Synaptics Incorporated · NASDAQ:SYNA

Synaptics — Investor Day (June 2020)

63 slides from Synaptics's investor day presentation, Jun 9, 2020

Slide 1: Investor Day 2020
Investor Day 2020 June 9, 2020
Slide 2: Investor Day Agenda
Investor Day Agenda TOPIC SPEAKER Introduction Jason Tsai Company Overview and Strategy Michael Hurlston PC Division Michael Hurlston Mobile Division Janice Mori IoT Division Saleel Awsare Financial Dean Butler Management Q&A All Speakers © 2020 Synaptics Incorporated 2
Slide 3: Safe Harbor Statement
Safe Harbor Statement This presentation 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 Exchange Act of 1934, as amended (the “Exchange Act”). Forward- looking statements give our
Slide 4: Non-GAAP Results
Non-GAAP Results • In evaluating our business, we consider and use non-GAAP net income, which we define as net income excluding share-based compensation, acquisition related costs, and certain other non-cash or recurring and non-recurring items we do not believe are indicative of our core operating
Slide 5: Company Overview and Strategy
Company Overview and Strategy Michael Hurlston, President and CEO © 2020 Synaptics Incorporated 5
Slide 6: Introduction
Introduction New Management Opportunities Challenges My Philosophy The New Synaptics © 2020 Synaptics Incorporated 6
Slide 7: Experienced Management Team
Experienced Management Team Dean Butler Janice Mori Saleel Awsare SVP & CFO SVP & GM, SVP & GM, Mobile Division IoT Division Michael Hurlston Satish Ganesan Phil Kumin Steve Schultis President & CEO SVP & CSO SVP, WW Sales VP & GM, PC Division Divyesh Shah Sunil Thomas Patrick Worfolk SVP, Operation
Slide 8: What We Do
What We Do AI & Neural Network Capacitive Far-field Voice & Sensing Speech Capture Display Driver & Acoustics & Integrated Sensing Audio Processing Video & Image Optical Imaging Processing 1986 SYNA ~$2.5B 18 Sites Worldwide 1800+ Listed 2002 As of June 5, 2020 1400+ Employees Nasdaq ESTABLISHED LIS
Slide 9: Synaptics Products are Everywhere
Synaptics Products are Everywhere CONSUMER IOT MOBILE Audio processor Touch/Display Display driver Voice processor Touch controller Video processor AI Computer Vision Neural Network Accelerators AUTOMOTIVE PC Touch Intelligent Video AI Video Interface Touch controller Pointing device Display driver
Slide 10: Market Opportunity
Market Opportunity Focused to Grow • SAM expected growth of 7% CAGR through 2023 • Investments in differentiated, $11B high-margin products TAM • Technology leadership in each core area • Expanding addressable markets • Balanced portfolio $5B SAM • Diversified tier-one customer base Source: IHS, IDC
Slide 11: Driving Operational Excellence
Driving Operational Excellence Consolidate Foundries 10 Foundries 21 Package/Test Consolidate Package/Test Multiple Sales Teams Unified Global Sales • Improve COGS and procurement • Drive best-in-class operations • Unified sales to drive additional opportunities with customers © 2020 Synaptics Incor
Slide 12: Strategic Repositioning
Strategic Repositioning Building a Stronger Synaptics Augment with M&A Exit Non- differentiated Products Streamline Operations Improve Balance Profitability Smarter Portfolio Investments © 2020 Synaptics Incorporated 12
Slide 14: Winning Track Record with Innovation
Winning Track Record with Innovation VIDEO INTERFACE TOUCH TouchPad ForcePad Docks Dongles Adapters FINGERPRINT SecurePad TouchStyk Side Power C Deck Touch Button © 2020 Synaptics Incorporated 14
Slide 15: The Opportunity ~$800M
The Opportunity Market Leadership • Over 50% share of PC OEM market for TouchPads; leader in commercial PCs • Virtually all commercial PCs with fingerprint sensor use Synaptics • Industrial design and manufacturing leadership • Reliable and convenient high-security biometrics • Touchpad leader for e
Slide 16: Why Synaptics Wins
Why Synaptics Wins Key Customers • Foundation of Synaptics • History of Technology and Market Leadership • Innovating for Thin & Light • Strong Profitability – Efficient and predictable cash flow generation © 2020 Synaptics Incorporated 16
Slide 18: Leading Mobile Technology
Leading Mobile Technology Huawei P40 Pro Flexible On-Cell OLED OPPO Winning performance with On-Cell Flexible OLED Reno 3 Pro driving touch success Flexible On-Cell OLED Huawei Premium display technologies moving from gaming Honor 30 Pro towards mainstream for 5G teleconference, video Flexible On-Ce
Slide 19: Mobile Opportunity ~$2.6B
Mobile Opportunity Market Trends • Flexible OLED CAGR 37% through 2023 and quickly transitioning to On-Cell • Innovation with new smartphone designs/form factors and better performance • Flexible OLED leads to brighter displays and better industrial designs for better consumer experience • Managing
Slide 20: Touch Performance for Thinner, Brighter Displays
Touch Performance for Thinner, Brighter Displays Basic Phone Surface Basic Phone Surface 2.5D Phone Surface 3D Phone Surface Flexible On-Cell 2.0 mm Foldable Phone Surface 10%-20% brighter 50% thinner than LCD 1.5 mm 1.3 mm 10x higher background < 1.0 mm interference Touch Sensor Touch Sensor <350u
Slide 21: Mobile: Differentiation & Strengths
Mobile: Differentiation & Strengths • Focused on high-margin Flexible OLED market • Leadership in Flexible On-Cell touch performance • Premium Display performance • Significant IP portfolio and strong OEM and customer relationships Long-term Strategy / Investment Areas Diversify Touch Expand Display
Slide 22: OLED TDDI
OLED TDDI Touch leadership to expand position in the higher ASP display market Significant performance benefits across the ecosystem and more beautiful and functional phones Enables premium foldable touch experience to enable more differentiated form factors Builds on our heritage of innovation, our
Slide 23: Uniquely Positioned to Lead OLED TDDI
Uniquely Positioned to Lead OLED TDDI • Market leader with long • Premium Display history in OLED Touch features • Winning in today’s • High Refresh Rate challenging on-cell Touch Display displays • Low Power mode • 12Bit DAC • Created LCD • ~200 million OLED TDDI Market touch and display TDDI OLED
Slide 24: OLED TDDI Competition
OLED TDDI Competition OLED Display Performance On-Cell Flexible Touch Flexible OLED Experience LCD TDDI Production IP Portfolio © 2020 Synaptics Incorporated 24
Slide 25: Why Synaptics Wins
Why Synaptics Wins Integrated OLED Touch & Display • Continuing leadership in Flexible On- Cell discrete touch solutions Display Driver ICs • Driving innovation and further differentiation with OLED TDDI Touch Controller ICs • Significant IP portfolio and strong OEM and customer relationships © 2020
Slide 27: IoT – Areas of Investment
IoT – Areas of Investment HIGH-SPEED EDGE SOC with AI AUTOMOTIVE VIDEO INTERFACE Industry leading SoC with Innovative Video ICs for Single chip Touch & Display Solution Voice/Video/Vision AI notebooks, tablets & phones (TDDI) for Integrated panels Smart Home & Industrial Driving video/audio for Lead
Slide 29: Edge SoC – The Opportunity
Edge SoC – The Opportunity Market Trends • Voice interface proliferating beyond smart speakers to STBs; evolving to single SoC for voice/video/vision • Surge in consumer video and camera vision usage • Rapid expansion in industrial automation / security • Privacy and security remain paramount ~$1.0B
Slide 30: What is Edge AI?
What is Edge AI? EDGE AI CLOUD AI ENVIRONMENT DEVICE INTERNET CLOUD PRIVATE / SECURE FASTER RESPONSE ENERGY EFFICIENT © 2020 Synaptics Incorporated 30
Slide 31: What is Synaptics Edge AI?
What is Synaptics Edge AI? Customer Applications Scalable Edge AI SoC Platform Analytics / Enhancement Edge AI Developer Tools OS (Android, Linux, RDK) High-End BSP CPU Graphics Voice, Video, Vision Secure AI Processor Open AI Development Tools Secure Processing of Industry Leading Performance Compa
Slide 32: Expanding into Video and Vision AI
Expanding into Video and Vision AI VOICE VIDEO VISION VISION VIDEO VIDEO VOICE VOICE VOICE Relative market sizing for illustrative purposes only © 2020 Synaptics Incorporated 32
Slide 33: Edge AI – Competitive Landscape
Edge AI – Competitive Landscape AI CO-PROCESSORS Open AI Programming Tools Integrated Voice / Video / Vision SoC Complete SoC Software Content Security © 2020 Synaptics Incorporated 33
Slide 34: Why Synaptics Wins
Why Synaptics Wins • Expanding market for feature-rich devices employing AI • Capturing the market with differentiated Voice/Video/Vision AI solutions • Scalable platform approach addresses multiple market segments • Significant software/firmware customization and optimization for OEMs © 2020 Synapt
Slide 36: High Speed Video Interface – The Opportunity
High Speed Video Interface – The Opportunity Market Trends • Market converging to single cable USB-C dock for video, data & audio • Increase in Type-C adoption by PCs, tablets and smartphones driving the growth of docking stations and dongles • Thunderbolt 3/USB 4 emerging as the advanced and versat
Slide 37: Momentum in Docks / Dongles / Adapters
Momentum in Docks / Dongles / Adapters DOCKS DONGLES ADAPTERS ADAPTERS DONGLES DONGLES DOCKS DOCKS DOCKS Relative market sizing for illustrative purposes only © 2020 Synaptics Incorporated 37
Slide 38: Ahead of the Pack in High-Speed Video Interface
Ahead of the Pack in High-Speed Video Interface Fully Integrated High-Speed Customer Applications Connectivity Video Interface IC Platform x 4 lanes 8 Ghz USB-C x 4 lanes 12 Ghz 10 Ghz 20 - 40 Gbps Ultra-low Power for Pioneering High-Speed Technology Exceptional Video/Audio Quality All Form Factors
Slide 39: High-Speed Video Interface – Competitive Landscape
High-Speed Video Interface – Competitive Landscape Protocol Converter HDMI 2.1 (8K) HDMI 2.0 (4K) HDMI 2.0 (4K) HDMI 2.0 (4K) HDMI 2.0 (4K) Universal Docks 2-ports 2-ports Enterprise Docks 3-ports Dongles (Video + Data) 10G USB 3 5G USB 3 5 or 10G USB 3 © 2020 Synaptics Incorporated 39
Slide 40: Why Synaptics Wins
Why Synaptics Wins • Synaptics Interface ICs used on almost all Thunderbolt 3 enterprise docks • Leading the market in USB solutions combining audio, video & data • Lowest power per bandwidth – driving products of all form factors © 2020 Synaptics Incorporated 40
Slide 42: Automotive – The Opportunity
Automotive – The Opportunity Market Trends • #1 in Automotive TDDI enabling larger and better performing displays • Winning more than 70% of designs for TDDI over the past 24 months • Eight automotive display mfg. with 35 platforms under development using Synaptics TDDI • LTDI (Large Touch & Display
Slide 43: Momentum in Automotive TDDI & LTDI
Momentum in Automotive TDDI & LTDI PILLAR-TO-PILLAR DISCRETE TOUCH INTEGRATED TOUCH INTEGRATED TOUCH LTDI TDDI TDDI DISCRETE TOUCH DISCRETE TOUCH DISCRETE TOUCH Relative market sizing for illustrative purposes only © 2020 Synaptics Incorporated 43
Slide 44: Under the Hood – TDDI vs. LTDI
Under the Hood – TDDI vs. LTDI TDDI LTDI Up to 3 TDDIs Up to 12 Front-Ends for One Touch & Display Controller 17” & 4K Up to 55” & 8K DESERIALIZER Tcon/Touch • Enables transition from • Expands instrument cluster and infotainment display on a single panel Discrete Touch to Integrated • Scalable plat
Slide 45: Automotive – TDDI Competitive Landscape
Automotive – TDDI Competitive Landscape 4K Support Integrated Touch EMC Compliant Global Technical Support © 2020 Synaptics Incorporated 45
Slide 46: Why Synaptics Wins
Why Synaptics Wins • Leading industry transition to Integrated displays (TDDI) with majority share • TDDI solution enables significant cost savings per display • Driving industry to Pillar-to-Pillar display industrial design with LTDI • Largest portfolio for Integrated Touch display solutions © 2020
Slide 48: Key Pillars of Financial Focus
Key Pillars of Financial Focus Stabilize Revenue Margin Capital Allocation & Return to Growth Expansion Priorities Right Size the Business to Expand Cash Flow Generation © 2020 Synaptics Incorporated 48
Slide 49: A Year of Significant Progress
A Year of Significant Progress REVENUE GROSS MARGIN OPERATING MARGIN $295M 46% 15% $275M TDDI Divest 39% 5% Q4'19 Q4'20 Q4'19 Q4'20 Q4'19 Q4'20 Mid-point of guidance Mid-point of guidance mid-point mid-pointofguidance Mid-point guidance Gross Margin and Operating Margin are Non-GAAP Results/Guidance
Slide 50: Committed to Non-GAAP Gross Margin Expansion
Committed to Non-GAAP Gross Margin Expansion >50% What We’ve Done Supply-chain Mgmt. • Exited lower margin businesses 46% Product Mix • Focus on higher-margin mobile TDDI Divestiture OLED Touch • Improvements in operations and Supply-chain Mgmt. supply-chain Product Mix 39% Achieving the New Target
Slide 51: Restructuring Update: $40M Plan Announced on Aug 8, 2019
Restructuring Update : $40M Plan Announced on Aug 8, 2019 Non-GAAP Operating Expenses $40M achieved $412M within 6 months Incremental ~$35M savings delivered $338M FY19 Announced Over TDDI Divestment Q4'20 Potential Restructuring Acheivement Annualized Not to scale, for illustrative purposes only Q4
Slide 52: Market Growth Opportunity
Market Growth Opportunity Mobile -5-10% vs +5% market PC +2% IOT +15% $6.7B 7% SAM Touch: Gaining share & grow with market SAM CAGR Display: Foundation for OLED TDDI $5.0B Opportunity: OLED TDDI SAM Maintain high share & grow with market Mobile Opportunity: Innovation in touchpad & industrial design
Slide 53: Driving End Market Diversification
Driving End Market Diversification Past Present Future PC IoT 25% 40% 61% 45% Mobile 35% Past : FY2019 Actual results Present : Q4’20 mid-point guidance as provided on May 7, 2020 Future : Management’s long-term model © 2020 Synaptics Incorporated 53
Slide 54: Capital Allocation Priorities and Capital Structure
Capital Allocation Priorities and Capital Structure Organic Growth Smarter Investments & Spend Accelerate Growth Acquisitions Flex up to 4.0x Leverage Target Net Leverage 1.5-2.0x Debt Management Manage Debt Maturities Share Repurchases Opportunistic Net Leverage as principal value of outstanding de
Slide 55: Macro Environment Impact to Synaptics
Macro Environment Impact to Synaptics COVID-19 COVID-19 US/ /China US China Trade TradeWar War Demand: Lowered exposure post-TDDI divestment + Work from Home: PC & Video Docking (+) Continuing to ship (non-EAR products) − Retail Consumer: IoT & Automotive (+) ~ Smartphones: Unclear (+) Huawei: No di
Slide 56: New Long-Term Financial Model
New Long-Term Financial Model FY20 New Long-Term FY19 Actual Prior Model Consensus Model Revenue $1,472M $1,332M -- +4-6% Non-GAAP Gross Margin 39% 43% 36-41% >50% Non-GAAP R&D 21% 20% 18-20% 20-22% Non-GAAP SG&A 7% 7% ~6% 6-8% Non-GAAP Operating Margin 11% 16% 12-15% ~20% Source: Factset, mean Anal
Slide 57: Investment Highlights
Investment Highlights A GLOBAL LEADER IN HUMAN TO MACHINE INTERFACE TECHNOLOGIES STRONG PORTFOLIO OF DIFFERENTIATED TECHNOLOGIES & INCREASING MIX OF HIGH-MARGIN PRODUCTS STRONG POSITION IN LARGE, GROWING MARKETS DEEP RELATIONSHIPS WITH DIVERSE BASE OF LEADING OEMS STRONG MANAGEMENT TEAM DRIVING SIGN
Slide 58: Thank You
Slide 60: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Gross Profit © 2020 Synaptics Incorporated 60
Slide 61: GAAP to Non-GAAP Reconciliations (cont'd)
GAAP to Non-GAAP Reconciliations (cont’d) Operating Income © 2020 Synaptics Incorporated 61
Slide 62: GAAP to Non-GAAP Reconciliations (cont'd)
GAAP to Non-GAAP Reconciliations (cont’d) Research & Development Expense Selling, General, and Administrative Expense © 2020 Synaptics Incorporated 62
Slide 63: 4Q FY2020 Company Guidance Provided May 7, 2020
4Q FY2020 Company Guidance Provided May 7, 2020 GAAP Non-GAAP Non-GAAP Adjustment Revenue $260M to $290M N/A N/A -21 percent to -12 percent Q/Q Gross Margin 41.5 percent to Approximately 45 percent to 44.0 percent $8.9M* 47 percent Operating Expense $110M to $116M Approximately $83M to $86M $27M to

Synaptics — Investor Day (June 2020) on 6ix

Synaptics — Investor Day (June 2020)

Slide 1: Investor Day 2020

Slide 2: Investor Day Agenda

Slide 3: Safe Harbor Statement

Slide 4: Non-GAAP Results

Slide 5: Company Overview and Strategy

Slide 6: Introduction

Slide 7: Experienced Management Team

Slide 8: What We Do

Slide 9: Synaptics Products are Everywhere

Slide 10: Market Opportunity

Slide 11: Driving Operational Excellence

Slide 12: Strategic Repositioning

Slide 13: PC Division

Slide 14: Winning Track Record with Innovation

Slide 15: The Opportunity ~$800M

Slide 16: Why Synaptics Wins

Slide 17: Mobile Division

Slide 18: Leading Mobile Technology

Slide 19: Mobile Opportunity ~$2.6B

Slide 20: Touch Performance for Thinner, Brighter Displays

Slide 21: Mobile: Differentiation & Strengths

Slide 22: OLED TDDI

Slide 23: Uniquely Positioned to Lead OLED TDDI

Slide 24: OLED TDDI Competition

Slide 25: Why Synaptics Wins

Slide 26: IoT Division

Slide 27: IoT – Areas of Investment

Slide 28: Edge SoC

Slide 29: Edge SoC – The Opportunity

Slide 30: What is Edge AI?

Slide 31: What is Synaptics Edge AI?

Slide 32: Expanding into Video and Vision AI

Slide 33: Edge AI – Competitive Landscape

Slide 34: Why Synaptics Wins

Slide 35: High-Speed Video Interface

Slide 36: High Speed Video Interface – The Opportunity

Slide 37: Momentum in Docks / Dongles / Adapters

Slide 38: Ahead of the Pack in High-Speed Video Interface

Slide 39: High-Speed Video Interface – Competitive Landscape

Slide 40: Why Synaptics Wins

Slide 41: Automotive

Slide 42: Automotive – The Opportunity

Slide 43: Momentum in Automotive TDDI & LTDI

Slide 44: Under the Hood – TDDI vs. LTDI

Slide 45: Automotive – TDDI Competitive Landscape

Slide 46: Why Synaptics Wins

Slide 47: Financial

Slide 48: Key Pillars of Financial Focus

Slide 49: A Year of Significant Progress

Slide 50: Committed to Non-GAAP Gross Margin Expansion

Slide 51: Restructuring Update: $40M Plan Announced on Aug 8, 2019

Slide 52: Market Growth Opportunity

Slide 53: Driving End Market Diversification

Slide 54: Capital Allocation Priorities and Capital Structure

Slide 55: Macro Environment Impact to Synaptics

Slide 56: New Long-Term Financial Model

Slide 57: Investment Highlights

Slide 58: Thank You

Slide 59: Appendix

Slide 60: GAAP to Non-GAAP Reconciliations

Slide 61: GAAP to Non-GAAP Reconciliations (cont'd)

Slide 62: GAAP to Non-GAAP Reconciliations (cont'd)

Slide 63: 4Q FY2020 Company Guidance Provided May 7, 2020