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 26, 2020

☐ 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.

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  ☒

Number of shares of Common Stock outstanding at January 29, 2021: 34,952,361

SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 26, 2020

TABLE OF CONTENTS

			Page
Part I. Financial Information
	Item 1.	Condensed Consolidated Financial Statements (Unaudited):	3
		Condensed Consolidated Balance Sheets—December 26, 2020 and June 27, 2020	3
		Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended December 26, 2020 and December 28, 2019	4
		Condensed Consolidated Statements of Stockholders’ Equity	5
		Condensed Consolidated Statements of Cash Flows—Three and Six Months Ended December 26, 2020 and December 28, 2019	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 4.	Controls and Procedures	37
Part II. Other Information
	Item 1.	Legal Proceedings	38
	Item 1A.	Risk Factors	38
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
	Item 6.	Exhibits	39
Signatures			40

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			June
	2020			2020
ASSETS
Current Assets:
Cash and cash equivalents	$	309.9		$	763.4
Short-term investments		7.0			—
Accounts receivable, net of allowances of $5.8 at December 2020 and June 2020		249.3			195.3
Inventories		73.1			102.0
Prepaid expenses and other current assets		32.3			16.9
Total current assets		671.6			1,077.6
Property and equipment at cost, net of accumulated depreciation of $129.0 and $131.2 at    December 2020 and June 2020, respectively		93.6			84.3
Goodwill		568.6			360.8
Acquired intangibles, net		354.6			93.4
Non-current other assets		103.8			77.7
	$	1,792.2		$	1,693.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	74.4		$	60.6
Accrued compensation		37.5			59.5
Income taxes payable		16.2			33.0
Other accrued liabilities		97.4			91.0
Total current liabilities		225.5			244.1
Long-term debt		100.0			100.0
Convertible notes, net		496.1			486.6
Other long-term liabilities		82.6			44.0
Total liabilities		904.2			874.7
Stockholders' Equity:
Common stock:
$0.001 par value; 120,000,000 shares authorized, 66,677,341 and 65,871,648 shares    issued, and  34,928,146 and 34,122,453 shares outstanding, at December 2020    and June 2020, respectively		0.1			0.1
Additional paid-in capital		1,362.3			1,340.2
Treasury stock:  31,749,195 common treasury shares at December    2020 and June 2020, at cost		(1,222.6	)		(1,222.6	)
Retained earnings		748.2			701.4
Total stockholders' equity		888.0			819.1
	$	1,792.2		$	1,693.8

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

3

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	December						December
	2020			2019			2020			2019
Net revenue	$	357.6		$	388.3		$	686.0		$	728.2
Cost of revenue		207.2			229.0			401.1			442.7
Gross margin		150.4			159.3			284.9			285.5
Operating expenses:
Research and development		77.3			77.0			158.2			163.0
Selling, general, and administrative		39.5			31.5			74.8			59.0
Acquired intangibles amortization		8.7			3.0			15.4			5.9
Restructuring costs		0.6			13.3			6.2			19.9
Gain on sale of audio technology assets		(34.2	)		—			(34.2	)		—
Total operating expenses		91.9			124.8			220.4			247.8
Operating income		58.5			34.5			64.5			37.7
Interest and other expense, net		(6.0	)		(2.3	)		(10.7	)		(5.9	)
Income before provision for income taxes    and equity investment loss		52.5			32.2			53.8			31.8
Provision for income taxes		2.4			12.0			6.0			7.1
Equity investment loss		(0.5	)		(0.4	)		(1.0	)		(0.9	)
Net income and Comprehensive income	$	49.6		$	19.8		$	46.8		$	23.8
Net income per share:
Basic	$	1.43		$	0.59		$	1.36		$	0.72
Diluted	$	1.36		$	0.58		$	1.29		$	0.70
Shares used in computing net income per share:
Basic		34.8			33.5			34.5			33.2
Diluted		36.5			34.4			36.4			34.1

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

4

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

	Common Stock				Paid-in			Treasury			Retained			Stockholders'
	Shares		Amount		Capital			Stock			Earnings			Equity
Balance at June 2020		65,871,648	$	0.1	$	1,340.2		$	(1,222.6	)	$	701.4		$	819.1
Net loss		—		—		—			—			(2.8	)		(2.8	)
Issuance of common stock for share-    based award compensation plans		296,917		—		10.4			—			—			10.4
Payroll taxes for deferred stock units		—		—		(5.6	)		—			—			(5.6	)
Share-based compensation attributable to acquisition		—		—		3.2			—			—			3.2
Share-based compensation		—		—		14.4			—			—			14.4
Balance at September 2020		66,168,565		0.1		1,362.6			(1,222.6	)		698.6			838.7
Net income		—		—		—			—			49.6			49.6
Issuance of common stock for share-    based award compensation plans		508,776		—		0.8			—			—			0.8
Payroll taxes for deferred stock units		—		—		(20.2	)		—			—			(20.2	)
Share-based compensation		—		—		19.1			—			—			19.1
Balance at December 2020		66,677,341	$	0.1	$	1,362.3		$	(1,222.6	)	$	748.2		$	888.0

	Common Stock				Paid-in			Treasury			Retained			Stockholders'
	Shares		Amount		Capital			Stock			Earnings			Equity
Balance at June 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 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 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 2019		65,388,813	$	0.1	$	1,294.2		$	(1,209.4	)	$	606.4		$	691.3

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

5

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	Six Months Ended
	December
	2020			2019
Cash flows from operating activities
Net income	$	46.8		$	23.8
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation costs		33.5			23.3
Depreciation and amortization		10.2			15.3
Acquired intangibles amortization		57.0			29.3
Gain on sale of audio technology assets		(34.2	)		—
Deferred taxes		(5.8	)		—
Amortization of convertible debt discount and issuance costs		9.5			9.1
Amortization of debt issuance costs		0.4			0.2
Amortization of cost of development services		4.2			—
Acquired in-process research and development		—			3.7
Equity investment loss		1.0			0.9
Foreign currency remeasurement loss		(0.6	)		(0.3	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		(46.9	)		(16.4	)
Inventories		62.0			55.6
Prepaid expenses and other current assets		(8.6	)		(2.5	)
Other assets		(7.9	)		0.8
Accounts payable		9.1			(7.4	)
Accrued compensation		(24.6	)		15.1
Income taxes payable		(15.3	)		(0.5	)
Other accrued liabilities		(11.9	)		(30.0	)
Net cash provided by operating activities		77.9			120.0
Cash flows from investing activities
Acquisition of businesses, net of cash and cash equivalents acquired		(623.0	)		—
Proceeds from sale of audio technology assets		34.2			—
Purchase of in-process research and development		—			(2.5	)
Proceeds from maturities of investments		88.0			—
Purchases of property and equipment		(12.2	)		(8.2	)
Cost method investment		(5.0	)		—
Net cash used in investing activities		(518.0	)		(10.7	)
Cash flows from financing activities
Purchases of treasury stock		—			(17.0	)
Proceeds from issuance of shares		11.2