Press release·03/02/2025 19:54:08

Financial Performance Overview

Synaptics, a leading developer of human interface solutions, has reported its financial results for the six months ended December 2024. The company saw solid growth in revenue across most of its product applications, with particular strength in its Core IoT and Enterprise/Automotive segments.

Net revenue for the six-month period was $524.9 million, up 10.6% from the same period a year earlier. Enterprise and Automotive product applications made up 58.4% of total revenue at $306.7 million, an increase of 5.3% year-over-year. Core IoT product applications grew 58.8% to $120.7 million, while Mobile product applications declined 9.1% to $97.5 million.

The increase in revenue was driven by higher unit volumes, particularly in the Core IoT and Enterprise/Automotive segments, as well as some increases in average selling prices. However, revenue from the licensing of Synaptics’ intellectual property declined by $25.5 million compared to the prior year period.

Gross margin for the six months improved to 46.3% of net revenue, up from 45.5% a year earlier. This was primarily due to favorable changes in product mix and lower costs related to excess and obsolete inventory reserves and share-based compensation. The decrease in IP licensing revenue had a negative impact on gross margin, but this was offset by other factors.

Operating Expenses and Profitability

Operating expenses increased during the period, with research and development (R&D) costs declining 2.3% to $164.6 million, while selling, general and administrative (SG&A) expenses rose 21.3% to $99.5 million. The decrease in R&D was driven by lower headcount and project costs, partially offset by higher variable compensation. The SG&A increase was due to higher stock-based compensation, variable pay, professional fees, and foreign exchange impacts.

Synaptics reported an operating loss of $43.6 million for the six months, an improvement from the $53.1 million loss in the prior year period. This was primarily due to the increase in gross profit, which was partially offset by the rise in operating expenses.

The company recorded a $6.5 million loss on the early extinguishment of debt related to the repayment of its Term Loan Facility. However, this was more than offset by a $39.0 million tax benefit recognized in the period, resulting in a net loss of $21.3 million compared to a $64.6 million net loss a year earlier.

Liquidity and Capital Resources

Synaptics ended the period with $596.1 million in cash and cash equivalents, down from $876.9 million at the end of fiscal 2024. This decrease was primarily due to $278.2 million in net cash used for financing activities, including the full repayment of the Term Loan Facility, share repurchases, and payments related to capped call transactions.

Cash provided by operating activities was $11.4 million, down from $84.6 million in the prior year period. This was due to changes in working capital, including a decrease in income taxes payable and an increase in accounts receivable.

Investing activities used $14.6 million in cash, primarily for purchases of property and equipment. This was down significantly from the $139.8 million used in the prior year, which included a $130.0 million prepayment to Broadcom.

In November 2024, Synaptics issued $450.0 million of 0.75% Convertible Senior Notes due 2031, using the proceeds along with cash on hand to fully repay the outstanding Term Loan Facility. The company also has a $350.0 million revolving credit facility, of which no amount was drawn as of December 2024.

Strengths, Weaknesses, and Outlook

Synaptics’ key strengths include its diverse product portfolio spanning Enterprise/Automotive, Core IoT, and Mobile applications, as well as its strong market positions and ongoing investments in research and development. The company has demonstrated the ability to adapt its technology to meet the evolving needs of its OEM customers.

However, Synaptics faces some headwinds, including the decline in its Mobile product revenue, the negative impact of macroeconomic factors like inflation and supply chain challenges, and the potential disruption to its Israel-based operations due to the ongoing conflict in the region.

Looking ahead, Synaptics will need to continue executing on its growth strategy, particularly in the Core IoT and Enterprise/Automotive segments, to offset the softness in Mobile. The company’s strong liquidity position and recent debt refinancing provide financial flexibility to weather near-term uncertainties.

Overall, Synaptics remains a leading provider of human interface solutions, with a diversified product portfolio and a focus on innovation. While near-term challenges exist, the company appears well-positioned to navigate the current environment and capitalize on long-term opportunities in its key markets.