Q4 2024 Synaptics Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Synaptics Inc. fourth quarter fiscal year 2024 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah, Vice President of Investment Relations. Please go ahead.

Operator: Good day, and thank you for standing by. Welcome to the Synaptics Inc. 4th quarter fiscal year 2024 financial results conference call.

Speaker Change: Good day, and thank you for standing by. Welcome to the Synaptics, Inc. Fourth Quarter Fiscal Year 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session.

Operator: At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

To ask a question during the session you will need to press star one one on your telephone You will then hear an automated message advising your hand is raised

Operator: Please be advised that today's conference is being recorded.

Munjal Shah: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah, Vice President of Investor Relations. Please go ahead.

Munjal Shah: I would now like to hand the conference over to your first speaker today, Mohal Shah, Vice President of Investor Relations. Please go ahead. Thank you.

Munjal Shah: Thank you. Good afternoon, and thank you for joining us today on Synaptics' fourth quarter fiscal 2024 conference call. My name is Munjal Shah, and I am the head of investor relations. With me on today's call are Michael Hurlston, our President and CEO, Ken Rizvi, our CFO, and Matt Padfield, our Vice President of Finance. This call is also being broadcast live over the web and can be accessed from the investor relations section of the company's website at Synaptics.com.

Munjal Shah: Good afternoon, and thank you for joining us today on Synaptics' 4th quarter fiscal 2024 conference call.

Munjal Shah: Thank you. Good afternoon and thank you for joining us today on Synaptic's fourth quarter fiscal 2024 conference call. My name is Munjal Shah and I'm the head of investor relations.

Munjal Shah: My name is Munjal Shah, and I'm the head of Investor Relations. With me on today's call, are Michael Holston, a president and CEO, Ken Rizvi, our CFO, and Matt Patel, a vice president of finance. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at Synaptics.com. In addition to a supplemental slide presentation, we have also posted a copy of these prepared remarks on our Investor Relations website. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs, and certain other non-cash or recurring or non-recurring items. Please refer to the press release issued after the market closed 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.com.

Speaker Change: With me on today's call are Michael Hurlston, our President and CEO , Ken Rizwi, our CFO , and Matt Patfill, our Vice President of Finance.

Munjal Shah: This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at Synaptics.com.

Munjal Shah: In addition to a supplemental slide presentation, we have also posted a copy of these prepared remarks on our Investor Relations website. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis. Excludes share-based compensation, acquisition-related costs, and certain other non-cash, or recurring or non-recurring items.

Munjal Shah: In addition to a supplemental slide presentation, we have also posted a copy of these prepared remarks on our Investor Relations website.

Munjal Shah: In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis.

Munjal Shah: which excludes share-based compensation, acquisition-related cost, and certain other non-cash or recurring or non-recurring items.

Munjal Shah: Please refer to the press release issued after the 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.com. Additionally, we would like to remind you that during the course of this conference call, Synaptics may make forward-looking statements. Overlooking statements give our current expectations and projections relating to our financial conditions, results of operations, plans, objectives, future performance, and business.

Munjal Shah: Please refer to the press release issued after the 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.com.

Munjal Shah: 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 and projections relating to our financial condition, results of operation, plans, objectives, future performance, and business. Although Synaptics believe that estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond a control and may prove to be inaccurate. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statement. We refer you to the company's current and periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-K, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement.

Munjal Shah: Additionally, we would like to remind you that during the course of this conference call, the mathematics will make forward-looking statements.

Munjal Shah: Forward-looking statements give our current expectations and projections relating to our financial condition, results of operation, plans, objectives, future performance, and business.

Munjal Shah: Although synaptic beliefs are estimates and assumptions believed to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statements. We refer you to the company's current and periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. Synaptics expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Michael.

Munjal Shah: Although synaptic beliefs are estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate.

Munjal Shah: Synaptic crushes that actual results may differ materially from any future performance adjusted in the company's forward-looking status.

Munjal Shah: We refer you to the company's current and periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement.

Munjal Shah: Synaptics expressly disclaims any obligation to update this forward-looking information.

Munjal Shah: Synaptics expressly disclaims any obligation to update this forward-looking information.

Michael Hurlston: I would now turn the call over to Michael. Thanks, Benjol.

Michael Hurlston: Thanks, Munjal. I'd like to welcome everybody to today's call. We just closed our 2024 fiscal year, and while, for the most part, it didn't play out as we planned, we were able to accomplish some of our most important goals. During the year, we stabilized revenue and began to show incremental growth, though at a slower rate versus our prior expectations due to muted end-demand recovery. In addition, we were able to get largely clear of the inventory issues that have plagued us for the last six quarters or so.

Michael Hurlston: I'd like to welcome everybody to today's call. We just closed our 2024 fiscal year, and while for the most part, it didn't play out as we planned, we were able to accomplish some of our most important goals. During the year, we stabilized revenue and began to show incremental growth, though at a slower rate versus our prior expectations due to muted end-demand recovery. In addition, we were able to get largely clear of the inventory issues that plagued us for the last six quarters or so. Finally, Core IoT is on the right track, showing significant, albeit somewhat inconsistent growth after bottoming in the fourth quarter of last-last year.

Munjal Shah: I will now turn the call over to Michael.

Michael Hurlston: Thanks, Munjal. I'd like to welcome everybody to today's call. We just closed our 2024 fiscal year, and while, for the most part, it didn't play out as we planned, we were able to accomplish some of our most important goals.

Michael Hurlston: During the year, we stabilized revenue and began to show incremental growth, though at a slower rate versus our prior expectations due to muted end demand recovery.

Munjal Shah: In addition, we were able to get largely clear of the inventory issues that plagued us for the last six quarters or so.

Michael Hurlston: Finally, Core IoT is on the right track, showing significant, albeit somewhat inconsistent, growth after bottoming in the fourth quarter of last year. As we enter fiscal 2025, we are in a better place overall to drive revenue and earnings growth. Moving to the June quarter, revenue was slightly above the midpoint of our guidance range, with enterprise products incrementally above forecast. Non-Gap Gross Margin came in at roughly the midpoint of our guidance, while Non-Gap OPEX was below target, resulting in Non-Gap EPS above the forecast provided in May.

Munjal Shah: Finally, Core IoT is on the right track, showing significant, albeit somewhat inconsistent growth after bottoming in the fourth quarter of last year.

Michael Hurlston: As we enter fiscal 2025, we are in a better place overall to drive revenue and earnings growth. Moving to the June quarter, revenue was slightly above the midpoint of our guidance range, with enterprise products incrementally above forecast. Non-GAAP gross margin came in at roughly the midpoint of our guidance, while non-GAAP off-ex was below target, resulting in non-GAAP EPS above the forecast provided in May. The success in our core IoT products, which grew 63% year over year, primarily driven by wireless. We taped out our first broad market device that features a more than 50% power reduction and a 40% decrease in die size compared to a similar high-performance device.

Michael Hurlston: As we enter fiscal 2025, we are in a better place overall to drive revenue and earnings growth.

Michael Hurlston: Moving to the June quarter, revenue was slightly above the midpoint of our guidance range with enterprise products incrementally above forecast.

Michael Hurlston: Non-gap gross margin came in at roughly the midpoint of our guidance, while non-gap OPEX was below target, resulting in non-gap EPS above the forecast provided in May.

Michael Hurlston: This quarter marked more success in our core IoT products, which grew 63% year-over-year, primarily driven by wireless. We've taped out our first broad market device that features a more than 50% power reduction and a 40% decrease in die sizes compared to a similar high-performance device. Even with these advances, we maintain our overall throughput and interoperability advantage, thereby delivering the best overall solution in this product category. The chip is on track to sample to customers toward the end of the calendar year, with revenue contribution expected to start in the middle of calendar 2025.

Munjal Shah: This quarter marked more success in our core IoT products, which grew 63% year-over-year, primarily driven by wireless.

Munjal Shah: We taped out our first broad market device that features a more than 50% power reduction and a 40% decrease in die sizes compared to a similar high performance device.

Michael Hurlston: Even with these advances, we maintain our overall throughput and interoperability advantages, thereby delivering the best overall solution in this product category. The chip is on track to sample to customers toward the end of the calendar year, with revenue contribution expected to start in the middle of calendar 2025. Our first Wi-Fi 7 device is slightly ahead of schedule, and we expect to be sampling customers toward the end of this coming quarter. In addition, demand for our shipping Wi-Fi, Bluetooth combos, and GPS products continues to improve. Pre-production has started on several of our key design wins in product categories such as drones, sound systems, wearables, and OTG streamers.

Munjal Shah: Even with these advances, we maintain our overall throughput and interoperability advantages. They're by delivering the best overall solution in this product category.

Munjal Shah: The chip is on track to sample the customers toward the end of the calendar year with a revenue contribution expected to start in the middle of calendar 2025.

Michael Hurlston: Our first Wi-Fi 7 device is slightly ahead of schedule, and we expect to be sampling customers toward the end of this coming quarter. In addition, demand for our shipping Wi-Fi, Bluetooth combos, and GPS products continues to improve. Pre-production has started on several of our key design wins in product categories such as drones, sound systems, wearables, and OTT streamers.

Munjal Shah: Our first Wi-Fi 7 device is slightly ahead of schedule, and we expect to be sampling customers toward the end of this coming quarter.

Munjal Shah: In addition, demand for our shipping Wi-Fi, Bluetooth combos, and GPS products continues to improve.

Munjal Shah: Pre-production is started on several of our key design wins in product categories such as drones, sound systems, wearables, and OTT streamers.

Michael Hurlston: We have had success adding new module partners in Japan, Korea, and China, though progress to high volume shipments has been slower than expected. We expect wireless revenue to continue to improve, and while quarter-over-quarter growth rates may vary, we continue to believe the double-digit increases will occur on a year-over-year basis. We are also making progress with our smart embedded processors. Following a successful launch last quarter, Astra, our embedded AI-enabled line of MPUs and MPCUs, has generated interest from a broad set of customers in product categories such as navigation devices, appliances, and security systems. Initial demand for a Mechina RDKs exceeded expectations, and we are ramping production for commercial availability.

Michael Hurlston: We have had success adding new module partners in Japan, Korea, and China, though progress to high volume shipments has been slower than expected. We expect wireless revenue to continue to improve, and while quarter-over-quarter growth rates may vary, we continue to believe that double-digit increases will occur on a year-over-year basis. We are also making progress with our smart embedded processors. Following a successful launch last quarter, Astra, our embedded AI-enabled line of MPUs and MPCUs, has generated interest from a broad set of customers in product categories such as navigation devices, appliances, and security systems.

Munjal Shah: We have had success adding new module partners in Japan, Korea, and China, though progress to high-volume shipments has been slower than expected.

Munjal Shah: We expect wireless revenue to continue to improve, and while quarter-over-quarter growth rates may vary, we continue to believe that double-digit increases will occur on a year-over-year basis.

Munjal Shah: We are also making progress with our smart embedded processors.

Munjal Shah: Following a successful launch last quarter, Astra, our embedded AI-enabled line of MPUs and MPCUs, has generated interest from a broad set of customers in product categories such as navigation devices, appliances, and security systems.

Michael Hurlston: Initial demand for Makina RDKs exceeded expectations, and we are ramping production for commercial availability. We made our software generally available, making it easier for customers to integrate, lowering the barrier to adoption. Finally, we are building relationships with system integrators and system-on-module partners who enable us to scale significantly faster. In the quarter, we started sampling our SR series of SMART MCUs for vision-based use cases.

Munjal Shah: Initial demand for Makina RDKs exceeded expectations and we are ramping production for commercial availability.

Michael Hurlston: We made our software generally available, making it easier for customers to integrate, lowering barrier to adoption. Finally, we are building relationships with system integrators and system on module partners who enable us to scale significantly faster. In the quarter, we started sampling our SR series of smart MPUs for vision-based use cases. In addition, we are driving synergies in our compute and wireless portfolios and are sampling our first Astra connected processor in a package combining our Wi-Fi 660 device with our Quad Core A55 processors. While Astra's customer traction is ahead of schedule, we haven't changed our outlook, and the products won't contribute materially until the second half of our fiscal 2026.

Munjal Shah: We made our software generally available, making it easier for customers to integrate lowering barrier to adoption.

Munjal Shah: Finally, we are building relationships with system integrators and system on module partners who enable us to scale significantly faster.

Munjal Shah: In the quarter, we started sampling our SR series of SMART MCUs for vision-based use cases.

Michael Hurlston: In addition, we are driving synergies in our compute and wireless portfolios and are sampling our first Astra-connected processor in a package, combining our Wi-Fi 660 device with our quad-core A55 processor. While Astra's customer traction is ahead of schedule, we haven't changed our outlook, and the products won't contribute materially until the second half of our fiscal 2026. While our smart embedded processors are the future, our operator solutions product family continues to generate revenue today.

Munjal Shah: In addition, we are driving synergies in our compute and wireless portfolios and are sampling our first Astra connected processor in a package, combining our Wi-Fi 6 6E device with our quad core A55 processors.

Munjal Shah: While Astra's customer traction is ahead of schedule, we haven't changed our outlook and the products won't contribute materially until the second half of our fiscal 2026.

Michael Hurlston: While our smart embedded processors are the future, our operator solicits Solutions, Product family continues to generate revenue today. Our recently announced wins have started to ramp, and over the last quarter we added new customers in Japan with production launches expected in calendar 2025. Moving to our enterprise and automotive products, revenue improved 7% on quarter driven by improvement in our video interface and PC products. In PCs, we are gaining market share at multiple OEMs and driving higher content with larger touch pads and haptics technology. We do think the PC TAM continues to grow as adoption of AI PCs and ARM-based platforms drives a refreshed cycle.

Munjal Shah: While our smart embedded processors are the future, operate or solutions, product family continues to generate revenue today.

Michael Hurlston: Our recently announced wins have started to ramp, and over the last quarter, we added new customers in Japan with production launches expected in calendar 2025. Moving to our enterprise and automotive products, revenue improved 7% on a quarter, driven by improvement in our video interface and PC products.

Munjal Shah: Our recently announced wins have started to ramp and, over the last quarter, we added new customers in Japan with production launches expected in calendar 2025.

Munjal Shah: Moving to our enterprise and automotive products, revenue improves 7% on quarter driven by improvement in our video interface and PC products.

Michael Hurlston: In PCs, we're gaining market share at multiple OEMs and driving higher content with larger touchpads and haptics technology. We do think that PC-TAM will continue to grow as adoption of AI PCs and ARM-based platforms drives a refresh cycle. Our User Presence Detection Solution has been awarded both mid-board and camera module platforms that are major customers, stepping up our share in model year 2025. We are working to sell these AI-based devices to additional customers and expect further adoption given the system's power savings they can deliver, translating to longer PC battery life.

Munjal Shah: In PCs, we're gaining market share at multiple OEMs and driving higher content with larger touch pads and haptics technology.

Munjal Shah: We do think the PC Tam continues to grow as adoption of AI PCs and arm-based platforms drives a refresh cycle.

Michael Hurlston: Our user presence detection solution has been awarded both midboard and camera module platforms that are a major customer stepping up our share in model year 2025. We are working to sell these AI-based devices to additional customers and expect further adoption given the systems' power savings they can deliver, translating to longer PC battery life. While we are able to grow enterprise product sales sequentially, we continue to be disappointed at the rate of recovery. IT spending on personal hardware remains well below historic norms as capital is being allocated toward AI infrastructure. In automotive, the overall market softness is slowing the adoption of new technology.

Munjal Shah: Our user presence detection solution has been awarded both mid-board and camera module platforms that are a major customer.

Munjal Shah: Stepping up our share in model year 2025.

Munjal Shah: We are working to sell these AI-based devices to additional customers and expect further adoption given the system's power savings they can deliver, translating to longer PC battery life.

Michael Hurlston: While we were able to grow enterprise product sales sequentially, we continue to be disappointed at the rate of recovery. IT spending on personal hardware remains well below historic norms as capital is being allocated toward AI infrastructure.

Munjal Shah: While we were able to grow enterprise product sales sequentially, we continue to be disappointed at the rate of recovery. IT spending on personal hardware remains well below historic norms as capital is being allocated toward AI infrastructure.

Michael Hurlston: In the automotive industry, overall market softness is slowing the adoption of new technology. This has been good for us as our existing TDI solutions are expected to remain in production longer. However, uptake of our new SmartBridge product is being pushed out, limiting our content gains in the near term. In addition, our legacy DDIC devices continue to moderate as production shifts away from older models.

Michael Hurlston: This has been good for us as our existing TDI solutions are expected to remain in production longer. However, uptake of our new smart bridge product is being pushed out, limiting our content gains near term. In addition, our legacy DDIC devices continue to moderate as production shifts away from older models. In mobile, our touch controllers are aligned with the high end of the Android market, which is seeing normal seasonal trends. We do see an opportunity for TAM expansion as flexible OLED displays come down in price and capture a higher percentage of the volume at a given OEM.

Munjal Shah: In automotive, the overall market softness is slowing the adoption of new technology.

Munjal Shah: This has been good for us as our existing TDI solutions are expected to remain in production longer.

Munjal Shah: However, uptake of our new smart bridge product is being pushed out limiting our content gains near term.

Munjal Shah: In addition, our legacy DDIC devices continue to moderate as production shifts away from older models.

Michael Hurlston: In mobile, our touch controllers are aligned with the high end of the Android market, which is seeing normal seasonal trends. We do see an opportunity for TAM expansion as flexible OLED displays come down in price and capture a higher percentage of the volume at a given OEM. Our technical advantages in extracting signals from a very noisy environment give us more than sufficient differentiation to garner high market share both in China and Korea.

Munjal Shah: In mobile, our touch controllers are aligned with the high end of the Android market, which is seeing normal seasonal trends.

Munjal Shah: We do see an opportunity for Tam Expansion as flexible OLED displays come down in price and capture a higher percentage of the volume at a given OEM.

Michael Hurlston: Our technical advantages in extracting signal from a very noisy environment give us more than sufficient differentiation to garner high market share both in China and Korea. We had multiple ramps and design winds across major Android smartphone OEMs this quarter. We remain confident in our market position, and starting next year we expect our mobile products to track largely track the high end Android market.

Munjal Shah: Our technical advantages in extracting signal from a very noisy environment give us more than sufficient differentiation to garner high market share both in China and Korea.

Michael Hurlston: We had multiple ramps and design wins across major Android smartphone OEMs this quarter. We remain confident in our market position, and starting next year, we expect our mobile products to largely target the high-end Android market. To conclude, we continue to be excited about our core IRT opportunity, particularly in processors and wireless. Through new product ramps and customer engagements, we have set ourselves up for a bright future. In addition, we have cleared most of the inventory problems that plagued our enterprise products for the last few quarters and positioned us for a steadier phase of growth.

Munjal Shah: We had multiple ramps in design winds across major androids smartphone OEMs this quarter.

Munjal Shah: We remain confident in our market position, and starting next year, we expect our mobile products to largely track the high-end Android market.

Michael Hurlston: To conclude, we continue to be excited about our core IRT opportunity, particularly on processors and wireless. Through a new product ramps and customer engagements, we have set ourselves up for a bright future. In addition, we have cleared most of the inventory problems that plagued our enterprise products for the last few quarters and positioned us for a steadier phase of growth. We have set the company up for earnings and cash flow growth in 2025 and beyond.

Munjal Shah: To conclude, we continue to be excited about our core IRT opportunity, particularly on processors and wireless.

Munjal Shah: Through a new product ramps and customer engagements, we have set ourselves up for a bright future. In addition, we have cleared most of the inventory problems that plagued our enterprise products for the last few quarters, and positioned us for a steadier phase of growth.

Michael Hurlston: To set the company up for earnings and cash flow growth in 2025 and beyond. Before I turn the call over to Matt for a review of our fourth quarter financial results and our first quarter outlook, let me take a second to introduce our new CFO, Ken Rizvi. I'm pleased to have Ken join the team, and I'm looking forward to getting his help in driving profitable growth for Synaptics. He's a seasoned finance and semiconductor executive, having previously served as CFO of a public company. Ken, can you make a few comments? Thanks, Mike.

Munjal Shah: We have set the company up for earnings and cash flow growth in 2025 and beyond.

Michael Hurlston: Before I turn the call over to Matt for review of our fourth quarter financial results and our first quarter outlook, let me take a second to introduce our new CFO, Ken Rizvi. I'm pleased to have Ken join the team, and I'm looking forward to getting his help in driving profitable growth. for Synaptics. He's a seasoned finance and semiconductor executive, having previously served as CFO of a public company.

Speaker Change: Before I turn the call over to Matt for review of our fourth quarter fight answer results and our first quarter outlook, let me take a second to introduce our new CFO, Ken Rizvy.

Speaker Change: I'm pleased to have Ken join the team, and I'm looking forward to getting his help in driving profitable growth for synaptics.

Munjal Shah: He is a seasoned finance and semiconductor executive, having previously served as CFO of a public company.

Ken Rizvi: Ken, can you make a few comments? Thanks, Michael, and good afternoon to everyone. Several of you know me for my previous roles, and I'm excited to join Synaptics at this stage of the company.

Ken Rizvi: Thanks, Michael, and good afternoon to everyone. Several of you know me from my previous roles, and I'm excited to join Synaptics at this stage of the company. Michael and the team have done a phenomenal job transforming the company into a leading IoT player. I'm looking forward to building upon that foundation and helping the company drive long-term growth. I look forward to meeting you all in the upcoming weeks and months, and as it's only been a few weeks since I joined, I'll hand the call over to my colleague, Matt, to review our financials. Matt

Ken Rizvy: Can you make a few comments? Thanks Michael and good afternoon to everyone, several of you know me from my previous roles and I'm excited to join synaptics.

Ken Rizvi: Michael and the team have done a phenomenal job transforming the company into a leading IoT player. I'm looking forward to build upon that foundation and help the company drive long-term growth.

Ken Rizwi: at this stage of the company. Michael and the team have done a phenomenal job transforming the company into a leading IOT player. I'm looking forward to build upon that foundation and help the company drive long-term growth.

Ken Rizvi: I look forward to meeting you all in the upcoming weeks and months, and as it's only been a few weeks since I've joined, I'll hand the call over to my colleague, Matt, to review our financials.

Ken Rizwi: I look forward to meeting you all in the upcoming weeks and months, and as it's only been a few weeks since I joined, I'll hand the call over to my colleague Matt to review our financials Matt.

Matt Patel: Matt, thanks, Ken, and good afternoon to everyone. I will focus my remarks primarily on our non-GAAP result, which are reconflastic GAAP and the earnings release table and in our investor materials on our website. Now, let me turn to our financial results for fiscal 2024 and Q4. We completed our fiscal year 2024 with net revenue of 959 million, which was 29 percent. Now, compared to 1.36 billion in the prior year, largely due to declines in our core IoT and enterprise and automotive products, and partially offset by growth from our mobile products. While demand in Fiscal 2024 was soft across multiple end markets, we were able to grow revenues into the second half of the year while also reducing channel inventories to near-normal levels.

Matt Padfield: Thanks, Ken, and good afternoon to everyone. I will focus my remarks primarily on our non-GAAP results, which are Reckon Plastics GAAP and the earnings release tables, and in our investor materials on our website. Now let me turn to our financial results for fiscal 2024 and Q4. We completed our fiscal year 2024 with net revenue of $959 million, which was 29%, down compared to 1.36 billion in the prior year, largely due to declines in our core IoT and enterprise and automotive products, and partially offset by growth from our mobile products.

Matt Patfill: Thanks, Ken, and good afternoon to everyone. I will focus my remarks primarily on our non-gap results, which are reconflathed gap in the earnings release tables and in our investor materials on our website.

Speaker Change: Now, let me turn to our financial result for fiscal 2024 and Q4.

Matt Patfill: We completed our fiscal year 2024 with net revenue of $959 million, which was $29%.

Speaker Change: Daft compared to 1.36 billion in the prior year, largely due to declines in our core IoT and enterprise and automotive products, and partially offset by growth from our mobile products.

Matt Padfield: While demand in fiscal 2024 was soft across multiple end markets, we were able to grow revenues into the second half of the year while also reducing channel inventories to near normal levels. Non-Gap Gross Margin for Fiscal 2024 came in at 53.0%. Non-GAF net income for fiscal year 2024 was $89.4 million, or $2.25 per diluted share. The company continues to be solidly cash flow positive, generating $135.9 million in cash from operations in fiscal year 2024. Now, let me turn to our Q4 results.

Speaker Change: While demand in fiscal 2024 was soft across multiple end markets, we were able to grow revenues into the second half of the year while also reducing channel inventories to near normal levels.

Matt Patel: Non-GAAP gross margin for fiscal 2024 came in at 53.0 percent. Non-GAAP net income for fiscal year 2024 was 89.4 million or $2.25 per diluted share. The company continues to be solidly cashflow positive, generating 135.9 million in cash from operations in Fiscal Year 2024.

Speaker Change: Non-gap gross margin for fiscal 2024 came in at 53.0 percent.

Speaker Change: non-GAAP net income for fiscal year 2024 was $89.4 million or $2.25 per diluted share.

Speaker Change: The company continues to be solidly cash flow positive, generating $135.9 million in cash from operations in fiscal year 2024. Now, let me turn to our Q4 results.

Matt Padfield: Revenue for Q4 was $247.4 million, above the midpoint of our guidance, with sequential improvement in our core IoT and enterprise and automotive products. Revenue from Core IoT, Enterprise, and Automotive, and Mobile Products were 22%, 58%, and 20%, respectively. This was largely in line with our previous expectations, with Enterprise and Automotive products above our original forecast. Total Q4 revenues were up 9% on a year-over-year basis, benefiting from reduced inventory digestion, and were up 4% sequentially.

Matt Patel: Now, let me turn to our Q4 results. Revenue for Q4 was 247.4 million above the midpoint of our guidance, with sequential improvement in our core IoT and enterprise and automotive products. Revenue from core IoT, enterprise, and automotive and mobile products were 22 percent, 58 percent, and 20 percent, respectively. This was largely in line with our previous expectations, with enterprise and automotive products above our original forecast. Total Q4 revenues were up 9 percent on a year-over-year basis, benefiting from reduced inventory digestion and was up 4 percent sequentially. In Q4, core IoT product revenue was up 63 percent year-over-year due to reduced inventory digestion and up 15 percent sequentially, reflecting a modest recovery in the wireless end market.

Speaker Change: Revenue for Q4 was $247.4 million above the midpoint of our guidance with sequential improvement in our core IoT and enterprise and automotive products.

Speaker Change: Revenue from Core IOT, Enterprise and Automotive, and Mobile Products, where 22%, 58% and 20% respectively.

Speaker Change: This was largely in line with our previous expectations with enterprise and automotive products above our original forecast.

Speaker Change: Total Q4 revenues were up 9% on a year over year basis, benefiting from reduced inventory digestion and was up 4% sequentially.

Matt Padfield: In Q4, core IoT product revenue was up 63% year over year due to reduced inventory digestion and up 15% sequentially, reflecting a modest recovery in the wireless-in market. Enterprise and automotive product revenue was up 2% year over year and up 7% sequentially. We saw our PC products improve seasonally on a sequential basis, although we expect the enterprise inventory correction to be largely behind us, and demand for these products continues to be relatively soft. Our mobile product revenue was down 6% year-over-year and 11% sequentially.

Unknown Executive: Good day, and thank you for standing by.

Unknown Executive: Welcome to the Synaptics Inc.

Speaker Change: In Q4, core IoT product revenue was up 63% year-over-year due to reduced inventory digestion and up 15% sequentially, reflecting a modest recovery in the wireless-in market.

Unknown Executive: 4th quarter fiscal year 2024 financial results conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask the question, during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Matt Patel: Enterprise and automotive product revenue was up 2 percent year-over-year and up 7 percent sequentially. We saw our PC products improve seasonally on a sequential basis. While we expect the enterprise inventory correction to be largely behind us, and demand for these products continues to be relatively soft. Moble product revenue was down 6% year-over-year, and 11% sequentially. The quarter-over-quarter performance was primarily due to seasonal trends and largely in line with our prior expectations. During the quarter, we had two customers greater than 10% of revenue, each at approximately 12%. Q4 non-GAAP growth margin was 53.4% and in line with the midpoint of our guidance range.

Speaker Change: Enterprise and automotive product revenue was up 2% year-over-year and up 7% sequentially.

Unknown Executive: Please be advised that today's conference is being recorded.

Speaker Change: We saw our PC products improve seasonally on a sequential basis.

Munjal Shah: I would now like to hand the conference over to your first speaker today, Mohal Shah, Vice President of Investor Relations. Please go ahead. Thank you.

Speaker Change: While we expect the enterprise inventory correction to be largely behind of, and demand for these products continues to be relatively soft.

Munjal Shah: Good afternoon, and thank you for joining us today on Synaptics 4th quarter fiscal 2024 conference call. My name is Munjal Shah, and I am the head of Investor Relations. With me on today's call, our Michael Holston, our President and CEO, Ken Rizvi, our CFO, and Matt Patville, our Vice President of Finance. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at Synaptics.com.

Speaker Change: Mobile product revenue was down 6% year-over-year and 11% sequentially. The quarter-over-quarter performance was primarily due to seasonal trends and largely in line with our prior expectations.

Matt Padfield: The quarter-over-quarter performance was primarily due to seasonal trends and largely in line with our prior expectations. During the quarter, we had two customers with greater than 10% of revenue, each at approximately 12%. Q4 non-GAAP gross margin was 53.4% and in line with the midpoint of our guidance range. Our fourth quarter non-GAAP operating expense was $96.5 million and towards the low end of our guidance as we continue to maintain tight expense control. Non-GAAP net income in Q4 was $25.6 million, an increase of 22% from the prior quarter and a 31% increase from the same quarter a year ago. Non-GAAP EPS per diluted share of 64 cents was above the midpoint of our guidance range, helped in part by lower than anticipated operating expenses. Now, turning to the balance.

Speaker Change: During the quarter, we had two customers greater than 10% of revenue, each at approximately 12%.

Speaker Change: Q4, non-gap grows margin, was 53.4% and inline with the midpoint of our guidance range.

Matt Patel: Our fourth quarter non-GAAP operating expense was 96.5 million and towards the low end of our guidance as we continue to maintain tight expense control. Non-GAAP net income in Q4 was 25.6 million and increase of 22% from the prior quarter and at 31% increased from the same quarter a year ago.

Munjal Shah: In addition to a supplemental slide presentation, we have also posted a copy of this prepared remarks on our Investor Relations website. In addition to the company's gap results, management will also provide supplementary results on a non-gap basis, which excludes share-based compensation, acquisition, related costs, and certain other non-cash or recurring or non-recurring items. Please refer to the press list issued after the market closed today for a detailed reconcilation of gap and non-gap results, which can be accessed from the Investor Relations section of the company's website at Synaptics.com.

Speaker Change: Our fourth quarter non-GAAP operating expense was $96.5 million and towards the low end of our guidance as we continue to maintain tight expense control.

Speaker Change: Non-gap and net income in Q4 was 25.6 million, an increase of 22% from the prior quarter and a 31% increase from the same quarter a year ago.

Matt Patel: Non-GAAP EPS per diluted share of 64 cents was above the midpoint of our guidance range, helped in part by lower-than-anticipated operating expenses. Now turning to the balance sheet. We ended the quarter in fiscal year with 877 million of cash, cash equivalent, and short-term investments on hand, up 49 million from the preceding quarter. Cash flow from operations was $65 million. Capital expenditures were 7.7 million and appreciation for the quarter was 6.8 million. Receivables at the end of June were 142 million and days of sales outstanding were 52 days, down from 55 days last quarter. Our ending inventory balance was 114 million flat compared to last quarter as we continue to manage our inventory purchases.

Speaker Change: non-GAAP EPS per diluted share of $0.64 was above the midpoint of our guidance range, helped in part by lower-than-anticipated operating expenses. Now turning to the balance sheet.

Munjal Shah: 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 and projections relating to our financial condition, results of operation, plans, objectives, future performance and business. Although Synaptics believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond a control and may prove to be inaccurate. Synaptics caution that actual results may differ materially from any future performance suggested in the company's forward-looking statement.

Matt Padfield: We ended the quarter and fiscal year with $877 million of cash, cash equivalents, and short-term investments on hand, up $49 million from the preceding quarter. Cash flow from operations was $65 million. Capital expenditures were $7.7 million, and depreciation for the quarter was $6.8 million. Receivables at the end of June were $142 million, and days of sales outstanding were 52 days, down from 55 days last quarter. Our ending inventory balance was $114 million, flat compared to last quarter as we continue to manage our inventory purchases. The calculated days of inventory on our balance sheet were 88.

Speaker Change: We ended the quarter and fiscal year with $877 million of cash, cash equivalents, and short-term investments on hand, up $49 million from the preceding quarter. Cash flow from operations was $65 million.

Speaker Change: Capital expenditures were $7.7 million and depreciation for the quarter was $6.8 million.

Speaker Change: Receivables at the end of June were $142 million, and days of sales outstanding were 52 days, down from 55 days last quarter.

Munjal Shah: We refer you to the company's current and periodic reports filed with the SEC, including our most recent annual report on form 10K and quarterly report on form 10K for important risk factors that could cause actual results to differ materially from those contents in any forward-looking statement. Synaptics expressly disclaims any obligation to update this forward-looking information.

Speaker Change: Our ending inventory balance was 114 million flat compared to last quarter as we continue to manage our inventory purchases. The calculated days of inventory in our balance sheet were 88.

Matt Patel: The calculated days of inventory in our balance sheet were 88. Our cash balance is at a healthy level, with ample flexibility to navigate our capital deployment needs. We continue to prioritize our capital allocation between M&A, debt management, and share repurchases.

Matt Padfield: Our cash balance is at a healthy level with ample flexibility to navigate our capital deployment. We continue to prioritize our capital allocation between M&A, debt management, and share repurchase. Now let me turn to our first quarter of 2025 guidance. We expect revenues to be approximately $255 million at the midpoint, plus or minus $15 million. Our guidance for the first quarter reflects an expected revenue mix from core IOT, enterprise, and automotive, and mobile products in the September quarter to be approximately 23%, 58%, and 19%, respectively. We are seeing stabilization and a return to normalcy in our business, with order trends and pipelines starting to modestly improve. However, recovery continues to be slow and gradual in almost all of our end markets.

Munjal Shah: I would now turn the call over to Michael. Thank you, Benjol.

Speaker Change: Our cash balance is at a healthy level, with ample flexibility to navigate our capital deployment needs. We continue to prioritize our capital allocation between M&A, debt management and carry purchases.

Michael Hurlston: I'd like to welcome everybody to today's call. We just closed our 2024 fiscal year, and while for the most part, it didn't play out as we planned, we were able to accomplish some of our most important goals. During the year, we stabilized revenue and began to show incremental growth, though at a slower rate versus our prior expectations due to muted and demand recovery. In addition, we were able to get largely clear of the inventory issues that plagued us for the last six quarters or so. Finally, Core IoT is on the right track, showing significant, albeit somewhat inconsistent growth after bottoming in the fourth quarter of last- Last year.

Matt Patel: Now let me turn to our first quarter of 2025 guidance. We expect revenues to be approximately 255 million at the midpoint, plus or minus 15 million. Our guidance for the first quarter reflects an expected revenue mix from core IoT, enterprise, and automotive and mobile products in the September quarter to be approximately 23%, 58%, and 19% respectively. We are seeing stabilization and return to normalcy in our business with order trends and pipelines starting to modestly improve. However, recovery continues to be slow and gradual in almost all of our end markets. We expect non-GAAP gross margin to be 53.5% at the midpoint, plus or minus 1%, consistent with the previous quarter.

Matt Padfield: We expect non-GAAP gross margin to be 53.5% at the midpoint, plus or minus 1%, consistent with the previous quarter. We expect non-GAAP operating expense in the September quarter to be $96 million at the midpoint, plus or minus $2 million, given the slower pace of recovery and continued macroeconomic uncertainty. We remain focused on managing our overall operating expenses. We expect non-GAAP net interest and other expense to be approximately $6 million in the September quarter.

Speaker Change: Now, let me turn to our first quarter of 2025 guidance.

Speaker Change: We expect revenues to be approximately $255 million at the midpoint, plus or minus $15 million.

Speaker Change: Our guidance for the first quarter reflects an expected revenue mix from core IOT, enterprise and automotive, and mobile products in the September quarter to be approximately 23%, 58%, and 19% respectively.

Speaker Change: We are seeing stabilization and return to normalcy in our business with order trends and pipeline starting to modestly improve.

Michael Hurlston: As we enter fiscal 2025, we are in a better place overall to drive revenue and earnings growth. Moving to the June quarter, revenue was slightly above the midpoint of our guidance range with enterprise products incrementally above forecast. Non-gap gross margin came in at roughly the midpoint of our guidance while non-gap off-ex was below target, resulting in non-gap EPS above the forecast provided in May. The success in our core IoT products, which grew 63% year over year, primarily driven by wireless.

Speaker Change: However, recovery continues to be slow and gradual in almost all of our end markets.

Speaker Change: We expect non-GAAP gross margin to be 53.5% at the midpoint, plus or minus 1%, consistent with the previous quarter.

Matt Patel: We expect non-GAAP up for an expense in the September quarter to be 96 million at the midpoint, plus or minus 2 million. Given the slower pace of recovery and continued macroeconomic uncertainties, we remain focused on managing our overall operating expenses. We expect non-GAAP, net interest, and other expense to be approximately $6 million in the September quarter. We recently completed a project that included the domestication of certain foreign subsidiaries and the onshoring of certain intellectual property. This is expected to reduce our non-GAAP tax rate to a range of 13 to 15%. Non-GAAP net income per diluted share is anticipated to be 75 cents per share at the midpoint, plus or minus 20 cents on an estimated 40.3 million fully diluted shares.

Speaker Change: We expect a non-gap operating expense in the September quarter to be 96 million at the midpoint, plus or minus 2 million.

Speaker Change: Given the lower pace of recovery and continued macroeconomic uncertainties, we remain focused on managing our overall operating expenses.

Michael Hurlston: We taped out our first broad market device that features a more than 50% power reduction and a 40% decrease in die size compared to a similar high performance device. Even with these advances, we maintain our overall throughput and interoperability advantages, thereby delivering the best overall solution in this product category. The chip is on track to sample the customers toward the end of the calendar year with revenue contribution expected to start in the middle of calendar 2025.

Speaker Change: We expect non-GAAP net interest and other expense to be approximately $6 million in the September quarter.

Matt Padfield: We recently completed a project that included the domestication of certain foreign subsidiaries and the on-shoring of certain intellectual property. This is expected to reduce our non-GAF tax rate to a range of 13 to 15 percent. Non-GAAP net income per diluted share is anticipated to be $0.75 per share at the mid- plus or minus 20 cents on an estimated $40.3 million fully diluted share. This wraps up our prepared remarks. I'd like to now turn the call over to the operator to start the Q&A session.

Speaker Change: We recently completed a project that included the domestication of certain foreign subsidiaries and the on-shoring of certain intellectual property. This is expected to reduce our non-GAF tax rate to a range of 13 to 15 percent.

Speaker Change: Non-gap net income per diluted share is anticipated to be 75 cents per share at the midpoint, plus or minus 20 cents on an estimated 43 million fully diluted shares.

Michael Hurlston: Our first Wi-Fi 7 device is slightly ahead of schedule and we expect to be sampling customers toward the end of this coming quarter. In addition, demand for our shipping Wi-Fi Bluetooth combos and GPS products continues to improve. Pre-production has started on several of our key design wins in product categories such as drones, sound systems, wearables, and OTG streamers. We have had success adding new module partners in Japan, Korea, and China, though progress to high volume shipments has been slower than expected.

Matt Patel: This wraps up our prepared remarks.

Operator: I'd like to now turn the call over to the operator to start the Q&A session. Thank you. At this time, we will now conduct a question-and-answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To draw your question, please press star 11 again. Please stand by while we compile our Q&A roster.

Speaker Change: 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 now conduct a question-and-answer session. As a reminder, to ask a question, you'll need to press star-one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star-one-one again. Please stand by while we compile our Q&A roster. Our first question comes from the line of... Kevin Cassidy, with Rosenbolt Securities. The line is yours.

Speaker Change: Thank you. At this time, we will now conduct a question and answer session. As a reminder to ask a question, you'll need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile our Q&A roster.

Kevin Cassidy: Our first question comes from the line of Kevin Cassidy with Rosenbalt Securities; the line is yours. Yeah, thanks for taking my question. Congratulations on the good results.

Michael Hurlston: We expect wireless revenue to continue to improve and while quarter over quarter growth rates may vary, we continue to believe that double digit increases will occur on a year over year basis. We are also making progress with our smart embedded processors. Following a successful launch last quarter, Astra, our embedded AI-enabled line of MPUs and MPCUs has generated interest from a broad set of customers in product categories such as navigation devices, appliances, and security systems.

Speaker Change: Our first question comes from the line of...

Kevin Cassidy: Kevin Cassidy

Kevin Cassidy: Yeah, thanks for taking my question and congratulations on the good results. And also, Ken, I'm looking forward to working with you again. You know, you mentioned that enterprise spending is down, but the inventory has been cleared out. I'm wondering if you're hearing of any spending coming up, maybe starting a new year, anything that would be related to the video interface revenue. It seems, you know, that there was strong growth for a few years.

Speaker Change: with the Rosenbalk Securities, the line is yours.

Kevin Cassidy: And also welcome, Ken. I look forward to working with you again.

Kevin Cassidy: Yeah, thanks for taking my question and congratulations on the good results and also welcome Ken looking forward to working with you again.

Michael Hurlston: Yeah, thanks, Kevin. You know, you mentioned the enterprise spending is down, but the inventory has been cleared out. I'm wondering if you're hearing of any, any spending coming up, maybe starting the new year, anything that would be related to the video interface revenue. Seems, you know, that that was strong growth for a few years. Just like I think that's the positive, also just make sure it'd be positive for growth margin also.

Michael Hurlston: Initial demand for a Mechina RDK has exceeded expectations and we are ramping production for commercial availability. We made our software generally available making it easier for customers to integrate lowering barrier to adoption. Finally, we are building relationships with system integrators and system on module partners who enable us to scale significantly faster. In the quarter, we started sampling our SR series of smart MCUs for vision-based use cases. In addition, we are driving synergies in our compute and wireless portfolios and are sampling our first Astra connected processor in a package combining our Wi-Fi 660 device with our Quad Core A55 processors. While Astra's customer traction is ahead of schedule, we haven't changed our outlook and the products won't contribute materially until the second half of our fiscal 2026.

Kevin Cassidy: I'm...

Speaker Change: You mentioned that enterprise spending is down, but the inventory has been cleared out. I'm wondering if you're hearing of any spending coming up, maybe starting a new year, anything that would be related to the video interface revenue. It seems that was strong growth for a few years.

Michael Hurlston: ..... would be positive. Also, just make sure it'd be positive for gross margin also.

Speaker Change: just like I think it would be positive also, just make sure it would be positive for gross margin also.

Michael Hurlston: Yeah, Kevin. First, thanks for the question and positive comments. You know, we did see the video interface business come up a bit this quarter, which is encouraging. It's been probably six quarters or more of negative, so it was really good to see it come up, although off a much lower base. Um, you know, I think we will start seeing indications of buying patterns as IT budgets get reset in December, probably maybe late November, early December.

Michael Hurlston: Yeah, Kevin, first thanks for the question and positive comments. You know, we did see the video interface business come up a bit this quarter, which is encouraging. It's been probably six quarters or more of negative. So it was really good to see it come up, although off a much lower base. You know, I think we would start seeing indications of buying patterns as IT budgets get reset in December, probably maybe late November, early December. Those are typically when things get reset. And I think we'd have a much better handle on how our back half looks then.

Speaker Change: Yeah, Kevin. First, thanks for the question and positive comments. You know, we did see the video interface business come up a bit this quarter, which is encouraging. It's been...

Speaker Change: probably six quarters or more of negative so it was really good to see it come up although off a much lower base.

Speaker Change: I think we would start seeing indications of...

Speaker Change: Buying patterns as IT budgets get reset in December, probably maybe late November, early December. Those are typically when things get reset, and I think we'd have a much better handle on how our back half looks then.

Michael Hurlston: Those are typically when things get reset, and I think we'd have a much better handle on how our back half looks then. But I think our, you know, to your point, I think our video interface business is probably finally bottomed, and I think we're expecting pretty decent year-over-year growth this year.

Michael Hurlston: But I think our, you know, to your point, I think our video interface business is probably finally bottomed, and I think we're expecting pretty decent year-over-year growth this year.

Speaker Change: But I think to your point, I think our video interface business is probably finally bottom then I think we're expecting pretty decent year over year growth this year.

Michael Hurlston: While our smart embedded processors are the future, operate or solic- Solutions, product family continues to generate revenue today. Our recently announced wins have started to ramp and over the last quarter we added new customers in Japan with production launches expected in calendar 2025. Moving to our enterprise and automotive products, revenue improves 7% on quarter driven by improvement in our video interface and PC products. In PCs we are gaining market share at multiple OEMs and driving higher content with larger touch pads and haptics technology.

Kevin Cassidy: Okay, great. Thanks for that answer.

Michael Hurlston: Okay, great. Thanks for that answer. And also, you mentioned AIPC as being a growth driver. And I just wonder if you have any more exposure between the ARM-based AIPCs or x86, or are you neutral on that?

Michael Hurlston: And also you mentioned that AIPC has been a growth driver, and just wonder if you have any more exposure between the arm based AIPC's or x86, or are you neutral on that. Generally neutral, I'd say generally neutral. The one opportunity you were seeing on the arm-based PCs is to add connectivity content, so generally we have zero connectivity content on the traditional PCs. We do think we have an opportunity to add connectivity on arm-based PCs, particularly non-Qual-Comm arm-based PCs, who bundle their own Wi-Fi I would presume, but on the other platforms we think there's a decent opportunity.

Speaker Change: Okay, great, thanks for that answer. And also you mentioned that AI PC has been a growth driver.

Michael Hurlston: Generally neutral. I'd say it is generally neutral.

Speaker Change: And just wonder if you have any more exposure between the ARM-based AIPCs or x86, or are you neutral on that?

Michael Hurlston: The one opportunity we're seeing on the ARM-based PCs is to add connectivity content. So, generally, we have zero connectivity content on traditional PCs. But, we do think we have an opportunity to add connectivity on ARM-based PCs, particularly non-Qualcomm ARM-based PCs who bundle their own Wi-Fi, I presume. But on the other platforms, we think there's a decent opportunity. But, generally speaking, it's flat because our touchpad, fingerprint, and the main content is neutral, Kevin, across the various platforms. Okay, great.

Speaker Change: Generally, I'd say generally neutral, the one opportunity we're seeing on the arm-based PCs is to add connectivity content. So generally we have zero connectivity content on

Michael Hurlston: We do think the PC TAM continues to grow as adoption of AI PCs and ARM-based platforms drives a refreshed cycle. Our user presence detection solution has been awarded both midboard and camera module platforms that are a major customer stepping up our share in mile year 2025. We are working to sell these AI-based devices to additional customers and expect further adoption given the systems power savings they can deliver translating to longer PC battery life.

Speaker Change: on the traditional PCs.

Speaker Change: We do think we have an opportunity to add connectivity on ARM-based PCs, particularly, you know, non-Qualcomm ARM-based PCs who bundle their own Wi-Fi, I would presume.

Kevin Cassidy: But generally speaking, it's flat because our touchpad, fingerprint, the main content is neutral, Kevin, across the various platforms. Okay, great. I'll get back in the queue. Thanks.

Kevin Cassidy: But on the other platforms, we think there's a decent opportunity. But generally speaking, it's flat because our touchpad, fingerprint, the main content is neutral, Kevin, across the various platforms.

Michael Hurlston: While we are able to grow enterprise product sales sequentially, we continue to be disappointed at the rate of recovery. IT spending on personal hardware remains well below historic norms as capital is being allocated toward AI infrastructure.

Kevin Cassidy: Okay, great. I'll get back in the queue. Thanks.

Operator: Thank you for your question.

Kevin Cassidy: Okay, great. I'll get back in the queue. Thanks.

Quinn Bolton: Our next question comes from the line of Quinn Bolton of Needham, the line of yours. Our next question comes from the line of Quinn Bolton from Needham, the line of yours.

Operator: Our next question comes from the line of Quinn. Bolton of Needham, the line is yours. Our next question comes from the line of Quinn Bolton from Needham. The line is yours.

Kevin Cassidy: Thank you for your question.

Speaker Change: Our next question comes from the line of...

Michael Hurlston: In automotive, the overall market softness is slowing the adoption of new technology. This has been good for us as our existing TDI solutions are expected to remain in production longer. However, uptake of our new smart bridge product is being pushed out limiting our content gains near term. In addition, our legacy DDIC devices continue to moderate as production shifts away from older models. In mobile, our touch controllers are aligned with the high end of the Android market which is seeing normal seasonal trends.

Speaker Change: Quinn

Speaker Change: Our next question comes from the line of Quinn Bolton from Needham. The line is yours.

Quinn Bolton: Sorry guys, I was on mute. I was going to say I just wanted to thank my congratulations, Michael, and welcome Ken to Synaptics. I guess you guys have had some momentum on the Core IoT business, mostly driven by wireless. I think in the script, Michael, you said you expected that business to be lumpy, but to still grow double digits as you come into next year. I guess looking at the ramp off the bottom, you know, double digits could actually, you know, if it's low, double digit might actually, you know, imply some declines on a sequential basis.

Quinn Bolton: Sorry, guys, I was on mute. I was gonna say I just wanted to echo my congratulations, Michael, and welcome, Ken, to Synaptics. I guess, you guys have had some momentum in the core IoT business, mostly driven by wireless. I think in the script, Michael, you said you expected that business to be lumpy but to still grow double digits as you come into next year. I guess, looking at the ramp off the bottom, double digits could actually, you know, if it's low, actually, imply some declines on a sequential basis.

Speaker Change: Oh!

Quinn Bolton: Sorry, guys, I was on mute. I was gonna say I just wanted

Michael Hurlston: for my congratulations, Michael, and welcome, can two synaptics.

Speaker Change: I guess you guys have had some momentum on the Core IOT.

Speaker Change: Business, mostly driven by wireless, I think in the script, Michael, you said you expected that business to be lumpy, but to still grow.

Michael Hurlston: We do see an opportunity for TAM expansion as flexible OLED displays come down in price and capture a higher percentage of the volume at a given OEM. Our technical advantages and extracting signal from a very noisy environment give us more than sufficient differentiation to garner high market share both in China and Korea. We had multiple ramps and design winds across major Android smartphone OEMs this quarter. We remain confident in our market position and starting next year we expect our mobile products to track largely track the high end Android market.

Speaker Change: Double Digits is coming to next year. I guess looking at the ramp off the bottom, you know, Double Digits could actually, you know, if it's low double digit, find actually, you know, implies some...

Quinn Bolton: And so I'm wondering if you might be able to give us some thoughts on sequential growth rates in that business. I know it's lumpy, but would you expect the trend still to be up generally on a quarter over quarter basis? Yeah.

Michael Hurlston: And so wondering if you might be able to give us, you know, some thoughts on sequential growth rates in that business. I know you said it's lumpy, but would you expect the trends still to be up generally on a quarter-of-a-quarter basis? Yeah, definitely. I'm sorry if we left you with that impression, Quinn, but I would say, on a sequential basis, we'd expect strong growth. Obviously, we had a couple of quarters here on a backward-looking basis that were really, really significant. As you correctly point out, it was off a low base, but, you know, as we look forward, we would expect that growth to continue both on an annual and a sequential basis.

Speaker Change: Declines on a sequential basis, and so wondering if you might be able to give us, you know, some thoughts on sequential growth rates in that business. I know he said it's lumpy, but would you expect the trends still to be up generally on a quarter or a quarter basis?

Michael Hurlston: Yeah, yeah, definitely. I'm sorry if we left you with that impression, Quinn.

Speaker Change: Yeah, definitely. I'm sorry if we left you with that impression Quinn, but I would say on a sequential basis we'd expect.

Michael Hurlston: To conclude, we continue to be excited about our core IRT opportunity particularly on processors and wireless. Through a new product ramps and customer engagements we have set ourselves up for a bright future. In addition, we have cleared most of the inventory problems that plagued our enterprise products for the last few quarters and positioned us for a steadier phase of growth.

Speaker Change: Strong Growth. Obviously, we had a couple of quarters here on a backward-looking basis that were really, really significant. As you correctly point out, it was off a low base. But, you know, as we look forward, we would expect that growth to continue both on an annual and a sequential basis.

Michael Hurlston: Yeah, it's perfect. And then I guess maybe just following up on the last question about the enterprise, the video interface, the PC business, you know, how, how important or, you know, how significant a driver, do you think an AI PC upgrade cycle would be? Do you think that it would pull through a lot of the video interface? Do you think it would just be primarily on the PC side? The touch fads and fingerprint sensors just, you know, can you give us your latest thoughts on, you know, how much you might benefit from an AI PC upgrade cycle.

Michael Hurlston: We have set the company up for earnings and cash flow growth in 2025 and beyond.

Speaker Change: Got it. Perfect. And then I guess maybe

Michael Hurlston: Before I turn the call over to Matt for review of our fourth quarter financial results and our first quarter outlook, let me take a second to introduce our new CFO, Ken Rizvi, for Synaptics. He's a seasoned finance and semiconductor executive having previously served as CFO of a public company.

Speaker Change: Justice.

Speaker Change: Following up on the last question about the enterprise, the video interface, the PC business.

Speaker Change: You know, how, how...

Speaker Change: Important, or, you know, how significant a driver do you think good in an AI PC upgrade cycle?

Speaker Change: Would be, do you think that would pull through a lot of the video interface do you think it would just be primarily on the PC side?

Ken Rizvi: Ken, can you make a few comments? Thanks Michael and good afternoon to everyone. Several of you know me from my previous roles and I'm excited to join Synaptics at this stage of the company. Michael and the team have done a phenomenal job transforming the company into a leading IoT player. I'm looking forward to build upon that foundation.

Speaker Change: The Touch Fads and Fingerprint Sensors, just, you know, could you give us your latest thoughts on, you know, how much you might benefit from an AI PCF grade cycle, and I'm probably thinking that happens more next year than the second half of calendar 24, but, you know, would love your latest thoughts.

Michael Hurlston: And I'm probably thinking that happens more next year than the second half of calendar 24, but you know, we'd love your latest thoughts. Yeah, I think you sort of got the timing right. And if you remember in a last call, you and I had this discussion; we have not yet seen ordering patterns that would be consistent with a big refresh cycle, whether that's AI PCs, whether that's ARM PCs, or whether that just has to do with sweating these PCs for a lot longer than they typically are. A typical refresh cycle is sort of three and a half to four years.

Michael Hurlston: And then I guess maybe Just following up on the last question about the enterprise, the video interface, the PC business, you know, how important or, you know, how significant of a driver do you think an AI PC upgrade cycle would be? Do you think that would pull through a lot of the video interface? Do you think it would just be primarily on the PC side? The touchpads and fingerprint sensors, just, you know, can you give us your latest thoughts on, you know, how much you might benefit from an AI PC upgrade cycle? And I'm probably thinking that happens more next year than the second half of calendar 24, but, you know, would love your latest thoughts. Yeah, I think I've sort of got the timing right.

Michael Hurlston: But I would say on a sequential basis, we'd expect strong growth. Obviously, we had a couple of quarters here on a backward looking basis that were really, really significant. As you correctly point out, it was off a low base. But, you know, as we look forward, we would expect that growth to continue both on an annual and a sequential basis.

Quinn Bolton: Got it. Perfect.

Speaker Change: Yeah, I think you sort of got the timing right and if you remember in a last call and you and I had this discussion, we have not yet seen ordering patterns that would be consistent with.

Michael Hurlston: Yeah, I think you've sort of got the timing right. And if you remember, in our last call, and we had this discussion, we have not yet seen ordering patterns that would be consistent with a big refresh cycle, whether that's AI PCs, whether that's arm PCs, where that just has to do with sweating these PCs for a lot longer than they typically are. A typical refresh cycle is, sort of, three and a half to four years, and we're probably at, you know So we would expect just a natural refresh to happen there. But, generally speaking, I haven't seen it. It's a little bit early from our perspective to call it that.

Matt Patville: I look forward to meeting you all in the upcoming weeks and months, and as it's only been a few weeks since I joined, I'll hand the call over to my colleague Matt to review our financials. Matt, thanks Ken and good afternoon to everyone. I will focus my remarks primarily on our non-GAAP result, which are Reconflastic GAAP and the earnings release tables and in our investor materials on our website.

Speaker Change: a big refresh cycle, whether that's AIPCs, whether that's arm PCs, whether that just has to do with sweating these PCs for a lot longer than they typically are at typical refresh cycle is.

Michael Hurlston: And we're probably at four and a half to five at this point. So we would expect just a natural refresh happening there. But generally speaking, haven't seen it. It's a little bit early from our perspective to call it the thing that you did hit on, which I would expect to be true is that PC buying is going to pull through a lot of our other products. You typically see, and we saw it certainly during the pandemic. When PCs were going out the door to a relatively high rate, it was pulling through docking stations. It was pulling through headsets.

Speaker Change: sort of three and a half to four years, and we're probably at, you know, four and a half to five at this point. So we would expect just a natural refresh happening there. But generally speaking, haven't seen it. It's a little bit early from our perspective to call it.

Matt Patville: Now, let me turn to our financial result for fiscal year, fiscal 2024 and Q4. We completed our fiscal year 2024 with net revenue of 959 million, which was 29% down compared to 1.36 billion in the prior year, largely due to declines in our core IoT and enterprise and automotive products and partially offset by growth from our mobile products. While demand in fiscal 2024 was soft across multiple end markets, we were able to grow revenues into the second half of the year while also reducing channel inventories to near normal levels.

Michael Hurlston: The thing that you hit on, which I would expect to be true, is that PC buying is going to pull through a lot of our other products. You typically see, and we saw it certainly during the pandemic, when PCs were going out the door at a relatively high rate; it was pulling through docking stations. It was pulling through headsets. It was pulling through monitors and other things that we have exposure to.

Speaker Change: The thing that you did hit on, which I would expect to be true, is that PC buying is going to pull through a lot of our other products, you typically see and we saw it certainly during the pandemic when PCs were...

Michael Hurlston: It was pulling through monitors and other things that we have exposure to. So I think if it does happen, it's a nice tailwind for us, but we haven't seen it. We haven't seen the orders come in yet. We're seeing growth, but moderated growth. But we remain optimistic. We hear everybody else's calls talking about it. And we're certainly hopeful that that helps us in the ensuing quarters.

Speaker Change: Going out the door at a relatively high rate, it was pulling through docking stations. It was pulling through headsets. It was pulling through monitors and other things that we have exposure to.

Michael Hurlston: So I think if it does happen, it's a nice tailwind for us, but we haven't seen it. We haven't seen the orders come in yet. We're seeing growth, but it's moderated growth, but we remain optimistic. We hear everybody else's calls talking about it, and we're certainly hopeful that that will help us in the ensuing quarters.

Matt Patville: Non-GAAP gross margin for fiscal 2024 came in at 53.0%. Non-GAAP net income for fiscal year 2024 was 89.4 million or $2.25 per diluted share. The company continues to be solidly cash flow positive generating 135.9 million in cash from operations in fiscal year 2024.

Speaker Change: I think if it does happen, it's a nice tailwind for us, but we haven't seen it. We haven't seen the orders come in yet. We're seeing growth, but moderated growth, but we remain optimistic. We hear everybody else's calls talking about it.

Speaker Change: We're certainly hopeful that that helps us in the ensuing quarters.

Quinn Bolton: Great. Thank you.

Operator: Thank you for your question.

Speaker Change: Great, thank you.

Matt Patville: Now, let me turn to our Q4 results. Revenue for Q4 was 247.4 million above the midpoint of our guidance with sequential improvement in our core IoT and enterprise and automotive products. Revenue from core IoT, enterprise and automotive and mobile products were 22%, 58%, and 20%, respectively. This was largely in line with our previous expectations with enterprise and automotive products above our original forecast. Total Q4 revenues were up 9% on a year over year basis, benefiting from reduced inventory digestion and was up 4% sequentially.

Eddie Pellon: Our next question comes from a line of. Chris Sankar from TD Cohen, the line is yours.

Operator: Our next question comes from the line of... Krish Sankar from T.D. Cohen. The line is yours.

Speaker Change: Thank you for your question.

Speaker Change: Our next question comes from the line of.

Eddie Pellon: Hey guys, this is Eddie for Chris. Michael, you shared your expectation of Wi-Fi growing double-digit. You also talked about sampling Wi-Fi 7. I had a schedule and some of the design wins there.

Eddie Pellon: Hey guys, this is Eddie for Krish. Michael, you shared your expectation of Wi Fi growing double digits. He also talked about sampling Wi-Fi 7 ahead of schedule and some of the design wins there. So it feels like there are some good tailwinds, but I wonder if you guys have a growth range that you can share in mind. Like when you say double digit, are we talking about somewhere in the teens, or is there a possible scenario where revenues can grow 20, 30% for IOT and fiscal 25?

Speaker Change: Chris Senkawak from TD Cohen, The Lineage Wars.

Eddie: Hey guys, this is Eddie for Krish. Michael, you shared your expectation of Wi-Fi growing double-digit.

Speaker Change: He also talked about sampling Wi-Fi 7 ahead of schedule and some of the design wins there.

Michael Hurlston: So it feels like there are some good tailwinds, but I wonder if you guys have a growth range that you can share in mind. Like when you say double digit, are we talking about somewhere in the teens, or is there a possible scenario where revenues can grow 23% for IoT and fiscal 25? Okay. No, Eddie. Thanks for the question. I think we've outlined, generally speaking, we've outlined our sort of core IoT growth rate being double that of normal growth rate. Our saying is a long-term forecast is sort of 10 to 12% on the top line, and we'd expect our core IoT to be growing at twice that rate.

Chris Senkawak: So it feels like there are some good tailwinds, but I wonder if you guys have a growth range that you can share in mind. Like when you say double digit, are we talking about somewhere in the teens? Or is there a possible scenario where revenues can grow 23% for IoT in fiscal 25?

Michael Hurlston: Okay, no, Eddie, thanks for the question. You know, I think we've outlined, generally speaking, our sort of core IoT growth rate at being double that of normal. Our normal growth rate, what we're saying is a long-term forecast is sort of 10 to 12% on the top line. And we'd expect our core IoT business to be growing at twice that rate. So there's nothing that we've seen that would back us away from those comments and those projections that we outlined, you know, a handful of quarters ago.

Matt Patville: In Q4, core IoT product revenue was up 63%, year over year due to reduced inventory digestion and up 15% sequentially reflecting a modest recovery in the wireless end market. Enterprise and automotive product revenue was up 2% year over year and up 7% sequentially. We saw our PC products improved seasonally on a sequential basis. While we expect the enterprise inventory... Correction, to be largely behind us and demand for these products continues to be relatively soft.

Chris Senkawak: Okay. No, Eddie, thanks for the question. You know, I think we've outlined, generally speaking, we've outlined our sort of core IFT growth rate at

Speaker Change: being double that of normal, our normal growth rate, we're saying is a long term forecast is sort of 10 to 12% on the top line. And we'd expect our core IoT to be growing at twice that rate.

Michael Hurlston: So there's nothing that we've seen that would back us away from those comments and those projections that we outlined a handful of quarters ago. In fact, our wireless business is doing better than that. Our processor business, as we said in the prepared remarks, kind of too early to tell, but we're seeing good early signs there. So we feel like the wireless business is 20% plus percent growth or on aggregate, and again, nothing we've seen that would back us off. of those projections.

Speaker Change: So there's nothing that we've seen that would back us away from those comments and those projections that we outlined.

Michael Hurlston: In fact, our wireless business is doing better than that. Our processor business, as we said in the prepared remarks, kind of too early to tell, but we're seeing good early signs there. So we feel, we feel like the wireless business is, you know, 20 plus percent growing on aggregate. And, again, nothing we've seen that would back us off of those, those, those projections.

Speaker Change: you know, a handful of quarters ago. In fact, our wireless business is doing better than that. Our processor business, as we said in the prepared remarks, kind of too early to tell. But we're seeing good early signs there. So.

Matt Patville: Moble product revenue was down 6% year-over-year and 11% sequentially. The quarter-over-quarter performance was primarily due to seasonal trends and largely in line with our prior expectations. During the quarter we had two customers greater than 10% of revenue, each at approximately 12%. Q4 non-gap growth margin was 53.4% and in line with the midpoint of our guidance range. Our fourth quarter non-gap operating expense was 96.5 million and towards the low end of our guidance as we continue to maintain tight expense control.

Speaker Change: You know, we feel like the wireless business is, you know, 20 plus percent grower on aggregate and again, nothing we've seen that would back us off of those projections.

Eddie Pellon: That's super helpful. And just a follow-up question, if... I think you mentioned as well partnering with new system integrators, and that would significantly impact your growth rate, quote unquote. Maybe, Michael, could you talk a little bit about that? Like how big of a driver that can be, and why these partnerships specifically can be significant to your growth rate going forward. Like, are they focused on specific applications or geographies that you guys haven't had before? Just any color on that would be helpful.

Michael Hurlston: That's super helpful. And just follow up, I think you mentioned as well, partnering with new system integrators, and that would significantly impact your growth rate. Quite unquote, maybe Michael, can you talk a little bit about that, like how big of a driver that can be, and why these partnerships that specifically can be significant to your growth rate going forward? Like, are they focused on specific applications or geographies that you guys haven't had before?

Speaker Change: That's super helpful. And just a follow-up, if...

Speaker Change: I think you mentioned as well.

Speaker Change: Partnering with new system integrators and that would significantly.

Speaker Change: impact your growth rate?

Guarong Good: Guarong Good

Guarong Good: Maybe, Michael, can you talk a little bit about that, like how big of a driver that can be and why these partnerships specifically can be significant to your growth rate going forward? Like, are they focused on specific applications or geographies that you guys haven't had before? Just any color on that would be helpful. That's it for me.

Matt Patville: Non-gap net income in Q4 was 25.6 million and increased of 22% from the prior quarter and at 31% increased from the same quarter a year ago. Non-gap EPS per diluted share of 64% was above the midpoint of our guidance range, helped in part at lower than anticipated operating expenses, now turning to the balance sheet. We ended the quarter in fiscal year with 877 million of cash, cash equivalent and short-term investments on hand, up 49 million from the preceding quarter.

Michael Hurlston: Just any color on that would be helpful.

Michael Hurlston: That's it for me. Thank you. Yeah, Eddie, again, I appreciate the question; a good one. You know, two things, right? You've heard me talk about in the wireless business, these module partners in the past that really help us bring wireless to market much more rapidly. We've had one really key partner in the module area for wireless, and we said in the prepared remarks, we've added a couple more. Those represent significant opportunities because they're helping us reach a much broader set of customers, much more quickly. In wireless, you have a situation whereby there's a lot of components, RF components and power amplifiers and other things that go in those modules.

Michael Hurlston: Yeah, Eddie, again, I appreciate the question. It's a good one.

Michael Hurlston: That's it for me. Thank you. Yeah, Eddie, again, I appreciate the question. A good one. You know, two things, right? You've heard me talk about in

Michael Hurlston: You know, two things, right? You've heard me talk about in the wireless business, these module partners in the past that really help us bring wireless to market much more rapidly. You know, we've had one really key partner in the module area for wireless, and as we said in the prepared remarks, we've added a couple more. Those represent significant opportunities because they're helping us reach a much broader set of customers much more quickly. Wireless, you have a situation whereby there are a lot of components, RF components, power amplifiers, and other things that go in those modules, and that time to market that the module folks enable is critical.

Yeah: Yeah, Eddie, again, I appreciate the question. A good one. You know, two things, right? You've heard me talk about in the wireless business, these module partners in the past that really help us.

Guarong Good: bring wireless to market much more rapidly.

Speaker Change: You know, we've had one really, really key partner in the module area for wireless and that we said in the prepared remarks, we've added a couple more. Those represent significant opportunities because they're helping us reach a much broader set of customers.

Matt Patville: Cash flow from operations was 65 million. Capital expenditures were 7.7 million and appreciation for the quarter was 6.8 million, receivables at the end of June were 142 million and days of sales outstanding were 52 days down from 55 days last quarter. Our ending inventory balance was 114 million flat compared to last quarter as we continue to manage our inventory purchases that calculated days of inventory in our balance sheet were 88. Our cash balance is at a healthy level with ample flexibility to navigate our capital deployment needs. We continue to prioritize our capital allocation between M&A debt management and share repurchases.

Speaker Change: Much more quickly.

Speaker Change: and wireless, you have a situation whereby

Speaker Change: There's a lot of components RF components and

Michael Hurlston: And that time to market that the module folks enable is critical. The comment you're referring to is on the processor side, and it's a very similar thing where you have a guy that's going to aggregate a system with a processor, with wireless connectivity, with software, and those system integrators are then able to reach out to a number of different customers and tweak the platform slightly for a given application. So, while in wireless, we have a lot of experience and ability to go scale through these module folks, in processors less so, but I'm very optimistic that the same model prevails, that these processor scaling partners help us reach a much broader set of customers much more quickly.

Speaker Change: Power Ampifiers and other things that go in those modules and that time to market that the module folks enable is critical.

Michael Hurlston: The comment you're referring to is on the processor side, and it's a very similar thing where you have a guy that's going to aggregate a system with a processor, with wireless connectivity, with software, and those system integrators are then able to reach out to a number of different customers and tweak the platform slightly for a given application. So while in wireless, we have a lot of experience and ability to go scale to these module folks, in processors, less so, but I'm very optimistic that the same model prevails, that these processor scaling partners help us reach a much broader set of customers much more quickly. We can go one to many in a much easier fashion than we can if we have to deal with all these customers by ourselves.

Speaker Change: The comment you're referring to is on the processor sign and it's a very similar thing where you have a guy that's going to aggregate his system.

Speaker Change: with a processor, with wireless connectivity, with software, and those system integrators are then able to reach out to a number of different customers and tweak the platform slightly for a given application.

Matt Patville: Now let me turn to our first quarter of 2025 guidance. We expect revenues to be approximately 255 million at the midpoint plus or minus 15 million. Our guidance for the first quarter reflects an unexpected revenue mix from core IoT, enterprise automotive and mobile products in the September quarter to be approximately 23%, 58% and 19% respectively. We are seeing stabilization and return to normalcy in our business with order trends and pipelines starting to modestly improve.

Speaker Change: We're we well in wireless we have a lot of experience and ability to go scale to these module folks

Speaker Change: [inaudible] We can go one to many in a much...

Michael Hurlston: We can go one to many in a much easier fashion than we can if we have to deal with all these customers by ourselves.

Speaker Change: Easier fashion than we can if we have to deal with all these customers by ourselves.

Eddie Pellon: Great. Thank you, Michael. Thanks, Eddie.

Operator: Thanks for your question. One moment, please.

Michael Hurlston: Great. Thank you, Michael.

Eddie: Thanks, Eddie.

Speaker Change: Thank you for your questions.

Peter Peng: Our next question comes from the line of Peter Peng from JP Morgan, the line of George. You guys, thanks for taking my question, and congrats on the results, and welcome to the team, Ken. Thank you.

Operator: Our next question comes from the line of Peter Peng from J.P. Morgan. The line is yours.

Matt Patville: However, recovery continues to be slow and gradual in all of our end markets. We expect non-GAP gross margin to be 53.5% at the midpoint plus or minus 1% consistent with the previous quarter. We expect non-GAP, for an expense in the September quarter, to be 96 million at the midpoint, plus or minus 2 million.

Speaker Change: Good morning, please.

Speaker Change: Our next question comes from the line of Peter Peng from J.P. Morgan. The line is yours.

Peter Peng: Hey guys, thanks for taking my question and congrats on the results and welcome to the team Ken. Just on, you talk about inventory digestion. It seems like it's kind of gone. And, you know, inventories are quite clean. So does that indicate that you're kind of shipping?

Peter Peng: Hey guys, thanks for taking my question and congrats on the results and welcome to the team, Ken.

Peter Peng: Just on, you talked about that inventory digestion seems like it's kind of gone and you know, inventory is it's quite so does that indicate that you're kind of shipping. Yeah, I, I, Peter, again, good question. I do think we're, we're shipping below and demand. I think, you know, you have a sell out that's clearly larger than the sell in because we've cleared out quite a significant amount of inventory. I'd be hesitant to size that, but it's clear that we're under shipping, right? Because the inventory and the channel has been worked down during the course of the year and.

Peter Peng: Just on, you talked about that inventory digestion seems like it's kind of gone and inventory, it's quite clean. So does that indicate that you're kind of shipping?

Matt Patville: Given the slower pace of recovery and continued macroeconomic uncertainties, we remained focused on managing our overall operating expenses. We expect non-gap, net interest and other expense to be approximately 6 million in the September quarter.

Speaker Change: at Bayes and Uganda, you're shipping to end the man, or you still feel that we're still kind of shipping below end the man at this point.

Michael Hurlston: Yeah, I, Peter, again, good question. I do think we're shipping below end demand. I think, you know, you have a sellout that's clearly larger than the sell-in because we've cleared out quite a significant amount of inventory. I'd be hesitant to size that, but it's clear that we're under shipping, right?

Speaker Change: Yeah, Peter, again, good question. I do think we're shipping below end demand. I think, you know, you have a sellout that's

Matt Patville: We recently completed a project that included the domestication of certain foreign subsidiaries and the onshoreing of certain intellectual property. This is expected to reduce our non-gap tax rate to a range of 13 to 15%. Non-gap net income per diluted share is anticipated to be 75 cents per share at the midpoint, plus or minus 20 cents on an estimated 40.3 million fully diluted share.

Speaker Change: Clearly larger than the sell-in because we've cleared out quite a significant amount of inventory.

Speaker Change: I'd be hesitant to size that, but it's clear that we're under shipping, right? Because the inventory in the channel has been worked down during the course of the year.

Michael Hurlston: Because the inventory in the channel has been worked down during the course of the year, and you can see the level of our shipment. So I, I'd say that the under shipment phenomenon is there. There still is pretty muted end demand. So the thing that surprised us, and I think we've talked about this for the last handful of quarters, is we'd expected once inventory cleared out to get to a much higher level of shipment.

Michael Hurlston: You can see the level of our shipment, so I'd say that under shipment phenomenon is there.

Speaker Change: You can see the level of our shipments. So I'd say that under-shipment phenomenon is there. There still is pretty muted end demand. So the thing that surprised us, and I think we've talked about this for the last handful of quarters, is we'd expected once inventory to clear out to get to a much higher level of shipment.

Michael Hurlston: There still is pretty muted and demand, so the thing that surprised us, and I think we've talked about this for the last handful of quarters, as we'd expected once inventory to clear out to get to a much higher level of shipment, we're not there because I think that on top of the inventory problem, there has been a demand issue that's been underlying it. But clearly, where our ship in is less than ship out, so we're under shipping, and I think that as this demand profile recovers or the demand environment recovers, we'll see it kind of a second up tick.

Matt Patville: This wraps up our prepared remarks. I'd like to now turn the call over to the operator to start the Q&A session. Thank you.

Michael Hurlston: We're not there because I think that on top of the inventory problem, there has been a demand issue that's been underlying it, but clearly, we are, you know, our ship in is less than ship out, so we're under shipping, and I think that as this demand profile recovers, or the demand environment recovers, we'll see a kind of a second uptick.

Peter Peng: Got it. Thanks.

Unknown Executive: At this time, we will now conduct a question and answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To draw your question, please press star 11 again. Please stand by while we compile our Q&A roster.

Speaker Change: We're not there because I think that on top of the inventory problem there has been

Speaker Change: a demand issue that's been underlying it, but clearly we're our ship in is less than ship out so we're under shipping, and I think that as demand profile recovers or the demand environment recovers, we'll see it kind of a second up tick.

Kevin Cassidy: Our first question comes from the line of Kevin Cassidy with Rosenbalt Securities, the line of yours. Yeah, thanks for taking my question. Congratulations on the good results. And also welcome Ken. I'm looking forward to working with you again. Yeah, thanks, Kevin. You know, you mentioned the enterprise spending is down, but the inventory has been cleared out. I'm wondering if you're hearing of any, any spending coming up, maybe starting a new year, anything that would be related to the video interface revenue seems, you know, that that was strong growth for a few years and just like I think that's the positive also just make sure it would be positive for gross margin also.

Michael Hurlston: Got it, thanks. And then this is kind of a gross margin trajectory. If I kind of look at your end market, it seems like you're most positive on the continued recovery and quality in enterprise and automotive, and mobile may be kind of trucking along. So I would think that, you know, there is going to be some product mix headwind in your gross margin. So can you just talk about how you think about gross margins over the next couple quarters? Yeah, I think that's right. We've set aside a target of 57, and 57 is really based on that enterprise and automotive shipping at full throw.

Michael Hurlston: And then This is a kind of gross margin trajectory. If I kind of look at your and Mark, it seems like you're most positive on the continued recovery in core LTE and enterprise and automotive and mobile, maybe kind of kind of chugging along. So I would think that, you know, there's going to be some product make Headwind on your gross margins. So can you just talk about how you think about gross margins over the next couple of quarters? Yeah, I think that's right. We've

Speaker Change: Got it. Thanks. And then this is a kind of a gross margin trajectory. If I kind of look at your

Speaker Change: And Mark, it seems like you're most positive on the continual recovery in CoreLT and enterprise and automotive and mobile may be kind of kind of chugging along. So I would think that, you know, there's going to be some product mix.

Speaker Change: Headwind on your gross margins. So can you just talk about how you think about gross margins over the next couple quarters?

Michael Hurlston: Yeah, I think that's right. We've set aside a target of 57, and 57 is really based on that enterprise and automotive shipping at full throttle. The enterprise and automotive market is clearly well above 57 in a basket from where we stand. Processors and wireless are at or slightly below that 57 number, and then mobile is quite a bit below that. So the aggregate says that when we're shipping it, you know, kind of full tilt on enterprise and automotive, we would expect that the whole basket goes up to 57. As Core IoT continues to do well. In opposition to the enterprise and automotive sectors, you're right; there's a little bit of a downdraft on the gross margin.

Mark: Yeah, I think that's right. We've set aside a target of 57, and 57 is really based on that enterprise and automotive shipping at full throat. The enterprise and automotive is clearly well above 57 in a basket from where we stand.

Michael Hurlston: The enterprise and automotive is is clearly well above 57 in a basket from from where we stand. Processors and wireless are at or slightly below that 57 number, and then mobile is quite a bit below. So the aggregate says that when we're shipping it, you know, kind of full tilt on enterprise and automotive, we would expect that the whole basket goes up to 57 as core IoT continues to do well in opposition to the enterprise and automotive. You're right, there's a little bit of a down draft on the gross margin. Thank you for your question.

Kevin Cassidy: Yeah, Kevin, first thanks for the question and positive comments. You know, we did see the video interface business come up a bit this quarter, which is encouraging. It's been probably six quarters or more of negative, so it was really good to see it come up, although of a much lower base. You know, I think we would start seeing indications of buying patterns as IT budgets get reset in December, probably maybe late November early December, those are typically when things get reset and I think we'd have a much better handle on how our back half looks then.

Speaker Change: Processors and wireless are at or slightly below that 57 number, and then mobile is quite a bit below.

Speaker Change: The aggregate says that when we're shipping it, you know, kind of full tilt on enterprise and automotive, we would expect that the whole basket goes up to 57. As Core IoT continues to do well.

Speaker Change: in opposition to the enterprise and automotive, you're right. There's a little bit of a down draft on the gross margin.

Kevin Cassidy: But I think our, you know, to your point, I think our video interface business is probably finally bottomed and I think we're expecting pretty decent year over your growth this year. Okay, great. Thanks for that answer. And also you mentioned that AIPC has been a growth driver and just wonder if you have any more exposure between the arm-based AIPC's or X86 or are you neutral on that? Generally neutral, I'd say generally neutral.

Operator: Again, as a reminder to ask a question, please press star 1-1 on your telephone. One moment, please.

Operator: Again, as a reminder, to ask a question, please press star one one on your telephone. For a moment, please. Our next question comes from the line of Jason Getz from Munzo Securities. The line is yours.

Speaker Change: Thank you for your question. Again, as a reminder, to ask a question, please press star one one on your telephone.

Jason Getz: Our next question comes from the line of Jason Gets from Mundo Securities; the line is yours. Hey guys, thanks. Let me ask a question. You mentioned on the IT budget's reset in November and December and those preliminary conversations you have with customers, just wondering what kind of impressions are you getting on those budgets for next year. Do you think that they could maybe be stretched to include some more enterprise spend, or do we need to see a pullback in that AI spend before enterprise can return? I mean to the second part of the question; I don't think so.

Speaker Change: One moment please.

Speaker Change: Our next question comes from the line of Jason Getz from Munzo Securities. The line is yours.

Jason Getz: Hey guys, thanks for letting me ask a question. You mentioned that IT budgets reset in November and December. In those preliminary conversations you have with customers, just wondering what kind of impressions you get on those budgets for next year? Do you think that they could maybe be stretched to include some more enterprise spend, or do we need to see a pullback in that AI spend before enterprise can return?

Jason Getz: Hey guys, thanks for letting me ask you a question. You mentioned on the IT budgets reset in November and December. Those preliminary conversations you have with customers. Just wondering, what kind of impressions are you getting on those budgets for next year? Do you think that they could maybe be stretched to include?

Kevin Cassidy: The one opportunity you were seeing on the arm-based PCs is to add connectivity content. So, generally we have zero connectivity content on the traditional PCs. We do think we have an opportunity to add connectivity on arm-based PCs, particularly non-qualcomm arm-based PCs. We bundle our own Wi-Fi, I would presume, but on the other platforms, we think there's a decent opportunity. But generally speaking, it's flat because our touchpad, fingerprint, the main content is neutral, Kevin, across the various platforms. Okay, great. I'll get back in the queue. Thanks. Thank you for your question.

Speaker Change: and a priori spend, or do we need to see a pullback in the AI spend before a priori can return?

Michael Hurlston: I mean, to the second part of the question, I don't think so. I mean, I think the two things are very related, that on more limited budgets, the allocation is very much going toward AI spend. We would hope that, generally, you're going to be able to feed both sides of the equation as budgets get reset. But to the first part of your question, we really don't have visibility. We know our numbers internally, and we're going through that budgeting cycle now with Ken and Matt, but we can't really tell what other companies are doing in that regard.

Jason Getz: Got it. Thanks.

Michael Hurlston: I mean I think the two things are have been very related that you know on more limited budgets the allocation is very much going to or AI spend. We would hope that generally you're going to be able to feed both sides of the equation as budgets get reset. But to the first part of the question, we really don't have visibility. We know our numbers internally, and we're going through that budgeting cycle now with Ken and Matt, but we can't really tell what other companies are doing in that regard. Got it.

Speaker Change: I mean, to the second part of the question I don't think so, I mean, I think the two things are have been very related that, you know, on more limited budgets, the allocation is very much going toward AI spend.

Speaker Change: We would hope that generally you're going to be able to feed both sides of the equation as budgets get reset. To the first part of your question, we really don't have visibility.

Speaker Change: Know our numbers internally and we're going through that budgeting cycle now With Ken and Matt, but we can't really tell what other companies are doing in that regard

Michael Hurlston: And then maybe a little bit of a follow-up question on the gross margin side. I get that, you know, mix is a big piece of it. But as we are kind of getting back to that enterprise demand, do you see any levers, you know, that are more in your control that can help get a little bit of improvement as you track towards that 50% 7%, maybe something like pricing or just some of our costs could come out, anything that could, you know, create some upside there? We're looking at all of that. I mean, I think that that's a fair price.

Michael Hurlston: Thanks. And then maybe a little bit of a follow-up question on the gross margin side. I get that, you know, mix is a big piece of it, but as we are kind of getting back to that enterprise demand, do you see any levers, you know, that are more in your control that can help get a little bit of improvement as you track towards the 50% percent. Maybe something like pricing or just some more more cost can come out anything that could, you know, create some upside there. Yeah, we're looking at all of that. I mean, I think that that's a fair point.

Speaker Change: Got it. Thanks and then maybe a little bit of a follow-up question on the gross margin side.

Quinn Bolton: Our next question comes from the line of Quinn Bolton of Needham, the line of yours. Our next question comes from the line of Quinn Bolton from Needham, the line of yours.

Speaker Change: I guess that, you know, mix is a big piece of it, but as we are kind of getting back to that enterprise demand,

Speaker Change: See any levers, you know, that are more in your control that can help get a little bit of improvement as you track towards the 50% percent, maybe something like pricing or just some of our more costs can come out anything that could, you know, create some upside there.

Michael Hurlston: Yeah, we're looking at all of that. I mean, I think that that's a fair point.

Quinn Bolton: Sorry, guys. I was on mute. I was going to say I just wanted to thank my congratulations, Michael, and welcome Ken to Synaptics. I guess you guys have had some momentum on the Core IoT business, mostly driven by wireless. I think in the script, Michael, you said you expected that business to be lumpy, but to still grow double digits as you come into next year. I guess looking at the ramp off the bottom, you know, double digits could actually, you know, if it's low double digits might actually, you know, imply some some declines on a sequential basis.

Michael Hurlston: You know, we went through an environment of significant price, obsturring during COVID. We've not seen a lot of revisions on the cost line from our Foundry and OSAT partners, but as we sort of look out and again, Ken coming on board, how we think about our pricing strategy, particularly in areas we have pricing power. I mean, if you remember. I've characterized the business as having a significant number of markets in which we play, where we have sizable market share and the ability to command some level of pricing power. As we look out across the balance of this fiscal year, I think we're going to look at that a little more closely.

Speaker Change: We're looking at all of that. I mean, I think that that's a fair point. You know, we went through an environment of

Speaker Change: Significant price upstaring, during COVID, we've not seen a lot of revisions on the cost line from our Foundry and OSAT partners.

Michael Hurlston: You know, we went through an environment of significant price increases during COVID. We've not seen a lot of revisions on the cost line from our Foundry and OSAT partners. But as we sort of look out, and again, Ken coming on board, how we think about our pricing strategy, particularly in areas where we have pricing power. I mean, if you remember, I've characterized the business as having a significant number of markets in which we play where we have a sizable market share and the ability to command some level of pricing power.

Speaker Change: but as we sort of look out and again, can coming on board how we think about our pricing strategy, particularly in areas we have pricing power, I mean if you remember

Speaker Change: I've characterized the business as having a significant number of markets in which we play where we have sizable market share and the ability to demand some level of pricing power.

Quinn Bolton: And so wondering if you might be able to give us, you know, some thoughts on sequential growth rates in that business. I know you said it's lumpy, but would you expect the trends still to be up generally on a quarter of a quarter basis? Yeah, definitely. I'm sorry if we left you with that impression, Quinn, but I would say on a sequential basis, we'd expect strong growth. Obviously, we had a couple of quarters here on a backward looking basis that were really, really significant. Again, as you correctly point out, it was off a low base, but, you know, as we look forward, we would expect that growth to continue both on an annual and a sequential basis. Got it. Perfect.

Michael Hurlston: As we look out across the balance of this fiscal year, I think we're going to look at that a little more closely and see where we do have the opportunity to potentially raise prices in markets where we have stronger positions. But all that's TBD. What I can tell you is that on the cost line, marginally better, we're seeing marginally better pricing, but not enough to really favorably move the needle. Our number one needle mover, as we've talked about, is always mixed. And then we may, if we don't see mix improving, we may look at pricing levers to see what we can do.

Speaker Change: As we look out across the balance of this fiscal year, I think we're going to look at that a little more closely.

Michael Hurlston: And see where we do have opportunity to potentially raise prices in markets where we have stronger positions, but all that's TBD. What I can tell you is I think on the cost line marginally better; we're seeing marginally better pricing, but not enough to really favorably move the needle. Our number one needle mover, as we've talked about, is always mix. And then we may, if we don't see mix improving, we may look at pricing levers to see what we can do.

Speaker Change: and see where we do have opportunity to potentially raise prices in markets where we have

Speaker Change: Stronger positions, but all that's TBD. What I can tell you is I think on the cost line Marginally better we're seeing marginally better pricing But not enough to really favorably move the needle our number one needle mover as we've talked about is always mix

Speaker Change: and then we may, if we don't see mixed improving, we may look at pricing levers to see what we can do.

Quinn Bolton: And then I guess maybe just just following up on the last question about the enterprise, the video interface, the PC business. You know, how, how important or, you know, how significant a driver, do you think an AI PC upgrade cycle would be? Do you think that it would pull through a lot of the video interface? Do you think it would just be primarily on the PC side, the touch pads and fingerprint sensors just, you know, can you give us your latest thoughts on, you know, how much you might benefit from an AI PC upgrade cycle.

Michael Hurlston: Thank you very much.

Operator: Thank you for your question. At this time, I'm showing you no further questions.

Speaker Change: Got it. Thank you very much.

Michael Hurlston: At this time, I'm showing no further questions. This concludes the question and answer session. I would now like to turn it back to Michael Hurlston, Chief Executive Officer, for closing remarks.

Michael Hurlston: This concludes the question and answer session.

Speaker Change: Thank you for your question. At this time, I'm showing no further questions. This concludes the question and answer session. I would now like to turn it back to Michael Hurlston, Chief Executive Officer, for closing remarks.

Operator: I would now like to turn it back to Michael Hurlston, Chief Executive Officer, for closing remarks. I'd like to thank everybody for their questions and for joining this call, and we look forward to speaking to you at upcoming investor events throughout the quarter. Thank you.

Michael Hurlston: I'd like to thank everybody for their questions and for joining this call, and we look forward to speaking to you at upcoming investor events throughout the quarter. Thank you.

Michael Hurlston: I'd like to thank everybody for their questions and for joining this call and we look forward to speaking to you at upcoming investor events throughout the quarter. Thank you.

Operator: Thank you for your participation in today's conference.

Operator: Thank you for your participation in today's conference. This does conclude the program.

Operator: This does conclude the program. You may now disconnect.

Quinn Bolton: And I'm probably thinking that happens more next year than then second half of calendar 24, but you know, would love your latest thoughts. Yeah, I think you sort of got the timing right. And if you remember in a last call and you and I had this discussion, we have not yet seen ordering patterns that would be consistent with a big refresh cycle, whether that's AIPCs, whether that's ARM PCs, whether that just has to do with sweating these PCs for a lot longer than they typically are.

Quinn Bolton: A typical refresh cycle is sort of three and a half to four years. And we're probably at four and a half to five at this point. So we would expect just a natural refresh happening there. But generally speaking, haven't seen it. It's a little bit early from our perspective to call it the thing that you did hit on, which I would expect to be true is that PC buying is going to pull through a lot of our other products.

Quinn Bolton: You typically see and we saw it certainly during the pandemic. When PCs were going out the door to relatively high rate, it was pulling through docking stations, it was pulling through headsets, it was pulling through monitors and other things that we have exposure to. So I think if it does happen, it's a nice tailwind for us, but we haven't seen it. We haven't seen the orders come in yet. We're seeing growth, but moderated growth. But you know, we remain optimistic. We hear everybody else's calls talking about it. And we're certainly hopeful that that that helps us in the in suing quarters.

Unknown Executive: Great. Thank you.

Unknown Executive: Thank you for your question. Our next question comes from a line of.

Eddie Pellon: Chris Sankar from TD calling the line is yours. Hey guys, this is Eddie for Chris. Michael, you shared your expectation of Wi-Fi growing double digit. You also talked about sampling Wi-Fi 7. I had a schedule and some of the design wins there. So it feels like there are some good tailwinds, but I wonder if you guys have a growth range that you can share in mind. Like when you say double digit, are we talking about somewhere in the teens?

Eddie Pellon: Or is there a possible scenario where revenues can grow 23% for IoT and fiscal 25? Okay. No, Eddie. Thanks for the question. You know, I think we've we've outlined generally speaking. We've outlined our sort of core IoT growth rate. It being double that of normal, our normal growth rate. We're saying is a long term forecast is sort of 10 to 12% on the top line. And we'd expect our core IoT to be growing at twice that rate.

Eddie Pellon: So there's nothing that we've seen that would back us away from those comments and those projections that we outlined, you know, a handful of quarters ago. In fact, our wireless business is doing better than that. Our processor business, as we said in the in the prepared remarks, kind of too early to tell. But we're seeing good early signs there. So, you know, we feel we feel like the the wireless business is, you know, 20 plus percent grow on aggregate.

Eddie Pellon: And again, nothing we've seen that would back us off, for those projections. That's super helpful. And just follow-up, I think you mentioned as well, partnering with new system integrators, and that would significantly impact your growth rate, quote-unquote. Maybe Michael, can you talk a little bit about that, like how big of a driver that can be, and why these partnerships that specifically can be significant to your growth rate going forward? Are they focused on specific applications or geographies that you guys haven't had before?

Eddie Pellon: Just any color on that would be helpful. That's it for me. Thank you. Eddie, again, I appreciate the question, a good one. Two things, you've heard me talk about in the wireless business, these module partners in the past that really help us bring wireless to market much more rapidly. We've had one really key partner in the module area for wireless, and we said in the prepared remarks, we've added a couple more.

Eddie Pellon: Those represent significant opportunities because they're helping us reach a much broader set of customers much more quickly. In wireless, you have a situation whereby there's a lot of components, RF components and power amplifiers, and other things that go in those modules, and that time to market that the module folks enable is critical. The comment you're referring to is on the processor side, and it's a very similar thing where you have a guy that's going to aggregate a system with a processor, with wireless connectivity, with software, and those system integrators are then able to reach out to a number of different customers and tweak the platform slightly for a given application.

Eddie Pellon: While in wireless, we have a lot of experience and ability to go scale through these module folks. In processors, less so, but I'm very optimistic that the same model prevails, that these processor scaling partners help us reach a much broader set of customers much more quickly. We can go one to many in a much easier fashion than we can if we have to deal with all these customers by ourselves.

Michael Hurlston: Great. Thank you, Michael. Thanks, Eddie. Thanks for your question.

Unknown Executive: One moment, please.

Peter Peng: Our next question comes from the line of Peter Peng from J.P. Morgan, the line of yours. Thank you guys.

Peter Peng: Thanks for taking my question and congrats on the results, and welcome to the team, Ken. Thank you. Just on, you talked about that inventory digestion seems like it's kind of gone, and inventory is quite, so does that indicate that you're kind of shipping at, based on your shipping to end-demand, or do you still feel that we're still kind of shipping below end-demand at this point? Yeah, I, Peter, again, good question. I do think we're, we're shipping below end-demand.

Peter Peng: I think, you know, you have a sell-out that's clearly larger than the sell-in, because we've cleared out quite a significant amount of inventory. I'd be hesitant to size that, but it's clear that we're under shipping, right? Because the inventory in the channel has been worked down during the course of the year. You can see the level of our shipment so I'd say that under shipment phenomenon is there there still is pretty muted and demand so the thing that surprised us and I think we've talked about this for the last handful of quarters as we'd expected once inventory to clear out to get to a much higher level of shipment.

Peter Peng: We're not there because I think that on top of the inventory problem there has been a demand issue that's been underlying it but clearly. We're, you know, we're our ship in is less than ship out so we're under shipping and I think that is this demand profile recovers or the demand environment recovers will see it kind of a second up tick.

Michael Hurlston: Got it thanks and then this is a kind of a gross margin trajectory by kind of look at your end market seems like your most positive on the continual recovery and quality and enterprise and automotive and mobile may be kind of kind of trucking along so I would think that you know there is going to be some product mix headwind in your gross margin so can you just talk about how you think about gross margins over the next couple quarters. Yeah, I think that's right we've set aside a target of 57 and 57 is really based on that enterprise and automotive shipping at full throw the enterprise and automotive is is clearly well above 57 in a basket from from where we stand.

Michael Hurlston: Processors and wireless are at or slightly below that 57 number and then mobile is is quite a bit below so the aggregate says that when we're shipping it you know kind of full tilt on enterprise and automotive we would expect that the whole basket goes up to 57 is as core IOT continues to do well. In opposition to the enterprise and automotive you're right there's a little bit of a down draft on the on the gross margin.

Unknown Executive: Thank you for your question again as a reminder to ask a question please press star one one on your telephone one moment please.

Jason Getz: Our next question comes from the line of Jason gets from Monday securities the line is yours. Hey guys thanks let me ask a question you mentioned on the IT budgets reset November and December and those preliminary conversations you have with customers just wondering what kind of impressions are you getting on those budgets for next year do you think that they could maybe be stretched to include. Some more enterprise spender do we need to see a pullback in that AI spend before enterprise can return.

Jason Getz: I mean to the to the second part of the question I don't think so I mean I think the two things are have been very related that that you know on more limited budgets the allocation is very much going to or AI spend.

Michael Hurlston: We would hope that generally you're going to be able to feed both sides of the equation as budgets get reset to the first part of your question we really don't have visibility we know our numbers internally and we're going through that budgeting cycle now with Ken and Matt but we can't really tell what other companies are doing in that regard. Got it. Thanks.

Michael Hurlston: And then maybe a little bit of a follow-up question on the gross margin side. I get that, you know, mix is a big piece of it, but as we are kind of getting back to that enterprise demand, you see any lovers, you know, that are more in your control that can help get a little bit of improvement as you track towards the 50% percent, maybe something like pricing or just some more more cost can come out anything that could, you know, create some upside there.

Michael Hurlston: Yeah, we're looking at all of that. I mean, I think that that's a fair point. You know, we went through an environment of significant price upstoring during COVID. We've not seen a lot of revisions on the cost line from our Foundry and OSAT partners, but as we sort of look out and again, Ken coming on board, how we think about our pricing strategy, particularly in areas we have pricing power. I mean, if you remember, I've characterized the business as having a significant number of markets in which we play where we have sizable market share and the ability to command some level of pricing power.

Michael Hurlston: As we look out across the balance of this fiscal year, I think we're going to look at that a little more closely and see where we do have opportunity to potentially raise prices in markets where we have stronger positions. But all that's TBD. What I can't tell you is I think on the cost line marginally better. We're seeing marginally better pricing, but not enough to really favorably move the needle. Our number one needle mover, as we've talked about, is always mix. And then we may, if we don't see mixed improving, we may look at pricing levers to see what we can do. Yeah, thank you very much. Thank you for your question.

Unknown Executive: At this time, I'm showing you no further questions.

Michael Hurlston: This concludes the question and answer session.

Michael Hurlston: I would now like to turn it back to Michael Hurlston, Chief Executive Officer for closing remarks. I'd like to thank everybody for their questions and for joining this call, and we look forward to speaking to you at upcoming investor events throughout the corner. Thank you. Thank you for your participation in today's conference.

Unknown Executive: This does conclude the program.

Unknown Executive: You may now disconnect. Thank you very much.