Synaptics Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual) Transcript

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

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Yes. That's a great overview. Kind of actually want to talk about the investment thesis. We see a clear sort of trend in let's say, gross margin -- gross margins go up, typically, the multiple investors are willing to subscribe to a company intends to go up -- you guys have driven a lot of earnings power, but the multiple, it seems fairly undervalued still relative to the sockets peer group, especially with some of the things you're doing in IoT and then in the margin profiles. I guess just at a high level, what do you think is holding back investors or people just maybe are not understanding about Synaptics.

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Yes. I sense another area and maybe people with long memories, has to do with -- on your recent earnings calls about getting more aggressive and growing the business, maybe looking at some areas where your competitors have been raising prices and you didn't perhaps insert your health yourself and then gain some market opportunities. At the same time, you said that your margins are going to be basically pretty solid. So I think there may be some misconception or people misconstruing what's going on. But I guess, can you provide any additional color on the opportunities you're seeing, where you feel you could be aggressive while maintaining a great gross and operating margin performance? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 25, 2021 / 8:25PM, SYNA.OQ - Synaptics Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual)

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Okay. That makes a lot of sense to me. One thing, of course, holding back top line growth has been just the chronic sort of supply sort of chain issues. And I was hoping you can update us on that matter. And especially, how does it impact each of your main segments or even within segments in the case of IoT? Some of -- some peers out there, semis have talked about demand exceeds supply by even 40% or so, in some cases. I guess how much demand is exceeding supply for some of these key markets, especially you talked about IoT, but IoT, PC and mobile products?

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : I guess with that in mind, now almost everybody is now saying this is likely to even probably go into 2022. Do you guys basically see this as a kind of a first half '22 phenomenon?

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Okay. Well, let's move on to some of the various businesses. I'd like to start with IoT. I think it's certainly some of the really attractive growth opportunities. It's been a little less than a year ago, you acquired 2 great businesses: DisplayLink of Broadcom; wireless IoT connectivity. You discussed that wireless IoT exceeding on track to double the quarterly revenue run rate, at that -- at the time of acquisition here in the current quarter, and now you have the DisplayLink, he's been doing very well. Seems to be benefiting from a hybrid model. I think you guys used the term hoteling. Almost 1 year-end, can you provide an update on these 2 acquisitions.

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Yes. These are 2 really good businesses. And hopefully, the supply constraints, especially the WiFi side start to mitigate. I think you guys also got some Bluetooth and combo chip capability. What are the other areas you've seen the most design win activity? Or do you see a lot in the combo space? Or is it primarily on the WiFi side at this stage?

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Other exciting parts to the IoT segment, earlier in the edge-SOCs, you kind of repurpose some of your technology in the auto. You've given some growth metrics around that. Kind of just starting off in low power AI. I guess if we just sort of think holistically, what -- how should we think about growth of these other parts of your IoT business by their own rights, have some nice potential tailwinds or potential customer interest behind them? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 25, 2021 / 8:25PM, SYNA.OQ - Synaptics Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual)

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Yes. No, it's just -- so many -- again so many great things going on IoT. You kind of alluded to it earlier, and there has been some fears that at some point, the PC market and the Notebook market could rollover. But on the other hand, your TAM is expanding, too, right? I mean, you're able to address some parts of the consumer segment you haven't been able to maybe perhaps address before. So I guess, how should we think about PC growth over the next -- your PC growth over the next few years when we overlay the market dynamics, coupled with your TAM expansion?

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Yes. Makes sense. Shifting to mobile, and it's -- I think the strategy is very sound here, certainly to diversify the revenue base and so forth, make it less -- this overall raw business is well less cyclical. You did guide the June quarter to be kind of a bottom. I guess what gives you confidence that you can see this business returning to growth? And I mean, how should we -- should we think of it relatively flat quarter-to-quarter. Or just less seasonality. More muted seasonality. How should we think about the business from here?

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : And to be clear with that last part on Display Driver, you're speaking about OLED Display Driver.

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Okay. I don't know if this is for you or for Dean. But this gross margin -- I mean, I personally have never seen gross margins improve over, say, a six-quarter time frame. And you already said its kind of taking it as somewhat flattish over the next few quarters. Taking into account the seasonality or lack thereof of a mobile, continued COVID headwinds, maybe expedite fees that you might have, well offset maybe by pricing, the mix of business, updates, your productivity initiatives, I mean, how should we think about the gross margin as we look into really in the next fiscal year and beyond?

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : In terms of capital allocation, you have -- there's converts, I think you guys are not shy on M&A. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 25, 2021 / 8:25PM, SYNA.OQ - Synaptics Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual) I've asked you this in the past, too and you have a great wireless franchise, but there's certainly more protocols. I'm curious, how would you say, do you have any missing parts of the business that could be of interest? Or balancing that versus debt pay down? How should we think about the use of cash?

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Sure. Well, with that, I do believe we're out of time. This has been a great discussion. Michael and Dean, thanks for your time, and I would say we're going to following the progress and hope the supply constraints don't hold back some of these initiatives you have going on.

Question: William Chapman Peterson - JPMorgan Chase & Co, Research Division - Analyst : Thanks for that. Okay, guys...