Q1 2024 Synaptics Incorporated Earnings Call
Good day, and thank you for standing by and welcome to the Synaptics incorporated first quarter of 'twenty 'twenty four financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
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I'd like to hand, the conference over to your first speaker today and Joshua <unk>. Please go ahead.
Good afternoon, and thank you for joining us today.
First quarter fiscal 2024 conference call.
My name is Magellan and I'm head of Investor Relations.
On today's call for Michael Hogan, President and CEO and Dean Butler, our CFO.
This call is being broadcast live.
Can be accessed from the Investor Relations section of the company.
These upsides Synaptics dot com.
In addition to a supplemental slide presentation.
Posted a copy of these prepared remarks on our Investor Relations website.
In addition to the company's GAAP results management will provide supplementary results on a non-GAAP basis, which excludes share based compensation acquisition.
And certain other noncash or recurring or nonrecurring items.
Please refer to the press release issued after market close today for a detailed reconciliation of GAAP and non-GAAP results, which can be accessed from the Investor Relations section of the company's website at Synaptics dotcom.
Additionally, we would like to remind you that during the course of this conference call.
Next we will make forward looking statements.
Forward looking statements give our current expectations and projections relating to our financial condition results of operations plans objectives future performance and business.
Although synaptics believes our estimates and assumptions to be reasonable.
A number of risks and uncertainties beyond our control.
Can we get an accurate.
<unk> cautions that actual results may differ materially from any future performance suggested in the company's forward looking statements.
Before you to the company's current and periodic reports filed with the SEC, including our most recent annual reports on Form 10-K, and quarterly report on Form 10-Q for important risk factors that could cause actual results to differ.
From those content in any forward looking statement.
Synaptics expressly disclaims any obligation to update these forward looking information.
I would now turn the call over to Michael.
Thank you good job.
I would like to welcome everyone today's call.
I'd like to start by thanking our team in Israel for their continued effort during this difficult period in their country.
Our team continues to work tirelessly in the face of worry for their families and colleagues.
Last few years, we've been fortunate enough to establish a meaningful presence in Israel.
Our thoughts are with our team there.
With that said the main theme of today's discussion is that our business is winding up essentially as we've outlined over the past several months in.
In the quarter, we saw overall inventories come down in the channel as expected reductions are not uniform and we still have some work to do particularly in enterprise.
Margins continue to be below our target model due to product mix, but a return to normal enterprise numbers should lead us back toward our long term target.
In short we continue to believe we are at right now.
Now past the bottom in our business and should start to climb out during calendar 2024, with both top line and mix improvements.
Visibility in the slope of the recovery is uncertain customers have started to place orders again engagements are increasing and our pipeline is showing strength.
Moving to the September quarter revenue increased 5%.
Compared to the three months prior and was slightly above the midpoint of our guidance range with our enterprise PC products performing better than expected.
Our product mix imbalance, resulting in a drag on growth gross margins, putting us at the low end of the guide.
We maintained our spending discipline and ultimately delivered non-GAAP EPS above the midpoint of guidance.
As discussed at our Investor Day in September we are redefining our product breakouts as core Iot.
Enterprise and automotive and mobile.
Beginning with our core Iot products, we continue to make progress with multiple design wins and new product introductions.
In wireless we introduced a new cost effective single stream device.
S Y N 43711.
This product adds to our current high performance portfolio and is the first wireless device done from the ground up by the Synaptics team.
I'm very proud to report that the device was a first past success and was delivered on schedule.
The other three devices, we introduced this year, yes, why and four to $3 $75 six E. A dual radio to buy to Wi Fi six <unk> product <unk>.
And for 3811 by one triple combo and.
And the S way and $43 two a two by two triple combo are all beginning to ramp and customers.
In addition, the development of our first dedicated broad market chip is progressing as planned and we expect to tape out the device next year.
In the quarter, we saw the first orders from a new module partner, marking our initial channel expansion with the goal of extending our reach into the broader customer base.
Finally, we won multiple designs and the high performance Iot market sports cameras drones and sound bars, and we are engaged in new opportunities in trucking and logistics Tvs and industrial automation applications.
All of these designs require the highest performance Wi Fi flaws less interoperability and unmatched Bluetooth coexistence.
And our processor roadmap, we recently introduced a quad core Linux based power efficient and cost us drive system on a chip.
The D V F 120.
Like other <unk> in the process of portfolio. This device can be used to execute a variety of artificial intelligence applications.
The D V. F 120 can run machine learning models on ship utilizing our standard toolkit and framework for rapid development and deployment.
Early traction includes intelligent video and adaptive noise cancellation for the unified communications and collaboration market.
The device also operates from our unified software development kit that supports existing synaptics sse's, demonstrating our extensible software platform.
As with our wireless products, we had several wins in the quarter some of our traditional operator customer base and others for more general purpose applications.
For example, our customer Swisscom launched their next generation streaming device TV box five that is 35% more energy efficient and half the size of its predecessor, helping them achieve strict European ESG goals.
Soon we expect to announce our new family of general purpose Sfc's targeting a wide variety of Iot applications that will enable synaptics to expand our addressable market.
Our enterprise.
Rising automotive products had two diametrically opposed stories during the quarter with our PC and automotive products performing better than expected that continued softness in video interface and enterprise headsets.
Our automotive products remained steady with new TDI based wins at Toyota Tata Motors, Volkswagen and Mercedes.
The move to larger screen sizes is accelerating but the corresponding ASP benefit is offset by continued competitive price pressure.
Another favorable trend in automotive is.
He is increased adoption of our local dimming, which brings LCD screens, which have already have price and longevity advantages to the performance level of pilot high end OLED, giving us added confidence in our smart fridge rollout.
PC is a second bright spot with solid sequential growth in fiscal Q1 customer.
Inventories appear to be back to normal levels and demand is improving.
Our touchpad and fingerprint solutions continue to perform well with design wins across major Oems and smaller customers.
In addition, we are seeing solid traction in several focus areas within enterprise that we believe are long term growth drivers.
Our human presence detection solution for laptops performed better than initially forecast as early attach rates were higher than projected.
We had our first wireless headset launch with one of our leading customers logitech, introducing a product that utilizes our AI based voice processing for near field and far field noise suppression as well as premium hybrid ANC algorithms.
Our low power enterprise class audio SSC enables up to 40 hours of battery life.
However, the remainder of enterprises week as inventory levels persist at relatively high levels. In addition, new product ramps are slower than normal with engineering cutbacks that our customers affecting the timeline of initial introductions.
In spite of this customer interest design wins and momentum remained strong for our products and it is only a matter of time before we see a return to normal run rate.
In mobile we believe the majority of hand droid handset makers are shifting more of their models to flexible OLED, which plays to our strength.
Our Chinese customers are doing better against foreign com <unk> in the domestic market.
Outside China, we continue to build momentum at Samsung following a successful launch of the Z flip five phone and we expect to follow on <unk> follow on wins in the near future.
To conclude our business is stabilizing at current levels. We continue to expect a recovery starting in calendar 2024, so visibility to the strength and the slope of this recovery is still limited.
We are confident enterprise inventories will return to normal levels over the next few quarters, improving our overall mix and margins.
We are focused on executing our core Iot opportunities and are already seeing traction with our initiatives to expand our addressable market.
Now, let me turn the call over to Dean for a review of our first quarter financial results and second quarter outlook.
Thanks, Michael and good afternoon to everyone.
Before I get started I want to remind investors that we have reclassified our revenue into new categories core Iot enterprise and automotive and mobile beginning this fiscal year.
We believe this provides investors with better measurement of our focus areas and creates an easier and more direct comparison with similar peers.
We have provided this reclassification on a historical basis and the supplemental slide presentation posted on our Investor Relations website.
Now, let me dive into the review of our financial results for the recently completed quarter, followed by our current outlook.
Revenue for the September quarter was $237 7 million, which was above the midpoint of our prior guidance.
Revenue from core Iot enterprise, and mobile were 16%, 65% and 19% respectively.
While we did not guide to these categories. During our August call Q1 results were in line with our expectations of former Iot and former mobile products.
While our former PC products outperformed our forecast during the quarter.
Year over year consolidated September quarter revenue was down 47%, but more importantly grew sequentially by 5% as we moved off from what we believe to be the bottom of sales.
On a consolidated basis channel inventory depleted nicely in the quarter.
And our distributors point of sale indicated an increase relative to prior quarter.
Core Iot revenue increased by 15% sequentially.
It's down 66% year over year.
This area has experienced the most acute channel inventory accumulation, which we believe is now near its bottom and should see its final depletion over the coming quarters.
And enterprise and automotive our September quarter revenue was up 9% sequentially, but down 47% year over year.
Sequential growth was driven almost entirely by recovery and PC product shipments.
We are optimistic that this may be a directional indicator of overall corporate it spending as we look forward into calendar year 2024.
Automotive product shipments slowed modestly during the quarter, but were largely in line with our expectations.
We're continuing to work down inventory across the balance of the enterprise portfolio, which will likely take place over the next few quarters.
Mobile product revenue was down 15% sequentially in the September quarter, and down 10% year over year.
We are seeing modest improvements in Android shipments and are gaining share at Samsung.
While recovery in mobile is encouraging as more customers adopt higher and flexible OLED displays we continue to believe the mobile end market will ultimately remain volatile.
During the quarter, we had two customers greater than 10% of revenue at approximately 18% and 11% respectively.
For the September quarter, our GAAP gross margin was 45, 1%, which includes $17 8 million of intangible asset amortization and $1 1 million of share based compensation costs.
Temporary non-GAAP gross margin of 53% was below our midpoint.
But within our guidance range as product mix skewed us a bit lower.
GAAP operating expenses in the September quarter were $142 3 million, which includes share based compensation costs of $32 1 million and intangible asset amortization of $5 5 million.
September quarter non-GAAP operating expenses.
Of $96 seven was down from the preceding quarter and below our guidance range as we continue to maintain visual expense control.
The GAAP tax rate was negative, resulting in a tax expense of $15 million for the quarter.
And the non-GAAP tax rate was 17%.
September quarter, GAAP net loss was $55 6 million or a GAAP net loss of $1 43 per share.
non-GAAP net income in the September quarter was $23 million, an increase of 4% from the prior quarter and an 85% decrease from the same quarter one year ago.
non-GAAP earnings per diluted share of 52.
It was near the high end of our guidance range.
Now turning to the balance sheet.
We ended the quarter with $824 million of cash cash equivalents and short term investments on hand.
Down from the preceding quarter as we completed the wireless licensing transaction early fiscal Q1.
Cash flow from operations was $45 million.
Capital expenditures were $6 7 million and depreciation for the quarter was $7 2 million.
Receivables at the end of September were $111 million and days of sales outstanding were 42 days.
A decrease of 23 days from last quarter.
This decline is primarily due to collection from short payment term customers and some front end loaded linearity of our sales during the quarter.
Our ending inventory balance was $132 million down $5 million as we cautiously reduced our inventory purchases.
Our calculated days of inventory on our balance sheet also declined at 105 compared to 122 at the end of prior quarter.
Now, let me turn to our December quarter outlook.
September saw good progress in reducing our inventory among our distributors with inventories depleting in line with our expectations.
Point of sale at our distributors continue to hold up and in fact increased versus the June quarter.
As we look ahead, we continue to focus on reducing customer and distributor inventories further until fall equilibrium is met.
Demand showed signs of continued stabilization at the current levels with almost all our product shipping below historical 2019 levels.
We expect to recover from these levels in 2024, but the timing and shape of recovery is still uncertain.
We see improving strength in PC and mobile end markets, which creates a gross margin headwind from a product mix perspective.
Given these end market dynamics than expected channel inventory burn in the December quarter.
<unk> revenue to be in the range of $220 million to $250 million roughly flat with the prior quarter.
Core Iot is expected to be up slightly for the December quarter enterprise to be down on ongoing inventory correction and mobile to be up at certain models are expected to ramp.
We expect our revenue mix from core Iot enterprise and automotive and mobile products in the December quarter to be approximately 17%, 59% and 24% respectively.
We expect GAAP gross margin for the December quarter to be in the range of 42% to 45%.
We expect non-GAAP gross margin in the range of 51% to 54% roughly similar to the prior quarter as mix remains unfavorable with mobile ramps occurring faster than inventory depletion in the other areas.
We expect GAAP operating expenses in the December quarter to be in the range of $135 million to $140 million, which includes intangible amortization and share based compensation.
We expect non-GAAP operating expenses in the December quarter to.
To be in the range of $95 million to $99 million.
GAAP net loss per basic share for our December quarter is expected to be in the range of $1 40 to $1 80.
And non-GAAP net income per diluted share is anticipated to be in the range of 25 to.
<unk> 65 per share on an estimated $39 5 million fully diluted shares.
We expect non-GAAP net interest expense to be approximately $6 million in the December quarter with the corresponding GAAP net interest expense of approximately $7 million.
This wraps up our prepared remarks, I'd like to now turn the call over to the operator to start the Q&A session operator.
Thank you at this time, we will conduct a question answer session. As a reminder to ask a question you will need to press star one on your telephone and we seem to be announced to Joe. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Our first question comes from Christopher Rolland of.
A few comments. Please go ahead.
Thanks for the question guys.
I guess enterprise, we're waiting for this to come back.
Where are the pockets, where you see the most inventory.
And are there any products or areas that are.
Now kind of clear of that inventory overhang and orders are starting to come back reasonably well.
Yes, Chris. This is this is Michael thanks for the question.
I'd say two pockets of.
Of concern one is around our docking station business and that's obviously a great great margin driver for US we've seen some recovery in the display port side of the business. The display link if you remember that was one of our acquisitions. The one to many dock that one has has had quite a bit of.
Inventory and we're still working through that the other areas audio.
We did really bang up business and again, its a gross margin of pre.
Accretive product for us.
And that one has been been slow we've started to see a little bit dribs and drabs of orders, but I still think theres quite a bit of inventory in the channel.
Whats doing well, obviously PC now we're classifying in this area.
And we had a good quarter in PC, we do think Thats, a solid leading indicator for docking stations that it's just a matter of time for that inventory clears out and frankly it probably couple of then the these audio these wired audio headsets as well so.
On balance I would say relatively good news even in the enterprise sector.
Excellent maybe one for deemed too.
It sounds like mix is.
The big problem with gross margin here, but.
Are there any other issues to consider anything like pricing.
Et cetera, and then maybe you could give us a timeline on when we might be able to return to.
57% gross margin or your target gross margin again, it seems like it might be pushed out a bit yes.
<unk> this is mix driven Chris.
As we talked about at Investor day, and even on prior earnings calls.
Enterprise This is bill.
In a little softer is actually is going to prevent us from having margins.
Immediately I.
I mean, theres, some mild pricing pressure, but it's not materially factoring into our guide any pricing pressure really is about maybe new products that might ramp in a year or two from now.
So that's not as much of a sort of near term concern, it's really all around mix.
And how do we get back to our target mix in our target margin model.
Really what we need is for <unk>.
All of the areas to kind of move back into its normal mix.
We think that that core Iot business has hit bottom and thats starting to move up enterprise, probably is just a little bit behind that while at the same time actually mobile is actually starting to move faster and actually it looks like it's.
Up in December quarter, So that's a headwind for us.
Great. Thanks, guys and nice to hear the bottom might be yes. Thanks, Chris.
Thank you one moment, Sir next question.
The next question comes from Kevin Cassidy Rosneft on Securities. Please go ahead.
Yes, Thanks for taking my question and congratulations on a great quarter and in this atmosphere.
Yes.
Interesting new.
Wireless connectivity products Youre introducing.
Can you give us an idea of what the ASP lift will be for those products versus the past generation.
Yes, good question.
And thank you for the for the nice words.
It does feel like to your point, we're now really coming off the bottom I would say, we sort of called the bottom relatively early in the cycle and now it feels like we're certainly moving off of it.
Our wireless products everything that we're doing right now is in the high performance areas, we outlined in the Investor day. These.
These three categories for us the high performance the broad market and then the Bluetooth opportunity and so this one is in the broad Mark sorry on the high performance area to one by one product.
Typically.
A two by two product to give you an idea is in <unk>.
Sort of three and a half to $5 range a one by one product is in.
Sort of two to $3 range.
What what we get in benefit here and I think you and I had talked about this before is the idea of a lower die size. So.
Our our core Iot business is sort of from a gross margin perspective is sort of at the corporate model or maybe slightly below as we outlined in Investor day. This gives us an opportunity to improve and continue to see a build on gross margins by taking some of the cost out of this one by one device.
Great.
I imagine would be smaller die and higher performance.
Moving away from any competition head to head competition.
How does.
That's right I mean at high performance, particularly for the Iot market.
We really have.
I don't want to say that run in the market, but we're obviously on these security cameras video streamers drones things that are moving video across the wireless link we have an incredible competitive advantage just because of the quality of the.
The signal that we're able to generate.
We really like where we are from a competitive standpoint, and theres not many folks out there Kevin that can do this really can deliver that consistency.
Wireless performance over that long video long range. So we think we're really really well competitively positioned in this one by one just helps us on the cost front.
Okay, great. Thank you.
Thank you what limits our next question.
Your next question comes from Chris <unk> of Cowen. Please go ahead.
Yes, hi, Thanks for taking my question and congrats on the goodwill and the guidance to the environment.
The first question I was wondering either Michael or Dean now based on the bookings you've seen so far in the quarter can you give any color into March do you think it could be flattish or do you think there could be some seasonality impact on it and then I had a follow up.
Yeah, let me take that one Chris.
Just on what we see on bookings, we actually think we've hit bottom in fact, if anything it looks like things are looking more positive as we look forward, we're not guiding specifically into march or anything beyond the December quarter at this point, but it does look like based on bookings and.
What we can see into channel dynamics et cetera.
Looks like bottom is actually behind us and likely moves up.
The open question is trajectory right, we had less visibility on exactly what does that slope look like but it seems to be positive rather than negative.
Got it got it that's very helpful. And then a follow up question on inventory.
Is there any way to quantify how much excess inventory is that if you're a customer.
These are in terms of days or what it is today relative to maybe three months ago at the beginning of the year.
And along the same about dean.
You've done a great job reducing inventory days.
What are the target do you want to go back to like 70 days, which it was historically or do you have.
The updated target for inventory days. Thank you.
It's kind of an interesting question Krish as we start to see the bookings were a little wary.
What is positive momentum look like from here and how far down should we drive inventory tip.
Typically we would want to hold something like 75 days are in that range, but I think that contemplates a like a very consistent you can predict the mix youll super well kind of business.
So I think it probably your days continues to flow down a little bit, but we're going to be cautious on not trying to outsmart ourselves and cut inventory and get the mix wrong, and then not be able to respond to.
Any upside there or any sort of new bookings to start flowing in.
As far as sort of channel shipping so we basically what we've been trying to do Chris without <unk>.
Targeting a specific days our inventory level.
Trying to ship.
Less than shipping out.
And for the first time last quarter in September we saw ship out actually from the distributors, you'll start to move up relative to the June quarter.
One data point is not quite a trend so we're going to keep an eye on that.
So I think what youll, probably see from us over the next kind.
A couple of quarters. It just continue to sort of be cautious on what we're shipping in the channel until we have you.
Really a nice trend behind us that we get.
Kind of get back to normal as far as channel operations.
So hope that helps.
Yeah. Thanks, a lot Dean thanks, Michael Thank you.
Thank you one moment for our next question.
The next question comes from Quinn Bolton Needham. Please go ahead.
Hey, guys. This is Nick Doyle on for Glenn Congrats again also for the performance and what we're seeing is a week Iot environment.
Can you talk a little bit more about why you think the rising PC demand is a solid indicator of the enterprise recovery.
I'm just.
Is demand coming from the same enterprise customers that typically by your docking stations and audio products.
I guess I'm, just trying to make sure it's not more of a consumer driven recovery.
Yeah I mean.
You got the right you've got the right general direction for the answer we are that we're definitely biased toward corporate spending and corporate buying.
So.
In areas that.
Our enterprise products ship into.
The audio headsets the docking stations they will typically.
Follow and be relatively well correlated to PC because our PC.
Is really enterprise focus we have some mix of consumer and there and I agree with your thesis, where we're a little bit less.
Less certain about that particular segment of the market, but because we're so heavily indexed to corporate our PC business has done pretty well over the last couple of quarters, certainly coming off bottom and we'd expect it to start pulling through docking station and headsets.
Okay.
And we I think if you remember for those folks that followed us on previous earnings calls the docking station and headset businesses fell later than PC. So we saw a roll off later.
We would expect that now to recover a little bit later as well so it's not not totally inconsistent with prior remarks on the downside on the upside we expect to see the same thing and certainly enterprise doesn't move quite as fast as the consumer markets.
Thanks, and then.
Yes, we're talking a lot about inventory and gross margins on the call already but I guess I'll ask it a little bit of a different way is there a way to get back to 50, 658% without the enterprise recovery.
Yes.
Yes, maybe I'll take that and to have Dean add some color I think as I said that is a challenge I mean, where are our enterprise business is obviously, our best gross margin business.
I think if it doesn't recover it will be a bit more of a struggle and not that we can't get there I mean, we're making a lot of improvements as we just outlined a second ago in the core Iot area to help on the margin line with cost reductions and things like that but I do think that we are the gross margin.
<unk> back to 57, and what have you is very dependent on the enterprise business, Yes, Nick I would just reiterate what Michael said it does depend on enterprise getting all the way back to normal.
If enterprise, we're not you'd probably deal fall, just a little bit shy of that target.
But you would need enterprise to recover from this inventory and get back to its normal level to get up to target or any chances of moving back beyond that like <unk> like you said.
Thanks.
Thank you one moment for our next question.
Your next question comes from Gary Mobley of Wells Fargo. Please go ahead.
Hey, guys. Thanks for taking my question.
I hope your employees in Israel are safe and stay safe.
Knowing that you have such a large employee base I think primarily the DSP group acquisition I wanted to ask about.
How many have been called to military duty and given those circumstances, how you're managing those day to day operations and as well roadmaps that come out of that region.
Yes, Gary Thanks for the question, obviously appreciate the sentiment.
We've had slightly less than 10% of our employees called into service some of those that have been called ask.
Actually are able to multitask, a bit theyre doing backline jobs, meaning intelligence and some other sort of back of the frontline's type of activities, so they're able to perform.
As mostly as usual.
That being said, obviously, there's really some important projects that are going through our Israel team and we're trying to backfill those with engineers across the globe and I think right now as it stands we have a good plan for that and we can keep most of our key projects.
Very much on schedule.
I appreciate that Michael.
As my follow up I wanted to ask about.
Some of the inflationary pressures or lack of in your in your supply chain I. Appreciate the fact that mix is presenting a gross margin headwind, but presumably as well some higher cost inventory flowing through the P&L statement, but as you think about.
The pricing terms that youre getting.
From the current design wins there.
As theyre happening today.
Does that match up with the <unk>.
Trends in foundry quotes that Youre seeing from your foundry partners as well is that does that fit into your goal of 57% gross margin.
Yes, Gary I mean, we're.
Our cost I would say on balance are going down modestly. So in general we're seeing relatively good cooperation from our foundry partners.
Not significantly.
Significantly, but modestly we're seeing decreases in more certainly working as well with our own SaaS suppliers our operations team is.
Figuring out different strategies in the backend on packaging and test to take cost out of the business and they've actually done a pretty remarkable job.
There is no secret that foundry prices have been tough to move in our biggest cost is wafers.
But we have seen I'd say modest decreases in the supply chain.
The question that keeps coming up over and over again on the pricing pressure I mean, it's there it's there to to a certain extent, but that's why we've kind of come off the 61 62, 61% gross margin and move that target down to 57, I think that contemplates a modest level of pricing pressure that dean.
<unk> talked about and also what we're seeing in the supply chain, which again is some help but I wouldn't call. It.
We're not doing jumping jacks yet.
Got it thank you guys.
Thank you one moment our next question.
Your next question comes from Andrew <unk>.
BMO. Please go ahead.
Alright. Thank you. Thank you for taking my questions.
<unk>.
Mike.
We do try to match the new segments with what you had before.
And really just trying to understand.
How much of the underpriced business, what's the mix of the enterprise business Thats too.
It isn't that sort of hub kennon inventory not bottomed out yet so I'm, assuming the part of the consumer Pcs Where's that knows is that part of our.
Iot or where does that go.
Yes.
Let me just first make a statement, we're not intending to sort of slice and dice, our new buckets and quantify every piece that being said, our our former PC bucket that we had historically reported.
Is 100% in the enterprise and automotive bucket today.
Our historical PC business that Youll formally called out it was largely focused on enterprise laptops. I mean, we certainly had consumer exposure in there as well, but the majority of that.
Significantly more than 50%.
Is enterprise focus so for simplicity.
Thats fully captured in our enterprise bucket and just sort of give you like a first order PC you can take the historical PC number and just sort of compare it to our new enterprise and automotive bucket. So that PC makes up kind of.
First one third of the bucket and two thirds being the balance of the enterprise related devices.
<unk> the automotive related devices. So if that helps you map map a little bit on bridge.
Yes that does that does.
Okay got it got it so then be.
Back to the comments on stabilization from the peak to trough.
It is indeed, the trough seems like it is thank you.
Saw it earlier than everybody else. Thank you off by 50%.
Trying to understand what other.
Metrics that you look at.
And we've all been through.
So many cycles.
Nevertheless, if you have the two metrics that are the same in terms of the rate of cancellations.
Bookings.
What can you provide.
To kind of support that view that we indeed.
At the bottom here.
Let me just outline some of the things that we look at from a quantitative standpoint, certainly there is a lot of qualitative customer conversations design activity.
Expect it to go into ramp et cetera, but from a quantitative standpoint.
Generally we are looking at things like.
Booking rates have booking rates accelerated slowed you'll look at book to bill sort of ratios.
What we noticed is that actually bottomed a few quarters back.
We look at cancellation rates and pushout requests on already booked backlog.
What we've noticed over the last actually several quarters that has significantly slowed and fat.
It's very little now, it's actually almost back to sort of a normal rate. There's always some amount of noise in the system on people rescheduling their backlog et cetera, It's normal course of business.
But what we've seen over probably the last two to three quarters is like the peak volume from these second order.
Metrics.
Youll started to slow down and their magnitude.
We saw peak order as people try to cancel and reschedule and as you know when we talked about it back in our May call, we started allowing people actually to Yuri.
Reschedule on what it is that they needed to do we also work with channel partners to do the same so on balance each quarter, we've seen that amplitude.
Way way down and to the point, where it's getting close to being sort of normal course of business.
We do see this level.
Certainly sustainable at that if anything were probably bias up to bias down as we look into 'twenty four.
And I think he credit to the business teams and sales teams here at Synaptics on trying to make a call early on where the direction of inventory and forecasts are going and I think the internal team did a pretty good job.
Got it got it that's very helpful. Thank you I appreciate it.
Thank you one moment our next call.
Yeah.
Next question comes from Brian.
Hum.
Okay.
Alright. Thank you for taking my question a question on the module partners.
Okay.
Can you maybe talk about the partner help for you to address any new segments by geography, our customer base and do you see.
More of those partnerships developing.
The medium term.
Yes, Martin Thanks for the question.
Yes, the module partners are important for us because.
As we try to move into this broad market strategy that we outlined at the Investor day.
This is a really good first step.
Customers that they can serve are not customers that we would be able to enable.
So our business like many of the semiconductor business is built around big customers customers that we all know and understand the nameplates of but there is a huge market out there that are these smaller customers that.
We simply can't service with our application engineers. So this particular module partner.
Is really going after.
A bunch of customers that that we Couldnt service.
There are applications in there like.
Tags and inventory trackers and things like that that these guys are getting into there or not.
<unk> things that we would normally do but I think the more important issue is the customers that they serve versus customers we would serve in so.
We would expect this particular module guy like our first module partner to become a very very meaningful component of our wireless business.
Simply because they can serve a very very broad array of customers that we wouldn't otherwise touch.
Okay. Michael So is it right to assume an impact on your business was.
The market recovers in earnest and this new larger partner, maybe serve in Petro business similar to getting to a new distributor.
It's almost like that Martin Yeah, it's pretty significant.
A customer touch and we've.
We obviously are monitoring who they're talking to and they report that out I mean, the number of customers that are talking to.
Are in the hundreds and we would talk to 10, so it's a really multiple multiplicative effect.
Yes, ultimately, we would expect to see business on the level of a distributor because they act like that Theyre, obviously very technical they have a tremendous amount of software support that goes with it it's very focused on wireless modules in our case a combo module.
But they are really really specialists in taking the product doing a work on it to modularize. It in and then reselling it.
But on a magnitude basis, yet so it's like a distributor.
Thank you very much.
This concludes the question and answer session I would now like to turn it back to Michael <unk> for closing remarks.
I'd like to thank all of you for joining US today, we certainly look forward to speaking to you at our upcoming investor conferences during the quarter.
Thanks have a good day.
This now concludes the conference you may now disconnect.
Okay.
Okay.
[music].
Okay.
Yes.