Q4 2020 Synaptics Inc Earnings Call
Good day and welcome to the Synaptics fourth quarter fiscal 2020 Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Jason Soc. Please go ahead Sir.
Good afternoon. Thank you for joining yesterday Snapfix fourth quarter fiscal 2020 conference call. My name is Jason sign on the head of Investor Relations, Let's see on today's call and Michael Holstered, Our president and CEO and being Butler. Our CFO. This call is also being broadcast live over the web access in the Investor Relations section of our.
Companies lopsided Synaptics dotcom.
In addition to a supplemental slide presentation. We have also posted a copy these prepared remarks on our Investor Relations website supplementary slides have also been furnished as an exhibit to our current report on form 8-K filed with the FCC earlier today and add additional color to our financial results. In addition to the company's GAAP results management will also provide supplement.
Our results on a non-GAAP basis, which excludes share based compensation acquisition related costs and certain other noncash or recurring or nonrecurring items. Please refer to the press release issued after the market. Both today for a detailed reconciliation to GAAP and non-GAAP results.
Additionally, we would like to remind you that during the course of this conference call Synaptics will make forward looking statements forward looking statements give our current expectations in productions relating to our financial condition results of operations plans objectives, future performance and business, including our expectations regarding the potential impacts on our business of the covert 19 impact.
Endemic although synaptics believes our estimates and assumptions to be reasonable they are subject to a number of risks and uncertainties beyond our control any proved to be inaccurate synaptics cautions that actual results may differ materially from any future performance adjusted in the company's forward looking statements.
For you that accompanies current in periodic reports filed with the FCC, including the Synaptics form 10-K for the fiscal year end of June 29, 2019 for important risk factors that could cause actual results to differ materially from those continue in any forward looking statements synaptics expressly disclaims any obligation to up.
At this forward looking information I'll now turn the call over to Mike Michael.
Thanks, Jason and I'd like to welcome everyone todays call.
I'm pleased to be speaking with all of you again today and reported a solid quarter. Despite the ongoing global uncertainty with coven 19.
Our business in the quarter performed as expected.
And our current continuing focus on managing things within our control panel has led to better gross margins and operating profitability.
Our team worked hard and executed well despite the ongoing macro challenges.
During the past quarter, we taped out for new chips for Aiotv secured meaningful new design wins with tier one customers across our different businesses, and we announced and close to highly accretive acquisitions.
Certainly was a busy quarter.
Dean will go over our financials in greater detail later, but let me first share with you some of our accomplishments over the past 12 months.
Core business, our business, excluding the broad calm and display linked transactions continues to deliver strong results and the improvements in changes that we put in place over the past year has really built a strong foundation for the company going forward.
Over the past four quarters gross margins are up almost 800 basis points.
While operating margins are up over 1300 basis points.
As a result, we achieved record high GAAP and non-GAAP earnings per share for fiscal 2020.
We are more focused than ever before.
Divesting in exiting lower margin more commoditized products, such as mobile LCD TDD.
And investing in more differentiated and a higher margin solutions like OLED touch and just so sees and video interface.
Through these more focused investments and initiatives, we are working more closely with our customers, providing more complete solutions and capabilities to further their product Roadmaps technology leadership and innovation.
Despite the ongoing challenges around the world we are positioned to see strong growth. This quarter as we continue to benefit from these fundamental improvements in our business.
As many of you saw in July we announced in closed on two highly accretive and synergistic acquisitions that we are uniquely positioned to benefit from.
First we acquired certain assets and manufacturing rights to Broadcoms wireless Io Te connectivity business.
Adding Wi Fi Bluetooth and GPS connectivity solutions to our portfolio.
This equips us with the best in class wireless connectivity solutions for the IR team market as well as additional roadmap products that will ensure technology leadership for years to comp.
Wireless connectivity is highly complementary to our existing portfolio.
In addition.
Many people it Synaptics myself included have intimate familiarity of the nuances of this businesses and as a result.
Can anticipate the inevitable speed bumps, while finding hidden opportunities.
Second.
We acquired display link the undisputed leader in technology, enabling universal docking stations.
This is a financially compelling acquisition with significantly higher gross and operating margins and we can extract additional synergies given our own position in the market.
I am extremely pleased with our team's hard work in closing both acquisitions in a short time and excited to share that we are already shipping in volume to customers in both cases.
We are building a professional capability to rapidly identify and integrate acquisitions and extract synergies and ultimately generate incremental shareholder value.
Now, let me talk to you about our core business.
As all of us spend more time at home, we're seeing a positive impact across multiple areas of our business.
Our customers are aligning their investment dollars to capitalize on this macro trend.
The expected near term benefits are easily seen in the strength of our PC and video interface businesses. We were also seeing unexpected benefits with customers looking to broaden their offerings with solutions like headsets speakers sound bars, and smart displays and enable consumers to make more of their.
Time at home, while still connecting with friends and family.
In I O T. We taped out four platforms, including two new edge SNC solutions.
This includes the asked for 70 for voice enabled devices like smart speakers and the vs 640 for markets, including set top boxes medias video streamers and cameras.
We are seeing strong interest for our latest edges to seize with service providers around the world looking to offer differentiated solutions that leverage the integration of voice video vision and AI capabilities that can uniquely define their products and services.
We have secured wins with two different major us based service providers, one for smart dips display and one for video set top box.
We also taped out two new video interface solutions.
We announced Cayenne just last month and is already led to a number of wins with PC Oems and retail brands like cable matters for their USBC see dongle and docking station products.
The second video interface tape out is an upgrade to our highly successful panamera product family that addresses commercial PC docking stations and increases our lead in this space.
In digital audio our wired headsets solutions have been strong as our solutions deliver premium voice and sound quality with active noise suppression.
In mobile our touch controllers for OLED smartphones continue to find success with the top handset makers in the world due to our superior performance and features.
As more smartphones adopt flexible on cell OLED panels, we are seeing stronger demand and the design pipeline for our touch controllers as increasing rapidly.
This quarter, we have added to our already extensive customer list with several new wins at oppo and vivo in their upcoming smartphones.
We expect to be able to talk about additional design wins at marquee customers by this time next quarter.
Separately sales of our LCD DDAC remained stable as our key customer recently launched their highly anticipated low end LCD smartphone last quarter.
Has enjoyed widespread customer adoption.
In PC, we continued to benefit from the increase in work from home and this business achieved record revenue and profitability in the June quarter.
Demand for both commercial and consumer laptops remains strong and we believe this strength will be sustain this quarter.
Overall, I'm very pleased with our execution over both the last three months and the entire fiscal year.
Our team has done an outstanding job staying focused and engage with our customers and we have a strong pipeline of new wins that will drive long term growth.
Our new acquisitions will create significant opportunities to increase content at our existing customers and expand the number of markets in which we play.
I am excited by both our backward looking results and our forward looking prospects.
Now, let me turn on the call over to Dean to review, our fourth quarter financials and provider outlook.
Great. Thanks, Michael and good afternoon, everyone.
First I'll start with a review of our financial results for our recently completed quarter.
Then provide our current outlook for our fiscal Q1.
Before I begin I'd like to remind everyone that on April 16 at the beginning of our fourth quarter, we completed the sale of our mobile LCD TDD business.
And our results exclude any contributions from that business as of that date.
In some cases, such as comparison to prior periods. This creates an apples to oranges compare.
Revenue for the fourth quarter fiscal 2020 of 278 million.
Was slightly above the midpoint of our guidance range.
Down 15% from the preceding quarter and down 6% from the same quarter last fiscal year.
This is primarily due to divestment of our TV AD business that closed early in the fourth quarter.
Adjusting for the TDV I'd divestment results in our fourth quarter were up 36% on a same quarter year over year comparison, and nearly flat on an adjusted quarter on quarter basis.
During the quarter, we had three customers above 10% of revenue at 21%, 13% and 10%.
For the June quarter, our GAAP gross margin was 43.9% at the high end of our range and includes 8.1 million of intangible asset amortization.
GAAP operating expenses in the June quarter, or 109.8 million, which include share based compensation of 16.2 million.
Intangibles amortization of 2.9 million.
Restructuring expenses of 6.8 million and retention program costs of 2.9 million.
GAAP other income for the quarter included a 105.1 million gain on the sale of our mobile LCD DIY product line.
We accrued a GAAP tax expense in the quarter of 21.3 million, bringing the fiscal 2020 GAAP tax rate to 24.2%.
GAAP net income for the quarter was 90 million.
Or net income of $2.55 per diluted share.
On a non-GAAP basis, our June quarter gross margin of 46.9% was at the high end of our guidance range as we continue to execute on our ongoing cost savings initiatives and improved product mix.
Merrily, reflecting the positive impact of our TDD divestiture.
In the June quarter, non-GAAP operating expenses were below our guidance range at 79.8 million.
Down $6.9 million from the preceding quarter.
Primarily reflecting the benefit of the divestment of TDD.
And savings from restructuring activities initiated in the first half of the fiscal year.
Our non-GAAP tax rate for the quarter and year to date period was 12%.
Non-GAAP net income for the June quarter was 43.8 million or $1.24 cents per diluted share.
A 230% increase year over year as we continue to focus on improved bottom line results.
Now turning to our balance sheet.
We ended the quarter with approximately $763 million of cash on hand.
An increase of 291 million from the prior quarter.
Primarily driven by the addition of 139 million from the sale of our mobile LCD TV AD product line.
100 million from the drawdown from our revolver facility.
And 53 million in cash flow from operations during the quarter.
Receivables at the end of the June quarter, what were 195 million and Dsos were 63 days.
Inventories were 102 million and inventory days were 62.
Capital expenditures for the quarter or 4.6 million and depreciation was 4.8 million.
Before I turn to our guidance, let me make note of to post quarter end transactions that will drive our ability to continue to improve profitability, while expanding our ability to more broadly serve our customers to drive long term growth.
We closed our acquisition of certain rights to Broadcoms wireless I O Te connectivity business on July 20 Threerd.
We also closed our acquisition of display link on July 31st.
Both of these transactions were closed with the available cash on our balance sheet and position us well to execute on our long term growth targets for higher growth and profitability.
Given the timing of these transactions will provide our outlook for both our newly consolidated business as well as our for our core business that excludes these two acquisitions for the September quarter.
Our core business continues to be strong as new designs ramp and sales for our existing products continues to be robust.
For future Joel quarters, we will only.
The providing the consolidated business results and outlook.
Before I provide our outlook. Let me first note there were unable to provide a reconciliation of these forward looking non-GAAP financial measures to their respective comparable GAAP financial measures.
Because without unreasonable efforts, we are unable to predict with reasonable certainty the amount or timing of certain adjustments that are used to reconcile these non-GAAP financial measures.
Our post acquisition consolidated business outlook for the September quarter revenue is expected to be in the range of 315 to 335 million.
We expect our two acquisitions to add about 30 million for roughly two months of revenue.
A little better than what we had forecasted when we announced the acquisitions last month.
For the quarter, we expect the consolidated revenue mix from mobile Aiotv, and PC products to be 42%, 32% and 26% respectively.
Non-GAAP gross margin is expected to be 47.5% to 49.5%, reflecting the strength in our existing business and the positive impact from the newly acquired businesses.
Including the additional operating expenses from the acquisitions and before any significant synergy capture our non-GAAP operating expenses are expected to be 87 million to 90 million.
We anticipate our non-GAAP tax rate post acquisition to remain in the range of 11% to 13%.
Non-GAAP net income per diluted share for the September quarter is anticipated to be in the range of $1.50 to $1.80 cents per share.
Now turning to our core business our backlog entering the September quarter is approximately 257 million.
We anticipate our core business revenue for the September quarter to be strong and be in the range of 285 million to 305 billion.
We continue to see near term strengthen our PC related business with greater than 25% year on year growth.
Our mobile business growing nearly 15% sequentially and our I O T sales beginning to stabilize.
Non-GAAP gross margins for our core business prior to the effects from from our acquisitions continues to perform extremely well and as expected the between 46% and 48% reflecting continued execution on our gross margin improvement initiatives.
We expect non-GAAP operating expenses for the core Synaptics in the September quarter.
To be in the range of 76 million to 79 million also reflecting an active focus on controllable operating expense reductions.
Core Synaptics non-GAAP net income per diluted share for the September quarter is anticipated to contribute in the range of $1.30 to $1.60 cents per share as our emphasis on building a more profitable business bears fruit.
In summary, the operational improvements and focus on execution resulted in a record year for earnings per share for fiscal year 2020.
Building upon this foundation will drive further profitability improvements across our core business as well as the newly combined business as we extract additional synergies throughout the fiscal year 2021 and beyond.
This wraps up our prepared remarks, so now I'd like to turn the call over to the operator to start the QNX session. Operator, if there if you would like to ask a question we signaled by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function has turned off to a larger signal to reach our equipment.
Again, Please press star one to ask a question, we'll pause momentarily to allow everyone an opportunity to signal for questions.
Well take our first question from Kevin Cassidy with Rosenblatt Securities.
Hi, congratulations on the great quarter.
Thanks for taking my question.
I wonder if you've been able to look up your acquisitions and.
Have a seasonality for them.
September quarter, a strong seasonally or maybe if you could just help us out how to think about how that revenue comes in.
Yeah, Kevin So good question. So this is the first quarter. We've had these acquisitions, so we're sort of still getting our hands around seasonality.
Given that it's part of our I O T business and similar to many of our I O acute business that we have today, we we think that the seasonality is likely to be similar.
To our overall Aiotv business.
Okay, Great and on me two wins you had with service providers can you give us a little more details on what the.
Timing of that would be when would would be fee revenue for that.
Yes, Kevin those are going to be.
2021 calendar events, we may see some some early impact in the fourth quarter of our fiscal year. So the second calendar quarter, but I would say the majority of that revenue is going to hit in the second half of 2021.
Okay, great Congratulations again I'll get back in the Q.
Thanks, Kevin.
Thank you we'll take our next question from Christopher Rolland with Susquehanna.
Hi, guys. Thanks for the question I guess Michael.
Can you talk about the market out there for.
New technologies that you think you may want to add to your portfolio.
And also perhaps the speed at which you think you can start combining some of the assets you have.
In your new portfolio. Thanks.
Yeah, Chris May take they take the second one first yeah. We've certainly begun working on the integration strategy set of people were already.
And actually are at display link looking at how we can take and start to create things like wireless stocking solution. So that work is already begun.
And I think we it's relatively straight forward given.
Wireless asset and the drivers and things of that nature to get that combination underway. It's also relatively straightforward for us to combine the wireless products with our Ed just to see so that work has already begun and.
I'd say, we're going Gung Ho there.
In terms of what we do look at for acquisitions.
I don't think that Weve, obviously, just brought into and we're going to spend some time absorbing those were excited about both of those acquisitions as Dean said in his comments, we've been pleasantly surprised by the revenue that we've seen from both of them, it's a holding up a little bit more than we expected.
But I think it's dramatically what we said and what I believed to be true is we're going to be looking to add depth to the portfolio continuing to strengthen the businesses we have.
Rather than going wide and adding new businesses. So I think the initiative the Dean has basically.
Kicked off here is looking for things, they're going to strengthen the core and add some more differentiation to the to the to the products that we have.
Great and.
And then yeah, perhaps one for Dean.
So I think in your display link.
Powerpoint you said 95 million revenue I believe that was a 2019 number.
Correct me if that.
Assumption is wrong.
And then as we do this merger model here it doesn't necessarily seem like we saw this massive bump in work from home a trend that I thought we would have seen in this business.
And perhaps just my math is off but.
If you could talk.
About that that would be great. Thanks.
Yeah, Chris.
Your math is right on 95 million that was the 20 in calendar 2019 results from from display linked.
As far as work from home, it's actually we're seeing a little bit better strength and sort of that 95 run rate, but I think the bigger bump on work from home large that occurred before we close this acquisition.
Since the pandemic sort of first started I think the biggest way that sort of gone past.
I would think of this similar to sort of.
The PC demand, which actually was surged really strong over the last couple of quarters.
And sort of continues but at some point things you have to come back to normal and we sort of see the display link business sort of coming back to normal run rates here at some point, we're just not not sure when that tail off happens.
Yes, Chris I mean, I think it view I think what yeah, just to add some color I think what Dean said was that the two acquisitions, we're going to add 30 million in revenue.
Plus or minus over just two months. So if you kind of back that out it seems that the dead display linked is running consistent to the levels that we talked about or a little bit more.
Yeah, Yeah that is fair, thanks, guys and I'll forget back in Q.
Thanks, Chris.
Thank you we'll take our next question from Roger Gill with Needham and company.
Yes, Thank you and I Echo my congratulations.
If we look at the difference between the core business and the total business with the acquisitions.
It looks like there was about 20 cents of EPS accretion.
Just going from.
Through the September.
And so I know in the display link slide you talked about.
About a dollar of Vps post the synergies.
So just wondering how we think about the ongoing EPS accretion as we progress throughout the year. How do you how does how should we be thinking about that in terms of the cadence the timing.
Yes, so Roger.
The 20 cents is right on front on the contribution from this quarter for two months.
Right, which is ticket roughly 10 cents a month, if you sort of just run rate. It and then extrapolate that out to a year in order to get to that what we showed in the display link acquisition slide deck, which was sort of around the dollar an EPS accretion that does assume that the full synergy get.
Captured so that's at the full annualized run rate.
We've sort of just close this transaction, we haven't actually captured entry synergies yet I mean, we we literally just just closed this thing.
We did say in that announcement that it will take approximately 12 months to get all the way to that full run rate.
The planning is happening the teams are sort of work going virtually together to make sure that.
All of those synergies happen, but from a feel if you just think about how to model. This I would just.
Likely think about layering in and sort of over the course of the four quarters.
Okay, Great and Michael in your prepared remarks, you talked about.
Now to some additional marquee customers and OLED touch.
Just wanted to get that kind of an updated in terms of what you are kind of competitive positioning is.
Right now and OLED touch as you.
Progressed throughout the year and how do we think about that that positioning as we go into the.
Into the fall and moving into calendar 21.
Yeah, we continue to feel pretty good about it I think.
You know we.
Effectively run the table on the high and handsets in China.
We feel good that we can add you know as I said, a couple of additional marquee customers to to our our wall.
That we should be able to discuss.
The next call.
And we think it's sustainable Weve.
Wins now that we're seeing our for models that would shift next year Rajiv so.
The wins were picking up now are for phones that even start production some of them in second calendar quarter.
Of 21 and.
And so we feel we continue to feel good about it shifts span a really pleasant surprise and one that we continue to see on a go forward basis.
Great. Thank you.
Thank you Bill Thanks, Roger Moore, we'll take our next question from Charlie Anderson with Colliers Securities.
Yes, thanks for taking my questions and my congrats as well in all but a great progress here I wonder on the mobile business two large components in there you've got display chips and you've got kind of ships I.
I Wonder if you could maybe speak to how that mix is shifting over time and wondered maybe you could talk about which one is larger in the in the current quarter and then on a go forward how sort of that trend Hello.
Yeah, I mean, Charlie Fair question I don't I don't think we break it out but directionally I say the following I think that the display driver continues to hold off you know as as phones transition.
Oh away from LCD and toward OLED.
We'll we'll see erosion in that that number but thats actually held up for awhile and held up better than expected I think it's going to continue to hold up because you see.
Refreshes, particularly from our largest customer on the LCD panels. So.
I don't think that that is going away anytime soon.
That.
[laughter] kind of downward glide path, though has been offset by our touch wins in our touch wins continue to gain momentum.
Weve as as I said in the previous question, we've done very well in China.
We expect to pick up a couple of of key wins here going forward. It other large handset makers.
And so our touch momentum is actually strong mainstream looks like it's going to maintain strength.
And you know it to the extent that we can pick up customers I think we'll continue to do well.
Okay, Great and then for my follow up on the Io tea business I think if I exclude out the revenue from acquisitions, but core aiotv, maybe down kind of mid teens year over year.
No. It was down in the June quarter. So I Wonder if you can just kind of speak to some of the cross currents there and maybe how you see the trajectory that business over time in terms of it the.
Recovery. Thanks.
Yeah, Charlie your math is right so sort of on a year over year.
Excluding the new acquisitions that core I O T is down about 15%.
Which but it's actually about 8% quarter on quarter. So as we talked about last quarter sort of this was the areas of our business that we feel coven 19 has had.
Some additional impact on.
Where we actually do see some headwinds there.
We're actually really positive see it does start to stabilize and and sort of move up quarter on quarter with plus 8%.
On this guide relative to last quarter's actual so we do think it is starting to stabilize but that is an area of the portfolio that it probably has had the most.
Headwinds against that over 90.
Yeah, I mean, just to add a little bit of color to what what Dean said, if you look at the kind of the core sub segments. We've had some that have done relatively well like our video interface is done really well, but I think we've talked about automotive is in there and automotive is obviously had some weakness the car buying cycles.
Can lay down our largest business in that grouping and the Aiotv grouping is the I just to see and I think he talked about on the last earnings call. A lot of that is through retail channels and we haven't seen with.
With all the stores closed here in the United States, we haven't seen the pick up.
Of our retail class products.
Now that's not to say as I said in my prepared remarks, we have really nice momentum in that business has been a focus area for us.
We feel like we're clicking off now significant customer wins, but those wins you know aren't going to ship until next year.
We are depending on the wins, we have now and that those wins that we have now are subject to exactly the same phenomenon the de talked about.
Perfect you got smaller color appreciate it.
Thank you we'll take our next question from here some better with our research.
Hi, guys. It looks like another strong quarter annual PC business Fool long queue 21.
How long do you expect these elevated revenues to loss before you settled back into that more of a normal run rate or has this normal run rate kind of pushed up a little bit.
Yeah, I mean, we've talked about I think a little bit on prior calls our visibility.
Through the end of the year looks good.
We continue to see momentum in that business, we've had a couple of record setting quarters for us in a row.
I think we'll we'll sometime it's going to us it's going to slow down it's going to return to our sort a normal levels.
But I think.
Certainly through the calendar Q4 of this year, we see continued strength and.
That's that's certainly right.
The way, we're thinking about the business again, you have any more thoughts on that yeah, I mean it seems.
All the indicators that we have both through customers backlog and sort of macro indicators does seem like the it has a little bit a leg, but I think Michaels comment as right is that at some point as to revert back to the mean end sort of that's that's our longer term assumption.
Great. Thanks, and then I think we had a little bit just now on automotive, but have you seen any push out in models featuring featuring the sort of fingerprint and TDD solutions and then is there a particular to geographic toe in the sort of near term pipeline.
I mean answer is nowhere so our RTD I products have really yet to launch the majority of our automotive business is still discreet touch.
And discrete display drivers, but we are expecting.
The TDD I products to launch.
Late calendar Q4 for the upcoming model year, the model year 21, and at least as far as we can tell at the moment theres been no push out in those design launches. So we expect automotive to be a good news story for us across fiscal our fiscal 2021.
On loaded to the back half.
And there's been no particular geographic killed I think they early adopters for our TDD I, our European European Oems, but generally speaking.
Good.
Time time, plus or minus.
We're running the table pretty effectively with that that area and.
Japan, you estimate automakers other Asian automakers, all should launch in the next 12 to 15 months.
Thanks, guys.
Thanks Harrison.
Thank you. Our next question comes from Christopher Rolland with Susquehanna.
Hey, guys. Thanks for the follow up.
Just two quick ones.
Perhaps Michael for you the win with the service providers.
Is that just for the C or is this also a Wi Fi win per you guys and then maybe you can clear up or whether there's any gray area using why Fi in a set top boxes have to the only O T. T. If it goes through a service provider.
Because that kind of violate the the broadcom agreement or not and then theme sorry for coming back to the but the hubs that I've seen out there from display link prices for lot of have doubled.
Also a lot of them are out of stock entirely and so I would imagine there's an inventory restocking process for those parts that.
They still need to be take place.
So why would we see that in the September quarter or even into December. Thanks.
Hey, Chris Let me, let me start with the first question both the wins are.
Certainly we're in flight before we had to the wireless assets and neither of them are including a wireless there just our edge so see.
To your second question, we're focused on these Oh chichi streamers that.
Have wireless content in is there we feel like we're where we don't feel like we know we can sell in.
For service provider, particularly head ends the gateways, where you've got internet content coming in the first entry point to the home. That's typically more of an access point there we cannot so we can't sell into a product that would be the first entry a DSL.
Cable modem, that's the entry point to the home.
So hopefully that gives you the necessary cover color, we've got plenty of opportunity to put together our agencies and the wireless asset, but we certainly for the main kind of broad calm class products that are in.
The first entry point, we're precluded from from doing anything there.
And then Chris Let me just take your your other question around display Lincoln sort of it it's run rate and work from home and whether those supply availability out there.
So so one you know the projection that providing for the September quarter is based on the backlog as it transferred over to us.
So when when we actually look into the backlog.
Which is sort of just recently came over in the last week or so.
We actually see sort of this level run rate today.
I don't I can't speak to whether there's broad availability sorta shortage out there, where we're sort of not hearing that from from our customer base I don't know if there's other components within these steel applications that people are unable to get and supply that are sort of research.
Acting the display link chipsets.
Can't really speak to that but as of sort of new ownership on what we see today. This is sort of the run rate we see for the next deal via two months right. So it's sorta two months out of our quarter.
Thanks, Dan Thanks, guys.
Thank you and as a reminder store one to ask your question.
Well take our next question from Paul Chung with JP Morgan.
Hi, guys. Thanks for taking my questions and congrats on the acquisitions. So just on the on Opex as we kind of move past porn Q.
You know where do you see that kind of quarterly opex run rate trending as we kind of move throughout the year and then.
10 million in in incremental F. One to Opex is that just two months worth.
And you know how should we modeled out kind of your new amortization and stock comp. If you have any guidance there and then or we are we kind of done with restructuring expenses for now.
Yeah, so that but.
Let me just trying to summarize it here for you Paul for a second so.
First on the Opex and sort of the run rate going forward.
So the $10 million incremental operating expenses roughly added four for two months of the acquisitions that that is only two months.
You will see a full three month.
All one quarter.
The next quarter and December quarter.
However, we also have operating expenses initiatives that had been ongoing at the base Synaptics.
So overall, we actually feel that.
The guy that we've given for the September quarter is sort of the baseline.
We will sort of be increasing although you have.
Three months' instead of two months in the December quarter.
The other way and I think one of the prior callers asked about how to think about the synergies synergies on what we've committed on the display link acquisition is 15 million on an annualized run rate.
That I would expect to sort of layer and.
Quarterly so you can sort of do do the math on how to sort of quarterly layer that in.
As far as.
Other adjustments.
One of the we're actually not sort of.
Updating specific guidance around stock comp or specific guidance around depreciation et cetera.
We have a number of sort of purchase price accounting sort of considerations to go through having just close these that.
We've actually wouldn't be comfortable sort of giving specific guidance at this point Paul.
Thanks, that's very helpful.
In you know very nice free cash flow to kind of end the year.
I guess as we think about next year, there probably a lot to.
Moving pieces as you are mentioning but you know how should we think about kind of overall free cash flow for fiscal year 21 looks like you had.
Nice benefit from working cap and other operating cash flow. This year does that kind of reverse.
In fiscal year, 21, and then where do you kind of see capex levels as you integrate more.
For the businesses.
Yes, so the free cash flow for the newly combined business should be deal as good or sort of better I mean, you have to think about the two acquisitions here are similar to Synaptics, where it's relatively capex light. So I don't see a significant capex needs.
To add here.
In terms of just how to think about free cash flow. This is actually one of the things that Michael and I have been working toward over the last 12 months and I think you see a pretty significant increase in free cash flow over the last 12 months.
We're going to be applying that same formula sort of going forward.
Specifically when you look at these two businesses that come in they only add to incremental accretion rather than dilution. So that's how it was sort of thinking about a pop.
Thanks, guys.
Thanks, Paul.
Thank you. This concludes today's question and answer session I would now like to turn the call over to Michael Hoffman.
I'd like to thank all of you for joining US today, we look forward to speaking you at our upcoming investor conferences during the quarter. Thanks a lot.
Thank you ladies and gentlemen, this concludes todays teleconference. You may now disconnect.