syna-10q_20191228.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 December 28, 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)

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

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.

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 ☒

Number of shares of Common Stock outstanding at January 31, 2020: 33,940,408

SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 28, 2019

TABLE OF CONTENTS

			Page
Part I. Financial Information

	Item 1.	Condensed Consolidated Financial Statements (Unaudited):	3

		Condensed Consolidated Balance Sheets—December 31, 2019 and June 30, 2019	3

		Condensed Consolidated Statements of Income—Three and Six Months Ended December 31, 2019 and 2018	4

		Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended December 31, 2019 and 2018	5

		Condensed Consolidated Statements of Stockholders’ Equity	6

		Condensed Consolidated Statements of Cash Flows—Six Months Ended December 31, 2019 and 2018	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	32

Part II. Other Information

	Item 1.	Legal Proceedings	33

	Item 1A.	Risk Factors	33

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

	Item 6.	Exhibits	34

Signatures			35

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)

	December 31,			June 30,
	2019			2019
ASSETS
Current Assets:
Cash and cash equivalents	$	424.8		$	327.8
Accounts receivable, net of allowances of $1.7 at December 31, 2019 and $2.1 at June 30, 2019		246.4			230.0
Inventories		82.1			158.7
Current assets held for sale		21.0			-
Prepaid expenses and other current assets		16.5			14.6
Total current assets		790.8			731.1
Property and equipment at cost, net of accumulated depreciation of $134.2 and $133.1 at December 31, 2019 and June 30, 2019, respectively		87.7			103.0
Non-current assets held for sale		16.1			—
Goodwill		362.8			372.8
Acquired intangibles, net		115.5			144.8
Non-current other assets		84.3			58.1
	$	1,457.2		$	1,409.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	88.9		$	98.3
Accrued compensation		45.5			30.4
Income taxes payable		17.5			19.1
Other accrued liabilities		87.6			106.1
Total current liabilities		239.5			253.9
Convertible notes, net		477.4			468.3
Other long-term liabilities		49.0			30.3
Total liabilities		765.9			752.5
Stockholders' Equity:
Common stock:
$0.001 par value; 120,000,000 shares authorized, 65,388,813 and 64,283,948 shares issued, and 33,898,937 and 33,349,735 shares outstanding, at December 31, 2019 and June 30, 2019, respectively		0.1			0.1
Additional paid-in capital		1,294.2			1,266.1
Treasury stock: 31,489,876 and 30,934,213 common treasury shares at December 31, 2019 and June 30, 2019, respectively, at cost		(1,209.4	)		(1,192.4	)
Retained earnings		606.4			583.5
Total stockholders' equity		691.3			657.3
	$	1,457.2		$	1,409.8

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

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
Net revenue	$	388.3		$	425.5		$	728.2		$	843.1
Cost of revenue		229.0			275.7			442.7			552.4
Gross margin		159.3			149.8			285.5			290.7
Operating expenses:
Research and development		77.0			84.2			163.0			174.3
Selling, general, and administrative		31.5			35.6			59.0			69.4
Acquired intangibles amortization		3.0			2.9			5.9			5.8
Restructuring costs		13.3			2.1			19.9			10.4
Total operating expenses		124.8			124.8			247.8			259.9
Operating income		34.5			25.0			37.7			30.8
Interest and other expense, net		(2.3	)		(4.3	)		(5.9	)		(6.2	)
Income/(loss) before provision/(benefit) for income taxes and equity investment loss		32.2			20.7			31.8			24.6
Provision/(benefit) for income taxes		12.0			7.5			7.1			7.2
Equity investment loss		(0.4	)		(0.4	)		(0.9	)		(0.8	)
Net income	$	19.8		$	12.8		$	23.8		$	16.6
Net income per share:
Basic	$	0.59		$	0.37		$	0.72		$	0.48
Diluted	$	0.58		$	0.36		$	0.70		$	0.47
Shares used in computing net income per share:
Basic		33.5			34.5			33.2			34.8
Diluted		34.4			35.1			34.1			35.6

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

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(unaudited)

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2018		2019		2018
Net income	$	19.8	$	12.8	$	23.8	$	16.6
Other comprehensive income:
Change in unrealized net gain on investment		—		—		—		(1.5	)
Comprehensive income	$	19.8	$	12.8	$	23.8	$	15.1

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

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

					Additional									Total
	Common Stock				Paid-in			Treasury			Retained			Stockholders'
	Shares		Amount		Capital			Stock			Earnings			Equity
Balance at June 30, 2019, as reported		64,283,948	$	0.1	$	1,266.1		$	(1,192.4	)	$	583.5		$	657.3
Cumulative effect of changes in accounting principles		—		—		—			—			(0.9	)	$	(0.9	)
Balance at June 30, 2019, as adjusted		64,283,948		0.1		1,266.1			(1,192.4	)		582.6			656.4
Net income		—		—		—			—			4.0			4.0
Issuance of common stock for share- based award compensation plans		209,110		—		1.7			—			—			1.7
Payroll taxes for deferred stock units		—		—		(1.5	)		—			—			(1.5	)
Purchases of treasury stock		—		—		—			(17.0	)		—			(17.0	)
Share-based compensation		—		—		11.2			—			—			11.2
Balance at September 30, 2019		64,493,058		0.1		1,277.5			(1,209.4	)		586.6			654.8
Net income		—		—		—			—			19.8			19.8
Issuance of common stock for share- based award compensation plans		895,755		—		11.8			—			—			11.8
Payroll taxes for deferred stock units		—		—		(7.2	)		—			—			(7.2	)
Share-based compensation		—		—		12.1			—			—			12.1
Balance at December 31, 2019		65,388,813	$	0.1	$	1,294.2		$	(1,209.4	)	$	606.4		$	691.3

											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

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

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	Six Months Ended
	December 31,
	2019			2018
Cash flows from operating activities
Net income	$	23.8		$	16.6
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation costs		23.3			32.9
Depreciation and amortization		15.3			19.2
Acquired intangibles amortization		29.3			38.0
Deferred taxes		—			(4.5	)
Amortization of convertible debt discount and issuance costs		9.1			8.7
Amortization of debt issuance costs		0.2			0.3
Impairment recovery on investments		—			(2.8	)
Acquired in-process research and development		3.7			—
Arbitration settlement		—			(1.9	)
Equity investment loss		0.9			0.8
Foreign currency remeasurement loss		(0.3	)		0.2
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		(16.4	)		(31.7	)
Inventories		55.6			(14.5	)
Prepaid expenses and other current assets		(2.5	)		(17.0	)
Other assets		0.8			2.6