Synaptics (SYNA) Q4 Earnings Beat Estimates, Revenues Miss

Synaptics Incorporated SYNA delivered fourth-quarter fiscal 2018 non-GAAP earnings of $1 per share that beat the Zacks Consensus Estimate of 92 cents. The figure also came in line with the upper end of the guided range of 80 cents to $1 per share. However, the figure declined 15.3% from the year-ago quarter.

Revenues declined approximately 8.9% from the year-ago quarter to $388.5 million and were within the guidance range of $370-$410 million. The figure lagged the Zacks Consensus Estimate of $395 million.

Segmental Highlights

In order to maintain ease of reporting, Synaptics’ fingerprint products are classified according to the type of device.

Mobile products (57% of total revenues) include display driver, touchscreen and applicable fingerprint products. This segment reported revenues of $221.5 million, declining 36% on a year-over-year basis. Weakness in the smartphone market hurt mobile products’ revenues.

The company expects the weakness to continue in the second half of the calendar year as well. Nevertheless, management is looking forward to restructuring the optical finger print business of the mobile segment.

Management is optimistic about the company’s touch and display technologies for LCD smartphones. They are positive about the performance of the Chip-on-film (CoF) solutions, which enhance the display of LCD phones, with TDDI and DDIC CoF solutions already available in the market.

The company’s ClearView OLED was adopted by ASUS for its high-performance smartphone. Management is also hopeful about being able to cater to OEM demand for OLED panels in China.

Consumer IoT products (25%) revenues came in at $96.4 million, up 319% from the year-ago quarter. Per the company data, approximately $27.7 million of mobile revenues in the reported quarter have been reclassified as Consumer IoT revenues.

Notably, a surge in the demand for smart homes, smart devices, Automotive, VR, as well as voice and video-enabled products is aiding this segment.

Synaptics’ AudioSmart far-field voice DSP technology has been adopted by Baidu for its Duer Mobile Accessory platform. Additionally, Samsung also announced that it has selected Synaptics’ far-field voice DSP for its digital assistant Bixby.

The company’s VideoSmart portion of the IoT segment has also gained traction with its multimedia SOC being used by its customers to deliver 4K Ultra HD content to subscribers.

The automotive portion of the IoT segment has been boosted by an increase in demand for the company’s touch controllers, display drivers, fingerprint sensors, and voice technologies.

PC products (18%) generated revenues of $70.6 million, which grew 23% year over year on solid partnerships with the likes of Microsoft MSFT and Advanced Micro Devices AMD among others.

Management is positive about the new Match-in-Sensor fingerprint solution expected to start shipping in the ongoing quarter.

Synaptics Incorporated Price, Consensus and EPS Surprise

Synaptics Incorporated Price, Consensus and EPS Surprise | Synaptics Incorporated Quote

Operating Details

Synaptics reported non-GAAP gross margin of 37.8%, which expanded 520 basis points ("bps") on a year-over-year basis, was above the high end of the guided range of 36-37%. This can be attributed to acquisitions that the company completed a year back. These boosted the company’s capabilities in the high-margin IoT segment.

Non-GAAP selling, general and administrative ("SG&A") expenses increased 14.3% year over year to $27.9 million while research and development "(R&D") expenses surged 21.2% to $79.6 million.

Consequently, non-GAAP operating income declined 19.6% to $39.3 million.

Balance Sheet & Cash Flows

As on Jun 30, 2018, cash & cash equivalents were $301 million, up from $283.4 million, reported in the previous quarter.

Synaptics generated net cash from operations of $8 million, down from $34 million in the previous quarter.

Full-Year 2018 Details

Synaptics delivered fiscal 2018 non-GAAP earnings of $4.05 per share, down 17% from the previous fiscal.

Revenues declined 5% year over year to $1.63 billion.

Guidance

Non-GAAP earnings in first-quarter fiscal 2019 are expected to come between $1.05 cents and $1.25 per share. The Zacks Consensus Estimate is currently pegged at $1.23 cents per share, indicating a 19.42% increase year over year.

For first-quarter fiscal 2019, revenues are anticipated to be in the range of $390-$430 million, indicating a decline of 1.7% year over year at the mid-point.

The current Zacks Consensus Estimate is pegged at $427.5 million.

Management expects revenue mix from Mobile, Consumer IoT and PC products to be approximately 62%, 22% and 16%, respectively.

Non-GAAP gross margin is expected to be in the range of 37-38%. Non-GAAP operating expenses are anticipated to be in the range of $105-$109 million.

Zacks Rank & Stocks to Consider

Synaptics currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the same industry is Cirrus Logic, Inc. CRUS, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Cirrus Logic is 11.1%.

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