Synaptics Reports Results for Second Quarter of Fiscal 2010

-- Net revenue of $133.3 million, up 11% sequentially

-- Non-PC revenue grew 33% sequentially

-- Continued innovation with Scrybe(TM) and Fuse(TM) introductions

-- Retired $63 million of debt; repurchased 783,000 shares of stock

Jan 21, 2010, 16:15 ET from Synaptics

SANTA CLARA, Calif., Jan. 21 /PRNewswire-FirstCall/ -- Synaptics (Nasdaq: SYNA), a leading developer of human interface solutions for mobile computing, communications, and entertainment devices, today reported financial results for the second fiscal quarter ended December 31, 2009.  

Net revenue for the second quarter of fiscal 2010 was $133.3 million, an increase of approximately 11% over net revenue of $119.6 million for the previous quarter and a decrease of approximately 6% from net revenue of $141.5 million for the second quarter of fiscal 2009.

GAAP net income for the second quarter of fiscal 2010 was $12.2 million, or $0.35 per diluted share, compared with net income of $9.8 million, or $0.27 per diluted share, for the previous quarter and $17.6 million, or $0.50 per diluted share, for the second quarter of fiscal 2009.  

Non-GAAP net income for the second quarter of fiscal 2010, which excludes non-cash charges for interest expense and share-based compensation, was $21.7 million, or $0.62 per diluted share, compared with net income of $17.2 million, or $0.48 per diluted share, for the previous quarter and net income of $29.5 million, or $0.84 per diluted share, for the second quarter of fiscal 2009.  (See attached table for a reconciliation of GAAP to non-GAAP results.)  

"Robust demand for Synaptics' touch solutions drove solid results for the December quarter," stated Tom Tiernan, CEO.  "Synaptics continues its leadership in innovation, and our design activity remains strong. At the recent CES show, we experienced strong interest in our new Scrybe gesture workflow solution and the Fuse concept phone, demonstrating new usage models made possible with our technology.  As a market leader in capacitive touch solutions, Synaptics is well positioned to capitalize on expanding market opportunities by delivering advanced designs that generate compelling value to leading OEMs and their customers."

PC revenue of $73.6 million represented 55% of total revenue for the quarter. Synaptics continued to drive increasing penetration of its multi-finger gesture enabled TouchPads™ and innovative product offerings, such as ClickPad™.  

Non-PC revenue of $59.7 million comprised 45% of total revenue for the quarter and grew 33% sequentially.  Non-PC revenue growth was driven by increasing adoption of Synaptics' capacitive touchscreen solutions by major mobile handset manufacturers and strong demand for personal entertainment devices.  

Cash and short-term investments at December 31, 2009 totaled $140.0 million.  Cash flow from operations for the quarter was $25.7 million. The Company used $63.0 million to retire all but $2.3 million of its 0.75% convertible notes and used $19.1 million to buy back approximately 783,000 shares of its common stock under its stock repurchase program.

Kathy Bayless, CFO, added, "Considering backlog of approximately $58 million entering the quarter, expected product mix, customer order patterns, and customer forecasts, we anticipate revenue in the March quarter to be between $110 million and $115 million, an increase of 9% to 14% over the comparable quarter last year.  Taking into account first half results, design wins, customer forecasts, and visibility into our pipeline of new business opportunities, we anticipate fiscal 2010 revenue to be in the range of $495 million to $505 million."

In the December quarter, the Company identified a calculation error in the third-party equity accounting software commonly used in industry, resulting in an understatement of previously reported non-cash share-based compensation.  The cumulative error to GAAP net income since the adoption in fiscal 2006 of FAS123R was $3.1 million and was determined to be immaterial to previously reported financial results.  In accordance with current accounting guidance, the December quarter GAAP results reflect the cumulative impact of correcting the calculation error.  The correction did not impact non-GAAP results.

Earnings Call Information

The Synaptics second quarter fiscal 2010 teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time, on Thursday, January 21, 2010, during which the Company will provide forward-looking information. To participate on the live call, analysts and investors should dial 877-941-2068 at least ten minutes prior to the call.  Synaptics will also offer a live and archived webcast of the conference call, accessible from the "Investor Relations" section of the Company's Web site at www.synaptics.com.

About Synaptics Incorporated

Synaptics is a leading developer of human interface solutions for mobile computing, communications, and entertainment devices. The Company creates interface solutions for a variety of devices including notebook PCs, PC peripherals, digital music players, and mobile phones. The TouchPad™, Synaptics' flagship product, is integrated into a majority of today's notebook computers. Consumer electronics and computing manufacturers use Synaptics' solutions to enrich the interaction between humans and intelligent devices through improved usability, functionality, and industrial design. The Company is headquartered in Santa Clara, California. www.synaptics.com

NOTE: Synaptics, Scrybe, Fuse, TouchPad, ClickPad, and the Synaptics logo are trademarks of Synaptics in the United States and/or other countries.

Use of Non-GAAP Financial Information

In evaluating its business, Synaptics considers and uses net income per share excluding share-based compensation, non-cash interest charges, and unusual or non-recurring items as a supplemental measure of operating performance.  Net income excluding share-based compensation, non cash interest charges, and unusual or non-recurring items is not a measurement of the Company's financial performance under GAAP and should not be considered as an alternative to GAAP net income. The Company presents net income excluding share-based compensation, non-cash interest charges, and unusual or non-recurring items because it considers it an important supplemental measure of its performance. The Company believes this measure facilitates operating performance comparisons from period to period by eliminating potential differences in net income caused by the existence and timing of non-cash compensation charges, non-cash interest charges, and unusual or non-recurring items. Net income excluding share-based compensation, non-cash interest charges, and unusual or non-recurring items has limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company's GAAP net income.  The principal limitations of this measure are that it does not reflect the Company's actual expenses and may thus have the effect of inflating its net income and net income per share.  

Forward-Looking Statements

This press release contains "forward-looking" statements about Synaptics, as that term is defined under the federal securities laws. Synaptics intends such forward-looking statements to be subject to the safe harbor created by those laws. Such forward-looking statements include, but are not limited to, statements regarding the rapid expansion of interest in the Company's leadership in innovation and its strong design activity, the potential for success of the Company's Scrybe gesture solution and Fuse concept phone, the Company's positioning to capitalize on current and future market opportunities by delivering advanced designs that generate compelling value to leading OEMs and their customers, the Company's penetration of its multi-finger gesture enabled touchpads in consumer laptops as well as the adoption of new product offerings, Synaptics' anticipated revenue for the March quarter of fiscal 2010, and Synaptics' anticipated revenue for fiscal 2010.  Synaptics cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein.  Such factors include, but are not limited to, (a) demand for Synaptics' products, (b) market demand for OEMs' products using Synaptics' solutions, (c) changing market demand trends in the markets it serves, (d) the success of our customers' products that utilize our product solutions, (e) the development and launch cycles of our customers' products, (f) market pressures on selling prices, (g) changes in product mix, (h) the market acceptance of our product solutions compared with competitors solutions, (i) general economic conditions, including consumer confidence and demand, and (j) other risks as identified from time to time in Synaptics' reports filed with the Securities and Exchange Commission, including Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K for the fiscal year ended June 30, 2009. All forward-looking statements are based on information available to Synaptics on the date hereof, and Synaptics assumes no obligation to update such statements.

(Tables to Follow)

SYNAPTICS INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

December 31,

June 30,

2009

2009 *

Assets

Current assets:

Cash and cash equivalents

$                        140,033 

$                        169,036 

Short term investments

22,934 

Total cash, cash equivalents, and short-term investments

140,033 

191,970 

Receivables, net of allowances of $513 and $513, respectively

100,302 

84,739 

Inventories

15,837 

14,950 

Prepaid expenses and other current assets

4,171 

3,094 

Total current assets

260,343 

294,753 

Property and equipment, net

25,425 

25,431 

Goodwill

1,927 

1,927 

Non-current auction rate securities

28,952 

28,767 

Other assets

18,110 

25,272 

Total assets

$                        334,757 

$                        376,150 

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$                          52,909 

$                          32,210 

Accrued compensation

8,069 

8,450 

Income taxes payable

12,806 

9,128 

Current deferred tax liability

10,225 

Other accrued liabilities

15,464 

11,813 

Note payable

63,234 

Total current liabilities

89,248 

135,060 

Convertible senior subordinated notes

2,305 

Other liabilities

19,238 

18,484 

Commitments and contingencies

Stockholders' equity:

Preferred stock;

$.001 par value; 10,000,000 shares authorized;

no shares issued and outstanding

Common stock;

$.001 par value; 60,000,000 shares

authorized; 44,166,949 and

43,779,011 shares issued, and

33,295,636 and 34,690,911

shares outstanding, respectively

44

44 

Additional paid in capital

315,954 

293,666 

Less: 10,871,313 and 9,088,100

treasury shares,

respectively, at cost

(281,932)

(237,387)

Retained earnings

188,185 

166,154 

Accumulated other comprehensive income

1,715 

129 

Total stockholders' equity

223,966 

222,606 

Total liabilities and stockholders' equity

$                        334,757 

$                        376,150 

*Adjusted for retrospective application of ASC 470-20.  Refer to our earnings release dated October 23, 2009 for the impact of the retrospective application of ASC 470-20.  

SYNAPTICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

December 31,

December 31,

2009

2008 *

2009

2008 *

Net revenue

$               133,323 

$              141,523 

$              252,915 

$             257,380 

Cost of revenue (1)

79,492 

83,717 

150,762 

152,981 

Gross margin

53,831 

57,806 

102,153 

104,399 

Operating expenses

Research and development (1)

22,442 

15,940 

42,417 

31,745 

Selling, general, and administrative (1)

16,575 

13,714 

30,339 

28,284 

Total operating expenses

39,017 

29,654 

72,756 

60,029 

Operating income

14,814 

28,152 

29,397 

44,370 

Interest income

241 

974 

572 

2,232 

Interest expense

(968)

(1,739)

(2,391)

(4,280)

Loss on early retirement of debt

(1,053)

(1,053)

Net loss on investments

(6,509)

(443)

(6,509)

Income before income taxes

14,087 

19,825 

27,135 

34,760 

Provision for income taxes (2)

1,860 

2,250 

5,104 

4,474 

Net income

$                 12,227 

$                17,575 

$                22,031 

$               30,286 

Net income per share:

Basic

$                     0.36 

$                    0.52 

$                    0.65 

$                   0.90 

Diluted

$                     0.35 

$                    0.50 

$                    0.62 

$                   0.86 

Shares used in computing net income per share:

Basic

33,611 

33,833 

33,976 

33,736 

Diluted

34,936 

35,057 

35,477 

35,311 

(1) Includes share-based compensation charges of:

Cost of revenue

$                      815 

$                     402 

$                  1,263 

$                    813 

Research and development

4,646 

1,962 

7,444 

3,978 

Selling, general, and administrative

6,635 

3,292 

10,437 

6,746 

$                 12,096 

$                  5,656 

$                19,144 

$               11,537 

(2) Includes tax benefit for share-based compensation charges of:

$                   3,106 

$                  1,769 

$                  5,307 

$                 3,737 

Non-GAAP net income per share:

Basic

$                     0.65 

$                    0.87 

$                    1.15 

$                   1.40 

Diluted

$                     0.62 

$                    0.84 

$                    1.10 

$                   1.34 

*Adjusted for retrospective application of ASC 470-20.  Refer to our earnings release dated October 23, 2009 for the impact of the retrospective application of ASC 470-20.

SYNAPTICS INCORPORATED

Computation of Basic and Diluted Net Income Per Share

(in thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

December 31,

December 31,

2009

2008 *

2009

2008 *

Numerator:

Basic and diluted net income

$           12,227

$            17,575

$             22,031

$              30,286

Denominator:

Shares, basic

             33,611

              33,833

               33,976

                33,736

Effect of dilutive share-based awards

               1,325

                1,224

                 1,501

                  1,575

Shares, diluted

             34,936

              35,057

               35,477

                35,311

Net income per share:

Basic

$               0.36

$                0.52

$                 0.65

$                  0.90

Diluted

$               0.35

$                0.50

$                 0.62

$                  0.86

Computation of non-GAAP basic and diluted net income per share (unaudited):

Numerator:

Reported net income

$           12,227

$            17,575

$             22,031

$              30,286

Non-GAAP adjustments (net of tax):

Loss on early retirement of debt

                     -  

                   643

                       -  

                     643

Net loss on investments

                     -  

                6,509

                    443

                  6,509

Non cash interest expense

                  483

                   846

                 1,192

                  2,094

One-time tax charge

                     -  

                     -  

                 1,445

                        -  

Share-based compensation

               8,990

                3,887

               13,837

                  7,800

Non-GAAP basic and diluted net income

$           21,700

$            29,460

$             38,948

$              47,332

Non-GAAP net income per share:

Basic

$               0.65

$                0.87

$                 1.15

$                  1.40

Diluted

$               0.62

$                0.84

$                 1.10

$                  1.34

*Adjusted for retrospective application of ASC 470-20.  Refer to our earnings release dated  October 23, 2009 for the impact of the retrospective application of ASC 470-20

For more information contact:

Alex Wellins

The Blueshirt Group

415-217-5861

alex@blueshirtgroup.com

SOURCE Synaptics



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