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Subject: Synaptics Incorporated (SYNA)
Author: Buynholdisdead
Date: 11/01/2014
Sector: Technology
Industry: Computer Hardware
Synaptics Incorporated (SYNA) Closing Price $62.11 Closed down 11.16 the day after the report.
Price: $64.54
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Cotton: $59.80
Lumber: $319.90
Today the Price is $61.90: The P/E ratio is 67
**August 2nd, 2012 4Q:2012 earnings highlights:
**Revenues were $137.6 million down 4% from $143.4 million
**TTM Revenues were $548.2 million down 8% from $598.5 million
**Cost of Revenues were $74.2 million down 10% from $82.8 million
**Gross Profit were $63.4 million up 4% from $60.6 million
**Gross Profit Margin were 46%
**TTM Gross Profit were $255.6 million up 4% from 246.1 million
**TTM Gross Profit Margin were 47%
**Net Income were $12.3 million down 12% from $13.9 million
**4Q Earnings per share were $.36 down 10% from $.40
**TTM Earnings per share were $1.57 down 13% from $1.80
**Diluted share count were 34,505,000 down 1% from 35,011,000 Quarter over Quarter
**Cash Flow for the quarter was $19.1 million up 218% from $6 million
**TTM cash flow was $91 million up 17% from $78 million
**Cash $305 million up from 247.2 million
**Debt 0
**Inventory for the quarter were 31,667,000 up 10% from 28,850,000
**R & D for the quarter were $30.5 million up 11% from $27.5 million
**Percentage of R&D to revenue 22%
**Trading range between $24.78 to $31.31
**P/E range 10.61 to 16.26
**P/S range 2.96 to 4.26
** Stock went up $4.40 the day after the report
**Purchased Pacinian Corporation
**Purchased IDT, video display, for $5.0 million
**Introduced ForcePad, ThinTouch Technology, and expanded ClearPad capabilities
**Revenue mix from PC and non-PC applications was approximately 56% and 44% respectively
**Backlog of approximately 50 million
**October 25th, 2012 1Q:2013 earnings highlights:
**Revenues were $127 million down 5% from $133.4 million
**TTM Revenues were $541.8 million down 6% from $578.7 million
**Cost of Revenues were $66.5 million down 8% from $72.2 million
**Gross Profit were $60.6 million down 1% from $61.3 million
**Gross Profit Margin were 48%
**TTM Gross Profit were $254.9 million up 4% from 244.6 million
**TTM Gross Profit Margin were 47%
**Net Income were $6.1 million down 53% from $13 million
**1Q Earnings per share were $.18 down 54% from $.39
**TTM Earnings per share were $1.57 down 13% from $1.80
**Diluted share count were 34,014,000 down 1% from 34,505,000 Quarter over Quarter
**Cash Flow for the quarter was $13.5 million down 51% from $27.4 million
**TTM cash flow was $77.1 million down 14% from $90.1 million
**Cash $312.9 million up from 305 million
**Debt 0
**Inventory for the quarter were 31,236,000 down from 31,667,000
**R & D for the quarter were $32.8 million up 16% from $28.2 million
**Percentage of R&D to revenue 26%
**Trading range between $22.60 to 31.56
**P/E range 14.39 to 20.10
**P/S range 1.42 to 1.98
** Stock went up $1.68 the day after the report
**Received Windows certification through oem’s such as Lenovo and Razer
**Revenue mix from PC and non-PC applications was approximately 49% and 51% respectively
**First Quarter non-pc sold more than pc
**Backlog of $74 million
**January 24th, 2013 2Q:2013 earnings highlights:
**Revenues were $143 million down 2% from $145.5 million
**TTM Revenues were $539.4 million down 4% from $564.7 million
**Cost of Revenues were $74 million down 4% from $76.7 million
**Gross Profit were $69 million up from $68.7 million
**Gross Profit Margin were 48%
**TTM Gross Profit were $254.9 million up 4% from 244.6 million
**TTM Gross Profit Margin were 47%
**Net Income were $11.1 million down 36% from $17.4 million
**2Q Earnings per share were $.33 down 35% from $.51
**TTM Earnings per share were $1.19 down 29% from $1.67
**Diluted share count were 33,313,000 down 2% from 34,005,000 Quarter over Quarter
**Cash Flow for the quarter was $10.5 million down 61% from $26.9 million
**TTM cash flow was $75.6 million down 8% from $81.9 million
**Cash $292.5 million down from 312.9 million
**Debt 0
**Inventory for the quarter were 32,124,000 down from 31,236,000
**R & D for the quarter were $34.3 million up 15% from $29.8 million
**Percentage of R&D to revenue 24%
**Trading range between $22.94 to $39.75
**P/E range 19.27 to 33.40
**P/S range 1.42 to 2.45
** Stock went up $3.88 the day after the report
**continue to shift into many of the flagship smartphones on the market
**Revenue mix from PC and non-PC applications was approximately 43% and 57% respectively
**Non-pc (mobile) continues to gain traction
**Net income continues to reflect additional operating expense from recent acquisitions
**Rick Bergman (CEO) on conference call states that topline growth is number one priority.
**Unidentified analyst said a competitor suggested that in 6 quarters the touch market will be monetized and declines may begin to flow. Rick Bergman states they have a several year roadmap and doesn’t see peer price play in that time frame.
**Backlog of approximately $79 million
**April 25th, 3Q:2013 earnings highlights:
**Revenues were $163.3 million up 24% from $131.7 million
**TTM Revenues were $571.3 million up 3% from $554 million
**Cost of Revenues were $82.2 million up 18% from $69.5 million
**Gross Profit were $81.1 million up 30% from $62.2 million
**Gross Profit Margin were 50%
**TTM Gross Profit were $274.1 million up 8% from 252.8 million
**TTM Gross Profit Margin were 48%
**Net Income were $36.4 million up 219% from $11.4 million
**3Q Earnings per share were $1.07 up 224% from $.33
**TTM Earnings per share were $1.94 up 20% from $1.62
**Diluted share count were 34,135,000 up 2% from 33,313,000 Quarter over Quarter
**Cash Flow for the quarter was $15.6 million down 11% from $17.6 million
**TTM cash flow was $58.7 million down 25% from $77.9 million
**Cash $315.5 million up from 292.5 million
**Debt 0
**Inventory for the quarter were 43,911,000 up from 32,124,000
**R & D for the quarter were $36.7 million up 37% from $29.4 million
**Percentage of R&D to revenue 22%
**Trading range between $33.56 to $45.40
**P/E range 17.30 to 23.40
**P/S range 2.00 to 2.71
** Stock went up $5.59 the day after the report
**One time non-recurring , non-cash item of $15.8 million driving up net income
**Revenue from mobile products totaled $104.7 million and was up 57.2% YoY.
**Mobile products revenue includes all touchscreen and video display products
**Revenue mix from PC and non-PC applications was approximately 36% and 64% respectively
**Non-pc (mobile) continues to gain traction
**Backlog of approximately $124 million
**Samsung AirView capabilities take advantage of next-gen ClearPad with patented 3d touch
**Kathy Bayless CFO Tablets growing nicely but not 10% yet
**August 1st, 4Q:2013 earnings highlights:
**Revenues were $230.2 million up 67% from $137.6 million
**TTM Revenues were $663.6 million up 21% from $348.3 million
**Cost of Revenues were $115.1 million up 55% from $74.2 million
**Gross Profit were $115.1 million up 82% from $63.4 million
**Gross Profit Margin were 50%
**TTM Gross Profit were $325.8 million up 27% from 255.6 million
**TTM Gross Profit Margin were 49%
**Net Income were $45.3 million up 268% from $12.3 million
**4Q Earnings per share were $1.29 up 258% from $.36
**TTM Earnings per share were $2.89 up 84% from $1.57
**Diluted share count were 35,150,000 up 3% from 34,135,000 Quarter over Quarter
**Cash Flow for the quarter was $14 million down 27% from $19.1 million
**TTM cash flow was $53.6 million down 41% from $91 million
**Cash $355.3 million up from 315.5 million
**Debt 0
**Inventory for the quarter were 49,948,000 up 14% from 43,911,000
**R & D for the quarter were $40.9 million up 34% from $30.5 million
**Percentage of R&D to revenue 18%
**Trading range between $34.98 to $44.99
**P/E range 12.10 to 15.57
**P/S range 1.85 to 2.38
**Increased buyback of stock by 100 million for a total authorization of $160 million
**Revenue mix from PC and non-PC applications was approximately 25% and 75% respectively
**Non-pc (mobile) continues to gain traction
**Backlog of approximately $96 million
**$46.3 million was used to repurchase 1.6 million shares bringing repurchases of shares to approximately 5% of shares outstanding.
**China vendors continue to edge up with Syna being well represented in 2nd tier phones
**With addition of Single Layer On-Cell multi-touch they are able to address the entry-level market.
**Launched ClearPad s7500 for large touchscreens up to 15.6 inches
**Smartphone market is huge with total units over 1 billion and unit growth forecast in excess of 20% over the next several years
**Given the technology advantages they see a long runway ahead in mobile.
**Pc’s are declining but they see growth rate in business for 2014 the same as 2013.
**Tablets are 5% of revenue expect that to grow
**China a little over 10% of revenue
**October 24th, 1Q:2014 earnings highlights:
**Revenues were $222.6 million up 75% from $127 million
**TTM Revenues were $759.2 million up 40% from $541.8 million
**Cost of Revenues were $113.3 million up 41% from $66.5 million
**Gross Profit were $109.3 million up 80% from $60.6 million
**Gross Profit Margin were 49%
**TTM Gross Profit were $374.5 million up 47% from 254.9 million
**TTM Gross Profit Margin were 49%
**Net Income were $34.9 million up 481% from $6 million
**1Q Earnings per share were $1.00 up 455% from $.18
**TTM Earnings per share were $3.71 up 173% from $1.36
**Diluted share count were 35,020,000 down from 35,150,000 Quarter over Quarter
**Cash Flow for the quarter was $18.9 million up 40% from $13.5 million
**TTM cash flow was $59 million down 23% from $77.1 million
**Cash $331.6 million up from 355.3 million
**Debt 0
**Inventory for the quarter were 57,293,000 up 15% from 49,948,000
**R & D for the quarter were $40.4 million up 19% from $32.8 million
**Percentage of R&D to revenue 18%
**Trading range between $38.33 to $56.55
**P/E range 10.33 to 15.24
**P/S range 1.77 to 2.6
**Stock went down $7.59 the day after the report
**Significant Mobile and Tablet design wins
**Revenue mix from PC and non-PC applications was approximately 27% and 73% respectively
**Backlog of approximately $117 million
**Announced acquisition of Validity which enters them into the fingerprint id market.
**Syna expects topline growth of over 50% over the same period last year.
**Rick Bergman states that volumes get really large in Q2 and Q3.
**Bought back 3.5% of shares outstanding but paid for the Validity transaction with stock. They used 50 million in stock buyback and still have 110 million authorization left.
**January 23rd, 2Q:2014 earnings highlights:
**Revenues were $205.8 million up 44% from $143 million
**TTM Revenues were $821.9 million up 52% from $539.4 million
**Cost of Revenues were $109 million up 47% from $74 million
**Gross Profit were $94.5 million up 37% from $69 million
**Gross Profit Margin were 46%
**TTM Gross Profit were $400 million up 57% from 255.2 million
**TTM Gross Profit Margin were 49%
**Net Income were $17.3 million up 56% from $11.1 million
**2Q Earnings per share were $.48 up 45% from $.33
**TTM Earnings per share were $3.83 up 219% from $1.20
**Diluted share count were 36,059,000 up 3% from 35,020,000 Quarter over Quarter
**Cash Flow for the quarter was $49.7 million up 373% from $10.5 million
**TTM cash flow was $98.2 million up 62% from $60.7 million
**Cash $369.4 million up 11% from 331.6 million
**Debt 2.3 million
**Inventory for the quarter were 51,746,000 down 10% from 57,293,000
**R & D for the quarter were $45.9 million up 34% from $34.3 million
**Percentage of R&D to revenue 22%
**Trading range between $43.94 to $63.76
**P/E range 11.47 to 16.65
**P/S range 1.93 to 2.80
**The stock went up $5.42 the day after the report
**Expect Validity acquisition to be accretive by end of fiscal year, earlier than previously anticipated.
**Revenue mix from PC and non-PC applications was approximately 35% and 65% respectively
**PC mix starting to come back a little.
**Backlog of approximately $117 million
**GAAP eps was impacted by additional operating costs and acquisition of Validity which closed November 7th
**Recent design wins with Amazon, Dell, Lenovo, Acer. ClearPad series 7 solution provided the most accurate finger and small object detection on the market.
**Finger print solution alone should grow from 30 million units last year to .5 billion units in two years. They essentially have full share in the market for enterprise notebooks incorporating fingerprint solutions.
**Expect to see a number of solutions in the second half of the year built around fingerprint technology on cellphones.
**They paid approximately $90.3 million in a combination of cash and 1.6 million shares of common stock for Validity. They also may pay up to an additional $162.5 million in earn-out payment primarily in cash
**They expect 20% fiscal growth per year and whatever Validity can add upon that.
**April 24th, 3Q:2014 earnings highlights:
**Revenues were $204.3 million up 25% from $163.3 million
**TTM Revenues were $862.8 million up 51% from $571 million
**Cost of Revenues were $109.5 million up 33% from $82.2 million
**Gross Profit were $92.4 million up 14% from $81.1 million
**Gross Profit Margin were 45%
**TTM Gross Profit were $411.4 million up 50% from 274.1 million
**TTM Gross Profit Margin were 48%
**Net Income were ($40.1) million down from $36.4 million
**3Q Earnings per share were $(1.12) down from $1.07
**TTM Earnings per share were $1.62 down from $1.94
**Diluted share count were 35,685,000 down from 36,059,000 Quarter over Quarter
**Cash Flow for the quarter was ($9.8) million down from $15.6 million
**TTM cash flow was $85.5 million up 46% from $58.7 million
**Cash $391.5 million up 10% from 355.3 million
**Debt 0
**Inventory for the quarter were 18,086,000 down from 51,746,000
**R & D for the quarter were $49.4 million up 35% from $36.7 million
**Percentage of R&D to revenue 24%
**Trading range between $53.06 to $69.00
**P/E range 32.75 to 42.59
**P/S range 1.35 to 2.85
** Revenue mix from mobile and PC products was approximately 74% and 26%, respectively. Fingerprint ID
products have been classified according to type of device.
**Revenue from mobile products of $150.7 million was up 44% year-over-year. Mobile products revenue includes
all touchscreen, video display, and applicable fingerprint ID products.
**Revenue from PC products totaled $53.5 million, a decrease of 9% year-over-year.
**Net revenue for the third quarter of fiscal 2014 was $204.3 million, an increase of 25% compared with $163.3
million for the comparable quarter last year. Third quarter revenue reflects the first full quarter of the
fingerprint ID business
**Paid $19 million in cash, issued 1,557,559 shares worth 70.3 million and have 37.5 million on contingency for the
Validity finger print technology. The contingent consideration make requires earn out consideration payments up to 162.5 million, calculated quarterly, based primarily on sales, ending on March 31, 2016.
**July 31st, 4Q:2014 earnings highlights:
**Revenues were $314.9 million up 37% from $230.2 million
**TTM Revenues were $947.5 million up 43% from $663.6 million
**Cost of Revenues were $172.7 million up 50% from $115.1 million
**Gross Profit were $139.8 million up 21% from $115.1 million
**Gross Profit Margin were 44%
**TTM Gross Profit were $436.1 million up 34% from 325.8 million
**TTM Gross Profit Margin were 46%
**Net Income were 34.5 million down 24% from $45.3 million
**4Q Earnings per share were $.89 down 31% from $1.29
**TTM Earnings per share were $1.26 down 56% from $2.89
**Diluted share count were 38,817,000 up from 35,685,000 Quarter over Quarter
**Cash Flow for the quarter was 34.1 million up 144% from $14 million
**TTM cash flow was $92.9 million up 73% from $53.6 million
**Cash $447.2 million up 14% from $391.5 million QoQ
**Debt $57.4 million (contingency consideration)
**Inventory for the quarter were 82,311,000 up from 18,086,000 QoQ
**R & D for the quarter were $56.9 million up from $40.9 million
**Percentage of R&D to revenue 18%
**Trading range between $56.50 to $93.27
**P/E range 44.84 to 74.02
**P/S range 2.31 to 3.03
** Revenue mix from mobile and PC products was approximately 77% and 23%, respectively. Fingerprint ID
products have been classified according to type of device.
**Revenue from mobile products of $242.9 million was up 40% year-over-year. Mobile products revenue includes
all touchscreen, video display, and applicable fingerprint ID products.
**Revenue from PC products totaled $72.0 million, an increase of 26% year-over-year, and includes applicable
fingerprint ID products.
**Oct 23, 1Q:2015 earnings highlights:
**Revenues were $282.7 million up 27% from $222.6 million
**TTM Revenues were $1.008 billion up 33% from $759.2 million
**Cost of Revenues were $158.5 million up 40% from $113.3 million
**Gross Profit were $124.2 million up 14% from $109.3 million
**Gross Profit Margin were 44%
**TTM Gross Profit were $451 million up 46% from 308.1 million
**TTM Gross Profit Margin were 45%
**Net Income were 26.6 million down 24% from $34.9 million
**1Q Earnings per share were $.68 down 32% from $1.00
**TTM Earnings per share were $.93 down 75% from $3.69
**Diluted share count were 39,227,000 up from 38,817,000 Quarter over Quarter
**Cash Flow for the quarter was $40.8 million up 116% from $18.9 million
**TTM cash flow was $114.8 million up 95% from $59 million
**Cash $449.8 million up from $447.2 million QoQ
**Debt $46.2 million (contingency consideration)
**Inventory for the quarter were 5,863,000 down from 82,311,000 QoQ
**R & D for the quarter were $57.5 million up 42% from $40.4 million
**Percentage of R&D to revenue 20%
**Trading range between $61.23 to $87.85
**P/E range 65.84 to 94.46
**P/S range 2.56 to 3.42
**DSO = 62 days
**Inventory turns = 8
**Close of Renesas SP Drivers acquisition completed earlier than anticipated
**December quarter revenue expected to be up more than double year-over-year
**Revenue mix from mobile and PC products was approximately 71% and 29%, respectively. Fingerprint ID products have been classified according to type of device.
**Revenue from mobile products of $199.7 million was up 23% year-over-year. Mobile products revenue includes all touchscreen, video display, and applicable fingerprint ID products.
**Revenue from PC products totaled $83.0 million, an increase of 38% year-over-year, and includes applicable fingerprint ID products.
**Share based compensation is at 3%
Income Statement
Revenue this quarter was up 27%. Surprisingly pc product applications were up 38.5%, they expected pc products to stay in decline. Mobile products were up 22.8% YoY. Mobile products were down to 70.6% of revenue from 73.1% and pc product applications were up 29.4% up from 26.9%. The increase in pc product applications was due to higher unit sales and the pc-based biometric fingerprint authentication. They are now sitting at more than a billion dollars in revenue TTM.
Cost of Revenue was up 40%. This was primarily due to amortization of acquired intangibles recognized in the quarter as well as a higher mix of module products, which generally carry a lower margin than chip products.
Their net income was down 24% yoy. This was mainly due to a 42% increase in R&D and a 45% increase in SG&A. They have been steadily increasing R&D quarter over quarter. They have to stay on top of the competition. This quarter the increase was due to increase in personnel-related costs and the acquisition of Validity. A $4.6 million increase in infrastructure costs and a $1.5 million increase in share based compensation. The SG&A has been going up because of their acquisitions. A $6.4 million increase due to personnel-related costs a $2.2 million increase infrastructure-related costs and a $.9 million increase in share-based compensation costs. Hopefully we will see this come down in the coming year. The acquisitions that they have been taking on in the last few quarters has been weighing heavily on their earnings per share which has driven their p/e up. They were considered cheap before they went on this acquisition. In order to pay for these acquisitions they have used their shares,debt, and also cash. While QoQ their share increase was only up 1% their increase YoY was up 12%. So while Revenue is going up net income is coming down and shares are going up. The income statement is weaker because of this.
In connection with their acquisition of RSP they will have additional amortization charges which will affect their cost of revenue. These additional charges will cause future gross margins to decline for the remainder of fiscal 2015.
Balance Sheet
They now have $449.8 million dollars on their balance sheet. This is flat YoY. Their inventory is also flat Yoy. Their contingency debt is down QoQ. These contingency are being paid out due to the acquisitions they have made and are based on sales. The contingency for Validity is over in March 2016 and contingency for Pacinian will be over in June 2016. The balance sheet is neutral this quarter.
Cash Flow
Cash flow for the quarter was up 116%. Their share based compensation was at 9.5 million, 3% of revenue. The large increase to cash flow was due to $26.6 million of net income plus non-cash charges of $13.3 million, and a $20.6 million change in operating assets and liabilities. Part of this was a $5.9 million decrease in inventory. DSO increased from 56 days to 62 days and inventory turns increased from 6 to 8. The cash flow statement is positive this quarter.
Conclusion
With the addition of RSP, Synaptics thinks this will increase their addressable market by 50%. This will allow them to address the lower end market also. While RSP is in Apple, Synaptics is playing this down. They are not sure that Apple will keep it in their phones. They have now made two very important acquisitions recently. RSP which will allow them to put driver chips along with their touch screens to create TDDI and Validity which gives them the ability of fingerprint id. Both of these acquisitions push them forward in the tablet and smartphone market.
Synaptics has auction rate securities (ARS). Since 2008 all companies have failed to settle these auctions and Synaptics has been writing them down. Instead of taking a loss Synaptics has decided not to sell the ARS investments. You can read more about these investments here.
http://en.wikipedia.org/wiki/Auction_rate_security
Revenue is growing and Synaptics expects Revenue for the next quarter to double. The high end of smart phone has been slowing down for the company since the release of the Iphone6 and 6+. But with the acquisition of RSP they hope to change this around. Even if they are unable to get into the Iphone they believe this acquisition will allow them to get into the lower end smart phone market. With the products they are selling now they are mostly in the high end market. With the cost of the acquisitions they have been making that it has been driving down their margins but after fiscal 2015 we should see the margins pick up. I am keeping my eye on the revenue’s and how they are growing.
Andy
Long Syna and weight proportional