SYNAPTICS FINANCIAL & OPERATING HIGHLIGHTS
OPERATING DATA - in millions (except per share and percentage)
FISCAL YEAR ENDED JUNE
Net Revenue
Gross Margin Percentage
Operating lncome/(Loss)
Net lncome/(Loss)
Net lncome/(Loss) Per Share - Diluted
2019
$1,472.2
2020
$1,333.9
2021
$1,339.6
2022
$1,739.7
2023
$1,355.1
33.8%
$(6.3)
40.7%
$68.9
$(22.9)
$118.8
45.6%
$147.0
$79.6
54.2%
$350.4
$257.5
$6.33
$13.54
52.8%
$154.3
$73.6
$1.83
$8.12
GAAP
Non-GAAP*
$(0.66)
$4.00
$3.41
$5.95
$2.08
$8.26
* Non-GAAP results presented exclude certain non-cash expenses and other items that may be either recurring
or non-recurring that we do not consider to be indicative of our core ongoing operating performance. See the
Non-GAAP financial information and the GAAP to non-GAAP reconciliation at the end of this report.
BALANCE SHEET AND CASH FLOW DATA - in millions (except per share amounts)
FISCAL YEAR ENDED JUNE
Cash and cash equivalents
Total Assets
Stockholders' Equity
Book Value Per Diluted Share
2019
$327.8
2020
$763.4
2021
$836.3
2022
$824.0
2023
$924.7
$1,409.8
$1,693.8
$2,226.8
$2,858.1
$2,611.4
$657.3
$19.00
$819.1
$23.54
$25.25
$31.12
Cumulative Cash Used For Share Repurchases
$1,192.4
$1,222.6
$1,222.6
$1,222.6
Cash Flow From Operating Activities
$154.2
$221.8
$319.2
$462.7
$30.93
$1406.1
$331.5
$967.2
$1,266.4
$1,243.4
Our annual meeting of stockholders will take place on Tuesday, October 24, 2023, at 9:00 a.m. Pacific time
and will be held via live interactive webcast on the internet at www.virtualshareholdermeeting.com/syna2023
CORPORATE INFORMATION
EXECUTIVE TEAM
Michael Hurlston
President & Chief Executive Officer
Dean Butler
Saleel Awsare
Michael Brooker
Satish Ganesan
Vikram Gupta
Lori Stahl
Senior Vice President & Chief Financial Officer
Senior Vice President & General Manager of Enterprise/Mobile
Senior Vice President, Information Technology & Chief Information Officer
Senior Vice President & General Manager of Automotive/VR, Chief Strategy Officer
Senior Vice President & General Manager, IoT Processors and Chief Product Officer
Senior Vice President & Chief People Officer
Venkat Kodavati
Senior Vice President & General Manager, Wireless Products
Todd Lepinski
Senior Vice President, Worldwide Sales
John McFarland
Senior Vice President, General Counsel & Secretary
Kermit Nolan
Divyesh Shah
Corporate Vice President & Chief Accounting Officer
Senior Vice President, Operations
BOARD OF DIRECTORS
Nelson Chan
Chair of the Board, Synaptics
Jeffrey Buchanan
Independent Consultant
Keith Geeslin
Partner, Francisco Partners
Susan Hardman
Former Executive
Vivie "YY" Lee
James Whims
Independent Consultant
Partner, Alsop - Louie Partners
STOCKHOLDERS MEETING
Michael Hurlston
President & Chief Executive Officer, Synoptics
Patricia Kummrow
Vice President, Network and Edge Group, and General Manager, Ethernet Division, Intel Corporation
ANNUAL REPORT COPIES
Stockholders may obtain copies of the company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, without charge from Synoptics Incorporated, 1109 McKay Drive, San Jose, CA 95131.
Such information is also available on the company's website at www.synaptics.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP
Mission Towers 1, Suite 600
3975 Freedom Circle
Santa Clara, CA 95054
408.367.5764
STOCK TRANSFER AGENT
Equiniti Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
800.937.5449
2023 Letter to Stockholders
As we began our fiscal year, we saw a rapid easing of the supply constraints that had plagued us
for the better part of the past two years. However, we found that during the prolonged period of tightness,
customers had accumulated significant amounts of inventory. On top of that, the world entered
significant economic uncertainty. In response to rising inflation, the U.S. Federal Reserve and other
central banks began rapidly increasing interest rates. Naturally, this had a significant impact on our
business as customers lowered forecasts in response to uncertain enterprise and consumer buying patterns.
The high inventory levels and reduced demand led to weak top-line performance for Synaptics. Sales
declined in each sequential quarter of the fiscal year. After three very successful fiscal years, we
experienced by far our most difficult as a management team.
While the macro-economic driven dynamics were disappointing, the company continued to
maintain its financial discipline, delivering strong annual performance with Non-GAAP gross margins at
a historic high of 60.1% and Non-GAAP earnings per share of $8.12.1 Further, with the support of the
company’s board of directors, our strong cash flows enabled us to repurchase approximately 2 million
shares during the fiscal year, or about 5% of the public shares outstanding.
Strategic Focus of IoT products
Our goal is to be the semiconductor leader for the IoT market. Since 2019, there has been a
remarkable strategic shift at Synaptics, with our IoT portfolio increasing from 21% of our annual sales to
70% in 2023. The incredible transformation in the company’s sales profile was achieved by both smart
organic and inorganic investments. Today, we have a wide array of IoT-centric technologies that enable
us to serve large end markets such as enterprise, consumer and automotive. This gives us a strong
foundation to build from as we look to 2024 and beyond.
Going forward we intend to maintain this strategic focus on IoT and have outlined a new goal for
the company: to grow our annual revenue from our Wireless products to over $1 billion. We believe Wi-
Fi, Bluetooth, GPS, and other wireless connectivity technologies will serve as a central long-term theme
as we embark on our next phase of growth. In addition, we believe the future of our society will include
an ever-increasing number of intelligent devices. As machine learning becomes increasingly prevalent,
we intend to reshape our existing processing technology to create products that intercept this opportunity.
As we go forward, these two product areas, wireless and processors, will be our focus within the IoT
portfolio as they offer us the greatest prospects for sustainable long-term growth.
Looking forward
As we move into fiscal year 2024, we remain confident in our ability to navigate ongoing
economic challenges and expect our customers’ abrupt shift in demand to reverse course over the next
twelve months. Internally, we intend to focus on executing on technology roadmaps which further
enhance stockholder value as we pursue growth in IoT. I want to express my sincere appreciation to our
dedicated employees worldwide as our success would not have been possible if not for their devotion to
our business. I also want to thank our customers, partners, suppliers, and stockholders for their continued
support of Synaptics.
Michael Hurlston
President and CEO
September 2023
1 A reconciliation of GAAP to Non-GAAP gross margins and earnings per share can be found at the end of this annual report.
Statement Regarding Forward-Looking Information
This 2023 Annual Report contains forward-looking statements that are subject to the safe harbors created
under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Act of 1934, as amended (the
“Exchange Act”). Forward-looking statements give our current expectations and projections relating to our financial
condition, results of operations, plans, objectives, future performance and business, and can be identified by the fact
that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such
as “expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “target,” “strategy,” “continue,” “may,” “will,”
“should,” variations of such words, or other words and terms of similar meaning. All forward-looking statements
reflect our best judgment and are based on several factors relating to our operations and business environment, all of
which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to,
the risks as identified in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Business” sections in this 2023 Annual Report, and other risks as identified from time to
time in our Securities and Exchange Commission reports. Forward-looking statements are based on information
available to us on the date hereof, and we do not have, and expressly disclaim, any obligation to publicly release any
updates or any changes in our expectations, or any change in events, conditions, or circumstances on which any
forward-looking statement is based. Our actual results and the timing of certain events could differ materially from
the forward-looking statements. These forward-looking statements do not reflect the potential impact of any mergers,
acquisitions, or other business combinations that had not been completed as of the date of this 2023 Annual Report.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☑☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 24, 2023
Or
For the transition period from
to
Commission File Number 000-49602
SYNAPTICS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1109 McKay Drive
San Jose, California
(Address of principal executive offices)
77-0118518
(I.R.S. Employer
Identification No.)
95131
(Zip Code)
(408) 904-1100
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.001 per share
Trading Symbol
SYNA
Name of each exchange on which registered
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any
of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of Common Stock held by nonaffiliates of the registrant (34,662,099 shares), based on the closing price of the registrant’s Common
Stock as reported on the Nasdaq Global Select Market on December 23, 2022 of $94.15, was $3,263,436,621. For purposes of this computation, all officers, directors,
and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10%
beneficial owners are, in fact, affiliates of the registrant.
As of August 11, 2023, there were 38,584,203 shares of the registrant's common stock outstanding.
Documents Incorporated by Reference
Portions of Part III of this Form 10-K are incorporated by reference from the registrant’s definitive proxy statement for its 2023 annual meeting of stockholders,
which will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K. Except with respect to
information specifically incorporated by reference in this Form 10-K, the proxy statement is not deemed to be filed as part of this Form 10-K.
SYNAPTICS INCORPORATED
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 24, 2023
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS .................................................................................................................................................
ITEM 1A. RISK FACTORS ........................................................................................................................................
ITEM 1B. UNRESOLVED STAFF COMMENTS.....................................................................................................
PROPERTIES.............................................................................................................................................
ITEM 2.
ITEM 3.
LEGAL PROCEEDINGS...........................................................................................................................
ITEM 4. MINE SAFETY DISCLOSURES ..............................................................................................................
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES ..................................................................
ITEM 6. RESERVED................................................................................................................................................
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ..............................................................................................................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ..........................
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........................................................
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ................................................................................................................
ITEM 9A. CONTROLS AND PROCEDURES ..........................................................................................................
ITEM 9B. OTHER INFORMATION ..........................................................................................................................
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ...................................
ITEM 11. EXECUTIVE COMPENSATION .............................................................................................................
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS ...........................................................................................
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE......................................................................................................................................
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ...........................................................................
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .................................................................
ITEM 16. FORM 10-K SUMMARY ..........................................................................................................................
SIGNATURES ..............................................................................................................................................................
1
16
29
29
29
30
30
31
32
44
44
44
44
45
45
46
46
46
46
46
47
50
51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ...................................................................................
F-1
Statement Regarding Forward-Looking Statements
This report on Form 10-K for the year ended June 24, 2023 contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject
to the “safe harbor” created by those sections. Forward-looking statements give our current expectations and projections relating to our financial condition,
results of operations, plans, objectives, future performance and business, and can be identified by the fact that they do not relate strictly to historical or current
facts. Such forward-looking statements may include words such as “expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “target,” “strategy,”
“continue,” “may,” “will,” “should,” variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best
judgment and are based on several factors relating to our operations and business environment, all of which are difficult to predict and many of which are
beyond our control. Such factors include, but are not limited to, the risks as identified in the “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Business” sections in this report on Form 10-K, and other risks as identified from time-to-time in our
Securities and Exchange Commission reports. Forward-looking statements are based on information available to us on the date hereof, and we do not have,
and expressly disclaim, any obligation to publicly release any updates or any changes in our expectations, or any change in events, conditions, or circumstances
on which any forward-looking statement is based. Our actual results and the timing of certain events could differ materially from the forward-looking
statements. These forward-looking statements do not reflect the potential impact of any mergers, acquisitions, or other business combinations that had not been
completed as of the date of this filing.
Statements made in this report, unless the context otherwise requires, include the use of the terms “us,” “we,” “our,” the “company” and “Synaptics”
to refer to Synaptics Incorporated and its consolidated subsidiaries.
ITEM 1.
BUSINESS
Overview
PART I
We are a leading worldwide developer and fabless supplier of premium mixed signal semiconductor solutions that enable
people to engage with connected devices and data, engineering exceptional experiences throughout the home, at work, in the
car and on the go. We supply connectivity, sensors, and AI-enhanced processor solutions to original equipment manufacturers,
or OEMs, that design Internet of Things (IoT) products and devices for automobiles, virtual reality, smartphones, tablets, and
notebook computers. Our current served markets include Internet of Things, or IoT, personal computer, or PC, and Mobile.
Our solutions either contain or consist of our wireless, voice and speech, video, fingerprint, authentication, display driver, or
touch semiconductor solutions, which include our hardware, and, where applicable, firmware and software.
Our website is located at www.synaptics.com. Through our website, we make available, free of charge, all our Securities
and Exchange Commission, or SEC, filings, including our annual reports on Form 10-K, our proxy statements, our quarterly
reports on Form 10-Q, and our current reports on Form 8-K, as well as Form 3, Form 4, and Form 5 Reports for our directors,
officers, and principal stockholders, together with amendments to those reports filed or furnished pursuant to Sections 13(a),
15(d), or 16 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. These reports are available on our
website promptly after their electronic filing with the SEC. You can also read these SEC filings and reports over the Internet
at the SEC’s website at www.sec.gov. Our website also includes corporate governance information, including our Code of
Conduct, our Code of Ethics for the Chief Executive Officer and Senior Financial Officers, and our Board Committee Charters.
The contents of our website, including the content contained in any website addresses or links included elsewhere in this report,
are not incorporated into or deemed to be a part of this report.
We were initially incorporated in California in 1986 and were re-incorporated in Delaware in 2002. Our fiscal year is
the 52- or 53-week period ending on the last Saturday in June. The fiscal years presented in this report were the 52-week
periods ended June 24, 2023, June 25, 2022, and June 26, 2021.
IoT Applications Market
Our IoT market solutions broadly consist of wireless connectivity (Wi-Fi, Bluetooth and global positioning system, or
GPS) products, System-on-Chip, or SoC, products, display and touch integrated circuits for use in automobiles, and a wide
range of audio and video products and solutions. Our products enable smart devices at the edge of a network such as smart
assistant speakers, over-the-top multimedia devices, wireless speakers, voice driven intelligent devices including those
integrating far-field technology, personal voice and audio products, set-top boxes, video interface solutions for docking stations,
high-speed connectivity for virtual reality devices, video surveillance, voice over IP SoCs, image processing solutions for use
in printers, and fax modems. In addition, our automotive solutions include over a decade of mass production experience in
mature touch solutions and display drivers adapted from our mobile consumer business to meet automotive-grade quality
standards.
Within the growing consumer IoT market, we continue to expand our footprint in various devices by bringing converged
video, vision, audio, and voice technologies coupled with artificial intelligence and wireless connectivity capabilities. Our deep
investment in far-field voice technology, our intellectual property portfolio for video, vision, audio and security, and our
significant experience enabling Android-based platforms for service providers, coupled with our focus on enabling high
performance, low power, and highly secure SoC solutions enable us to effectively serve our existing customers and position us
to grow within the addressable market of consumer IoT devices.
PC Product Applications Market
We provide custom and semi-custom product solutions for navigation, cursor control, access to devices or applications
through fingerprint authentication, and human presence detection solutions, for many of the world’s premier PC OEMs. These
functions are offered as both stand-alone and integrated touch pads plus fingerprint biometric solutions and as chipsets with
In addition to notebook applications, other PC product applications for our
integrated visual sensing software algorithms.
technology include peripherals, such as high-end keyboards and accessory touchpads.
We continue to expand our available product offerings through technology development enabling us to increase our
product content within each notebook unit. We are also applying our technologies to enable adoption of fingerprint recognition
solutions to broaden our market opportunities. Based on the strength of our technology and engineering know-how, we believe
we are well positioned to continue to take advantage of opportunities in the PC product applications market.
1
Mobile Product Applications Markets
We believe our intellectual property portfolio, engineering know-how, systems engineering experience, technological
expertise, and experience in providing human experience product solutions to major OEMs position us to be a key technological
enabler for multiple consumer electronic devices targeted to meet the mobile product applications markets. Mobile product
applications include smartphones, tablets, large touchscreen applications, as well as a variety of mobile, handheld, and
entertainment devices.
We believe our existing technologies, our range of product solutions, and our emphasis on ease of use, advanced
functionality, small size, low power consumption, durability, and reliability enable us to serve the markets for mobile product
applications and other electronic devices.
Acquisitions
In February 2023, we completed the acquisition of certain GPS developed technology intangible assets from Broadcom.
These assets expand and enhance our wireless connectivity technology product offerings to our customer base.
In October 2022, we completed the acquisition of Emza Visual Sense, Ltd., or Emza, a developer of ultra-low-power
artificial intelligence visual sensing solutions. Emza's technology extends our position in Edge AI and allows us to serve the
personal computing market with a solution for human presence detection, or HPD.
In December 2021, we completed our merger with DSP Group, Inc, or DSPG, a global provider of voice processing and
wireless chipset solutions for converged communications. DSPG's capabilities in low power AI align with our vision of
embedding more intelligence in connected devices. The addition of DSPG's Ultra Low Energy, or ULE, wireless technology
and Voice over IP, or VOIP, processing solutions enhances our ability to offer and deliver differentiated solutions to our
customer base.
Our Strategy
Our objective is to continue to enhance our position as a leading supplier of premium semiconductor product solutions
for each of the target markets in which we operate, including the IoT applications market, the PC product applications market,
and the mobile product applications markets, with a key focus on expanding our market share. Key aspects of our strategy to
achieve this objective include those set forth below.
Extend Our Technological Leadership
We plan to utilize our extensive intellectual property portfolio, engineering know-how, and technological expertise to
extend the functionality of our current product solutions and offer new and innovative product solutions to customers across
multiple markets. We intend to continue utilizing our technological expertise to reduce the overall size, cost, and power
consumption of our product solutions while increasing their applications, capabilities, and performance. We plan to continue
enhancing the ease of use and functionality of our solutions. We plan to invest in our research and development efforts through
our engineering activities, including advancement of existing technologies, the hiring of key engineering personnel, and
strategic acquisitions and alliances. We believe that these efforts will enable us to meet customer expectations and achieve our
goal of supplying, on a timely and cost-effective basis, easy to use, functional human experience semiconductor product
solutions to our target markets.
2
Focus on and Grow in the IoT Market
We intend to capitalize on the growth of the IoT market including solutions for smart home and home automation, video
delivery over wired and wireless, voice enabled assistants, virtual reality, video interface docking, and wearables. We intend
to build upon our existing innovative and intuitive and intelligent semiconductor product solutions portfolio and continue to
address the evolving portability, connectivity, security, and functionality requirements of these new markets. We will offer
our solutions to existing and potential customers to enable increased functionality, reduced size, lower cost, simplified security,
enhanced industrial design features, and to enhance the user experience of our OEMs’ products. We plan to utilize our existing
technologies as well as aggressively pursue new technologies as new markets evolve that demand new solutions.
Pursue Strategic Relationships and Acquisitions
We intend to develop and expand our strategic relationships to enhance our ability to offer value-added semiconductor
product solutions to our customers, penetrate new markets, and strengthen the technological leadership of our product solutions.
We also intend to evaluate the potential acquisitions of companies and assets in order to expand our technological expertise
and to establish or strengthen our presence in selected target markets.
Fabless Semiconductor Manufacturing
We plan to selectively partner with foundries and backend processors to solidify our longstanding key supply chain
relationships. This strategy results in a scalable business model, enables us to concentrate on our core competencies of research
and development and product design and engineering, and reduces our capital expenditures and working capital requirements.
Our fabless semiconductor manufacturing strategy allows us to maintain a variable cost model, in which we do not incur most
of our manufacturing costs until our product solutions have been shipped and invoiced to our customers.
Products
Our family of product solutions allows our customers to solve their interface needs and differentiate their products from
those of their competitors.
Voice Over IP
Our Digital Voice Family, or DVF, of SoC products is a comprehensive solution for developing affordable, scalable and
power efficient VoIP, home and office products. DVF facilitates rapid introduction of embedded features into residential
devices such as cordless IP and instant messaging phones. DVF enables development of low-power enterprise IP, analog
terminal adapters, or ATAs, and home VoIP phones that offer superb acoustic echo cancellation, high-quality HD voice, multi-
line capabilities, and an enhanced user interface. Built on an open platform with multi-ARM processors running on Linux OS,
DVF includes IPfonePro™, an extensive software development kit for IP phones and ATAs.
DECT Cordless
Our Digital Enhanced Cordless Telecommunications, or DECT, SoC solutions provide integrated digital solutions and
include all relevant digital baseband, analog interface and RF functionality. Enhanced with our hardware and software
technologies, these chipsets are highly versatile and enable the development of an array of cordless telephony solutions that
allow for faster time to market than alternative custom silicon and software offerings. This portfolio supports cordless phones,
cordless headsets, remote controls, home DECT-enabled gateways, fixed-mobile convergence solutions and home automation
devices.
Ultra-Low Power Edge AI
Our ultra-low power edge AI platform includes a highly integrated edge AI SOC designed for battery powered wireless
devices equipped with audio or camera capabilities for consumer and industrial IoT applications. These solutions are designed
for a wide range of power constrained IoT applications used in office buildings, retail, factories, warehouses, robotics, and
smart homes and cities.
Wireless Connectivity
Our wireless connectivity solutions include state-of-the-art Wi-Fi, Bluetooth, GPS, GNSS, and ULE to address broad
IoT market applications including home automation, multimedia streamers, security sensors, surveillance cameras, wireless
speakers, games, drones, printers, wearable and fitness devices, in addition to numerous other applications which require a
wireless connection.
3
AudioSmart®
AudioSmart products bring forward optimum analog, mixed-signal and digital signal processor, or DSP, technologies
for high-fidelity voice and audio processing. Our AudioSmart products include far-field voice technologies that enable accurate
voice command recognition from a distance while disregarding other sounds, such as music, in order to activate smart devices
such as smart speakers. AudioSmart also includes personal voice and audio solutions for high-performance headsets that enable
active noise cancellation.
ConnectSmart™
Our ConnectSmart video interface IC portfolio offers a full range of high-speed video/audio/data connectivity solutions
that are designed for linking CPUs/GPUs and various endpoints for applications including PC docking stations, travel docks,
dongles, protocol converters and virtual reality head mounted displays.
DisplayLink®
Our DisplayLink products utilize highly efficient video encode/decode algorithms to deliver a semiconductor-based
solution which transmits compressed video frames across low bandwidth connections. These solutions are used in PC docking
applications, conference room video display systems, and video casting applications.
VideoSmart™
Our VideoSmart series SoCs include CPUs running at up to 40K Dhrystone Million Instructions per Second, gaming-grade
Graphics Processing Unit, or GPUs, voice, and neural network processing units, or NPU. These powerful solutions combine a
central processing unit, or CPU, NPU, and GPU, into a single software-enriched SoC. They enable smart multimedia devices
including set-top boxes, or STB, over-the-top, or OTT, streaming devices, soundbars, surveillance cameras and smart displays.
ImagingSmart™
Our ImagingSmart solutions include a product portfolio that spans four distinct product areas including document and
photo imaging controllers, digital video, fax, and modem solutions. ImagingSmart products leverage image processing IP,
JPEG encoders and DSP technology to deliver a wide range of fax, modem, digital video and printer solutions for home, mobile
and imaging applications.
Natural ID®
Our Natural ID family of capacitive-based fingerprint ID products is designed for use in notebook PCs, PC peripherals,
automobiles, and other applications. Thin form factors provide industrial design flexibility, while robust matching algorithms
and anti-spoofing technology provide strong security. Our Natural ID family of products spans a range of form factors, colors,
and materials suitable for design on the front, back or side of a device.
Natural ID products are designed to be compatible with Fast IDentity Online, or FIDO, protocols, enhancing security
and interoperability with a broad range of solutions. FIDO was formed to enhance online authentication by developing open,
scalable technical standards to help facilitate the adoption of robust, easy to use authentication that reduces the reliance on
passwords. Natural ID products increase the security of automobile and PC products while maintaining ease of use for the
customer.
TouchPadTM
Our TouchPad family of products, which can take the place of, and exceed the functionality of a mouse, consists of a
touch-sensitive pad that senses the position and movement of one or more fingers on its surface through the measurement of
capacitance. Our TouchPad provides an accurate, comfortable, and reliable method for screen navigation, cursor movement,
and gestures, and provides a platform for interactive input for both the consumer and corporate markets. Our TouchPad
solutions allow our OEMs to provide stylish, simple, user-friendly, and intuitive solutions to consumers. Our TouchPad
solutions also offer various advanced features, including scrolling, customizable tap zones, tapping and dragging of icons, and
device interaction.
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SecurePadTM
Our SecurePad integrates our Natural ID fingerprint sensor directly into the TouchPad area, improving usability and
simplifying the supply chain for notebook PC manufacturers.
ClickPadTM
Our ClickPad introduces a clickable mechanical design to the TouchPad solution, eliminating the need for physical
buttons. The button-less design of our ClickPad allows for unique, intuitive industrial design and makes an excellent alternative
to conventional input and navigation devices. Our ClickPad is activated by pressing down on the internal tact switch to perform
left-button or right-button clicks and provides tactile feedback similar to pressing a physical button. The latest version of
ClickPad features ClickEQTM, a mechanical solution that provides uniform click depth to maximize the surface area available
for gestures and improves click performance over hinged designs.
ForcePad®
Our ForcePad is a thinner version of our ClickPad, which introduces a new dimension in control through the addition of
variable force sensitivity. ForcePad is designed to provide consistent performance across OEM models through its design
intelligence and self-calibration features. By detecting the amount of force applied, ForcePad is engineered to enable more
intuitive and precise user interactions in operating system controls and applications. Designed with thin and light notebooks
in mind, ForcePad is 40% thinner than a conventional touch pad.
ClearPad®
Our ClearPad family of products enables the user to interact directly with the display on electronic devices, such as
mobile smartphones, tablets, and automobiles. Our ClearPad has distinct advantages, including low-profile form factor; high
reliability, durability, and accuracy; and low power consumption. We typically sell our ClearPad solution as a chip, together
with customer-specific firmware, to sensor manufacturers, OLED manufacturers or LCD manufacturers, to integrate into their
touch-enabled products.
ClearViewTM
Our ClearView display driver products offer advanced image processing and low power technology for displays on
electronic devices, including smartphones and tablets. ClearView products include adaptive image processing that works in
concert with proprietary customization options to enable development of efficient and cost-effective high-performance
solutions and faster time to market. Our display driver products offer automatic regional control of color balance that optimizes
light and dark areas of an image simultaneously, and sunlight readability enhancement capabilities that optimize image quality
under various lighting conditions. Our virtual reality bridge and virtual reality display driver integrated circuit, or DDIC, chips
enable our customers to move to higher resolution and faster response displays.
TouchViewTM
Our TouchView solutions include our TDDI products that combine two functions, a touch controller, and a display driver,
into a single chip that incorporates all the features of our ClearView and ClearPad products. TouchView products enable
thinner form factors to help customers minimize component count and add flexibility to their industrial designs. These products
are used in large screen devices, including notebooks and tablets, and are also certified for automotive display applications.
Other Products
Other product solutions we offer include Dual Pointing Solutions, and TouchStykTM. Our dual pointing solutions offer
TouchPad with a pointing stick in a single notebook computer, enabling users to select their interface of choice. TouchStyk is
a self-contained pointing stick module that uses capacitive technology similar to that used in our TouchPad.
Technologies
We have developed and own an extensive array of technologies, encompassing ASICs, firmware, software, mechanical
and electrical designs, display systems, pattern recognition, touch-sensing technologies, fingerprint sensing, voice, audio,
imaging, modem, and multimedia technologies. We continue to develop technology in these areas. We believe these
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technologies and the related intellectual property rights create barriers for competitors and allow us to provide high-value
human experience semiconductor product solutions in a variety of high-growth markets.
Our broad line of semiconductor product solutions is currently based upon the following key technologies:
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Proprietary microcontroller technology;
Proprietary vector co-processor technology;
Multimedia processing technology;
Voice and audio technology;
Pattern recognition technology;
Deep learning and neural network inferencing technology.
Mixed-signal integrated circuit technology;
Wireless connectivity technology;
Video interface and compression technology;
Imaging and modem technology;
Capacitive position and force sensing technology;
Capacitive active pen technology;
Multi-touch technology; and
Display systems and circuit technology.
In addition to these technologies, we develop firmware and device driver software that we incorporate into our products,
In addition, our ability to integrate all our products to interface with major
which provide unique and advanced features.
operating systems provides us with a competitive advantage.
Proprietary Microcontroller Technology. One example of our microcontroller technology is our proprietary 16-bit
microcontroller core that is embedded in the digital portion of our capacitive touch mixed signal ASICs, which is allowing us
to optimize our ASICs for position sensing tasks. Our embedded microcontroller provides great flexibility in customizing our
products via firmware, which eliminates the need to design new circuitry for each new application.
Proprietary Vector Co-Processor Technology. Our vector co-processor technology is designed for use in our ASICs,
accompanying either one of our own proprietary microcontroller cores or a commercially available one. The co-processor
boosts an ASIC’s computational performance by efficiently processing vectors of data for a range of mathematical operations.
This allows us to implement more computationally intensive algorithms within our firmware.
Multimedia Processing Technology. This technology allows us to create multimedia SoC products for set-top boxes,
soundbars, digital personal assistants, smart displays, virtual reality, OTT, audio, and video. Our video processing technology
includes hardware and algorithms to reduce analog and digital noise, convert to different video formats, and enhance color and
contrast. Our products include security and secure encrypt/decrypt technology, including secure boot and hardware root of
trust.
Voice and Audio Technology. This technology allows us to develop human experience and communication products
based on voice and audio interaction. The technology embodies a broad range of analog and mixed signal circuits expertise
and audio signal processing algorithms, including:
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Noise suppression;
Acoustic echo cancellation;
Active noise cancellation;
Trigger word detection;
Mid-field and far-field voice processing;
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Audio digital signal processor architecture;
Audio codecs;
Audio post processing;
High performance audio analog-to-digital converters, or ADCs, and digital-to-analog converters, or DACs;
Audio amplifiers;
Low power audio processing;
Speaker protection; and
Product acoustic design.
Pattern Recognition Technology. This technology is a set of software algorithms and techniques for converting real
world data, such as gestures and handwriting, into a digital form that can be recognized and manipulated within a computer.
Our technology provides reliable gesture decoding and handwriting recognition and can be used in other applications such as
signature verification for a richer user experience.
Deep Learning and Neural Network Inferencing Technology. This technology allows us to create and train deep neural
networks for audio, image processing, video processing and computer vision functions. Some of our products contain hardware
designed to evaluate deep neural networks securely and with low latency. We also have technology that allows us to compress
our trained neural networks for more efficient AI-at-the-edge on our hardware. These neural network algorithms improve the
quality of the sensed data (for example, reduce the noise, or increase the resolution) as well as interpret the sensed data.
Mixed-Signal Integrated Circuit Technology. This hybrid analog-digital integrated circuit technology combines the
power of digital computation with the ability to interface with non-digital, real-world signals, such as the position of a finger
or stylus on a surface. Our patented design techniques permit us to utilize this technology to optimize our core ASIC engine
for all our products. Our mixed-signal technology consists of a broad portfolio of circuit expertise in areas such as the
following:
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High-speed serial interfaces;
Analog-to-digital and digital-to-analog converters;
Electromagnetic emissions suppression and susceptibility hardening;
Very Large Scale Integrated, or VLSI, digital circuits with multiple clock and power domains;
Communications and signal processing circuits;
Power management (switching converters, charge pumps, and LDOs);
Precision capacitance measurement;
Display timing controllers, or TCONs.
Wireless Technology. Our wireless connectivity solutions include discrete and integrated Wi-Fi and Bluetooth solutions,
and satellite-based GPS/GNSS mobile navigation receivers. Wi-Fi allows devices on a local area network to communicate
wirelessly, adding the convenience of mobility to the utility of high-speed data networks. We offer a family of high
performance, low power Wi-Fi chipsets. We offer products which incorporate the latest Wi-Fi standards such as 802.11AX,
which is known as Wifi-6 and Wifi-6E. Bluetooth is a low power technology that enables direct connectivity between devices.
We offer a family of Bluetooth silicon and software solutions that enable customers to easily and cost-effectively add Bluetooth
functionality to virtually any device, including Bluetooth 6.0 and Bluetooth Enterprise True Wireless Stereo (TWS). These
solutions include combination chips that offer integrated Wi-Fi and Bluetooth functionality, which provides significant
performance advantages over discrete solutions.
We also offer a family of GPS and GNSS semiconductor products, software, and location data services. These products
are part of a broad location platform that enable customer devices to wirelessly communicate and receive precise location and
navigational data from satellite constellations for use in various location services applications.
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As part of our wireless technology, DECT based devices provide worldwide coverage for telephony applications,
supporting most RF bands and cordless protocols standardized around the world. This includes 1.7GHz -1.9GHz used in
Europe, U.S., Korea, Japan and Latin America; and 2.4GHz – used in Japan, China, India and the U.S., along with other
proprietary protocols for specific use cases.
Video Compression Technology. Our video interface solutions include our ConnectSmart and DisplayLink portfolios,
offering a full range of interface solutions that connect devices to external displays and support the latest versions of the most
widely used protocols, connectors, and operating systems. Our flexible product lines for connecting devices combine high-
performance interface with low power consumption and are designed for both commercial and consumer end-products. Our
solutions have been broadly adopted by the top OEMs and original device manufacturers, or ODMs, to enable video expansion
and protocol conversion, leverage high-end features, and deliver the bandwidth needed to drive multiple high-resolution
external displays simultaneously.
Imaging and Modem Technology. This technology allows us to create a family of SoC integrated circuits and software
for printers, video cameras, fax machines and modems. Key functional blocks include:
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Image processing hardware accelerators;
Printer imaging pipeline;
Inkjet, laser, and thermal print engine and motor control;
Scan/camera and peripheral control; and
Data and fax modem hardware and firmware.
Capacitive Fingerprint Sensing Technology. Our fingerprint sensing technology simplifies the system or application
authentication process by substituting the user’s fingerprint for the login name and password. Our capacitive fingerprint sensing
technology provides for fingerprint authentication by scanning and matching an image of a user’s fingerprint, as well as initial
fingerprint enrollment. Our sensing technology also incorporates spoof detection and includes many implementation choices
including the back of the phone or PC, button integration, touchpad integration, and under glass.
Capacitive Position and Force Sensing Technology. Our Position Sensing technology provides a method for sensing the
presence, position, and contact area of one or more fingers or a stylus on a flat or curved surface. Our technology works with
very light touch, supports full multi-touch capabilities, and provides highly responsive cursor navigation, scrolling, and
selection. It uses no moving parts, can be implemented under plastic or glass, and is extremely durable. Our technology can
also track one or more fingers in proximity to the touch surface. Our Force Sensing technology senses the direction and
magnitude of a force applied to an object. Our electronic circuitry determines the magnitude and direction of an applied force,
permits very accurate sensing of tiny changes in capacitance, and minimizes electrical interference from other sources. Our
capacitive force sensing technology can be integrated with our position sensing technology.
Capacitive Active Pen Technology. This technology allows us to develop a pen that can be used for input on a capacitive
touchscreen. As well as generating a signal that allows the touchscreen to track the pen, additional data, such as the pen applied
force and pen button states, are also communicated to the touchscreen device. Information can also be communicated from the
touchscreen to the pen.
Multi-touch Technology. This technology allows us to create capacitive touch products that simultaneously track the
presence, position, and other characteristics of multiple objects in contact with or in close proximity to a flat or curved touch
surface. It enables, for example, the recognition of multi-finger gestures, the tracking of a stylus position while the user’s palm
is also in contact with the touch surface, and the simultaneous interaction of multiple users with the same touch surface.
Display Systems and Circuit Technology. This technology enables us to develop optimized human experience
semiconductor product solutions with improved compatibility with their application environments. This technology consists of
mobile and large format display semiconductor expertise, including the following functional blocks:
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TCONs;
Thin-Film-Transistor, or TFT, gamma references;
Smooth dimming and content adaptive brightness control;
Contrast enhancement;
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Color enhancement;
Gamma curve control;
Force, touch, and display synchronization;
Local area active contrast optimization;
Adaptive image compression and decompression;
Sub-pixel rendering;
Demura compensation;
Rounded corner processing;
Frame rate control;
High-speed serial interfaces such as mobile industry processor interface display serial interface, or MIPI DSI, and
Qualcomm mobile display digital interface, or MDDI; and
Display power circuits such as inductive switchers, charge pumps, and LDOs.
This technology also enables us to develop advanced products that combine the functions of the display and touch sensing
systems to enable highly integrated display and touch functionality with improved performance, thinner form factors, and lower
system cost.
Our latest addition to our automotive portfolio is an automotive-grade TDDI for indium gallium zinc oxide and
amorphous silicon gate-in-panel displays and low-temperature polycrystalline panels up to 4K resolution.
Research and Development
We conduct ongoing research and development programs that focus on advancing our existing technologies, improving
our current product solutions, developing new products, improving design and manufacturing processes, enhancing the quality
and performance of our product solutions, and expanding our technologies to serve new markets. Our goal is to provide our
customers with innovative solutions that address their needs and improve their competitive positions.
Our research and development programs focus on the development of accurate, easy to use, reliable, and intuitive human
experiences for electronic devices. We believe our innovative interface technologies can be applied to many diverse products,
and we believe the interface is a key factor in the differentiation of many products. AI-at-the-edge is a focus area for us in
enabling better performance and enhancing user experience in many of these products. We believe that our technologies enable
us to provide customers with product solutions that have significant advantages over alternative technologies in terms of
functionality, size, power consumption, durability, and reliability. We also intend to pursue strategic relationships and
acquisitions to enhance our research and development capabilities, leverage our technology, and shorten our time to market
with new technological applications.
Our research, design, and engineering teams frequently work directly with our customers to design custom solutions for
specific applications. We focus on enabling our customers to overcome their technical barriers and enhance the performance
of their products. We believe our engineering know-how and electronic systems expertise provide significant benefits to our
customers by enabling them to concentrate on their core competencies of production and marketing.
As of the end of fiscal 2023, we employed 1,416 people in our technology, engineering, and product design functions in
the United States, China, Taiwan, Japan, Israel, the United Kingdom, India, Germany, Poland, and Korea.
Intellectual Property Rights
Our success and ability to compete depend in part on our ability to maintain the proprietary aspects of our technologies
and products. We rely on a combination of patents, trademarks, trade secrets, copyrights, confidentiality agreements, and other
statutory and contractual provisions to protect our intellectual property, but these measures may provide only limited protection.
As of June 2023, we held 2,583 active patents and 569 pending patent applications worldwide that expire between 2023
and 2043. Collectively, these patents and patent applications cover various aspects of our key technologies, including those
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for touch sensing, voice processing, secure biometrics, display drivers, touch and display integration, docks and adapters, video
interfaces, wired and wireless connectivity, audio processing, video processing, edge computing, open AI tools, and computer
vision. Our proprietary firmware and software, including source code, are also protected by copyright laws and applicable
trade secret laws.
Our extensive array of technologies includes those related to ICs, firmware, software, and mechanical hardware. Our
products rely on a combination of these technologies, making it difficult to use any single technology as the basis for replicating
our products. Furthermore, the lengths of our customers’ design cycles and the customizations required within the products
we provide to our customers also serve to protect our intellectual property rights.
Customers
Our customers include many of the world’s largest mobile and PC OEMs, based on unit shipments, as well as many large
IoT OEMs, automotive manufacturers and a variety of consumer electronics manufacturers. Our demonstrated track record of
technological leadership, design innovation, product performance, cost-effectiveness, and on-time deliveries have resulted in
our leadership position in providing human experience semiconductor product solutions. We believe our strong relationship
with our OEM customers, many of which are also currently developing product solutions which are focused in several of our
target markets, will continue to position us as a source of supply for their product offerings.
We generally supply our products to OEMs through their contract manufacturers, supply chain or distributors. We
consider both the OEMs and their contract manufacturers or supply chain partners to be our customers, as well as in some
cases, our distributors. Both the OEMs and their partners may determine the design and pricing requirements and make the
overall decision regarding the use of our human experience semiconductor product solutions in their products. The contract
manufacturers and distributors place orders with us for the purchase of our products, take title to the products purchased upon
delivery by us, and pay us directly for those purchases. The majority of these customers do not have return rights except for
warranty provisions.
Sales and Marketing
We sell our product solutions for incorporation into the products of our OEM customers. We generate sales through
direct sales employees as well as outside sales representatives, distributors and value-added resellers. Our sales personnel
receive substantial technical assistance and support from our internal technical marketing and engineering resources because
of the highly technical nature of our product solutions. Sales frequently result from multi-level sales efforts that involve senior
management, design engineers, and our sales personnel interacting with our customers' decision makers throughout the product
development and order process.
As of the end of fiscal 2023, we employed 399 sales and marketing professionals. We maintain customer support offices
domestically and internationally, which are located in the U.S., Taiwan, China, India, Korea, Japan, United Kingdom and
Switzerland. In addition, we utilize value-added resellers and sales distributors that are primarily located in the U.S., China,
Korea, Japan, Taiwan and Germany.
International sales constituted nearly all of our revenue for each of fiscal 2023, 2022, and 2021. Approximately 63%,
66% and 68% of our sales in fiscal 2023, 2022 and 2021, respectively, were made to companies located in China and Taiwan
that provide design and manufacturing services for major IoT, notebook computer, and mobile product applications OEMs.
Our sales are almost exclusively denominated in U.S. dollars. This information should be read in conjunction with Note 15
Segment, Customers, and Geographic Information to the consolidated financial statements contained elsewhere in this report.
Manufacturing
We employ a fabless semiconductor manufacturing platform through third-party relationships. We currently utilize third-
party semiconductor wafer manufacturers to supply us with silicon wafers integrating our proprietary design specifications.
The completed silicon wafers are forwarded to third-party package and test processors for further processing into die and
packaged ASICs, as applicable, which are then utilized in our custom module products or processed as our ASIC-based solution.
After processing and testing, the die and ASICs are consigned to various contract manufacturers for assembly or are
shipped directly to our customers. During the assembly process, our die or ASIC is either combined with other components to
complete the module for our custom product solutions or the ASIC is maintained as a standalone finished good. The finished
assembled product is subsequently shipped directly to our customers or by our contract manufacturers directly to our customers
for integration into their products.
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We believe our third-party manufacturing strategy provides a scalable business model, enables us to concentrate on our
core competencies of research and development, technological advances, and product design and engineering, and reduces our
capital investment.
Our third-party contract manufacturers and semiconductor fabricators are predominately Asia-based organizations. We
generally provide our contract manufacturers with six-month rolling forecasts of our production requirements. As a result of
recent supply constraints and capacity shortages affecting the global semiconductor industry, we have entered into long-term
capacity and pricing agreements with some suppliers. Our reliance on these parties exposes us to vulnerability owing to our
dependence on a few sources of supply.
In some cases, we have alternative sources of suppliers to mitigate supplier risk;
however, in the current environment, all of them could be constrained. We may establish relationships with other contract
manufacturers in order to reduce our dependence on any single source of supply.
Periodically, we purchase inventory from our contract manufacturers when a customer delays its delivery schedule or
cancels its order. In those circumstances in which our customer has cancelled its order and we purchase inventory from our
contract manufacturers, we consider a write-down to reduce the carrying value of the inventory purchased to its net realizable
value. We charge write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory to its net
realizable value and charge such write-downs to cost of revenue. We also record a liability and charge to cost of revenue for
estimated losses on inventory we are obligated to purchase from our contract manufacturers when such losses become probable
from customer delays or order cancellations.
In addition, the impact of entering into long-term capacity agreements could
create significant inventory write-down if the end customer demand substantially declines.
Competition
IoT
Our diverse SoC solutions integrate artificial intelligence hardware engines, video processing, far-field voice and
linguistics processing products and are sold into market segments that offer significant potential growth, ranging from home
automation applications, smart assistant platforms, surveillance cameras, to set-top-box/over-the-top, or STB/OTT platforms
to a wide variety of embedded products in the broader IoT market. The markets for STB/OTT products, surveillance cameras,
home automation, smart assistant solutions and embedded IoT products require strong technology innovation in silicon and
software along with deep systems and systems engineering expertise. Our principal competition in these markets include
Broadcom, MediaTek, NXP, AmLogic, and Ambarella, among others.
We provide voice processing silicon and software solutions for voice-enabled devices, consumer and commercial
imaging, and next-generation audio applications. In addition to our voice solutions, we support the audio headphone and virtual
reality head mounted display industry with universal serial bus-c, or USB-C, audio codec solutions for next generation wireless
audio devices and wearables. Our competitors in the sale of audio products include Cirrus Logic, BES Technic, Realtek, and
Qualcomm.
Our wireless products for use in IoT application markets include our technologies such as Wi-Fi, Bluetooth, Wi-Fi-
Bluetooth combinations, and GPS/GNSS support our customers’ need to develop products which can wirelessly communicate
to networks, remote control of edge-devices, machine-to-machine communication, among other purposes. Our principal
competition includes Infineon, Qualcomm, MediaTek, NXP, and Silicon Labs, among others.
Our automotive products include touch, display driver, SmartBridge, and TDDI solutions for major automotive OEMs.
Our principal competitors for these products include Focaltech, Himax, Novatek Microelectronics and Microchip. Our IoT
video interface products are sold into PC and smartphone docks and wireless adapter market applications. Our principal
competitors in the sale of IoT interface products are Parade, Megachips, and Realtek.
We also provide fax, modem and image processors and software solutions for printers, fax machines, point of sale
terminals, and medical applications. Our principal competitors in these markets are Skyworks, Marvell, and Qbit.
PC and Mobile
Our touch, display and fingerprint-based semiconductor products are sold into markets for PC product applications,
mobile product applications, and other electronic devices. The markets for touchscreen products are characterized by rapidly
changing technology and intense competition. Our principal competition in the sale of touchscreen products includes
Broadcom, Goodix, Focaltech, ST Micro and various other companies involved in human experience semiconductor product
solutions. Our principal competitors in the sale of notebook touch pads are Cirque Corporation, Elan Microelectronics and
Goodix. Our principal competitors in the sale of display driver products for mobile product applications market include Novatek
Microelectronics, Samsung LSI, LX Semicon and Raydium. Our principal competitors in the sale of display driver products
for virtual reality applications market include Novatek Microelectronics and Samsung LSI Our principal competitors in the
sale of fingerprint authentication solutions for PC product applications markets are Egis Technology, Elan Microelectronics,
and Goodix.
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Corporate Social Responsibility
We strive to be a leading corporate citizen. We uphold the most ethical standards in our business practices and policies,
and we believe that sustainable corporate practices and consistent attention to social and governance priorities will help enhance
long-term value for our stockholders. With guidance from our Board of Directors, our management team applies an integrated
methodology to financial matters, corporate governance, and corporate responsibility, leading to increased accountability,
better decision making and ultimately enhanced long-term value. This focus on the environment, social, and governance, or
ESG, influences the way we consider our business goals and strategies.
Environmental
In the last several years, we have improved our internal and external policies, better aligning our corporate actions with
our commitment to a greener planet. We have implemented internal green programs and initiatives to reinforce our commitment
to minimizing natural resource consumption, improving sustainability, disposing of end-of-life products in an environmentally
safe manner, reducing waste, and increasing reuse and recycling programs company-wide. In addition, we recently completed
a comprehensive review of Scope 3 GHG emissions across our Company.
We participate in the Climate Disclosure Program (CDP) and have also implemented a Supplier environmental
conservation program. We have set specific goals to reduce Scope 1 and Scope 2 GHG emissions, increase the use of renewable
energy, and reduce waste generation at our facilities. These goals can be found on our website at www.synaptics.com/corporate-
environmental-policy. Our climate change management currently involves a focus on education, increasing internal awareness
of climate change mitigation and impact reduction through on-going training and internal education.
Our Chief Information Officer, or CIO, also acts as our Chief Sustainability Officer and has responsibility for our Global
Workplace Resources function and executes our climate strategy and related issues. The CIO is responsible for assessing and
leading the management of climate-related risks and opportunities, elevating stakeholder concerns and guiding the
implementation of climate-related policies, programs and disclosures. As a member of our senior executive team, the CIO is
responsible for elevating climate topics to senior leadership and, ultimately, to the Board’s Nominations and Corporate
Governance Committee and Audit Committee.
Social
Our employees and communities are the heart of our company, and we take pride in our social responsibility to them as
well becoming better global citizens. We support our local communities through charitable causes and events, and we have
numerous programs in place around the world that promote our commitments to diversity, equality of opportunity, non-
discrimination, and the highest standards of human rights.
We support and contribute toward educational programs with the intent to help reduce social and economic inequalities.
Our employees are passionate about their communities, and we support global causes that they care about and volunteer toward.
We are committed to the use of a socially responsible supply chain. We have adopted a supplier and vendor code of
conduct, and businesses in our supply chain are contractually obligated to comply with and support the Responsible Business
Alliance (RBA) Code of Conduct. We expect suppliers and vendors to uphold the highest standards of human rights including
anti-discrimination and humane treatment, freedom of association and collective bargaining, prevention of child labor, limits
on working hours, minimum fair and living wage, worker feedback and grievance systems. We expect suppliers to exercise
due diligence on relevant minerals in their supply chains and to have a policy to reasonably assure that the tantalum, tin,
tungsten, and gold in the products they manufacture does not directly or indirectly finance or benefit armed groups that
perpetrate serious human rights abuses in the Democratic Republic of the Congo or an adjoining country. Our vendors and
suppliers are also required to obtain and maintain all required health and safety permits, provide reasonable working and living
conditions, have incident management systems and emergency preparedness and response protocols.
Governance
We are dedicated to supporting leading corporate governance and board practices to ensure oversight accountability and
transparency in our business practices. We place a high value on ethical actions, individual integrity, and fair dealing in every
aspect of what we do. Our Board of Directors is responsible for overseeing our ESG policies and practices generally. The
Nominations and Corporate Governance Committee has oversight of ESG strategy and receives regular updates from
management on our ESG performance. The Audit Committee provides oversight of business risks and our company’s Code
of Business Conduct and Ethics. Our Board of Directors receives periodic updates from Nominations and Corporate
Governance Committee and management on our ESG performance.
Accountability
Our Board of Directors and management are strongly committed to our corporate responsibility policies and will continue
to regularly evaluate these policies to ensure an effective outcome and strict adherence by our employees, suppliers, vendors,
and partners. We actively monitor and evaluate our internal compliance with our Code of Conduct and other corporate social
responsibility policies and programs.
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Human Capital
Our company has been built on the collective contributions from people of many countries, religions, and ethnic
backgrounds. People are our most critical asset and are the core component behind our success. We want to attract, develop,
and retain the world’s best talent.
Competition for talent in our industry is extremely intense. Our human resource strategy and programs are focused on
attracting, engaging, developing and retaining this talent. We believe our company attributes differentiate us and, in part, allow
us to consistently retain our employees throughout fiscal year 2023, as our attrition rate continues to be lower than benchmark
data. Our employee average tenure globally is 7.6 years.
Our Board of Directors and Board committees provide oversight on certain workforce management matters including,
among other aspects, management depth and strength assessment, diversity, equity, inclusion and belonging, and our employee
survey results. The Audit Committee’s oversight of business risks and our company’s Code of Business Conduct and Ethics is
relevant to human capital management. The Nominations and Corporate Governance Committee’s oversight of ESG strategy
includes talent attraction and retention and inclusion and diversity. The Compensation Committee provides oversight of our
overall compensation philosophy, policies, and programs, and assesses whether our compensation establishes appropriate
incentives for executive officers and other employees.
As of June 24, 2023, we employed 1,891 employees. Our workforce is distributed globally across 16 countries with 23%
of our employees located in North America, 60% located in Asia Pacific and 17% located in Europe and the Middle East, or
EMEA.
Competitive Compensation and Benefits
We provide competitive benefits related to health, wellness, mental health and family resources designed to meet the
needs of our diverse global workforce. We have a robust pay for performance philosophy and compensation framework to
reward high performance. We align executive compensation with our corporate strategies, business objectives and the creation
of long-term value for our stockholders without encouraging unnecessary or excessive risk-taking.
Engagement and Development
We strive to create exceptional employee experiences. Our focus is on creating a space for employees to do their best
work and feel valued and engaged. As part of our dedication to and investment in our employees, we conduct organizational
health surveys designed to assess employee engagement, leadership, work environment, and culture.
Employees have various opportunities to learn though technical, compliance and other professional trainings. We offer
career advancement opportunities to our employees and are focused on leadership development. Investing in our employees
and their professional development is a priority for our company.
Diversity, Equity, Inclusion and Belonging
We embrace diversity and inclusion and strive to provide a rich environment with diverse skills, backgrounds and
perspectives. We strongly believe diverse teams are more innovative and productive. Our goal is to cultivate an environment
that not only allows for, but also encourages, everyone to collaborate and participate equally to foster individual and company
growth. As of June 2023, 20% of global employees and 38% of our board of directors identified as female. We are committed
to diversity, equity and inclusion. Fiscal 2023 was a year of program development and growth around this topic including a
comprehensive internal assessment, internal communications campaign, several diversity, equity, inclusion, and belonging
events, and employee resource group development.
Community Impact
We believe in giving back to the communities where our employees live and work. We provide opportunities for
employees to donate or volunteer their time through various programs and charitable events. Our employees regularly
participate in events focused on youth and underrepresented communities.
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Information about our Executive Officers
The following table sets forth certain information regarding our executive officers as of August 11, 2023:
Name
Michael Hurlston
Dean Butler
Saleel Awsare
John McFarland
Vikram Gupta
Age
56
41
58
56
54
Position
President and Chief Executive Officer
Chief Financial Officer
Senior Vice President and General Manager, PC & Peripherals Divisions
Senior Vice President, General Counsel and Secretary
Senior Vice President and General Manager, IoT Processors and Chief
Product Officer
Michael Hurlston has been the President and Chief Executive Officer of our company since August 19, 2019. Prior to
joining our company, Mr. Hurlston served as the Chief Executive Officer and a member of the Board of Directors of Finisar
Corporation (“Finisar”) from January 2018 to August 2019. Prior to joining Finisar, he served as Senior Vice President and
General Manager of the Mobile Connectivity Products/Wireless Communications and Connectivity Division and held senior
leadership positions in sales, marketing, and general management at Broadcom Limited (“Broadcom”) and its predecessor
corporation from November 2001 through October 2017. Prior to joining Broadcom in 2001, Mr. Hurlston held senior
marketing and engineering positions at Oren Semiconductor, Inc., Avasem, Integrated Circuit Systems, Micro Power Systems,
Exar and IC Works from 1991 until 2001. Mr. Hurlston is a member of the board of directors of Flex Ltd. Mr. Hurlston serves
on the Board of Executive Trustees of the UC Davis Foundation and on the Dean’s Executive Committee for the College of
Engineering and the Dean’s Advisory Counsel for the Graduate School of Management at the University of California, Davis.
Mr. Hurlston holds Bachelor of Science and Master of Science degrees in Electrical Engineering and a Master of Business
Administration degree from the University of California, Davis.
Dean Butler has been the Chief Financial Officer of our company since October 21, 2019. Prior to joining our company,
Mr. Butler served as Vice President of Finance at Marvell Technology Inc. (“Marvell”) from July 2016 to October 2019. Prior
to joining Marvell, he served as Controller of the Ethernet Switching Division at Broadcom from January 2015 through July
2016. Prior to joining Broadcom, Mr. Butler held senior finance positions at Maxim Integrated from May 2007 to December
2014. Mr. Butler holds a Bachelor of Business Administration degree in Finance from the University of Minnesota Duluth.
Saleel Awsare has been the Senior Vice President and General Manager of our PC and Peripherals unit since July 2020.
Previously, Mr. Awsare was the Senior Vice President and General Manager of our IoT Division from April 2019 to July 2020
and the Senior Vice President of Corporate Marketing & Investor Relations from December 2018 until April 2019. Prior to
joining our company as Corporate Vice President and General Manager of Audio & Imaging Products in July 2017, he was
President of Conexant Systems, LLC (“Conexant”) from March 2016 to July 2017, and Senior Vice President & General
Manager of Audio & Imaging from April 2012 to March 2016. Synaptics acquired Conexant in July 2017. Prior to joining
Conexant, Mr. Awsare served as President of Nuvoton Technology Corporation's (“Nuvoton”) U.S. operations and General
Manager of Nuvoton’s audio and voice divisions from December 2008 to March 2012. Prior to joining Nuvoton, Mr. Awsare
was the Executive Vice President and General Manager of mixed signal products for Winbond Electronics Corporation America
(“Winbond”). Prior to joining Winbond, Mr. Awsare was a director of engineering for Information Storage Devices. Mr.
Awsare is a member of the Board of Trustees of Stevens Institute of Technology. Mr. Awsare holds a Bachelor of Science
degree in Electrical Engineering from Stevens Institute of Technology and a Master of Science degree in Engineering
Management from Santa Clara University.
Vikram Gupta has been the SVP and GM of IoT Processors and Chief Product Officer since January 2023. Prior to
joining Synaptics, Mr. Gupta was the SVP and GM of IoT Compute and Wireless Business Lines for Infineon Technologies,
where he led the integration and transformation efforts for the $1B+ multi-site business with three product lines following
Infineon’s acquisition of Cypress Semiconductor, where he served as VP of Engineering of the IoT Business Unit. Prior to
Cypress Semiconductor, Mr. Gupta navigated a progressive tenure with Broadcom, advancing in leadership and responsibility
across both engineering and business. Earlier in his career he was a co-founder of Zeevo, a developer of system-on-chip
solutions for Bluetooth and other wireless communications applications, which was ultimately purchased by Broadcom. He
holds a Bachelor’s Degree in Electrical and Electronics Engineering from Birla Institute of Technology & Science in India and
a Master’s Degree in Electrical Engineering from the University of Hawaii at Manoa.
John McFarland has been the Senior Vice President, General Counsel and Secretary of our company since November
2013. Prior to joining our company, Mr. McFarland served for nine years as the Executive Vice President, General Counsel
and Secretary of Magnachip Semiconductor. Mr. McFarland spent his early career at law firms in Palo Alto, California, and
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Seoul, Korea. Mr. McFarland holds a Bachelor of Arts degree in Asian Studies, conferred with highest distinction from the
University of Michigan, and a Juris Doctor degree from the University of California, Los Angeles, School of Law.
15
ITEM 1A. RISK FACTORS
You should carefully consider the following factors, together with all the other information included in this report, in
evaluating our company and our business.
Risks Related to Our Markets and Customers
We currently depend on our solutions for the IoT, PC, and mobile product applications markets for a substantial
portion of our revenue, and any downturn in sales of these products would adversely affect our business, revenue,
operating results, and financial condition.
We currently depend on our solutions for the IoT, PC, and mobile product applications markets for a substantial portion
of our revenue. Any downturn in sales of our products into any of these markets would adversely affect our business, revenue,
operating results, and financial condition. Similarly, a softening of demand in any of these markets, or a slowdown of growth
in any of these markets because of changes in customer preferences, the emergence of applications not including our solutions,
or other factors would cause our business, operating results, and financial position to suffer.
A significant portion of our sales comes from one or more large customers, the loss of which could harm our business,
financial condition, and operating results.
Historically, we have relied on a limited number of customers for a substantial portion of our total revenue. If we lost
key customers, or if key customers reduced or stopped placing orders for our high-volume products, our financial results could
be adversely affected. Sales to one direct customer accounted for 10% or more of our net revenue in fiscal 2023. During fiscal
2023, we had five OEM customers that integrated our products into their products representing approximately 37% of our
revenue; we sold to these customers primarily indirectly through multiple distributors. Significant reductions in sales to our
largest customers, the loss of other major customers, or a general decrease in demand for our products within a short period of
time could adversely affect our revenue, financial condition, and business.
We sell to contract manufacturers that serve our OEM customers. Any material delay, cancellation, or reduction of orders
from any one or more of these contract manufacturers or the OEMs they serve could harm our business, financial condition,
and operating results. The adverse effect could be more substantial if our other customers do not increase their orders or if we
are unsuccessful in generating orders for our solutions with new customers. Many of these contract manufacturers sell to the
same OEMs, and therefore our concentration with certain OEMs may be higher than with any individual contract manufacturer.
Concentration in our customer base may make fluctuations in revenue and earnings more severe and make business planning
more difficult.
We face risks related to recessions, inflation, stagflation and other macroeconomic conditions
Customer demand for our products may be impacted by weak macroeconomic conditions, inflation, stagflation,
recessionary or lower-growth environments, rising interest rates, equity market volatility or other negative economic factors in
the U.S. or other nations. For example, under these conditions or expectation of such conditions, our customers may cancel
orders, delay purchasing decisions or reduce their use of our services. In addition, these economic conditions could result in
higher inventory levels and the possibility of resulting excess capacity charges from our manufacturing partners if we need to
slow production to reduce inventory levels. Further, in the event of a recession or threat of a recession, our manufacturing
partners, suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges, and as
a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet
our customer demands or collect revenue or otherwise harm our business. Similarly, disruptions in financial and/or credit
markets may impact our ability to manage normal commercial relationships with our manufacturing partners, customers,
suppliers and creditors and might prevent us from accessing preferred sources of liquidity, and causing our borrowing costs to
potentially increase. Thus, if general macroeconomic conditions, conditions in the semiconductor industry, or conditions in our
customer end markets continue to deteriorate or experience a sustained period of weakness or slower growth, our business and
financial results could be materially and adversely affected.
In addition, we are subject to risk from inflation and increasing market prices of certain components and supplies, which
are incorporated into our end products or used by our manufacturing partners or suppliers to manufacture our end products.
These components and supplies have, from time-to-time, become restricted. Additionally, general market factors and
conditions have in the past, and may in the future, affect pricing of such components and supplies (such as inflation or supply
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chain constraints). See also, “Our gross margin and results of operations may be adversely affected in the future by a number
of factors, including decreases in our average selling prices of products over time, shifts in our product mix, or price increases
of certain components or third-party services due to inflation, supply chain constraints, or for other reasons.”
We are exposed to industry downturns and cyclicality in our target markets that may result in fluctuations in our
operating results.
The consumer electronics industry has experienced significant economic downturns at various times. These downturns
are characterized by diminished product demand, accelerated erosion of average selling prices, production overcapacity, and
increased inventory and credit risk. In addition, the consumer electronics industry is cyclical in nature. We seek to reduce our
exposure to industry downturns and cyclicality by providing design and production services for leading companies in rapidly
expanding industry segments. We may, however, experience substantial period-to-period fluctuations in future operating
results because of general industry conditions or events occurring in the general economy.
We cannot assure you that our product solutions for new markets will be successful or that we will be able to continue
to generate significant revenue from these markets.
Our product solutions may not be successful in new markets. Various target markets for our product solutions, such as
IoT, may develop slower than anticipated or could utilize competing technologies. The markets for certain of these products
depend in part upon the continued development and deployment of wireless and other technologies, which may or may not
address the needs of the users of these products.
Our ability to generate significant revenue from new markets will depend on various factors, including the following:
•
•
•
the development and growth of these markets;
the ability of our technologies and product solutions to address the needs of these markets, the price and
performance requirements of OEMs, and the preferences of end users; and
our ability to provide OEMs with solutions that provide advantages in terms of size, power consumption, reliability,
durability, performance, and value-added features compared with alternative solutions.
Many manufacturers of these products have well-established relationships with competitive suppliers. Our ongoing
success in these markets will require us to offer better performance alternatives to other solutions at competitive costs. The
failure of any of these target markets to develop as we expect, or our failure to serve these markets to a significant extent, will
impede our sales growth and could result in substantially reduced earnings and a restructuring of our operations. We cannot
predict the size or growth rate of these markets or the market share we will achieve or maintain in these markets in the future.
If we fail to maintain and build relationships with our customers, or our customers’ products that utilize our solutions
do not gain widespread market acceptance, our revenue may stagnate or decline.
We do not sell any products to end users and we do not control or influence the manufacture, promotion, distribution, or
pricing of the products that incorporate our solutions. Instead, we design various solutions that our OEM customers incorporate
into their products, and we depend on such OEM customers to successfully manufacture and distribute products incorporating
our solutions and to generate consumer demand through marketing and promotional activities. As a result of this, our success
depends almost entirely upon the widespread market acceptance of our OEM customers’ products that incorporate our
solutions. Even if our technologies successfully meet our customers' price and performance goals, our sales could decline or
fail to develop if our customers do not achieve commercial success in selling their products that incorporate our solutions.
We must maintain our relationships with our existing customers and expand our relationships with OEMs in new markets.
Our customers generally do not provide us with firm, long-term volume purchase commitments, opting instead to issue purchase
orders that they can cancel, reduce, or delay, subject to certain limitations. In order to meet the expectations of our customers,
we must provide innovative solutions on a timely and cost-effective basis. This requires us to match our design and production
capacity with customer demand, maintain satisfactory delivery schedules, and meet performance goals. If we are unable to
achieve these goals for any reason, our sales may decline or fail to develop, which would result in decreasing revenue.
In addition to maintaining and expanding our customer relationships, we must also identify areas of significant growth
potential in other markets, establish relationships with OEMs in those markets, and assist those OEMs in developing products
that incorporate our solutions. Our failure to identify potential growth opportunities in the markets in which we operate,
particularly in the IoT market, or our failure to establish and maintain relationships with OEMs in those markets, would prevent
our business from growing in those markets.
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Our gross margin and results of operations may be adversely affected in the future by a number of factors, including
decreases in our average selling prices of products over time, shifts in our product mix, or price increases of certain
components or third-party services due to inflation, supply chain constraints, or other reasons.
We expect that the average unit selling prices of our products will continue to be subject to significant pricing pressures.
In addition, our more recently introduced products tend to have higher associated costs because of initial overall development
and production expenses. Therefore, over time, we may not be able to maintain or improve our gross margins. Our financial
results could suffer if we are unable to offset any reductions in our average selling prices by other cost reductions through
efficiencies, introduction of higher margin products and other means.
To attract new customers or retain existing customers, we may offer certain price concessions to certain customers, which
could cause our average selling prices and gross margins to decline. In the past, we have reduced the average selling prices of
our products in anticipation of future competitive pricing pressures, new product introductions by us or by our competitors and
other factors. We expect to continue to have to reduce prices of existing products in the future. Moreover, because of the wide
price differences across the markets we serve, the mix and types of performance capabilities of our products sold may affect
the average selling prices of our products and have a substantial impact on our revenue and gross margin. We may enter new
markets in which a significant amount of competition exists, and this may require us to sell our products with lower gross
margins than we earn in our established businesses. If we are successful in growing revenue in these markets, our overall gross
margin may decline. Fluctuations in the mix and types of our products may also affect the extent to which we are able to recover
the fixed costs and investments associated with a particular product, and as a result may harm our financial results.
Additionally, because we do not operate our own manufacturing, assembly, testing or packaging facilities, we are not
able to reduce our costs as rapidly as companies that operate their own facilities and our costs may even increase, which could
also reduce our gross margins. Our gross margin could also be impacted, for example, by the following factors: increased costs
(including increased costs caused by tariffs, inflation, higher interest rates, or supply chain constraints); loss of cost savings if
parts ordering does not correctly anticipate product demand or if the financial health of either our manufacturers partners or
our suppliers deteriorates; excess inventory, or inventory holding and obsolescence charges. In addition, we are subject to risks
from fluctuating market prices of certain components, which are incorporated into our products or used by our suppliers to
manufacture our products. Supplies of these components may from time-to-time become restricted, or general market factors
and conditions such as inflation or supply chain constraints have in the past affected and may in the future affect pricing of
such commodities. Any increase in the price of components used in our products will adversely affect our gross margins.
We are subject to order and shipment uncertainties. If we are unable to accurately predict customer demand, we may
hold excess or obsolete inventory, which would reduce our gross margin. Conversely, we may have insufficient inventory
or be unable to obtain the supplies or contract manufacturing capacity to meet that demand, which would result in lost
revenue opportunities and potential loss of market share as well as damaged customer relationships.
We typically sell products pursuant to purchase orders rather than long-term purchase commitments. Some of our
customers have, and others may in the future, cancel or defer purchase orders on short notice without incurring a significant
penalty. In addition, customers who have purchase commitments may not honor those commitments. Due to their inability to
predict demand or other reasons during our fiscal 2023, some of our customers have accumulated excess inventories and, as a
consequence, they either have deferred or they may defer future purchases of our products. We cannot accurately predict what
or how many products our customers will need in the future. Anticipating demand is difficult because our customers face
unpredictable demand for their own products and are increasingly focused more on cash preservation and tighter inventory
management.
We place orders with our suppliers based on forecasts of customer demand and, in some instances, may establish buffer
inventories to accommodate anticipated demand. Our forecasts are based on multiple assumptions, each of which may introduce
error into our estimates. For example, our ability to accurately forecast customer demand may be impaired by the delays
inherent in our customer’s product development processes, which may include extensive qualification and testing of
components included in their products, including ours. In many cases, they design their products to use components from
multiple suppliers. This creates the risk that our customers may decide to cancel or change product plans for products
incorporating our semiconductor solutions prior to completion, which makes it even more difficult to forecast customer
demand. In addition, while many of our customers are subject to purchase orders or other agreements that do not allow for
cancellation, there can be no assurance that these customers will honor these contract terms and cancellation of these orders
may adversely affect our business operations and demand forecast which is the basis for us to have products made.
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Our products are incorporated into complex devices and systems, which creates supply chain cross-dependencies. Due
to cross dependencies, supply chain disruptions have in the past, and may in the future, negatively impact the demand for our
products. We have a limited ability to predict the timing of a supply chain correction. If we cannot predict future customer
demand or supply chain disruptions, then we may hold excess or obsolete inventory. Moreover, significant supply chain
disruption may negatively impact the timing of our product shipments and revenue shipment linearity, which may impact and
extend our cash conversion cycle. In addition, the market share of our customers could be adversely impacted on a long-term
basis due to any continued supply chain disruption, which could negatively affect our results of operations.
If we overestimate customer demand, our excess or obsolete inventory may increase significantly, which would reduce
our gross margin and adversely affect our financial results. The risk of obsolescence and/or excess inventory is heightened for
semiconductor solutions due to the rapidly changing market for these types of products. Conversely, if we underestimate
customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially
lose market share and damage our customer relationships. In addition, any future significant cancellations or deferrals of
product orders, or the return of previously sold products, could materially and adversely affect our profit margins, increase
product obsolescence and restrict our ability to fund our operations.
Risks Related to Our Supply Chain
We depend on third parties to maintain satisfactory manufacturing yields and delivery schedules, and their inability to
do so could increase our costs, disrupt our supply chain, and result in our inability to deliver our products, which would
adversely affect our operating results.
We depend on our contract manufacturers and semiconductor fabricators to maintain high levels of productivity and
satisfactory delivery schedules at manufacturing and assembly facilities located primarily in Asia. We provide our contract
manufacturers with six-month rolling forecasts of our production requirements. We generally do not, however, have long-term
agreements with our contract manufacturers that guarantee production capacity, prices, lead times, or delivery schedules. In
our fiscal 2022, we faced manufacturing capacity constraints as a result of the supply constraints and capacity shortages
affecting the global semiconductor industry that materially limited our ability to meet our customers’ demand forecasts, thereby
limiting our potential revenue growth during the fiscal year. As a result of the supply shortages, we have entered into long-term
capacity and pricing agreements with certain of our suppliers.
If end customer demand declines, these long-term capacity
agreements could result in significant write-downs of inventory. On occasion, customers require rapid increases in production,
which can strain our resources and reduce our margins. Although we have been able to obtain increased production capacity
from our third-party contract manufacturers in the past, there is no guarantee that our contract manufacturers will be able to
increase production capacity to enable us to meet our customer demands in the future. Our contract manufacturers also serve
other customers, a number of which have greater production requirements than we do. As a result, our contract manufacturers
could determine to prioritize production capacity for other customers or reduce or eliminate deliveries to us on short notice.
Qualifying new contract manufacturers, and specifically semiconductor foundries, is time consuming and might result in
unforeseen manufacturing and operations problems. We may also encounter lower manufacturing yields and longer delivery
schedules in commencing volume production of new products that we introduce, which could increase our costs or disrupt our
supply of such products. The loss of relationships with our contract manufacturers or assemblers, or their inability to conduct
their manufacturing and assembly services for us as anticipated in terms of capacity, cost, quality, and timeliness could
adversely affect our ability to fill customer orders in accordance with required delivery, quality, and performance requirements,
and adversely affect our operating results.
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Shortages of components and materials may delay or reduce our sales and increase our costs, thereby harming our
operating results.
The inability to obtain sufficient quantities of components and other materials necessary for the production of our
products could result in reduced or delayed sales or lost orders. Many of the materials used in the production of our products
are available only from a limited number of foreign suppliers, particularly suppliers located in Asia. In most cases, neither we
nor our contract manufacturers have long-term supply contracts with these suppliers. As a result, we are subject to increased
costs, supply interruptions, and difficulties in obtaining materials. Our customers also may encounter difficulties or increased
costs in obtaining the materials necessary to produce their products into which our product solutions are incorporated. Future
shortages of materials and components, including potential supply constraints of silicon, could cause delayed shipments and
customer dissatisfaction, which may result in lower revenue.
Risks Related to Product Development
We are subject to lengthy development periods and product acceptance cycles, which can result in development and
engineering costs without any future revenue.
We provide solutions that are incorporated by OEMs into the products they sell. OEMs make the determination during
their product development programs whether to incorporate our solutions or pursue other alternatives. This process requires
us to make significant investments of time and resources in the design of solutions for our OEMs’ products well before our
customers introduce their products incorporating our interface solutions into the market, and before we can be sure that we will
generate any significant sales to our customers or even recover our investment. During a customer’s entire product development
process, we face the risk that our interfaces will fail to meet our customer’s technical, performance, or cost requirements, or
that our products will be replaced by competitive products or alternative technological solutions. Even if we complete our
design process in a manner satisfactory to our customer, the customer may delay or terminate its product development efforts.
The occurrence of any of these events could cause sales to not materialize, be deferred, or be cancelled, which could adversely
affect our operating results.
We face intense competition that could result in our losing or failing to gain market share and suffering reduced
revenue.
We serve intensely competitive markets that are characterized by price erosion, rapid technological change, and
competition from major domestic and international companies. This intense competition could result in pricing pressures,
lower sales, reduced margins, and lower market share. Depressed economic conditions, a slowdown in the markets in which
we operate, the emergence of new products not including our product solutions, rapid changes in the markets in which we
operate, and competitive pressures may result in lower demand for our product solutions and reduced unit margins.
Some of our competitors have greater market recognition, larger customer bases, and substantially greater financial,
technical, marketing, distribution, and other resources than we possess and that afford them greater competitive advantages.
As a result, they may be able to devote greater resources to the promotion and sale of products, negotiate lower prices for raw
materials and components, deliver competitive products at lower prices, and introduce new product solutions and respond to
customer requirements more quickly than we can. Our competitive position could suffer if one or more of our customers
determine not to utilize our custom engineered, total solutions approach and instead, decide to design and manufacture their
own interfaces, contract with our competitors, or use alternative technologies.
If we do not keep pace with technological innovations, our products may not remain competitive and our revenue and
operating results may suffer.
We operate in rapidly changing, highly competitive markets. Technological advances, the introduction of new products
and new design techniques could adversely affect our business unless we are able to adapt to changing conditions.
Technological advances could render our solutions less competitive or obsolete, and we may not be able to respond effectively
to the technological requirements of evolving markets. Therefore, we may be required to expend substantial funds for and
commit significant resources to enhancing and developing new technology, which may include purchasing advanced design
tools and test equipment, hiring additional highly qualified engineering and other technical personnel, and continuing and
expanding research and development activities on existing and potential solutions.
Our research and development efforts with respect to new technologies may not result in customer or market acceptance.
Some or all of those technologies may not successfully make the transition from the research and development stage to cost-
effective production as a result of technology problems, competitive cost issues, yield problems, and other factors. Even if we
successfully complete a research and development effort with respect to a particular technology, our customers may decide not
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to introduce or may terminate products utilizing the technology for a variety of reasons, including difficulties with other
suppliers of components for the products, superior technologies developed by our competitors and unfavorable comparisons of
our solutions with these technologies, price considerations and lack of anticipated or actual market demand for the products.
Our business could be harmed if we are unable to develop and utilize new technologies that address the needs of our
customers, or our competitors or customers develop and utilize new technologies more effectively or more quickly than we
can. Any investments made to enhance or develop new technologies that are not successful could have an adverse effect on
our net revenue and operating results.
We may not be able to enhance our existing product solutions and develop new product solutions in a timely manner.
Our future operating results will depend to a significant extent on our ability to continue to provide new solutions that
compare favorably with alternative solutions on the basis of time to introduction, cost, performance, and end user preferences.
Our success in maintaining existing customers, attracting new customers, and developing new business depends on various
factors, including the following:
•
•
•
•
•
•
innovative development of new solutions for customer products;
utilization of advances in technology;
maintenance of quality standards;
performance advantages;
efficient and cost-effective solutions; and
timely completion of the design and introduction of new solutions.
Our inability to enhance our existing product solutions and develop new product solutions on a timely basis could harm
our operating results and impede our growth.
If we become subject to product returns or claims resulting from defects in our products, we may incur significant costs
resulting in a decrease in revenue.
We develop complex products in an evolving marketplace and generally warrant our products for a period of 12 months
from the date of delivery. Despite testing by us and our customers, defects may be found in existing or new products. We
handle product quality matters sustainably by working on a one-on-one basis with our customers. We have never formally
recalled a product or had a mass defect that affected an entire product line. Nevertheless, manufacturing errors or product
defects could result in a delay in recognition or loss of revenue, loss of market share, or failure to achieve market acceptance.
Additionally, defects could result in financial or other damages to our customers, causing us to incur significant warranty,
support, and repair costs, and diverting the attention of our engineering personnel from key product development efforts.
We must finance the growth of our business and the development of new products, which could have an adverse effect
on our operating results.
To remain competitive, we must continue to make significant investments in research and development, marketing, and
business development. Our failure to sufficiently increase our net revenue to offset these increased costs would adversely
affect our operating results.
From time-to-time, we may seek additional equity or debt financing to provide for funds required to expand our business,
including through acquisitions. We cannot predict the timing or amount of any such requirements at this time. If such financing
is not available to us on satisfactory terms, we may be unable to expand our business or to develop new business at the rate
desired and our operating results may suffer. If obtained, the financing itself carries risks including the following: (i) debt
financing increases expenses and must be repaid regardless of operating results; and (ii) equity financing, including the issuance
of convertible notes or additional shares in connection with acquisitions, could result in dilution to existing stockholders and
could adversely affect the price of our common stock.
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Risks Related to International Sales and Operations
Changes to import, export and economic sanction laws may expose us to liability, increase our costs and adversely affect
our operating results.
As a global company headquartered in the U.S., we are subject to U.S. laws and regulations, including import, export,
and economic sanction laws. These laws may include prohibitions on the sale or supply of certain products to embargoed or
sanctioned countries, regions, governments, persons, and entities, may require an export license prior to the export of the
controlled item, or may otherwise limit and restrict the export of certain products and technologies. Many of our customers,
suppliers and contract manufacturers are foreign companies or have significant foreign operations. The imposition of new or
additional economic and trade sanctions against our major customers, suppliers or contract manufacturers could result in our
inability to sell to, and generate revenue from such customer, supplier, or contract manufacturer. As a result of restrictive export
laws, our customers may also develop their own solutions to replace our products or seek to obtain a greater supply of similar
or substitute products from our competitors that are not subject to these restrictions, which could material and adversely affect
our business and operating results.
In addition, compliance with additional export regulations may result in increased costs to the company. Although we
have an export compliance program, maintaining and adapting our export controls program to new and shifting regulations is
expensive, time-consuming and requires significant management attention. Failure to comply with trade or economic sanctions
could subject the company to legal liabilities and fines from the U.S. government. We must also comply with export restrictions
and laws imposed by other countries affecting trade and investments. Although these restrictions and laws have not materially
restricted our operations in the recent past, there is a significant risk that they could do so in the future, which would materially
and adversely affect our business and operating results.
Changes to international trade policy and rising concerns of international tariffs, including tariffs applied to goods
traded between the U.S. and China, could materially and adversely affect our business and results of operations.
Many of the materials used in the production of our products are available only from a limited number of foreign
suppliers, particularly suppliers located in Asia. The imposition of tariffs against foreign imports of certain materials could
make it more difficult or expensive for us or our OEMs to obtain sufficient quantities of components and other materials
necessary for the production of our products or products which incorporate our product solutions. Any interruptions to supply
could result in delay or cancellation of our products, which could adversely affect our business and operating results.
In addition, the institution of trade tariffs both globally and between the U.S. and China carry the risk that China’s overall
economic condition may be negatively affected, which could affect our China operations, including the manufacturing
operations on which we rely in China. Further, imposition of tariffs could cause a decrease in the sales of our products to
customers located in China or to our OEMs selling to customers in China, which could impact our business, revenue, and
operating results.
International sales and manufacturing risks could adversely affect our operating results.
Our manufacturing and assembly operations are primarily conducted in Taiwan, China, and Korea by contract
manufacturers and semiconductor fabricators. We have sales and logistics operations in Hong Kong, and sales and engineering
design support operations in China, France, Germany, India, Israel, Japan, Korea, Poland, Switzerland, Taiwan, and the U.K.
These international operations expose us to various economic, political, regulatory, and other risks that could adversely affect
our operations and operating results, including the following:
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difficulties and costs of staffing and managing a multinational organization;
unexpected changes in regulatory requirements;
differing labor regulations;
differing environmental laws and regulations, including in response to climate change;
potentially adverse tax consequences;
possible employee turnover or labor unrest;
greater difficulty in collecting accounts receivable;
the burdens and costs of compliance with a variety of foreign laws;
the volatility of currency exchange rates;
22
•
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•
potentially reduced protection for intellectual property rights;
political or economic instability in certain parts of the world; and
natural disasters, including earthquakes or tsunamis.
If any of these risks associated with international operations materialize, our operations could significantly increase in
cost or be disrupted, which would negatively affect our revenue and operating results.
Our operating results could be adversely affected by fluctuations in the value of the U.S. dollar against foreign
currencies.
We transact business predominantly in U.S. dollars, and we invoice and collect our sales in U.S. dollars. A weakening
of the U.S. dollar could cause our overseas vendors to require renegotiation of either the prices or currency we pay for their
goods and services.
In the future, customers may negotiate pricing and make payments in non-U.S. currencies. For fiscal
2023, approximately 13% of our costs were denominated in non-U.S. currencies, including British pounds, Canadian dollars,
European Union euro, Hong Kong dollars, Indian rupee, New Taiwan dollars, Japanese yen, Korean won, Chinese yuan, Polish
zloty, Israeli New Shekel, and Swiss francs.
If our overseas vendors or customers require us to transact business in non-U.S. currencies, fluctuations in foreign
currency exchange rates could affect our cost of goods, operating expenses, and operating margins, and could result in exchange
losses. In addition, currency devaluation could result in a loss to us if we hold deposits of that currency. Hedging foreign
currencies can be difficult, especially if the currency is not freely traded. We cannot predict the impact of future exchange rate
fluctuations on our operating results.
Risks Related to Our Employees
We depend on key personnel who would be difficult to replace, and our business will likely be harmed if we lose their
services or cannot hire additional qualified personnel.
Our success depends substantially on the efforts and abilities of our senior management and other key personnel. The
competition for qualified management and key personnel, especially engineers, is intense. Although we maintain nondisclosure
covenants with most of our key personnel, and our key executives have change of control severance agreements, we do not
have employment agreements with many of them. The loss of services of one or more of our key employees or the inability to
hire, train, and retain key personnel, especially engineers and technical support personnel, and capable sales and customer-
support employees outside the U.S., could delay the development and sale of our products, disrupt our business, and interfere
with our ability to execute our business plan.
If we are unable to obtain stockholder approval of share-based compensation award programs or additional shares for
such programs, we could be at a competitive disadvantage in the marketplace for qualified personnel or may be required
to increase the cash element of our compensation program.
Competition for qualified personnel in our industry is extremely intense, particularly for engineering and other technical
personnel. Our compensation program, which includes cash and share-based compensation award components, has been
instrumental in attracting, hiring, motivating, and retaining qualified personnel. Our success depends on our continued ability
to use our share-based compensation programs to effectively compete for engineering and other technical personnel and
In the future, if we are unable to obtain
professional talent without significantly increasing cash compensation costs.
stockholder approval of our share-based compensation programs or additional shares for such programs, we could be at a
competitive disadvantage in the marketplace for qualified personnel or we may be required to increase the cash elements of
our compensation program to account for this disadvantage.
Risks Related to Our Intellectual Property
Our ability to compete successfully and continue growing as a company depends on our ability to adequately protect
our proprietary technology and confidential information.
We protect our proprietary technology and confidential information through the use of patents, trade secrets, trademarks,
copyrights, confidentiality agreements and other contractual provisions. The process of seeking patent protection is lengthy
and expensive. Further, there can be no assurance that even if a patent is issued, that it will not be challenged, invalidated, or
circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial
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advantage. Failure to obtain trademark registrations could compromise our ability to fully protect our trademarks and brands
and could increase the risk of challenge from third parties to our use of our trademarks and brands. Effective intellectual
property protection may be unavailable or limited in some foreign countries in which we operate. In particular, the validity,
enforceability and scope of protection of intellectual property in China, where we derive a significant portion of our net sales,
and certain other countries where we derive net sales, are still evolving and historically, have not protected and may not protect
in the future, intellectual property rights to the same extent as laws developed in the U.S.
We do not consistently rely on written agreements with our customers, suppliers, manufacturers, and other recipients of
our technologies and products and therefore, some trade secret protection may be lost and our ability to enforce our intellectual
property rights may be limited. Confidentiality and non-disclosure agreements that are in place may not be adequate to protect
our proprietary technologies or may be breached by other parties. Additionally, our customers, suppliers, manufacturers, and
other recipients of our technologies and products may seek to use our technologies and products without appropriate limitations.
In the past, we did not consistently require our employees and consultants to enter into confidentiality, employment, or
proprietary information and invention assignment agreements. Therefore, our former employees and consultants may try to
claim some ownership interest in our technologies and products or may use our technologies and products competitively and
without appropriate limitations. Unauthorized parties may attempt to copy or otherwise use aspects of our technologies and
products that we regard as proprietary. Other companies, including our competitors, may independently develop technologies
that are similar or superior to our technologies, duplicate our technologies, or design around our patents. If our intellectual
property protection is insufficient to protect our intellectual property rights, we could face increased competition in the markets
for our technologies and products.
We may pursue, and from time-to-time defend, litigation to enforce our intellectual property rights, to protect our trade
secrets, and to determine the validity and scope of the proprietary rights of others. Litigation whether successful or
unsuccessful, could result in substantial costs and diversion of resources, which could have a material adverse effect on our
business, financial condition, and operating results.
Any claims that our technologies infringe the intellectual property rights of third parties could result in significant costs
and have a material adverse effect on our business.
We cannot be certain that our technologies and products do not and will not infringe issued patents or other third-party
proprietary rights. Any claims, with or without merit, could result in significant litigation costs and diversion of resources,
including the attention of management, and could require us to enter into royalty or licensing agreements, any of which could
have a material adverse effect on our business. There can be no assurance that such licenses could be obtained on commercially
reasonable terms, if at all, or that the terms of any offered licenses would be acceptable to us. We may also have to pay
substantial damages to third parties or indemnify customers or licensees for damages they suffer if the products they purchase
from us or the technology they license from us violates any third-party intellectual property rights. An adverse determination
in a judicial or administrative proceeding, or a failure to obtain necessary licenses to use such third-party technology could
prevent us from manufacturing, using, or selling certain of our products, and there is no guarantee that we will be able to
develop or acquire alternate non-infringing technology.
In addition, we license certain technology used in and for our products from third parties. These third-party licenses are
granted with restrictions, and there can be no assurances that such third-party technology will remain available to us on
commercially acceptable terms. Any breach or violation of the terms and conditions specified in these license agreements could
have significant adverse consequences on our operations and financial performance and may result in legal action, monetary
penalties, or the termination of the license, which would impact our ability to offer certain products or services.
If third-party technology currently utilized in our products is no longer available to us on commercially acceptable terms,
or if any third-party initiates litigation against us for alleged infringement of their proprietary rights, we may not be able to sell
certain of our products and we could incur significant costs in defending against litigation or attempting to develop or acquire
alternate non-infringing products, which would have an adverse effect on our operating results.
Risks Related to Acquisitions
Any acquisitions that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value, and
harm our operating results.
We expect to continue to pursue opportunities to acquire other businesses and technologies in order to complement our
current solutions, expand the breadth of our markets, enhance our technical capabilities, or otherwise create growth
opportunities. We cannot accurately predict the timing, size, and success of any currently planned or future acquisitions. We
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may be unable to identify suitable acquisition candidates or to complete the acquisitions of candidates that we identify.
Increased competition for acquisition candidates or increased asking prices by acquisition candidates may increase purchase
prices for acquisitions to levels beyond our financial capability or to levels that would not result in the returns required by our
acquisition criteria. Acquisitions may also become more difficult in the future as we or others acquire the most attractive
candidates. Unforeseen expenses, difficulties, and delays frequently encountered in connection with rapid expansion through
acquisitions could inhibit our growth and negatively impact our operating results. If we make any future acquisitions, we could
issue stock that would dilute existing stockholders' percentage ownership, incur substantial debt, assume contingent liabilities,
or experience higher operating expenses.
We may be unable to effectively complete an integration of the management, operations, facilities, and accounting and
information systems of acquired businesses with our own; efficiently manage, combine or restructure the operations of the
acquired businesses with our operations; achieve our operating, growth, and performance goals for acquired businesses; achieve
additional revenue as a result of our expanded operations; or achieve operating efficiencies or otherwise realize cost savings as
a result of anticipated acquisition synergies. The integration of acquired businesses involves numerous risks, including the
following:
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the potential disruption of our core business;
the potential strain on our financial and managerial controls, reporting systems and procedures;
potential unknown liabilities associated with the acquired business;
costs relating to liabilities which we agree to assume;
unanticipated costs associated with the acquisition;
diversion of management’s attention from our core business;
problems assimilating the purchased operations, technologies, or products;
risks associated with entering markets and businesses in which we have little or no prior experience;
failure of acquired businesses to achieve expected results;
adverse effects on existing business relationships with suppliers and customers;
failure to retain key customers, suppliers, or personnel of acquired businesses;
the risk of impairment charges related to potential write-downs of acquired assets; and
the potential inability to create uniform standards, controls, procedures, policies, and information systems.
We cannot assure you that we would be successful in overcoming problems encountered in connection with any
acquisitions, and our inability to do so could disrupt our operations, result in goodwill or intangible asset impairment charges,
and adversely affect our business.
Potential strategic alliances may not achieve their objectives, and the failure to do so could impede our growth.
We have entered, and we anticipate that we will continue to enter, into strategic alliances. We continually explore
strategic alliances designed to enhance or complement our technology or to work in conjunction with our technology; to provide
necessary know-how, components, or supplies; and to develop, introduce, and distribute products utilizing our technology.
Certain strategic alliances may not achieve their intended objectives, and parties to our strategic alliances may not perform as
contemplated. The failure of these alliances to achieve their objectives may impede our ability to introduce new products and
enter new markets.
We may incur material environmental liabilities as a result of prior operations at an acquired company.
In connection with our acquisition in July 2017 of Conexant Systems, we agreed to assume certain environmental
liabilities, including remediation of environmental impacts at a property formerly owned and operated by Conexant (the
“Conexant Site”) and for potential future claims alleging personal injury or property damage related to the environmental
impacts at and about the Conexant Site. We continue to incur costs to investigate and remediate the Conexant Site’s
environmental impacts, and we are at risk for future personal injury and property damage claims related to the Conexant Site.
Various federal, state, and local authorities regulate the release of hazardous substances into the environment and can impose
substantial fines if our remediation efforts at or about the Conexant Site fail or are deemed inadequate. In addition, changes in
laws, regulations and enforcement policies, the discovery of previously unknown contamination at the Conexant Site, the
25
implementation of new technology at the Conexant Site, or the establishment or imposition of stricter federal, state, or local
cleanup standards or requirements with respect to the Conexant Site could require us to incur additional costs in the future that
could have a negative effect on our financial condition or results of operations.
Risks Factors Related to Our Indebtedness
Our indebtedness could adversely affect our financial condition or operating flexibility and prevent us from fulfilling
our obligations outstanding under our credit agreement, our 4.000% senior notes due 2029, or the Senior Notes, and
other indebtedness we may incur from time-to-time.
On March 11, 2021, we completed the offering of the Senior Notes in the aggregate principal amount of $400.0 million,
with a corresponding amendment and restatement of our credit agreement, or as amended and supplemented, the Credit
Agreement, with the lenders party thereto, or the Lenders, and Wells Fargo Bank, National Association, or the Administrative
Agent, as administrative agent for the Lenders. The Senior Notes include a mandatory semi-annual payment of a 4.000%
coupon. We are permitted under the indenture governing our Senior Notes and the Credit Agreement to incur additional debt
under certain conditions, including additional secured debt. If new debt were to be incurred in the future, the related risks that
we now face could intensify.
Our level of indebtedness could have important consequences on our future operations, including:
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•
making it more difficult for us to satisfy our payment and other obligations under the Notes, the Credit Agreement,
or our other outstanding debt from time-to-time;
risking an event of default if we fail to comply with the financial and other covenants contained in the Notes
indenture or the Credit Agreement, which could result in the Senior Notes or any outstanding bank debt becoming
immediately due and payable and could permit the lenders under the Credit Agreement to foreclose on the assets
securing such bank debt;
subjecting us to the risk of increased sensitivity to interest rate increases on our debt with variable interest rates,
including the debt that we may incur under the Credit Agreement;
reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other
general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business,
the industry in which we operate and the general economy; and
placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.
Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us
under the Credit Agreement, the indenture governing the Senior Notes or otherwise in an amount sufficient to enable us to pay
our debt or to fund our other liquidity needs.
The covenants in the Credit Agreement and Senior Notes impose restrictions that may limit our operating and financial
flexibility.
The Credit Agreement includes certain covenants that limit (subject to certain exceptions) our ability to, among other
things: (i) incur or guarantee additional indebtedness; (ii) incur or suffer to exist liens securing indebtedness; (iii) make
investments; (iv) consolidate, merge or transfer all or substantially all of our assets; (v) sell assets; (vi) pay dividends or other
distributions on, redeem or repurchase capital stock; (vii) enter into transactions with affiliates; (viii) amend, modify, prepay
or redeem subordinated indebtedness; (ix) enter into certain restrictive agreements; and (x) engage in a new line of business.
In addition, the Credit Agreement contains financial covenants that (i) require the ratio of the amount of our consolidated total
indebtedness to consolidated EBITDA to be less than certain maximum ratio levels, and (ii) require the ratio of the amount of
our consolidated EBITDA to consolidated interest expense to be greater than a certain minimum ratio level.
If we violate these covenants and are unable to obtain waivers, our debt under the Credit Agreement would be in default
and could be accelerated, and could permit, in the case of secured debt, the lenders to foreclose on our assets securing the Credit
Agreement. If the indebtedness is accelerated, we may not be able to repay our debt or borrow sufficient funds to refinance it.
Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to
us. If our debt is in default for any reason, our cash flows, results of operations or financial condition could be materially and
adversely affected. In addition, complying with these covenants may also cause us to take actions that may make it more
26
difficult for us to successfully execute our business strategy and compete against companies that are not subject to such
restrictions.
General Risk Factors
If we fail to manage our growth effectively, our infrastructure, management, and resources could be strained, our ability
to effectively manage our business could be diminished, and our operating results could suffer.
The failure to manage our planned growth effectively could strain our resources, which would impede our ability to
increase revenue. We have increased the number of our solutions in the past and may plan to further expand the number and
diversity of our solutions and their use in the future. Our ability to manage our planned diversification and growth effectively
will require us to:
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•
successfully hire, train, retain, and motivate additional employees, including employees outside the U.S.;
efficiently plan, expand, or cost-effectively reduce our facilities to meet headcount requirements;
enhance our global operational, financial, and management infrastructure; and
expand our development and production capacity.
In connection with the expansion and diversification of our product and customer base, we may increase our personnel
and make other expenditures to meet demand for our expanding product offerings, including offerings in the IoT market, the
PC applications market, and the mobile product applications market. Any increase in expenses or investments in infrastructure
and facilities in anticipation of future orders that do not materialize would adversely affect our profitability. Our customers
also may require rapid increases in design and production services that place an excessive short-term burden on our resources
and the resources of our contract manufacturers. An inability to quickly expand our development, design or production capacity
or an inability of our third-party manufacturers to quickly expand development, design, or production capacity to meet this
customer demand could result in a decrease to our revenue or operating results. If we cannot manage our growth effectively,
our business and operating results could suffer.
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We face risks associated with security breaches or cyberattacks.
We face risks associated with security breaches or cyberattacks of our computer systems or those of our third-party
representatives, vendors, and service providers. Although we have implemented security procedures and controls to address
these threats, our systems may still be vulnerable to data theft, computer viruses, programming errors, ransomware, and other
attacks by third parties, or similar disruptive problems. If our systems, or systems owned by third parties affiliated with our
company, were breached or attacked, the proprietary and confidential information of our company, our employees and our
customers could be disclosed and we may be required to incur substantial costs and liabilities, including the following: liability
for stolen assets or information; fines imposed on us by governmental authorities for failure to comply with privacy laws or for
disclosure of any personally identifiable information as a part of such attack; costs of repairing damage to our systems; lost
revenue and income resulting from any system downtime caused by such breach or attack; loss of competitive advantage if our
proprietary information is obtained by competitors as a result of such breach or attack; increased costs of cyber security
protection; costs of incentives we may be required to offer to our customers or business partners to retain their business; damage
to our reputation; and expenses to rectify the consequences of the security breach or cyberattack. In addition, any compromise
of security from a security breach or cyberattack could deter customers or business partners from entering into transactions that
involve providing confidential information to us. As a result, any compromise to the security of our systems could have a
material adverse effect on our business, reputation, financial condition, and operating results.
If tax laws change in the jurisdictions in which we do business or if we receive a material tax assessment in connection
with an examination of our income tax returns, our consolidated financial position, results of operations and cash flows
could be adversely affected.
We are subject to U.S. federal, state, and foreign income taxes in the various jurisdictions in which we do business. In
addition, we are required to pay U.S. federal taxes on the operating earnings of certain of our foreign subsidiaries. Our future
effective tax rates and the value of our deferred tax assets could be adversely affected by changes in tax laws in the U.S. or in
the foreign jurisdictions in which we operate. In addition, we are subject to the examination of our income tax returns by the
tax authorities in the jurisdictions in which we do business. The calculation of tax liabilities involves significant judgment in
estimating the impact of uncertainties in the application of highly complex tax laws. Our results have in the past, and could in
the future, include favorable and unfavorable adjustments to our estimated tax liabilities in the period a determination of such
estimated tax liability is made or resolved, upon the filing of an amended return, upon a change in facts, circumstances, or
interpretation, or upon the expiration of a statute of limitation. While we believe we have adequately provided for reasonably
foreseeable outcomes in connection with the resolution of income tax uncertainties, the resolution of these uncertainties in a
manner inconsistent with our expectations could have a material impact on our consolidated financial position, result of
operations, or cash flows.
We are subject to governmental laws, regulations and other legal obligations related to privacy and data protection.
We collect, use, and store personally identifiable information, or PII, as part of our business and operations. We are
subject to federal, state, and international laws relating to the collection, use, retention, security, and transfer of PII. The
legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving and is likely to
remain uncertain for the foreseeable future. The cost of complying with and implementing these privacy-related and data
governance measures could be significant as they may create additional burdensome security, business process, business record
or data localization requirements. The theft, loss or misuse of PII collected, used, stored or transferred by us, our any inability,
or perceived inability, to adequately address privacy and data protection concerns, even if unfounded, or our failure to comply
with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations, could result in
additional cost and liability to us, including litigation, which could have an adverse effect on our business, operating results,
cash flows, and financial condition.
Our charter documents and Delaware law could make it more difficult for a third-party to acquire us and discourage
a takeover.
Our certificate of incorporation and the Delaware General Corporation Law contain provisions that may have the effect
of making more difficult or delaying attempts by others to obtain control of our company, even when such attempts may be in
the best interests of our stockholders. Our certificate of incorporation also authorizes our Board of Directors, without
stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that
adversely affect or dilute the voting power of the holders of our common stock. Delaware law also imposes conditions on
certain business combination transactions with “interested stockholders.” Our certificate of incorporation divides our Board of
Directors into three classes, with one class to stand for election each year for a three-year term after the election. The
classification of directors tends to discourage a third-party from initiating a proxy solicitation or otherwise attempting to obtain
control of our company and may maintain the incumbency of our Board of Directors, as this structure generally increases the
difficulty of, or may delay, replacing a majority of directors. Our certificate of incorporation authorizes our Board of Directors
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to fill vacancies or newly created directorships. A majority of the directors then in office may elect a successor to fill any
vacancies or newly created directorships, thereby increasing the difficulty of, or delaying a third-party’s efforts in, replacing a
majority of directors.
The market price of our common stock has been and may continue to be volatile.
The trading price of our common stock has been and may continue to be subject to wide fluctuations in response to
various factors, including the following:
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variations in our quarterly results;
the financial guidance we may provide to the public, any changes in such guidance, or our failure to meet such
guidance;
changes in financial estimates by industry or securities analysts or our failure to meet such estimates;
various market factors or perceived market factors, including rumors, whether or not correct, involving us, our
customers, our suppliers, our competitors, or a potential acquisition of our company;
announcements of technological innovations by us, our competitors, or our customers;
introductions of new products or new pricing policies by us, our competitors, or our customers;
acquisitions or strategic alliances by us, our competitors, or our customers;
recruitment or departure of key personnel;
the gain or loss of significant orders;
the gain or loss of significant customers;
market conditions in our industry, the industries of our customers, and the economy as a whole;
short positions held by investors;
new federal and state laws and regulations affecting our industry; and
general financial market conditions or occurrences, including market volatility resulting from geopolitical risks,
and rivalries, acts of war, terrorist attacks, cybersecurity attacks, health pandemics, financial market technological
glitches and interruptions of trading activity.
In addition, stocks of technology companies have experienced extreme price and volume fluctuations that often have
been unrelated or disproportionate to these companies’ operating performance. Public announcements by technology
companies concerning, among other things, their performance, accounting practices, or legal problems could cause the market
price of our common stock to decline regardless of our actual operating performance.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
Our principal executive offices, as well as our principal research and development, sales, marketing, and administrative
functions, are located in San Jose, California, where we lease approximately 111,000 square feet of facilities. We also have
research and development functions in leased offices in California, Georgia, and Massachusetts. Our two Asia Pacific principal
offices are located in leased offices in Hong Kong and Japan, where we have sales, operations, and research and development
functions. We have a leased facility with logistics operations in Taiwan, leased facilities with sales and support operations in
China, Hong Kong, Japan, Korea, Switzerland, and Taiwan, and leased facilities with engineering design support operations in
China, France, Germany, India, Israel, Japan, Korea, Poland, Switzerland, Taiwan, the U.K. and California, U.S.
ITEM 3.
LEGAL PROCEEDINGS
We are party to various litigation matters and claims arising from time-to-time in the ordinary course of business. While
the results of such matters cannot be predicted with certainty, we believe that the final outcome of such matters will not have a
material adverse effect on our business, financial condition, results of operations or cash flows.
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For further information regarding current legal proceedings, see Note 10, Indemnifications and Contingencies to the
consolidated financial statements contained elsewhere in this report.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information on Common Stock
Our common stock has been listed on the Nasdaq Global Select Market (formerly the Nasdaq National Market) under
the symbol "SYNA" since January 29, 2002. Prior to that time, there was no public market for our common stock.
Stockholders
As of August 11, 2023, there were approximately 115 holders of record of our common stock. The closing price of our
common stock as quoted on the Nasdaq Global Select Market as of August 11, 2023 was $89.20.
Dividends
We have never declared or paid cash dividends on our common stock. We currently plan to retain all earnings to finance
the growth of our business, make our debt payments, or purchase shares under our common stock repurchase program.
Payments of any cash dividends in the future will depend on our financial condition, operating results, and capital requirements,
as well as other factors deemed relevant by our Board of Directors.
Our Credit Agreement and the indenture governing our Senior Notes also place restrictions on the payment of any
dividends. For a further description of the terms of the Credit Agreement and our Senior Notes indenture, see Note 8 Debt to
the consolidated financial statements contained elsewhere in this report.
Stock-Based Compensation
For information on securities authorized for issuance under our equity compensation plans, see Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Issuer Purchases of Equity Securities
From April 2005 through April 2023, our Board of Directors cumulatively authorized the repurchase of up to $2.3 billion
for our common stock under our stock repurchase program, which expires in July 2025. As of the end of fiscal 2023, the
remaining amount authorized for repurchase under our stock repurchase program was $893.9 million. During the three-month
period ended June 24, 2023, repurchases under the stock repurchase program were as follows:
Period
March 26, 2023 - April 22, 2023
April 23, 2023 - May 20, 2023
May 21, 2023 - June 24, 2023
Total
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Program
Maximum
Dollar Value
of Shares
that May
Yet Be
Purchased
Under the
Program
Average
Price
Paid
per
Share
—
—
83.50
—
—
998,942
—
—
$893,922,447
Total
Number
of Shares
Purchased
—
—
998,942 $
998,942
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Performance Graph
The following line graph compares cumulative total stockholder returns for the five years ended June 24, 2023 for (i) our
common stock, (ii) the Nasdaq Composite Index and (iii) the Russell 2000 Index. The graph assumes an investment of $100
on June 30, 2018. The calculations of cumulative stockholder return on the Nasdaq Composite Index and the Russell 2000
Index include reinvestment of dividends. The calculation of cumulative stockholder return on our common stock does not
include reinvestment of dividends because we did not pay any dividends during the measurement period. The historical
performance shown is not necessarily indicative of future performance.
The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise
subject to the liability of that section. The performance graph above will not be deemed incorporated by reference into any
filing of our company under the Exchange Act or the Securities Act.
ITEM 6.
RESERVED
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements and Factors That May Affect Results
You should read the following discussion and analysis in conjunction with our financial statements and related notes
contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties, and
assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of
a variety of factors, including those set forth elsewhere in this report and under Item 1A. Risk Factors.
Impact of COVID-19
Many of the restrictions and other containment measures implemented by governmental authorities in response to the
COVID-19 pandemic have since been lifted or scaled back. We did not incur significant disruptions to our business or a
materially negative impact on our consolidated results of operations and financial condition from the COVID-19 pandemic and
our business was not severely impacted.
Overview
We are a leading worldwide developer and fabless supplier of premium mixed signal semiconductor solutions changing
the way humans engage with connected devices and data, engineering exceptional experiences throughout the home, at work,
in the car and on the go. We believe our results to date reflect the combination of our customer focus and the strength of our
intellectual property and our engineering know-how, which allow us to develop or engineer products that meet the demanding
design specifications of our OEMs.
We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that
reflects the consideration we expect to receive in exchange for those goods or services. Most of our revenue is recognized at a
point in time, either on shipment or delivery of the product, depending on customer terms and conditions. We also generate
revenue from license-based arrangements. We license the rights to certain of our intellectual properties to customers granting
them the right to manufacture and sell licensed products. For fiscal 2023, revenue from the IoT product applications market
accounted for 70.0% of our net revenue, revenue from the PC product applications market accounted for 16.0% of our net
revenue, and revenue from the mobile product applications market accounted for 14.0% of our net revenue.
Many of our customers have manufacturing operations in China, and many of our OEM customers have established
design centers in Asia. With our expanding global presence, including offices in China, France, Germany, Hong Kong, India,
Israel, Japan, Korea, Poland, Switzerland, Taiwan, the U.K., and the U.S., we are well positioned to provide local sales,
operational, and engineering support services to our existing customers, as well as potential new customers, on a global basis.
Our manufacturing operations are based on a variable cost model in which we outsource all of our production
requirements and generally drop ship our products directly to our customers from our contract manufacturers’ facilities,
eliminating the need for significant capital expenditures and allowing us to minimize our investment in inventories. This
approach requires us to work closely with our contract manufacturers and semiconductor fabricators to ensure adequate
production capacity to meet our forecasted volume requirements. As a result of recent supply constraints and capacity shortages
affecting the global semiconductor industry, we have entered into long-term capacity and pricing agreements with some
suppliers. We use third-party wafer manufacturers to supply wafers and third-party packaging manufacturers to package our
proprietary ASICs. In certain cases, we rely on a single source or a limited number of suppliers to provide other key components
of our products. Our cost of revenue includes all costs associated with the production of our products, including materials;
logistics; amortization of intangibles related to acquired developed technology; backlog; supplier arrangements; manufacturing,
assembly, royalties paid to third-party intellectual property providers and test costs paid to third-party manufacturers; and
related overhead costs associated with our indirect manufacturing operations personnel. Additionally, we charge all warranty
costs, losses on inventory purchase obligations, and write-downs to reduce the carrying value of obsolete, slow moving, and
non-usable inventory to net realizable value, to cost of revenue.
Our gross margin generally reflects the combination of the added value we bring to our OEM customers’ products by
meeting their custom design requirements and the impact of our ongoing cost-improvement programs. These cost-improvement
programs include reducing materials and component costs and implementing design and process improvements. Our newly
introduced products may have lower margins than our more mature products, which have realized greater benefits associated
with our ongoing cost-improvement programs. As a result, new product introductions may initially negatively impact our gross
margin.
32
Our research and development expenses include costs for supplies and materials related to product development, as well
as the engineering costs incurred to design ASICs and human experience solutions for OEM customers prior to and after our
OEMs’ commitment to incorporate those solutions into their products. In addition, we expense in-process research and
development projects acquired as part of a business acquisition, which have not yet reached technological feasibility, and which
have no foreseeable alternative future use. We continue to commit to the technological and design innovation required to
maintain our position in our existing markets, and to adapt our existing technologies or develop new technologies for new
markets.
Selling, general, and administrative expenses include expenses related to sales, marketing, and administrative personnel;
internal sales and outside sales representatives’ commissions; market and usability research; outside legal, accounting, and
consulting costs; and other marketing and sales activities.
Acquired intangibles amortization, included in operating expenses, consists primarily of amortization of customer
relationship and tradenames intangible assets recognized under the purchase method for business combinations.
Restructuring costs primarily reflect severance costs related to the restructuring of our operations to reduce operating
expenses and gain efficiencies from our recent acquisitions. These headcount related costs were in cost of revenue, research
and development, and selling, general and administrative expenses. See Note 16 Restructuring Activities to the consolidated
financial statements contained elsewhere in this report.
Interest and other expense, net, primarily reflects interest expense on our Senior Notes, Term Loan Facility and revolving
line of credit as well as the amortization of debt issuance costs and discount on our debt, partially offset by interest income
earned on our cash, cash equivalents and short-term investments.
Acquisitions
Broadcom
In February 2023, we completed the acquisition of certain GPS developed technology intangible assets from Broadcom
for an aggregate consideration of $30.0 million, which was paid in cash in the previous fiscal year.
Emza
On October 2022, we completed the acquisition of Emza Visual Sense, Ltd., or Emza, for total purchase consideration
of $15.8 million. Emza is a developer of ultra-low-power artificial intelligence visual sensing solutions. Emza's technology
extends our position in Edge AI and allows us to serve the personal computing market with a solution for human presence
detection, or HPD. For further discussion of the Emza acquisition, see Note 4 Acquisitions, Divestiture and Investment included
in the consolidated financial statements contained elsewhere in this report.
33
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles,
or GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses,
and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to revenue recognition, allowance for doubtful accounts, cost of revenue, inventories, product warranty, share-based
compensation costs, provision for income taxes, deferred income tax asset, valuation allowances, uncertain tax positions, tax
contingencies, goodwill, intangible assets, investments, and contingencies. We base our estimates on historical experience,
applicable laws and regulations, and various other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The methods, estimates, interpretations, and judgments we use in applying our most critical accounting policies can have
a significant impact on the results that we report in our consolidated financial statements. The SEC considers an entity’s most
critical accounting policies to be those policies that are both most important to the portrayal of the entity’s financial condition
and results of operations and those that require the entity’s most difficult, subjective, or complex judgments, often as a result
of the need to make assumptions and estimates about matters that are inherently uncertain. We believe the following critical
accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial
statements:
•
•
•
•
•
Revenue Recognition
Inventory Valuation
Business Combinations
Income Taxes
Goodwill
Revenue Recognition
Our revenue is primarily generated from the sale of ASIC chips, either directly to a customer or to a distributor. Revenue
is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the
consideration we expect to receive in exchange for those goods or services. All of our revenue, except an inconsequential
amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and
conditions. We generally warrant our products for a period of 12 months from the date of sale and estimate probable product
warranty costs at the time we recognize revenue as the warranty is considered an assurance warranty and not a performance
obligation. Non-product revenue is recognized over the same period of time such performance obligations are satisfied. We
then select an appropriate method for measuring satisfaction of the performance obligations.
Revenue from sales to distributors is recognized upon shipment of the product to the distributors (sell-in basis). Master
sales agreements are in place with certain customers, and these agreements typically contain terms and conditions with respect
to payment, delivery, warranty, and supply. In the absence of a master sales agreement, we consider a customer's purchase
order or our standard terms and conditions to be the contract with the customer.
Rights to our intellectual property, or IP, are either sold or licensed to customers. Revenue recognition from the licensing
of our IP is dependent on the nature and terms of each agreement. We recognize revenue from the licensing of our IP upon
delivery of the IP if there are no substantive future obligations to perform under the arrangement. Sales-based or usage-based
royalties from the license of IP are recognized at the later of the period the sale or usage occurs, or the satisfaction of the
performance obligation to which some or all of the sales-based or usage-based royalties have been allocated.
34
Our pricing terms are negotiated independently, on a stand-alone basis. In determining the transaction price, we evaluate
whether the price is subject to refund or adjustment to determine the net consideration which we expect to receive for the sale
of such products. In limited situations, we make sales to certain customers under arrangements where we grant stock rotation
rights, price protection and price allowances; variable consideration associated with these rights is expected to be
inconsequential. These adjustments and incentives are accounted for as variable consideration, classified as other current
liabilities under the new revenue standard and are shown as customer obligations within Other Accrued Liabilities as disclosed
in Note 1 Organization and Summary of Significant Accounting Policies to the consolidated financial statements contained
elsewhere in this report. We estimate the amount of variable consideration for such arrangements based on the expected value
to be provided to customers, and we do not believe that there will be significant changes to our estimates of variable
consideration. When incentives, stock rotation rights, price protection, volume discounts, or price allowances are applicable,
they are estimated and recorded in the period the related revenue is recognized. Stock rotation reserves are based on historical
return rates applied to distributor inventory subject to stock rotation rights and recorded as a reduction to revenue with a
corresponding reduction to cost of goods sold for the estimated cost of inventory that is expected to be returned and recorded
as prepaid expenses and other current assets. In limited circumstances, we enter into volume-based tiered pricing arrangements
and we estimate total unit volumes under such arrangement to determine the expected transaction price for the units expected
to be transferred. Such arrangements are accounted for as contract liabilities within other accrued liabilities. Sales returns
liabilities are recorded as refund liabilities within other accrued liabilities.
Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive
consideration from customers. Payments are generally due within three months of completion of the performance obligation
and subsequent invoicing and, therefore, do not include significant financing components. To date, there have been no material
impairment losses on accounts receivable.
We invoice customers and recognize all of our revenue, except an inconsequential amount, at a point in time, either on
shipment or delivery of the product, depending on customer terms and conditions. We account for shipping and handling costs
as fulfillment costs before the customer obtains control of the goods. We continue to account for collection of all taxes on a net
basis.
We incur commission expense that is incremental to obtaining contracts with customers. Sales commissions (which are
recorded in the selling, general and administrative expense line item in the consolidated statements of operations) are expensed
when the product is shipped because such commissions are owed after shipment.
Inventory Valuation
We state our inventories at the lower of cost or net realizable value. We base our assessment of the ultimate realization
of inventories on our projections of future demand and market conditions. Sudden declines in demand, rapid product
improvements, or technological changes, or any combination of these factors can cause us to have excess or obsolete
inventories. On an ongoing basis, we review for estimated excess, obsolete, or unmarketable inventories and write down our
If actual market
inventories to their net realizable value based on our forecasts of future demand and market conditions.
conditions are less favorable than our forecasts, additional inventory write-downs may be required. The following factors
influence our estimates: changes to or cancellations of customer orders, unexpected or sudden decline in demand, rapid product
improvements, technological advances, and termination or changes by our OEM customers of any product offerings
incorporating our product solutions.
Periodically, we purchase inventory from our contract manufacturers when a customer delays its delivery schedule or
cancels its order. In those circumstances, we record a write-down, if necessary, to reduce the carrying value of the inventory
purchased to its net realizable value. The effect of these write-downs is to establish a new cost basis in the related inventory,
which we do not subsequently write up. We also record a liability and charge to cost of revenue for estimated losses on
inventory we are obligated to purchase from our contract manufacturers when such losses become probable from customer
delays, order cancellations, or other factors.
Business Combinations
We allocate the fair value of the purchase consideration of a business acquisition to the tangible assets, liabilities, and
intangible assets acquired, including in-process research and development (“IPR&D”), based on their estimated fair values.
The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded
as goodwill. IPR&D is initially recorded at fair value as an intangible asset with an indefinite life and assessed for impairment
thereafter. When an IPR&D project is completed, IPR&D is reclassified as an amortizable intangible asset and amortized over
the asset’s estimated useful life. Our valuation of acquired assets and assumed liabilities requires significant estimates,
especially with respect to intangible assets. The valuation of intangible assets requires that we use valuation techniques such
as the income approach that includes the use of a discounted cash flow model, which includes discounted cash flow scenarios
and requires the following significant estimates: future expected revenue, expenses, capital expenditures and other costs, and
35
discount rates. We estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently
uncertain and unpredictable and, as a result, actual results may differ from estimates. Estimates associated with the accounting
for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.
Acquisition-related expenses and related restructuring costs are recognized separately from the business combination and are
expensed as incurred.
Income Taxes
We estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our
actual tax exposure together with assessing temporary differences resulting from the differing treatment of certain items for tax
return and financial statement purposes. These differences result in deferred tax assets and liabilities, which are included in our
consolidated balance sheets.
We recognize income taxes using an asset and liability approach. This approach requires the recognition of taxes payable
or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have
been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred taxes is based
on the provisions of enacted tax law and the effects of future changes in tax laws or rates are not anticipated. Taxes payable
on Global Intangible Low-Taxed Income, or GILTI, inclusions in the U.S. are recognized as a current period expense when
incurred.
Evaluating the need for a valuation allowance for deferred tax assets requires judgment and analysis of all positive and
negative evidence available, including recent earnings history and taxable income in recent years, reversals of deferred tax
liabilities, projected future taxable income, and tax planning strategies to determine whether all or some portion of the deferred
tax assets will not be realized. Using available evidence and judgment, we establish a valuation allowance for deferred tax
assets when it is determined that it is more likely than not that they will not be realized. Valuation allowances have been
provided primarily against state research and development credits and certain capital losses of foreign subsidiaries. A change
in the assessment of the realizability of deferred tax assets may materially impact our tax provision in the period in which a
change of assessment occurs.
As a multinational corporation, we conduct our business in many countries and are subject to taxation in many
jurisdictions. The taxation of our business is subject to the application of various and sometimes conflicting tax laws and
regulations as well as multinational tax conventions. Our effective tax rate is highly dependent upon the geographic distribution
of our worldwide earnings or losses, tax laws and regulations in various jurisdictions, tax incentives, the availability of tax
credits and loss carryforwards, and the effectiveness of our tax planning strategies, which includes our estimates of the fair
value of our intellectual property. The application of tax laws and regulations is subject to legal and factual interpretation,
judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in
legislation, and the evolution of regulations and court rulings and tax audits. There can be no assurance that we will accurately
predict the outcome of audits, and the amounts ultimately paid on resolution of audits could be materially different than the
amounts previously included in our income tax expense and therefore, could have a material impact on our tax provision, results
of operations, and cash flows. Consequently, taxing authorities may impose tax assessments or judgments against us that could
materially impact our tax liability and/or our effective income tax rate.
We are subject to income tax audits by the respective tax authorities in the jurisdictions in which we operate. We
recognize the effect of income tax positions only if these positions are more likely than not to be sustained. Recognized income
tax positions are measured at the largest amount that is more than 50% likely to be realized. Changes in recognition or
measurement with respect to our uncertain tax positions are reflected in the period in which a change in judgment occurs. We
record interest and penalties related to unrecognized tax benefits in income tax expense. The calculation of our tax liabilities
involves the inherent uncertainty associated with complex tax laws. We believe we have adequately provided for in our financial
statements additional taxes that we estimate to be required as a result of such examinations. While we believe that we have
adequately provided for all tax positions, amounts asserted by tax authorities could be greater or less than our accrued position.
Any unpaid tax liabilities, including the interest and penalties, are released pursuant to a final settlement with tax authorities,
completion of audit or expiration of various statutes of limitation. The material jurisdictions in which we are subject to potential
examination by tax authorities throughout the world include Japan, India, Hong Kong, Israel and the United States.
The recognition and measurement of income taxes payable or refundable, and deferred tax assets and liabilities require
that we make certain estimates and judgments. Changes to these estimates or judgments may have a material effect on our
income tax provision in a future period.
Goodwill
Goodwill is the excess of the aggregate of the consideration transferred over the identifiable assets acquired and liabilities
assumed in connection with business combinations. Our reporting units are at the operating segment level. Our goodwill is
contained within two reporting units: IoT, and Mobile/PC.
36
We perform our goodwill impairment analysis in the fourth quarter of each year and, if certain events or circumstances
indicate that an impairment loss may have been incurred, on a more frequent basis. The analysis may include both qualitative
and quantitative factors to assess the likelihood of an impairment, which occurs when the carrying value of a reporting unit
exceeds its fair value. Significant judgment is required in estimating the fair value of our reporting units to determine if the fair
values of those units exceed their carrying values and an impairment to goodwill is required when a quantitative goodwill
impairment test is performed. The fair values of our reporting units are estimated using a combination of the income approach,
which requires estimating the present value of expected future cash flows of a reporting unit, and the market approach, which
uses various financial data and ratios of comparable companies to arrive at an estimated value for the reporting unit. Significant
estimates and assumptions used in the income approach include assessments of macroeconomic conditions, projected growth
rates of our reporting units in the near and long-term, expectations of our ability to execute on our roadmap, and the discount
rate applied to cash flows. Significant estimates used in the market approach include the identification of comparable companies
for each reporting unit, the determination of an appropriate control premium that a market participant would apply to a reporting
unit, and the determination of appropriate multiples to apply to a reporting unit based on adjustments and consideration of
specific attributes of that reporting unit.
Our quantitative assessment for the current year indicated that the fair value of our reporting units substantially exceeded
their carrying value.
Trends and Uncertainties
Current Economic Conditions
The impact of rising rates over the course of the past 18 months has had a material impact on many sectors of the economy
leading to broad-based workforce reductions, a slowing or deferral of investment in information technology spending, and
increased concern of a global recession. We believe the threat of global recession is the primary driver for the slowdown in
orders from our customer base that we have experienced. During fiscal 2023, we experienced a broad reduction in demand in
most of our product applications as many customers and channel partners continue to consume their accumulation of
inventories, combined with customer requests to delay orders. Inflation in the costs of goods and services has not had a material
impact on our results of operations, but rising inflation could increase our operating expenses and reduce our net income.
Further, rising interest rates have increased our borrowing costs on our variable rate Term Loan Facility, which will continue
to drive an increase in interest costs in future accounting periods and potentially limit our borrowing capacity if a future
acquisition opportunity requiring financing presents itself.
37
Results of Operations
The following sets forth certain of our consolidated statements of operations data for fiscal 2023 and 2022 along with
comparative information regarding the absolute and percentage changes in these amounts (in millions, except percentages):
IoT product applications
PC product applications
Mobile product applications
Net revenue
Gross margin
Operating expenses:
Research and development
Selling, general, and administrative
Acquired intangibles amortization
Restructuring costs
Operating income
Interest and other income, net
Interest expense
Loss on extinguishment of debt
Gain from sale and leaseback transaction
Income before provision for income taxes
Provision for income taxes
Equity investment loss
Net income
2023
2022
$ Change
% Change
$
$
946.3
217.3
191.5
1,355.1
715.9
$
1,100.9
343.0
295.8
1,739.7
943.1
351.2
175.0
35.4
-
154.3
27.2
(55.5)
-
-
126.0
52.4
-
367.3
168.4
38.7
18.3
350.4
3.0
(30.2)
(8.1)
5.4
320.5
64.6
1.6
$
73.6
$
257.5
$
(154.6)
(125.7)
(104.3)
(384.6)
(227.2)
(16.1)
6.6
(3.3)
(18.3)
(196.1)
24.2
(25.3)
8.1
(5.4)
(194.5)
(12.2)
(1.6)
(183.9)
(14.0%)
(36.6%)
(35.3%)
(22.1%)
(24.1%)
(4.4%)
3.9%
(8.5%)
(100.0%)
(56.0%)
806.7%
83.8%
(100.0%)
(100.0%)
(60.7%)
(18.9%)
(100.0%)
(71.4%)
The following sets forth certain of our consolidated statements of operations data as a percentage of net revenues for
fiscal 2023 and 2022:
IoT product applications
PC product applications
Mobile product applications
Net revenue
Gross margin
Operating expenses:
Research and development
Selling, general, and administrative
Acquired intangibles amortization
Restructuring costs
Operating income
Interest and other income, net
Interest expense
Loss on extinguishment of debt
Gain from sale and leaseback transaction
Income before provision for income taxes
Provision for income taxes
Equity investment loss
Net income
2023
2022
Percentage
Point
Increase
(Decrease)
69.8%
16.0%
14.2%
100.0%
52.8%
25.9%
12.9%
2.6%
0.0%
11.4%
2.0%
(4.1%)
0.0%
0.0%
9.3%
3.9%
0.0%
5.4%
63.3%
19.7%
17.0%
100.0%
54.2%
21.1%
9.7%
2.2%
1.1%
20.1%
0.2%
(1.7%)
(0.5%)
0.3%
18.4%
3.7%
0.1%
14.8%
6.5%
(3.7%)
(2.8%)
(1.4%)
4.8%
3.2%
0.4%
(1.1%)
(8.7%)
1.8%
(2.4%)
0.5%
(0.3%)
(9.1%)
0.2%
(0.1%)
(9.4%)
38
Fiscal 2023 Compared with Fiscal 2022
Net Revenue.
Net revenue was $1,355.1 million for fiscal 2023 compared with $1,739.7 for fiscal 2022, a decrease of $384.6 million,
or 22.1%. Of our fiscal 2023 net revenue, $946.3 million, or 69.8%, of net revenue was from the IoT product applications
market, $217.3 million, or 16.0%, of net revenue was from the PC product applications market, and $191.5 million, or 14.2%,
of net revenue was from the mobile product applications market. The overall decrease in net revenue for fiscal 2023 was due
to demand and inventory corrections in our market areas resulting in a decrease in revenues in all our product applications. Net
revenue from IoT product applications decreased $154.6 million, or 14.0%, net revenue from PC product applications
decreased $125.7 million, or 36.6%, and net revenue from mobile product applications decreased $104.3 million, or 35.3%.
The decrease in net revenue from IoT product applications was primarily driven by a 11.6% decrease in the units sold as well
as a 2.7% decrease in average selling prices. The decrease in net revenue from PC product applications was driven by a 38.3%
decrease in the units sold, partially offset by a 2.7% increase in average selling prices. The decrease in mobile product
applications was driven by a 29.3% decrease in the units sold as well as a 8.4% decrease in average selling prices.
The overall decrease in our revenues in fiscal 2023 compared to fiscal 2022 is the result of a broad reduction in demand
in most of our product applications as many customers and channel partners continued to consume their accumulation of
inventories, combined with customer requests to delay orders and downward pressure on product pricing.
Gross Margin.
Gross margin as a percentage of net revenue was 52.8%, or $715.9 million, for fiscal 2023 compared with 54.2%, or
$943.1 million, for fiscal 2022. The 140 basis point decrease in gross margin was primarily due to a decrease in units sold as
well as an overall decline in average selling prices in all our product applications.
Because we sell our technology solutions in designs that are generally unique or specific to an OEM customer’s
application, gross margin varies on a product-by-product basis, making our cumulative gross margin a blend of our product
specific designs. We charge losses on inventory purchase obligations and write-downs to reduce the carrying value of obsolete,
slow moving, and non-usable inventory to net realizable value (including warranty costs) to cost of revenue.
Operating Expenses.
Research and Development Expenses. Research and development expenses decreased $16.1 million, to $351.2 million,
for fiscal 2023 compared with fiscal 2022. The decrease in research and development expenses primarily reflected a $21.8
million decrease in variable compensation and a $17.0 million decrease in share-based compensation costs primarily related to
our phantom stock awards. The final vesting of our phantom stock awards occurred in the second quarter of fiscal 2023 and
there are no phantom stock awards outstanding. Total compensation costs associated with our phantom stock awards for fiscal
2023 and 2022 were $0.3 million and $27.2 million, respectively. These decreases were partially offset by an increase in payroll
related costs of $17.8 million as a result of increases in headcount and an increase of $3.9 million in new product development
activities.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $6.6 million, to
$175.0 million, for fiscal 2023 compared with fiscal 2022. The increase in selling, general, and administrative expenses
primarily reflected a net increase of $6.8 million in share-based compensation costs. The net increase in share-based
compensation was a combination of increases in share-based compensation from equity awards granted during fiscal 2023,
partially offset by decreases in phantom stock and performance-based stock awards year over year. Payroll related costs
increased $4.1 million as a result of increases in headcount. The increase in selling, general and administrative expense was
partially offset by a decrease of $11.2 million in variable compensation costs.
Acquired Intangibles Amortization. Acquired intangibles amortization reflects the amortization of intangibles acquired
through recent acquisitions. See Note 7 Goodwill and Acquired Intangible Assets to the consolidated financial statements
contained elsewhere in this report.
39
Restructuring Costs. Restructuring costs primarily reflect employee severance costs and facilities consolidation costs
related to the restructuring of operations, improve efficiencies in our operational activities and gain synergies from acquisitions.
These headcount-related costs included personnel
in operations, research and development, and selling, general and
administrative functions. There were no restructuring costs incurred during fiscal 2023. Restructuring costs incurred in fiscal
2022 were $18.3 million. See Note 16 Restructuring Activities to the consolidated financial statements contained elsewhere in
this report.
Non-Operating Income.
Interest and Other Income, Net. Interest and other income, net increased $24.2 million, to $27.2 million for fiscal 2023
compared with fiscal 2022. The increase is due to higher interest rates on our cash, cash equivalents and short-term investments.
Interest Expense.
Interest expense and amortization of debt issuance costs increased $25.3 million to $55.5 million
during fiscal 2023 as compared to $30.2 million during fiscal 2022. Interest expense on the $600 million incremental Term
Loan Facility increased by $26.0 million during fiscal 2023 compared to the same period a year ago, as the interest rate on the
Term Loan Facility increased by approximately 340 basis points period-over-period. Additionally, the Term Loan Facility was
funded in December 2021 and included approximately seven months of interest expense during fiscal 2022. The interest
expense on the Term Loan Facility during fiscal 2023 and 2022 was $36.2 million and $10.2 million, respectively.
Loss on redemption of convertible notes. Loss on redemption of convertible notes represents the difference between fair
value and the carrying value as of the redemption date of the convertible notes. The loss on redemption of convertible notes
for fiscal 2022 was $8.1 million.
Gain from sale and leaseback transaction. Gain from sale and leaseback transaction represents the gain from the sale of
our headquarters buildings and properties located San Jose, California in fiscal 2022. The gain from the sale and leaseback
transaction for fiscal 2022 was $5.4 million.
Provision for Income Taxes. The provision for income taxes was $52.4 million and $64.6 million in fiscal 2023 and 2022,
respectively, represented estimated federal, foreign, and state income taxes. The effective tax rate for fiscal 2023 diverged from
the combined U.S. federal and state statutory tax rate primarily due to tax law changes becoming effective in our fiscal 2023,
including non-creditable foreign withholding taxes resulting from the final foreign tax credit regulations published in January
2022 and the research and development capitalization rules increasing our GILTI, resulting from the U.S. Tax Cuts and Jobs
Act of 2017, and non-deductible officer compensation, partially offset by the benefit of foreign income taxed at lower rates,
and research credits. See “Note 14 Income Taxes” to the consolidated financial statements contained elsewhere in this report
for the table reconciling the provision for income taxes from the federal statutory rate for fiscal 2023, 2022 and 2021.
Fiscal 2022 Compared with Fiscal 2021.
For discussion related to the results of operations and changes in financial condition for fiscal 2022 compared to fiscal
2021, please refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of
Operations” in our fiscal 2022 Form 10-K, which was filed with the SEC on August 22, 2022.
Liquidity and Capital Resources
Our cash and cash equivalents were $924.7 million as of the end of fiscal 2023 compared with $824.0 million as of the
end of fiscal 2022, an increase of $100.7 million. The increase primarily reflected cash flows provided by operating activities
of $331.5 million, offset by $221.3 million of cash used by financing activities.
We consider almost all earnings of our foreign subsidiaries as not indefinitely reinvested overseas and have made
appropriate provisions for income or withholding taxes, that may result from a future repatriation of those earnings. As of the
end of fiscal 2023, $824.4 million of cash and cash equivalents was held by our foreign subsidiaries. If these funds are needed
for our operations in the U.S., we will be able to repatriate these funds without any further impact on our tax provision.
Cash Flows from Operating Activities. For fiscal 2023, the $331.5 million in net cash provided by operating activities
was primarily attributable to net income of $73.6 million plus adjustments for non-cash charges, including acquired intangibles
amortization of $130.4 million, share-based compensation costs of $122.0 million, depreciation and amortization of $27.4
million, as well as other non-cash adjustments of $1.5 million, and a net change in operating assets and liabilities of $23.4
million. The net change in operating assets and liabilities related primarily to a $161.3 million decrease in accounts receivable
primarily related to a decrease in sales, a decrease of $24.6 million in inventories as we continued our efforts to control
inventory spend while turning over the inventories we accumulated during the first half of fiscal 2023, a decrease of $95.6
million in accounts payable due to timing of payments and a decrease of $45.4 in accrued compensation primarily related to
decreases in our annual bonus accrual. Our days sales outstanding was 65 days in fiscal 2023 as compared to 61 days in fiscal
2022. Our inventory turns decreased to three times in fiscal 2023 from four times in fiscal 2022.
40
For fiscal 2022, the $462.7 million in net cash provided by operating activities was primarily attributable to net income
of $257.5 million plus adjustments for non-cash charges, including acquired intangibles amortization of $123.5 million, share-
based compensation costs of $100.8 million, depreciation and amortization of $24.0 million, as well as other non-cash
adjustments of $24.2 million, and a net change in operating assets and liabilities of $18.9 million. The net change in operating
assets and liabilities related primarily to an $81.1 million increase in accounts receivable, an increase of $54.2 million in
inventories, an increase of $23.2 million in accounts payable, an increase of $48.6 million in income taxes payable and an
increase of $17.4 million in other accrued liabilities. Our days sales outstanding was 61 days in fiscal 2022 as compared to 63
days in fiscal 2021. Our inventory turns decreased to four times in fiscal 2022 from seven times from fiscal 2021.
Cash Flows from Investing Activities. Net cash used in investing activities for fiscal 2023 was $6.0 million and consisted
primarily of $15.5 million used for the acquisition of businesses, net of cash and cash equivalents acquired, and $34.2 million
used for the purchases of property and equipment; partially offset by $43.6 in proceeds from maturities and sales of our short-
term investments.
Net cash used in investing activities for fiscal 2022 was $482.7 million and consisted primarily of $501.1 million used
for the acquisition of businesses, net of cash and cash equivalents acquired, and $31.1 million used for the purchases of property
and equipment; partially offset by proceeds from sale and leaseback transaction of $55.9 million and $24.4 million in proceeds
from sales of investments.
Cash Flows from Financing Activities. Net cash used in financing activities for fiscal 2023 was $221.3 million and was
primarily attributable to $183.5 million in repurchases of our common stock, $6.0 in debt repayments and $54.5 million used
for payroll taxes for restricted stock units, or RSUs, market stock units, or MSUs, and performance stock units, or PSUs,
partially offset by $17.6 million in proceeds from issuance of shares.
Our net cash provided by financing activities for fiscal 2022 was $14.3 million and was primarily attributable to $600.0
million in proceeds from issuance of debt and $15.2 million in proceeds from issuance of shares, partially offset by $3.0 million
of payment on debt, $67.3 million used for payroll taxes for restricted stock units, or RSUs, market stock units, or MSUs, and
performance stock units, or PSUs, and $505.6 million used for payment for redemption of convertible notes.
For discussion related to the statement of cash flows for fiscal 2021, please refer to “Part II, Item 7. Management’s
Discussion and Analysis of Financial Conditions and Results of Operations” in our fiscal 2021 Form 10-K, which was filed
with the SEC on August 23, 2021.
Common Stock Repurchase Program. As of the end of fiscal 2023, our Board of Directors had cumulatively authorized
the purchase of up to an aggregate of $2.3 billion of our common stock pursuant to our common stock repurchase program
through July 2025. The program authorizes us to purchase our common stock in the open market or in privately negotiated
transactions, depending upon market conditions and other factors. The number of shares purchased, and the timing of purchases
is based on the level of our cash balances, general business and market conditions, and other factors, including alternative
investment opportunities. Common stock purchased under this program is held as treasury stock. From April 2005 through
the end of fiscal 2023, we purchased, net of issuances for settlement of our convertible notes, 30,116,439 shares of our common
stock in the open market for an aggregate cost of $878.0 million. As of the end of fiscal 2023, the remaining available
authorization under our common stock repurchase program was $893.9 million.
Senior Notes. On March 11, 2021, we completed an offering of $400.0 million aggregate principal amount of 4.0% senior
notes due 2029, or the Senior Notes, in a private offering. The Senior Notes were issued pursuant to an Indenture, dated as of
March 11, 2021, or the Indenture, by and among our company, the guarantors named therein and Wells Fargo Bank, National
Association, as trustee. The Senior Notes requires bi-annual interest only payments. In fiscal 2023, we paid interest expense
of $16.0 million on the Senior Notes.
Bank Credit Facility. On March 16, 2023, we entered into the Second Amendment to our Credit Agreement, dated March
11, 2021. The Second Amendment replaces the LIBOR-based interest rate applicable to borrowings under the Credit
Agreement with SOFR-based interest rate. On July 28, 2023, we entered into the Third Amendment to our Credit Agreement,
which provides that the consolidated interest coverage ratio financial covenant will only apply if, as of the last day of any fiscal
quarter, our aggregate cash and cash equivalents are less than $450 million. The Credit Agreement provides for a revolving
credit facility in a principal amount of up to $250 million, which includes a $20 million sublimit for letters of credit and a $25
million sublimit for swingline loans. Under the terms of the Credit Agreement, we may, subject to the satisfaction of certain
conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $150
million to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable. Future
proceeds under the revolving credit facility are available for working capital and general corporate purposes. As of June 2023,
there was no balance outstanding under the revolving credit facility.
41
Term Loan Facility. In December 2021, we entered into that certain First Amendment and Lender Joinder Agreement to
the Credit Agreement, to, among other things, establish a new $600.0 million incremental term loan facility, or the Term Loan
Facility. The Term Loan Facility was advanced under the Credit Agreement to finance our DSPG acquisition. The Term Loan
Facility matures on December 2, 2028. Principal on the Term Loan Facility is payable in equal quarterly installments on the
last day of each March, June, September and December of each year, beginning December 31, 2021, at a rate of 1.00% per
annum, plus an applicable margin. For the year-ended June 2023, we repaid $6.0 million of the principal outstanding on the
Term Loan Facility.
See “Note 8. Debt” in the Notes to the Condensed Consolidated Financial Statements for additional information on our
outstanding debt obligations.
$100 Million Shelf Registration. We have registered an aggregate of $100.0 million of common stock and preferred
stock for issuance in connection with acquisitions, which shares generally will be freely tradeable after their issuance under
Rule 145 of the Securities Act unless held by an affiliate of the acquired company, in which case such shares will be subject to
the volume and manner of sale restrictions of Rule 144 of the Securities Act.
Working Capital Needs. We believe our existing cash and cash equivalents, anticipated cash flows from operating
activities, anticipated cash flows from financing activities, and available credit under our revolving credit facility, will be
sufficient to meet our working capital and other cash requirements, including small tuck-in acquisitions, and our debt service
obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue,
the timing and extent of spending to support product development efforts, costs associated with restructuring activities net of
projected savings from those activities, costs related to protecting our intellectual property, the expansion of sales and marketing
activities, timing of introduction of new products and enhancements to existing products, costs to ensure access to adequate
manufacturing, costs of maintaining sufficient space for our workforce, the continuing market acceptance of our product
solutions, our common stock repurchase program, and the amount and timing of our investments in, or acquisitions of, other
technologies or companies. Further equity or debt financing may not be available to us on acceptable terms or at all. If sufficient
funds are not available or are not available on acceptable terms, our ability to fund our future long-term working capital needs,
take advantage of business opportunities or to respond to competitive pressures could be limited or severely constrained.
The undistributed earnings of our foreign subsidiaries are not currently required to meet our United States working capital
and other cash requirements, but should we repatriate a portion of these earnings, we may be required to pay certain previously
accrued state and foreign taxes, which would impact our cash flows.
Contractual Obligations and Commercial Commitments. The following table sets forth a summary of our material
contractual obligations and commercial commitments as of the end of fiscal 2023 (in millions):
Contractual Obligations
Long-term debt (1)
Leases
Purchase obligations and other commitments (2)
Total
Total
$ 1,339.0
62.0
142.7
$ 1,543.7
$
$
Less than
1 year
Payments due by period
1-3
Years
3-5
Years
67.2
10.3
71.2
148.7
$
$
133.8
18.3
71.5
223.6
$
$
131.9
13.3
—
145.2
Thereafter
$ 1,006.1
20.1
—
$ 1,026.2
(1) Represents the principal and interest payable through the maturity date of the underlying contractual obligation.
(2) Purchase obligations and other commitments include payments due for inventory purchase obligations with contract manufacturers, long-term software
tool licenses, and other licenses.
The amounts in the table above exclude gross unrecognized tax benefits related to uncertain tax positions of $43.7 million.
As of the end of fiscal 2023, we were unable to make a reasonably reliable estimate of when cash settlement with a taxing
authority may occur in connection with our gross unrecognized tax benefit.
We do not have any transactions, arrangements, or other relationships with unconsolidated entities that are reasonably
likely to materially affect our financial condition, revenues or expenses, results of operations, liquidity, or capital resources.
We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit
risk support; engage in leasing, hedging, or research and development services; or have other relationships that expose us to
liability that is not reflected in our financial statements.
42
Recent Accounting Pronouncements
Please see "Note 1 - Organization and Summary of Significant Accounting Policies - Accounting Pronouncements Issued
But Not Yet Adopted” in our Notes to the Consolidated Financial Statements set forth in Part II, Item 8 of this Annual Report
on Form 10-K.
43
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks in the ordinary course of our business. These risks primarily include:
Foreign Currency Exchange Risk
Our total net revenue for fiscal 2023 and 2022 was denominated in U.S. dollars. Costs denominated in foreign currencies
were approximately 13% of our total costs in each of fiscal years 2023 and 2022.
We face the risk that our accounts payable and acquisition-related liabilities denominated in foreign currencies will
increase if such foreign currencies strengthen quickly and significantly against the U.S. dollar. Approximately 12% and 2% of
our accounts payable were denominated in foreign currencies in June 2023 and June 2022, respectively.
To provide an assessment of the foreign currency exchange risk associated with our foreign currency exposures within
revenue, cost, and operating expenses, we performed a sensitivity analysis to determine the impact that an adverse change in
exchange rates would have on our financial statements. A hypothetical weighted-average change of 10% in currency exchange
rates would have changed our operating income before taxes by approximately $15.5 million and our net income by
approximately $19.3 million for fiscal 2023, assuming no offsetting hedge positions. However, this quantitative measure has
inherent limitations. The sensitivity analysis disregards the possibility that U.S. dollar and other exchange rates can move in
opposite directions and that gains from one currency may or may not be offset by losses from another currency.
Interest Rate Risk on Cash, Cash Equivalents
Our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents and short-
term investments. We do not use our investment portfolio for trading or other speculative purposes. There have been no
significant changes in the maturity dates and average interest rates for our cash equivalents subsequent to fiscal 2023.
Interest Rate Risk on Debt
With our outstanding debt, we are exposed to various forms of market risk, including the potential losses arising from
adverse changes in interest rates on our outstanding Term Loan. See “Note 8. Debt” for further information. A hypothetical
increase in the interest rate by 1% would result in an increase in annual interest expense by approximately $6.0 million.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements, the report of our independent registered public accounting firm, and the
notes thereto commencing at page F-1 of this report, which financial statements, report, and notes are incorporated herein by
reference. Reference is also made to the quarterly results of operations included elsewhere in this report, which are incorporated
herein by reference.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusions Regarding Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer, as of June 24, 2023, concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that information required to be
disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
44
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for our company. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO
2013 framework).
Based on our evaluation under the COSO 2013 framework and the satisfactory completion of the remediation actions
described below, our management concluded that our internal control over financial reporting was effective, at the reasonable
assurance level, as of June 24, 2023. The effectiveness of our internal control over financial reporting, as of June 24, 2023,
has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report included herein on
page F-2.
Remediated Material Weakness
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be
prevented or detected on a timely basis. During the quarter ended June 24, 2023, the Company identified a material weakness
in internal control related to the identification and monitoring of the sales reporting requirements of a single non-royalty bearing
intellectual property license agreement. The material weakness was primarily due to ineffective risk assessment related to
identifying and analyzing risks and ineffective information and communication processes related to identifying and assessing
the accuracy of the information used in reporting under certain non-royalty bearing intellectual property license agreements.
As a result of this lack of controls, an immaterial error in financial reporting was identified.
The Company has concluded that the material weakness described above was fully remediated as of June 24, 2023, due
to the implementation of specific processes and controls to identify reporting requirements for non-royalty bearing intellectual
property license agreements and to monitor the Company’s ongoing compliance with periodic sales reporting in accordance
with the terms of such agreements. These controls were tested and determined to be operating effectively as of June 24, 2023.
Changes in Internal Control Over Financial Reporting
Except for the identified material weakness and remediation described above under the heading “Remediated Material
Weakness,” there were no other changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) that occurred during the quarter ended June 24, 2023, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure
controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if
any, within our company have been or will be prevented or detected. Further, internal controls may become inadequate as a
result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.
ITEM 9B. OTHER INFORMATION
There were no items requiring reporting on Form 8-K that were not reported on Form 8-K during the fourth quarter of
the year covered by this Form 10-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
45
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item relating to directors of our company and corporate governance is incorporated
herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2023
Annual Meeting of Stockholders. The information required by this Item relating to our executive officers is included in Item
1. Business – Information about our Executive Officers.
We have adopted a code of ethics that applies to our chief executive officer, chief financial officer, chief accounting
officer, and other senior accounting personnel. The “Code of Ethics for the CEO and Senior Financial Officers” is located on
our website at www.synaptics.com in the Investor Relations section under Corporate Governance.
We intend to satisfy the disclosure requirement under Item 5.05(c) of Form 8-K regarding any amendment to, or waiver
from, a provision of this code of ethics by posting such information on our website, at the address and location specified above.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly
under the caption “Executive Compensation”) to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual
Meeting of Stockholders.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly
under the captions “Security Ownership of Principal Stockholders, Directors, and Officers” and “Executive Compensation—
Stock-Based Compensation Plan Information”) to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual
Meeting of Stockholders.
ITEM 13. CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS,
AND
DIRECTOR
INDEPENDENCE
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly
under the caption “Certain Relationships and Related Transactions”) to be filed pursuant to Regulation 14A of the Exchange
Act for our 2023 Annual Meeting of Stockholders.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement (particularly
under the caption “Ratification of Appointment of Independent Auditor”) to be filed pursuant to Regulation 14A of the
Exchange Act for our 2023 Annual Meeting of Stockholders.
46
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Financial Statements and Financial Statement Schedules
(1)
Financial Statements are listed in the Index to Financial Statements on page F-1 of this report.
(b) Exhibits
Exhibit
Number
2.2#
2.3
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.6
10.1(a)
10.1(b)
Exhibit
To
Date Filed
Incorporated by Reference
Agreement and Plan of Merger, dated July 17,
2020, by and among Synaptics Incorporated,
DisplayLink Corp., Falcon Merger Sub, Inc., the
sellers who became parties thereto and Shareholder
Representative Services LLC
Agreement and Plan of Merger by and among DSP
Group, Inc., Synaptics Incorporated and Osprey
Merger Sub, Inc., dated as of August 30, 2021.
Quarterly Report on Form 10-Q
November 5, 2020
Quarterly Report on Form 10-Q
November 4, 2021
Certificate of Incorporation
Quarterly Report on Form 10-Q
February 21, 2002
Certificate of Designation of Series A Junior
Participating Preferred Stock
Third Amended and Restated Bylaws (amended and
restated as of July 27, 2010)
Certificate of Amendment of Certificate of
Incorporation of the registrant
Certificate of Amendment of Certificate of
Incorporation of the registrant
Registration Statement on Form 8-A August 16, 2002
Current Report on Form 8-K
August 2, 2010
Current Report on Form 8-K
December 7, 2004
Current Report on Form 8-K
October 22, 2010
Form of Common Stock Certificate
Annual Report on Form 10-K
September 12, 2002
Description of Registrant’s Securities
Annual Report on Form 10-K
August 23, 2019
Current Report on Form 8-K
March 11, 2021
Current Report on Form 8-K
March 11, 2021
Current Report on Form 8-K
December 2, 2021
Indenture, dated as of March 11, 2021, by and
among the Company, the guarantors named therein
and Wells Fargo Bank, National Association, as
trustee
Form of 4.000% Senior Notes due 2029 (included
in Exhibit 4.3).
Second Amended and Restated Credit Agreement,
dated March 11, 2021, by and among Synaptics
Incorporated, as borrower, the lenders from time to
time party thereto, Wells Fargo Bank, National
Association, as administrative agent, swingline
lender and issuing lender, Wells Fargo Securities,
LLC, as joint lead arranger and joint bookrunner,
MUFG Union Bank, N.A. and BMO Capital
Markets Corp., as joint lead arrangers, joint
bookrunners and co-syndication agents
First Amendment and Lender Joinder Agreement,
dated as of December 2, 2021, by and among
Synaptics Incorporated, the Lenders party thereto,
and Wells Fargo Bank, National Association, as
Administrative Agent
47
10.1(c)
10.1(d)
Second Amendment, dated as of March 16, 2023,
by and among Synaptics Incorporated, the Lenders
party thereto, and Wells Fargo Bank, National
Association, as Administrative Agent
Third Amendment, dated as of July 28, 2023, by
and among Synaptics Incorporated, the Revolving
Credit Lenders party thereto, and Wells Fargo
Bank, National Association, as Administrative
Agent
Current Report on Form 8-K
March 17, 2023
Current Report on Form 8-K
August 3, 2023
10.2(a)* Synaptics Incorporated 2019 Inducement Equity
Registration Statement on Form S-8 August 16, 2019
Plan
10.2(b)* Form of Restricted Stock Unit Inducement Award
Registration Statement on Form S-8 August 16, 2019
Agreement for 2019 Inducement Equity Plan
10.2(c)* Form of Market Stock Unit Inducement Award
Registration Statement on Form S-8 August 16, 2019
Agreement for 2019 Inducement Equity Plan
10.2(d)* Form of Performance Stock Unit Inducement
Registration Statement on Form S-8 August 16, 2019
Award Agreement for 2019 Inducement Equity
Plan
10.3(a)* 2019 Equity and Incentive Compensation Plan
Registration Statement on Form S-8 November 1, 2019
10.3(b)* Amended and Restated 2019 Equity and Incentive
Current Report on Form 8-K
October 29, 2020
Compensation Plan
10.3(c)* Amended and Restated 2019 Equity and Incentive
Current Report on Form 8-K
October 28, 2021
Compensation Plan
10.3(d)* Amended and Restated 2019 Equity Incentive
Current Report on Form 8-K
October 27, 2022
Compensation Plan
10.3(e)* Form of Restricted Stock Unit Award Agreement
Registration Statement on Form S-8 November 1, 2019
under the 2019 Equity and Incentive Compensation
Plan (for awards granted before July 27, 2021)
10.3(f)* Form of Performance Stock Unit Award Agreement
under the 2019 Equity and Incentive Compensation
Plan (for awards granted before July 27, 2021)
Registration Statement on Form S-8 November 1, 2019
10.3(g)* Form of Market Stock Unit Award Agreement
Registration Statement on Form S-8 November 1, 2019
under the 2019 Equity and Incentive Compensation
Plan
10.3(h)* Form of Restricted Stock Unit Award Agreement
Annual Report on Form 10-K
August 23, 2021
under the 2019 Equity and Incentive Compensation
Plan (for awards granted after July 27, 2021)
10.3(i)* Form of Performance Stock Unit Award Agreement
under the 2019 Equity and Incentive Compensation
Plan (for awards granted after July 27, 2021)
Annual Report on Form 10-K
August 23, 2021
10.3(j)* Form of Market Stock Unit Award Agreement
Quarterly Report on Form 10-Q
November 5, 2020
under the 2019 Equity and Incentive Compensation
Plan
10.3(k)* Form of Performance Stock Unit Award Agreement
under the 2019 Equity and Incentive Compensation
Plan
Quarterly Report on Form 10-Q
November 5, 2020
48
10.3(l)* Form of Market Stock Unit Award Agreement
Annual Report on Form 10-K
August 22, 2022
under the 2019 Equity and Incentive Compensation
Plan
10.4*
2019 Employee Stock Purchase Plan
Registration Statement on Form S-8 November 1, 2019
10.5(a)* Amended and Restated 2010 Incentive
Current Report on Form 8-K
November 1, 2018
Compensation Plan, as amended effective on
October 30, 2018
10.5(b)* Form of Non-Qualified Stock Option Agreement
for 2010 Incentive Compensation Plan
10.5(c)* Form of Incentive Stock Option Agreement for
2010 Incentive Compensation Plan
Annual Report on Form 10-K
August 18, 2017
Current Report on Form 8-K
October 22, 2010
10.5(d)* Form of Deferred Stock Award Agreement for 2010
Annual Report on Form 10-K
August 18, 2017
Incentive Compensation Plan
10.5(e)* Form of Deferred Stock Award Agreement for
Market Stock Units for Amended and Restated
2010 Incentive Compensation Plan
Quarterly Report on Form 10-Q
February 8, 2018
10.5(f)* Form of Deferred Stock Award Agreement for
Quarterly Report on Form 10-Q
February 8, 2018
Performance Stock Units for Amended and
Restated 2010 Incentive Compensation Plan
Change of Control Severance Policy for Principal
Executive Officers
Annual Report on Form 10-K
August 23, 2019
Severance Policy for Principal Executive Officers
Annual Report on Form 10-K
August 23, 2019
Form of Director and Officer Indemnification
Agreement
Written Description of the Synaptics Incorporated
Retention Program Adopted May 6, 2019
Employment Offer Letter, dated August 1, 2019
between the registrant and Michael Hurlston
Employment Offer Letter, dated October 7, 2019
between the registrant and Dean Butler
Employment Offer Letter, dated December 4, 2018
between the registrant and Saleel Awsare
Current Report on Form 8-K
May 17, 2016
Annual Report on Form 10-K
August 23, 2019
Quarterly Report on Form 10-Q
November 17, 2019
Quarterly Report on Form 10-Q
February 6, 2020
Annual Report on Form 10-K
August 21, 2020
List of Subsidiaries
Consent
Accounting Firm
of
Independent Registered
Filed herewith
Public
Filed herewith
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a)
Filed herewith
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a)
Filed herewith
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
21
23.1
31.1
31.2
32.1##
Section 1350 Certification of Chief Executive
Officer
Furnished herewith
32.2##
Section 1350 Certification of Chief Financial Officer Furnished herewith
101.INS
Inline
XBRL Instance Document
Filed herewith
101.SCH XBRL Taxonomy Extension Schema Document
Filed herewith
49
Inline
101.CAL
Inline
XBRL Taxonomy Extension Calculation Linkbase
Document
Filed herewith
101.DEF
Inline
XBRL Taxonomy Extension Definition Linkbase
Document
Filed herewith
101.LAB
Inline
XBRL Taxonomy Extension Label Linkbase
Document
Filed herewith
101.PRE
Inline
XBRL Taxonomy Extension Presentation Linkbase
Document
Filed herewith
104
Cover Page Interactive Data File – The cover page
interactive data file does not appear in the Interactive
Data File because its XBRL tags are embedded
within the Inline XBRL document
Filed herewith
* Indicates a contract with management or compensatory plan or arrangement.
# Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted
schedule will be furnished as a supplement to the Securities and Exchange Commission upon request.
## This certification is being furnished solely pursuant to 18 U.S.C. § 1350 and shall not be deemed filed by the Company
for purposes of Section 18 of the Exchange Act or incorporated by reference in any registration statement of the Company
filed under the Securities Act.
ITEM 16.
FORM 10-K SUMMARY
Not applicable.
50
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: August 18, 2023
SYNAPTICS INCORPORATED
By: /s/ Michael E. Hurlston
Michael E. Hurlston
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ Michael E. Hurlston
Michael E. Hurlston
President and Chief Executive Officer,
and Director (Principal Executive Officer)
/s/ Dean Butler
Dean Butler
/s/ Kermit Nolan
Kermit Nolan
/s/ Nelson C. Chan
Nelson C. Chan
/s/ Jeffrey D. Buchanan
Jeffrey D. Buchanan
/s/ Keith B. Geeslin
Keith B. Geeslin
/s/ Susan Hardman
Susan Hardman
/s/ Patricia Kummrow
Patricia Kummrow
/s/ Vivie Lee
Vivie Lee
/s/ James L. Whims
James L. Whims
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Corporate Vice President and Chief Accounting
Officer (Principal Accounting Officer)
Chair of the Board
Director
Director
Director
Director
Director
Director
Date
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
51
INDEX TO FINANCIAL STATEMENTS
SYNAPTICS INCORPORATED AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm (KPMG LLP, Santa Clara, California, PCAOB Audit Firm
ID: 185) ................................................................................................................................................................................. F-2
Consolidated Balance Sheets................................................................................................................................................. F-4
Consolidated Statements of Operations ................................................................................................................................ F-5
Consolidated Statements of Comprehensive Income............................................................................................................ F-6
Consolidated Statements of Stockholders' Equity................................................................................................................. F-7
Consolidated Statements of Cash Flows ............................................................................................................................... F-8
Notes to Consolidated Financial Statements ......................................................................................................................... F-9
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Synaptics Incorporated:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Synaptics Incorporated and subsidiaries (the Company) as
of June 24, 2023 and June 25, 2022, the related consolidated statements of operations, comprehensive income, stockholders’
equity, and cash flows for each of the fiscal years in the three fiscal year period ended June 24, 2023, and the related notes
(collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial
reporting as of June 24, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of June 24, 2023 and June 25, 2022, and the results of its operations and its cash flows for each of
the fiscal years in the three fiscal year period ended June 24, 2023, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of June 24, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
F-2
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate
opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Valuation of inventories
As discussed in Note 1 to the consolidated financial statements, the Company held $137.2 million of inventories as of
June 24, 2023 which are stated at the lower of cost or net realizable value. The Company records a write-down for excess,
obsolete or unmarketable inventories based on forecasts of future demand and market conditions.
We identified the valuation of inventories associated with excess, obsolete or unmarketable inventories as a critical audit
matter. A higher degree of auditor judgment was required to evaluate the Company’s estimate of net realizable value for
these inventories. Specifically, there is a high degree of subjectivity in evaluating the effect of any unexpected or sudden
declines in market demand which may result from changes to or cancellations of customer orders, rapid product
improvements or technological advances, due to the nature of the evidence available related to these factors.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to the Company’s process to develop the
estimated net realizable value of inventory. For a selection of inventory items, we assessed the Company’s assumptions
by comparing them to historical activity and demand forecasts. As part of the procedure, we considered customer
communications, as well as end user and third-party publications. For a sample of inventory items, we recalculated the
required write-downs and compared this to the recorded amounts. Additionally, we tested a sample of returns which
resulted from quality related issues of the Company's products during the year and subsequent to period-end to evaluate
if additional write-downs were warranted.
/s/ KPMG LLP
We have served as the Company’s auditor since 2003.
Santa Clara, California
August 18, 2023
F-3
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except par value and share amounts)
ASSETS
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for credit losses of $5.0 and $6.0 at June 2023
and 2022, respectively
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Acquired intangibles, net
Right-of-use assets
Non-current other assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued compensation
Income taxes payable
Other accrued liabilities
Current portion of long-term debt
Total current liabilities
Long-term debt
Other long-term liabilities
Total liabilities
Commitments and contingencies
Stockholders' Equity:
Preferred stock:
$0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding
Common stock:
$0.001 par value; 120,000,000 shares authorized, 68,687,511 and 67,745,800
shares issued,
and 38,571,072 and 39,621,179 shares outstanding, at June 2023 and 2022,
respectively
Additional paid-in capital
Treasury stock: 30,116,439 and 28,124,621 common shares at June 2023 and 2022,
respectively, at cost
Accumulated other comprehensive loss
Retained earnings
Total stockholders' equity
June
2023
June
2022
924.7
9.6
$
163.9
137.2
36.6
1,272.0
66.4
816.4
298.5
49.0
109.1
2,611.4
45.8
45.9
54.0
108.4
6.0
260.1
972.0
135.9
1,368.0
$
$
824.0
52.0
322.1
169.7
35.6
1,403.4
62.9
806.6
390.0
61.2
134.0
2,858.1
141.8
90.6
79.7
145.3
6.0
463.4
975.7
152.6
1,591.7
—
—
0.1
1,009.2
(878.0)
-
1,112.1
1,243.4
2,611.4
$
0.1
924.1
(694.5)
(1.8)
1,038.5
1,266.4
2,858.1
$
$
$
$
See accompanying notes to consolidated financial statements.
F-4
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Net revenue
Cost of revenue
Gross margin
Operating expenses:
Research and development
Selling, general, and administrative
Acquired intangibles amortization
Restructuring costs
Gain on sale of audio technology assets
Total operating expenses
Operating income
Interest and other income
Interest expense
Loss on redemption of convertible notes
Gain from sale and leaseback transaction
Income before provision for income taxes and equity investment gain
(loss)
Provision for income taxes
Equity investment gain (loss)
Net income
Net income per share:
Basic
Diluted
Shares used in computing net income per share:
Basic
Diluted
$
2023
1,355.1
639.2
715.9
$
Fiscal Year
2022
$
1,739.7
796.6
943.1
2021
1,339.6
728.4
611.2
351.2
175.0
35.4
—
—
561.6
154.3
27.2
(55.5)
—
—
126.0
52.4
—
73.6
1.86
1.83
39.6
40.2
$
$
$
367.3
168.4
38.7
18.3
—
592.7
350.4
3.0
(30.2)
(8.1)
5.4
320.5
64.6
1.6
257.5
6.60
6.33
39.0
40.7
$
$
$
313.4
144.9
32.7
7.4
(34.2)
464.2
147.0
2.9
(29.5)
(0.3)
—
120.1
31.4
(9.1)
79.6
2.29
2.08
34.8
38.3
$
$
$
See accompanying notes to consolidated financial statements.
F-5
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net income
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale securities
Reclassification adjustments for losses included in net income
Other comprehensive income (loss)
Comprehensive income
$
$
2023
Fiscal Year
2022
2021
73.6
$
257.5
$
0.6
1.2
1.8
75.4
$
(1.8)
—
(1.8)
255.7
$
79.6
—
—
—
79.6
See accompanying notes to consolidated financial statements.
F-6
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except share amounts)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Total
Treasury Comprehensive Retained Stockholders'
Stock
Income (loss)
Earnings
Equity
65,871,648 $
—
0.1 $
—
— $
—
701.4 $
79.6
Balance at June 2020
Net income
Issuance of common stock for share-based award
compensation plans
Payroll taxes related to net share settlement of share-
based awards
Treasury stock issued for redemption of convertible
notes
Share-based compensation attributable to acquisition
Share-based compensation
Balance at June 2021
Net income
Other comprehensive loss
Issuance of common stock for share-based award
compensation plans
Treasury stock issued for redemption of convertible
notes
Payroll taxes related to net share settlement of share-
based awards
Share-based compensation attributable to acquisition
Share-based compensation
Balance at June 2022
Net income
Other comprehensive income
Issuance of common stock for share-based award
compensation plans
Payroll taxes related to net share settlement of share-
based awards
Common stock repurchased
Share-based compensation
1,091,358
—
—
—
—
66,963,006
—
—
782,794
—
—
—
—
67,745,800
—
—
941,711
—
—
—
Balance at June 2023
68,687,511 $
1,340.2 $ (1,222.6) $
—
27.8
(28.3)
(17.5)
3.2
66.1
1,391.5
—
—
—
—
—
17.2
—
—
(1,205.4)
—
—
15.2
—
(517.8)
510.9
(67.3)
1.7
100.8
924.1
—
—
—
—
—
(694.5)
—
—
17.6
—
—
—
—
—
—
0.1
—
—
—
—
—
—
—
0.1
—
—
—
819.1
79.6
27.8
(28.3)
(0.3)
3.2
66.1
967.2
257.5
(1.8)
15.2
(6.9)
(67.3)
1.7
100.8
1,266.4
73.6
1.8
—
—
—
—
781.0
257.5
—
—
—
—
—
—
1,038.5
73.6
—
—
—
—
—
—
—
—
(1.8)
—
—
—
—
—
(1.8)
—
1.8
—
—
17.6
—
—
—
0.1 $
(54.5)
—
122.0
—
(183.5)
—
1,009.2 $ (878.0) $
—
—
—
— $ 1,112.1 $
—
—
—
(54.5)
(183.5)
122.0
1,243.4
See accompanying notes to consolidated financial statements.
F-7
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2023
Fiscal Year
2022
2021
$
73.6
$
257.5
$
Share-based compensation costs
Depreciation and amortization
Acquired intangibles amortization
Gain on sale of audio technology assets
Gain on sale and leaseback transaction
Loss on redemption of convertible notes
Deferred taxes
Amortization of convertible debt discount and issuance costs
Amortization of right-of-use assets
Amortization of cost of development services
Provision for inventory excess and obsolescence
Equity investment (gain) loss
Foreign currency remeasurement (gain) loss
Other
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued compensation
Income taxes payable
Other accrued liabilities
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from sale of assets
Acquisition of businesses, net of cash and cash equivalents acquired
Advance payment on intangible assets
Proceeds from sale of audio technology assets
Proceeds from maturity of investments
Proceeds from sale of investments
Purchase of short-term securities
Purchases of property and equipment
Receipt of liquidation payment on equity investment
Purchase of intangible assets
Proceeds from sale of equity method investment
Cost method investment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of debt
Payment of debt issuance costs
Proceeds from issuance of shares
Payroll taxes related to net share settlement of share-based awards
Repurchases of common stock
Repayment on line of credit borrowings and debt
Payment for redemption of convertible notes
Refundable deposit paid to vendor
Return of deposit received from vendor and other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds
Cash paid for interest
Supplemental disclosures of non-cash transactions
Purchases of property and equipment in current liabilities
Receipt of intangible assets from advance payment made in previous fiscal year
122.0
27.4
130.4
—
—
—
(25.9)
2.6
9.7
5.8
7.9
—
1.7
(0.3)
161.3
24.6
(6.1)
9.4
(95.6)
(45.4)
(15.6)
(56.0)
331.5
0.2
(15.5)
—
—
21.4
22.2
—
(34.2)
0.8
(0.9)
—
—
(6.0)
—
—
17.6
(54.5)
(183.5)
(6.0)
—
—
5.1
(221.3)
(3.5)
100.7
824.0
924.7
91.4
51.9
$
$
$
$
$
$
100.8
24.0
123.5
—
(5.4)
8.1
(29.7)
3.4
10.8
10.0
(10.9)
(1.6)
(7.6)
(1.3)
(81.1)
(54.2)
6.9
15.0
23.2
5.3
48.6
17.4
462.7
55.9
(501.1)
(30.0)
—
—
24.4
(5.8)
(31.1)
—
—
5.0
—
(482.7)
600.0
(11.2)
15.2
(67.3)
—
(3.0)
(505.6)
(16.6)
2.8
14.3
(6.6)
(12.3)
836.3
824.0
38.3
25.0
$
$
$
$
3.6
— $
79.6
66.1
21.6
110.1
(34.2)
—
0.3
(5.2)
19.8
8.6
9.2
9.7
9.1
(2.8)
—
(25.9)
43.4
(9.4)
(8.6)
32.2
14.9
(2.1)
(17.2)
319.2
—
(626.5)
—
34.2
—
95.8
—
(21.1)
—
—
—
(5.0)
(522.6)
400.0
(6.0)
27.8
(28.3)
—
(100.0)
(19.4)
—
—
274.1
2.2
72.9
763.4
836.3
39.4
9.6
0.8
—
$
$
See accompanying notes to consolidated financial statements.
2.2
30.0
$
$
F-8
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
We are a leading worldwide developer and fabless supplier of premium mixed signal semiconductor solutions changing
the way humans engage with connected devices and data, engineering exceptional experiences throughout the home, at work,
in the car and on the go. Our current served markets include Internet of Things, or IoT, personal computer, or PC, and Mobile.
We deliver complete chip, firmware and software semiconductor solutions that allow our customers to seamlessly integrate
advanced functions into their end products.
Basis of Presentation and Principles of Consolidation
Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. Accordingly, every fifth or sixth fiscal
year will have a 53-week period. The additional week in a 53-week year is added to the first quarter, making such quarter a 14-
week period. The fiscal years presented in this report were 52-week periods ended June 24, 2023, June 25, 2022, and June 26,
2021.
The consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles,
or U.S. GAAP, and include our financial statements and those of our wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated upon consolidation. Certain reclassifications have been made to the amounts
for prior years in order to conform to the current year’s presentation
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue, allowance for doubtful
accounts, cost of revenue, inventories, loss on purchase commitments, product warranty, accrued liabilities, share-based
compensation costs, provision for income taxes, deferred income tax asset valuation allowances, uncertain tax positions,
goodwill, intangible assets, investments, and loss contingencies. We base our estimates on historical experience, applicable
laws and regulations, and various other assumptions that we believe to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or conditions.
Cash Equivalents and Investments
Cash equivalents consist of highly liquid investments with original maturities of three months or less at the time of
purchase. Our cash equivalents as of the end of fiscal 2023 and 2022 consisted of bank deposits and money market funds with
a fair value of $924.7 million and $824.0 million, respectively.
Short-Term Investments
We classify our investments in debt securities as available-for-sale and record these investments at fair value. Investments
with an original maturity of three months or less at the date of purchase are considered cash equivalents, while all other
investments are classified as short-term based on management’s intent and ability to use the funds in current operations.
Unrealized gains and losses are reported as a component of other comprehensive income (loss). Realized gains and losses are
determined based on the specific identification method, and are reflected as other income (expense), net in our Consolidated
Statements of Operations.
We regularly review our investment portfolio to identify and evaluate investments that have indicators of possible
impairment. Some of the factors we consider include, but are not limited to, the following: the length of time and extent a
security’s fair value has been below its cost, the financial condition and near-term prospects of the investee, the credit quality
of the security’s issuer, likelihood of recovery and our intent and ability to hold the security for a period of time sufficient to
allow for any anticipated recovery in value. For our debt instruments, we also evaluate whether we have the intent to sell the
security or it is more likely than not that we will be required to sell the security before recovery of its cost basis.
Fair Value Measurements
We apply fair value accounting for all financial assets and liabilities that are required to be recognized or disclosed at
fair value in the Consolidated Financial Statements. Fair value is defined as the price that would be received from selling an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When
F-9
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
determining the fair value measurements for assets and liabilities, we consider the principal or most advantageous market in
which we would transact, and the market-based risk measurements or assumptions that market participants would use in pricing
the asset or liability, such as inherent risk, transfer restrictions and credit risk. The carrying amounts reported in the consolidated
financial statements approximate the fair value for cash, accounts receivable, accounts payable and accrued liabilities due to
their short-term nature.
Intangible assets, property and equipment, and goodwill are measured at fair value on a non-recurring basis if impairment
is indicated. The interest rate on our bank debt is variable, which is subject to change from time-to-time to reflect a market
interest rate; accordingly, the carrying value of our bank debt approximates fair value.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents,
investments, and accounts receivable. Our investment policy, which is predicated on capital preservation and liquidity, limits
investments to U.S. government treasuries and agency issues, taxable securities, and municipal issued securities with a
minimum rating of investment grade by the rating agencies.
We sell our products to contract manufacturers that provide manufacturing services for OEMs, to some OEMs directly,
and to distributors. We extend credit based on an evaluation of a customer’s financial condition, and we generally do not
require collateral.
The following customers accounted for more than 10% of our accounts receivable balance as of the end of fiscal 2023
and 2022:
Customer A
Customer B
Other Concentrations
2023
10%
20%
2022
17%
15%
Our products include certain components that are currently single sourced. We believe other vendors would be able to
provide similar components, however, the qualification of such vendors may require additional lead time. In order to mitigate
any potential adverse impact from a supply disruption, we strive to maintain an adequate supply of critical single-sourced
components.
Revenue Recognition
Our revenue is primarily generated from the sale of ASIC chips, either directly to a customer or to a distributor. Revenue
is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the
consideration we expect to receive in exchange for those goods or services. All of our revenue, except an inconsequential
amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and
conditions. Non-product revenue is recognized over the same period of time such performance obligations are satisfied. We
then select an appropriate method for measuring satisfaction of the performance obligations.
Rights to our intellectual property, or IP, are either sold or licensed to customers. Revenue recognition from the licensing
of our IP is dependent on the nature and terms of each agreement. We recognize revenue from the licensing of our IP upon
delivery of the IP if there are no substantive future obligations to perform under the arrangement. Sales-based or usage-based
royalties from the license of IP are recognized at the later of the period the sale or usage occurs, or the satisfaction of the
performance obligation to which some or all of the sales-based or usage-based royalties have been allocated.
Revenue from sales to distributors is recognized upon shipment of the product to the distributors (sell-in basis). Master
sales agreements are in place with certain customers, and these agreements typically contain terms and conditions with respect
to payment, delivery, warranty and supply. In the absence of a master sales agreement, we consider a customer's purchase order
or our standard terms and conditions to be the contract with the customer.
F-10
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Our pricing terms are negotiated independently, on a stand-alone basis. In determining the transaction price, we evaluate
whether the price is subject to refund or adjustment to determine the net consideration which we expect to receive for the sale
of such products. In limited situations, we make sales to certain customers under arrangements where we grant stock rotation
rights, price protection and price allowances; variable consideration associated with these rights is expected to be
inconsequential. These adjustments and incentives are accounted for as variable consideration, classified as other current
liabilities under the revenue standard and are shown as customer obligations in other accrued liabilities on our consolidated
balance sheets. We estimate the amount of variable consideration for such arrangements based on the expected value to be
provided to customers, and we do not believe that there will be significant changes to our estimates of variable consideration.
When incentives, stock rotation rights, price protection, volume discounts, or price allowances are applicable, they are estimated
and recorded in the period the related revenue is recognized. Stock rotation reserves are based on historical return rates applied
to distributor inventory subject to stock rotation rights and recorded as a reduction to revenue with a corresponding reduction
to cost of goods sold for the estimated cost of inventory that is expected to be returned and recorded as prepaid expenses and
other current assets. In limited circumstances, we enter into volume-based tiered pricing arrangements and we estimate total
unit volumes under such arrangement to determine the expected transaction price for the units expected to be transferred. Such
arrangements are accounted for as contract liabilities within other accrued liabilities. Sales returns liabilities are recorded as
refund liabilities within other accrued liabilities.
Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive
consideration from customers. Payments are generally due within three months of completion of the performance obligation
and subsequent invoicing and, therefore, do not include significant financing components. There was $1.3 million of contract
assets (i.e., unbilled accounts receivable, deferred commissions) recorded on the consolidated balance sheets as of June 2023,
and $1.2 million as of June 2022. Contract assets are presented as part of prepaid expenses and other current assets. Contract
liabilities and refund liabilities were $18.7 million and $39.8 million, respectively, as of June 2023, and $27.3 million and
$61.3 million, respectively, as of June 2022. Both contract liabilities and refund liabilities are presented as part of customer
obligations in other accrued liabilities on our consolidated balance sheets. During fiscal 2023 and 2022, we recognized $21.9
million and $3.6 million, respectively, in revenue related to contract liabilities outstanding as of the beginning of each such
fiscal year.
We invoice customers for each delivery upon shipment and recognize revenue in accordance with delivery terms. As of
June 2023, we did not have any remaining unsatisfied performance obligations with an original duration greater than one year.
Accordingly, under the optional exception provided by the ASC, we do not disclose revenues allocated to future performance
obligations of partially completed contracts. We have elected to account for shipping and handling costs as fulfillment costs
before the customer obtains control of the goods. We continue to classify shipping and handling costs as a cost of revenue. We
have elected to continue to account for collection of all taxes on a net basis.
We incur commission expense that is incremental to obtaining contracts with customers. Sales commissions (which are
recorded in the selling, general and administrative expense line item in the consolidated statements of operations) are expensed
when the product is shipped because such commissions are incurred after the product has been shipped.
Revenue from contracts with customers disaggregated by geographic area based on customer location and groups of
similar products is presented in Note 15 Segment, Customers, and Geographical Information.
Advertising Costs
Advertising costs, if any, are expensed when incurred.
Allowance for Credit Losses
We maintain allowances for credit losses resulting from the inability of customers to meet their financial obligations. On
an ongoing basis, we evaluate the collectability of accounts receivable based on a combination of factors. In circumstances in
which we are aware of a specific customer’s potential inability to meet its financial obligation, we record a specific reserve of
the credit loss against amounts due. In addition, we make judgments and estimates on the collectability of accounts receivable
based on our historical bad debt experience, customers’ creditworthiness, current economic trends, recent changes in customers’
payment trends, and deterioration in customers’ operating results or financial position.
If circumstances change adversely,
additional credit loss allowances may be required. At June 2023 and June 2022, the allowance for credit losses on our trade
receivables was $5.0 million and $6.0 million, respectively.
Cost of Revenue
Our cost of revenue includes the cost of products shipped to our customers, which primarily includes the cost of products
built to our specifications by our contract manufacturers, the cost of silicon wafers supplied by independent semiconductor
F-11
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
wafer manufacturers, and the related assembly, package, and test costs of our products. Also included in our cost of revenue
are personnel and related costs, including share-based compensation for quality assurance and manufacturing support
personnel; logistics costs; depreciation of equipment supporting manufacturing; acquired intangibles amortization; fair value
adjustments associated with acquired businesses; inventory write-downs and losses on purchase obligations; and warranty
costs.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value as of the end of fiscal 2023
and 2022, and consisted of the following (in millions):
Raw materials and work-in-progress
Finished goods
2023
2022
$
$
70.5 $
66.7
137.2 $
92.2
77.5
169.7
Inventories are recorded at standard cost, which approximates actual cost computed on a first-in, first-out basis. We
record a write-down, if necessary, to reduce the carrying value of inventory to its net realizable value. The effect of these write-
downs is to establish a new cost basis in the related inventory, which we do not subsequently write-up. We also record a
liability and charge to cost of revenue for estimated losses on inventory we are obligated to purchase from our contract
manufacturers when such losses become probable from customer delays, order cancellations, or other factors. The following
factors influence our estimates: changes to or cancellations of customer orders, unexpected or sudden decline in demand, rapid
product improvements, technological advances, and termination or changes by our OEM customers of any product offerings
incorporating our product solutions.
Property and Equipment
We state property and equipment at cost less accumulated depreciation and amortization. We compute depreciation using
the straight-line method over the estimated useful lives of the assets. We amortize leasehold improvements over the shorter of
the lease term or the estimated useful life of the asset.
Foreign Currency
The U.S. dollar is our functional and reporting currency. We remeasure our monetary assets and liabilities not
denominated in our functional currency into U.S. dollar equivalents at the rate of exchange in effect on the balance sheet date.
We measure and record non-monetary balance sheet accounts at the historical rate in effect at the date of transaction. We
remeasure foreign currency expenses at the weighted average exchange rate in the month that the transaction occurred. These
foreign currency transactions and remeasurement gains and losses, resulted in a net loss of $2.3 million in fiscal 2023, a net
gain of $5.6 million in fiscal 2022 and a net loss of $1.4 million in fiscal 2021. Gains and losses resulting from foreign currency
transactions are included in selling, general, and administrative expenses in the consolidated statements of operations.
Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the identifiable assets acquired and
liabilities assumed. We test for impairment of goodwill on an annual basis in the fourth quarter and at any other time when
events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. We have the option to
first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The
qualitative factors we assess include long-term prospects of our performance, share price trends and market capitalization, and
Company specific events. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions,
estimates and judgments.
If we determine that as a result of the qualitative assessment that it is more likely than not (i.e., greater than 50%
likelihood) that the fair value of a reporting unit is less than its carrying amount, then the quantitative test is required. Otherwise,
no further testing is required. The quantitative goodwill impairment test requires us to estimate the fair value of our reporting
units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired
and we record an impairment loss equal to the excess of the carrying value of the reporting unit over its fair value, not to exceed
the carrying amount of goodwill. The fair value of each of our goodwill reporting units is generally estimated using discounted
cash flow methodologies.
F-12
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We elected not to perform the qualitative assessment and performed the quantitative goodwill impairment test in fiscal
2023. Based on the impairment analysis performed in the fourth quarter of each year presented, the fair value of our reporting
units exceeded their carrying values and no goodwill impairment was recognized.
Intangible Assets
Intangible assets consist primarily of intangible assets purchased through acquisitions. Finite-lived intangible assets are
amortized for financial reporting purposes using the straight-line method over the estimated useful lives of the assets ranging
from 1 to 6 years. Indefinite-lived intangible assets are not amortized but tested annually for impairment in the fourth quarter,
or when events or changes in circumstances indicate that indefinite-lived intangible assets might be impaired.
Impairment of Long-Lived Assets
We evaluate long-lived assets, such as property and equipment and intangible assets subject to amortization, for
impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
We measure recoverability of assets to be held and used by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset. We review the carrying value of indefinite-lived
intangible assets for impairment at least annually during the last quarter of our fiscal year, or more frequently if we believe
indicators of impairment exist. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, we
recognize an impairment charge in an amount by which the carrying amount of the asset exceeds the fair value of the asset.
Assets to be disposed of would be separately presented in the consolidated balance sheets and reported at the lower of the
carrying amount or fair value less costs to sell and would no longer be depreciated. The assets and liabilities of a disposed
group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated
balance sheets. No impairment of long-lived assets was recognized for fiscal 2023, 2022, and 2021.
Leases
We determine if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and liabilities are
recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU
assets also include any initial direct costs and prepayments less lease incentives. Lease terms may include options to extend or
terminate the lease when it is reasonably certain that the Company will exercise such options. As our leases do not provide an
implicit rate, we use our collateralized incremental borrowing rate based on the information available at
the lease
commencement date, including lease term, in determining the present value of lease payments. Lease expense for these leases
is recognized on a straight-line basis over the lease term.
We have elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a
term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term.
Other Accrued Liabilities and Other Long-Term Liabilities
As of the end of fiscal 2023 and 2022, other accrued liabilities consisted of the following (in millions):
Customer obligations
Inventory obligations
Operating lease liabilities
Other
2023
2022
$
$
58.5 $
7.0
9.0
33.9
108.4 $
88.6
14.1
7.6
35.0
145.3
As of the end of fiscal 2023 and 2022, other long-term accrued liabilities consisted of the following (in millions):
Operating lease liabilities, long-term
Deferred tax liability
Income taxes payable, long-term
Other
2023
2022
$
$
42.4
39.1
38.1
16.3
135.9
$
$
51.5
52.6
29.1
19.4
152.6
F-13
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Share-Based Compensation
We charge the estimated fair value less actual forfeitures to earnings on a straight-line basis over the vesting period of
the entire underlying award, which is generally three or four years for our restricted stock units, or RSU, awards, three years
for our market stock units, or MSU, awards, three years for our performance stock units, or PSU, awards, and up to one year
for shares purchased under our 2019 employee stock purchase plan.
We estimate the fair value of market-based MSUs at the date of grant using a Monte Carlo simulation model and amortize
those fair values over the requisite service period, which is generally three years. The Monte Carlo simulation model that we
use to estimate the fair value of market-based MSUs at the date of grant incorporates into the valuation the possibility that the
market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the market-based
MSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However,
the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria.
We value PSUs using the aggregate intrinsic value on the grant date and amortize the compensation expense over the
three-year service period on a ratable basis, dependent upon the probability of meeting the performance measures.
We recognize compensation expense for phantom stock units on a straight-line basis for each tranche of each award
based on the average closing price of our common stock over the thirty calendar days ended prior to each balance sheet date.
As our phantom stock is a cash-settled award, it is recorded as a liability and remeasured each reporting period.
Income Taxes
We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and operating loss and tax credit carryforwards. We measure deferred tax assets and
liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. We recognize the effect of a change in tax rates in income on deferred tax assets and
liabilities in the period that includes the enactment date. We establish valuation allowances when necessary to reduce deferred
tax assets to the amounts that are more likely than not to be realized.
We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to determine whether
it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or
litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being
realized upon ultimate settlement with a taxing authority. The calculation of tax liabilities involves significant judgment in
estimating the impact of uncertainties in the application of highly complex tax laws. Resolution of these uncertainties in a
manner inconsistent with our expectations could have a material impact on our consolidated financial position, results of
operations, and cash flows. We believe we have adequately provided for reasonably foreseeable outcomes in connection with
the resolution of income tax uncertainties. However, our results have in the past, and could in the future, include favorable and
unfavorable adjustments to our estimated tax liabilities in the period a determination of such estimated tax liability is made or
resolved, upon the filing of an amended return, upon a change in facts, circumstances, or interpretation, or upon the expiration
of a statute of limitation. Accordingly, our effective tax rate could fluctuate materially from period to period.
Product Warranty
We generally provide warranties to cover defects in workmanship, materials and manufacturing for a period of twelve
months to meet the stated functionality as agreed to in each sales arrangement. Products are tested against specified functionality
requirements prior to delivery, but we nevertheless from time-to-time experience claims under our warranty guarantees. These
standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product
will continue working as specified. Therefore, warranties are not considered separate performance obligations in the
arrangement. We accrue for estimated warranty costs under those guarantees based upon historical experience, and for specific
items, at the time their existence is known and the amounts are determinable.
Acquisitions
In accordance with the guidance for business combinations, we determine whether a transaction or other event is a
business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business
combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for
the transaction or other event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquired entity. We capitalize acquisition-related costs and fees
associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business
combinations.
F-14
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible
assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values
of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and
liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets. Critical
estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer
relationships and acquired developed technology and discount rates. Our estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ
materially from estimates. Other estimates associated with the accounting for acquisitions may change as additional information
becomes available regarding the assets acquired and liabilities assumed. Any change in facts and circumstances that existed as
of the acquisition date and impacts our preliminary estimates is recorded to goodwill if identified within the measurement
period. Any adjustments subsequent to the measurement period or our final determination of fair value of assets and liabilities,
will be charged to earnings.
Research and Development
Research and development costs are expensed as incurred.
Accounting Pronouncements Issued But Not Yet Adopted
In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of
Topic 848. ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. Effective March
16, 2023, we transitioned our credit and loan agreements from LIBOR to the Secured Overnight Financing Rate, or SOFR. We
are currently evaluating the timing of adoption and impact, if any, of this standard on our consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Acquired
Contract Assets and Contract Liabilities” which improves comparability for both the recognition and measurement of acquired
revenue contracts with customers at the date of and after a business combination by providing consistent recognition guidance.
This standard is effective for fiscal years beginning after December 15, 2022. We will adopt this standard in the first quarter of
our fiscal 2024 and do not expect it to have a material impact on our consolidated financial statements.
2. Net Income Per Share
The computation of basic and diluted net income per share for fiscal 2023, 2022, and 2021 was as follows (in millions,
except per share amounts):
Numerator:
Net income
Denominator:
2023
2022
2021
$
73.6 $
257.5 $
79.6
Shares, basic
Effect of dilutive share-based awards and convertible
notes
Shares, diluted
Net income per share:
39.6
0.6
40.2
39.0
1.7
40.7
Basic
Diluted
$
$
1.86 $
1.83 $
6.60 $
6.33 $
34.8
3.5
38.3
2.29
2.08
Diluted net income per share does not include the effect of potential common shares related to certain share-based awards
for fiscal 2023, 2022, and 2021 as follows (in millions):
Share-based awards
2023
2022
2021
0.7
0.1
—
These share-based awards were not included in the computation of diluted net income per share because the proceeds
received, if any, from such share-based awards combined with the average unamortized compensation costs, were greater than
the average market price of our common stock, and therefore, their effect would have been antidilutive.
Our basic net income per share amounts for each period presented have been computed using the weighted average
number of shares of common stock outstanding. Our diluted net income per share amounts for each period presented include
F-15
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
the weighted average effect of potentially dilutive shares. We used the “treasury stock” method to determine the dilutive effect
of outstanding share-based awards and convertible notes.
3. Property and Equipment
Property and equipment as of the end of fiscal 2023 and 2022 consisted of the following (in millions):
Computer equipment
Manufacturing equipment
Furniture, fixtures, and leasehold improvements
Capitalized software
Construction in progress
Accumulated depreciation and amortization
Property and equipment, net
Life
3 - 5 years
1 - 5 years
3 - 10 years
3 - 7 years
2023
2022
$
$
20.1
105.9
43.4
22.5
7.0
198.9
(132.5)
66.4
$
$
19.3
93.3
39.6
24.3
9.2
185.7
(122.8)
62.9
Our construction in progress primarily includes machinery and equipment that we expect to place in service in the next
12 months.
4. Acquisitions
Asset Acquisition
During the third quarter of fiscal 2023, we completed the acquisition of certain developed technology intangible assets
from Broadcom for an aggregate consideration of $30.0 million, which was paid in cash in the previous fiscal year. This
transaction did not meet the definition of a business combination as substantially all of the fair value of the gross assets acquired
was concentrated in the finite-lived developed technology intangible asset. As a result, this transaction was accounted for as
an asset acquisition and the total purchase consideration was allocated to intangible assets, amortized over an estimated useful
life of six years.
Emza Visual Sense, Ltd.
On October 25, 2022, we acquired all of the outstanding shares of Emza Visual Sense, Ltd., or Emza, a developer of ultra-
low-power artificial intelligence visual sensing solutions, for total purchase consideration of $15.8 million. The purchase price
was attributed to $0.3 million cash acquired, $8.0 million of intangible assets, $9.8 million of goodwill and $2.3 million net
liabilities assumed. Goodwill recognized from the acquisition of Emza is not deductible for income tax purposes. Pro forma
results of operations for this acquisition have not been presented because they are not material to our consolidated results of
operations, either individually or in the aggregate.
DSP Group, Inc.
On August 30, 2021, we entered into an agreement and plan of merger with DSP Group, Inc., or DSPG, to acquire all of
the equity of DSPG, a leading global provider of voice and wireless chipset solutions for converged communications, for
$22.00 per share in an all-cash transaction, referred to as the DSPG acquisition. The DSPG acquisition closed on December 2,
2021, or the DSPG Closing Date, whereupon we obtained voice and wireless technology and product solutions for converged
communications. In addition, under the terms of the agreement and plan of merger, we provided replacement equity awards to
the transferred employees and allocated $1.7 million of the replacement equity awards value to consideration transferred.
The DSPG acquisition has been accounted for using the purchase method of accounting in accordance with the business
acquisition guidance. Under the purchase accounting method, the total estimated purchase consideration of the acquisition was
allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their relative fair values.
The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities has
been recorded as goodwill. Our estimate of the fair values of the acquired intangible assets at June 25, 2022, was based on
established and accepted valuation techniques performed with the assistance of our third-party valuation specialists.
The adjusted purchase price paid for DSPG was $543.3 million. The final purchase price allocation is as follows (in
millions):
F-16
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Property and equipment
Intangible assets
Right-of-use lease asset
Severance pay fund
Deferred tax asset
Non-current other assets
Total identifiable assets acquired
Accounts payable
Other accrued expenses
Short-term lease liabilities
Long-term lease liabilities
Accrued severance
Deferred tax liability
Other long-term liabilities
Total liabilities
Net identifiable assets acquired
Goodwill
Net assets acquired
Final
As Adjusted
June 25, 2022
40.5
71.9
12.9
22.6
4.0
5.9
212.0
9.8
16.2
6.7
2.3
404.8
(6.7)
(19.8)
(1.5)
(8.2)
(16.4)
(39.4)
(6.1)
(98.1)
306.7
236.6
543.3
$
$
There were no measurement period adjustments during fiscal 2023.
The following table summarizes the estimated fair value of the intangible assets as of the DSPG Closing Date (in
millions):
Developed technology
Customer contracts and related relationships
In process research and development
Trade names
Estimated fair value of acquired intangibles
Estimated
Weighted
Average Useful
Lives in Years
Estimated Fair
Value
N/A
5.2
4.0
1.0
$
$
150.0
45.0
16.0
1.0
212.0
We estimated the fair value of the identified intangible assets using a discounted cash flow model for each of the
underlying identified intangible assets. These fair value measurements were based on significant inputs not observable in the
market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future cash flows,
conditions and demands specific to each intangible asset over its remaining useful life, and discount rates we believe to be
consistent with the inherent risks associated with each type of asset, which range from 4% to 18%. The fair value of these
intangible assets is primarily affected by the projected revenue, gross margins, operating expenses, the technology migration
curve, customer ramp up period and the anticipated timing of the projected income associated with each intangible asset coupled
with the discount rates used to derive their estimated present values. We believe the level and timing of expected future cash
flows appropriately reflects market participant assumptions.
In-process research and development consists of advanced semiconductor telecommunications products for the Internet
of Things, or IoT, market. We expect to complete the in-process research and development project in calendar year 2024.
F-17
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The value of goodwill reflects the anticipated synergies of the combined operations and workforce of DSPG as of the
DSPG Closing Date. None of the goodwill is expected to be deductible for income tax purposes.
Prior to the DSPG acquisition, we did not have an existing relationship or transactions with DSPG.
The consolidated financial statements include approximately $83.8 million of revenue from the DSPG Closing Date
through June 2022. It is impracticable to determine the effect on net income attributable to DSPG as we completed the
integration of DSPG into our ongoing operations during the third quarter of fiscal 2022.
In fiscal year 2022, we incurred $4.4 million in acquisition related costs which were recorded in selling, general and
administrative expense in the consolidated statements of operations. In December 2021, we executed the Term Loan Facility
agreement in the amount of $600.0 million, the proceeds of which were used to finance the DSPG acquisition and we incurred
$11.2 million of debt financing costs thereon. As of June 2023, $6.0 million of the Term Loan Facility is included in short-
term debt, and $585.0 million is included in long-term debt on the accompanying consolidated balance sheets. See “Note 8 –
Debt” for additional information.
Supplemental Pro Forma Information (Unaudited)
The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily
indicative of the financial position or results of operations that would have been realized if the acquisition had been completed
on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results
or financial position. The pro forma adjustments are based upon currently available information and certain assumptions we
believe are reasonable under the circumstances.
The following supplemental pro forma information presents the combined results of operations as if DSPG had been
acquired as of the beginning of fiscal 2021. Pro forma adjustments used to arrive at pro forma net income included adjustments
for the addition of intangible amortization expense for the value of intangibles under the purchase price allocation, adjustments
to record acquired inventories at fair value, transaction and restructuring costs. The total pro forma adjustments for fiscal 2022
was an increase to net income of $5.9 million and a decrease in net income of $86.3 million in fiscal 2021. The unaudited
supplemental pro forma financial information for the periods presented is as follows (in millions):
2022
2021
Revenue
Net income (loss)
$
$
1,802.6
263.4
$
$
1,466.0
(6.7)
5.
Cash, Cash Equivalents and Short-Term Investments
The following table summarizes our cash, cash equivalents and short-term investments by category at June 2023 and
June 2022 (in millions):
We use the specific-identification method to determine any realized gains or losses from the sale of our short-term
investments classified as available-for-sale.
Cash
Cash equivalents:
Money market funds
Treasury bills
Total cash and cash equivalents
Short-term investments:
Certificates of deposit
Corporate debt securities
Municipal bonds
Total short-term investments
Amortized
Cost
$
$
$
$
853.9
54.4
16.4
924.7
0.2
6.5
3.1
9.8
June 2023
Gross
unrealized
gain (loss)
$
Fair Value
853.9
— $
Amortized
Cost
$
811.9
June 2022
Gross
unrealized
gain (loss)
$
Fair Value
811.9
— $
—
—
— $
54.4
16.4
924.7
— $
(0.2)
—
(0.2) $
0.2
6.3
3.1
9.6
$
$
$
12.1
—
824.0
2.4
43.7
7.9
54.0
$
$
$
—
—
— $
— $
(1.9)
(0.1)
(2.0)
$
12.1
—
824.0
2.4
41.8
7.8
52.0
$
$
$
F-18
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table classifies our short-term investments by contractual maturities (in millions):
Due within 1 year
Due between 1 year to 5 years
June 2023
June 2022
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
$
$
9.8
—
9.8
$
$
9.6
—
9.6
$
$
21.0
33.0
54.0
$
$
20.4
31.6
52.0
All available-for-sale securities have been classified as current, based on management's intent and ability to use the funds
in current operations.
6. Fair Value Measurements
We determine fair value based on the fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most
advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based
on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or
liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair
value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:
•
•
•
Level 1 – Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the
financial instruments.
Level 3 – Valuation is based upon other unobservable inputs that are significant to the fair value measurements.
The fair value of our Level 1 financial instruments are traded in active markets and are based on quoted market prices
for identical instruments. The fair value of our Level 2 fixed income securities is obtained from an independent pricing service,
which may use quoted market prices for identical or comparable instruments or model driven valuations using observable
market data or inputs corroborated by observable market data. Our marketable securities are held by custodians who obtain
investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models.
At the end of June 2023 and 2022, financial assets measured at fair value on a recurring basis are summarized below (in
millions):
Assets:
Cash equivalents:
Money market funds
Treasury bills
Short-term investments:
Certificates of deposit
Corporate debt securities
Municipal bonds
Total assets
Level 1
June 2023
Level 2
Total
Level 1
June 2022
Level 2
Total
$
$
54.4
16.4
—
—
—
70.8
$
$
— $
—
0.2
6.3
3.1
9.6
$
54.4
16.4
0.2
6.3
3.1
80.4
$
$
12.1
—
—
—
—
12.1
$
$
— $
—
2.4
41.8
7.8
52.0
$
12.1
—
2.4
41.8
7.8
64.1
The above table excludes $853.9 million of cash held in our bank accounts. We did not have any financial instruments
measured at fair value on a recurring basis within Level 3 fair value during fiscal 2023 and 2022 and there were no transfers in
or out of our Level 1 or 2 assets during the same periods.
F-19
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
We report our financial instruments at fair value with the exception of the Senior Debt and Term Loan (“Note 8. Debt”).
The estimated fair value of the notes was determined based on the trading price of the notes as of the last day of trading for the
period. We consider the fair value of the notes to be a Level 2 measurement as they are not actively traded in markets.
The carrying amounts and estimated fair values of the Senior Notes and Term Debt are as follows for the periods
presented (in millions):
Senior Notes due 2029
Term Loan due 2028
June 2023
Carrying
Amount
395.6
582.4
978.0
Estimated Fair
Value
337.2
575.3
912.5
$
$
$
$
$
$
$
June 2022
Carrying
Amount
395.0
586.7
981.7
7. Goodwill and Acquired Intangible Assets
The following table presents our goodwill balance as of June 2023 and June 2022 (in millions):
Beginning balance
Acquisition activity
Ending balance
$
$
2023
806.6
9.8
816.4
The following table summarizes the life, the gross carrying value of our acquired intangible assets, and the related
accumulated amortization as of the end of fiscal 2023 and 2022 (in millions):
Estimated Fair
Value
326.9
575.0
901.9
2022
570.0
236.6
806.6
$
$
$
$
$
2023
2022
Weighted
Average
Life in
Years
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
5.6 $
4.1
231.9 $
158.2
(150.7) $
(117.8)
81.2 $
40.4
232.1 $
170.5
(109.3) $
(99.7)
122.8
70.8
5.8
3.0
5.0
4.4
8.0
4.4
158.0
82.0
5.2
10.8
4.4
5.8
(58.0)
(79.7)
(0.7)
(8.9)
(4.3)
(4.7)
100.0
2.3
128.0
82.0
4.5
1.9
0.1
1.1
—
9.9
4.4
5.8
(33.8)
(52.4)
—
(7.5)
(3.7)
(3.3)
94.2
29.6
—
2.4
0.7
2.5
Audio and video technology
Customer relationships
Wireless connectivity
technology
Video interface technology
Human presence detection
technology
Licensed technology and other
Patents
Tradename
In process research and
development
Acquired intangibles, gross
4.9 $
Not
applicable
67.0
723.3 $
—
(424.8) $
67.0
298.5 $
67.0
699.7 $
—
(309.7) $
67.0
390.0
F-20
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During fiscal 2023, we retired fully amortized intangible assets of $20.4 million of display driver technology. During
fiscal 2022, we retired fully amortized intangible assets of $21.5 million of audio and video developed technology, $12.0
million in backlog and $3.1 million in licensed technology and other.
Amortization expense is calculated using the straight-line method over the estimated useful lives of the acquired
intangibles. The total amortization expense for the acquired intangible assets was $130.4 million in fiscal 2023, $123.5 million
in fiscal 2022, and $110.1 million in fiscal 2021. This amortization expense was included in our consolidated statements of
operations as acquired intangibles amortization and cost of revenue.
The following table presents expected annual aggregate amortization expense in future fiscal years (in millions):
2024
2025
2026
2027
2028
Thereafter
To be determined
Future amortization
$
$
73.8
66.9
53.8
23.2
10.6
3.2
67.0
298.5
8. Debt
Senior Debt
On March 11, 2021, we completed an offering of $400.0 million aggregate principal amount of 4.0% senior notes due
2029, or the Senior Notes, in a private offering. The Senior Notes were issued pursuant to an Indenture, dated as of March 11,
2021, or the Senior Notes Indenture, by and among our company, the guarantors named therein and Wells Fargo Bank, National
Association, as trustee.
The Indenture provides that the Senior Notes will bear interest at a rate of 4.0% per annum, payable in cash semi-annually
in arrears on December 15 and June 15 of each year, commencing on June 15, 2021. The Senior Notes will mature on June 15,
2029 and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our current
and future domestic restricted subsidiaries that guarantee our obligations under our senior secured credit facilities.
Prior to June 15, 2024, we may redeem the Senior Notes, in whole or in part, at a redemption price of 100% of the
principal amount thereof, plus a make-whole premium set forth in the Indenture, plus accrued and unpaid interest, if any, up
to, but excluding, the redemption date.
On or after June 15, 2024, we may redeem some or all of the Senior Notes at the redemption prices specified below, plus
accrued and unpaid interest, if any, up to, but excluding, the redemption date:
Year
2024
2025
2026 and thereafter
Price
102%
101%
100%
In addition, at any time prior to June 15, 2024, we may redeem up to 40% of the aggregate principal amount of the Senior
Notes at a redemption price equal to 104% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but
excluding, the applicable redemption date with the net cash proceeds from one or more equity offerings by us.
The Senior Notes are the general unsecured obligations of our company. The Senior Note guarantees are the senior
unsecured obligations of each guarantor. Under certain circumstances, the guarantors may be released from their Senior Note
guarantees without consent of the holders of Senior Notes. Under the terms of the Indenture, the Senior Notes rank equally in
right of payment with all of our and the guarantors’ existing and future senior indebtedness, and rank contractually senior in
right of payment to our and the guarantors’ future indebtedness and other obligations that are, by their terms, expressly
subordinated in right of payment to the Senior Notes. The Senior Notes are effectively subordinated to our and the guarantors’
existing and future secured indebtedness, including secured indebtedness under our senior secured credit facilities, to the extent
of the value of the assets securing such indebtedness. The Senior Notes and guarantees are structurally subordinated to all
F-21
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
existing and future indebtedness and liabilities (including trade payables) of our subsidiaries that do not guarantee the Senior
Notes.
The Indenture contains covenants that, subject to exceptions and qualifications, among other things, limit our ability and
the ability of our Restricted Subsidiaries (as defined in the Indenture) to (i) incur additional indebtedness and guarantee
indebtedness; (ii) pay dividends or make other distributions or repurchase or redeem our company’s or any parent’s capital
stock; (iii) prepay, redeem or repurchase certain indebtedness; (iv) issue certain preferred stock or similar equity securities; (v)
make loans and investments; (vi) dispose of assets; (vii) incur liens; (viii) enter into transactions with affiliates; (ix) enter into
agreements restricting its subsidiaries’ ability to pay dividends; and (x) consolidate, merge or sell all or substantially all of its
assets.
The Indenture contains customary events of default including, without limitation, failure to make required payments,
failure to comply with certain agreements or covenants, cross-acceleration to certain other indebtedness in excess of specified
amounts, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the
Indenture will allow either the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding
Senior Notes to accelerate, or in certain cases, will automatically cause the acceleration of, the maturity of the principal, and
accrued and unpaid interest, if any, on all outstanding Notes.
Debt issuance costs relating to the Senior Notes of $5.7 million, netted against the debt amount on the consolidated
balance sheet, are amortized as interest expense using the effective interest method over 99 months. The total interest expense
and amortization of the debt issuance costs recorded on the Senior Notes during the fiscal year ended June 2023 and 2022 was
$16.6 million in each year.
Revolving Credit Facility
On March 16, 2023, we entered into a Second Amendment, or the Second Amendment, and on July 28, 2023, we entered
into a Third Amendment, or the Third Amendment, to our Second Amended and Restated Credit Agreement, as amended, the
Credit Agreement, with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, dated
March 11, 2021. The Second Amendment replaces the LIBOR-based interest rate applicable to borrowings under the Credit
Agreement with a SOFR-based interest rate, and the Third Amendment provides that the consolidated interest coverage ratio
financial covenant only applies if, as of the last day of any fiscal quarter, our aggregate cash and cash equivalents balance is
less than $450 million.
The Credit Agreement provides for a revolving credit facility in a principal amount of up to $250 million, which includes
a $20 million sublimit for letters of credit and a $25 million sublimit for swingline loans. Under the terms of the Credit
Agreement, we may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility
commitments in an aggregate principal amount of up to $150 million to the extent existing or new lenders agree to provide
such increased or additional commitments, as applicable. Future proceeds under the revolving credit facility are available for
working capital and general corporate purposes. As of June 2023, there was no balance outstanding under the revolving credit
facility.
Borrowings under the revolving credit facility are required to be repaid in full by March 11, 2026. Debt issuance costs
relating to the revolving credit facility of $1.6 million, included in non-current other assets on our consolidated balance sheet,
are being amortized over 60 months.
Our obligations under the Credit Agreement are guaranteed by the material domestic subsidiaries of our company, subject
to certain exceptions, who collectively with our company are referred to as the Credit Parties. The obligations of the Credit
Parties under the Amended Credit Agreement and the other loan documents delivered in connection therewith are secured by
a first priority security interest in substantially all of the existing and future personal property of the Credit Parties, including,
without limitation, 65% of the voting capital stock and 100% of the non-voting capital stock of certain of the Credit Parties’
direct foreign subsidiaries, subject to certain exceptions.
The Credit Agreement bears interest, at our election, of a Base Rate plus an Applicable Margin or Adjusted Term SOFR,
as defined in the Second Amendment, plus an Applicable Margin. Swingline loans bear interest at a Base Rate plus an
Applicable Margin. The Base Rate is a floating rate that is the greater of the Prime Rate, the Federal Funds Rate plus 50 basis
points, or Adjusted Term SOFR plus 100 basis points. The Applicable Margin is based on a sliding scale which ranges from
25 to 100 basis points for Base Rate loans and 100 basis points to 175 basis points for Adjusted Term SOFR loans. We are
required to pay a commitment fee on any unused commitments under the Credit Agreement which is determined on a leverage-
based sliding scale ranging from 0.175% to 0.25% per annum. Interest and fees are payable on a quarterly basis.
F-22
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Under the Credit Agreement, there are various restrictive covenants, including two financial covenants which limit the
consolidated total leverage ratio, or leverage ratio, the consolidated interest coverage ratio, or interest coverage ratio, which
after the Third Amendment, only applies if our cash and cash equivalents balance is less than $450 million as of the last day of
any fiscal quarter. The leverage ratio is the ratio of net debt as of the measurement date to Consolidated EBITDA, for the four
consecutive quarters ending with the quarter of measurement. The current leverage ratio shall not exceed 3.75 to 1.00 provided
that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted
to 4.25 to 1.00, and thereafter 3.75 to 1.0. The interest coverage ratio is Consolidated EBITDA to interest expense for the four
consecutive quarters ending with the quarter of measurement. If our quarter-end cash and cash equivalents balance is less than
$450.0 million, the interest coverage ratio must not be less than 3.50 to 1.0 as of the date of determination. As of the end of the
quarter, we remain in compliance with the restrictive covenants.
Term Loan Facility
On December 2, 2021, we entered into that certain First Amendment and Lender Joinder Agreement to the Credit
Agreement, to, among other things, establish a new $600.0 million incremental term loan facility, or the Term Loan Facility.
The Term Loan Facility was advanced by certain existing and new lenders under the Credit Agreement to finance the DSPG
acquisition. The Term Loan Facility matures on December 2, 2028. Principal on the Term Loan Facility is payable in equal
quarterly installments on the last day of each March, June, September and December of each year, beginning December 31,
2021, at a rate of 1.00% per annum.
Borrowings under the Term Loan Facility accrue interest at the SOFR, plus 2.25%, or at the Base Rate plus 1.25%,
subject to a 25 basis point step-down based on total gross leverage, and subject to an Adjusted Term SOFR floor of 50 basis
points. The base rate is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the Prime Rate and (iii) the one-month Adjusted
Term SOFR plus 1.00%. The Term Loan Facility contains customary representations and warranties, affirmative and negative
covenants and events of default, in each case consistent with the Credit Agreement. The Term Loan Facility does not contain
any financial covenants.
The Term Loan Facility is subject to a 1.00% prepayment premium in the event all or any portion of the Term Loan
Facility is prepaid within the first 6 months in connection with a repricing transaction only. The Term Loan Facility is subject
to customary mandatory prepayments, including, commencing June 30, 2023, an excess cash flow sweep, subject to customary
step-downs and thresholds.
Debt issuance costs relating to the Term Loan Facility of $11.2 million, netted against the debt amount on the consolidated
balance sheet, are amortized as interest expense over 96 months. The total interest expense and amortization of the debt issuance
costs recorded on the Term Loan Facility during fiscal 2023 and 2022 was $37.9 million and $11.2 million, respectively.
The following table presents the future principal payments related to our Senior Notes and Term Loan Facility in future
fiscal years (in millions):
2024
2025
2026
2027
2028
Thereafter
Senior Notes
$
Term Loan
Facility
Total
6.0
6.0
6.0
6.0
6.0
561.0
591.0
$
$
6.0
6.0
6.0
6.0
6.0
961.0
991.0
— $
—
—
—
—
400.0
400.0
$
$
As of the end of fiscal 2023 and 2022, our total debt is presented in our consolidated balance sheet as follows (in millions):
2023
Issuance
costs
Total debt,
net of
issuance
costs
Total debt
2022
Issuance
costs
Total debt,
net of
issuance
costs
Total debt
$
$
$
6.0
985.0
991.0
— $
(13.0)
(13.0) $
6.0
972.0
978.0
$
$
$
6.0
991.0
997.0
— $
(15.3)
(15.3) $
6.0
975.7
981.7
Current portion of long-
term debt
Long-term debt
F-23
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Convertible Debt
On June 1, 2021, pursuant to the Indenture, dated as of June 26, 2017 between us and Wells Fargo Bank, National
Association, as trustee, or the Convertible Notes Indenture, we provided an irrevocable notice of redemption, for all
$525,000,000 aggregate principal amount of our outstanding 0.50% convertible senior notes due in 2022, or the Convertible
Notes. The Convertible Notes were redeemable at a cash redemption price of 100.0% of the principal amount, plus accrued and
unpaid interest, if any, to, but excluding, the redemption date of August 4, 2021.
Holders of the Convertible Notes had the right to convert the Convertible Notes called for redemption no later than
August 3, 2021, or the Conversion Deadline. The conversion rate was equal to 13.7267 shares per $1,000 principal amount of
the Convertible Notes, which was the initial conversion rate of 13.6947 shares per $1,000 principal amount of the Convertible
Notes plus a number of additional shares equal to 0.0320 shares per $1,000 principal amount of the Convertible Notes. We
elected to settle any conversions by Combination Settlement (as defined in the Convertible Notes Indenture) with a Specified
Dollar Amount (as defined in the Convertible Notes Indenture) per $1,000 principal amount of Convertible Notes equal to
$1,000, plus a number of shares of our common stock, to be determined pursuant to the Convertible Notes Indenture, together
with additional cash, if applicable, in lieu of delivering any fractional shares of common stock. As a result of this election, on
August 4, 2021, we settled or redeemed the remaining outstanding Convertible Notes for $505.6 million in cash representing
the principal amount outstanding and delivered approximately 3.5 million shares in common stock from our treasury stock for
additional amounts, resulting in a loss of approximately $8.1 million which is included in Interest and other expense, net on
our condensed consolidated statements of operations included elsewhere in this report.
9. Leases
Our leases primarily include our headquarters office and worldwide office and research and development facilities which
are all classified as operating leases. Certain leases include renewal options that are under our discretion. The leases expire at
various dates through fiscal year 2034, some of which include options to extend the lease for up to seven years. During fiscal
2023 and 2022, we recorded approximately $12.0 million and $12.7 million of operating leases expense, respectively. Our
short-term leases are immaterial and we do not have finance leases.
As of the end of fiscal 2023 and 2022, the components of leases are as follows (in millions):
Operating lease right-of-use assets
Operating lease liabilities
Operating lease liabilities, long-term
Total operating lease liabilities
2023
2022
49.0
9.0
42.4
51.4
$
$
$
61.2
7.6
51.5
59.1
$
$
$
Supplemental cash flow information related to leases is as follows (in millions):
Cash paid for operating leases included in
operating cash flows
Supplemental non-cash information related to
lease liabilities arising from obtaining right-
of-use assets
2023
2022
$
10.6 $
12.5
7.3
42.5
As of the end of fiscal 2023, the weighted average remaining lease term was 7.38 years, and the weighted average
discount rate was 5.15%.
F-24
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Future minimum lease payments for the operating lease liabilities are as follows (in millions):
Fiscal Year
2024
2025
2026
2027
2028
Thereafter
Total future minimum operating lease payments
Less: interest
Total lease liabilities
Sale and Leaseback Transaction
Operating
Lease
Payments
10.3
9.9
8.4
7.4
5.9
20.2
62.1
(10.7)
51.4
$
$
On February 8, 2022, we executed a sale and leaseback transaction of our properties located at 1109-1251 McKay Drive
and 1140-1150 Ringwood Court, San Jose, California, for a purchase price, net of closing and other expenses payable by us,
of $55.9 million. Concurrent with the sale, we entered into a lease agreement with the buyer to lease back the land and
properties located at 1109 and 1151 McKay Drive, San Jose, California, for an initial term of 12 years and a renewal option for
an additional seven years. The transaction qualified for sale and leaseback and operating lease accounting classification, and
we recorded a gain of $5.4 million which is recorded in the gain on sale and leaseback transaction line in the consolidated
statements of operations.
10. Indemnifications and Contingencies
Legal proceedings
We are subject to a variety of claims and suits that arise from time-to-time in the ordinary course of our business. While
management currently believes that resolving claims against us, individually or in the aggregate, will not have a material
adverse impact on our financial position, results of operations or statements of cash flows, these matters are subject to inherent
uncertainties and management’s view of these matters may change in the future. We accrue for loss contingencies when it is
both probable that we will incur the loss and when we can reasonably estimate the amount of the loss or range of loss.
During the fourth quarter of fiscal 2023, we accrued $4.0 million in relation to a contractual dispute with a vendor.
Contingencies
We have in the past and may in the future receive notices from third parties that claim our products infringe their
intellectual property rights. We cannot be certain that our technologies and products do not and will not infringe issued patents
or other proprietary rights of third parties.
Any infringement claims, with or without merit, could result in significant litigation costs and diversion of management
and financial resources, including the payment of damages, which could have a material adverse effect on our business,
financial condition, and results of operations.
Indemnifications
In connection with certain agreements, we are obligated to indemnify the counterparty against third-party claims alleging
infringement of certain intellectual property rights by us. We have also entered into indemnification agreements with our
officers and directors. Maximum potential future payments under these agreements cannot be estimated because these
agreements do not have a maximum stated liability. However, historical costs related to these indemnification provisions have
not been significant. We have not recorded any liability in our consolidated financial statements for such indemnification
obligations.
F-25
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Stockholders’ Equity
Preferred Stock
We are authorized, subject to limitations imposed by Delaware law, to issue up to a total of 10,000,000 shares of preferred
stock in one or more series without stockholder approval. Our Board of Directors has the power to establish, from time-to-
time, the number of shares to be included in each series and to fix the rights, preferences, and privileges of the shares of each
wholly unissued series and any of its qualifications, limitations, or restrictions. Our Board of Directors can also increase or
decrease the number of shares of a series, but not below the number of shares of that series then outstanding, without any
further vote or action by the stockholders.
Our Board of Directors may authorize the issuance of preferred stock with voting or conversion rights that could harm
the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility
in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying,
deferring, or preventing a change in control of our company and might harm the market price of our common stock and the
voting power and other rights of the holders of our common stock. As of the end of fiscal 2023, there were no shares of
preferred stock outstanding.
Shares Reserved for Future Issuance
Shares of common stock reserved for future issuance as of the end of fiscal 2023 were as follows:
Stock options outstanding
Restricted stock units outstanding
Market stock units outstanding
Performance stock units outstanding
Awards available for grant under all share-based
compensation plans
Reserved for future issuance
Treasury Stock
3,083
1,304,926
227,321
253,359
3,994,824
5,783,513
Our cumulative authorization of repurchases under our common stock repurchase program as of the end of fiscal 2023
was $2.3 billion expiring July 2025. The program authorizes us to repurchase our common stock in the open market or in
privately negotiated transactions depending upon market conditions and other factors. The number of shares repurchased and
the timing of repurchases is based on the level of our cash balances, general business and market conditions, and other factors,
including alternative investment opportunities. Common stock repurchased under this program is held as treasury stock. As
of the end of fiscal 2023, we had $893.9 million of common stock remaining to be repurchased under our common stock
repurchase program.
12. Share-Based Compensation
The purpose of our various share-based compensation plans is to attract, motivate, retain, and reward high-quality
employees, directors, and consultants by enabling such persons to acquire or increase their proprietary interest in our common
stock in order to strengthen the mutuality of interests between such persons and our stockholders and to provide such persons
with annual and long-term performance incentives to focus their best efforts on the creation of stockholder value.
Consequently, we determine whether to grant share-based compensatory awards subsequent to the initial award for our
employees and consultants primarily on individual performance.
Share-Based Compensation Plans
On October 29, 2019, our stockholders approved: (i) our 2019 Equity and Incentive Compensation Plan, or the 2019
Incentive Plan, to replace our Amended and Restated 2010 Incentive Compensation Plan, or the 2010 Incentive Plan, and (ii)
our 2019 Employee Stock Purchase Plan, or the 2019 ESPP, to replace our Amended and Restated 2010 Employee Stock
Purchase Plan, or our 2010 ESPP. Upon approval of the 2019 Incentive Plan, new awards are no longer issued under the 2010
Incentive Plan. Awards outstanding at October 29, 2019 under our prior share-based compensation plans were not impacted by
the approval of the 2019 Incentive Plan and continue to remain outstanding and vest by their terms under the applicable share-
based compensation plan. Shares underlying certain share-based awards forfeited under the 2010 Incentive Plan subsequent to
the approval of the 2019 Incentive Plan automatically transfer to and become available for award issuance from the 2019
Incentive Plan.
F-26
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The 2019 Incentive Plan authorizes our Board of Directors to provide equity-based compensation in the form of stock
options, stock appreciation rights, restricted stock units, cash incentive awards, performance shares, performance stock units,
and other stock-based awards. The cumulative number of shares approved under the 2019 Incentive Plan was 5,288,000. The
2019 ESPP authorizes us to provide eligible employees with an opportunity to acquire an equity interest in our company through
the purchase of stock at a discount, with an initial authorization of 1,500,000 shares.
Effective August 19, 2019, we adopted the 2019 Inducement Equity Plan. 650,000 shares of our common stock have
been reserved for issuance under the 2019 Inducement Equity Plan, subject to adjustment for stock dividends, stock splits, or
other changes in our common stock or capital structure. The 2019 Inducement Equity Plan is intended to comply with Rule
5635(c)(4) of the Nasdaq Stock Market Listing Rules, which provide an exception to the Nasdaq Stock Market Listing Rules’
on the shareholder approval requirement for the issuance of securities with regards to grants to employees of the company or
its subsidiaries as an inducement material to such individuals entering into employment with the company or its subsidiaries.
An individual was eligible to receive an award under the 2019 Inducement Equity Plan only if he or she was not previously an
employee or director of our company (or is returning to work after a bona-fide period of non-employment), and an award under
the 2019 Inducement Equity Plan is a material inducement for him or her to accept employment with our company. As a result
of approval by our stockholders of our amended and restated 2019 Incentive Plan on October 27, 2020, no new awards will be
granted under the 2019 Inducement Equity Plan.
Share-based compensation awards available for grant or issuance for each plan as of the beginning of the fiscal year,
including changes in the balance of awards available for grant for fiscal 2023, were as follows:
Balance at June 2022
Additional shares authorized
Transferred between plans
Restricted stock units granted
Market stock units granted
Performance stock units granted
Performance stock units performance
adjustment
Market stock units performance adjustment
Purchases under employee stock purchase plan
Forfeited
Plan shares no longer available for new grants
Balance at June 2023
Awards
Available
Under All
2019
Incentive
2019
Employee
Inducement
2019
Employee
Stock
2010
Incentive
Equity
Plan
Purchase
Plan
Compensation
Plan
Share-Based Compensation
Award Plans
4,449,604
698,000
—
(808,153)
(110,885)
(157,710)
Plan
3,379,524
698,000
5,733
(808,153)
(110,885)
(157,710)
— 1,070,080
—
—
—
—
—
—
—
—
—
—
141,565
(168,796)
(172,044)
103,689
19,554
3,994,824
142,899
(148,347)
—
95,727
(1,334)
(20,449)
—
—
(172,044)
—
—
— 898,036
—
— 21,783
3,096,788
DSPG
Replacement
Award
Plan
—
—
—
—
—
—
—
—
—
2,229
(2,229)
—
—
—
(5,733)
—
—
—
—
—
—
5,733
—
—
Share-based compensation and the related tax benefit for our stock-based awards and our cash settled phantom stock
units, which we granted in October 2019 (see Phantom Stock Units below) recognized in our consolidated statements of income
for fiscal 2023, 2022, and 2021 were as follows (in millions):
Cost of revenue
Research and development
Selling, general, and
administrative
Total
Income tax benefit on share-
based compensation
$
$
$
2023
2022
2021
Stock-
based
awards
4.0
52.4
Phantom
Stock Units
$
— $
0.3
Stock-
based
awards
4.0
42.5
Phantom
Stock Units
0.2
$
27.2
65.6
122.0
$
0.3
0.6
13.2
$
$
54.3
100.8
$
4.7
32.1
23.1
Stock-
based
awards
3.0
23.5
39.6
66.1
15.2
$
$
$
Phantom
Stock Units
0.4
$
21.9
4.7
27.0
$
F-27
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We recognize a tax benefit upon expensing certain share-based awards associated with our share-based compensation
plans, including RSUs, market stock units, or MSUs, PSUs, and phantom stock units. We do not recognize a tax benefit upon
expensing all or a portion of share-based awards granted to certain executive officers and certain foreign-based employees.
We compare the actual tax benefit associated with the tax deduction from share-based award activity to the hypothetical
tax benefit based on the grant date fair values of the corresponding share-based awards. Tax benefit associated with excess tax
deduction creditable to our income tax provision is recognized when incurred. Tax deficiency associated with a tax deduction
shortfall is debited to our income tax provision when incurred.
Historically, we have issued new shares in connection with our share-based compensation plans, however, treasury shares
are also available for issuance. Any additional shares repurchased under our common stock repurchase program will be
available for issuance under our share-based compensation plans.
Stock Options
Our share-based compensation plans with outstanding stock option awards include our 2010 Incentive Plan. Under our
2010 Incentive Plan, we were able to grant incentive stock options or nonqualified stock options to purchase shares of our
common stock at not less than 100% of the fair market value, or FMV, on the date of grant. We ceased granting stock options
in fiscal 2018.
Options granted under our 2010 Incentive Plan generally vest three to four years from the vesting commencement date
and expire seven years after the date of grant if not exercised.
Certain stock option activity for fiscal 2023 and balances as of the end of fiscal 2023 were as follows:
Balance at June 2022
Exercised
Expired
Balance at June 2023
Exercisable at June 2023
Stock
Option
Awards
Outstanding
Weighted
Average
Exercise
Price
Intrinsic
Value
(In millions)
31,185 $
(27,545) $
(557) $
3,083 $
3,083 $
61.50
62.10
81.88
52.53 $
52.53 $
0.1
0.1
The aggregate intrinsic value was determined using the closing price of our common stock on the last trading day of
fiscal 2023, or June 23, 2023, of $81.16.
Cash received and the aggregate intrinsic value of stock options exercised for fiscal 2023, 2022, and 2021 were as follows
(in millions):
Cash received
Aggregate intrinsic value
2023
2022
2021
$
$
3.3 $
1.6 $
5.3 $
3.6 $
23.9
8.6
There was no unrecognized share-based compensation costs for stock options granted under our various plans.
Restricted Stock Units
Our 2019 Incentive Plan provides for the grant of RSUs to our employees, consultants, and directors, and previously our
2019 Inducement Equity Plan and our 2010 Incentive Plan provided for the grant of deferred stock units, or DSUs, to our
employees, consultants, and directors. An RSU and a DSU are each a promise to deliver shares of our common stock at a
future date in accordance with the terms of the grant agreement and the words can be used interchangeably. We began granting
DSUs in January 2006 and RSUs in 2019. The use of RSUs will cover the meaning of both RSUs and DSUs.
RSUs granted generally vest ratably over three to four years from the vesting commencement date. Delivery of shares
under the plans take place on the quarterly vesting dates. At the delivery date, we withhold shares to cover applicable statutory
tax withholding for grantees subject to withholding and deliver a net quantity of shares to the grantee after such withholding.
Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the RSU award.
F-28
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RSU activity, including RSUs granted, delivered, and forfeited in fiscal 2023, and the balance and aggregate intrinsic
value of RSUs as of the end of fiscal 2023 were as follows:
Balance at June 2022
Granted
Vested
Forfeited
Balance at June 2023
RSU Awards
Outstanding
$
1,220,565
808,153
$
(631,492) $
(92,300) $
$
1,304,926
Average
Grant Date
Fair Value
119.83
129.14
115.30
137.60
126.50
At the end of fiscal 2023, the aggregate intrinsic value of RSUs expected to vest was $105.9 million and the number of
RSU awards expected to vest is 1.3 million shares. Our closing stock price of $81.16 on the last day of trading in fiscal 2023
was used to calculate the intrinsic value for the RSUs.
The unrecognized share-based compensation cost for RSUs granted under our 2019 Incentive Plan, our 2019 Inducement
Equity Plan and our 2010 Incentive Plan was approximately $122.7 million as of the end of fiscal 2023, which will be
recognized over a weighted average period of approximately 1.84 years.
Market Stock Units
Our 2019 Incentive Plan, and previously our 2019 Inducement Equity Plan, provide for the grant of MSU awards, to our
employees, consultants, and directors. An MSU is a promise to deliver shares of our common stock at a future date based on
the achievement of market-based performance requirements in accordance with the terms of the MSU grant agreement.
We have granted MSU awards to our executive officers and other management members under our 2010 Incentive Plan,
our 2019 Incentive Plan and our 2019 Inducement Equity Plan, which are designed to vest in three or four tranches with the
target quantity for each tranche equal to one-third or one-fourth of the total MSU grant. The first tranche vests based on a one-
year performance period; the second tranche vests based on a two-year performance period; the third tranche vests based on a
three-year performance period; and the fourth tranche (in the case of four-year vesting) vests based on a four-year performance
period.
For MSU awards granted in fiscal 2023, performance is measured based on our achievement of a specified level of total
stockholder return, or TSR, relative to the TSRs of each company in the Russell 2000 Index. The potential payout ranges from
0% to 300% of the target grant quantity based on our TSR performance relative to the TSRs of each company in the Russell
2000 Index. No payout will occur if our TSR performance falls below the 25th percentile of the TSRs of each company in the
Russell 2000 Index, and a 300% payout will occur if our TSR performance exceeds the 80th percentile of the TSRs of each
company in the Russell 2000 Index. Performance payouts between the 25th and 80th percentiles will be determined on a linear
basis with performance at the 50th percentile equal to 100% of target.
The first tranche and the second tranche can payout up to 300%, and the payout for the third tranche will be calculated
based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year
performance period, less shares issued for the first tranche and the second tranche, but not less than the third tranche target
quantity multiplied by the final payout factor.
For MSU awards granted in fiscal 2022 and 2021, performance is measured based on our achievement of a specified
level of total stockholder return, or TSR, relative to the TSRs of each company in the Russell 2000 Index. The potential payout
ranges from 0% to 200% of the target grant quantity based on our TSR performance relative to the TSRs of each company in
the Russell 2000 Index. No payout will occur if our TSR performance falls below the 25th percentile of the TSRs of each
company in the Russell 2000 Index, and a 200% payout will occur if our TSR performance exceeds the 75th percentile of the
TSRs of each company in the Russell 2000 Index. Performance payouts between the 25th and 75th percentiles will be
determined on a linear basis with performance at the 50th percentile equal to 100% of target.
The first tranche and the second tranche can payout up to 200%, and the payout for the third tranche will be calculated
based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year
performance period, less shares issued for the first tranche and the second tranche, but not less than the third tranche target
quantity multiplied by the final payout factor.
F-29
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For outstanding MSU awards granted in fiscal 2020, performance is measured based on our achievement of a specified
level of TSR relative to the TSR of the S&P Semiconductor Select Industry Index, or the Index. The potential payout ranges
from 0% to 200% of the target grant quantity and is adjusted on a two-to-one ratio based on our TSR performance relative to
the Index.
The payout for the first tranche, the second tranche and the third tranche will not exceed 100% and the payout for the
fourth tranche will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on
performance for the four-year performance period, less shares issued for the first tranche, the second tranche and the third
tranche.
Delivery of shares earned, if any, will take place on the dates provided in the applicable MSU grant agreement, assuming
the grantee is still an employee, consultant, or director of our company at the end of the applicable performance period. On the
delivery date, we withhold shares to cover statutory tax withholding requirements and deliver a net quantity of shares to the
recipient after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares
underlying the MSU award.
MSU activity, including MSUs granted, delivered, and forfeited in fiscal 2023, and the balance and aggregate intrinsic
value of MSUs as of the end of fiscal 2023 were as follows:
Balance at June 2022
Granted
Performance adjustment
Vested
Balance at June 2023
MSU Awards
Outstanding
$
251,974
$
110,885
168,796
$
(304,334) $
$
227,321
Weighted
Average
Grant Date
Fair Value
138.51
179.98
—
104.04
235.67
As a result of Synaptics achieving the 80th percentile relative to the remaining constituents in the Russell 2000 Index, we
delivered 200% of the targeted shares underlying tranche one of the fiscal 2022 MSU grants. As a result of Synaptics achieving
the 84th percentile relative to the remaining constituents in the Russell 2000 Index, we delivered 200% of the targeted shares
underlying tranche two of the fiscal 2021 MSU grants. As a result of the Synaptics TSR outperforming the Index TSR by
84.53 percentage points for the tranche three performance period, we delivered 200% of the targeted shares underlying the
fiscal 2020 MSU grants, less shares issued for the first tranche and second tranche.
At the end of fiscal 2023, the aggregate intrinsic value of MSUs expected to vest was $18.5 million and the number of
MSU awards expected to vest is 0.2 million shares. Our closing stock price of $81.16 on the last day of trading in fiscal 2023
was used to calculate the intrinsic value for the MSUs.
The fair value of each MSU granted from our plans for fiscal 2023, 2022, and 2021 was estimated at the date of grant
using the Monte Carlo simulation model, assuming no expected dividends and the following assumptions:
Expected volatility of company
Expected volatility of Index
Correlation coefficient
Expected life in years
Risk-free interest rate
Fair value per award
2023
2022
2021
55.22%
52.61%
53.62%
17.9% - 320.7%
0.61
2.87
3.24%
17.4% - 581.6%
0.53
2.87
0.40%
19.6% - 197.6%
0.51
2.87
0.17%
$218.15 -
$438.24
$284.43 -
$342.89
$131.34 -
$175.15
We amortize the compensation expense over the three- or four-year performance and service period on a ratable basis.
The unrecognized share-based compensation cost of our outstanding MSUs was approximately $22.3 million as of the end of
fiscal 2023, which will be recognized over a weighted average period of approximately 0.73 years.
Performance Stock Units
F-30
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Our 2019 Incentive Plan and our 2010 Incentive Plan provide for the grant of PSU awards to our employees, consultants,
and directors. A PSU is a promise to deliver shares of our common stock at a future date based on the achievement of
performance-based requirements in accordance with the terms of the PSU grant agreement.
We have granted PSU awards to our executive officers and other key management team members under our 2010
Incentive Plan, our 2019 Incentive Plan and our 2019 Inducement Equity Plan, which, generally, are designed to vest in three
tranches with the target quantity for each tranche equal to one-third of the total PSU award. Generally, PSU awards have a
specific one-year performance period and vesting occurs over three service periods with the final service period ending
approximately three years from the grant date. Performance is measured based on the achievement of a specified level of
performance relative to predefined performance criteria (for PSU awards granted in fiscal 2023 and 2022, the performance
criteria was based on non-GAAP earnings per share, for PSU awards granted in fiscal 2021 the performance criteria was based
on a combination of our design win revenue, non-GAAP gross margin percentage and non-GAAP operating expenses). For
our fiscal 2023 PSU awards, the potential payout ranges from 0% to 200% of the target grant quantity and is adjusted on a
linear basis with a payout triggering if our measurement results are greater than 65% of the target with a maximum payout
achieved at 135% of target.
Delivery of shares earned, if any, will take place on the dates provided in the applicable PSU grant agreement, assuming
the grantee is still an employee, consultant, or director of our company at the end of the applicable service period. On the
delivery date, we withhold shares to cover statutory tax withholding requirements and deliver a net quantity of shares to the
recipient after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares
underlying the PSU award.
PSU activity, including PSUs granted, delivered, and forfeited in fiscal 2023, and the balance and aggregate intrinsic
value of PSUs as of the end of fiscal 2023 were as follows:
Balance at June 2022
Granted
Performance adjustment
Vested
Forfeited
Balance at June 2023
PSU Awards
Outstanding
$
257,903
$
157,710
128,622
$
(279,438) $
(11,438) $
$
253,359
Weighted
Average
Grant Date
Fair Value
101.50
119.50
—
97.40
123.12
125.40
We value PSUs using the aggregate intrinsic value on the grant date and amortize the compensation expense over the
three-year service period on a ratable basis, dependent upon the probability of meeting the performance measures. The PSU
awards outstanding balance at June 2023 is based on the target grant quantity and does not include any performance adjustment
of shares for completed performance periods.
At the end of fiscal 2023, the aggregate intrinsic value of PSUs expected to vest was $20.6 million and the number of
PSU awards expected to vest is 0.2 million shares. Our closing stock price of $81.16 on the last day of trading in fiscal 2023
was used to calculate the intrinsic value for the PSUs.
The unrecognized share-based compensation cost of our outstanding PSUs was approximately $3.3 million as of June
2023, which will be recognized over a weighted average period of approximately 0.67 years.
Phantom Stock Units
The 2019 Incentive Plan authorized the grant of phantom stock units to non-employee directors, officers and employees.
We initially granted phantom stock units in October 2019. Phantom stock units were cash-settled and entitled the recipient to
receive a cash payment equal to the value of a single share for each unit based on the average closing share price of our stock
over the thirty calendar days prior to the vesting date. Grants of phantom stock units vested over three years, with an annual
F-31
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
vesting date of October 31 each year subsequent to the grant date. The final vesting occurred on October 31, 2022, and no
phantom stock units remain outstanding under this plan.
Phantom stock activity was as follows:
Balance as of June 2022
Paid
Forfeited
Balance as of June 2023
Employee Stock Purchase Plan
Phantom
Stock Units
Outstanding
Weighted
Average
Grant Date
Fair Value
176,097
$
(173,436) $
(2,661) $
— $
42.11
42.11
42.11
0.00
Our 2019 ESPP allows employees to designate up to 15% of their base compensation, subject to legal restrictions and
limitations, to purchase shares of common stock at 85% of the lesser of the FMV at the beginning of the offering period or the
exercise date. Under the 2019 ESPP, the offering period extends for up to one year and includes two exercise dates occurring
at six-month intervals. Under the terms of our 2019 ESPP, if the FMV at an exercise date is less than the FMV at the beginning
of the offering period, the current offering period will terminate and a new offering period will commence.
Shares purchased, weighted average purchase price, cash received, and the aggregate intrinsic value for employee stock
purchase plan purchases in fiscal 2023, 2022, and 2021 were as follows (in millions, except shares purchased and weighted
average purchase price):
Shares purchased
Weighted average purchase price
Cash received
Aggregate intrinsic value
2023
172,044
2022
138,502
$
$
$
91.88 $
15.8 $
2.8 $
97.90 $
13.6 $
12.5 $
2021
220,389
57.00
12.6
10.3
The fair value of each award granted under our 2019 ESPP for fiscal 2023, 2022, and 2021 was based on the Black-
Scholes option pricing model. The fair value per award for fiscal 2023, 2022 and 2021 was $40.70, $38.93 and $20.82,
respectively.
Unrecognized share-based compensation costs for awards granted under our 2019 ESPP at the end of fiscal 2023 were
approximately $6.3 million that will be amortized over the next 8 months.
13. Employee Benefit Plans
401(k) Plan
We have a 401(k) Retirement Savings Plan for full-time employees in the U.S. Under the plan, eligible employees may
contribute a portion of their net compensation up to the annual limit of $22,500 or $30,000 for employees who are 50 years or
older. In fiscal 2023, we provided matching funds of 25% of our employees’ contributions, excluding catch-up contributions.
The employer matching funds vest immediately. We made matching contributions of $1.9 million, $1.7 million and $1.8
million in fiscal 2023, 2022, and 2021, respectively.
14. Income Taxes
Income/(loss) before provision for income taxes for fiscal 2023, 2022, and 2021 consisted of the following (in millions):
United States
Foreign
Income before provision for income taxes
2023
2022
2021
$
$
(118.2) $
244.2
126.0
$
(44.8) $
365.3
320.5
$
(21.0)
141.1
120.1
F-32
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The provision for income taxes for fiscal 2023, 2022, and 2021 consisted of the following (in millions):
Current tax expense/(benefit)
Federal
State
Foreign
Deferred tax expense/(benefit)
Federal
State
Foreign
Provision for income taxes
2023
2022
2021
$
$
15.8
0.1
62.4
78.3
(12.7)
—
(13.2)
(25.9)
52.4
$
(0.6) $
—
94.9
94.3
(21.8)
—
(7.9)
(29.7)
64.6
$
$
4.1
0.1
36.1
40.3
(0.5)
—
(8.4)
(8.9)
31.4
The provision for income taxes differs from the federal statutory rate for fiscal 2023, 2022, and 2021 as follows (in
millions):
Provision at U.S. federal statutory tax rate
State income taxes
Non-deductible share-based compensation
(Windfall)/shortfall related to share-based compensation
Non-deductible officer compensation
Business credits
Foreign tax differential
U.S. inclusion of foreign income
Deferred taxes on unremitted foreign earnings
Other differences
Provision for income taxes
2023
2022
2021
26.4
—
6.6
(1.3)
6.4
(5.2)
(0.5)
21.0
0.3
(1.3)
52.4
$
$
67.3
—
7.9
(18.1)
6.4
(10.0)
6.4
3.6
0.7
0.4
64.6
$
$
25.1
0.1
5.2
(3.8)
6.4
(3.8)
(6.7)
5.2
3.5
0.2
31.4
$
$
F-33
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Non-current deferred tax assets and non-current deferred tax liabilities are included in “Non-current other assets” and
“Other long-term liabilities,” respectively, on our consolidated balance sheets.
Significant components of our deferred tax assets (liabilities) as of the end of fiscal 2023 and 2022 consisted of the
following (in millions):
Deferred tax assets:
Capital loss carryforward
Inventory write downs
Property and equipment and intangible assets
Share-based compensation
Nondeductible interest
Lease liabilities
Business credit carryforward
Net operating loss carryforward
Other accruals
Valuation allowance
Deferred tax liabilities:
Property and equipment
Right-of-use assets
Unremitted foreign earnings
Acquisition intangibles
Net deferred tax assets
2023
2022
$
$
34.1
1.9
42.1
10.3
4.9
10.1
45.1
10.8
5.1
164.4
(78.4)
86.0
(1.9)
(9.5)
(14.3)
(31.4)
(57.1)
28.9
$
$
33.8
2.6
11.7
12.0
5.4
11.2
62.0
16.3
5.6
160.6
(75.0)
85.6
(2.0)
(11.5)
(22.1)
(45.8)
(81.4)
4.2
The fiscal 2022 capital loss carryforward deferred tax asset and its corresponding valuation allowance includes a
reclassification adjustment of $16.0 million to conform to the current period presentation. This reclassification had no impact
on previously reported deferred tax assets.
Realization of deferred tax assets depends on our generating sufficient U.S. and certain foreign taxable income in future
years to obtain a benefit from the utilization of those deferred tax assets on our tax returns. Accordingly, the amount of deferred
tax assets considered realizable may increase or decrease when we reevaluate the underlying basis for our estimates of future
U.S. and foreign taxable income. As of the end of fiscal 2023, a valuation allowance of $78.4 million was maintained to reduce
deferred tax assets primarily related to state tax credits and capital losses carryforwards that are not more likely than not to be
realized through future taxable income. The net change in the valuation allowance during fiscal 2023 was an increase of $3.4
million, primarily due to an increase of unrealized deferred tax assets associated with state tax credits.
We consider most of the earnings of our foreign subsidiaries as not indefinitely reinvested overseas and have made
appropriate provisions for income or withholding taxes, that may result from a future repatriation of those earnings. As a result,
$14.3 million of our deferred tax liability is associated with unremitted foreign earnings, which if remitted would not result in
a further provision for income taxes. We continue to indefinitely reinvest $200 million on certain accumulated earnings and
outside basis differences primarily related to our DSPG acquisition. If the undistributed earnings and other outside basis
differences were recognized in a taxable transaction, the associated foreign tax credits would be expected to reduce the U.S.
income tax liability associated with the foreign distribution or the otherwise taxable transaction. As of our fiscal 2023, assuming
full utilization of the associated foreign tax credits, the potential net deferred tax liability associated with these undistributed
earnings and outside basis differences would be approximately $46 million.
As of the end of fiscal 2023, we had federal, California, and foreign net operating loss carryforwards of approximately
$28.7 million, $25.0 million, and $49.6 million, respectively. The federal and California net operating loss will begin to expire
in fiscal 2037 and 2027, respectively, if not utilized. Most of our foreign net operating losses have no expiration date. Under
current tax law, net operating loss and tax credit carryforwards available to offset future income or income taxes may be limited
by statute or upon the occurrence of certain events, including significant changes in ownership.
We had $16.4 million and $53.4 million of federal and state research tax credit carryforwards, respectively, as of the end
of fiscal 2023. The federal research tax credit carryforward will begin to expire in 2029 and the state research tax credit can be
carried forward indefinitely.
F-34
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The total liability for gross unrecognized tax benefits related to uncertain tax positions, included in other liabilities in our
consolidated balance sheets, increased by $13.9 million from $29.8 million in fiscal 2022 to $43.7 million in fiscal 2023. Of
this amount, $33.1 million will reduce the effective tax rate on income from operations, if recognized. A reconciliation of the
beginning and ending balance of gross unrecognized tax benefits for fiscal 2023, 2022, and 2021 consisted of the following (in
millions):
Beginning balance
Increase in unrecognized tax benefits related to current year tax
positions
Increase in unrecognized tax benefits related to prior year tax
positions
Decrease due to effective settlement with tax authorities
Remeasurement of unrecognized tax benefits
Decrease due to statute expiration
Ending Balance
$
2023
2022
2021
$
29.8
$
22.6
$
13.7
2.5
(1.1)
(0.3)
(0.9)
43.7
$
7.1
5.5
—
(0.5)
(4.9)
29.8
$
20.1
5.5
—
—
—
(3.0)
22.6
Accrued interest and penalties increased by $0.5 million in fiscal 2023 as compared to fiscal 2022 and increased by $0.8
million in fiscal 2022 as compared to fiscal 2021. Accrued interest and penalties were $3.0 million and $2.5 million as of the
end of fiscal 2023and 2022, respectively. Our policy is to classify interest and penalties, if any, as components of income tax
expense.
It is reasonably possible that the amount of liability for unrecognized tax benefits may change within the next 12 months;
an estimate of the range of possible changes could result in a decrease of $1.4 million to an increase of $8.8 million. Any
prospective adjustments to our unrecognized tax benefits will be recorded as an increase or decrease to income tax expense and
cause a corresponding change to our effective tax rate. Accordingly, our effective tax rate could fluctuate materially from period
to period.
Our major tax jurisdictions are the U.S., Hong Kong SAR, Japan, Israel and the U.K. From fiscal 2017 onward, we
remain subject to examination by one or more of these jurisdictions.
15. Segment, Customers, and Geographic Information
We operate in one segment: the development, marketing, and sale of semiconductor products used in electronic devices
and products. We generate our revenue from three broad product categories: the IoT product applications market, the personal
computing, or PC, product applications market, and the mobile, product applications market. The chief executive officer was
identified as the chief operating decision maker, or CODM, and is ultimately responsible for and actively involved in the
allocation of resources and the assessment of our performance. The fact that we operate in only one reportable segment is
based on the following:
•
•
•
Our organizational structure is based along functional lines. Each of the functional department heads reports
directly to the CODM.
The assessments of our performance company-wide, including assessment of our incentive compensation plan, are
based largely on our operational performance and consolidated financial performance.
The decisions on allocation of resources and other operational decisions are made by the CODM based on his direct
involvement with our operations and product development.
Net revenue within geographic areas based on our customers’ locations for fiscal 2023, 2022, and 2021, consisted of the
following (in millions):
China
Taiwan
Japan
Vietnam
Other
South Korea
United States
2023
2022
2021
$
$
485.0 $
367.4
337.7
61.5
62.6
35.0
5.9
1,355.1 $
609.1 $
539.4
453.1
11.8
72.1
39.1
15.1
1,739.7 $
524.0
382.6
330.7
3.4
66.1
28.5
4.3
1,339.6
F-35
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net revenue from external customers for each group of similar products for fiscal 2023, 2022, and 2021 consisted of the
following (in millions):
IoT product applications
PC product applications
Mobile product applications
2023
946.3 $
217.3
191.5
1,355.1 $
2022
1,100.9 $
343.0
295.8
1,739.7 $
2021
612.9
354.7
372.0
1,339.6
$
$
Long-lived assets within geographic areas as of the end of fiscal 2023 and 2022 consisted of the following (in millions):
United States
Asia Pacific
EMEA
2023
119.1 $
195.8
866.4
1,181.3 $
2022
118.1
196.4
945.0
1,259.5
$
$
The fiscal 2022 long-lived assets reported in the above table includes a reclassification of approximately $428.0 million
to conform to the current period presentation. The reclassification relates to goodwill and intangible assets previously reported
within the Asia Pacific region that are now presented within the EMEA region. This reclassification had no impact on
previously reported geographic long-lived assets.
Our goodwill of $816.4 million has been allocated to two reporting units which include IoT and Mobile/PC.
Major customers’ revenue as a percentage of total net revenue for fiscal 2023, 2022, and 2021 were as follows:
Customer A
Customer B
Customer C
*
Less than 10%
16. Restructuring Activities
2023
10%
*
*
2022
12%
13%
*
2021
10%
13%
14%
We have initiated various strategic restructuring actions primarily intended to reduce costs, gain synergies from our
recent acquisitions and align our business in response to market conditions.
The following table summarizes the restructuring activity and related charges during the periods presented (in millions):
Balance, beginning of period
Charges
Payments
Balance, end of period
2023
Years Ended
2022
$
1.4
—
(1.4)
— $
0.2
18.3
(17.1)
1.4
$
$
$
$
2021
6.1
7.4
(13.3)
0.2
During fiscal 2023, no restructuring charges were recorded.
During fiscal 2022, we recorded restructuring and related charges of $18.3 million in our consolidated statements of
operations. The charges were for activities intended to further improve efficiencies in our operational activities and gain
synergies from the DSPG acquisition. These activities from the restructuring actions taken during fiscal 2022 are complete as
of the end of fiscal 2022.
During fiscal 2021, we recorded restructuring and related charges of $7.4 million in our consolidated statements of
operations. The charges were for activities to gain synergies from our DisplayLink acquisition. The activities from the
restructuring actions taken during fiscal 2021 were complete as of the end of fiscal 2021.
F-36
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. Subsequent Events
In July 2023, we entered into an agreement with Avago Technologies International Sales PTE. Limited, or Broadcom, to
acquire certain developed technology intangible assets from Broadcom for an aggregate consideration of $130.0 million. We
are still in the process of evaluating the proper accounting treatment under Topic 805 on Business Combinations.
On July 21, 2023, the IRS issued Notice 2023-55 which generally allows taxpayers to defer application of elements of
the 2022 foreign tax credit final regulations, and related guidance, until 2024. In our case, foreign taxes which were creditable
under the prior regulations will continue to be creditable for our fiscal 2023. As this Notice was issued subsequent to our fiscal
2023 and represents a retroactive change in tax law, we anticipate recording a discrete tax benefit in the first quarter of fiscal
2024 in the amount of approximately $12 million.
F-37
NON-GAAP FINANCIAL INFORMATION
In evaluating our business, we consider and use gross margin and operating profit as a percentage of revenue and net income/(loss)
per share excluding certain acquisition/divestiture and integration related costs (including primarily amortization of acquired
intangible assets, inventory fair value adjustments, integration costs, and legal and consulting costs), share-based compensation
charges, loss/(recovery) on supply commitment charges, restructuring costs, retention costs, in-process research and development
charges, CEO severance costs, non-cash interest on convertible debt, amortization prepaid development costs, vendor settlement
accrual, gain on sale of audio technology assets, gain on sale of assets, gain on sale and leaseback transaction, gain on supplier
settlement, loss on extinguishment of debt, other items, net (including non-cash interest, net, arbitration costs, equity investment
gain/loss, and non-GAAP share adjustment), and tax adjustments as a supplemental measure of operating performance. These
adjustments to gross margin and operating profit as a percentage of revenue and net income/(loss) per share eliminate the impact
of certain non-cash expenses and other items that may be either recurring or non-recurring that we do not consider to be indicative
of our core ongoing operating performance. These non-GAAP measures of gross margin and operating profit as a percentage of
revenue and net income per share are not measurements of our financial performance under GAAP and should not be considered
as an alternative to GAAP gross margin and operating profit as a percentage of revenue and net income/(loss) per share. We present
non-GAAP gross margin and operating profit as a percentage of revenue and net income per share because we consider it an
important supplemental measure of our performance. We believe these measures facilitate operating performance comparisons
from period to period by eliminating potential differences in gross margin and operating profit as a percentage of revenue and net
income/(loss) per share caused by the existence and timing of certain acquisition/divestiture and integration related costs (including
primarily amortization of acquired intangible assets, inventory fair value adjustments, integration costs, and legal and consulting
costs), share-based compensation charges, loss/(recovery) on supply commitment charges, restructuring costs, retention costs, in-
process research and development charges, CEO severance costs, non-cash interest on convertible debt, amortization prepaid
development costs, vendor settlement accrual, gain on sale of audio technology assets, gain on sale of assets, gain on sale and
leaseback transaction, gain on supplier settlement, loss on extinguishment of debt, other items, net (including non-cash interest,
net, arbitration costs, equity investment gain/loss, and non-GAAP share adjustment), and tax adjustments. Non-GAAP gross
margin and operating profit as a percentage of revenue and net income per share have limitations as analytical tools and should not
be considered in isolation or as a substitute for our GAAP gross margin and operating profit as a percentage of revenue and net
income/(loss) per share. The principal limitation of these measures is they do not reflect our actual expenses and may thus have the
effect of inflating our GAAP gross margin and operating profit as a percentage of revenue and net income/(loss) per share.
The following is a reconciliation of the differences between GAAP and non-GAAP gross margin as a percentage of revenue for
the periods indicated:
GAAP gross margin as a percentage of revenue
Acquisition and related costs (1)….......................................
Share-based compensation charge…...................................
Loss/(recovery) on supply commitment…............................
Retention costs…...............................................................
Non-GAAP gross margin as a percentage of revenue
2023
52.8%
7.0%
0.3%
-
-
60.1%
Fiscal Years Ended June
2021
2022
2020
54.2%
5.6%
0.2%
-
-
60.0%
45.6%
7.7%
0.3%
-
-
53.6%
40.7%
3.0%
0.2%
-0.2%
0.1%
43.7%
2019
33.8%
4.2%
0.2%
0.6%
-
38.8%
(1) Acquisition related costs consists of items related to acquisitions, including primarily amortization associated with certain acquired
intangibles and inventory fair value adjustments.
The following is a reconciliation of the differences between GAAP and non-GAAP operating profit as a percentage of revenue for
the periods indicated:
2023
2022
Fiscal Years Ended June
2021
(in millions, except percentages)
2020
2019
$
$
$
$
$
GAAP Operating income /(loss)
GAAP operating margin/(loss) percentage…...................
Acquisition/divestiture and integration related costs (1)…......
Share-based compensation charge…...................................
Loss/(recovery) on supply commitment…............................
Restructuring costs….........................................................
Retention costs…...............................................................
In-process research and development charge…...................
CEO severance…..............................................................
Amortization prepaid development costs…...........................
Vendor settlement accrual….................................................
Gain on sale of audio technology assets…............................
Other items, net(2)…...........................................................
Non-GAAP operating income
Non-GAAP operating margin percentage
154.3
11.4%
132.2
122.6
-
-
-
-
-
5.8
4.0
-
-
418.9
30.9%
350.4
20.1%
140.2
133.0
-
18.3
-
-
-
10.0
-
-
-
651.9
37.5%
147.0
11.0%
139.4
93.1
(0.6)
7.4
5.1
-
-
9.2
-
(34.2)
-
366.4
27.4%
68.9
5.2%
55.6
60.4
(3.0)
33.0
13.9
2.4
-
-
-
-
-
231.2
17.3%
(6.3)
-0.4%
77.3
59.0
9.0
17.7
2.5
-
2.2
-
-
-
(1.7)
159.7
10.8%
$
$
$
$
$
(1) Acquisition/divestiture and integration related costs consists of items related to acquisitions, potential acquisitions and divestitures
of businesses or assets, including primarily amortization associated with acquired intangibles, inventory fair value adjustments, integration
costs, and legal and consulting costs.
(2) Other items, net, within operating income GAAP to Non-GAAP adjustments includes arbitration costs and acquisition related severance.
The following is a reconciliation of the differences between GAAP and non-GAAP net income/(loss) per share for the periods
indicated:
2023
Fiscal Years Ended June
2021
2022
2020
2019
GAAP net income/(loss) per share - diluted
$
1.83
$
6.33
$
2.08
$
3.41
$
(0.66)
Acquisition/divestiture and integration related costs (1)…..........
Share-based compensation…………………………………….
Loss/(recovery) on supply commitment…................................
Restructuring costs………………………………………………
Retention costs…...................................................................
In-process research and development charges…......................
CEO severance…..................................................................
Gain on sale of audio technology assets…................................
Amortization prepaid development costs…...............................
Vendor settlement accrual….....................................................
Non-cash interest on convertible debt……………………………
Gain on sale of assets……………………………………………
Gain on sale and leaseback transaction…………………………
Gain on supplier settlement………………………………………
Loss on extinguishment of debt…………………………………
Other items, net(2)…...............................................................
Tax adjustments…………………………………………………
3.29
3.05
-
-
-
-
-
-
0.14
0.10
-
-
-
-
-
0.06
(0.35)
3.44
3.27
-
0.45
-
-
-
-
0.24
-
0.04
-
(0.13)
(0.04)
0.20
0.01
(0.27)
3.64
2.43
(0.01)
0.19
0.13
-
-
(0.89)
0.24
-
0.50
-
-
-
-
0.26
(0.31)
1.60
1.73
(0.09)
0.95
0.40
0.07
-
-
-
-
0.53
(3.02)
-
-
-
0.07
0.30
2.23
1.71
0.26
0.51
0.07
-
0.06
-
-
-
0.50
-
-
-
-
(0.14)
(0.54)
Non-GAAP net income per share - diluted
$
8.12
$
13.54
$
8.26
$
5.95
$
4.00
(1) Acquisition/divestiture and integration related costs consists of items related to acquisitions, potential acquisitions and divestitures of
businesses or assets, including primarily amortization associated with acquired intangibles, inventory fair value adjustments, integration
costs, and legal and consulting costs.
(2) Other items, net, within net income GAAP to Non-GAAP adjustments includes arbitration costs, equity investment loss, acquisition related
severance, amortization of debt issuance costs and non-GAAP share adjustment.
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SYNAPTICS FINANCIAL & OPERATING HIGHLIGHTS
OPERATING DATA - in millions (except per share and percentage)
FISCAL YEAR ENDED JUNE
Net Revenue
Gross Margin Percentage
Operating lncome/(Loss)
Net lncome/(Loss)
Net lncome/(Loss) Per Share - Diluted
2019
2020
2021
2022
$1,472.2
$1,333.9
$1,339.6
$1,739.7
33.8%
$(6.3)
40.7%
$68.9
$(22.9)
$118.8
45.6%
$147.0
$79.6
2023
$1,355.1
52.8%
$154.3
$73.6
$1.83
$8.12
54.2%
$350.4
$257.5
$6.33
$13.54
GAAP
Non-GAAP*
$(0.66)
$4.00
$3.41
$5.95
$2.08
$8.26
* Non-GAAP results presented exclude certain non-cash expenses and other items that may be either recurring
or non-recurring that we do not consider to be indicative of our core ongoing operating performance. See the
Non-GAAP financial information and the GAAP to non-GAAP reconciliation at the end of this report.
BALANCE SHEET AND CASH FLOW DATA - in millions (except per share amounts)
FISCAL YEAR ENDED JUNE
Cash and cash equivalents
Total Assets
Stockholders' Equity
Book Value Per Diluted Share
2019
$327.8
2020
$763.4
2021
$836.3
2022
$824.0
2023
$924.7
$1,409.8
$1,693.8
$2,226.8
$2,858.1
$2,611.4
$657.3
$19.00
$819.1
$23.54
$967.2
$1,266.4
$1,243.4
$25.25
$31.12
Cumulative Cash Used For Share Repurchases
$1,192.4
$1,222.6
$1,222.6
$1,222.6
Cash Flow From Operating Activities
$154.2
$221.8
$319.2
$462.7
$30.93
$1406.1
$331.5
CORPORATE INFORMATION
EXECUTIVE TEAM
Michael Hurlston
President & Chief Executive Officer
Dean Butler
Saleel Awsare
Michael Brooker
Satish Ganesan
Vikram Gupta
Lori Stahl
Senior Vice President & Chief Financial Officer
Senior Vice President & General Manager of Enterprise/Mobile
Senior Vice President, Information Technology & Chief Information Officer
Senior Vice President & General Manager of Automotive/VR, Chief Strategy Officer
Senior Vice President & General Manager, IoT Processors and Chief Product Officer
Senior Vice President & Chief People Officer
Venkat Kodavati
Senior Vice President & General Manager, Wireless Products
Todd Lepinski
Senior Vice President, Worldwide Sales
John McFarland
Senior Vice President, General Counsel & Secretary
Kermit Nolan
Divyesh Shah
Corporate Vice President & Chief Accounting Officer
Senior Vice President, Operations
BOARD OF DIRECTORS
Nelson Chan
Chair of the Board, Synaptics
Jeffrey Buchanan
Independent Consultant
Keith Geeslin
Partner, Francisco Partners
Susan Hardman
Former Executive
Michael Hurlston
President & Chief Executive Officer, Synoptics
Patricia Kummrow
Vice President, Network and Edge Group, and General Manager, Ethernet Division, Intel Corporation
Vivie "YY" Lee
James Whims
Independent Consultant
Partner, Alsop - Louie Partners
STOCKHOLDERS MEETING
Our annual meeting of stockholders will take place on Tuesday, October 24, 2023, at 9:00 a.m. Pacific time
and will be held via live interactive webcast on the internet at www.virtualshareholdermeeting.com/syna2023
ANNUAL REPORT COPIES
Stockholders may obtain copies of the company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, without charge from Synoptics Incorporated, 1109 McKay Drive, San Jose, CA 95131.
Such information is also available on the company's website at www.synaptics.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP
Mission Towers 1, Suite 600
3975 Freedom Circle
Santa Clara, CA 95054
408.367.5764
STOCK TRANSFER AGENT
Equiniti Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
800.937.5449