Good day, and thank you for standing by. Welcome to the Synaptics, Inc. First Quarter Fiscal Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to hand the conference over to your host, Mr. Munjal Shah, Head of Investor Relations. Mr. Shah, you may now begin.

Thank you, Krisa. Good afternoon, and thank you for joining us today on Synaptics' first quarter fiscal 2022 conference call. My name is Munjal Shah, and I'm Head of Investor Relations. With me on today's call are Michael Hurlston, our President and CEO; and Dean Butler, our Chief Financial Officer. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at synaptics.com. In addition to a supplemental slide presentation, we have also posted a copy of these prepared remarks on our Investor Relations website. The supplementary slides have also been furnished as an exhibit to our current report on Form 8-K filed with the SEC earlier today and add additional color on our financial results. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs and certain other noncash or recurring or nonrecurring items. Please refer to the press release issued after market close today for a detailed reconciliation of GAAP and non-GAAP results. Additionally, we would like to remind you that during the course of this conference call, Synaptics will make forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, including our expectations regarding the potential impacts of our business -- on our business of the COVID-19 pandemic and the supply chain disruption and component shortages currently affecting the global semiconductor industry. Although Synaptics believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statements. We refer you to the company's current and periodic reports filed with the SEC, including our most recent annual report on Form 10-K for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. Synaptics expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Michael. Michael?

Thanks, Munjal. I'd like to welcome everyone to today's call. We had a great start to our fiscal year 2022 and I am pleased with what we were able to achieve in the last three months. Revenue for the September quarter was above the mid-point of our guidance driven by continued growth in our IoT products. Our mix of IoT revenue improved again, resulting in record GAAP and non-GAAP gross margin. Higher revenue and gross margin in turn drove our non-GAAP operating margin and non-GAAP EPS to record levels in the quarter. Two factors are contributing to the success. First, we are working with tier 1 customers whose products are generally exceeding market expectations. In our existing customer base, we have been able to cross sell multiple product lines increasing our content, improve our mix and shift ASPs upward by delivering higher performance and more integrated solutions. Second, we have had success selling into totally new customers. We saw several new ramps in the quarter which had meaningful impact on revenue. Our IoT revenues increased 70% YoY. Most every area of our IoT portfolio has experienced dramatic growth and design win momentum. Our fastest growing piece of the portfolio continues to be our WiFi-Bluetooth combo devices which are seeing traction in number of new applications such as handheld scanners and networked fitness equipment. Our wireless devices are an example of our cross-selling success as we can attach them to almost every other piece of our IoT portfolio. Our latest generation Triple-Combo wireless device has recently taped out and is now back in our labs for full qualification. This new family of products combines multiple wireless technologies in a single solution including Wi-Fi 6E, Bluetooth, and now 802.15.4. We plan to offer a Thread networking protocol stack on the 802.15.4 engine.…

Thanks Michael, and good afternoon to everyone. Before I begin, I’d like to go over the reporting change of our Virtual Reality focused products. This set of market leading products has been purpose built from our core technology and until now was historically classified as part of our Mobile products grouping. The emerging Virtual Reality market has been rapidly growing and is poised for long-term secular growth which is unrelated to Mobile phones. Starting this quarter and inclusive of our first quarter results here today, we are realigning our Virtual Reality revenue classification to better reflect a more accurate category for Synaptics as part of our IoT reporting going forward. A simplified reconciliation of this change can be found in our supplemental slide deck available on our investor relations site. Moving on to the fiscal first quarter results, revenue for the September quarter was $373 million, slightly above the midpoint of our guidance. Revenue was up 14% sequentially, reflecting continued strong demand across our IoT, PC, and Mobile products as all areas grew sequentially. Year-over-year, the September quarter revenue was up 13%, driven by growth in our IoT revenue, partially offset by a decline in our Mobile revenue as we continue to focus our efforts toward more attractive IoT opportunities. Revenue from IoT, PC, and Mobile were 55%, 24% and 21%, respectively, in the September quarter. Revenue from our IoT products was up 70% compared with the year-ago quarter and up 16% sequentially as our revenue momentum in this area continues to outpace almost all peers. PC product revenue was up 5% sequentially and up 10% year-over-year despite many of our customers continuing to face component constraints. And, as we had previously highlighted, our Mobile business bottomed in the June quarter and was up 19% sequentially in the September quarter…

[Operator Instructions]. Your first question comes from the line of Christopher Rolland of Susquehanna.

This is [Steven] on for Chris. Could you talk about demand for connectivity, any long-term wafer contracts to support this? And when might you have an integrated connectivity plus IoT platform?

Yes. I -- the first question is around the demand. Obviously, it's very, very strong. Our backlog is certainly significantly outpacing our ability to ship. We don't have any long-term contracts that guarantee any supply, but we've been really working very well with our key foundry partner. This is one of the areas that we've seen outsized supply relative to what we projected. We really have had some good support from our foundry partners. On our IoT platform, of course, our long-term goal that we talked about with the merger with DSP Group is to try to create an edge AI-enabled platform where WiFi or Bluetooth is combined with compute, a processor at the edge of the network. And that's something we're very much on track to do. We haven't announced any specific platforms there, but that certainly part of our long-term plan, and our development remains very much on pace.

And just a quick follow-up. What is the timetable for production in shipping OLED TDDI?

Yes. We expect to be in production in the first half of 2022.

Your next question comes from the line of Raji Gill of Needham.

Congratulations on the excellent momentum. Michael, I wanted to speak a little bit about the virtual reality market. You are segmenting it -- or you're taking it away from mobile and putting it into IoT. Wanted to get a sense if you could maybe quantify what that revenue was as part of IoT because if you look historically in the numbers that you gave, there's a little bit of a shuffle going from mobile into IoT. So I just wanted to get a sense of the magnitude. And when you're looking at this market, going forward, how do you see the adoption rate of VR? And how is your technology on the display side helping or enabling the adoption of virtual reality headsets?

Yes. Let me take the second half, Raji, and I'll have Dean talk to the first piece around the revenue breakout. We're obviously super excited about this market. We've been thinking about this breakout for quite a while before there's been a lot of news around this particular segment. So it's a fortunate coincidence. We had developed products specific for this market a long time back. And we really -- as I said in the prepared remarks, have very specific technology that focuses the eye. I mean you have a display that's right in front of your face, and you have to have very specific technology that creates a focal point for that. We just never really talked about it because it wasn't particularly meaningful revenue, but it's become something a little bit more meaningful, and we see really, really good growth prospects as we look out in the future. One of the other things that's happening in that market, Raji, is you've got, A, more dense OLED displays you're getting into 2K x 2K, 4K x 4K which are really, really difficult to do from a display driver standpoint and then also new display types. Micro OLED, we expect that to be coming online on certain goggles; in some cases, mini-LED. And we've actually invested in those product areas. So we think we've got a pretty outsized lead on both the core technology dimension. But then as we look out in the future, different display types and different kind of content. So we feel pretty good about it. Maybe Dean can take us through the breakout.

Yes. Raji, we actually tried to make everybody's lives simple. In our supplementary deck on our Investor Relations site, we actually have a table that gives the reconciliation, but just to give you some quick numbers. In fiscal 2020, this was about $12 million for the year, so sort of $4 million a quarter. That's grown pretty significantly over the course of the last 1.5 years. This quarter, we just concluded was $13 million in the quarter. So that is sort of roughly on a $50 million annualized run rate today. And given where virtual reality is in the marketplace, we just think there's a ton of potential sort of going forward in this area. It's really probably just getting started.

Okay. Perfect. And then on the -- Michael, the Triple-Combo combining the different wireless protocols, 6E, Bluetooth, 802. How are you thinking about that in context of your edge AI processor? Are you bolting on this Triple Combo with your embedded SoC? Are you selling it on more discrete applications? Can you just help me kind of think about what the strategy there is on the Triple Combo? Is it bundling it? Or is it more -- are you seeing a lot of growth just on just pure discrete Triple Combo devices?

Yes. I mean I hate to be a cop-out, but it's both. It's a perfect platform for edge AI because you do have -- we think that 802.15.4, this Thread protocol is going to be one of the connected -- big leading connectivity standards for the edge AI processors. You've got the right combination of range, but with lower bandwidth, right? Because you're not going to be talking about big data rates on these edge AI platforms. But also to the second part of your question, there's a lot of standalone demand as well. Our core customers in WiFi, Bluetooth combos, which are video processing, high-bandwidth types of applications, they're often looking to connect controls to the same platform, and that control mechanism may well come through an 802.15.4 protocol. So we think it gives us a pretty nice differentiator even in our core markets and keeps us ahead of competition.

Your next question comes from the line of Karl Ackerman of Cowen.

Two questions, if I may. Last quarter, Dean, you stated that 90% of your expected fiscal 2022 revenue was supported by backlog. But since then, it sounds like you've received greater wafer allocation from your foundry partner for this legacy Broadcom asset. And you also indicated that your order backlog for December is above the high end guide. So clearly, much, much better. My question is, does that 90% order backlog anchoring fiscal '22, does that number move higher from here? If you could just talk about the perhaps proliferating order backlog you have, not just in WiFi, but across IoT that -- I think that supports the not just the December quarter guide, but also perhaps fiscal '22, that would be very helpful.

Yes, Karl, you're remembering correctly. So really, we've had continued momentum, as you might imagine. Our backlog coverage of what we said last quarter at 90% has gone higher from here in this quarter. We have been signaling through our supply chain for quite some time that we're winning in the marketplace. Our momentum is growing with customers. And therefore, we've slowly been trying to improve our supply alignment but clearly the customer demand continues to outstrip the supply capability. So there's still a gap for us to catch up, but we're certainly still 90% or better, Karl.

Very helpful. If I may, for my follow-up, could you provide a bit more color on what appears to be share gains and new growth opportunities in your PC segment? I ask because your primary peer for touchpads spoke about a moderation next quarter, but maybe simply just driven by your greater mix towards enterprise. So anything that you could add would be very helpful.

Karl, I think, again, your understanding is right. We feel like the -- probably the biggest reason for our more optimistic outlook than one of our competitors is the mix toward commercial. We typically do better there. So I think that, that's probably headline. But I do think in the subtext we are winning. We are taking share. I wouldn't say in a meaningful way, but we -- a couple of percentage points, we feel like we've been able to move the needle. So it's a little bit of both, but I'd say the biggest driver is the overall mix towards the commercial notebook.

[Operator Instructions]. Your next question comes from the line of Ambrish Srivastava of BMO Capital Markets.

This is Jitendra for Ambrish. Good to see the sequential growth back in your mobile business. Could you talk about any of the recent demand weakness in Asia market -- in the Asia handset market as recorded by some of the peers, would be impacting your business in the near term? And if so, how should we think about it?

Yes. I mean, I think the overriding pull for us is the number of design wins. So the biggest thing that's happened for us is the shift in the Android marketplace to flexible OLED displays. As that shift has happened, we've been able to gain share and frankly, gain revenue. So I think that, that's our big headline. Certainly, there's -- underneath, I think there's some churn in that market. There's all sorts of rumors about supply constraints and then drops in markets like India, but our long pull is really the dominant one, and that is the fact that we're winning in that market. We're gaining share. So some of the underneath noise is less apparent to us than it might be to somebody else who's got flat or is in a more balanced position.

That helps. As a follow-up, great to hear about the order revenues on track for the $100 million for the year. You talked about TDDI being a small part of the mix today. Could you briefly go on like various products and technologies that are driving your design wins today? And how do you see them grow over time?

Yes. Our primary business today is really discrete display drivers. We have a bit of discrete touch, but our mix is dominated today by discrete display drivers. Over time, that TDDI piece is really what's growing. I mean our design win traction is very predominantly on TDDI. That represents content gain for us because you're able to pull a Touch circuit in with the display drivers and there's a timing controller as well, as you likely know. So there's a lot more content. And then really, our position there is vastly stronger where we're one of a handful of suppliers that can supply discrete display drivers or discrete touch circuits. There are 1, maybe 2 that have meaningfully competitive TDDI solutions. We think we're winning in a fairly outsized way in TDDI. We think we have relatively outsized market share. So as that becomes the technology of choice in automotive, we feel like we're going to do really, really well. And that's why Munjal and Dean sort of feel good, and we all feel good that we're going to be able to hit this revenue target that we put out there.

I am showing no further questions at this time. I would like to turn the conference back to Michael. You may proceed.

I'd like to thank all of you for joining us today. We look forward to speaking to you at our upcoming investor conferences during the quarter. Thanks a lot.

This concludes today's conference call. Thank you for your participation, and have a wonderful day. You may now disconnect.