.6
Acquired intangibles amortization		3.0			1.4			8.8			8.5
Restructuring costs		—			2.2			10.4			8.6
Total operating expenses		119.8			135.2			379.7			405.7
Operating income/(loss)		(3.8	)		(12.3	)		27.0			(53.2	)
Interest and other expense, net		(4.3	)		(4.7	)		(10.5	)		(15.4	)
Income/(loss) before provision for income taxes and    equity investment loss		(8.1	)		(17.0	)		16.5			(68.6	)
Provision/(benefit) for income taxes		(15.3	)		(3.9	)		(8.1	)		52.6
Equity investment loss		(0.5	)		(0.6	)		(1.3	)		(1.4	)
Net income/(loss)	$	6.7		$	(13.7	)	$	23.3		$	(122.6	)
Net income/(loss) per share:
Basic	$	0.19		$	(0.40	)	$	0.67		$	(3.61	)
Diluted	$	0.19		$	(0.40	)	$	0.66		$	(3.61	)
Shares used in computing net income/(loss) per share:
Basic		34.4			34.5			34.7			34.0
Diluted		35.0			34.5			35.5			34.0

See accompanying notes to condensed consolidated financial statements (unaudited).

4

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(in millions)

(unaudited)

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2019		2018			2019			2018
Net income/(loss)	$	6.7	$	(13.7	)	$	23.3		$	(122.6	)
Other comprehensive loss:
Change in unrealized net gain on investment		—		—			(1.5	)		—
Net current period-other comprehensive loss		—		—			(1.5	)		—
Comprehensive income/(loss)	$	6.7	$	(13.7	)	$	21.8		$	(122.6	)

See accompanying notes to condensed consolidated financial statements (unaudited).

5

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

											Accumulated
					Additional						Other					Total
	Common Stock				Paid-in			Treasury			Comprehensive			Retained		Stockholders'
	Shares		Amount		Capital			Stock			Income			Earnings		Equity
Balance at June 30, 2018		62,889,679	$	0.1	$	1,195.2		$	(1,073.9	)	$	1.5		$	606.4	$	729.3
Net income		—		—		—			—			—			3.8		3.8
Other comprehensive income		—		—		—			—			(1.5	)		—		(1.5	)
Issuance of common stock for share-    based award compensation plans		140,379		—		2.1			—			—			—		2.1
Payroll taxes for deferred stock units		—		—		(0.9	)		—			—			—		(0.9	)
Purchases of treasury stock		—		—		—			(39.4	)		—			—		(39.4	)
Share-based compensation		—		—		16.7			—			—			—		16.7
Balance at September 30, 2018		63,030,058		0.1		1,213.1			(1,113.3	)		—			610.2		710.1
Net income		—		—		—			—			—			12.8		12.8
Issuance of common stock for share-    based award compensation plans		773,486		—		9.3			—			—			—		9.3
Payroll taxes for deferred stock units		—		—		(6.3	)		—			—			—		(6.3	)
Purchases of treasury stock		—		—		—			(37.9	)		—			—		(37.9	)
Share-based compensation		—		—		16.2			—			—			—		16.2
Balance at December 31, 2018		63,803,544		0.1		1,232.3			(1,151.2	)		—			623.0		704.2
Net income		—		—		—			—			—			6.7		6.7
Issuance of common stock for share-    based award compensation plans		138,622		—		1.7			—			—			—		1.7
Payroll taxes for deferred stock units		—		—		(1.8	)		—			—			—		(1.8	)
Share-based compensation		—		—		15.9			—			—			—		15.9
Balance at March 31, 2019		63,942,166	$	0.1	$	1,248.1		$	(1,151.2	)	$	—		$	629.7	$	726.7

See accompanying notes to condensed consolidated financial statements (unaudited).

6

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

											Accumulated
					Additional						Other					Total
	Common Stock				Paid-in			Treasury			Comprehensive		Retained			Stockholders'
	Shares		Amount		Capital			Stock			Income		Earnings			Equity
Balance at June 30, 2017		60,579,911	$	0.1	$	1,005.8		$	(980.3	)	$	1.5	$	730.5		$	757.6
Net loss		—		—		—			—			—		(26.5	)		(26.5	)
Issuance of common stock for share-    based award compensation plans		68,858		—		1.1			—			—		—			1.1
Issuance of common stock for acquisition		726,666				39.1											39.1
Payroll taxes for deferred stock units		—		—		(0.5	)		—			—		—			(0.5	)
Purchases of treasury stock		—		—		—			(93.6	)		—		—			(93.6	)
Share-based compensation		—		—		16.5			—			—		—			16.5
Issuance of Convertible debt		—		—		52.1			—			—		—			52.1
Balance at September 30, 2017		61,375,435		0.1		1,114.1			(1,073.9	)		1.5		704.0			745.8
Net loss		—		—		—			—			—		(82.4	)		(82.4	)
Issuance of common stock for share-    based award compensation plans		557,907		—		8.1			—			—		—			8.1
Payroll taxes for deferred stock units		—		—		(4.1	)		—			—		—			(4.1	)
Share-based compensation		—		—		17.8			—			—		—			17.8
Balance at December 31, 2017		61,933,342		0.1		1,135.9			(1,073.9	)		1.5		621.6			685.2
Net loss		—		—		—			—			—		(13.7	)		(13.7	)
Issuance of common stock for share-    based award compensation plans		300,769		—		5.8			—			—		—			5.8
Payroll taxes for deferred stock units		—		—		(0.2	)		—			—		—			(0.2	)
Share-based compensation		—		—		18.8			—			—		—			18.8
Balance at March 31, 2018		62,234,111	$	0.1	$	1,160.3		$	(1,073.9	)	$	1.5	$	607.9		$	695.9

See accompanying notes to condensed consolidated financial statements (unaudited).

7

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	Nine Months Ended
	March 31,
	2019			2018
Cash flows from operating activities
Net income/(loss)	$	23.3		$	(122.6	)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Share-based compensation costs		48.7			53.1
Depreciation and amortization		27.5			28.6
Acquired intangibles amortization		56.1			62.0
Deferred taxes		(12.4	)		16.8
Amortization of convertible debt discount and issuance costs		13.1			12.7
Amortization of debt issuance costs		0.4			1.5
Impairment recovery on investments		(2.8	)		—
Arbitration settlement		(1.9	)		—
Equity investment loss		1.3			1.4
Foreign currency remeasurement loss		0.2			0.1
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		27.5			8.2
Inventories		(21.9	)		102.2
Prepaid expenses and other current assets		(5.1	)		20.9
Other assets		(1.3	)		(7.2	)
Accounts payable		(35.8	)		(15.9	)
Accrued compensation		(3.3	)		(15.4	)
Acquisition-related liabilities		(6.8	)		—
Income taxes payable		(9.6	)		1.8
Other accrued liabilities		13.6			(11.1	)
Net cash provided by operating activities		110.8			137.1
Cash flows from investing activities
Acquisition of businesses, net of cash and cash equivalents acquired		—			(396.4	)
Proceeds from sales of investments		2.8			—
Purchases of property and equipment		(17.7	)