Synaptics Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Quinn Bolton - Needham & Co. - Analyst : Hey, guys. Thanks for taking my question and thanks for all the details sort of segment by segment in terms of where you think you are in the inventory process. I guess I'm first question trying to get a sense of in a number of your product segments. You've said you think you have kind of reached a normalized inventory levels and you'll start to ship in line with consumption I guess my question is, do you think you're currently shipping at end consumption or does that return to end consumption imply growth over the next some number of quarters as you come back to shipping in line with consumption. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 08, 2024 / 10:00PM, SYNA.OQ - Q2 2024 Synaptics Inc Earnings Call And I guess sort of related question is just as you look across all of your businesses, do you still think you're under-shipping consumption rates by as much as $100 million a quarter down here at the roughly $230 million, $235 million a quarter revenue level?

Question: Quinn Bolton - Needham & Co. - Analyst : It does.

Question: Quinn Bolton - Needham & Co. - Analyst : I was just going to ask it, it sounds like especially on the enterprise side of things that if demand is sort of softened with a slow corporate IT spending environment that ITO prior thoughts that you may be under-shipping demand by as much as $100 million sounds like we may need to temper that just given the sort of weaker macro environment. Should we think about where the revenue run rate might normalize as you finally clear, the inventory and enterprise. It sounds like that's part of the way we should be thinking about it.

Question: Quinn Bolton - Needham & Co. - Analyst : Got it. Understood. And then I think in the script said a couple of times you think you've reached the bottom for revenue, which is great to hear. I understand that the pace of recovery is uncertain, but I think at least you put the line in the sand that you don't think sales go down from here. So we've got bottom in revs, but your gross margin also looks like you may be bottoming or 52.5% in December, guided to 53% in the March quarter, is -- can we also sort of infer that you think you've probably hit the bottom in gross margins in this range of, call it 52.5%, 53% that you saw December March?

Question: Quinn Bolton - Needham & Co. - Analyst : Excellent. Thank you, guys.

Question: Christopher Rolland - Susquehanna Financial Group, LLP - Analyst : Hey, guys, thanks for the question. You had some nice commentary on wireless IoT. And so I'd like kind of your thoughts more longer term here. Is this really this kind of snapback we're seeing? Is this kind of inventory related? Or is there, through your visibility on design wins or engagements? Is this a bonafide bottom? And would you expect a strong sustained rebound from here?

Question: Christopher Rolland - Susquehanna Financial Group, LLP - Analyst : Thank you, Michael. And then mobile, obviously or a great quarter here, looks like it takes maybe a small step back next quarter, but longer term? Are we getting something going here? Can you broaden that Samsung beyond the GS24? How are the other OEMs and engagements there? I think Novatek has been talking up this market a little bit. I don't know if you have a similar kind of thought for the rest of the year.

Question: Christopher Rolland - Susquehanna Financial Group, LLP - Analyst : Understood. Thank you guys.

Question: Peter Pang - JP Morgan Chase & Co. - Analyst : Thanks for taking my question. Just on the enterprise and automotive so it's based on the mix guidance, it's kind of implying a low single digit Q-on-Q decline. So we kind of factor in that PC seasonality at your traditional enterprise, that seems like it's kind of bottoming or declining at a slower pace. So do think that we're kind of at the bottom for the March quarter. And so it's more stability going forward? Or how should we think about the puts and takes of that?

Question: Peter Pang - JP Morgan Chase & Co. - Analyst : And then for just kind of on Chris's comment on the snapback in the core IoT, that's in the wireless portion that was a $200 million revenue run rate kind of business. Do you think that you can kind of get back to those levels some time in this calendar year? Or is this more of a first half 2025 calendar year kind of trajectory? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 08, 2024 / 10:00PM, SYNA.OQ - Q2 2024 Synaptics Inc Earnings Call

Question: Peter Pang - JP Morgan Chase & Co. - Analyst : Thank you guys.

Question: Krish Sankar - TD Cowan - Analyst : Yeah, hi. Thanks for taking the question. I had close then, Michael, just on the last question on your answer, looks like you're guiding, the wireless core IoT is growing 20% sequentially and I'm not looking for guidance. But is it fair to assume that kind of growth rate is sustainable through the remaining quarters this year.

Question: Krish Sankar - TD Cowan - Analyst : Got it. And then a follow-up for Dean. When I look at your March quarter guidance, you guys kind of gave the product mix and it looks like three-quarters of your products. Our motors should be in the high 50% gross margin range you're guiding more like 52% to 54%. So I wanted to curious, I understand enterprise order has also inventory, but what is like the one or two biggest overhang on the gross margins? I know is it volume? Is it foundry pricing? Any color on that would be helpful.

Question: Krish Sankar - TD Cowan - Analyst : Got it, thanks a lot, Dean.

Question: Gary Mobley - Wells Fargo Securities - Analyst : Hey, guys. Thanks for taking my question. If I'm hearing you guys correctly, it sounds like perhaps structurally the market size or revenue potential in enterprise might be a little bit smaller than what you were thinking at your analyst day, at least the minimum pushed out further to the right. And therefore, the question is, does it is that causing you to sort of reevaluate the long-term gross margin target of 57%, which I believe is highly contingent on that very healthy margin mix from enterprise?

Question: Gary Mobley - Wells Fargo Securities - Analyst : Thank you, guys for that. Dean you underspent on the OpEx side in the December quarter by roughly 6%. Sounded like that was more variable versus structural on terms of OpEx reduction, correct me if I'm wrong there, but I'm most curious about how we should model and think about the OpEx when revenue normalizes when you actually start to ship in aggregate to end demand, let's call it $300 million per quarter plus in revenue.

Question: Gary Mobley - Wells Fargo Securities - Analyst : Thank you.

Question: Vijay Rakesh - Mizuho - Analyst : Yes, hi, Michael and Dean. Good to hear a business's bottom. So just wondering, just looking at the rest of '24, just wondering how the seasonality plays out for you through 2024. Do you expect to get back to kind of that $300 million level exiting the year or something?

Question: Vijay Rakesh - Mizuho - Analyst : Got it. And then on the AI PC side, any thoughts on how many PCs you expect with what I know you had a pretty good demo at CES. But with the Astra on that family of products into the AI PCs, how many PCs are deals think we see in 2024 with Synaptics on it?

Question: Vijay Rakesh - Mizuho - Analyst : Got it. And one last question, if I can sneak it in. On the handset side, you had a pretty good pickup last quarter. Obviously, a big win with this '24 as well. I missed part of the comments, but where you are thinking that handset business mostly flat to the year, or how are you looking at that trending?

Question: Vijay Rakesh - Mizuho - Analyst : Got it. Thank you.

Question: Kevin Cassidy - Rosenblatt Securities - Analyst : Yeah, thanks for taking my question. Congratulations on the results. Just there's been a lot of weakness in IoT and you're calling the bottom and seeing it coming back. Can you talk about the design activity maybe China related to the past cycle. Is this activity up tremendously? And then also, what are you MCUs and WiFi getting combined in these designs are kind of are you getting some leverage on your WiFi parts? Thanks.

Question: Kevin Cassidy - Rosenblatt Securities - Analyst : Great. Okay. Thank you.

Question: Martin Yang - Oppenheimer & Co. Inc - Analyst : I thank you for taking my question. I have one question on enterprise and automotive. Have you start speaking with our customers regarding this year's annual budget cycle for enterprise spending. Do you get a feel that adjusting for inventory differences on '20 calendar '24, would be flat

Question: Martin Yang - Oppenheimer & Co. Inc - Analyst : Got it. Thank you. That's it for me.